Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-30044 December 19, 1973

LORENZO SAYSON, as Highway Auditor, Bureau of
Public Highways, Cebu First Engineering District;
CORNELIO FORNIER, as Regional Supervising Auditor,
Eastern Visayas Region; ASTERIO, BUQUERON,
ADVENTOR FERNANDEZ, MANUEL S. LEPATAN, RAMON
QUIRANTE, and TEODULFO REGIS, petitioners,
vs.
FELIPE SINGSON, as sole owner and proprietor of
Singkier Motor Service, respondent.
Office of the Solicitor General Felix V. Makasiar and
Solicitor Bernardo P. Pardo for petitioners.
Teodoro Almase and Casiano U. Laput for respondent.

FERNANDO, J.:
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 D-8 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 of the Court of First
Instance of Cebu of September 4, 1968 is reversed and
set aside, and the suit for mandamus filed against
petitioners, respondents below, is dismissed. With
costs against respondent Felipe Singson.
Zaldivar (Chairman), Barredo, Antonio, Fernandez and
Aquino, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. No. L-36084 August 31, 1977

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE AMANTE P. PURISIMA, the Presiding Judge
of the court of first Instance of Manila (Branch VII),
and YELLOW BALL FREIGHT LINES, INC., respondents.

Solicitor General Estelito P. Mendoza, Assistant

Solicitor General Santiago M. Kapunan, Solicitor Oscar
C. Fernandez and Special Attorney Renato P. Mabugat
for petitioner.

Jose Q. Calingo for private respondent.

FERNANDO, Acting C.J.:

The jurisdictional issued raised by Solicitor General

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

The merit of the petition for certiorari and prohibition

is thus obvious.

1. There is pertinence to this excerpt from

Switzerland General Insurance Co., Ltd. v. Republic of
the Philippines: 6 "The doctrine of non-suability
recognized in this jurisdiction even prior to the
effectivity of the [1935] Constitution is a logical
corollary of the positivist concept of law which, to
para-phrase Holmes, negates the assertion of any
legal right as against the state, in itself the source of
the law on which such a right may be predicated. Nor
is this all.lwphl@it Even if such a principle does give
rise to problems, considering the vastly expanded role
of government enabling it to engage in business
pursuits to promote the general welfare, it is not
obeisance to the analytical school of thought alone
that calls for its continued applicability. Why it must
continue to be so, even if the matter be viewed
sociologically, was set forth in Providence Washington
Insurance Co. v. Republic thus: "Nonetheless, a
continued adherence to the doctrine of non-suability is
not to be deplored for as against the inconvenience
that may be caused private parties, the loss of
governmental efficiency and the obstacle to the
performance of its multifarious functions are far
greater if such a fundamental principle were
abandoned and the availability of judicial remedy were
not thus restricted. With the well-known propensity on
the part of our people to go the court, at the least
provocation, the loss of time and energy required to
defend against law suits, in the absence of such a
basic principle that constitutes such an effective
obstacle, could very well be imagined." 7 It only
remains to be added that under the present
Constitution which, as noted, expressly reaffirmed
such a doctrine, the following decisions had been
rendered: Del mar v. The Philippine veterans
Administration; 8 Republic v. Villasor; 9 Sayson v.
Singson; 10 and Director of the Bureau of Printing v.
Francisco. 11
2. Equally so, the next paragraph in the above
opinion from the Switzerland General Insurance
Company decision is likewise relevant: "Nor is injustice
thereby cause private parties. They could still proceed
to seek collection of their money claims by pursuing
the statutory remedy of having the Auditor General
pass upon them subject to appeal to judicial tribunals
for final adjudication. We could thus correctly
conclude as we did in the cited Provindence
Washington Insurance decision: "Thus the doctrine of
non-suability of the government without its consent,
as it has operated in practice, hardly lends itself to
the charge that it could be the fruitful parent of
injustice, considering the vast and ever-widening
scope of state activities at present being undertaken.
Whatever difficulties for private claimants may still
exist, is, from an objective appraisal of all factors,
minimal. In the balancing of interests, so unavoidable
in the determination of what principles must prevail if
government is to satisfy the public weal, the verdict
must be, as it has been these so many years, for its
continuing recognition as a fundamental postulate of
constitutional law." 12

3. Apparently respondent Judge was misled by the

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

WHEREFORE, the petitioner for certiorari is granted

and the resolution of October 4, 1972 denying the
motion to dismiss filed by the Rice and Corn
Administration nullified and set aside and the
petitioner for prohibition is likewise granted
restraining respondent Judge from acting on civil Case
No. 79082 pending in his sala except for the purpose
of ordering its dismissal for lack of jurisdiction. The
temporary restraining order issued on February 8,
1973 by this Court is made permanent terminating this
case. Costs against Yellow Ball Freight Lines, Inc.

Antonio, Aquino, Concepcion, Jr. and Santos, JJ.,

concur.

Barredo, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-32667 January 31, 1978

PHILIPPINE NATIONAL BANK, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS, GABRIEL V.
MANANSALA and GILBERT P. LORENZO, in his official
capacity as authorized Deputy sheriff, respondents.

Conrado E. Medina for petitioner.

Gabriel V. Manansala in his own behalf.

Jose K. Manguiat, Jr. for respondent Court.

FERNANDO, J.:

The issue raised in this certiorari proceeding is

whether or not an order of the now defunct
respondent Court of Industrial Relations denying for
lack of merit petitioner's motion to quash a notice of
garnishment can be stigmatized as a grave abuse of
discretion. What was sought to be garnished was the
money of the People's Homesite and Housing
Corporation deposited at petitioner's branch in
Quezon City, to satisfy a decision of respondent Court
which had become final and executory. 1 A writ of
execution in favor of private respondent Gabriel V.
Manansala had previously been issued. 2 He was the
counsel of the prevailing party, the United Homesite
Employees and Laborers Association, in the
aforementioned case. The validity of the order
assailed is challenged on two grounds: (1) that the
appointment of respondent Gilbert P. Lorenzo as
authorized deputy sheriff to serve the writ of
execution was contrary to law and (2) that the funds
subject of the garnishment "may be public in
character." 3 In thus denying the motion to quash,
petitioner contended that there was on the part of
respondent Court a failure to abide by authoritative
doctrines amounting to a grave abuse of discretion.
After a careful consideration of the matter, it is the
conclusion of this Tribunal that while the authorization
of respondent Lorenzo to act as special deputy sheriff
to serve the notice of garnishment may be open to
objection, the more basic ground that could have been
relied upon not even categorically raised, petitioner
limiting itself to the assertion that the funds "could be
public" in character, thus giving rise to the
applicability of the fundamental concept of non-
suability is hardly persuasive. The People's
Homesite and Housing Corporation had a juridical
existence enabling it sue and be sued. 4 Whatever
defect could be attributed therefore to the order
denying the motion to quash could not be
characterized as a grave abuse of discretion.
Moreover, with the lapse of time during which private
respondent had been unable to execute a judgment in
his favor, the equities are on his side. Accordingly, this
petition must be dismissed.

The order of August 26, 1970 of respondent Court

denying the motion to quash, subject of this certiorari
proceeding, reads as follows: "The Philippine National
Bank moves to quash the notice of garnishment
served upon its branch in Quezon City by the
authorized deputy sheriff of this Court. It contends
that the service of the notice by the authorized deputy
sheriff of the court contravenes Section 11 of
Commonwealth Act No. 105, as amended which
reads:" 'All writs and processes issued by the Court
shall be served and executed free of charge by
provincial or city sheriffs, or by any person authorized
by this Court, in the same manner as writs and
processes of Courts of First Instance.' Following the
law, the Bank argues that it is the Sheriff of Quezon
City, and not the Clerk of this Court who is its Ex-
Officio Sheriff, that has the authority to serve the
notice of garnishment, and that the actual service by
the latter officer of said notice is therefore not in
order. The Court finds no merit in this argument.
Republic Act No. 4201 has, since June 19, 1965,
already repealed Commonwealth Act No. 103, and
under this law, it is now the Clerk of this Court that is
at the same time the Ex-Officio Sheriff. As such Ex-
Officio Sheriff, the Clerk of this Court has therefore the
authority to issue writs of execution and notices of
garnishment in an area encompassing the whole of the
country, including Quezon City, since his area of
authority is coterminous with that of the Court itself,
which is national in nature. ... At this stage, the Court
notes from the record that the appeal to the Supreme
Court by individual employees of PHHC which
questions the award of attorney's fees to Atty. Gabriel
V.

Manansala, has already been dismissed and that the

same became final and executory on August 9, 1970.
There is no longer any reason, therefore, for
withholding action in this case. [Wherefore], the
motion to quash filed by the Philippine National Bank
is denied for lack of merit. The said Bank is therefore
ordered to comply within five days from receipt with
the 'notice of Garnishment' dated May 6, 1970." 5
There was a motion for reconsideration filed by
petitioner, but in a resolution dated September 22,
1970, it was denied. Hence, this certiorari petition.

As noted at the outset, the petition lacks merit.

1. The plea for setting aside the notice of

garnishment was promised on the funds of the
People's homesite and Housing Corporation deposited
with petitioner being "public in character." There was
not even a categorical assertion to that effect. It is
only the possibility of its being "public in character."
The tone was thus irresolute,the approach difficult The
premise that the funds could be spoken of as public in
character may be accepted in the sense that the
People's Homesite and Housing Corporation was a
government-owned entity It does not follow though
that they were exempt from garnishment. National
Shipyard and Steel Corporation v. court of Industrial
Relations 6 is squarely in point. As was explicitly
stated in the opinion of the then Justice, later Chief
Justice, Concepcion: "The allegation to the effect that
the funds of the NASSCO are public funds of the
government, and that, as such, the same may not be
garnished, attached or levied upon, is untenable for,
as a government owned and controlled corporation.
the NASSCO has a personality of its own, distinct and
separate from that of the Government. It has pursuant
to Section 2 of Executive Order No. 356, dated October
23, 1950 ..., pursuant to which the NASSCO has been
established 'all the powers of a corporation under
the Corporation Law ...' Accordingly, it may sue and be
sued and may be subjected to court processes just like
any other corporation (Section 13, Act No. 1459), as
amended." 7 The similarities between the aforesaid
case and the present litigation are patent. Petitioner
was similarly a government-owned corporation. The
principal respondent was the Court of Industrial
Relations. The prevailing parties were the employees
of petitioner. There was likewise a writ of execution
and thereafter notices of garnishment served on
several banks. There was an objection to such a move
and the ruling was adverse to the National Shipyard
and Steel Corporation. Hence the filing of a petition
for certiorari. To repeat, the ruling was quite
categorical Garnishment was the appropriate remedy
for the prevailing party which could proceed against
the funds of a corporate entity even if owned or
controlled by the government. In a 1941 decision,
Manila Hotel Employees Association v. Manila Hotel
Company, 8 this Court, through Justice Ozaeta, held:
"On the other hand, it is well settled that when the
government enters into commercial business, it
abandons its sovereign capacity and is to be treated
like any other corporation. (Bank of the United States
v. Planters' Bank, 9 Wheat, 904, 6 L.ed. 244). By
engaging in a particular business thru the
instrumentality of a corporation, the governmnent
divests itself pro hac vice of its sovereign character,
so as to render the corporation subject to the rules of
law governing private corporations."

2. It is worth noting that the decision referred to,

the Bank of the United States v. Planters' Bank, 10
was promulgated by the American Supreme Court as
early as 1824, the opinion being penned by the great
Chief Justice Marshall. As was pointed out by him: "It
is, we think, a sound principle, that when a
government becomes a partner in any trading
company, it divests itself, so far as concerns the
transactions of that company, of its sovereign
character, and takes that of a private citizen. Instead
of communicating to the company its privileges and its
prerogatives, it descends to a level with those with
whom it associates itself, and takes the character
which belongs to its associates, and to the business
which is to be transacted. Thus, many states of this
Union who have an interest in banks, are not suable
even in their own courts; yet they never exempt the
corporation from being sued. The state of Georgia, by
giving to the bank the capacity to sue and be sued,
voluntarily strips itself of its sovereign character, so
far as respects the transactions of the bank, and
waives an the privileges of that character. As a
member of a corporation, a government never
exercises its sovereignty. It acts merely as a
corporator, and exercises no other power in the
management of the affairs of the corporation, that are
expressly given by the incorporating act." 11 The
National Shipyard and Steel Corporation case,
therefore, merely reaffirmed one of the oldest and
soundest doctrines in this branch of the law.

3. The invocation of Republic v. Palacio, 12 as well as

Commissioner of Public Highways v. San Diego, 13 did
not help the cause of petitioner at all The decisions
are not applicable. If properly understood they can
easily be distinguished. As is clear in the opinion of
Justice J.B.L. Reyes in Republic v. Palacio, the
Irrigation Service Unit which was sued was an office
and agency under the Department of Public Works and
Communications. The Republic of the Philippines,
through the then Solicitor General, moved for the
dismissal of such complaint, alleging that it "has no
juridical personality to sue and be sued." 14 Such a
motion to dismiss was denied. The case was tried and
plaintiff Ildefonso Ortiz, included as private
respondent in the Supreme Court proceeding,
obtained a favorable money judgment. It became final
and executory. Thereafter, it appeared that the
Solicitor General was served with a copy of the writ of
execution issued by the lower court followed by an
order of garnishment 15 Again, there was an urgent
motion to lift such order, but it was denied. A
certiorari and prohibition proceeding was then filed
with the Court of Appeals. The legality of the issuance
of such execution and punishment was upheld, and
the matter was elevated to this Tribunal The Republic
was sustained. The infirmity of the decision reached
by the Court of Appeals, according to the opinion,
could be traced to the belief that there was a waiver
of "governmental immunity and, by implication,
consent to the suit." 16 There was no such waiver.
Even if there were, it was stressed by justice J.B.L.
Reyes: "It is apparent that this decision of the Court of
Appeals suffers from the erroneous assumption that
because the State has waived its immunity, its
property and funds become liable to seizure under the
legal process. This emphatically is not the law.
(Merritt v. Insular Government, 34 Phil 311)." 17 To
levy the execution of such funds, according to him,
would thus "amount to a disbursement without any
proper appropriation as required by law " 18 In
Commissioner of Public Highways v. San Diego, the
opening paragraph of Justice Teehankee was quite
specific as to why there could be neither execution nor
garnishment of the money of petitioner Bureau of
Public Highways: "In this special civil action for
certiorari and prohibition, the Court declares null and
void the two questioned orders of respondent Court
levying upon funds of petitioner Bureau of Public
Highways on deposit with the Philippine National
Bank, by virtue of the fundamental precept that
government funds are not subject to execution or
garnishment." 19 The funds appertained to a
governmental office, not to a government-owned or
controlled corporation with a separate juridical
personality. In neither case therefore was there an
entity with the capacity to sue and be sued, the funds
of which could thereafter be held liable to execution
and garnishment in the event of an adverse judgment.

4. Both the Palacio and the Commissioner of Public

Highways decisions, insofar as they reiterate the
doctrine that one of the coronaries of the fundamental
concept of non-suability is that governmental funds
are immune from garnishment, refer to Merritt v.
Insular Government, a 1916 decision 20 Since then
such a principle has been followed with undeviating
rigidity, the latest case in point being Republic v.
Villasor, 21 promulgated in 1973. It is an entirely
different matter if, according to Justice Sanchez in
Ramos v. Court of Industrial Relations, 22 the office or
entity is "possessed of a separate and distinct
corporate existence." 23 Then it can sue and be sued.
Thereafter, its funds may be levied upon or garnished.
That is what happened in this case.

5. With the crucial issue thus resolved in favor of the

correctness of the order assailed, the other objection
raised, namely that respondent Court acted
erroneously in having a special sheriff serve to the
writ of execution, hardly needs any extensive
decision. It is true that in the aforesaid Commissioner
of Public Highways opinion, this Court held that there
is no authorization in law for the appointment of
special sheriffs for the service of writs of execution. 24
In the order sought to be nullified, the then Judge
Joaquin M. Salvador of respondent Court pointed out
that under a later Act, 25 the Court of Industrial
Relations Act was amended with the proviso that its
Clerk of Court was the ex-oficio sheriff. The point
raised in the petition that it should be the sheriff of
Quezon City that ought to have served the writ of
execution would thus clearly appear to be
inconclusive. There is to be sure no thought of
deviating from the principle announced in the
Commissioner of Public Highways case. That is as it
ought to be. Even if, however, there is sufficient
justification for the infirmity attributed to respondent
Court by virtue of such a ruling, still considering all
the circumstances of this case, it clearly does not call
for the nullification of the order in question. What
cannot be denied is that the writ of execution was
issued as far back as May 5, 1970 by the then Clerk of
Court of respondent Tribunal as the authorized sheriff.
It would be, to say the least, unfair and unequitable if,
on the assumption that such Clerk of Court lacked
such competence, a new writ of execution had to be
issued by the proper official At any rate, what is
important is that the judgment be executed. That is to
achieve justice according to law. It would be to carry
technicality, therefore, to an absurd length if just
because of such a mistake, assuming that it is, but
undoubtedly one committed in good faith, further
delay would get be imposed on private respondent by
characterizing the order sought to be nullified
amounting to a grave abuse of discretion.

WHEREFORE, the petition for certiorari is dismissed.

No costs.

Barredo, Antonio and Concepcion, Jr., JJ., concur.

Aquino, J., concurs in the result.

Santos J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-41299 February 21, 1983

SOCIAL SECURITY SYSTEM, petitioner,

vs.
COURT OF APPEALS, DAVID B. CRUZ, SOCORRO
CONCIO CRUZ, and LORNA C. CRUZ, respondents.

The Solicitor General for petitioner.

Eribert D. Ignacio for respondents David Cruz, Socorro

Concio Cruz and Lorna Cruz.

MELENCIO-HERRERA, J.:

This Petition for Review on certiorari of the Decision of

the Court of Appeals 1 stems from the following facts,
as narrated by the Trial Court, adopted by the Court of
Appeals, and quoted by both petitioner 2 and private
respondents 3:

Sometime in March, 1963 the spouses David B. Cruz

and Socorro Concio Cruz applied for and were granted
a real estate loan by the SSS with their residential lot
located at Lozada Street, Sto. Rosario, Pateros, Rizal
covered by Transfer Certificate of Title No. 2000 of the
Register of Deeds of Rizal as collateral. Pursuant to
this real estate ban said spouses executed on March
26, 1963 the corresponding real estate mortgage
originally in the amount of P39,500.00 which was later
increased to P48,000.00 covering the aforementioned
property as shown in their mortgage contract, Exhibit
A and 1. From the proceeds of the real estate loan the
mortgagors constructed their residential house on the
mortgaged property and were furnished by the SSS
with a passbook to record the monthly payments of
their amortizations (Exhibits B and B-1). The
mortgagors, plaintiffs herein, complied with their
monthly payments although there were times when
delays were incurred in their monthly payments which
were due every first five (5) days of the month
(Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS
filed an application with the Provincial Sheriff of Rizal
for the foreclosure of the real estate mortgage
executed by the plaintiffs on the ground, among
others:

That the conditions of the mortgage have been broken

since October, 1967 with the default on the part of the
mortgagor to pay in full the installments then due and
payable on the principal debt and the interest
thereon, and, all of the monthly installments due and
payable thereafter up to the present date; ...

That by the terms of the contract herein above

referred to, the indebtedness to the mortgagee as of
June, 1968 amounts to Ten Thousand Seven Hundred
Two Pesos & 58/100 (P10,702.58), Philippine Currency,
excluding interests thereon, plus 20% of the total
amount of the indebtedness as attorney's fees, also
secured by the said mortgage. (Exhibit "C ")

Pursuant to this application for foreclosure, the notice

of the Sheriff's Sale of the mortgaged property was
initially published in the Sunday Chronicle in its issue
of July 14, 1968 announcing the sale at public auction
of the said mortgaged property. After this first
publication of the notice, and before the second
publication of the notice, plaintiff herein thru counsel
formally wrote defendant SSS, a letter dated July 19,
1968 and received on the same date by said entity
demanding, among others, for said defendant SSS to
withdraw the foreclosure and discontinue the
publication of the notice of sale of their property
claiming that plaintiffs were up-to-date in the payment
of their monthly amortizations (Exhibits "E" and "E-1").
In answer to this letter defendant SSS sent a telegram
to Atty. Eriberto Ignacio requesting him to come to
their office for a conference. This telegram was
received by said counsel on July 23, 1968 (Exhibit "G "
and "G-1 "). To this telegraphic answer, Atty. Ignacio
sent a telegraphic reply suggesting instead that a
representative of the SSS be sent to him because his
clients were the aggrieved parties (Exhibit-. "G-2").
Nothing came out of the telegraphic communications
between the parties and the second and third
publications of the notice of foreclosure were
published successively in the Sunday Chronicle in its
issues of July 21 and 28, 1968 (Exhibits "N-1 " and "O-
1"). 4

On July 24, 1968, the Cruz spouses, together with their

daughter Lorna C. Cruz, instituted before the Court of
First Instance of Rizal an action for damages and
attorney's fees against the Social Security System
(SSS) and the Provincial Sheriff of Rizal alleging,
among other things, that they had fully and religiously
paid their monthly amortizations and had not
defaulted in any payment.

In its Answer, with counterclaim, the SSS stressed its

right to foreclose the mortgage executed in its favor
by private respondents by virtue of the automatic
acceleration clause provided in the mortgage contract,
even after private respondents had paid their
amortization installments. In its counterclaim, the SSS
prayed for actual and other damages, as well as
attorney's fees, for malicious and baseless statements
made by private respondents and published in the
Manila Chronicle.

On September 23, 1968, the Trial Court enjoined the

SSS from holding the sale at public auction of private
respondent's property upon their posting of a
P2,000.00 bond executed in favor of the SSS.

The Trial Court rendered judgment on March 5, 1971,

the dispositive portion of which reads:

WHEREFORE, judgment is rendered against defendant

SSS, directing it to pay plaintiffs the following
amounts:

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages;
and
(d) P5,000.00 as attorney's fees.

Defendant SSS shall further pay the costs. 5

In respect of the moral and temperate damages

awarded, the Trial Court stated:

With respect to moral and temperate damages, the

Court holds that the first publication of the notice was
made in good faith but committed by defendant SSS in
gross negligence considering the personnel at its
command and the ease with which verifications of the
actual defaulting mortgagors may be made. On this
initial publication of the notice of foreclosure (Exhibits
"M" and "M-1"), the Court believes plaintiffs are
entitled to the amount of P5,000.00. The second
publication of the notice of foreclosure is another
matter. There was already notice by plaintiffs to
defendant SSS that there was no reason for the
foreclosure of their mortgaged property as they were
never in default. Instead of taking any corrective
measure to rectify its error, defendant SSS adopted a
position of righteousness and followed the same
course of action contending that no error has open
committed. This act of defendant indeed was
deliberate, calculated to cow plaintiffs into
submission, and made obviously with malice. On this
score, the Court believes defendant SSS should pay
and indemnify plaintiffs jointly in the sum of
P10,000.00. Lastly, on the third publication of the
notice of foreclosure, the Court finds this continued
publication an outright disregard for the reputation
and standing of plaintiffs. The publication having
reached a bigger segment of society and also done
with malice and callous disregard for the rights of its
clients, defendant SSS should compensate plaintiffs
jointly in the sum of P20,000.00. All in all, plaintiffs
are entitled to P35,000.00 by way of moral damages. 6

On appeal, the Court of Appeals affirmed the lower

Court judgment in a Decision promulgated on March
14, 1975, but upon SSS's Motion for Reconsideration,
modified the judgment by the elimination of the
P5,000.00 moral damages awarded on account of the
initial publication of the foreclosure notice. To quote:

xxx xxx xxx

After a re-examination of the evidence, we find that

the negligence of the appellant is not so gross as to
warrant moral and temperate damages. The amount of
P5,000.00 should be deducted from the total damages
awarded to the plaintiffs.

WHEREFORE, the decision promulgated on March 14,

1975 is hereby maintained with the sole modification
that the amount of P5,000.00 awarded on account of
the initial publication is eliminated so that the said
amount should be deducted from the total damages
awarded to the plaintiffs.

SO ORDERED. 7

In so far as exemplary and corrective damages are

concerned, the Court of Appeals had this to say.

The Court finds no extenuating circumstances to

mitigate the irresponsible action of defendant SSS and
for this reason, said defendant should pay exemplary
and corrective damages in the sum of P10,000.00 ...

Upon denial of its Motion for Reconsideration by

respondent Court, the SSS filed this Petition alleging
.

I. Respondent Court of Appeals erred in not finding

that under Condition No. 10 of the Mortgage contract,
which is a self-executing, automatic acceleration
clause, all amortizations and obligations of the
mortgagors become ipso jure due and demandable if
they at any time fail to pay any of the amortizations or
interest when due;

II. Respondent Court of Appeals erred in holding that

a previous notice to the mortgagor was necessary
before the mortgage could be foreclosed;

III. Respondent Court of Appeals erred in not holding

that, assuming that there was negligence committed
by subordinate employees of the SSS in staking
'Socorro C. Cruz' for 'Socorro J. Cruz' as the defaulting
borrower, the fault cannot be attributed to the SSS,
much less should the SSS be made liable for their acts
done without its knowledge and authority;

IV. Respondent Court of Appeals erred in holding that

there is no extenuating circumstance to mitigate the
liability of petitioner;

V. Respondent Court of Appeals erred in not holding

that petitioner is not liable for damages not being a
profit-oriented governmental institution but one
performing governmental functions petitions. 8

For failure of the First Division to obtain concurrence

of the five remaining members (Justices Plana and
Gutierrez, Jr. could take no part), the case was
referred to the Court en banc.

The pivotal issues raised are: (1) whether the Cruz

spouses had, in fact, violated their real estate
mortgage contract with the SSS as would have
warranted the publications of the notices of
foreclosure; and (2) whether or not the SSS can be
held liable for damages.

The first issue revolves around the question of

appreciation of the evidence by the lower Court as
concurred in by the Court of Appeals. The appraisal
should be left undisturbed following the general rule
that factual findings of the Court of Appeals are not
subject to review by this Court, the present case not
being one of the recognized exceptions to that rule. 9
Accordingly, we are upholding the finding of the Court
of Appeals that the SSS application for foreclosure was
not justified, particularly considering that the real
estate loan of P48,000.00 obtained by the Cruzes in
March, 1963, was payable in 15 years with a monthly
amortization of P425.18, and that as of July 14, 1968,
the date of the first notice of foreclosure and sale, the
outstanding obligation was still P38,875.06 and not
P10,701.58, as published.

The appellant was not justified in applying for the

extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses, David B. Cruz
and Socorro Concio-Cruz, Exh. 'A'. While it is true that
the payments of the monthly installments were
previously not regular, it is a fact that as of June 30,
1968 the appellee, David B. Cruz and Socorro Concio-
Cruz were up-to-date and current in the payment of
their monthly installments. Having accepted the prior
late payments of the monthly installments, the
appellant could no longer suddenly and without prior
notice to the mortgagors apply for the extra-judicial
foreclosure of the mortgage in July 1968. 10

A similar conclusion was reached by the trial Court.

Defendant's contention that there was clerical error in

the amount of the mortgage loan due as of June, 1968
as per their application for foreclosure of real estate
mortgage is a naive attempt to justify an untenable
position. As a matter of fact plaintiffs were able to
establish that the mortgagor who actually committed
the violation of her mortgage loan was a certain
'Socorro J. Cruz' who was in arrears in the amount of
P10,702.58 at the time the application for foreclosure
of real estate mortgage was filed Exhibits "BB" and
"EE"). Defendant mortgagee must have committed an
error in picking the record of plaintiff 'Socorro C. Cruz'
instead of the record of 'Socorro J. Cruz'. Defendant
SSS, however, denied having committed any error and
insists that their motion for foreclosure covers the
real estate mortgage of spouses David E. Cruz and
Socorro C. Cruz. This Court is nonetheless convinced
that the foreclosure proceedings should have been on
the real estate mortgage of 'Socorro J. Cruz' who was
in arrears as of June, 1968 in the amount of
P10,701.58, the exact amount mentioned in the
application for foreclosure of real estate mortgage by
defendant SSS. 11

We come now to the amendability of the SSS to

judicial action and legal responsibility for its acts. To
our minds, there should be no question on this score
considering that the SSS is a juridical entity with a
personality of its own. 12 It has corporate powers
separate and distinct from the Government. 13 SSS'
own organic act specifically provides that it can sue
and be sued in Court. 14 These words "sue and be
sued" embrace all civil process incident to a legal
action. 15 So that, even assuming that the SSS, as it
claims, enjoys immunity from suit as an entity
performing governmental functions, by virtue of the
explicit provision of the aforecited enabling law, the
Government must be deemed to have waived
immunity in respect of the SSS, although it does not
thereby concede its liability. That statutoy law has
given to the private-citizen a remedy for the
enforcement and protection of his rights. The SSS
thereby has been required to submit to the
jurisdiction of the Courts, subject to its right to
interpose any lawful defense. Whether the SSS
performs governmental or proprietary functions thus
becomes unnecessary to belabor. For by that waiver, a
private citizen may bring a suit against it for varied
objectives, such as, in this case, to obtain
compensation in damages arising from contract 16
and even for tort.

A recent case squarely in point anent the principle,

involving the National Power Corporation, is that of
Rayo vs. Court of First Instance of Bulacan, 110 SCRA
457 (1981), wherein this Court, speaking through Mr.
Justice Vicente Abad Santos, ruled:

It is not necessary to write an extended dissertation

on whether or not the NPC performs a governmental
function with respect to the management and
operation of the Angat Dam. It is sufficient to say that
the government has organized a private corporation,
put money in it and has snowed it to sue and be sued
in any court under its charter. (R.A. No. 6395, Sec.
3[d]). As a government owned and controlled
corporation, it has a personality of its own, distinct
and separate from that of the Government. (See
National Shipyards and Steel Corp. vs. CIR, et al., L-
17874, August 31, 1963, 8 SCRA 78 1). Moreover, the
charter provision that the NPC can 'sue and be sued in
any court' is without qualification on the cause of
action and accordingly it can include a tort claim such
as the one instituted by the petitioners.

The proposition that the SSS is not profit-oriented was

rejected in the case of SSS Employees' Association vs.
Hon. Soriano. 17 But even conceding that the SSS is
not, in the main, operated for profit, it cannot be
denied that, in so far as contractual loan agreements
with private parties are concerned, the SSS enters into
them for profit considering that the borrowers pay
interest, which is money paid for the use of money,
plus other charges.

In so far as it is argued that to hold the SSS liable for

damages would be to deplete the benefit funds
available for its covered members, suffice it to say,
that expenditures of the System are not confined to
the payment of social security benefits. For example,
the System also has to pay the salaries of its
personnel. Moreover, drawing a parallel with the
NASSCO and the Virginia Tobacco Administration,
whose funds are in the nature of public funds, it has
been held that those funds may even be made the
object of a notice of garnishment. 18

What is of paramount importance in this controversy

is that an injustice is not perpetrated and that when
damage is caused a citizen, the latter should have a
right of redress particularly when it arises from a
purely private and contractual relationship between
said individual and the System.
We find, however, that under the circumstances of the
case, the SSS cannot be held liable for the damages as
awarded by the Trial Court and the Appellate Tribunal.

As basis for the award of actual damages, the Trial

Court relied on the alleged expenses incurred by
private respondents for the wardrobe they were
supposed to use during their trip abroad, which was
allegedly aborted because of the filing of the
foreclosure application by the SSS. We find the
foregoing too speculative. There could have been
other reasons why the trip did not materialize.
Moreover, it appears that private respondents'
passports had already expired but that they made no
effort to secure new passports. 19 Nor did they secure
the necessary visas from the local consulates of
foreign countries they intended to visit for their trip
abroad. 20

Nor can the SSS be held liable for moral and

temperate damages. As concluded by the Court of
Appeals "the negligence of the appellant is not so
gross as to warrant moral and temperate damages",
21 except that, said Court reduced those damages by
only P5,000.00 instead of eliminating them. Neither
can we agree with the findings of both the Trial Court
and respondent Court that the SSS had acted
maliciously or in bad faith. The SSS was of the belief
that it was acting in the legitimate exercise of its right
under the mortgage contract in the face of irregular
payments made by private respondents, and placed
reliance on the automatic acceleration clause in the
contract. The filing alone of the foreclosure
application should not be a ground for an award of
moral damages in the same way that a clearly
unfounded civil action is not among the grounds for
moral damages. 22

With the ruling out of compensatory, moral and

temperate damages, the grant of exemplary or
corrective damages should also be set aside. 23
Moreover, no proof has been submitted that the SSS
had acted in a wanton, reckless and oppressive
manner. 24

However, as found by both the Trial and Appellate

Courts, there was clear negligence on the part of SSS
when they mistook the loan account of Socorro J. Cruz
for that of private respondent Socorro C. Cruz. Its
attention was called to the error, but it adamantly
refused to acknowledge its mistake. The SSS can be
held liable for nominal damages. This type of damages
is not for the purpose of indemnifying private
respondents for any loss suffered by them but to
vindicate or recognize their rights which have been
violated or invaded by petitioner SSS. 25

The circumstances of the case also justify the award of

attorney's fees, as granted by the Trial and Appellate
Courts, particularly considering that private
respondents were compelled to litigate for the
prosecution of their interests. 26

WHEREFORE, the judgment sought to be reviewed is

hereby modified in that petitioner SSS shall pay
private respondents: P3,000.00 as nominal damages;
and P5,000.00 as attorney's fees.

Costs against petitioner Social Security System.

SO ORDERED.

Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De

Castro, Vasquez and Relova, JJ., concur.

Fernando, C.J., concurs in the result.

Plana, Escolin ** and Gutierrez, Jr., *** JJ., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified

under arts. 2219 and 2220 of the Civil Code. I vote to
award the private respondents the additional sum of
P2,000 as litigation expenses.

MAKASIAR, J., dissenting:

I dissent.
I

To begin with, the negligent acts committed by the

officers and employees of the petitioner, Social
Security System, amounted to not simply a contractual
breach but tort. For the record is clear that
petitioner's officers and employees were grossly
negligent bordering on malice or bad faith in applying
for the extrajudicial foreclosure of the mortgage
contract executed in its favor by the spouses David B.
Cruz and Socorro Concio-Cruz, and that even after
private respondents had brought to the attention of
the petitioner's officers and employees their mistake,
they insisted on their course of action, instead of
making the necessary rectifications, which grossly
negligent and oppressive acts caused damage to
private respondents. As found by the Court of
Appeals:

The appellant was not justified in applying for the

extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and
Socorro Concio-Cruz, Exh. 'A'. While it is true that the
payments of the monthly installments were previously
not regular, it is a fact that as of June 30, 1968 the
appellees, David B. Cruz and Socorro Concio-Cruz were
up-to-date and current in the payment of their
monthly installments. Having accepted the prior late
payments of the monthly installments, the appellant
could no longer suddenly and without prior notice to
the mortgagors apply for the extra-judicial foreclosure
of the mortgage in July, 1968.

It is obvious that the appellant applied for the extra-

judicial foreclosure of the mortgage in question
because of the gross negligence of its employees. This
negligence was aggravated when the appellant, after
being informed of the error, insisted on proceeding
with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these
violations are either too minor to warrant the drastic
step of foreclosure or were deemed condoned when
the appellant accepted late payments prior to June 30,
1968. Hence the trial court did not err in concluding
that 'the act of defendant indeed was deliberate,
calculated to cow plaintiffs into submission and made
obviously with malice (p. 54, rec.; emphasis supplied).
The circumstance that there was a pre-existing
contractual relationship between the herein
contending parties, does not bar the tort liability of
the officers and employees of petitioner; because tort
liability may still exist despite presence of contractual
relations as the act that breaks the contract may also
be a tort, as in this case (Air France vs. Carrascoso, L-
21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson
& Castillo vs. Bank of the Philippine Islands, L-24837,
June 27, 1968, 23 SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the

applicable provision of law is Article 2180 in relation
to Article 2176 of the New Civil Code. Under Article
2180, ... The State is responsible in like manner when
it acts through a special agent; but not when the
damage has been caused by the official to whom the
task done properly pertains, in which case what is
provided in Article 2176 shall be applicable.

In the case at bar, the petitioner Social Security

System as the instrumentality of the State to
implement the social justice guarantee enunciated in
the Constitution, did not act through a special agent.
Hence, the Social Security System cannot be liable for
the damages caused by the tortious acts of its officers
and employees while in the performance of their
regular functions. The remedy therefore of private
respondents is to proceed against the guilty officers
and employees of petitioner Social Security System as
mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs.

Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article

1903 to the case wherein it acts through a special
agent, ... so that in representation of the state and
being bound to act as an agent thereof, he executes
the trust confided to him. This concept does not apply
to any executive agent who is an employee of the
active administration and who on his own
responsibility performs the functions which are
inherent in and naturally pertain to his office and
which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not

invoked by the petitioner as a defense, this does not
prevent this Tribunal from taking cognizance of the
same. For as stressed in Ortigas, Jr. vs. Lufthansa
German Airlines (June 30, 1975, 64 SCRA 610, 633),
failure to assign a defense as an error on appeal is a
pure technicality that should not prevail over the
substantial issues in a controversy as the same would
not serve the interest of justice, and "this Court is
clothed with ample authority to review matters even if
they are not assigned as errors in the appeal, if it
finds that our consideration is necessary in arriving at
a just decision of the case" (citing Saura & Export Co.,
Inc., May 31, 1963, 8 SCRA 143). Further, We have,
time and again, re-stated the rule that the Supreme
Court can suspend its own rules to serve the ends of
justice (Jose vs. C.A., et al., L-38581, March 31, 1976;
Phil. Blooming Mills Employees Organization, et al. vs.
PBM Co., et al., L-31195, 51 SCRA 189, 215; Ronquillo
vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313;
Ordoveza vs. Raymundo, 63 Phil. 275).

The principle that a defense not expressly pleaded is

deemed waived unless such failure is satisfactorily
explained, is merely a general rule which is subject to
exceptions, among which is when the Court can take
judicial notice of such defense. In this case, We can
take judicial notice of the law, like Article 2180 of the
New Civil Code. It must be emphasized that the courts
have as much duty as the Commission on August to
protect the public treasury from being mulcted or
raided illegally. And this becomes more imperative
considering that a substantial portion of the funds of
the petitioner comes from the contributions of-
employees and workers in private firms and is
therefore in the nature of a trust fund to be expended
only for their welfare and benefit, with the
government merely giving some subsidy. Any amount
of damages illegally assessed against the Social
Security System will deplete the benefit funds
available to its covered members for the contingencies
of sickness, disability, retirement or death.

It cannot likewise be seriously questioned that the

Social Security System is comprehended in the
definition in Section 2 of the Revised Administrative
Code of the term "Government of the Republic of the
Philippines ... which refers to the corporate
governmental entity through which the functions of
government are exercised throughout the Philippine
Islands, including, save as the contrary appears from
the context, the various arms through which political
authority is made effective in the Philippines, whether
pertaining to the central Government or to the
provincial or municipal branches or other forms of
local government." And the second paragraph of said
Section 2 provides that the term "national
government" refers to the central government as
distinguished from the different forms of local
government. There is nothing therein nor in the Social
Security Act, as amended, intimating that the national
government does not include the Social Security
System.

It is true that the Social Security System has a

corporate or juridical personality of its own. But this
does not remove it as an integral part of the national
or central government. For such corporate or juridical
personality invested in it is more for facility and
convenience in the attainment of the objectives for
which it was created by the legislative. Such vesting
of corporate or juridical personality in the Social
Security System was never intended to destroy the
shield from liability afforded it as an integral part of
the State or Government by Article 2180 of the New
Civil Code. Relatedly, such corporate or juridical
personality of the Social Security System and the
express provision of the law creating the same that it
can sue and be sued, have the effect of merely
waiving its immunity from suit as an entity performing
governmental functions. Such waiver of its immunity
from suit is not an admission of its liability. Such
waiver merely allows a private citizen a remedy for
the enforcement and protection of his rights, but
always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the
New Civil Code as aforestated. In other words, such
waiver of immunity from suit is not equivalent to
instant liability. The Social Security System can only
be held liable for damages arising from the tortious
acts of its officers and employees only if it acts
through a special agent, which is not true in the case
at bar.

II

It must be finally stressed that the Social Security

System cannot be liable for damages because it is an
entity of government performing governmental
functions; hence, not profit-oriented. The 1963
doctrine in SSSEA vs. Soriano (7 SCRA 1016 [1963])
that the system is exercising proprietary functions, is
no longer controlling.

For in 1969, the distinction between constituent and

ministrant functions of the Government as laid down
in the case of Bacani vs. Nacoco (100 Phil. 468 [1956])
has been obliterated. In the case of Agricultural Credit
and Cooperative Financing Administration (ACCFA) vs.
Confederation of Unions in Government Corporations
and Offices (CUGCO) [30 SCRA 649 (1969)], this Court
in re-examining the aforesaid Bacani ruling observed
that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in
governmental functions in favor of the more
responsive postulate that the growing complexities of
modern society have rendered the traditional
classification of government functions unrealistic and
obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however,

have rendered this traditional classification of the
functions of government quite unrealistic, not to say
obsolete. The areas which used to be left to private
enterprise and initiative and which the government
was called upon to enter optionally, and only 'because
it was better equipped to administer for the public
welfare than is any private individual or groups of
individuals,' continue to lose their well-defined
boundaries and to be absorbed within activities that
the government must have undertaken in its
sovereign capacity if it is to meet the increasing social
challenges of the times. Here as almost everywhere,
else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this
development was envisioned indeed adopted as a
national policy, by the Constitution itself in its
declaration of principle concerning the promotion of
social justice.

Chief Justice Fernando, then Associate Justice, in his

concurring opinion stressed that:

The decision reached by this Court so ably given

expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision,
represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on
what activities partake of a nature that is
governmental. Of even greater significance, there is a
definite rejection of the 'constituent-ministrant'
criterion of governmental functions, followed in Bacani
vs. National Coconut Corporation. That indeed is cause
for gratification. For me at least, there is again full
adherence to the basic philosophy of the Constitution
as to the extensive and vast power lodged in our
government to cope with the social and economic
problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of
the court, distinguished by its high quality of juristic
craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the

government is freed from the compulsion exerted by
the Bacani doctrine of the 'constituent-ministrant' test
as a criterion for the type of activity in which it may
engage. It constricting effect is consigned to oblivion.
No doubts or misgivings need assail us that
government efforts to promote the public wealth
whether through regulatory legislation of vast scope
and emplitude or through the undertaking of business
activities, would have to face a searching and rigorous
scrutiny. It is clear that their legitimacy cannot be
challenged on the ground alone of their being
offensive to the implications of the laissez- faire
concept. Unless there be a repugnancy then to the
limitations expressly set forth in the Constitution to
protect individual rights, the government enjoys a
much wider latitude of action as to the means it
chooses to cope with grave social and economic
problems that urgently press for solution. For me, at
least, that is to manifest deference to the philosophy
of our fundamental law. Hence my full concurrence, as
announced at the outset. (pp- 682-683, emphasis
supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the

well being and economic security of all the people
should be the concern of the State. (Art. II,
Declaration of Principles).
The present 1973 Constitution provides under its
Declaration of Principles and State Policies (Article
11), that

The State shall promote social justice to ensure the

dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the
acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse
property ownership and profits. (Section 6);

and

The State shall establish, maintain, and ensure

adequate social services in the field of education,
health, housing, employment, welfare, and social
security to guarantee the enjoyment by the people of
a decent standard of living. (Section 7).

The strictly governmental function of the SSS is

spelled out unmistakably in Section 2 of R.A. No. 1161
entitled "The Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of

the Philippines to develop, establish gradually and
perfect a social security system which shall be
suitable to the needs of the people throughout the
Philippines, and shall provide protection against the
hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that

became R. A. No. 1161, the Social Security Act of
1954:

It is a recognized principle in free societies that the

State must help its citizens to make provision for
emergencies beyond their control, such as
unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or
lesser degree by means of social security legislation in
a variety of forms.

And this Court, in Roman Catholic Archbishop of

Manila vs. SSS (L-15045, 1 SCRA 10 [1961]), declared
that "the Social Security Law was enacted pursuant to
the 'policy of the Republic to develop, establish
gradually and perfect a social security system which
shall be suitable to the needs of the people
throughout the Philippines and provide protection to
employees against the hazards of disability, sickness,
old age and death' (Sec. 2, Republic Act No. 1161, as
amended). Such enactment is a legitimate exercise of
the police power. It affords protection to labor,
especially to working women and minors, and is in full
accord with the constitutional provisions on the
'promotion of social justice to insure the well being
and economic security of all the people.

It is interesting to note that aforesaid pronouncement

of this Court was incorporated in the Social Security
Act (R.A. 1161) by Presidential Decree No. 24 issued
on October 19, 1972. Thus, as amended by said
Decree, its section 2 now reads: "It is the policy of the
Republic of the Philippines to establish, develop,
promote and perfect a sound viable 'tax exempt social
security service suitable to the needs of the people
throughout the Philippines, which shall provide to
covered employees and their families protection
against the hazards of disability, sickness, old age,
and death, with a view to promoting their well-being
in the spirit of social justice" (emphasis supplied). And
one of its whereases expressly states that "the
measure is necessary to effect reforms in SSS
operations and to revitalize its structure as an
important agency in the promotion of the social and
economic development programs of the
Government; ... (emphasis supplied).

Considering therefore that the establishment and

maintenance of an adequate social security and social
services, which the Social Security System seeks to
perform and achieve are functions pursuant to the
basic constitutional mandate directing the State to
promote "social justice to insure the well-being and
economic security of all the people" (1935
Constitution) or "to insure the dignity, welfare and
security of all the people" as well as the police power
of the State, the inescapable conclusion is that the
function of the SSS is and has always been
governmental.

It thus becomes clear that petitioner Social Security

System, under the obtaining facts and applicable laws
in the case, is not liable for the damages caused to
private respondents by the tortious acts of its officers
and employees to whom the task done properly
pertained.
A contrary rule as that enunciated in the majority
opinion invites conspiracy between officials and
employees of the Social Security System and private
parties to create financial liabilities against the
System. Its funds are public funds and more
importantly trust funds, which must be protected.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified

under arts. 2219 and 2220 of the Civil Code. I vote to
award the private respondents the additional sum of
P2,000 as litigation expenses.

MAKASIAR, J., dissenting:

I dissent.

To begin with, the negligent acts committed by the

officers and employees of the petitioner, Social
Security System, amounted to not simply a contractual
breach but tort. For the record is clear that
petitioner's officers and employees were grossly
negligent bordering on malice or bad faith in applying
for the extrajudicial foreclosure of the mortgage
contract executed in its favor by the spouses David B.
Cruz and Socorro Concio-Cruz, and that even after
private respondents had brought to the attention of
the petitioner's officers and employees their mistake,
they insisted on their course of action, instead of
making the necessary rectifications, which grossly
negligent and oppressive acts caused damage to
private respondents. As found by the Court of
Appeals:

The appellant was not justified in applying for the

extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and
Socorro Concio-Cruz, Exh. 'A'. While it is true that the
payments of the monthly installments were previously
not regular, it is a fact that as of June 30, 1968 the
appellees, David B. Cruz and Socorro Concio-Cruz were
up-to-date and current in the payment of their
monthly installments. Having accepted the prior late
payments of the monthly installments, the appellant
could no longer suddenly and without prior notice to
the mortgagors apply for the extra-judicial foreclosure
of the mortgage in July, 1968.

It is obvious that the appellant applied for the extra-

judicial foreclosure of the mortgage in question
because of the gross negligence of its employees. This
negligence was aggravated when the appellant, after
being informed of the error, insisted on proceeding
with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these
violations are either too minor to warrant the drastic
step of foreclosure or were deemed condoned when
the appellant accepted late payments prior to June 30,
1968. Hence the trial court did not err in concluding
that 'the act of defendant indeed was deliberate,
calculated to cow plaintiffs into submission and made
obviously with malice (p. 54, rec.; emphasis supplied).

The circumstance that there was a pre-existing

contractual relationship between the herein
contending parties, does not bar the tort liability of
the officers and employees of petitioner; because tort
liability may still exist despite presence of contractual
relations as the act that breaks the contract may also
be a tort, as in this case (Air France vs. Carrascoso, L-
21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson
& Castillo vs. Bank of the Philippine Islands, L-24837,
June 27, 1968, 23 SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the

applicable provision of law is Article 2180 in relation
to Article 2176 of the New Civil Code. Under Article
2180, ... The State is responsible in like manner when
it acts through a special agent; but not when the
damage has been caused by the official to whom the
task done properly pertains, in which case what is
provided in Article 2176 shall be applicable.

In the case at bar, the petitioner Social Security

System as the instrumentality of the State to
implement the social justice guarantee enunciated in
the Constitution, did not act through a special agent.
Hence, the Social Security System cannot be liable for
the damages caused by the tortious acts of its officers
and employees while in the performance of their
regular functions. The remedy therefore of private
respondents is to proceed against the guilty officers
and employees of petitioner Social Security System as
mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs.

Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article

1903 to the case wherein it acts through a special
agent, ... so that in representation of the state and
being bound to act as an agent thereof, he executes
the trust confided to him. This concept does not apply
to any executive agent who is an employee of the
active administration and who on his own
responsibility performs the functions which are
inherent in and naturally pertain to his office and
which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not

invoked by the petitioner as a defense, this does not
prevent this Tribunal from taking cognizance of the
same. For as stressed in Ortigas, Jr. vs. Lufthansa
German Airlines (June 30, 1975, 64 SCRA 610, 633),
failure to assign a defense as an error on appeal is a
pure technicality that should not prevail over the
substantial issues in a controversy as the same would
not serve the interest of justice, and "this Court is
clothed with ample authority to review matters even if
they are not assigned as errors in the appeal, if it
finds that our consideration is necessary in arriving at
a just decision of the case" (citing Saura & Export Co.,
Inc., May 31, 1963, 8 SCRA 143). Further, We have,
time and again, re-stated the rule that the Supreme
Court can suspend its own rules to serve the ends of
justice (Jose vs. C.A., et al., L-38581, March 31, 1976;
Phil. Blooming Mills Employees Organization, et al. vs.
PBM Co., et al., L-31195, 51 SCRA 189, 215; Ronquillo
vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313;
Ordoveza vs. Raymundo, 63 Phil. 275).

The principle that a defense not expressly pleaded is

deemed waived unless such failure is satisfactorily
explained, is merely a general rule which is subject to
exceptions, among which is when the Court can take
judicial notice of such defense. In this case, We can
take judicial notice of the law, like Article 2180 of the
New Civil Code. It must be emphasized that the courts
have as much duty as the Commission on August to
protect the public treasury from being mulcted or
raided illegally. And this becomes more imperative
considering that a substantial portion of the funds of
the petitioner comes from the contributions of-
employees and workers in private firms and is
therefore in the nature of a trust fund to be expended
only for their welfare and benefit, with the
government merely giving some subsidy. Any amount
of damages illegally assessed against the Social
Security System will deplete the benefit funds
available to its covered members for the contingencies
of sickness, disability, retirement or death.

It cannot likewise be seriously questioned that the

Social Security System is comprehended in the
definition in Section 2 of the Revised Administrative
Code of the term "Government of the Republic of the
Philippines ... which refers to the corporate
governmental entity through which the functions of
government are exercised throughout the Philippine
Islands, including, save as the contrary appears from
the context, the various arms through which political
authority is made effective in the Philippines, whether
pertaining to the central Government or to the
provincial or municipal branches or other forms of
local government." And the second paragraph of said
Section 2 provides that the term "national
government" refers to the central government as
distinguished from the different forms of local
government. There is nothing therein nor in the Social
Security Act, as amended, intimating that the national
government does not include the Social Security
System.

It is true that the Social Security System has a

corporate or juridical personality of its own. But this
does not remove it as an integral part of the national
or central government. For such corporate or juridical
personality invested in it is more for facility and
convenience in the attainment of the objectives for
which it was created by the legislative. Such vesting
of corporate or juridical personality in the Social
Security System was never intended to destroy the
shield from liability afforded it as an integral part of
the State or Government by Article 2180 of the New
Civil Code. Relatedly, such corporate or juridical
personality of the Social Security System and the
express provision of the law creating the same that it
can sue and be sued, have the effect of merely
waiving its immunity from suit as an entity performing
governmental functions. Such waiver of its immunity
from suit is not an admission of its liability. Such
waiver merely allows a private citizen a remedy for
the enforcement and protection of his rights, but
always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the
New Civil Code as aforestated. In other words, such
waiver of immunity from suit is not equivalent to
instant liability. The Social Security System can only
be held liable for damages arising from the tortious
acts of its officers and employees only if it acts
through a special agent, which is not true in the case
at bar.

II

It must be finally stressed that the Social Security

System cannot be liable for damages because it is an
entity of government performing governmental
functions; hence, not profit-oriented. The 1963
doctrine in SSSEA vs. Soriano (7 SCRA 1016 [1963])
that the system is exercising proprietary functions, is
no longer controlling.

For in 1969, the distinction between constituent and

ministrant functions of the Government as laid down
in the case of Bacani vs. Nacoco (100 Phil. 468 [1956])
has been obliterated. In the case of Agricultural Credit
and Cooperative Financing Administration (ACCFA) vs.
Confederation of Unions in Government Corporations
and Offices (CUGCO) [30 SCRA 649 (1969)], this Court
in re-examining the aforesaid Bacani ruling observed
that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in
governmental functions in favor of the more
responsive postulate that the growing complexities of
modern society have rendered the traditional
classification of government functions unrealistic and
obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however,

have rendered this traditional classification of the
functions of government quite unrealistic, not to say
obsolete. The areas which used to be left to private
enterprise and initiative and which the government
was called upon to enter optionally, and only 'because
it was better equipped to administer for the public
welfare than is any private individual or groups of
individuals,' continue to lose their well-defined
boundaries and to be absorbed within activities that
the government must have undertaken in its
sovereign capacity if it is to meet the increasing social
challenges of the times. Here as almost everywhere,
else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this
development was envisioned indeed adopted as a
national policy, by the Constitution itself in its
declaration of principle concerning the promotion of
social justice.

Chief Justice Fernando, then Associate Justice, in his

concurring opinion stressed that:

The decision reached by this Court so ably given

expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision,
represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on
what activities partake of a nature that is
governmental. Of even greater significance, there is a
definite rejection of the 'constituent-ministrant'
criterion of governmental functions, followed in Bacani
vs. National Coconut Corporation. That indeed is cause
for gratification. For me at least, there is again full
adherence to the basic philosophy of the Constitution
as to the extensive and vast power lodged in our
government to cope with the social and economic
problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of
the court, distinguished by its high quality of juristic
craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the

government is freed from the compulsion exerted by
the Bacani doctrine of the 'constituent-ministrant' test
as a criterion for the type of activity in which it may
engage. It constricting effect is consigned to oblivion.
No doubts or misgivings need assail us that
government efforts to promote the public wealth
whether through regulatory legislation of vast scope
and emplitude or through the undertaking of business
activities, would have to face a searching and rigorous
scrutiny. It is clear that their legitimacy cannot be
challenged on the ground alone of their being
offensive to the implications of the laissez- faire
concept. Unless there be a repugnancy then to the
limitations expressly set forth in the Constitution to
protect individual rights, the government enjoys a
much wider latitude of action as to the means it
chooses to cope with grave social and economic
problems that urgently press for solution. For me, at
least, that is to manifest deference to the philosophy
of our fundamental law. Hence my full concurrence, as
announced at the outset. (pp- 682-683, emphasis
supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the

well being and economic security of all the people
should be the concern of the State. (Art. II,
Declaration of Principles).

The present 1973 Constitution provides under its

Declaration of Principles and State Policies (Article
11), that

The State shall promote social justice to ensure the

dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the
acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse
property ownership and profits. (Section 6);

and

The State shall establish, maintain, and ensure

adequate social services in the field of education,
health, housing, employment, welfare, and social
security to guarantee the enjoyment by the people of
a decent standard of living. (Section 7).

The strictly governmental function of the SSS is

spelled out unmistakably in Section 2 of R.A. No. 1161
entitled "The Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of

the Philippines to develop, establish gradually and
perfect a social security system which shall be
suitable to the needs of the people throughout the
Philippines, and shall provide protection against the
hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that

became R. A. No. 1161, the Social Security Act of
1954:

It is a recognized principle in free societies that the

State must help its citizens to make provision for
emergencies beyond their control, such as
unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or
lesser degree by means of social security legislation in
a variety of forms.

And this Court, in Roman Catholic Archbishop of

Manila vs. SSS (L-15045, 1 SCRA 10 [1961]), declared
that "the Social Security Law was enacted pursuant to
the 'policy of the Republic to develop, establish
gradually and perfect a social security system which
shall be suitable to the needs of the people
throughout the Philippines and provide protection to
employees against the hazards of disability, sickness,
old age and death' (Sec. 2, Republic Act No. 1161, as
amended). Such enactment is a legitimate exercise of
the police power. It affords protection to labor,
especially to working women and minors, and is in full
accord with the constitutional provisions on the
'promotion of social justice to insure the well being
and economic security of all the people.

It is interesting to note that aforesaid pronouncement

of this Court was incorporated in the Social Security
Act (R.A. 1161) by Presidential Decree No. 24 issued
on October 19, 1972. Thus, as amended by said
Decree, its section 2 now reads: "It is the policy of the
Republic of the Philippines to establish, develop,
promote and perfect a sound viable 'tax exempt social
security service suitable to the needs of the people
throughout the Philippines, which shall provide to
covered employees and their families protection
against the hazards of disability, sickness, old age,
and death, with a view to promoting their well-being
in the spirit of social justice" (emphasis supplied). And
one of its whereases expressly states that "the
measure is necessary to effect reforms in SSS
operations and to revitalize its structure as an
important agency in the promotion of the social and
economic development programs of the
Government; ... (emphasis supplied).

Considering therefore that the establishment and

maintenance of an adequate social security and social
services, which the Social Security System seeks to
perform and achieve are functions pursuant to the
basic constitutional mandate directing the State to
promote "social justice to insure the well-being and
economic security of all the people" (1935
Constitution) or "to insure the dignity, welfare and
security of all the people" as well as the police power
of the State, the inescapable conclusion is that the
function of the SSS is and has always been
governmental.

It thus becomes clear that petitioner Social Security

System, under the obtaining facts and applicable laws
in the case, is not liable for the damages caused to
private respondents by the tortious acts of its officers
and employees to whom the task done properly
pertained.

A contrary rule as that enunciated in the majority

opinion invites conspiracy between officials and
employees of the Social Security System and private
parties to create financial liabilities against the
System. Its funds are public funds and more
importantly trust funds, which must be protected.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-55273-83 December 19, 1981

GAUDENCIO RAYO, BIENVINIDO PASCUAL, TOMAS

MANUEL, MARIANO CRUZ, PEDRO BARTOLOME,
BERNARDINO CRUZ JOSE PALAD , LUCIO FAJARDO,
FRANCISCO RAYOS, ANGEL TORRES, NORBERTO
TORRES, RODELIO JOAQUIN, PEDRO AQUINO,
APOLINARIO BARTOLOME, MAMERTO BERNARDO,
CIRIACO CASTILLO, GREGORIO CRUZ, SIMEON
ESTRELLA, EPIFANIO MARCELO, HERMOGENES SAN
PEDRO, JUAN SANTOS, ELIZABETH ABAN, MARCELINA
BERNABE, BUENAVENTURA CRUZ, ANTONIO MENESES,
ROMAN SAN PEDRO, LOPEZ ESPINOSA, GODOFREDO
PUNZAL, JULIANA GARCIA, LEBERATO SARMIENTO,
INOCENCIO DE LEON, CARLOS CORREA, REYNALDO
CASIMIRO, ANTONIO GENER, GAUDENCIO CASTILLO,
MATIAS PEREZ, CRISPINIANO TORRES, CRESENCIO
CRUZ, PROTACIO BERNABE, MARIANO ANDRES,
CRISOSTOMO CRUZ, MARCOS EUSTAQUIO, PABLO
LEGASPI, VICENTE PASCUAL, ALEJANDRA SISON,
EUFRACIO TORRES, ROGELIO BARTOLOME, RODOLFO
BERNARDO, APOLONIO CASTILLO, MARCELINO
DALMACIO, EUTIQUIO LEGASPI, LORENZO LUCIANO and
GREGORIO PALAD, petitioners,
vs.
COURT OF FIRST INSTANCE OF BULACAN, BRANCH V,
STA. MARIA, and NATIONAL POWER CORPORATION,
respondents.

ABAD SANTOS, J.:

The relevant antecedents of this case are narrated in

the petition and have not been controverted, namely:

3. At about midnight on October 26, 1978, during the

height of that infamous typhoon "KADING" the
respondent corporation, acting through its plant
superintendent, Benjamin Chavez, opened or caused
to be opened simultaneously all the three floodgates
of the Angat Dam. And as a direct and immediate
result of the sudden, precipitate and simultaneous
opening of said floodgates several towns in Bulacan
were inundated. Hardest-hit was Norzagaray. About a
hundred of its residents died or were reported to have
died and properties worth million of pesos destroyed
or washed away. This flood was unprecedented in
Norzagaray.

4. Petitioners, who were among the many

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

5. Respondent corporation filed separate answers to

each of these eleven complaints. Apart from
traversing the material averments in the complaints
and setting forth counterclaims for damages
respondent corporation invoked in each answer a
special and affirmative defense that "in the operation
of the Angat Dam," it is "performing a purely
governmental function", hence it "can not be sued
without the express consent of the State." ...

6. On motion of the respondent corporation a

preliminary hearing was held on its affirmative
defense as though a motion to dismiss were filed.
Petitioners opposed the prayer for dismissal and
contended that respondent corporation is performing
not governmental but merely proprietary functions
and that under its own organic act, Section 3 (d) of
Republic Act No. 6395, it can sue and be sued in any
court. ...

7. On July 29, 1980 petitioners received a copy of the

questioned order of the respondent Court dated
December 21, 1979 dismissing all their complaints as
against the respondent corporation thereby leaving
the superintendent of the Angat Dam, Benjamin
Chavez, as the sole party-defendant. ...

8. On August 7, 1980 petitioners filed with the

respondent Court a motion for reconsideration of the
questioned order of dismissal. ...

9. The respondent Court denied petitioners' motion

for reconsideration in its order dated October 3,
1980. ... Hence, the present petition for review on
certiorari under Republic Act No. 5440. (Rollo, pp. 3-
6.)

The Order of dismissal dated December 12, 1979,

reads as follows:

Under consideration is a motion to dismiss embodied

as a special affirmative defense in the answer filed by
defendant NPC on the grounds that said defendant
performs a purely governmental function in the
operation of the Angat Dam and cannot therefore be
sued for damages in the instant cases in connection
therewith.

Plaintiffs' opposition to said motion to discuss, relying

on Sec. 3 (d) of Republic Act 6396 which imposes on
the NPC the power and liability to sue and be sued in
any court, is not tenable since the same refer to such
matters only as are within the scope of the other
corporate powers of said defendant and not matters of
tort as in the instant cases. It being an agency
performing a purely governmental function in the
operation of the Angat Dam, said defendant was not
given any right to commit wrongs upon individuals. To
sue said defendant for tort may require the express
consent of the State.

WHEREFORE, the cases against defendant NPC are

hereby dismissed. (Rollo, p. 60.)

The Order dated October 3, 1980, denying the motion

for reconsideration filed by the plaintiffs is pro forma;
the motion was simply denied for lack of merit. (Rollo,
p. 74.)

The petition to review the two orders of the public

respondent was filed on October 16, 1980, and on
October 27, 1980, We required the respondents to
comment. It was only on April 13, 1981, after a
number of extensions, that the Solicitor General filed
the required comment. (Rollo, pp. 107-114.)

On May 27, 1980, We required the parties to file

simultaneous memoranda within twenty (20) days
from notice. (Rollo, p. 115.) Petitioners filed their
memorandum on July 22, 1981. (Rollo, pp. 118-125.)
The Solicitor General filed a number of motions for
extension of time to file his memorandum. We granted
the seventh extension with a warning that there would
be no further extension. Despite the warning the
Solicitor General moved for an eighth extension which
We denied on November 9, 1981. A motion for a ninth
extension was similarly denied on November 18, 1981.
The decision in this case is therefore, without the
memorandum of the Solicitor General.

The parties are agreed that the Order dated December

21, 1979, raises the following issues:
1. Whether respondent National Power Corporation
performs a governmental function with respect to the
management and operation of the Angat Dam; and

2. Whether the power of respondent National Power

Corporation to sue and be sued under its organic
charter includes the power to be sued for tort.

The petition is highly impressed with merit.

It is not necessary to write an extended dissertation

on whether or not the NPC performs a governmental
function with respect to the management and
operation of the Angat Dam. It is sufficient to say that
the government has organized a private corporation,
put money in it and has allowed it to sue and be sued
in any court under its charter. (R.A. No. 6395, Sec. 3
(d).) As a government owned and controlled
corporation, it has a personality of its own, distinct
and separate from that of the Government. (See
National Shipyards and Steel Corp. vs. CIR, et al., L-
17874, August 31, 1963, 8 SCRA 781.) Moreover, the
charter provision that the NPC can "sue and be sued in
any court" is without qualification on the cause of
action and accordingly it can include a tort claim such
as the one instituted by the petitioners.

WHEREFORE, the petition is hereby granted; the

Orders of the respondent court dated December 12,
1979 and October 3, 1980, are set aside; and said
court is ordered to reinstate the complaints of the
petitioners. Costs against the NPC.

SO ORDERED.

Barredo (Chairman), Aquino, De Castro, Ericta and

Escolin JJ., concur.

Concepcion Jr., J., is on leave.

GAUDENCIO RAYO vs. COURT OF FIRST INSTANCE OF
BULACAN G.R. No. L-55273-83 December 19, 1981
FACTS: At the height of the infamous typhoon
"Kading", the respondent opened simultaneously all
the three floodgates of the Angat Dam which resulted
in a sudden, precipitate and simultaneous opening of
said floodgates several towns in Bulacan were
inundated. The petitioners filed for damages against
the respondent corporation.

Petitioners opposed the prayer of the respondents

forn dismissal of the case and contended that the
respondent corporation is merely performing a
propriety functions and that under its own organic act,
it can sue and be sued in court.

ISSUE: W/N the respondent performs governmental

functions with respect to the management and
operation of the Angat Dam.

W/N the power of the respondent to sue and be sued

under its organic charter includes the power to be
sued for tort.

HELD: 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.

As a government owned and controlled corporation, it

has a personality of its own, distinct and separate
from that of the government. Moreover, the charter
provision that it can sue and be sued in any court.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-6060 September 30, 1954

FERNANDO A. FROILAN, plaintiff-appellee,

vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Quisumbing, Sycip, Quisumbing and Salazar, for

appellant.
Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.

PARAS, C.J.:

The factual antecedents of this case are sufficiently

recited in the brief filed by the intervenor-appellee as
follows:

1. On February 3, 1951, plaintiff-appellee, Fernando

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

2. On February 3, 1951, the lower court issued the

writ of replevin prayed for by Froilan and by virtue
thereof the Pan Oriental Shipping Co. was divested of
its possession of said vessel (Rec. on App. p. 47).

3. On March 1, 1951, Pan Oriental Shipping Co. filed

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

4. On November 10, 1951, after the leave of the

lower court had been obtained, the intervenor-
appellee, Government of the Republic of the
Philippines, filed a complaint in intervention alleging
that Froilan had failed to pay to the Shipping
Commission (which name was later changed to
Shipping Administration) the balance due on the
purchase price of the vessel in question, the interest
thereon, and its advances on insurance premium
totalling P162,142.95, excluding the dry-docking
expenses incurred on said vessel by the Pan Oriental
Shipping Co.; that intervenor was entitled to the
possession of the said vessel either under the terms of
the original contract as supplemented by Froilan's
letter dated January 28, 1949, or in order that it may
cause the extrajudicial sale thereof under the Chattel
Mortgage Law. It, therefore, prayed that Froilan be
ordered to deliver the vessel in question to its
authorized representative, the Board of Liquidators;
that Froilan be declared to be without any rights on
said vessel and the amounts he paid thereon forfeited
or alternately, that the said vessel be delivered to the
Board of Liquidators in order that the intervenor may
have its chattel mortgage extrajudicially foreclosed in
accordance with the provisions of the Chattel
Mortgage Law; and that pending the hearing on the
merits, the said vessel be delivered to it (Rec. on App.
pp. 54-66).

5. On November 29, 1951, the Pan Oriental Shipping

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

6. On November 29, 1951, Froilan tendered to the

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

7. On December 7, 1951, the Government of the

Republic of the Philippines brought the matter of said
payment and the circumstance surrounding it to the
attention of the lower court "in order that they may be
taken into account by this Honorable Court in
connection with the questions that are not pending
before it for determination" (Rec. on App. pp. 82-86).

8. On February 3, 1952, the lower court held that the

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

9. On May 10, 1952, the Government of the Republic

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

10. In an order dated July 1, 1952, the lower court

dismissed the counterclaim of the Pan Oriental
Shipping Co. as prayed for by the Republic of the
Philippines (Rec. on App. pp. 104-106).
11. It if from this order of the lower court dismissing
its counterclaim against the Government of the
Republic of the Philippines that Pan Oriental Shipping
Co. has perfected the present appeal (Rec. on App. p.
107).

The order of the Court of First Instance of Manila,

dismissing the counterclaim of the defendant Pan
Oriental Shipping Co., from which the latter has
appealed, reads as follows:

This is a motion to dismiss the counterclaim

interposed by the defendant in its answer to the
complaint in intervention.

"The counterclaim states as follows:

"COUNTERCLAIM

"As counterclaim against the intervenor Republic of

the Philippines, the defendant alleges:

"1. That the defendant reproduces herein all the

pertinent allegations of the foregoing answer to the
complaint in intervention

"2. That, as shown by the allegations of the foregoing

answer to the complaint in intervention, the
defendant Pan Oriental Shipping Company is entitled
to the possession of the vessel and the intervenor
Republic of the Philippines is bound under the
contract of charter with option to purchase it entered
into with the defendant to deliver that possession to
the defendant whether it actually has the said
possession or it does not have that possession from
the plaintiff Fernando A. Froilan and deliver the same
to the defendant;

"3. That, notwithstanding demand, the intervenor

Republic of the Philippines has not to date complied
with its obligation of delivering or causing the delivery
of the vessel to the defendant Pan Oriental Shipping
Company.1wphl.nt

"RELIEF

"WHEREFORE, the defendant respectfully prays that

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

"The defendant prays for such other remedy as the

Court may deem just and equitable in the premises."

The ground of the motion to dismiss are (a) That the

cause of action is barred by prior judgment; (b) That
the counterclaim states no cause of action; and (c)
That this Honorable Court has no jurisdiction over the
intervenor government of the Republic of the
Philippines in connection with the counterclaim of the
defendant Pan Oriental Shipping Co.

The intervenor contends that the complaint in

intervention having been dismissed and no appeal
having been taken, the dismissal of said complaint is
tantamount to a judgment.

The complaint in intervention did not contain any

claim whatsoever against the defendant Pan Oriental
Shipping Co.; hence, the counterclaim has no
foundation.

The question as to whether the Court has jurisdiction

over the intervenor with regard to the counterclaim,
the Court is of the opinion that it has no jurisdiction
over said intervenor.

It appearing, therefore, that the grounds of the

motion to dismiss are well taken, the counterclaim of
the defendant is dismissed, without pronouncement as
to costs.

The defendant's appeal is predicated upon the

following assignments of error:

I. The lower court erred in dismissing the

counterclaim on the ground of prior judgment.

II. The lower court erred in dismissing the

counterclaim on the ground that the counterclaim had
no foundation because made to a complaint in
intervention that contained no claim against the
defendant.
III. The lower court erred in dismissing the
counterclaim on the ground of alleged lack of
jurisdiction over the intervenor Republic of the
Philippines.

We agree with appellant's contention that its

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

The defendant's failure to appeal from the order of

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

The lower court also erred in holding that, as the

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

The other ground for dismissing the defendant's

counterclaim is that the State is immune from suit.
This is untenable, because by filing its complaint in
intervention the Government in effect waived its right
of nonsuability.

The immunity of the state from suits does not deprive

it of the right to sue private parties in its own courts.
The state as plaintiff may avail itself of the different
forms of actions open to private litigants. In short, by
taking the initiative in an action against a private
party, the state surrenders its privileged position and
comes down to the level of the defendant. The latter
automatically acquires, within certain limits, the right
to set up whatever claims and other defenses he
might have against the state. The United States
Supreme Court thus explains:

"No direct suit can be maintained against the United

States. But when an action is brought by the United
States to recover money in the hands of a party who
has a legal claim against them, it would be a very rigid
principle to deny to him the right of setting up such
claim in a court of justice, and turn him around to an
application to Congress." (Sinco, Philippine Political
Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8
Pet. 150, 8 L. ed. 899.)

It is however, contended for the intervenor that, if

there was at all any waiver, it was in favor of the
plaintiff against whom the complaint in intervention
was directed. This contention is untenable. As already
stated, the complaint in intervention was in a sense in
derogation of the defendant's claim over the
possession of the vessel in question.

Wherefore, the appealed order is hereby reversed and

set aside and the case remanded to the lower court for
further proceedings. So ordered, without costs.

Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista

Angelo, Concepcion, and Reyes, J.B.L., JJ., concur.

G.R. No. L-6060 September 30, 1954

FERNANDO A. FROILAN, plaintiff-appellee,

vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Facts:
Plaintiff, Fernando Froilan filed a complaint against
the defendant-appellant, Pan Oriental Shipping Co.,
alleging that he purchased from the Shipping
Commission the vessel for P200,000, paying P50,000
down and agreeing to pay the balance in instalments.
To secure the payment of the balance of the purchase
price, he executed a chattel mortgage of said vessel in
favor of the Shipping Commission. For various
reasons, among them the non-payment of the
installments, the Shipping Commission tool possession
of said vessel and considered the contract of sale
cancelled. The Shipping Commission chartered and
delivered said vessel to the defendant-appellant Pan
Oriental Shipping Co. subject to the approval of the
President of the Philippines. Plaintiff appealed the
action of the Shipping Commission to the President of
the Philippines and, in its meeting the Cabinet
restored him to all his rights under his original
contract with the Shipping Commission. Plaintiff had
repeatedly demanded from the Pan Oriental Shipping
Co. the possession of the vessel in question but the
latter refused to do so.

Plaintiff, prayed that, upon the approval of the bond

accompanying his complaint, a writ of replevin be
issued for the seizure of said vessel with all its
equipment and appurtenances, and that after hearing,
he be adjudged to have the rightful possession thereof
. The lower court issued the writ of replevin prayed for
by Froilan and by virtue thereof the Pan Oriental
Shipping Co. was divested of its possession of said
vessel.

Pan Oriental protested to this restoration of Plaintiff s

rights under the contract of sale, for the reason that
when the vessel was delivered to it, the Shipping
Administration had authority to dispose of said
authority to the property, Plaintiff having already
relinquished whatever rights he may have thereon.
Plaintiff paid the required cash of P10,000.00 and as
Pan Oriental refused to surrender possession of the
vessel, he filed an action to recover possession
thereof and have him declared the rightful owner of
said property. The Republic of the Philippines was
allowed to intervene in said civil case praying for the
possession of the in order that the chattel mortgage
constituted thereon may be foreclosed.

Issues:
Whether or not the Court has jurisdiction over the
intervenor with regard to the counterclaim.

Discussions:

When the government enters into a contract, for the

State is then deem to have divested itself of the
mantle of sovereign immunity and descended to the
level of the ordinary individual. Having done so, it
becomes subject to judicial action and processes.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-8587 March 24, 1960

BENITO E. LIM, as administrator of the Intestate Estate

of Arsenia Enriquez, plaintiff-appellant,
vs.
HERBERT BROWNELL, JR., Attorney General of the
United States, and ASAICHI KAGAWA, defendants-
appellee, REPUBLIC OF THE PHILIPPINES, intervenor-
appellee.

Angel S. Gamboa for appellant.

Townsend, Gilbert, Santos and Patajo for appellee.
Alfredo Catolico for intervenor.

GUTIERREZ DAVID, J.:

This is an appeal from an order of the Court of First

Instance of Manila, dismissing plaintiff's action for the
recovery of real property for lack of jurisdiction over
the subject matter.

The property in dispute consists of four parcels of land

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

On the theory that the lots in question still belonged

to Arsenia Enriquez, the latter's son Benito E. Lim filed
on November 15, 1948 a formal notice of claim to the
property with the Philippine Alien Property
Administrator. The notice was subsequently amended
to permit Lim to prosecute the claim as administrator
of the intestate estate of the deceased Arsenia
Enriquez, thus, in effect, substituting the intestate
estate as the claimant, it being alleged that the lots
were once the property of Arsenia Enriquez; that they
were mortgaged by her to the Mercantile Bank of
China; that the mortgage having been foreclosed, the
property was sold at public auction during the war to
the Japanese Asaichi Kagawa, who, by means of threat
and intimidation succeeded in preventing Arsenia
Enriquez from exercising her right of redemption; and
that Kagawa never acquired any valid title to the
property because he was ineligible under the
Constitution to acquire residential land in the
Philippines by reason of alien age.
On March 7, 1950, the claim was disallowed by the
Vested Property Claims Committee of the Philippine
Alien Property Administrator, and copy of the decision
disallowing the claim was received by claimant's
counsel on the 15th of that month. The claimant,
however, took no appeal to the Philippine Alien
Property Administrator, so that pursuant to the rules
of procedure governing claims before the Philippine
Alien Property Administrator, the decision of the
committee became final on April 15, 1950, that is,
twenty days after receipt of the decision by claimant's
counsel.

On November 13, 1950, the claimant Benito E. Lim, as

administrator of the intestate estate of Arsenia
Enriquez, filed a complaint in the Court of First
Instance of Manila against the Philippine Alien
Property Administrator (later substituted by the
Attorney General of the United States) for the
recovery of the property in question with back rents.
The complaint was later amended to include Asaichi
Kagawa as defendant. As amended, it alleged that the
lands in question formerly belonged to Arsenia
Enriquez and were mortgaged by her to the Mercantile
Bank of China; that the mortgage having been
foreclosed, she was sentenced to pay the mortgage
debt within 3 months; that within those 3 months the
bank commissioner, who had been appointed
liquidator of said bank, assured her that she could pay
her mortgage debt little by little in monthly
installments, and pursuant to that arrangement the
income derived from the mortgaged property were
thereafter applied to her indebtedness, that such
payment of the mortgage debt continued until a few
months after the occupation of the City of Manila by
the Japanese forces, when the Bank of Taiwan, having
taken over the administration and control of all banks
in the Philippines, including the Mercantile Bank of
China, had the properties sold at public auction on
October 26, 1942 by the sheriff of the city; that the
properties were awarded to Asaichi Kagawa and the
sale was subsequently confirmed by the court; that if
Arsenia Enriquez failed to redeem the properties
before the confirmation of the sale, it was because of
the financial depression and also because she was
prevented from doing so by Kagawa through threats
and intimidation; that the auction sale was irregular
and illegal because it was made without publication or
notice and because though the land was subdivided
into lots, the same was sold as a whole; that because
of the irregularities mentioned, competitive bidding
was prevented or stifled with the result that the lands,
which could have been easily sold for P300,000 at
then prevailing prices, were awarded to Kagawa
whose bid was only P54,460.40, a price that was
"grossly inadequate and shocking to the conscience;"
that the titles to the lands having been subsequently
transferred to Kagawa, the latter in June, 1943
illegally dispossessed Arsenia Enriquez and kept
possession of the properties until the liberation of the
City of Manila; that as Arsenia Enriquez was still the
owner of the properties, the seizure thereof by the
United States Attorney General's predecessors on the
assumption that they belong to Kagawa, as well as
their decision disallowing her claim, was contrary to
law. Plaintiff, therefore, prayed that the sheriff's sale
to Kagawa and the vesting of the properties in the
Philippine Alien Property Administrator and the
transfer thereof by the United States to the Republic
of the Philippines be declared null and void; that
Arsenia Enriquez be adjudged owner of the said
properties and the Register of Deeds of Manila be
ordered to issue the corresponding transfer
certificates of title to her; and that the defendant
Attorney General of the United States be required to
pay rental from March 14, 1946, and the Government
of the Philippines from August 3, 1948, at the rate of
P30,000 per annum with legal interest.The defendant
Attorney General of the United States and the
defendant-intervenor Republic of the Philippines each
filed an answer, alleging by way of affirmative
defenses (1) that the action with respect to Lots 1 and
2 had already prescribed, the same not having been
brought within the period prescribed in section 33 of
the Trading with the Enemy Act, as amended, and (2)
that the lower court had no jurisdiction over the claim
for rentals since the action in that regard constituted
a suit against the United States to which it had not
given its consent.

The defendant Asaichi Kagawa was summoned by

publication, but having failed to file an answer to the
complaint, he was declared in default. Thereafter, a
preliminary hearing on the affirmative defenses was
held at the instance of the United States Attorney
General pursuant to Section 5, Rule 8 of the Rules of
Court. After said hearing, the court ordered the
complaint dismissed on the ground as stated in the
dispositive part of the order that the "court has no
jurisdiction over the subject matter of this action,
taking into consideration the provisions of Sec. 34
(must be 33) of the Trading with the Enemy Act, as the
requirements needed by the above-mentioned Act
have not been fulfilled by the herein plaintiff." From
that order, plaintiff has taken the present appeal.

Judging from the context of the order complained of, it

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

The order of dismissal, however, with respect to

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

The claim for damages for the use of the property

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

With respect to the recovery or return of the

properties vested, section 33 of the Trading with the
Enemy Act, as amended, provides:

SEC. 33. Return of property; notice; institution of

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

From the above provisions, it is evident that a

condition precedent to a suit for the return of property
vested under the Trading with the Enemy Act is that it
should be filed not later than April 30, 1949, or within
two years from the date of vesting, whichever is later,
but in computing such two years, the period during
which there was pending a suit or claim for the return
of the said property pursuant to secs. 9 or 32(a) of the
Act shall be excluded. That limitation, as held in a
case, is jurisdictional. (See Cisatlantic Corporation, et
al. vs. Brownell, Jr., Civil Code No. 8-221, U.S. District
Court, Southern District, New York, affirmed by the
United States Court of Appeals, 2nd Circuit, May 11,
1955 (Docket No. 23499), annexed as appendices "D"
and "E" in appellees' brief.) Such being the case, it is
evident that the court below erred in dismissing the
complaint, at least insofar as lots 3 and 4 of the land
in dispute are concerned. These lots were vested only
on July 6, 1948 and consequently the two-year period
within which to file the action for their recovery
expired on July 7, 1950. But in computing that the two-
year period, the time during which plaintiff's claim
with the Philippine Alien Property Administration was
pending from November 16, 1948 when the claim
was filed to March 7, 1950 when it was dissallowed
should be excluded. The complaint thereof filed on
November 13, 1950 is well within the prescribed
period. As a matter of fact, the Attorney General of
the United States concedes that the dismissal of the
complaint with respect to these lots was erroneous.
Indeed, he states that he had never asked for the
dismissal of the complaint with respect to them
because the complaint insofar as those properties
were concerned was filed within the period provided
for in the law.
On the other hand, lots 1 and 2 were vested by the
Alien Property Custodian on March 14, 1946. The two-
year period, therefore, within which to file a suit for
their return expired on March 14, 1948. As no suit or
claim for the return of said properties pursuant to
sections 9 or 32(a) of the Trading with the Enemy Act
was filed by plaintiff within two years from the date of
vesting, the "later" date and the last on which suit
could be brought was April 30, 1949. The claim filed by
plaintiff with the Philippine Alien Property
Administration on November 15, 1948 obviously could
not toll the two-year period that had already expired
on March 14, 1948. And the complaint in the present
case having been filed only on November 13, 1950, the
same is already barred. (Pass vs. McGrath, 192 F. 2d
415; Kroll vs. McGrath, 91 F. Supp. 173.) The lower
court, therefore, had no jurisdiction to entertain the
action insofar as these lots are concerned.

Plaintiff contends that section 33 of the Trading with

the Enemy Act cannot prevail over section 40 of the
Code of Civil Procedure, which provides that an action
to recover real property prescribes after 10 years, on
the theory that under international law questions
relating to real property are governed by the law of
the place where the property is located and that
prescription, being remedial, is likewise governed by
the laws of the forum. But the trading with the Enemy
Act, by consent of the Philippine Government,
continued to be in force in the Philippines even after
July 4, 1946 (Brownell, Jr., vs. Sun Life Assurance Co.
of Canada,* 50 Off. Gaz., 4814; Brownell, Jr. vs.
Bautista, 95 Phil., 853) and consequently, is as much
part of the law of the land as section 40 of the Code of
Civil Procedure. Contrary to plaintiff's claim, therefore,
there is here no conflict of laws involved. It should be
stated that in an action under the Trading with the
Enemy Act for the recovery of property vested
thereunder, the rights of the parties must necessarily
be governed by the terms of that Act. Indeed, section
7 (c) thereof explicitly provides that the relief
available to a claimant of vested property is limited to
those expressly provided for by its terms.

Needless to say, the defense of limitation as contained

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

In view of the foregoing, the order appealed from

insofar as it dismisses the complaint with respect to
Lots 1 and 2 and the claim for damages against the
Attorney General of the United States and the
Republic of the Philippines, is affirmed, but revoked
insofar as it dismisses the complaint with respect to
Lots 3 and 4, as to which the case is hereby remanded
to the court below for further proceedings. Without
costs.

Paras, C.J., Bengzon, Montemayor, Bautista Angelo,

Labrador, Concepcion, Reyes, J.B.L., Endencia and
Barrera, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-29993 October 23, 1978

LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL

DE GUZMAN, ALFONSO R. MAGSANOC, JESUS
MACARANAS, MAXIMO MANANGAN, FIDEL
MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all
Members of the Municipal Council of Malasiqui in
1959, Malasiqui, Pangasinan, petitioners,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO,
ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA,
VIRGINIA, REMEDIOS and ROBERTO, all surnamed
FONTANILLA, and THE HONORABLE COURT OF
APPEALS, respondents.
G.R. No. L-30183 October 23, 1978

MUNICIPALITY OF MALASIQUI, petitioner,

vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO,
ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA,
VIRGINIA, REMEDIOS and ROBERTO, all surnamed
FONTANILLA, and the Honorable COURT OF APPEALS,
respondents.

Julian M. Armas, Assistant Provincial Fiscal for

petitioners.

Isidro L. Padilla for respondents.

MUOZ PALMA, J.:

These Petitions for review present the issue of

whether or not the celebration of a town fiesta
authorized by a municipal council under Sec. 2282 of
the Municipal Law as embodied in the Revised
Administrative Code is a governmental or a corporate
or proprietary function of the municipality.

A resolution of that issue will lead to another, viz the

civil liability for damages of the Municipality of
Malasiqui, and the members of the Municipal Council
of Malasiqui, province of Pangasinan, for a death
which occurred during the celebration of the town
fiesta on January 22, 1959, and which was attributed
to the negligence of the municipality and its council
members.

The following facts are not in dispute:

On October 21, 1958, the Municipal Council of

Malasiqui, Pangasinan, passed Resolution No. 159
whereby "it resolved to manage the 1959 Malasiqui
town fiesta celebration on January 21, 22, and 23,
1959." Resolution No. 182 was also passed creating
the "1959 Malasiqui 'Town Fiesta Executive
Committee" which in turn organized a sub-committee
on entertainment and stage, with Jose Macaraeg as
Chairman. the council appropriated the amount of
P100.00 for the construction of 2 stages, one for the
"zarzuela" and another for the cancionan Jose
Macaraeg supervised the construction of the stage
and as constructed the stage for the "zarzuela" was
"5- meters by 8 meters in size, had a wooden floor
high at the rear and was supported by 24 bamboo
posts 4 in a row in front, 4 in the rear and 5 on each
side with bamboo braces." 1

The "zarzuela" entitled "Midas Extravaganza" was

donated by an association of Malasiqui employees of
the Manila Railroad Company in Caloocan, Rizal. The
troupe arrived in the evening of January 22 for the
performance and one of the members of the group
was Vicente Fontanilla. The program started at about
10:15 o'clock that evening with some speeches, and
many persons went up the stage. The "zarzuela" then
began but before the dramatic part of the play was
reached, the stage collapsed and Vicente Fontanilla
who was at the rear of the stage was pinned
underneath. Fontanilia was taken to tile San Carlos
General Hospital where he died in the afternoon of the
following day.

The heirs of Vicente Fontanilia filed a complaint with

the Court of First Instance of Manila on September 11,
1959 to recover damages. Named party-defendants
were the Municipality of Malasiqui, the Municipal
Council of Malasiqui and all the individual members of
the Municipal Council in 1959.

Answering the complaint defendant municipality

invoked inter alia the principal defense that as a
legally and duly organized public corporation it
performs sovereign functions and the holding of a
town fiesta was an exercise of its governmental
functions from which no liability can arise to answer
for the negligence of any of its agents.

The defendant councilors inturn maintained that they

merely acted as agents of the municipality in carrying
out the municipal ordinance providing for the
management of the town fiesta celebration and as
such they are likewise not liable for damages as the
undertaking was not one for profit; furthermore, they
had exercised due care and diligence in implementing
the municipal ordinance. 2

After trial, the Presiding Judge, Hon. Gregorio T. Lantin

narrowed the issue to whether or not the defendants
exercised due diligence 'm the construction of the
stage. From his findings he arrived at the conclusion
that the Executive Committee appointed by the
municipal council had exercised due diligence and care
like a good father of the family in selecting a
competent man to construct a stage strong enough for
the occasion and that if it collapsed that was due to
forces beyond the control of the committee on
entertainment, consequently, the defendants were not
liable for damages for the death of Vicente Fontanilla.
The complaint was accordingly dismissed in a decision
dated July 10, 1962. 3

The Fontanillas appealed to the Court of Appeals. In a

decision Promulgated on October 31, 1968, the Court
of Appeals through its Fourth Division composed at
the time of Justices Salvador V. Esguerra, Nicasio A.
Yatco and Eulogio S. Serrano reversed the trial court's
decision and ordered all the defendants-appellees to
pay jointly and severally the heirs of Vicente
Fontanilla the sums of P12,000.00 by way of moral and
actual damages: P1200.00 its attorney's fees; and the
costs. 4

The case is now before Us on various assignments of

errors all of which center on the proposition stated at
the sentence of this Opinion and which We repeat:

Is the celebration of a town fiesta an undertaking in

the excercise of a municipality's governmental or
public function or is it or a private or proprietary
character?

1. Under Philippine laws municipalities are political

bodies corporate and as such ag endowed with the
faculties of municipal corporations to be exercised by
and through their respective municipal governments
in conformity with law, and in their proper corporate
name, they may inter alia sue and be sued, and
contract and be contracted with. 5

The powers of a municipality are twofold in character

public, governmental or political on the one hand, and
corporate, private, or proprietary on the other.
Governmental powers are those exercised by the
corporation in administering the powers of the state
and promoting the public welfare and they include the
legislative, judicial public, and political Municipal
powers on the other hand are exercised for the special
benefit and advantage of the community and include
those which are ministerial private and corporate. 6

As to when a certain activity is governmental and

when proprietary or private, that is generally a
difficult matter to determine. The evolution of the
municipal law in American Jurisprudence, for instance,
has shown that; none of the tests which have evolved
and are stated in textbooks have set down a
conclusive principle or rule, so that each case will
have to be determined on the basis of attending
circumstances.

In McQuillin on Municipal Corporations, the rule is

stated thus: "A municipal corporation proper has ... a
public character as regards the state at large insofar
as it is its agent in government, and private (so-
called) insofar as it is to promote local necessities and
conveniences for its own community. 7

Another statement of the test is given in City of

Kokomo v. Loy, decided by the Supreme Court of
Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and

their functions are two fold. In one they exercise the
right springing from sovereignty, and while in the
performance of the duties pertaining thereto, their
acts are political and governmental Their officers and
agents in such capacity, though elected or appointed
by the are nevertheless public functionaries
performing a public service, and as such they are
officers, agents, and servants of the state. In the other
capacity the municipalities exercise a private.
proprietary or corporate right, arising from their
existence as legal persons and not as public agencies.
Their officers and agents in the performance of such
functions act in behalf of the municipalities in their
corporate or in. individual capacity, and not for the
state or sovereign power. (112 N. E 994-995)

In the early Philippine case of Mendoza v. de Leon

1916, the Supreme Court, through Justice Grant T.
Trent, relying mainly on American Jurisprudence
classified certain activities of the municipality as
governmental, e.g.: regulations against fire, disease,
preservation of public peace, maintenance of
municipal prisons, establishment of schools, post-
offices, etc. while the following are corporate or
proprietary in character, viz: municipal waterwork,
slaughter houses, markets, stables, bathing
establishments, wharves, ferries, and fisheries. 8
Maintenance of parks, golf courses, cemeteries and
airports among others, are also recognized as
municipal or city activities of a proprietary character.
9

2. This distinction of powers becomes important for

purposes of determining the liability of the
municipality for the acts of its agents which result in
an injury to third persons.

If the injury is caused in the course of the performance

of a governmental function or duty no recovery, as a
rule, can be. had from the municipality unless there is
an existing statute on the matter, 10 nor from its
officers, so long as they performed their duties
honestly and in good faith or that they did not act
wantonly and maliciously. 11 In Palafox, et al., v.
Province of Ilocos Norte, et al., 1958, a truck driver
employed by the provincial government of Ilocos Norte
ran over Proceto Palafox in the course of his work at
the construction of a road. The Supreme Court in
affirming the trial court's dismissal of the complaint
for damages held that the province could not be made
liable because its employee was in the performance of
a governmental function the construction and
maintenance of roads and however tragic and
deplorable it may be, the death of Palafox imposed on
the province no duty to pay monetary consideration.
12

With respect to proprietary functions, the settled rule

is that a municipal corporation can be held liable to
third persons ex contract 13 or ex delicto. 14

Municipal corporations are subject to be sued upon

contracts and in tort. ...

xxx xxx xxx

The rule of law is a general one, that the superior or

employer must answer civilly for the negligence or
want of skill of its agent or servant in the course or
fine of his employment, by which another, who is free
from contributory fault, is injured. Municipal
corporations under the conditions herein stated, fall
within the operation of this rule of law, and are liable,
accordingly, to civil actions for damages when the
requisite elements of liability co-exist. ... (Dillon on
Municipal Corporations, 5th ed. Sec. 1610,1647, cited
in Mendoza v. de Leon, supra. 514)

3. Coming to the cam before Us, and applying the

general tests given above, We hold that the ho of the
town fiesta in 1959 by the municipality of Malsiqui
Pangasinan was an exercise of a private or proprietary
function of the municipality.

Section 2282 of the Chatter on Municipal Law of the

Revised Administrative Code provides:

Section 2282. Celebration of fiesta. fiesta may be

held in each municipality not oftener than once a year
upon a date fixed by the municipal council A fiesta s
not be held upon any other date than that lawfully
fixed therefor, except when, for weighty reasons, such
as typhoons, foundations, earthquakes, epidemics, or
other public ties, the fiesta cannot be hold in the date
fixed in which case it may be held at a later date in the
same year, by resolution of the council.

This provision simply gives authority to the

municipality to accelebrate a yearly fiesta but it does
not impose upon it a duty to observe one. Holding a
fiesta even if the purpose is to commemorate a
religious or historical event of the town is in essence
an act for the special benefit of the community and
not for the general welfare of the public performed in
pursuance of a policy of the state. The mere fact that
the celebration, as claimed was not to secure profit or
gain but merely to provide entertainment to the town
inhabitants is not a conclusive test. For instance, the
maintenance of parks is not a source of income for the
nonetheless it is private undertaking as distinguished
from the maintenance of public schools, jails, and the
like which are for public service.

As stated earlier, there can be no hard and fast rule

for purposes of determining the true nature of an
undertaking or function of a municipality; the
surrounding circumstances of a particular case are to
be considered and will be decisive. The basic element,
however beneficial to the public the undertaking may
be, is that it is governmental in essence, otherwise.
the function becomes private or proprietary in
character. Easily, no overnmental or public policy of
the state is involved in the celebration of a town
fiesta. 15

4. It follows that under the doctrine of respondent

superior, petitioner-municipality is to be held liable for
damages for the death of Vicente Fontanilia if that
was at- tributable to the negligence of the
municipality's officers, employees, or agents.

Art. 2176, Civil Code: Whoever by act or omission

causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by

article 2176 is demandable not only for one's own acts
or omission, but also for those of persons for whom
one is responsible. . .

On this point, the Court of Appeals found and held

that there was negligence.

The trial court gave credence to the testimony of

Angel Novado, a witness of the defendants (now
petitioners), that a member of the "extravaganza
troupe removed two principal braces located on the
front portion of the stage and u them to hang the
screen or "telon", and that when many people went up
the stage the latter collapsed. This testimony was not
believed however by respondent appellate court, and
rightly so. According to said defendants, those two
braces were "mother" or "principal" braces located
semi-diagonally from the front ends of the stage to
the front posts of the ticket booth located at the rear
of the stage and were fastened with a bamboo twine.
16 That being the case, it becomes incredible that any
person in his right mind would remove those principal
braces and leave the front portion of the stage
practically unsuported Moreover, if that did happen,
there was indeed negligence as there was lack of
suspension over the use of the stage to prevent such
an occurrence.

At any rate, the guitarist who was pointed to by

Novado as the person who removed the two bamboo
braces denied having done go. The Court of Appeals
said "Amor by himself alone could not have removed
the two braces which must be about ten meters long
and fastened them on top of the stags for the curtain.
The stage was only five and a half meters wide.
Surely, it, would be impractical and unwieldy to use a
ten meter bamboo pole, much more two poles for the
stage curtain. 17

The appellate court also found that the stage was not
strong enough considering that only P100.00 was
appropriate for the construction of two stages and
while the floor of the "zarzuela" stage was of wooden
planks, the Post and braces used were of bamboo
material We likewise observe that although the stage
was described by the Petitioners as being supported
by "24" posts, nevertheless there were only 4 in front,
4 at the rear, and 5 on each side. Where were the rest?

The Court of Appeals thus concluded

The court a quo itself attributed the collapse of the

stage to the great number of onlookers who mounted
the stage. The municipality and/or its agents had the
necessary means within its command to prevent such
an occurrence. Having filed to take the necessary
steps to maintain the safety of the stage for the use of
the participants in the stage presentation prepared in
connection with the celebration of the town fiesta,
particularly, in preventing non participants or
spectators from mounting and accumulating on the
stage which was not constructed to meet the
additional weight- the defendant-appellees were
negligent and are liable for the death of Vicente
Fontanilla . (pp. 30-31, rollo, L-29993)

The findings of the respondent appellate court that

the facts as presented to it establish negligence as a
matter of law and that the Municipality failed to
exercise the due diligence of a good father of the
family, will not disturbed by Us in the absence of a
clear showing of an abuse of discretion or a gross
misapprehension of facts." 18

Liability rests on negligence which is "the want of

such care as a person of ordinary prudence would
exercise under the circumstances of the case." 19

Thus, private respondents argue that the "Midas

Extravaganza" which was to be performed during the
town fiesta was a "donation" offered by an association
of Malasiqui employees of the Manila Railroad Co. in
Caloocan, and that when the Municipality of Malasiqui
accepted the donation of services and constructed
precisely a "zarzuela stage" for the purpose, the
participants in the stage show had the right to expect
that the Municipality through its "Committee on
entertainment and stage" would build or put up a
stage or platform strong enough to sustain the weight
or burden of the performance and take the necessary
measures to insure the personal safety of the
participants. 20 We agree.

Quite relevant to that argument is the American case

of Sanders v. City of Long Beach, 1942, which was an
action against the city for injuries sustained from a
fall when plaintiff was descending the steps of the city
auditorium. The city was conducting a "Know your City
Week" and one of the features was the showing of a
motion picture in the city auditorium to which the
general public was invited and plaintiff Sanders was
one of those who attended. In sustaining the award
for Damages in favor of plaintiff, the District Court of
Appeal, Second district, California, held inter alia that
the "Know your City Week" was a "proprietary activity"
and not a "governmental one" of the city, that
defendant owed to plaintiff, an invitee the duty of
exercising ordinary care for her safety, and plaintiff
was entitled to assume that she would not be exposed
to a danger (which in this case consisted of lack of
sufficient illumination of the premises) that would
come to her through a violation of defendant duty. 21

We can say that the deceased Vicente Fontanilla was

similarly situated as Sander The Municipality of
Malasiqui resolved to celebrate the town fiesta in
January of 1959; it created a committee in charge of
the entertainment and stage; an association of
Malasiqui residents responded to the call for the
festivities and volunteered to present a stage show;
Vicente Fontanilla was one of the participants who like
Sanders had the right to expect that he would be
exposed to danger on that occasion.

Lastly, petitioner or appellant Municipality cannot

evade ability and/or liability under the c that it was
Jose Macaraeg who constructed the stage. The
municipality acting through its municipal council
appointed Macaraeg as chairman of the sub-
committee on entertainment and in charge of the
construction of the "zarzuela" stage. Macaraeg acted
merely as an agent of the Municipality. Under the
doctrine of respondent superior mentioned earlier,
petitioner is responsible or liable for the negligence of
its agent acting within his assigned tasks. 22

... when it is sought to render a municipal corporation

liable for the act of servants or agents, a cardinal
inquiry is, whether they are the servants or agents of
the corporation. If the corporation appoints or elects
them, can control them in the discharge of their
duties, can continue or remove the can hold them
responsible for the manner in which they discharge
their trust, and if those duties relate to the exercise of
corporate powers, and are for the benefit of the
corporation in its local or special interest, they may
justly be regarded as its agents or servants, and the
maxim of respondent superior applies." ... (Dillon on
Municipal Corporations, 5th Ed., Vol IV, p. 2879)

5. The remaining question to be resolved centers on

the liability of the municipal councilors who enacted
the ordinance and created the fiesta committee.

The Court of Appeals held the councilors jointly and

solidarity liable with the municipality for damages
under Article 27 of the Civil Code which provides that
d any person suffering ing material or moral loss
because a public servant or employee refuses or
neglects, without just cause to perform his official
duty may file an action for damages and other relief at
the latter. 23

In their Petition for review the municipal councilors

allege that the Court of Appeals erred in ruling that
the holding of a town fiesta is not a governmental
function and that there was negligence on their part
for not maintaining and supervising the safe use of
the stage, in applying Article 27 of the Civil Code
against them and in not holding Jose Macaraeg liable
for the collapse of the stage and the consequent death
of Vicente Fontanilla. 24

We agree with petitioners that the Court of Appeals

erred in applying Article 27 of the Civil Code against
the for this particular article covers a case of
nonfeasance or non-performance by a public officer of
his official duty; it does not apply to a case of
negligence or misfeasance in carrying out an official
duty.
If We are led to set aside the decision of the Court of
Appeals insofar as these petitioners are concerned, it
is because of a plain error committed by respondent
court which however is not invoked in petitioners'
brief.

In Miguel v. The Court of appeal. et al., the Court,

through Justice, now Chief Justice, Fred Ruiz Castro,
held that the Supreme Court is vested with ample
authority to review matters not assigned as errors in
an appeal if it finds that their consideration and
resolution are indispensable or necessary in arriving
at a just decision in a given case, and that tills is
author under Sec. 7, Rule 51 of the Rules of Court. 25
We believe that this pronouncement can well be
applied in the instant case.

The Court of Appeals in its decision now under review

held that the celebration of a town fiesta by the
Municipality of Malasiqui was not a governmental
function. We upheld that ruling. The legal
consequence thereof is that the Municipality stands on
the same footing as an ordinary private corporation
with the municipal council acting as its board of
directors. It is an elementary principle that a
corporation has a personality, separate and distinct
from its officers, directors, or persons composing it 26
and the latter are not as a rule co-responsible in an
action for damages for tort or negligence culpa aquilla
committed by the corporation's employees or agents
unless there is a showing of bad faith or gross or
wanton negligence on their part. 27

xxx xxx xxx

The ordinary doctrine is that a director, merely by

reason of his office, is not personally Stable for the
torts of his corporation; he Must be shown to have
personally voted for or otherwise participated in
them ... Fletcher Encyclopedia Corporations, Vol 3A
Chapt 11, p. 207)

Officers of a corporation 'are not held liable for the

negligence of the corporation merely because of their
official relation to it, but because of some wrongful or
negligent act by such officer amounting to a breach of
duty which resulted in an injury ... To make an officer
of a corporation liable for the negligence of the
corporation there must have been upon his part such a
breach of duty as contributed to, or helped to bring
about, the injury; that is to say, he must be a
participant in the wrongful act. ... (pp. 207-208, Ibid.)

xxx xxx xxx

Directors who merely employ one to give a fireworks

Ambition on the corporate are not personally liable for
the negligent acts of the exhibitor. (p. 211, Ibid.)

On these people We absolve Use municipal councilors

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

6. One last point We have to resolve is on the award

of attorney's fees by respondent court. Petitioner-
municipality assails the award.

Under paragraph 11, Art. 2208 of the Civil Code

attorney's fees and expenses of litigation may be
granted when the court deems it just and equitable. In
this case of Vicente Fontanilla, although respondent
appellate court failed to state the grounds for
awarding attorney's fees, the records show however
that attempts were made by plaintiffs, now private
respondents, to secure an extrajudicial compensation
from the municipality: that the latter gave prorases
and assurances of assistance but failed to comply; and
it was only eight month after the incident that the
bereaved family of Vicente Fontanilla was compelled
to seek relief from the courts to ventilate what was
believed to be a just cause. 28

We hold, therefore, that there is no error committed in

the grant of attorney's fees which after all is a matter
of judicial discretion. The amount of P1,200.00 is fair
and reasonable.

PREMISES CONSIDERED, We AFFIRM in toto the

decision of the Court of Appeals insofar as the
Municipality of Malasiqui is concerned (L-30183), and
We absolve the municipal councilors from liability and
SET ASIDE the judgment against them (L-9993).

Without pronouncement as to costs.

SO ORDERED,

Teehankee (Chairman), Makasiar, Fernandez, and

Guerrero, JJ., concur.

Facts:

On October 21, 1978, the municipal council of

Malasiqui, Pangasinan passed 2 resolutions: one for
management of the town fiesta celebration and the
other for the creation of the Malasiqui Town Fiesta
Executive Committee. The Executive Committee, in
turn, organized a sub-committee on entertainment
and stage with Jose Macaraeg as Chairman. The
council appropriated the amount of P100.00 for the
construction of 2 stages, one for the "zarzuela" and
another for the cancionan. While the zarzuela was
being held, the stage collapsed. Vicente Fontanilla
was pinned underneath and died in the afternoon of
the following day. Fontanillas heirs filed a complaint
for damages with the CFI of Manila. The defendants
were the municipality, the municipal council and the
municipal council members. In its Answer, defendant
municipality argued that as a legally and duly
organized public corporation it performs sovereign
functions and the holding of a town fiesta was an
exercise of its governmental functions from which no
liability can arise to answer for the negligence of any
of its agents. The defendant councilors, in turn,
maintained that they merely acted as agents of the
municipality in carrying out the municipal ordinance
providing for the management of the town fiesta
celebration and as such they are likewise not liable for
damages as the undertaking was not one for profit;
furthermore, they had exercised due care and
diligence in implementing the municipal ordinance. CFI
held that the municipal council exercised due
diligence in selecting the person to construct the
stage and dismissed the complaint. CA reversed the
decision and held all defendants solidarily liable for
damages.

Issues:

1. Is the celebration of a town fiesta authorized by a

municipal council a governmental or a corporate
function of the municipality?

2. Is the municipality liable for the death of Fontanilla?

3. Are the municipal councilors who enacted the
ordinance and created the fiesta committee liable for
the death of Fontanilla?

Held:

1. The holding of the town fiesta in 1959 by the

municipality of Malsiqui Pangasinan was an exercise of
a private or proprietary function of the municipality.

Section 2282 of the Chatter on Municipal Law of the

Revised Administrative Code simply gives authority to
the municipality to celebrate a yearly fiesta but it does
not impose upon it a duty to observe one. Holding a
fiesta even if the purpose is to commemorate a
religious or historical event of the town is in essence
an act for the special benefit of the community and
not for the general welfare of the public performed in
pursuance of a policy of the state. The mere fact that
the celebration, as claimed was not to secure profit or
gain but merely to provide entertainment to the town
inhabitants is not a conclusive test. For instance, the
maintenance of parks is not a source of income for the
nonetheless it is private undertaking as distinguished
from the maintenance of public schools, jails, and the
like which are for public service. No governmental or
public policy of the state is involved in the celebration
of a town fiesta.

Municipal corporations exist in a dual capacity, and

their functions are two fold. In one they exercise the
right springing from sovereignty, and while in the
performance of the duties pertaining thereto, their
acts are political and governmental Their officers and
agents in such capacity, though elected or appointed
by the are nevertheless public functionaries
performing a public service, and as such they are
officers, agents, and servants of the state. In the other
capacity, the municipalities exercise a private,
proprietary or corporate right, arising from their
existence as legal persons and not as public agencies.
Their officers and agents in the performance of such
functions act in behalf of the municipalities in their
corporate or individual capacity, and not for the state
or sovereign power.

2. Under the doctrine of respondent superior,

petitioner-municipality is liable for damages for the
death of Vicente Fontanilla because the accident was
attributable to the negligence of the municipality's
officers, employees, or agents.
Art. 2176, Civil Code: Whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by

article 2176 is demandable not only for one's own acts
or omission, but also for those of persons for whom
one is responsible.
It was found that the stage was not strong enough
considering that only P100.00 was appropriate for the
construction of two stages and while the floor of the
"zarzuela" stage was of wooden planks, the post and
braces used were of bamboo material. The collapse of
the stage was also attributable to the great number of
onlookers who mounted the stage. The municipality
and/or its agents had the necessary means within its
command to prevent such an occurrence. But they
failed take the necessary steps to maintain the safety
of the stage, particularly, in preventing non-
participants or spectators from mounting and
accumulating on the stage.

Municipality cannot evade ability and/or liability under

the fact that it was Jose Macaraeg who constructed
the stage. The municipality acting through its
municipal council appointed Macaraeg as chairman of
the sub-committee on entertainment and in charge of
the construction of the "zarzuela" stage. Macaraeg
acted merely as an agent of the Municipality. Under
the doctrine of respondent superior mentioned earlier,
petitioner is responsible or liable for the negligence of
its agent acting within his assigned tasks.

3. The celebration of a town fiesta by the Municipality

of Malasiqui was not a governmental function. The
legal consequence thereof is that the Municipality
stands on the same footing as an ordinary private
corporation with the municipal council acting as its
board of directors. It is an elementary principle that a
corporation has a personality, separate and distinct
from its officers, directors, or persons composing it
and the latter are not as a rule co-responsible in an
action for damages for tort or negligence culpa aquilla
committed by the corporation's employees or agents
unless there is a showing of bad faith or gross or
wanton negligence on their part. The records do not
show that municipal councilors directly participated in
the defective construction of the "zarzuela" stage or
that they personally permitted spectators to go up the
platform. Thus, they are absolved from liability. (Torio
vs. Fontanilla, GR No. L-29993, October 23, 1978)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding
Judge of the Regional Trial Court of Makati, Branch 61
and STARBRIGHT SALES ENTERPRISES, INC.,
respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private

respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the

Revised Rules of Court to reverse and set aside the
Orders dated June 20, 1991 and September 19, 1991
of the Regional Trial Court, Branch 61, Makati, Metro
Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of

petitioner to dismiss the complaint in Civil Case No.
90-183, while the Order dated September 19, 1991
denied the motion for reconsideration of the June
20,1991 Order.

Petitioner is the Holy See who exercises sovereignty

over the Vatican City in Rome, Italy, and is
represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc.,
is a domestic corporation engaged in the real estate
business.

This petition arose from a controversy over a parcel of

land consisting of 6,000 square meters (Lot 5-A,
Transfer Certificate of Title No. 390440) located in the
Municipality of Paraaque, Metro Manila and
registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which

are covered by Transfer Certificates of Title Nos.
271108 and 265388 respectively and registered in the
name of the Philippine Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through

Msgr. Domingo A. Cirilos, Jr., acting as agent to the
sellers. Later, Licup assigned his rights to the sale to
private respondent.

In view of the refusal of the squatters to vacate the

lots sold to private respondent, a dispute arose as to
who of the parties has the responsibility of evicting
and clearing the land of squatters. Complicating the
relations of the parties was the sale by petitioner of
Lot 5-A to Tropicana Properties and Development
Corporation (Tropicana).

On January 23, 1990, private respondent filed a

complaint with the Regional Trial Court, Branch 61,
Makati, Metro Manila for annulment of the sale of the
three parcels of land, and specific performance and
damages against petitioner, represented by the Papal
Nuncio, and three other defendants: namely, Msgr.
Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil
Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988,

Msgr. Cirilos, Jr., on behalf of petitioner and the PRC,
agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at
the price of P1,240.00 per square meters; (2) the
agreement to sell was made on the condition that
earnest money of P100,000.00 be paid by Licup to the
sellers, and that the sellers clear the said lots of
squatters who were then occupying the same; (3)
Licup paid the earnest money to Msgr. Cirilos; (4) in
the same month, Licup assigned his rights over the
property to private respondent and informed the
sellers of the said assignment; (5) thereafter, private
respondent demanded from Msgr. Cirilos that the
sellers fulfill their undertaking and clear the property
of squatters; however, Msgr. Cirilos informed private
respondent of the squatters' refusal to vacate the lots,
proposing instead either that private respondent
undertake the eviction or that the earnest money be
returned to the latter; (6) private respondent
counterproposed that if it would undertake the
eviction of the squatters, the purchase price of the
lots should be reduced from P1,240.00 to P1,150.00
per square meter; (7) Msgr. Cirilos returned the
earnest money of P100,000.00 and wrote private
respondent giving it seven days from receipt of the
letter to pay the original purchase price in cash; (8)
private respondent sent the earnest money back to
the sellers, but later discovered that on March 30,
1989, petitioner and the PRC, without notice to private
respondent, sold the lots to Tropicana, as evidenced
by two separate Deeds of Sale, one over Lot 5-A, and
another over Lots 5-B and 5-D; and that the sellers'
transfer certificate of title over the lots were
cancelled, transferred and registered in the name of
Tropicana; (9) Tropicana induced petitioner and the
PRC to sell the lots to it and thus enriched itself at the
expense of private respondent; (10) private
respondent demanded the rescission of the sale to
Tropicana and the reconveyance of the lots, to no
avail; and (11) private respondent is willing and able
to comply with the terms of the contract to sell and
has actually made plans to develop the lots into a
townhouse project, but in view of the sellers' breach,
it lost profits of not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment

of the Deeds of Sale between petitioner and the PRC
on the one hand, and Tropicana on the other; (2) the
reconveyance of the lots in question; (3) specific
performance of the agreement to sell between it and
the owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos

separately moved to dismiss the complaint
petitioner for lack of jurisdiction based on sovereign
immunity from suit, and Msgr. Cirilos for being an
improper party. An opposition to the motion was filed
by private respondent.
On June 20, 1991, the trial court issued an order
denying, among others, petitioner's motion to dismiss
after finding that petitioner "shed off [its] sovereign
immunity by entering into the business contract in
question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration

of the order. On August 30, 1991, petitioner filed a
"Motion for a Hearing for the Sole Purpose of
Establishing Factual Allegation for claim of Immunity
as a Jurisdictional Defense." So as to facilitate the
determination of its defense of sovereign immunity,
petitioner prayed that a hearing be conducted to allow
it to establish certain facts upon which the said
defense is based. Private respondent opposed this
motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order

deferring the resolution on the motion for
reconsideration until after trial on the merits and
directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its

petition, petitioner invokes the privilege of sovereign
immunity only on its own behalf and on behalf of its
official representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was

filed before us by the Department of Foreign Affairs,
claiming that it has a legal interest in the outcome of
the case as regards the diplomatic immunity of
petitioner, and that it "adopts by reference, the
allegations contained in the petition of the Holy See
insofar as they refer to arguments relative to its claim
of sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the

Department of Foreign Affairs. In compliance with the
resolution of this Court, both parties and the
Department of Foreign Affairs submitted their
respective memoranda.

II

A preliminary matter to be threshed out is the

procedural issue of whether the petition for certiorari
under Rule 65 of the Revised Rules of Court can be
availed of to question the order denying petitioner's
motion to dismiss. The general rule is that an order
denying a motion to dismiss is not reviewable by the
appellate courts, the remedy of the movant being to
file his answer and to proceed with the hearing before
the trial court. But the general rule admits of
exceptions, and one of these is when it is very clear in
the records that the trial court has no alternative but
to dismiss the complaint (Philippine National Bank v.
Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service
Commission, 216 SCRA 114 [1992]. In such a case, it
would be a sheer waste of time and energy to require
the parties to undergo the rigors of a trial.

The other procedural question raised by private

respondent is the personality or legal interest of the
Department of Foreign Affairs to intervene in the case
in behalf of the Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or

international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the
Foreign Office of the state where it is sued to convey
to the court that said defendant is entitled to
immunity.

In the United States, the procedure followed is the

process of "suggestion," where the foreign state or
the international organization sued in an American
court requests the Secretary of State to make a
determination as to whether it is entitled to immunity.
If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney
General to submit to the court a "suggestion" that the
defendant is entitled to immunity. In England, a
similar procedure is followed, only the Foreign Office
issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale
Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign

government or the international organization to first
secure an executive endorsement of its claim of
sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to
the courts varies. In International Catholic Migration
Commission v. Calleja, 190 SCRA 130 (1990), the
Secretary of Foreign Affairs just sent a letter directly
to the Secretary of Labor and Employment, informing
the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World
Health Organization v. Aquino, 48 SCRA 242 (1972),
the Secretary of Foreign Affairs sent the trial court a
telegram to that effect. In Baer v. Tizon, 57 SCRA 1
(1974), the U.S. Embassy asked the Secretary of
Foreign Affairs to request the Solicitor General to
make, in behalf of the Commander of the United
States Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor
General embodied the "suggestion" in a Manifestation
and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign

Affairs, through the Office of Legal Affairs moved with
this Court to be allowed to intervene on the side of
petitioner. The Court allowed the said Department to
file its memorandum in support of petitioner's claim of
sovereign immunity.

In some cases, the defense of sovereign immunity was

submitted directly to the local courts by the
respondents through their private counsels (Raquiza v.
Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-
Ryukyus Command, 80 Phil. 262 [1948]; United States
of America v. Guinto, 182 SCRA 644 [1990] and
companion cases). In cases where the foreign states
bypass the Foreign Office, the courts can inquire into
the facts and make their own determination as to the
nature of the acts and transactions involved.

III

The burden of the petition is that respondent trial

court has no jurisdiction over petitioner, being a
foreign state enjoying sovereign immunity. On the
other hand, private respondent insists that the
doctrine of non-suability is not anymore absolute and
that petitioner has divested itself of such a cloak
when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in
the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-

suability, a brief look into its status as a sovereign
state is in order.
Before the annexation of the Papal States by Italy in
1870, the Pope was the monarch and he, as the Holy
See, was considered a subject of International Law.
With the loss of the Papal States and the limitation of
the territory under the Holy See to an area of 108.7
acres, the position of the Holy See in International
Law became controversial (Salonga and Yap, Public
International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the

Lateran Treaty, where Italy recognized the exclusive
dominion and sovereign jurisdiction of the Holy See
over the Vatican City. It also recognized the right of
the Holy See to receive foreign diplomats, to send its
own diplomats to foreign countries, and to enter into
treaties according to International Law (Garcia,
Questions and Problems In International Law, Public
and Private 81 [1948]).

The Lateran Treaty established the statehood of the

Vatican City "for the purpose of assuring to the Holy
See absolute and visible independence and of
guaranteeing to it indisputable sovereignty also in the
field of international relations" (O'Connell, I
International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is

difficult to determine whether the statehood is vested
in the Holy See or in the Vatican City. Some writers
even suggested that the treaty created two
international persons the Holy See and Vatican City
(Salonga and Yap, supra, 37).

The Vatican City fits into none of the established

categories of states, and the attribution to it of
"sovereignty" must be made in a sense different from
that in which it is applied to other states (Fenwick,
International Law 124-125 [1948]; Cruz, International
Law 37 [1991]). In a community of national states, the
Vatican City represents an entity organized not for
political but for ecclesiastical purposes and
international objects. Despite its size and object, the
Vatican City has an independent government of its
own, with the Pope, who is also head of the Roman
Catholic Church, as the Holy See or Head of State, in
conformity with its traditions, and the demands of its
mission in the world. Indeed, the world-wide interests
and activities of the Vatican City are such as to make
it in a sense an "international state" (Fenwick, supra.,
125; Kelsen, Principles of International Law 160
[1956]).

One authority wrote that the recognition of the

Vatican City as a state has significant implication
that it is possible for any entity pursuing objects
essentially different from those pursued by states to
be invested with international personality (Kunz, The
Status of the Holy See in International Law, 46 The
American Journal of International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign

relations and enter into transactions as the Holy See
and not in the name of the Vatican City, one can
conclude that in the Pope's own view, it is the Holy
See that is the international person.

The Republic of the Philippines has accorded the Holy

See the status of a foreign sovereign. The Holy See,
through its Ambassador, the Papal Nuncio, has had
diplomatic representations with the Philippine
government since 1957 (Rollo, p. 87). This appears to
be the universal practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987

Constitution, we have adopted the generally accepted
principles of International Law. Even without this
affirmation, such principles of International Law are
deemed incorporated as part of the law of the land as
a condition and consequence of our admission in the
society of nations (United States of America v. Guinto,
182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign

immunity, each widely held and firmly established.
According to the classical or absolute theory, a
sovereign cannot, without its consent, be made a
respondent in the courts of another sovereign.
According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with
regard to public acts or acts jure imperii of a state,
but not with regard to private acts or acts jure
gestionis
(United States of America v. Ruiz, 136 SCRA 487
[1987]; Coquia and Defensor-Santiago, Public
International Law 194 [1984]).
Some states passed legislation to serve as guidelines
for the executive or judicial determination when an act
may be considered as jure gestionis. The United States
passed the Foreign Sovereign Immunities Act of 1976,
which defines a commercial activity as "either a
regular course of commercial conduct or a particular
commercial transaction or act." Furthermore, the law
declared that the "commercial character of the activity
shall be determined by reference to the nature of the
course of conduct or particular transaction or act,
rather than by reference to its purpose." The Canadian
Parliament enacted in 1982 an Act to Provide For State
Immunity in Canadian Courts. The Act defines a
"commercial activity" as any particular transaction,
act or conduct or any regular course of conduct that
by reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a

solution to the host of problems involving the issue of
sovereign immunity, has created problems of its own.
Legal treatises and the decisions in countries which
follow the restrictive theory have difficulty in
characterizing whether a contract of a sovereign state
with a private party is an act jure gestionis or an act
jure imperii.

The restrictive theory came about because of the

entry of sovereign states into purely commercial
activities remotely connected with the discharge of
governmental functions. This is particularly true with
respect to the Communist states which took control of
nationalized business activities and international
trading.

This Court has considered the following transactions

by a foreign state with private parties as acts jure
imperii: (1) the lease by a foreign government of
apartment buildings for use of its military officers
(Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct
of public bidding for the repair of a wharf at a United
States Naval Station (United States of America v. Ruiz,
supra.); and (3) the change of employment status of
base employees (Sanders v. Veridiano, 162 SCRA 88
[1988]).

On the other hand, this Court has considered the

following transactions by a foreign state with private
parties as acts jure gestionis: (1) the hiring of a cook
in the recreation center, consisting of three
restaurants, a cafeteria, a bakery, a store, and a
coffee and pastry shop at the John Hay Air Station in
Baguio City, to cater to American servicemen and the
general public (United States of America v. Rodrigo,
182 SCRA 644 [1990]); and (2) the bidding for the
operation of barber shops in Clark Air Base in Angeles
City (United States of America v. Guinto, 182 SCRA 644
[1990]). The operation of the restaurants and other
facilities open to the general public is undoubtedly for
profit as a commercial and not a governmental
activity. By entering into the employment contract
with the cook in the discharge of its proprietary
function, the United States government impliedly
divested itself of its sovereign immunity from suit.

In the absence of legislation defining what activities

and transactions shall be considered "commercial" and
as constituting acts jure gestionis, we have to come
out with our own guidelines, tentative they may be.

Certainly, the mere entering into a contract by a

foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the
inquiry. The logical question is whether the foreign
state is engaged in the activity in the regular course
of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or
transaction must then be tested by its nature. If the
act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii, especially when
it is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of

America, like any other state, will be deemed to have
impliedly waived its non-suability if it has entered into
a contract in its proprietary or private capacity. It is
only when the contract involves its sovereign or
governmental capacity that no such waiver may be
implied.

In the case at bench, if petitioner has bought and sold

lands in the ordinary course of a real estate business,
surely the said transaction can be categorized as an
act jure gestionis. However, petitioner has denied that
the acquisition and subsequent disposal of Lot 5-A
were made for profit but claimed that it acquired said
property for the site of its mission or the Apostolic
Nunciature in the Philippines. Private respondent
failed to dispute said claim.

Lot 5-A was acquired by petitioner as a donation from

the Archdiocese of Manila. The donation was made not
for commercial purpose, but for the use of petitioner
to construct thereon the official place of residence of
the Papal Nuncio. The right of a foreign sovereign to
acquire property, real or personal, in a receiving state,
necessary for the creation and maintenance of its
diplomatic mission, is recognized in the 1961 Vienna
Convention on Diplomatic Relations (Arts. 20-22). This
treaty was concurred in by the Philippine Senate and
entered into force in the Philippines on November 15,
1965.

In Article 31(a) of the Convention, a diplomatic envoy

is granted immunity from the civil and administrative
jurisdiction of the receiving state over any real action
relating to private immovable property situated in the
territory of the receiving state which the envoy holds
on behalf of the sending state for the purposes of the
mission. If this immunity is provided for a diplomatic
envoy, with all the more reason should immunity be
recognized as regards the sovereign itself, which in
this case is the Holy See.

The decision to transfer the property and the

subsequent disposal thereof are likewise clothed with
a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off
the same because the squatters living thereon made it
almost impossible for petitioner to use it for the
purpose of the donation. The fact that squatters have
occupied and are still occupying the lot, and that they
stubbornly refuse to leave the premises, has been
admitted by private respondent in its complaint (Rollo,
pp. 26, 27).

The issue of petitioner's non-suability can be

determined by the trial court without going to trial in
the light of the pleadings, particularly the admission
of private respondent. Besides, the privilege of
sovereign immunity in this case was sufficiently
established by the Memorandum and Certification of
the Department of Foreign Affairs. As the department
tasked with the conduct of the Philippines' foreign
relations (Administrative Code of 1987, Book IV, Title I,
Sec. 3), the Department of Foreign Affairs has formally
intervened in this case and officially certified that the
Embassy of the Holy See is a duly accredited
diplomatic mission to the Republic of the Philippines
exempt from local jurisdiction and entitled to all the
rights, privileges and immunities of a diplomatic
mission or embassy in this country (Rollo, pp. 156-
157). The determination of the executive arm of
government that a state or instrumentality is entitled
to sovereign or diplomatic immunity is a political
question that is conclusive upon the courts
(International Catholic Migration Commission v.
Calleja, 190 SCRA 130 [1990]). Where the plea of
immunity is recognized and affirmed by the executive
branch, it is the duty of the courts to accept this claim
so as not to embarrass the executive arm of the
government in conducting the country's foreign
relations (World Health Organization v. Aquino, 48
SCRA 242 [1972]). As in International Catholic
Migration Commission and in World Health
Organization, we abide by the certification of the
Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case

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

IV

Private respondent is not left without any legal

remedy for the redress of its grievances. Under both
Public International Law and Transnational Law, a
person who feels aggrieved by the acts of a foreign
sovereign can ask his own government to espouse his
cause through diplomatic channels.

Private respondent can ask the Philippine

government, through the Foreign Office, to espouse its
claims against the Holy See. Its first task is to
persuade the Philippine government to take up with
the Holy See the validity of its claims. Of course, the
Foreign Office shall first make a determination of the
impact of its espousal on the relations between the
Philippine government and the Holy See (Young,
Remedies of Private Claimants Against Foreign States,
Selected Readings on Protection by Law of Private
Foreign Investments 905, 919 [1964]). Once the
Philippine government decides to espouse the claim,
the latter ceases to be a private cause.

According to the Permanent Court of International

Justice, the forerunner of the International Court of
Justice:

By taking up the case of one of its subjects and by

reporting to diplomatic action or international judicial
proceedings on his behalf, a State is in reality
asserting its own rights its right to ensure, in the
person of its subjects, respect for the rules of
international law (The Mavrommatis Palestine
Concessions, 1 Hudson, World Court Reports 293, 302
[1924]).

WHEREFORE, the petition for certiorari is GRANTED

and the complaint in Civil Case No. 90-183 against
petitioner is DISMISSED.

SO ORDERED.

Holy See vs. Rosario G.R. 101949 (1994)

Facts of the Case:

Petitioner in this case is the Holy See (who exercises

sovereignty over the Vatican City in Rome Italy and is
represented in the Philippines by the Papal Nuncio.
Respondent in this case is Hon. Edilberto Rosario in
his capacity as the Presiding Judge of RTC Makati,
Branch 61 and Starbright Sales Enterprises, a
domestic corporation engaged in the real estate
business.

The petition started from a controversy over a parcel

of land. Lot 5A registered under the name of the Holy
See, is connected to Lot 5B and 5D under the name of
Philippine Realty Corporation. The land was donated
by the Archdiocese of Manila to the Papal Nuncio
which represented the Holy See who exercises
sovereignty over the Vatican City, Rome Italy for his
residence.

The said lots were sold to Ramon Licup who assigned

his rights to respondents Starbright Sales, Inc.
When the squatters refused to vacate the lots, a
dispute arose between these two parties because both
were unsure as to whose responsibility was it to evict
the squatters from the said lots. Respondent
Starbright insists that the Holy See should clear the
property while Holy See says that Starbright should do
it or the earnest money will be returned.

Since Starbright refused to clear the property, Msgr.

Cirilios, the agent, returned P100k earnest money. The
same lots were sold to Tropicana Properties.

Starbright filed a suit for annulment of sale, specific

performance and damages against Msgr. Cirilios,
Philippine Realty Corporation and Tropicana. The Holy
See moved to dismiss the petition for lack of
jurisdiction based on sovereign immunity of suit. The
RTC denied the motion on the ground that the
petitioner already shed off its sovereign immunity by
entering into a business contract.

Issue:

Can the Holy See invoke sovereign immunity?

Court Ruling:

YES. The Court held that the Holy See may properly
invoke sovereign immunity for its non-suability. In
Article 31 (A) of the 1961 Vienna Convention on
Diplomatic Relations, diplomatic envoy (a
representative government who is sent on a special
diplomatic mission) shall be granted immunity from
civil and administrative jurisdiction of the receiving
state over any real action relating to private
immovable property.

The DFA certified that the Embassy of the Holy See is a

duly accredited diplomatic missionary to the Republic
of the Philippines and is thus exempted from local
jurisdiction and is entitled to immunity rights of a
diplomatic mission or embassy in this Court.

While the said lot was acquired and bought in the

ordinary cause of real estate business, its acquisition
and disposal were not made for profit but claimed that
it acquired the said property for its mission or the
Apostolic Nunciature of the Philippines.
Besides, the act of selling the land concerned is non-
proprietary in nature, or is not covered by a patent or
trademark. The transfer and disposal of property are
likewise clothed with a governmental character as the
petitioner did not buy and sell the land for gain but
merely because they cannot evict the said squatters in
the property.

Case Digest: The Holy See vs. Rosario, Jr.

G.R. No. 101949 01 December 1994

FACTS:

This petition arose from a controversy over a parcel of

land consisting of 6,000 square meters located in the
Municipality of Paranaque. Said lot was contiguous
with two other lots. These lots were sold to Ramon
Licup. In view of the refusal of the squatters to vacate
the lots sold, a dispute arose as to who of the parties
has the responsibility of evicting and clearing the land
of squatters. Complicating the relations of the parties
was the sale by petitioner of the lot of concern to
Tropicana.

ISSUE:

Whether the Holy See is immune from suit insofar as

its business relations regarding selling a lot to a
private entity

RULING:

As expressed in Section 2 of Article II of the 1987

Constitution, we have adopted the generally accepted
principles of International Law. Even without this
affirmation, such principles of International Law are
deemed incorporated as part of the law of the land as
a condition and consequence of our admission in the
society of nations. In the present case, if petitioner
has bought and sold lands in the ordinary course of
real estate business, surely the said transaction can
be categorized as an act jure gestionis. However,
petitioner has denied that the acquisition and
subsequent disposal of the lot were made for profit
but claimed that it acquired said property for the site
of its mission or the Apostolic Nunciature in the
Philippines.
The Holy See is immune from suit for the act of selling
the lot of concern is non-proprietary in nature. The lot
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 decision to transfer the property
and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did
not sell the lot for profit or gain. It merely wanted to
dispose of the same because the squatters living
thereon made it almost impossible for petitioner to
use it for the purpose of the donation.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E.

GALLOWAY, WILLIAM I. COLLINS and ROBERT GOHIER,
petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court
of First Instance of Rizal and ELIGIO DE GUZMAN &
CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for

petitioners.

Albert, Vergara, Benares, Perias & Dominguez Law

Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders

and restrain the respondent judge from trying Civil
Case No. 779M of the defunct Court of First Instance
of Rizal.

The factual background is as follows:

At times material to this case, the United States of

America had a naval base in Subic, Zambales. The
base was one of those provided in the Military Bases
Agreement between the Philippines and the United
States.

Sometime in May, 1972, the United States invited the

submission of bids for the following projects

1. Repair offender system, Alava Wharf at the U.S.

Naval Station Subic Bay, Philippines.

2. Repair typhoon damage to NAS Cubi shoreline;

repair typhoon damage to shoreline revetment,
NAVBASE Subic; and repair to Leyte Wharf approach,
NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the

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

In June, 1972, the company received a letter which

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

The defendants entered their special appearance for

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

Subsequently the defendants filed a motion to dismiss

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

The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State

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

The respondent judge recognized the restrictive

doctrine of State immunity when he said in his Order
denying the defendants' (now petitioners) motion: " A
distinction should be made between a strictly
governmental function of the sovereign state from its
private, proprietary or non- governmental acts (Rollo,
p. 20.) However, the respondent judge also said: "It is
the Court's considered opinion that entering into a
contract for the repair of wharves or shoreline is
certainly not a governmental function altho it may
partake of a public nature or character. As aptly
pointed out by plaintiff's counsel in his reply citing the
ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)],
and which this Court quotes with approval, viz.:

It is however contended that when a sovereign state

enters into a contract with a private person, the state
can be sued upon the theory that it has descended to
the level of an individual from which it can be implied
that it has given its consent to be sued under the
contract. ...

xxx xxx xxx

We agree to the above contention, and considering

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

The reliance placed on Lyons by the respondent judge

is misplaced for the following reasons:

In Harry Lyons, Inc. vs. The United States of America,

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

In sustaining the action of the lower court, this Court

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

It can thus be seen that the statement in respect of

the waiver of State immunity from suit was purely
gratuitous and, therefore, obiter so that it has no
value as an imperative authority.

The restrictive application of State immunity is proper

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

That the correct test for the application of State

immunity is not the conclusion of a contract by a State
but the legal nature of the act is shown in Syquia vs.
Lopez, 84 Phil. 312 (1949). In that case the plaintiffs
leased three apartment buildings to the United States
of America for the use of its military officials. The
plaintiffs sued to recover possession of the premises
on the ground that the term of the leases had expired.
They also asked for increased rentals until the
apartments shall have been vacated.

The defendants who were armed forces officers of the

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

In Syquia,the United States concluded contracts with

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

WHEREFORE, the petition is granted; the questioned

orders of the respondent judge are set aside and Civil
Case No. is dismissed. Costs against the private
respondent.

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera,

Plana, * Escolin, Relova, Gutierrez, Jr., De la Fuente,
Cuevas and Alampay, JJ., concur.

Fernando, C.J., took no part.

Separate Opinions
MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings

in Civil Case No. 779-M in the defunct CFI (now RTC) of
Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America

(104 Phil. 593), where the contract entered into
between the plaintiff (Harry Lyons, Inc.) and the
defendant (U.S. Government) involved stevedoring
and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United
States Government. through its agency at Subic Bay,
entered into a contract with appellant for stevedoring
and miscellaneous labor services within the Subic Bay
area, a U.S. Navy Reservation, it is evident that it can
bring an action before our courts for any contractual
liability that that political entity may assume under
the contract."

When the U.S. Government, through its agency at

Subic Bay, confirmed the acceptance of a bid of a
private company for the repair of wharves or shoreline
in the Subic Bay area, it is deemed to have entered
into a contract and thus waived the mantle of
sovereign immunity from suit and descended to the
level of the ordinary citizen. Its consent to be sued,
therefore, is implied from its act of entering into a
contract (Santos vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government

that commits a breach of its contractual obligation in
the case at bar by the unilateral cancellation of the
award for the project by the United States
government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party
who may have legitimate claims against it by seeking
refuge behind the shield of non-suability. A contrary
view would render a Filipino citizen, as in the instant
case, helpless and without redress in his own country
for violation of his rights committed by the agents of
the foreign government professing to act in its name.

Appropriate are the words of Justice Perfecto in his

dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil.
312, 325:
Although, generally, foreign governments are beyond
the jurisdiction of domestic courts of justice, such rule
is inapplicable to cases in which the foreign
government enters into private contracts with the
citizens of the court's jurisdiction. A contrary view
would simply run against all principles of decency and
violative of all tenets of morals.

Moral principles and principles of justice are as valid

and applicable as well with regard to private
individuals as with regard to governments either
domestic or foreign. Once a foreign government
enters into a private contract with the private citizens
of another country, such foreign government cannot
shield its non-performance or contravention of the
terms of the contract under the cloak of non-
jurisdiction. To place such foreign government beyond
the jurisdiction of the domestic courts is to give
approval to the execution of unilateral contracts,
graphically described in Spanish as 'contratos
leoninos', because one party gets the lion's share to
the detriment of the other. To give validity to such
contract is to sanctify bad faith, deceit, fraud. We
prefer to adhere to the thesis that all parties in a
private contract, including governments and the most
powerful of them, are amenable to law, and that such
contracts are enforceable through the help of the
courts of justice with jurisdiction to take cognizance of
any violation of such contracts if the same had been
entered into only by private individuals.

Constant resort by a foreign state or its agents to the

doctrine of State immunity in this jurisdiction
impinges unduly upon our sovereignty and dignity as a
nation. Its application will particularly discourage
Filipino or domestic contractors from transacting
business and entering into contracts with United
States authorities or facilities in the Philippines
whether naval, air or ground forces-because the
difficulty, if not impossibility, of enforcing a validly
executed contract and of seeking judicial remedy in
our own courts for breaches of contractual obligation
committed by agents of the United States
government, always, looms large, thereby hampering
the growth of Filipino enterprises and creating a
virtual monopoly in our own country by United States
contractors of contracts for services or supplies with
the various U.S. offices and agencies operating in the
Philippines.

The sanctity of upholding agreements freely entered

into by the parties cannot be over emphasized.
Whether the parties are nations or private individuals,
it is to be reasonably assumed and expected that the
undertakings in the contract will be complied with in
good faith.

One glaring fact of modern day civilization is that a big

and powerful nation, like the United States of America,
can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its
member states are equal and sovereign, becomes
hollow and meaningless because big nations wielding
economic and military superiority impose upon and
dictate to small nations, subverting their sovereignty
and dignity as nations. Thus, more often than not,
when U.S. interest clashes with the interest of small
nations, the American governmental agencies or its
citizens invoke principles of international law for their
own benefit.

In the case at bar, the efficacy of the contract between

the U.S. Naval authorities at Subic Bay on one hand,
and herein private respondent on the other, was
honored more in the breach than in the compliance
The opinion of the majority will certainly open the
floodgates of more violations of contractual
obligations. American authorities or any foreign
government in the Philippines for that matter, dealing
with the citizens of this country, can conveniently seek
protective cover under the majority opinion. The result
is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial

mentality. It fosters economic imperialism and foreign
political ascendancy in our Republic.

The doctrine of government immunity from suit cannot

and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs.
Cuenca, L-26400, February 29, 1972, 43 SCRA 360;
Ministerio vs. Court of First Instance, L-31635, August
31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-

suability, the United States government, through its
naval authorities at Subic Bay, should be held
amenable to lawsuits in our country like any other
juristic person.

The invocation by the petitioner United States of

America is not in accord with paragraph 3 of Article III
of the original RP-US Military Bases Agreement of
March 14, 1947, which states that "in the exercise of
the above-mentioned rights, powers and authority, the
United States agrees that the powers granted to it will
not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in

harmony with the amendment dated May 27, 1968 to
the aforesaid RP-US Military Bases Agreement, which
recognizes "the need to promote and maintain sound
employment practices which will assure equality of
treatment of all employees ... and continuing
favorable employer-employee relations ..." and
"(B)elieving that an agreement will be mutually
beneficial and will strengthen the democratic
institutions cherished by both Governments, ... the
United States Government agrees to accord
preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall
fill the needs for civilian employment by employing
Filipino citizens, etc." (Par. 1, Art. I of the Amendment
of May 27, 1968).

Neither does the invocation by petitioners of state

immunity from suit express fidelity to paragraph 1 of
Article IV of the aforesaid amendment of May 2 7,
1968 which directs that " contractors and
concessionaires performing work for the U.S. Armed
Forces shall be required by their contract or
concession agreements to comply with all applicable
Philippine labor laws and regulations, " even though
paragraph 2 thereof affirms that "nothing in this
Agreement shall imply any waiver by either of the two
Governments of such immunity under international
law."

Reliance by petitioners on the non-suability of the

United States Government before the local courts,
actually clashes with No. III on respect for Philippine
law of the Memorandum of Agreement signed on
January 7, 1979, also amending RP-US Military Bases
Agreement, which stresses that "it is the duty of
members of the United States Forces, the civilian
component and their dependents, to respect the laws
of the Republic of the Philippines and to abstain from
any activity inconsistent with the spirit of the Military
Bases Agreement and, in particular, from any political
activity in the Philippines. The United States shag take
all measures within its authority to insure that they
adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the

Agreement is further emphasized by No. IV on the
economic and social improvement of areas
surrounding the bases, which directs that "moreover,
the United States Forces shall procure goods and
services in the Philippines to the maximum extent
feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said

amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the
Agreement of May 27, 1968, "the discussions shall be
conducted on the basis of the principles of equality of
treatment, the right to organize, and bargain
collectively, and respect for the sovereignty of the
Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of

paragraph 1 of the joint statement of President
Marcos and Vice-President Mondale of the United
States dated May 4, 1978 that "the United States re-
affirms that Philippine sovereignty extends over the
bases and that Its base shall be under the command of
a Philippine Base Commander, " which is supposed to
underscore the joint Communique of President Marcos
and U.S. President Ford of December 7, 1975, under
which "they affirm that sovereign equality, territorial
integrity and political independence of all States are
fundamental principles which both countries
scrupulously respect; and that "they confirm that
mutual respect for the dignity of each nation shall
characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the

delineation of the powers, duties and responsibilities
of both the Philippine and American Base Commanders
that "in the performance of their duties, the Philippine
Base Commander and the American Base Commander
shall be guided by full respect for Philippine
sovereignty on the one hand and the assurance of
unhampered U.S. military operations on the other
hand and that "they shall promote cooperation
understanding and harmonious relations within the
Base and with the general public in the proximate
vicinity thereof" (par. 2 & par. 3 of the Annex covered
by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of
Foreign Affairs Carlos P. Romulo, Emphasis supplied).

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings

in Civil Case No. 779-M in the defunct CFI (now RTC) of
Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America

(104 Phil. 593), where the contract entered into
between the plaintiff (Harry Lyons, Inc.) and the
defendant (U.S. Government) involved stevedoring
and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United
States Government. through its agency at Subic Bay,
entered into a contract with appellant for stevedoring
and miscellaneous labor services within the Subic Bay
area, a U.S. Navy Reservation, it is evident that it can
bring an action before our courts for any contractual
liability that that political entity may assume under
the contract."

When the U.S. Government, through its agency at

Subic Bay, confirmed the acceptance of a bid of a
private company for the repair of wharves or shoreline
in the Subic Bay area, it is deemed to have entered
into a contract and thus waived the mantle of
sovereign immunity from suit and descended to the
level of the ordinary citizen. Its consent to be sued,
therefore, is implied from its act of entering into a
contract (Santos vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government

that commits a breach of its contractual obligation in
the case at bar by the unilateral cancellation of the
award for the project by the United States
government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party
who may have legitimate claims against it by seeking
refuge behind the shield of non-suability. A contrary
view would render a Filipino citizen, as in the instant
case, helpless and without redress in his own country
for violation of his rights committed by the agents of
the foreign government professing to act in its name.

Appropriate are the words of Justice Perfecto in his

dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil.
312, 325:

Although, generally, foreign governments are beyond

the jurisdiction of domestic courts of justice, such rule
is inapplicable to cases in which the foreign
government enters into private contracts with the
citizens of the court's jurisdiction. A contrary view
would simply run against all principles of decency and
violative of all tenets of morals.

Moral principles and principles of justice are as valid

and applicable as well with regard to private
individuals as with regard to governments either
domestic or foreign. Once a foreign government
enters into a private contract with the private citizens
of another country, such foreign government cannot
shield its non-performance or contravention of the
terms of the contract under the cloak of non-
jurisdiction. To place such foreign government beyond
the jurisdiction of the domestic courts is to give
approval to the execution of unilateral contracts,
graphically described in Spanish as 'contratos
leoninos', because one party gets the lion's share to
the detriment of the other. To give validity to such
contract is to sanctify bad faith, deceit, fraud. We
prefer to adhere to the thesis that all parties in a
private contract, including governments and the most
powerful of them, are amenable to law, and that such
contracts are enforceable through the help of the
courts of justice with jurisdiction to take cognizance of
any violation of such contracts if the same had been
entered into only by private individuals.

Constant resort by a foreign state or its agents to the

doctrine of State immunity in this jurisdiction
impinges unduly upon our sovereignty and dignity as a
nation. Its application will particularly discourage
Filipino or domestic contractors from transacting
business and entering into contracts with United
States authorities or facilities in the Philippines
whether naval, air or ground forces-because the
difficulty, if not impossibility, of enforcing a validly
executed contract and of seeking judicial remedy in
our own courts for breaches of contractual obligation
committed by agents of the United States
government, always, looms large, thereby hampering
the growth of Filipino enterprises and creating a
virtual monopoly in our own country by United States
contractors of contracts for services or supplies with
the various U.S. offices and agencies operating in the
Philippines.

The sanctity of upholding agreements freely entered

into by the parties cannot be over emphasized.
Whether the parties are nations or private individuals,
it is to be reasonably assumed and expected that the
undertakings in the contract will be complied with in
good faith.

One glaring fact of modern day civilization is that a big

and powerful nation, like the United States of America,
can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its
member states are equal and sovereign, becomes
hollow and meaningless because big nations wielding
economic and military superiority impose upon and
dictate to small nations, subverting their sovereignty
and dignity as nations. Thus, more often than not,
when U.S. interest clashes with the interest of small
nations, the American governmental agencies or its
citizens invoke principles of international law for their
own benefit.

In the case at bar, the efficacy of the contract between

the U.S. Naval authorities at Subic Bay on one hand,
and herein private respondent on the other, was
honored more in the breach than in the compliance
The opinion of the majority will certainly open the
floodgates of more violations of contractual
obligations. American authorities or any foreign
government in the Philippines for that matter, dealing
with the citizens of this country, can conveniently seek
protective cover under the majority opinion. The result
is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial

mentality. It fosters economic imperialism and foreign
political ascendancy in our Republic.
The doctrine of government immunity from suit cannot
and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs.
Cuenca, L-26400, February 29, 1972, 43 SCRA 360;
Ministerio vs. Court of First Instance, L-31635, August
31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-

suability, the United States government, through its
naval authorities at Subic Bay, should be held
amenable to lawsuits in our country like any other
juristic person.

The invocation by the petitioner United States of

America is not in accord with paragraph 3 of Article III
of the original RP-US Military Bases Agreement of
March 14, 1947, which states that "in the exercise of
the above-mentioned rights, powers and authority, the
United States agrees that the powers granted to it will
not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in

harmony with the amendment dated May 27, 1968 to
the aforesaid RP-US Military Bases Agreement, which
recognizes "the need to promote and maintain sound
employment practices which will assure equality of
treatment of all employees ... and continuing
favorable employer-employee relations ..." and
"(B)elieving that an agreement will be mutually
beneficial and will strengthen the democratic
institutions cherished by both Governments, ... the
United States Government agrees to accord
preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall
fill the needs for civilian employment by employing
Filipino citizens, etc." (Par. 1, Art. I of the Amendment
of May 27, 1968).

Neither does the invocation by petitioners of state

immunity from suit express fidelity to paragraph 1 of
Article IV of the aforesaid amendment of May 2 7,
1968 which directs that " contractors and
concessionaires performing work for the U.S. Armed
Forces shall be required by their contract or
concession agreements to comply with all applicable
Philippine labor laws and regulations, " even though
paragraph 2 thereof affirms that "nothing in this
Agreement shall imply any waiver by either of the two
Governments of such immunity under international
law."

Reliance by petitioners on the non-suability of the

United States Government before the local courts,
actually clashes with No. III on respect for Philippine
law of the Memorandum of Agreement signed on
January 7, 1979, also amending RP-US Military Bases
Agreement, which stresses that "it is the duty of
members of the United States Forces, the civilian
component and their dependents, to respect the laws
of the Republic of the Philippines and to abstain from
any activity inconsistent with the spirit of the Military
Bases Agreement and, in particular, from any political
activity in the Philippines. The United States shag take
all measures within its authority to insure that they
adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the

Agreement is further emphasized by No. IV on the
economic and social improvement of areas
surrounding the bases, which directs that "moreover,
the United States Forces shall procure goods and
services in the Philippines to the maximum extent
feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said

amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the
Agreement of May 27, 1968, "the discussions shall be
conducted on the basis of the principles of equality of
treatment, the right to organize, and bargain
collectively, and respect for the sovereignty of the
Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of

paragraph 1 of the joint statement of President
Marcos and Vice-President Mondale of the United
States dated May 4, 1978 that "the United States re-
affirms that Philippine sovereignty extends over the
bases and that Its base shall be under the command of
a Philippine Base Commander, " which is supposed to
underscore the joint Communique of President Marcos
and U.S. President Ford of December 7, 1975, under
which "they affirm that sovereign equality, territorial
integrity and political independence of all States are
fundamental principles which both countries
scrupulously respect; and that "they confirm that
mutual respect for the dignity of each nation shall
characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the

delineation of the powers, duties and responsibilities
of both the Philippine and American Base Commanders
that "in the performance of their duties, the Philippine
Base Commander and the American Base Commander
shall be guided by full respect for Philippine
sovereignty on the one hand and the assurance of
unhampered U.S. military operations on the other
hand and that "they shall promote cooperation
understanding and harmonious relations within the
Base and with the general public in the proximate
vicinity thereof" (par. 2 & par. 3 of the Annex covered
by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of
Foreign Affairs Carlos P. Romulo, Emphasis supplied).

USA v. Ruiz
7/30/2014 0 Comments

Constitutional Law. Political Law. Doctrine of State

Immunity.
USA v. RUIZ
GR No. L-35645; May 22, 1985

FACTS:
Sometime in May 1972, the United States invited the
submission of bids for certain naval projects. Eligio de
Guzman & Co. Inc. responded to the invitation and
submitted bids. Subsequently, the company received
two telegrams requesting it to confirm its price. In
June 1972, the copany received a letter which said
that the company did not qualify to receive an award
for the projects. The company then sued the United
States of America and individual petitioners
demanding that the company perform the work on the
projects, or for the petitioners to pay damages and to
issue a writ of preliminary injunction to restrain the
petitioners from entering into contracts with third
parties concerning the project.

ISSUE:
1) Do the petitioners exercise governmental or
proprietary functions?
2) Does the Court have jurisdiction over the case?
HELD:
The rule of State immunity exempts a State from
being sued in the courts of another state without its
consent or waiver. This is a necessary consequence of
the principles of independence and equality of states.
However, state immunity now extends only to
governmental acts of the state. The restrictive
application of State immunity is proper only when the
proceedings arise out of commercial transactions of
the foreign sovereign. In this case, the projects are
integral part of the naval base which is devoted to the
defense of the USA and Philippines which is,
indisputably, a function of the government. As such,
by virtue of state immunity, the courts of the
Philippines have no jurisdiction over the case for the
US government has not given consent to the filing of
this suit.

FIRST DIVISION
[G.R. No. 142396. February 11, 2003]

KHOSROW MINUCHER, petitioner, vs. HON. COURT OF

APPEALS and ARTHUR SCALZO, respondents.
DECISION
VITUG, J.:

Sometime in May 1986, an Information for violation of

Section 4 of Republic Act No. 6425, otherwise also
known as the Dangerous Drugs Act of 1972, was filed
against petitioner Khosrow Minucher and one Abbas
Torabian with the Regional Trial Court, Branch 151, of
Pasig City. The criminal charge followed a buy-bust
operation conducted by the Philippine police narcotic
agents in the house of Minucher, an Iranian national,
where a quantity of heroin, a prohibited drug, was
said to have been seized. The narcotic agents were
accompanied by private respondent Arthur Scalzo who
would, in due time, become one of the principal
witnesses for the prosecution. On 08 January 1988,
Presiding Judge Eutropio Migrino rendered a decision
acquitting the two accused.

On 03 August 1988, Minucher filed Civil Case No. 88-

45691 before the Regional Trial Court (RTC), Branch
19, of Manila for damages on account of what he
claimed to have been trumped-up charges of drug
trafficking made by Arthur Scalzo. The Manila RTC
detailed what it had found to be the facts and
circumstances surrounding the case.

"The testimony of the plaintiff disclosed that he is an

Iranian national. He came to the Philippines to study
in the University of the Philippines in 1974. In 1976,
under the regime of the Shah of Iran, he was
appointed Labor Attach for the Iranian Embassies in
Tokyo, Japan and Manila, Philippines. When the Shah
of Iran was deposed by Ayatollah Khomeini, plaintiff
became a refugee of the United Nations and continued
to stay in the Philippines. He headed the Iranian
National Resistance Movement in the Philippines.

He came to know the defendant on May 13, 1986,

when the latter was brought to his house and
introduced to him by a certain Jose Iigo, an informer of
the Intelligence Unit of the military. Jose Iigo, on the
other hand, was met by plaintiff at the office of Atty.
Crisanto Saruca, a lawyer for several Iranians whom
plaintiff assisted as head of the anti-Khomeini
movement in the Philippines.

During his first meeting with the defendant on May 13,

1986, upon the introduction of Jose Iigo, the
defendant expressed his interest in buying caviar. As a
matter of fact, he bought two kilos of caviar from
plaintiff and paid P10,000.00 for it. Selling caviar,
aside from that of Persian carpets, pistachio nuts and
other Iranian products was his business after the
Khomeini government cut his pension of over
$3,000.00 per month. During their introduction in that
meeting, the defendant gave the plaintiff his calling
card, which showed that he is working at the US
Embassy in the Philippines, as a special agent of the
Drug Enforcement Administration, Department of
Justice, of the United States, and gave his address as
US Embassy, Manila. At the back of the card appears a
telephone number in defendants own handwriting, the
number of which he can also be contacted.

It was also during this first meeting that plaintiff

expressed his desire to obtain a US Visa for his wife
and the wife of a countryman named Abbas Torabian.
The defendant told him that he [could] help plaintiff
for a fee of $2,000.00 per visa. Their conversation,
however, was more concentrated on politics, carpets
and caviar. Thereafter, the defendant promised to see
plaintiff again.
On May 19, 1986, the defendant called the plaintiff
and invited the latter for dinner at Mario's Restaurant
at Makati. He wanted to buy 200 grams of caviar.
Plaintiff brought the merchandize but for the reason
that the defendant was not yet there, he requested
the restaurant people to x x x place the same in the
refrigerator. Defendant, however, came and plaintiff
gave him the caviar for which he was paid. Then their
conversation was again focused on politics and
business.

On May 26, 1986, defendant visited plaintiff again at

the latter's residence for 18 years at Kapitolyo, Pasig.
The defendant wanted to buy a pair of carpets which
plaintiff valued at $27,900.00. After some haggling,
they agreed at $24,000.00. For the reason that
defendant did not yet have the money, they agreed
that defendant would come back the next day. The
following day, at 1:00 p.m., he came back with his
$24,000.00, which he gave to the plaintiff, and the
latter, in turn, gave him the pair of carpets.

At about 3:00 in the afternoon of May 27, 1986, the

defendant came back again to plaintiff's house and
directly proceeded to the latter's bedroom, where the
latter and his countryman, Abbas Torabian, were
playing chess. Plaintiff opened his safe in the bedroom
and obtained $2,000.00 from it, gave it to the
defendant for the latter's fee in obtaining a visa for
plaintiff's wife. The defendant told him that he would
be leaving the Philippines very soon and requested
him to come out of the house for a while so that he
can introduce him to his cousin waiting in a cab.
Without much ado, and without putting on his shirt as
he was only in his pajama pants, he followed the
defendant where he saw a parked cab opposite the
street. To his complete surprise, an American jumped
out of the cab with a drawn high-powered gun. He was
in the company of about 30 to 40 Filipino soldiers with
6 Americans, all armed. He was handcuffed and after
about 20 minutes in the street, he was brought inside
the house by the defendant. He was made to sit down
while in handcuffs while the defendant was inside his
bedroom. The defendant came out of the bedroom and
out from defendant's attach case, he took something
and placed it on the table in front of the plaintiff. They
also took plaintiff's wife who was at that time at the
boutique near his house and likewise arrested
Torabian, who was playing chess with him in the
bedroom and both were handcuffed together. Plaintiff
was not told why he was being handcuffed and why
the privacy of his house, especially his bedroom was
invaded by defendant. He was not allowed to use the
telephone. In fact, his telephone was unplugged. He
asked for any warrant, but the defendant told him to
`shut up. He was nevertheless told that he would be
able to call for his lawyer who can defend him.

The plaintiff took note of the fact that when the

defendant invited him to come out to meet his cousin,
his safe was opened where he kept the $24,000.00 the
defendant paid for the carpets and another $8,000.00
which he also placed in the safe together with a
bracelet worth $15,000.00 and a pair of earrings worth
$10,000.00. He also discovered missing upon his
release his 8 pieces hand-made Persian carpets,
valued at $65,000.00, a painting he bought for
P30,000.00 together with his TV and betamax sets. He
claimed that when he was handcuffed, the defendant
took his keys from his wallet. There was, therefore,
nothing left in his house.

That his arrest as a heroin trafficker x x x had been

well publicized throughout the world, in various
newspapers, particularly in Australia, America, Central
Asia and in the Philippines. He was identified in the
papers as an international drug trafficker. x x x

In fact, the arrest of defendant and Torabian was

likewise on television, not only in the Philippines, but
also in America and in Germany. His friends in said
places informed him that they saw him on TV with said
news.

After the arrest made on plaintiff and Torabian, they

were brought to Camp Crame handcuffed together,
where they were detained for three days without food
and water."[1]

During the trial, the law firm of Luna, Sison and

Manas, filed a special appearance for Scalzo and
moved for extension of time to file an answer pending
a supposed advice from the United States Department
of State and Department of Justice on the defenses to
be raised. The trial court granted the motion. On 27
October 1988, Scalzo filed another special appearance
to quash the summons on the ground that he, not
being a resident of the Philippines and the action
being one in personam, was beyond the processes of
the court. The motion was denied by the court, in its
order of 13 December 1988, holding that the filing by
Scalzo of a motion for extension of time to file an
answer to the complaint was a voluntary appearance
equivalent to service of summons which could likewise
be construed a waiver of the requirement of formal
notice. Scalzo filed a motion for reconsideration of the
court order, contending that a motion for an extension
of time to file an answer was not a voluntary
appearance equivalent to service of summons since it
did not seek an affirmative relief. Scalzo argued that
in cases involving the United States government, as
well as its agencies and officials, a motion for
extension was peculiarly unavoidable due to the need
(1) for both the Department of State and the
Department of Justice to agree on the defenses to be
raised and (2) to refer the case to a Philippine lawyer
who would be expected to first review the case. The
court a quo denied the motion for reconsideration in
its order of 15 October 1989.

Scalzo filed a petition for review with the Court of

Appeals, there docketed CA-G.R. No. 17023, assailing
the denial. In a decision, dated 06 October 1989, the
appellate court denied the petition and affirmed the
ruling of the trial court. Scalzo then elevated the
incident in a petition for review on certiorari, docketed
G.R. No. 91173, to this Court. The petition, however,
was denied for its failure to comply with SC Circular
No. 1-88; in any event, the Court added, Scalzo had
failed to show that the appellate court was in error in
its questioned judgment.

Meanwhile, at the court a quo, an order, dated 09

February 1990, was issued (a) declaring Scalzo in
default for his failure to file a responsive pleading
(answer) and (b) setting the case for the reception of
evidence. On 12 March 1990, Scalzo filed a motion to
set aside the order of default and to admit his answer
to the complaint. Granting the motion, the trial court
set the case for pre-trial. In his answer, Scalzo denied
the material allegations of the complaint and raised
the affirmative defenses (a) of Minuchers failure to
state a cause of action in his complaint and (b) that
Scalzo had acted in the discharge of his official duties
as being merely an agent of the Drug Enforcement
Administration of the United States Department of
Justice. Scalzo interposed a counterclaim of
P100,000.00 to answer for attorneys' fees and
expenses of litigation.

Then, on 14 June 1990, after almost two years since

the institution of the civil case, Scalzo filed a motion
to dismiss the complaint on the ground that, being a
special agent of the United States Drug Enforcement
Administration, he was entitled to diplomatic
immunity. He attached to his motion Diplomatic Note
No. 414 of the United States Embassy, dated 29 May
1990, addressed to the Department of Foreign Affairs
of the Philippines and a Certification, dated 11 June
1990, of Vice Consul Donna Woodward, certifying that
the note is a true and faithful copy of its original. In an
order of 25 June 1990, the trial court denied the
motion to dismiss.

On 27 July 1990, Scalzo filed a petition for certiorari

with injunction with this Court, docketed G.R. No.
94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon.
Wenceslao Polo, et al.," asking that the complaint in
Civil Case No. 88-45691 be ordered dismissed. The
case was referred to the Court of Appeals, there
docketed CA-G.R. SP No. 22505, per this Courts
resolution of 07 August 1990. On 31 October 1990, the
Court of Appeals promulgated its decision sustaining
the diplomatic immunity of Scalzo and ordering the
dismissal of the complaint against him. Minucher filed
a petition for review with this Court, docketed G.R. No.
97765 and entitled "Khosrow Minucher vs. the
Honorable Court of Appeals, et. al. (cited in 214 SCRA
242), appealing the judgment of the Court of Appeals.
In a decision, dated 24 September 1992, penned by
Justice (now Chief Justice) Hilario Davide, Jr., this Court
reversed the decision of the appellate court and
remanded the case to the lower court for trial. The
remand was ordered on the theses (a) that the Court
of Appeals erred in granting the motion to dismiss of
Scalzo for lack of jurisdiction over his person without
even considering the issue of the authenticity of
Diplomatic Note No. 414 and (b) that the complaint
contained sufficient allegations to the effect that
Scalzo committed the imputed acts in his personal
capacity and outside the scope of his official duties
and, absent any evidence to the contrary, the issue on
Scalzos diplomatic immunity could not be taken up.
The Manila RTC thus continued with its hearings on
the case. On 17 November 1995, the trial court
reached a decision; it adjudged:

WHEREFORE, and in view of all the foregoing

considerations, judgment is hereby rendered for the
plaintiff, who successfully established his claim by
sufficient evidence, against the defendant in the
manner following:

"`Adjudging defendant liable to plaintiff in actual and

compensatory damages of P520,000.00; moral
damages in the sum of P10 million; exemplary
damages in the sum of P100,000.00; attorney's fees in
the sum of P200,000.00 plus costs.

`The Clerk of the Regional Trial Court, Manila, is

ordered to take note of the lien of the Court on this
judgment to answer for the unpaid docket fees
considering that the plaintiff in this case instituted
this action as a pauper litigant."[2]

While the trial court gave credence to the claim of

Scalzo and the evidence presented by him that he was
a diplomatic agent entitled to immunity as such, it
ruled that he, nevertheless, should be held
accountable for the acts complained of committed
outside his official duties. On appeal, the Court of
Appeals reversed the decision of the trial court and
sustained the defense of Scalzo that he was
sufficiently clothed with diplomatic immunity during
his term of duty and thereby immune from the
criminal and civil jurisdiction of the Receiving State
pursuant to the terms of the Vienna Convention.

Hence, this recourse by Minucher. The instant petition

for review raises a two-fold issue: (1) whether or not
the doctrine of conclusiveness of judgment, following
the decision rendered by this Court in G.R. No. 97765,
should have precluded the Court of Appeals from
resolving the appeal to it in an entirely different
manner, and (2) whether or not Arthur Scalzo is indeed
entitled to diplomatic immunity.

The doctrine of conclusiveness of judgment, or its

kindred rule of res judicata, would require 1) the
finality of the prior judgment, 2) a valid jurisdiction
over the subject matter and the parties on the part of
the court that renders it, 3) a judgment on the merits,
and 4) an identity of the parties, subject matter and
causes of action.[3] Even while one of the issues
submitted in G.R. No. 97765 - "whether or not public
respondent Court of Appeals erred in ruling that
private respondent Scalzo is a diplomat immune from
civil suit conformably with the Vienna Convention on
Diplomatic Relations" - is also a pivotal question
raised in the instant petition, the ruling in G.R. No.
97765, however, has not resolved that point with
finality. Indeed, the Court there has made this
observation -

"It may be mentioned in this regard that private

respondent himself, in his Pre-trial Brief filed on 13
June 1990, unequivocally states that he would present
documentary evidence consisting of DEA records on
his investigation and surveillance of plaintiff and on
his position and duties as DEA special agent in Manila.
Having thus reserved his right to present evidence in
support of his position, which is the basis for the
alleged diplomatic immunity, the barren self-serving
claim in the belated motion to dismiss cannot be relied
upon for a reasonable, intelligent and fair resolution
of the issue of diplomatic immunity."[4]

Scalzo contends that the Vienna Convention on

Diplomatic Relations, to which the Philippines is a
signatory, grants him absolute immunity from suit,
describing his functions as an agent of the United
States Drugs Enforcement Agency as conducting
surveillance operations on suspected drug dealers in
the Philippines believed to be the source of prohibited
drugs being shipped to the U.S., (and) having
ascertained the target, (he then) would inform the
Philippine narcotic agents (to) make the actual
arrest." Scalzo has submitted to the trial court a
number of documents -

1. Exh. '2' - Diplomatic Note No. 414 dated 29 May

1990;

2. Exh. '1' - Certification of Vice Consul Donna K.

Woodward dated 11 June 1990;

3. Exh. '5' - Diplomatic Note No. 757 dated 25 October

1991;

4. Exh. '6' - Diplomatic Note No. 791 dated 17

November 1992; and
5. Exh. '7' - Diplomatic Note No. 833 dated 21 October
1988.

6. Exh. '3' - 1st Indorsement of the Hon. Jorge R.

Coquia, Legal Adviser, Department of Foreign Affairs,
dated 27 June 1990 forwarding Embassy Note No. 414
to the Clerk of Court of RTC Manila, Branch 19 (the
trial court);

7. Exh. '4' - Diplomatic Note No. 414, appended to the

1st Indorsement (Exh. '3'); and

8. Exh. '8' - Letter dated 18 November 1992 from the

Office of the Protocol, Department of Foreign Affairs,
through Asst. Sec. Emmanuel Fernandez, addressed to
the Chief Justice of this Court.[5]

The documents, according to Scalzo, would show that:

(1) the United States Embassy accordingly advised the
Executive Department of the Philippine Government
that Scalzo was a member of the diplomatic staff of
the United States diplomatic mission from his arrival
in the Philippines on 14 October 1985 until his
departure on 10 August 1988; (2) that the United
States Government was firm from the very beginning
in asserting the diplomatic immunity of Scalzo with
respect to the case pursuant to the provisions of the
Vienna Convention on Diplomatic Relations; and (3)
that the United States Embassy repeatedly urged the
Department of Foreign Affairs to take appropriate
action to inform the trial court of Scalzos diplomatic
immunity. The other documentary exhibits were
presented to indicate that: (1) the Philippine
government itself, through its Executive Department,
recognizing and respecting the diplomatic status of
Scalzo, formally advised the Judicial Department of his
diplomatic status and his entitlement to all diplomatic
privileges and immunities under the Vienna
Convention; and (2) the Department of Foreign Affairs
itself authenticated Diplomatic Note No. 414. Scalzo
additionally presented Exhibits "9" to "13" consisting
of his reports of investigation on the surveillance and
subsequent arrest of Minucher, the certification of the
Drug Enforcement Administration of the United States
Department of Justice that Scalzo was a special agent
assigned to the Philippines at all times relevant to the
complaint, and the special power of attorney executed
by him in favor of his previous counsel[6] to show (a)
that the United States Embassy, affirmed by its Vice
Consul, acknowledged Scalzo to be a member of the
diplomatic staff of the United States diplomatic
mission from his arrival in the Philippines on 14
October 1985 until his departure on 10 August 1988,
(b) that, on May 1986, with the cooperation of the
Philippine law enforcement officials and in the
exercise of his functions as member of the mission, he
investigated Minucher for alleged trafficking in a
prohibited drug, and (c) that the Philippine
Department of Foreign Affairs itself recognized that
Scalzo during his tour of duty in the Philippines (14
October 1985 up to 10 August 1988) was listed as
being an Assistant Attach of the United States
diplomatic mission and accredited with diplomatic
status by the Government of the Philippines. In his
Exhibit 12, Scalzo described the functions of the
overseas office of the United States Drugs
Enforcement Agency, i.e., (1) to provide criminal
investigative expertise and assistance to foreign law
enforcement agencies on narcotic and drug control
programs upon the request of the host country, 2) to
establish and maintain liaison with the host country
and counterpart foreign law enforcement officials, and
3) to conduct complex criminal investigations
involving international criminal conspiracies which
affect the interests of the United States.

The Vienna Convention on Diplomatic Relations was a

codification of centuries-old customary law and, by the
time of its ratification on 18 April 1961, its rules of law
had long become stable. Among the city states of
ancient Greece, among the peoples of the
Mediterranean before the establishment of the Roman
Empire, and among the states of India, the person of
the herald in time of war and the person of the
diplomatic envoy in time of peace were universally
held sacrosanct.[7] By the end of the 16th century,
when the earliest treatises on diplomatic law were
published, the inviolability of ambassadors was firmly
established as a rule of customary international law.
[8] Traditionally, the exercise of diplomatic intercourse
among states was undertaken by the head of state
himself, as being the preeminent embodiment of the
state he represented, and the foreign secretary, the
official usually entrusted with the external affairs of
the state. Where a state would wish to have a more
prominent diplomatic presence in the receiving state,
it would then send to the latter a diplomatic mission.
Conformably with the Vienna Convention, the
functions of the diplomatic mission involve, by and
large, the representation of the interests of the
sending state and promoting friendly relations with
the receiving state.[9]

The Convention lists the classes of heads of diplomatic

missions to include (a) ambassadors or nuncios
accredited to the heads of state,[10] (b) envoys,[11]
ministers or internuncios accredited to the heads of
states; and (c) charges d' affairs[12] accredited to the
ministers of foreign affairs.[13] Comprising the "staff
of the (diplomatic) mission" are the diplomatic staff,
the administrative staff and the technical and service
staff. Only the heads of missions, as well as members
of the diplomatic staff, excluding the members of the
administrative, technical and service staff of the
mission, are accorded diplomatic rank. Even while the
Vienna Convention on Diplomatic Relations provides
for immunity to the members of diplomatic missions, it
does so, nevertheless, with an understanding that the
same be restrictively applied. Only "diplomatic
agents," under the terms of the Convention, are
vested with blanket diplomatic immunity from civil
and criminal suits. The Convention defines "diplomatic
agents" as the heads of missions or members of the
diplomatic staff, thus impliedly withholding the same
privileges from all others. It might bear stressing that
even consuls, who represent their respective states in
concerns of commerce and navigation and perform
certain administrative and notarial duties, such as the
issuance of passports and visas, authentication of
documents, and administration of oaths, do not
ordinarily enjoy the traditional diplomatic immunities
and privileges accorded diplomats, mainly for the
reason that they are not charged with the duty of
representing their states in political matters. Indeed,
the main yardstick in ascertaining whether a person is
a diplomat entitled to immunity is the determination
of whether or not he performs duties of diplomatic
nature.

Scalzo asserted, particularly in his Exhibits 9 to 13,

that he was an Assistant Attach of the United States
diplomatic mission and was accredited as such by the
Philippine Government. An attach belongs to a
category of officers in the diplomatic establishment
who may be in charge of its cultural, press,
administrative or financial affairs. There could also be
a class of attaches belonging to certain ministries or
departments of the government, other than the
foreign ministry or department, who are detailed by
their respective ministries or departments with the
embassies such as the military, naval, air, commercial,
agricultural, labor, science, and customs attaches, or
the like. Attaches assist a chief of mission in his duties
and are administratively under him, but their main
function is to observe, analyze and interpret trends
and developments in their respective fields in the host
country and submit reports to their own ministries or
departments in the home government.[14] These
officials are not generally regarded as members of the
diplomatic mission, nor are they normally designated
as having diplomatic rank.

In an attempt to prove his diplomatic status, Scalzo

presented Diplomatic Notes Nos. 414, 757 and 791, all
issued post litem motam, respectively, on 29 May
1990, 25 October 1991 and 17 November 1992. The
presentation did nothing much to alleviate the Court's
initial reservations in G.R. No. 97765, viz:

"While the trial court denied the motion to dismiss,

the public respondent gravely abused its discretion in
dismissing Civil Case No. 88-45691 on the basis of an
erroneous assumption that simply because of the
diplomatic note, the private respondent is clothed
with diplomatic immunity, thereby divesting the trial
court of jurisdiction over his person.

xxxxxxxxx

And now, to the core issue - the alleged diplomatic

immunity of the private respondent. Setting aside for
the moment the issue of authenticity raised by the
petitioner and the doubts that surround such claim, in
view of the fact that it took private respondent one (1)
year, eight (8) months and seventeen (17) days from
the time his counsel filed on 12 September 1988 a
Special Appearance and Motion asking for a first
extension of time to file the Answer because the
Departments of State and Justice of the United States
of America were studying the case for the purpose of
determining his defenses, before he could secure the
Diplomatic Note from the US Embassy in Manila, and
even granting for the sake of argument that such note
is authentic, the complaint for damages filed by
petitioner cannot be peremptorily dismissed.
xxxxxxxxx

"There is of course the claim of private respondent

that the acts imputed to him were done in his official
capacity. Nothing supports this self-serving claim
other than the so-called Diplomatic Note. x x x. The
public respondent then should have sustained the trial
court's denial of the motion to dismiss. Verily, it
should have been the most proper and appropriate
recourse. It should not have been overwhelmed by the
self-serving Diplomatic Note whose belated issuance is
even suspect and whose authenticity has not yet been
proved. The undue haste with which respondent Court
yielded to the private respondent's claim is arbitrary."

A significant document would appear to be Exhibit No.

08, dated 08 November 1992, issued by the Office of
Protocol of the Department of Foreign Affairs and
signed by Emmanuel C. Fernandez, Assistant
Secretary, certifying that "the records of the
Department (would) show that Mr. Arthur W. Scalzo,
Jr., during his term of office in the Philippines (from 14
October 1985 up to 10 August 1988) was listed as an
Assistant Attach of the United States diplomatic
mission and was, therefore, accredited diplomatic
status by the Government of the Philippines." No
certified true copy of such "records," the supposed
bases for the belated issuance, was presented in
evidence.

Concededly, vesting a person with diplomatic

immunity is a prerogative of the executive branch of
the government. In World Health Organization vs.
Aquino,[15] the Court has recognized that, in such
matters, the hands of the courts are virtually tied.
Amidst apprehensions of indiscriminate and incautious
grant of immunity, designed to gain exemption from
the jurisdiction of courts, it should behoove the
Philippine government, specifically its Department of
Foreign Affairs, to be most circumspect, that should
particularly be no less than compelling, in its post
litem motam issuances. It might be recalled that the
privilege is not an immunity from the observance of
the law of the territorial sovereign or from ensuing
legal liability; it is, rather, an immunity from the
exercise of territorial jurisdiction.[16] The government
of the United States itself, which Scalzo claims to be
acting for, has formulated its standards for recognition
of a diplomatic agent. The State Department policy is
to only concede diplomatic status to a person who
possesses an acknowledged diplomatic title and
performs duties of diplomatic nature.[17]
Supplementary criteria for accreditation are the
possession of a valid diplomatic passport or, from
States which do not issue such passports, a diplomatic
note formally representing the intention to assign the
person to diplomatic duties, the holding of a non-
immigrant visa, being over twenty-one years of age,
and performing diplomatic functions on an essentially
full-time basis.[18] Diplomatic missions are requested
to provide the most accurate and descriptive job title
to that which currently applies to the duties
performed. The Office of the Protocol would then
assign each individual to the appropriate functional
category.[19]

But while the diplomatic immunity of Scalzo might

thus remain contentious, it was sufficiently
established that, indeed, he worked for the United
States Drug Enforcement Agency and was tasked to
conduct surveillance of suspected drug activities
within the country on the dates pertinent to this case.
If it should be ascertained that Arthur Scalzo was
acting well within his assigned functions when he
committed the acts alleged in the complaint, the
present controversy could then be resolved under the
related doctrine of State Immunity from Suit.

The precept that a State cannot be sued in the courts

of a foreign state is a long-standing rule of customary
international law then closely identified with the
personal immunity of a foreign sovereign from suit[20]
and, with the emergence of democratic states, made
to attach not just to the person of the head of state,
or his representative, but also distinctly to the state
itself in its sovereign capacity.[21] If the acts giving
rise to a suit are those of a foreign government done
by its foreign agent, although not necessarily a
diplomatic personage, but acting in his official
capacity, the complaint could be barred by the
immunity of the foreign sovereign from suit without
its consent. Suing a representative of a state is
believed to be, in effect, suing the state itself. The
proscription is not accorded for the benefit of an
individual but for the State, in whose service he is,
under the maxim - par in parem, non habet imperium -
that all states are sovereign equals and cannot assert
jurisdiction over one another.[22] The implication, in
broad terms, is that if the judgment against an official
would require the state itself to perform an affirmative
act to satisfy the award, such as the appropriation of
the amount needed to pay the damages decreed
against him, the suit must be regarded as being
against the state itself, although it has not been
formally impleaded.[23]

In United States of America vs. Guinto,[24] involving

officers of the United States Air Force and special
officers of the Air Force Office of Special Investigators
charged with the duty of preventing the distribution,
possession and use of prohibited drugs, this Court has
ruled -

"While the doctrine (of state immunity) appears to

prohibit only suits against the state without its
consent, it is also applicable to complaints filed
against officials of the state for acts allegedly
performed by them in the discharge of their duties. x x
x. It cannot for a moment be imagined that they were
acting in their private or unofficial capacity when they
apprehended and later testified against the
complainant. It follows that for discharging their
duties as agents of the United States, they cannot be
directly impleaded for acts imputable to their
principal, which has not given its consent to be sued. x
x x As they have acted on behalf of the government,
and within the scope of their authority, it is that
government, and not the petitioners personally, [who
were] responsible for their acts."[25]

This immunity principle, however, has its limitations.

Thus, Shauf vs. Court of Appeals[26] elaborates:

It is a different matter where the public official is

made to account in his capacity as such for acts
contrary to law and injurious to the rights of the
plaintiff. As was clearly set forth by Justice Zaldivar in
Director of the Bureau of Telecommunications, et al.,
vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the
State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers
are not acts of the State, and an action against the
officials or officers by one whose rights have been
invaded or violated by such acts, for the protection of
his rights, is not a suit against the State within the
rule of immunity of the State from suit. In the same
tenor, it has been said that an action at law or suit in
equity against a State officer or the director of a State
department on the ground that, while claiming to act
for the State, he violates or invades the personal and
property rights of the plaintiff, under an
unconstitutional act or under an assumption of
authority which he does not have, is not a suit against
the State within the constitutional provision that the
State may not be sued without its consent. The
rationale for this ruling is that the doctrine of state
immunity cannot be used as an instrument for
perpetrating an injustice.

xxxxxxxxx

(T)he doctrine of immunity from suit will not apply and

may not be invoked where the public official is being
sued in his private and personal capacity as an
ordinary citizen. The cloak of protection afforded the
officers and agents of the government is removed the
moment they are sued in their individual capacity. This
situation usually arises where the public official acts
without authority or in excess of the powers vested in
him. It is a well-settled principle of law that a public
official may be liable in his personal private capacity
for whatever damage he may have caused by his act
done with malice and in bad faith or beyond the scope
of his authority and jurisdiction.[27]

A foreign agent, operating within a territory, can be

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

All told, this Court is constrained to rule that

respondent Arthur Scalzo, an agent of the United
States Drug Enforcement Agency allowed by the
Philippine government to conduct activities in the
country to help contain the problem on the drug
traffic, is entitled to the defense of state immunity
from suit.

WHEREFORE, on the foregoing premises, the petition

is DENIED. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio

and Azcuna, JJ., concur

minucher v. CA 214 SCRA 242 (1992)

MINUCHER v. CA (September 24, 1992)
Petitioner: KHOSROW MINUCHER
Respondents: CA & ARTHUR W. CALZO, JR.
Nature: PETITION for review of the decision of the
Court of Appeals
Ponente: DAVIDE, JR., J.

1. CALZO FRAMES UP MINUCHER FOR POSSESSION OF

HEROIN. Calzo, an agent of the Drug Enforcement
Administration of Department of Justice of the USA
ordered from Minucher, a labor attach of the Iran
Embassy in Manila Iranian were introduced by a
common associate, Inigo. Calzo offered to help
Minucher with his problem with his familys US visas
for a fee of $2,000. Calzo also found buyers of certain
Iranian goods which Calzo was selling such as silk and
carpets. So, Calzo came to the residence of Minucher
and asked to be entrusted with a pair of Persian silk
carpets with a floor price of $24,000 each, for which
he had a buyer. The following day, Calzo returned to
Minuchers residence, took the carpets and gave the
latter $24,000; after about an hour, Calzo returned,
claimed that he had already made arrangements with
his contacts at the American Embassy concerning the
visas and asked for $2,000. He was given this amount.
It turned out, however, that Calzo had prepared an
elaborate plan to frame-up Minucher for alleged
trafficking; both were falsely arrested by Calzo and
some American and Filipino police officers, and were
taken to Camp Crame in their underwear. Calzo and his
companions took petitioners 3 suitcases containing
various documents, his wallet containing money and
the keys to his house and car, as well as the $24,000
which Calzo had earlier delivered to him. Minucher and
his companion, Torabian were handcuffed together for
3 days and were not given food and water; they were
asked to confess to the possession of heroin or else
they would be jailed or even executed by Iranian
terrorists. Consequently, the two were charged for the
violation of Section 4 of RA. No. 6425 (Dangerous
Drugs Act of 1972) before the Pasig RTC. They were,
however, acquitted by the said court. Calzo testified
for the prosecution in the said case.

2. COMPLAINT FOR DAMAGES. Minucher files a

complaint for damages against Calzo and alleges that
Calzo falsely testified against him in the criminal case.
Minucher also avers that charges of unlawful arrest,
robbery and estafa or swindling have already been
filed against the Calzo. He therefore prays for actual
and compensatory damages of not less than P480,000
($24,000) representing the fair market value of the
Persian silk carpet and $2,000 representing the refund
of the amount he had given for the visas; moral
damages in the amount of P5 million; exemplary
damages in the sum of P100,000 and attorneys fees
of at least P200,000 to answer for litigation expenses
incurred for his defense in the criminal case and for
the prosecution of the civil case,
3. SPECIAL APPEARANCE TO QUASH SUMMONS. Calzos
counsel, the law firm LUNA, SISON AND MANAS, filed a
Special Appearance and Motion alleging therein that
since Calzo is an agent of the Drug Enforcement
Administration of the USA, and the acts and omissions
complained of were performed by him in the
performance of official functions, the case is now
under study by the Departments of State and Justice
in Washington, D.C. for the purpose of determining
what defenses would be appropriate; said counsel also
prayed that the period to answer be extended. Then,
counsel filed a Special Appearance to Quash Summons
alleging therein that: The action being it personal
action for damages arising from an alleged tort, the
defendant being outside the Philippines and not being
a resident of the Philippines, Defendant is beyond the
processes of this court, and praying that the
summons issued be quashed. The trial court denied
the motion in its Order. Unsatisfied with the said order,
Calzo filed a petition for certiorari with the CA. In its
Decision, the CA dismissed the petition for lack of
merit. Calzo elevated the case to the SC but was
dismissed due to non-compliance with par 2 of Circular
No. 1-88 and its failure to show that the CA had
committed any reversible error.

4. CALZO FILED HIS ANSWER. Thereafter, Calzo filed

with the trial court his Answer in the civil case
wherein he denies the material allegations in the
complaint, sets forth the following Affirmative
Defenses: The Complaint fails to state a cause of
action: in having Minucher and Torabian arrested and
detained at Camp Crame; a quantity of heroin, seized
from plaintiff by Philippine police authorities and in
seizing the money used in the drug transaction,
defendant acted in the discharge of his official duties
or otherwise in the performance of his official
functions as agent of the Drug Enforcement
Administration, U.S. Department of Justice and
interposes a counterclaim for P100,000 to answer for
attorneys fees and the expenses of litigation.

5. CALZOS MTD BASED ON A DIPLOMATIC NOTE. Calzo

filed a Motion to Dismiss the case on the ground that
as per the copy of Diplomatic Note No. 414 issued by
the Embassy of the United States of America,13 dated
29 May 1990 and certified to be a true and faithful
copy of the original by one Donald K. Woodward, Vice
Consul of the United States of America on 11 June
1990, the Embassy advised the Department of Foreign
Affairs of the Republic of the Philippines that:

x x x Arthur W. Scalzo, was a member of the

diplomatic staff of the United States diplomatic
mission from his arrival in the Philippines on October
14, 1985 until his departure on August 10, 1988. x x x
x x x in May 1986, with the cooperation of Philippine
law enforcement officials and in the exercise of his
functions as a member of the mission, Mr. Scalzo
investigated Mr. Khosrow Minucher, the plaintiff in the
aforementioned case for allegedly trafficking in a
prohibited drug. It is this investigation which has
given rise to the plaintiffs complaint. The Embassy
takes note of the provisions of Article 39(2) of the
Vienna Convention on Diplomatic Relations, which
provides that Mr. Scalzo retains immunity from civil
suit for sets performed in the exercise of his
functions, as is the caw here, even though he has
departed (sic) the country.

The trial court issued an order denying the motion for

being devoid of merit.

6. CA DISMISSED CASE. Calzo then filed with the CA a

petition for certiorari. CA promulgated a Decision
dismissing the case due to the trial courts lack of
jurisdiction over the person of the defendant because
the latter possessed diplomatic immunity. MR denied
because: When therefore Mr. Scalzo testified in the
Criminal Case against Khosrow Minucher it was in
connection with his official functions as an agent of
the Drug Enforcement Administration of the United
States and member (sic) of the American Mission
charged with cooperating with the Philippine law
enforcement agency. He therefore, enjoys immunity
from criminal and civil jurisdiction of the receiving
State under Article 31 of the Vienna Convention on
Diplomatic Relations. Hence, this petition for review
under Rule 45 of the Rules of Court.

ISSUE: WON a complaint for damages should be

dismissed on the sole basis of a statement contained
in a Diplomatic Note, belatedly issued after an answer
to the said complaint had already been filed, that the
defendant was a member of the diplomatic staff of the
United States Diplomatic Mission in the Philippines at
the time the cause of action accrued?
HELD: NO.

7. CORRECT GROUND TO DISMISS: FAILURE TO STATE A

COA. While the trial court correctly denied the motion
to dismiss, the CA gravely abused its discretion in
dismissing the civil case on the basis of an erroneous
assumption that simply-because of the Diplomatic
Note, the private respondent is clothed with
diplomatic immunity, thereby divesting the trial court
of jurisdiction over his person. It may at once be
stated that even if the Calzo enjoys diplomatic
immunity, a dismissal of the case cannot be ordered
on the ground of lack of jurisdiction over his person,
but rather for lack of a cause of action because even if
he committed the imputed act and could have been
otherwise made liable therefor, his immunity would
bar any suit against him in connection therewith and
would prevent recovery of damages arising therefrom.

8. COURT ACQUIRED JURISDICTION OVER CALZO.

Jurisdiction over the person of the defendant is
acquired either by his voluntary appearance or by the
service of summons upon him. While in the instant
case, private respondents counsel filed, on 26
October 1988, a motion to quash summons because
being outside the Philippines and being a non-resident
alien, he is beyond the processes of the court, which
was properly denied by the trial court, he had in effect
already waived any defect in the service of the
summons by earlier asking, on 2 occasions, for an
extension of time to file an answer, and by ultimately
filing an Answer with Counterclaim. There is no
question that the trial court acquired jurisdiction over
the person of the private respondent.

9. THE CASE SHOULD NOT HAVE BEEN DISMISSED. The

complaint for damages filed by the Minucher still
cannot be peremptorily dismissed. Said complaint
contains sufficient allegations which indicate that the
private respondent committed the imputed acts in his
personal capacity and outside the scope of his official
duties and functions. As described in the complaint,
he committed criminal acts for which he is also civilly
liable. In the Special Appearance to Quash Summons
earlier alluded to, an the other hand, private
respondent maintains that the claim for damages
arose from an alleged tort. Whether such claim
arises from criminal acts or from tort, there can be no
question that private respondent was sued in his
personal capacity for acts committed outside his
official functions duties. In the decision acquitting
petitioner in the criminal case involving the violation
of the Dangerous Drugs Act, copy of which is attached
to his complaint for damages and which must be
deemed as an integral part thereof, the trial court
gave full credit to petitioners theory that he was a
victim of a frame-up instigated by the private
respondent. Thus, there is a prima facie showing in
the complaint that indeed private respondent could be
held personally liable for the acts committed beyond
his official functions or duties.

10. REITERATED DOCTRINE IN SHAUF. In Shauf vs.

Court of Appeals, after citing pertinent authorities,
this Court ruled: The aforecited authorities are clear
on the matter. They state that the doctrine of
immunity from suit will not apply and may not be
invoked where the public official is being sued in his
private and personal capacity as an ordinary citizen.
The cloak of protection afforded the officers and
agents of the government is removed the moment
they are sued in their individual capacity. This
situation usually arises where the public official acts
without authority or in excess of the powers vested in
him. It is a well-settled principle of law that a public
official may be liable in his personal private capacity
for whatever damage he may haw mused by his act
done with malice and in bad faith, or beyond the scope
of his authority or jurisdiction (Dumlao vs. Court of
Appeals, et al., 114 SCRA 247 [1982]).

11. ARTICLE 31 OF THE VIENNA CONVENTION ON

DIPLOMATIC RELATIONS admits of exceptions. It reads:
I. A diplomatic agent shall enjoy immunity from the
criminal jurisdiction of the receiving State. He shall
also enjoy immunity from its civil and administrative
jurisdiction except in the case of an action relating to
any professional or commercial activity exercised by
the diplomatic agent in the receiving State, outside
his official functions. (Emphasis supplied).

12. NO EVIDENCE TO PROVE HE ACTED IN HIS OFFICIAL

CAPACITY. There is of course the claim of private
respondent that the act imputed to him were done in
his official capacity. Nothing supports this self-serving
claim other than the so-called Diplomatic Note. In
short, insofar as the records are concerned, Calzo did
not come forward with evidence to prove that indeed,
he had acted in his official capacity. It does not appear
that an actual hearing on the motion to dismiss was
conducted and that Calzo offered evidence in support
thereof. Thus, it is apropos to quote what this Court
stated in United States of America vs. Guinto:

But even as we are, certain that the individual

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

It may be mentioned in this regard that Calzo himself,

in his Pre-trial Brief, unequivocally states that he
would present documentary evidence consisting of
DEA records on his investigation and surveillance of
plaintiff and on his position and duties as DEA special
agent in Manila. Having thus reserved his right to
present evidence in support of his position, which is
the basis for the alleged diplomatic immunity, the
barren self-serving claim in the belated motion to
dismiss cannot be relied upon for a reasonable,
intelligent and fair resolution of the issue of
diplomatic immunity.

The public respondent then should have sustained the

trial courts denial of the motion to dismiss. Verily,
such should have been the most proper and
appropriate recourse. It should not have been
overwhelmed by the self-serving Diplomatic Note
whose belated issuance is even suspect and whose
authenticity has not yet been proved. The undue haste
with which the CA yielded to the private respondents
claim is arbitrary.
DISPOSITION. WHEREFORE, the challenged decision of
the CA is SET ASIDE and the Order of the Regional Trial
Court of Manila denying private respondents Motion
to Dismiss is hereby REINSTATED

DECISION

DAVIDE, JR., J.:

May a complaint for damages be dismissed on the sole

basis of a statement contained in a Diplomatic Note,
belatedly issued after an answer to the said complaint
had already been filed, that the defendant was a
member of the diplomatic staff of the United States
Diplomatic Mission in the Philippines at the time the
cause of action accrued?

This is the issue in the instant petition.

On 3 August 1988, petitioner filed with the Regional

Trial Court (RTC) of Manila a complaint for damages
against private respondent Arthur Scalzo, Jr. The case
was docketed as Civil Case No. 88-45691 and was
raffled off to Branch 19 of said court. 1 Petitioner
alleges therein that he was the Labor Attache of the
Embassy of Iran in the Philippines "prior to the
Ayatollah Khomeini regime." On 13 May 1986, private
respondent, then connected with the American
Embassy in Manila, was introduced to him by a certain
Jose Iigo, an informer belonging to the military
intelligence community, with whom petitioner had
several business transactions involving Iranian
products like carpets, caviar and others. Iigo had
previously sought petitioners assistance in
connection with charges of illegal recruitment.
According to Iigo, private respondent was
purportedly interested in buying Iranian products,
namely caviar and carpets. On this same occasion,
petitioner complained to the private respondent about
the problems the former was then encountering with
the American Embassy regarding the expired visas of
his wife and fellow Iranian, Abbas Torabian. Offering
his help, private respondent gave the petitioner a
calling card showing that the former is an agent of the
Drug Enforcement Administration (DEA), Department
of Justice, of the United States of America assigned to
the American Embassy in Manila with official contacts
with a certain Col. Dumlao; head of the Anti-Narcotics
Command, Philippine Constabulary. Private
respondent also expressed his intent to purchase two
(2) kilos of caviar worth P10,000.00 and informed the
petitioner that he might have prospective buyers for
these goods; he further promised to arrange for the
renewal of the aforesaid visas for a $2,000.00 fee. On
19 May 1986, private respondent invited petitioner to
dinner at Marios Restaurant in Makati, Metro Manila;
the petitioner accepted. During the said dinner held
the very next day, both discussed politics and
business. Specifically, private respondent told
petitioner that he wanted to purchase an additional
two hundred (200) grams of caviar and inquired about
his commission for selling petitioners carpets;
petitioner promised a 10% commission based on
profits.chanrobles.com.ph : virtual law library

In the evening of 26 May 1986, private respondent

came to petitioners residence and asked to be
entrusted with a pair of Persian silk carpets with a
floor Price of $24,000.00 each, for which he had a
buyer. The following day, private respondent returned
to petitioners residence, took the carpets and gave
the latter $24,000.00; after about an hour, private
respondent returned, claimed that he had already
made arrangements with his contacts at the American
Embassy concerning the visas and asked for
$2,000.00. He was given this amount. It turned out,
however, that private respondent had prepared an
elaborate plan to frame-up the petitioner and Abbas
Torabian for alleged heroin trafficking; both were
falsely arrested by private respondent and some
American and Filipino police officers, and were taken
to Camp Crame in their underwear. Private respondent
and his companions took petitioners three (3)
suitcases containing various documents, his wallet
containing money and the keys to his house and car,
as well as the $24,000.00 which private respondent
had earlier delivered to him. Petitioner and Torabian
were handcuffed together for three (3) days and were
not given food and water; they were asked to confess
to the possession of heroin or else they would be
jailed or even executed by Iranian terrorists.
Consequently, the two were charged for the violation
of Section 4 of R.A. No. 6425 (Dangerous Drugs Act of
1972) before the Regional Trial Court of Pasig. They
were, however, acquitted by the said court on 8
January 1988. Private respondent testified for the
prosecution in the said case.

Petitioner further alleges in his complaint that private

respondent falsely testified against him in the criminal
case. The former also avers that charges of unlawful
arrest, robbery and estafa or swindling have already
been filed against the private Respondent.

He therefore prays for actual and compensatory

damages of not less than P480,000,00 ($24,000.00)
representing the fair market value of the Persian silk
carpet and $2,000.00 representing the refund of the
amount he had given for the visas; moral damages in
the amount of P5 million; exemplary damages in the
sum of P100,000.00 and attorneys fees of at least
P200,000.00 to answer for litigation expenses incurred
for his defense in the criminal case and for the
prosecution of the civil case.chanrobles law library

On 14 September 1988, private respondents counsel,

the law firm LUNA, SISON AND MANAS, filed a Special
Appearance and Motion alleging therein that since the
private respondent is an agent of the Drug
Enforcement Administration of the United States of
America, and the acts and omissions complained of
were performed by him in the performance of official
functions, the case is now under study by the
Departments of State and Justice in Washington, D.C.
for the purpose of determining what defenses would
be appropriate; said counsel also prayed that the
period to answer be extended to 13 October 1988. 2
This prayer was granted in the 16 September 1988
order of the court.

On 12 October 1988, private respondents aforesaid

counsel filed another Special Appearance and Motion
seeking a further extension of the period to answer to
28 October 1988 because the law firm had not yet
received the decision of the Departments of State and
Justice. 3

On 27 October 1988, private respondents counsel

filed a Special Appearance to Quash Summons 4
alleging therein that: "The action being a personal
action for damages arising from an alleged tort, the
defendant being outside the Philippines and not being
a resident of the Philippines, Defendant is beyond the
processes of this court," and praying that the
summons issued be quashed. The trial court denied
the motion in its Order of 13 December 1988. 5
Unsatisfied with the said order, private respondent
filed a petition for certiorari with the Court of Appeals
which was docketed as C.A.-G R. SP No 17023. In its
Decision promulgated on 6 October 1989, the Court of
Appeals dismissed the petition for lack of merit. 6
Respondent thus sought a review of the said decision
by filing a petition with this Court which was docketed
as G.R. No. 91173. Said petition was however,
dismissed by this Court in the Resolution of 20
December 1989 for non-compliance with paragraph 2
of Circular No. 1-88; moreover, respondent failed to
show that the Court of Appeals had committed any
reversible error in the questioned judgment. 7

On 9 March 1990, private respondent filed with the

trial court his Answer in Civil Case No. 88-46591 8
wherein he denies the material allegations in the
complaint, sets forth the following Affirmative
Defenses:jgc:chanrobles.com.ph

"The Complaint fails to state a cause of action: in

having plaintiff and Abbas Torabian arrested on May
27, 1986 and detained at Camp Crame; a quantity of
heroin, seized from plaintiff by Philippine police
authorities and in seizing the money used in the drug
transaction, defendant acted in the discharge of his
official duties or otherwise in the performance of his
official functions as agent of the Drug Enforcement
Administration, U.S. Department of Justice." 9

and interposes a counterclaim for P100,000.00 to

answer for attorneys fees and the expenses of
litigation.chanrobles law library : red

On 13 June 1990, private respondent filed with the

trial court the Defendants Pre-Trial Brief, 10 the
pertinent portions of which read:chanrob1es virtual
1aw library

x x x

"DEFENSES

1. Plaintiffs complaint is false and malicious;

2. In having a quantity of heroin and the money used
in the drug transaction between him and plaintiff
seized from plaintiff by P.C. NARCOM, plaintiff (sic)
was acting in the discharge of his official functions as
special agent of the Drug Enforcement Administration,
U.S. Department of Justice and was then a member of
the U.S. diplomatic mission in the Philippines.

DEFENDANTS EVIDENCE

Defendant will present:chanrob1es virtual 1aw library

1. His testimony by deposition upon written

interrogatories because defendant lives and works
outside the Philippines and is not a resident of the
Philippines.

2. Documentary evidence, consisting of DEA records

on his investigation and surveillance of plaintiff and
on his position and duties as DEA special agent in May
1980 in Manila; these will be identified by defendant
and possibly by another DEA official." 11

On 14 June 1990, private respondent filed a Motion to

Dismiss 12 the case on the ground that as per the
copy of Diplomatic Note No. 414 issued by the
Embassy of the United States of America, 13 dated 29
May 1990 and certified to be a true and faithful copy
of the original by one Donald K. Woodward, Vice-
Consul of the United States of America on 11 June
1990, 14 the Embassy advised the Department of
Foreign Affairs of the Republic of the Philippines
that:jgc:chanrobles.com.ph

". . . Arthur W. Scalzo, was a member of the diplomatic

staff of the United States diplomatic mission from his
arrival in the Philippines on October 14, 1985 until his
departure on August 10, 1988. . . .

. . . in May 1986, with the cooperation of Philippine

law enforcement officials and in the exercise of his
functions as a member of the mission, Mr. Scalzo
investigated Mr. Khosrow Minucher, the plaintiff in the
aforementioned case for allegedly trafficking in a
prohibited drug. It is this investigation which has
given rise to the plaintiffs complaint. The Embassy
takes note of the provisions of Article 39(2) of the
Vienna Convention on Diplomatic Relations, which
provides that Mr. Scalzo retains immunity from civil
suit for acts performed in the exercise of his
functions, as is the case here, even though he has
departed (sic) the country." chanrobles virtual
lawlibrary

Petitioner opposed the motion.

On 25 June 1990, the trial court issued an order

denying the motion for being "devoid of merit." 15

Private respondent then filed with the public

respondent Court of Appeals a petition for certiorari,
docketed therein as C.A.-G.R. SP No. 22505, to nullify
the aforesaid Order of 25 June 1990.

On 31 October 1990, public respondent promulgated a

Decision 16 ordering the dismissal of Civil Case No. 88-
45691 due to the trial courts lack of jurisdiction over
the person of the defendant because the latter
possessed diplomatic immunity.

Petitioners motion to reconsider the decision was

denied in the public respondents Resolution of 8
March 1991 because:jgc:chanrobles.com.ph

"When therefore Mr. Scalzo testified in the Criminal

Case against Khosrow Minucher it was in connection
with his official functions as an agent of the Drug
Enforcement Administration of the United States and
member (sic) of the American Mission charged with
cooperating with the Philippine law enforcement
agency. He therefore, enjoys immunity from criminal
and civil jurisdiction of the receiving State under
Article 31 of the Vienna Convention on Diplomatic
Relations." 17

Hence, this petition for review under Rule 45 of the

Rules of Court. Petitioner declares that the public
respondent erred:jgc:chanrobles.com.ph

"I. . . . IN NOT DISMISSING THE PETITION FOR

CERTIORARI FILED BY SCALZO.

II. . . . IN RULING THAT PRIVATE RESPONDENT

SCALZO IS A DIPLOMAT IMMUNE FROM CIVIL SUIT
CONFORMABLY WITH THE VIENNA CONVENTION ON
DIPLOMATIC RELATIONS.
III. . . . IN NOT FINDING THAT SCALZOS
PARTICIPATION IN THE BUY-BUST OPERATION IS
OUTSIDE OF HIS OFFICIAL FUNCTIONS, HENCE, THAT
HE IS NOT IMMUNE FROM SUIT UNDER THE VIENNA
CONVENTION ON DIPLOMATIC RELATIONS." 18

After private respondent filed his Comment to the

petition and the petitioner submitted his Reply
thereto, this Court gave due course to the same and
required the parties to submit their respective
Memoranda, which they subsequently did.

We find merit in the petition.

While the trial court correctly denied the motion to

dismiss, the public respondent gravely abused its
discretion in dismissing Civil Case No 88-45691 on the
basis of an erroneous assumption that simply because
of the Diplomatic Note, the private respondent is
clothed with diplomatic immunity, thereby divesting
the trial court of jurisdiction over his person. It may at
once be stated that even if the private respondent
enjoys diplomatic immunity, a dismissal of the case
cannot be ordered on the ground of lack of jurisdiction
over his person, but rather for lack of a cause of
action because even if he committed the imputed act
and could have been otherwise made liable therefor,
his immunity would bar any suit against him in
connection therewith and would prevent recovery of
damages arising therefrom. Jurisdiction over the
person of the defendant is acquired either by his
voluntary appearance or by the service of summons
upon him. While in the instant case, private
respondents counsel filed, on 26 October 1988, a
motion to quash summons because being outside the
Philippines and being a non-resident alien, he is
beyond the processes of the court, which was properly
denied by the trial court, he had in effect already
waived any defect in the service of the summons by
earlier asking, on two (2) occasions, for an extension
of time to file an answer, and by ultimately filing an
Answer with Counterclaim. There is no question that
the trial court acquired jurisdiction over the person of
the private Respondent.cralawnad

And now to the core issue the alleged diplomatic

immunity of the private Respondent. Setting aside for
the moment the issue of authenticity raised by the
petitioner and the doubts that surround such a claim,
in view of the fact that it took private respondent one
(1) year, eight (8) months and seventeen (17) days
from the time his counsel filed on 12 September 1988
a Special Appearance and Motion asking for a first
extension of time to file the Answer because the
Departments of State and Justice of the United States
of America were studying the case for the purpose of
determining his defenses, before he could secure the
Diplomatic Note from the U.S. Embassy in Manila, and
even granting for the sake of argument that such note
is authentic, the complaint for damages filed by the
petitioner still cannot be peremptorily dismissed. Said
complaint contains sufficient allegations which
indicate that the private respondent committed the
imputed acts in his personal capacity and outside the
scope of his official duties and functions. As described
in the complaint, he committed criminal acts for which
he is also civilly liable. In the Special Appearance to
Quash Summons earlier alluded to, on the other hand,
private respondent maintains that the claim for
damages arose "from an alleged tort." Whether such
claim arises from criminal acts or from tort, there can
be no question that private respondent was sued in
his personal capacity for acts committed outside his
official functions and duties. In the decision acquitting
the petitioner in the criminal case involving the
violation of the Dangerous Drugs Act, copy of which is
attached to his complaint for damages and which must
be deemed as an integral part thereof, the trial court
gave full credit to petitioners theory that he was a
victim of a frame-up instigated by the private
Respondent. Thus, there is a prima facie showing in
the complaint that indeed private respondent could be
held personally liable for the acts committed beyond
his official functions or duties.

In Shauf v. Court of Appeals, 19 after citing pertinent

authorities, 20 this Court ruled:chanrobles lawlibrary :
rednad

"The aforecited authorities are clear on the matter.

They state that the doctrine of immunity from suit will
not apply and may not be involved where the public
official is being sued in his private and personal
capacity as an ordinary citizen. The cloak of protection
afforded the officers and agents of the government is
removed the moment they are sued in their individual
capacity. This situation usually arises where the public
official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of
law that a public official may be liable in his personal
private capacity for whatever damage he may have
caused by his act done with malice and in bad faith, or
beyond the scope of his authority or jurisdiction
(Dumlao v. Court of Appeals, Et Al., 114 SCRA 247
[1982])."cralaw virtua1aw library

Even Article 31 of the Vienna Convention on

Diplomatic Relations admits of exceptions. It
reads:jgc:chanrobles.com.ph

"1. A diplomatic agent shall enjoy immunity from the

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

x x x

(c) an action relating to any professional or

commercial activity exercised by the diplomatic agent
in the receiving State outside his official functions.
(Emphasis supplied).

There is of course the claim of private respondent that

the acts imputed to him were done in his official
capacity. Nothing supports this self-serving claim
other than the so-called Diplomatic Note. In short,
insofar as the records are concerned, private
respondent did not come forward with evidence to
prove that indeed, he had acted in his official capacity.
It does not appear that an actual hearing on the
motion to dismiss was conducted and that private
respondent offered evidence in support thereof. Thus,
it is apropos to quote what this Court stated in United
States of America v. Guinto: 21

"But even as we are certain that the individual

petitioners in G.R. No. 80018 were acting in the
discharge of their official functions, we hesitate to
make the same conclusion in G.R. No. 80258. The
contradictory factual allegations in this case deserve
in our view a closer study of what actually happened
to the plaintiffs. The record is too meager to indicate if
the defendants were really discharging their official
duties or had actually exceeded their authority when
the incident in question occurred. Lacking this
information, this Court cannot directly decide this
case. The needed inquiry must first be made by the
lower court so it may assess and resolve the
conflicting claims of the parties on the basis of the
evidence that has yet to be presented at the trial.
Only after it shall have determined in what capacity
the petitioners were acting at the time of the incident
in question will this Court determine, if still necessary,
if the doctrine of state immunity is applicable."cralaw
virtua1aw library

It may be mentioned in this regard that private

respondent himself, in his Pre-trial Brief filed on 13
June 1990, unequivocally states that he would present
documentary evidence consisting of DEA records on
his investigation and surveillance of plaintiff and on
his position and duties as DEA special agent in Manila.
Having thus reserved his right to present evidence in
support of his position, which is the basis for the
alleged diplomatic immunity, the barren self-serving
claim in the belated motion to dismiss cannot be relied
upon for a reasonable, intelligent and fair resolution
of the issue of diplomatic immunity.

The public respondent then should have sustained the

trial courts denial of the motion to dismiss. Verily,
such should have been the most proper and
appropriate recourse. It should not have been
overwhelmed by the self-serving Diplomatic Note
whose belated issuance is even suspect and whose
authenticity has not yet been proved. The undue haste
with which respondent Court yielded to the private
respondents claim is arbitrary.

WHEREFORE, the challenged decision of public

respondent of 31 October 1990 in C.A.-G.R. SP No.
22505 is SET ASIDE and the Order of 25 June 1990 of
Branch 19 of the Regional Trial Court of Manila in Civil
Case No. 88-45691 denying private respondents
Motion to Dismiss is hereby REINSTATED.

Costs against private Respondent.

SO ORDERED.
Bidin, Romero and Melo, JJ., concur.

Gutierrez, Jr., J., is on official leave.

EN BANC
[G.R. No. 154705. June 26, 2003]
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY
AMBASSADOR SOERATMIN, and MINISTER
COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES
VINZON, doing business under the name and style of
VINZON TRADE AND SERVICES, respondent.
DECISION
AZCUNA, J:

This is a petition for review on certiorari to set aside

the Decision of the Court of Appeals dated May 30,
2002 and its Resolution dated August 16, 2002, in CA-
G.R. SP No. 66894 entitled The Republic of Indonesia,
His Excellency Ambassador Soeratmin and Minister
Counselor Azhari Kasim v. Hon. Cesar Santamaria,
Presiding Judge, RTC Branch 145, Makati City, and
James Vinzon, doing business under the name and
style of Vinzon Trade and Services.

Petitioner, Republic of Indonesia, represented by its

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

Petitioners claim that sometime prior to the date of

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

On the other hand, respondent claims that the

aforesaid termination was arbitrary and unlawful.
Respondent cites various circumstances which
purportedly negated petitioners alleged
dissatisfaction over respondents services: (a) in July
2000, Minister Counsellor Kasim still requested
respondent to assign to the embassy an additional
full-time worker to assist one of his other workers; (b)
in August 2000, Minister Counsellor Kasim asked
respondent to donate a prize, which the latter did, on
the occasion of the Indonesian Independence Day golf
tournament; and (c) in a letter dated August 22, 2000,
petitioner Ambassador Soeratmin thanked respondent
for sponsoring a prize and expressed his hope that the
cordial relations happily existing between them will
continue to prosper and be strengthened in the
coming years.

Hence, on December 15, 2000, respondent filed a

complaint[3] against petitioners docketed as Civil
Case No. 18203 in the Regional Trial Court (RTC) of
Makati, Branch 145. On February 20, 2001, petitioners
filed a Motion to Dismiss, alleging that the Republic of
Indonesia, as a foreign sovereign State, has sovereign
immunity from suit and cannot be sued as a party-
defendant in the Philippines. The said motion further
alleged that Ambassador Soeratmin and Minister
Counsellor Kasim are diplomatic agents as defined
under the Vienna Convention on Diplomatic Relations
and therefore enjoy diplomatic immunity.[4] In turn,
respondent filed on March 20, 2001, an Opposition to
the said motion alleging that the Republic of Indonesia
has expressly waived its immunity from suit. He based
this claim upon the following provision in the
Maintenance Agreement:

Any legal action arising out of this Maintenance

Agreement shall be settled according to the laws of
the Philippines and by the proper court of Makati City,
Philippines.

Respondents Opposition likewise alleged that

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

On May 17, 2001, the trial court denied herein

petitioners Motion to Dismiss. It likewise denied the
Motion for Reconsideration subsequently filed.

The trial courts denial of the Motion to Dismiss was

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

On May 30, 2002, the Court of Appeals rendered its

assailed decision denying the petition for lack of
merit.[6] On August 16, 2002, it denied herein
petitioners motion for reconsideration.[7]

Hence, this petition.

In the case at bar, petitioners raise the sole issue of

whether or not the Court of Appeals erred in
sustaining the trial courts decision that petitioners
have waived their immunity from suit by using as its
basis the abovementioned provision in the
Maintenance Agreement.

The petition is impressed with merit.

International law is founded largely upon the

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

The rules of International Law, however, are neither

unyielding nor impervious to change. The increasing
need of sovereign States to enter into purely
commercial activities remotely connected with the
discharge of their governmental functions brought
about a new concept of sovereign immunity. This
concept, the restrictive theory, holds that the
immunity of the sovereign is recognized only with
regard to public acts or acts jure imperii, but not with
regard to private acts or acts jure gestionis.[13]

In United States v. Ruiz,[14] for instance, we held that

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

Apropos the present case, the mere entering into a

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

Hence, the existence alone of a paragraph in a

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

Submission by a foreign state to local jurisdiction

must be clear and unequivocal. It must be given
explicitly or by necessary implication. We find no such
waiver in this case.

Respondent concedes that the establishment of a

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

We disagree. There is no dispute that the

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

The Solicitor General, in his Comment, submits the

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

On the matter of whether or not petitioners

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

1. A diplomatic agent shall enjoy immunity from the

criminal jurisidiction of the receiving State. He shall
also enjoy immunity from its civil and administrative
jurisdiction, except in the case of:

(a) a real action relating to private immovable

property situated in the territory of the receiving
State, unless he holds it on behalf of the sending
State for the purposes of the mission;

(b) an action relating to succession in which the

diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and
not on behalf of the sending State;

(c) an action relating to any professional or

commercial activity exercised by the diplomatic agent
in the receiving State outside his official functions.

xxx

The act of petitioners Ambassador Soeratmin and

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

The Solicitor General believes that said act may fall

under subparagraph (c) thereof,[20] but said provision
clearly applies only to a situation where the diplomatic
agent engages in any professional or commercial
activity outside official functions, which is not the case
herein.

WHEREFORE, the petition is hereby GRANTED. The

decision and resolution of the Court of Appeals in CA
G.R. SP No. 66894 are REVERSED and SET ASIDE and
the complaint in Civil Case No. 18203 against
petitioners is DISMISSED.
No costs.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban,

Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,
Carpio, Corona, Carpio-Morales, and Callejo, Sr., JJ.,
concur.
Austria-Martinez, J., on leave.
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY
AMBASSADOR SOERATMIN, and MINISTER
COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES
VINZON

FACTS:

Petitioner, Republic of Indonesia, represented by its

Counsellor, Siti Partinah, entered into a Maintenance
Agreement in August 1995 with respondent James
Vinzon, sole proprietor of Vinzon Trade and Services.
The equipment covered by the Maintenance
Agreement are air conditioning units and was to take
effect in a period of four years. When Indonesian
Minister Counsellor Kasim assumed the position of
Chief of Administration in March 2000, he allegedly
found respondents work and services unsatisfactory
and not in compliance with the standards set in the
Maintenance Agreement. Hence, the Indonesian
Embassy terminated the agreement in a letter dated
August 31, 2000. Respondent filed a complaint
claiming that the aforesaid termination was arbitrary
and unlawful. Petitioners filed a Motion to Dismiss
assailing that Republic of Indonesia, as a foreign
sovereign State, has sovereign immunity from suit and
cannot be sued as a party-defendant in the
Philippines.

ISSUE:

whether or not the Court of Appeals erred in

sustaining the trial courts decision that petitioners
have waived their immunity from suit by using as its
basis the abovementioned provision in the
Maintenance Agreement.

RULING:

The SC GRANTED the petition.

The rule that a State may not be sued without its
consent is a necessary consequence of the principles
of independence and equality of States. The mere
entering into a contract by a foreign State with a
private party cannot be construed as the ultimate test
of whether or not it is an act jure imperii or jure
gestionis. Such act is only the start of the inquiry. A
sovereign State does not merely establish a
diplomatic mission and leave it at that; the
establishment of a diplomatic mission encompasses its
maintenance and upkeep. Hence, the State may enter
into contracts with private entities to maintain the
premises, furnishings and equipment of the embassy
and the living quarters of its agents and officials. It is
therefore clear that petitioner Republic of Indonesia
was acting in pursuit of a sovereign activity when it
entered into a contract with respondent for the
upkeep or maintenance of the air conditioning units,
generator sets, electrical facilities, water heaters, and
water motor pumps of the Indonesian Embassy and
the official residence of the Indonesian ambassador.

Republic of Indonesia vs. James Vizon Digested

Republic of Indonesia vs. James Vizon G.R. No. 54705,
June 26, 2003

FACTS:

Petitioner, Republic of Indonesia entered into a

Maintenance Agreement in August 1995 with
respondent James Vinzon, sole proprietor of Vinzon
Trade and Services. The Maintenance Agreement
stated that respondent shall, for a consideration,
maintain specified equipment at the Embassy Main
Building, Embassy Annex Building and the Wisma
Duta, the official residence of petitioner Ambassador
Soeratmin. The equipments covered by the
Maintenance Agreement are air conditioning units,
generator sets, electrical facilities, water heaters, and
water motor pumps. It is likewise stated therein that
the agreement shall be effective for a period of four
years and will renew itself automatically unless
cancelled by either party by giving thirty days prior
written notice from the date of expiry.
Petitioners claim that sometime prior to the date of
expiration of the said agreement, or before August
1999, they informed respondent that the renewal of
the agreement shall be at the discretion of the
incoming Chief of Administration, Minister Counsellor
Azhari Kasim, who was expected to arrive in February
2000. When Minister Counsellor Kasim assumed the
position of Chief of Administration in March 2000, he
allegedly found respondents work and services
unsatisfactory and not in compliance with the
standards set in the Maintenance Agreement. Hence,
the Indonesian Embassy terminated the agreement in
a letter dated August 31, 2000. Petitioners claim,
moreover, that they had earlier verbally informed
respondent of their decision to terminate the
agreement. On the other hand, respondent claims that
the aforesaid termination was arbitrary and unlawful.
Respondent filed a complaint against petitioners (RTC)
of Makati, petitioners filed a Motion to Dismiss,
alleging that the Republic of Indonesia, as a foreign
sovereign State, has sovereign immunity from suit and
cannot be sued as a party-defendant in the
Philippines. The said motion further alleged that
Ambassador Soeratmin and Minister Counsellor Kasim
are diplomatic agents as defined under the Vienna
Convention on Diplomatic Relations and therefore
enjoy diplomatic immunity. In turn, respondent filed
on March 20, 2001, an Opposition to the said motion
alleging that the Republic of Indonesia has expressly
waived its immunity from suit. He based this claim
upon the following provision in the Maintenance
Agreement.
ISSUE:
Whether or not the Republic of Indonesia can be sued.
RULING:
The Supreme Court on the matter ruled that the
republic of Indonesia cannot be deemed to have
waived its immunity to suit. The existence alone of a
paragraph in a contract stating that any legal action
arising out of the agreement shall be settled
according to the laws of the Philippines and by a
specified court of the Philippines is not necessarily a
waiver of sovereign immunity from suit. The aforesaid
provision contains language not necessarily
inconsistent with sovereign immunity. On the other
hand, such provision may also be meant to apply
where the sovereign party elects to sue in the local
courts, or otherwise waives its immunity by any
subsequent act. The applicability of Philippine laws
must be deemed to include Philippine laws in its
totality, including the principle recognizing sovereign
immunity. Hence, the proper court may have no proper
action, by way of settling the case, except to dismiss
it.

The Court stated that the upkeep of its furnishings

and equipment is still part sovereign function of the
State. A sovereign State does not merely establish a
diplomatic mission and leave it at that; the
establishment of a diplomatic mission encompasses its
maintenance and upkeep. Hence, the State may enter
into contracts with private entities to maintain the
premises, furnishings and equipment of the embassy
and the living quarters of its agents and officials. It is
therefore clear that petitioner Republic of Indonesia
was acting in pursuit of a sovereign activity when it
entered into a contract with respondent for the
upkeep or maintenance of the air conditioning units,
generator sets, electrical facilities, water heaters, and
water motor pumps of the Indonesian Embassy and
the official residence of the Indonesian ambassador.
The Supreme Court grants the petition and reversed
the decision of the Court of Appeals.
public official charged with some administrative or
technical office who can be held to the proper
responsibility in the manner laid down by the law of
civil responsibility. Consequently, the trial court in not
so deciding and in sentencing the said entity to the
payment of damages, caused by an official of the
second class referred to, has by erroneous
interpretation infringed the provisions of Articles 1902
and 1903 of the Civil Code.

It is, therefore, evidence that the State (GPI) is only

liable, according to the above quoted decisions of the
Supreme Court of Spain, for the acts of its agents,
officers and employees when they act as special
agents within the meaning of paragraph 5 of Article
1903, supra, and that the chauffeur of the ambulance
of the General Hospital was not such an agent.

For the foregoing reasons, the judgment appealed

from must be reversed, without costs in this instance.
Whether the Government intends to make itself legally
liable for the amount of damages above set forth,
which the plaintiff has sustained by reason of the
negligent acts of one of its employees, be legislative
enactment and by appropriating sufficient funds
therefore, we are not called upon to determine. This
matter rests solely with the Legislature and not with
the courts.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-35131 November 29, 1972

THE WORLD HEALTH ORGANIZATION and DR. LEONCE

VERSTUYFT, petitioners,
vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of
Branch VIII, Court of First Instance of Rizal, MAJOR
WILFREDO CRUZ, MAJOR ANTONIO G. RELLEVE, and
CAPTAIN PEDRO S. NAVARRO of the Constabulary
Offshore Action Center (COSAC), respondents.

Sycip, Salazar, Luna, Manalo and Feliciano for

petitioners.

Emilio L. Baldia for respondents.

TEEHANKEE, J.:p

An original action for certiorari and prohibition to set

aside respondent judge's refusal to quash a search
warrant issued by him at the instance of respondents
COSAC (Constabulary Offshore Action Center) officers
for the search and seizure of the personal effects of
petitioner official of the WHO (World Health
Organization) notwithstanding his being entitled to
diplomatic immunity, as duly recognized by the
executive branch of the Philippine Government and to
prohibit respondent judge from further proceedings in
the matter.

Upon filing of the petition, the Court issued on June 6,

1972 a restraining order enjoining respondents from
executing the search warrant in question.

Respondents COSAC officers filed their answer joining

issue against petitioners and seeking to justify their
act of applying for and securing from respondent
judge the warrant for the search and seizure of ten
crates consigned to petitioner Verstuyft and stored at
the Eternit Corporation warehouse on the ground that
they "contain large quantities of highly dutiable
goods" beyond the official needs of said petitioner
"and the only lawful way to reach these articles and
effects for purposes of taxation is through a search
warrant." 1

The Court thereafter called for the parties'

memoranda in lieu of oral argument, which were filed
on August 3, 1972 by respondents and on August 21,
1972 by petitioners, and the case was thereafter
deemed submitted for decision.

It is undisputed in the record that petitioner Dr.

Leonce Verstuyft, who was assigned on December 6,
1971 by the WHO from his last station in Taipei to the
Regional Office in Manila as Acting Assistant Director
of Health Services, is entitled to diplomatic immunity,
pursuant to the Host Agreement executed on July 22,
1951 between the Philippine Government and the
World Health Organization.

Such diplomatic immunity carries with it, among other

diplomatic privileges and immunities, personal
inviolability, inviolability of the official's properties,
exemption from local jurisdiction, and exemption from
taxation and customs duties.

When petitioner Verstuyft's personal effects contained

in twelve (12) crates entered the Philippines as
unaccompanied baggage on January 10, 1972, they
were accordingly allowed free entry from duties and
taxes. The crates were directly stored at the Eternit
Corporation's warehouse at Mandaluyong, Rizal,
"pending his relocation into permanent quarters upon
the offer of Mr. Berg, Vice President of Eternit who was
once a patient of Dr. Verstuyft in the Congo." 2

Nevertheless, as above stated, respondent judge

issued on March 3, 1972 upon application on the same
date of respondents COSAC officers search warrant
No. 72-138 for alleged violation of Republic Act 4712
amending section 3601 of the Tariff and Customs Code
3 directing the search and seizure of the dutiable
items in said crates.

Upon protest of March 6, 1972 of Dr. Francisco Dy,

WHO Regional Director for the Western Pacific with
station in Manila, Secretary of Foreign Affairs Carlos P.
Romulo, personally wired on the same date
respondent Judge advising that "Dr. Verstuyft is
entitled to immunity from search in respect of his
personal baggage as accorded to members of
diplomatic missions" pursuant to the Host Agreement
and requesting suspension of the search warrant
order "pending clarification of the matter from the
ASAC."

Respondent judge set the Foreign Secretary's request

for hearing and heard the same on March 16, 1972,
but notwithstanding the official plea of diplomatic
immunity interposed by a duly authorized
representative of the Department of Foreign Affairs
who furnished the respondent judge with a list of the
articles brought in by petitioner Verstuyft, respondent
judge issued his order of the same date maintaining
the effectivity of the search warrant issued by him,
unless restrained by a higher court. 4

Petitioner Verstuyft's special appearance on March 24,

1972 for the limited purpose of pleading his diplomatic
immunity and motion to quash search warrant of April
12, 1972 failed to move respondent judge.

At the hearing thereof held on May 8, 1972, the Office

of the Solicitor General appeared and filed an
extended comment stating the official position of the
executive branch of the Philippine Government that
petitioner Verstuyft is entitled to diplomatic immunity,
he did not abuse his diplomatic immunity, 5 and that
court proceedings in the receiving or host State are
not the proper remedy in the case of abuse of
diplomatic immunity. 6

The Solicitor General accordingly joined petitioner

Verstuyft's prayer for the quashal of the search
warrant. Respondent judge nevertheless summarily
denied quashal of the search warrant per his order of
May 9, 1972 "for the same reasons already stated in
(his) aforesaid order of March 16, 1972" disregarding
Foreign Secretary Romulo's plea of diplomatic
immunity on behalf of Dr. Verstuyft.

Hence, the petition at bar. Petitioner Verstuyft has in

this Court been joined by the World Health
Organization (WHO) itself in full assertion of petitioner
Verstuyft's being entitled "to all privileges and
immunities, exemptions and facilities accorded to
diplomatic envoys in accordance with international
law" under section 24 of the Host Agreement.

The writs of certiorari and prohibition should issue as

prayed for.

1. The executive branch of the Philippine

Government has expressly recognized that petitioner
Verstuyft is entitled to diplomatic immunity, pursuant
to the provisions of the Host Agreement. The
Department of Foreign Affairs formally advised
respondent judge of the Philippine Government's
official position that accordingly "Dr. Verstuyft cannot
be the subject of a Philippine court summons without
violating an obligation in international law of the
Philippine Government" and asked for the quashal of
the search warrant, since his personal effects and
baggages after having been allowed free entry from
all customs duties and taxes, may not be baselessly
claimed to have been "unlawfully imported" in
violation of the tariff and customs code as claimed by
respondents COSAC officers. The Solicitor-General, as
principal law officer of the Government, 7 likewise
expressly affirmed said petitioner's right to diplomatic
immunity and asked for the quashal of the search
warrant.

It is a recognized principle of international law and

under our system of separation of powers that
diplomatic immunity is essentially a political question
and courts should refuse to look beyond a
determination by the executive branch of the
government, 8 and where the plea of diplomatic
immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is
then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the
principal law officer of the government, the Solicitor
General in this case, or other officer acting under his
direction. 9 Hence, in adherence to the settled
principle that courts may not so exercise their
jurisdiction by seizure and detention of property, as to
embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine
that "in such cases the judicial department of (this)
government follows the action of the political branch
and will not embarrass the latter by assuming an
antagonistic jurisdiction." 10
2. The unfortunate fact that respondent judge chose
to rely on the suspicion of respondents COSAC officers
"that the other remaining crates unopened contain
contraband items" 11 rather than on the categorical
assurance of the Solicitor-General that petitioner
Verstuyft did not abuse his diplomatic immunity, 12
which was based in turn on the official positions taken
by the highest executive officials with competence and
authority to act on the matter, namely, the Secretaries
of Foreign Affairs and of Finance, could not justify
respondent judge's denial of the quashal of the search
warrant.

As already stated above, and brought to respondent

court's attention, 13 the Philippine Government is
bound by the procedure laid down in Article VII of the
Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations 14 for
consultations between the Host State and the United
Nations agency concerned to determine, in the first
instance the fact of occurrence of the abuse alleged,
and if so, to ensure that no repetition occurs and for
other recourses. This is a treaty commitment
voluntarily assumed by the Philippine Government and
as such, has the force and effect of law.

Hence, even assuming arguendo as against the

categorical assurance of the executive branch of
government that respondent judge had some ground
to prefer respondents COSAC officers' suspicion that
there had been an abuse of diplomatic immunity, the
continuation of the search warrant proceedings before
him was not the proper remedy. He should,
nevertheless, in deference to the exclusive
competence and jurisdiction of the executive branch
of government to act on the matter, have acceded to
the quashal of the search warrant, and forwarded his
findings or grounds to believe that there had been
such abuse of diplomatic immunity to the Department
of Foreign Affairs for it to deal with, in accordance
with the aforementioned Convention, if so warranted.

3. Finally, the Court has noted with concern the

apparent lack of coordination between the various
departments involved in the subject-matter of the
case at bar, which made it possible for a small unit,
the COSAC, to which respondents officers belong,
seemingly to disregard and go against the
authoritative determination and pronouncements of
both the Secretaries of Foreign Affairs and of Finance
that petitioner Verstuyft is entitled to diplomatic
immunity, as confirmed by the Solicitor-General as the
principal law officer of the Government. Such
executive determination properly implemented should
have normally constrained respondents officers
themselves to obtain the quashal of the search
warrant secured by them rather than oppose such
quashal up to this Court, to the embarrassment of said
department heads, if not of the Philippine Government
itself vis a vis the petitioners. 15

The seriousness of the matter is underscored when

the provisions of Republic Act 75 enacted since
October 21, 1946 to safeguard the jurisdictional
immunity of diplomatic officials in the Philippines are
taken into account. Said Act declares as null and void
writs or processes sued out or prosecuted whereby
inter alia the person of an ambassador or public
minister is arrested or imprisoned or his goods or
chattels are seized or attached and makes it a penal
offense for "every person by whom the same is
obtained or prosecuted, whether as party or as
attorney, and every officer concerned in executing it"
to obtain or enforce such writ or process. 16

The Court, therefore, holds that respondent judge

acted without jurisdiction and with grave abuse of
discretion in not ordering the quashal of the search
warrant issued by him in disregard of the diplomatic
immunity of petitioner Verstuyft.

ACCORDINGLY, the writs of certiorari and prohibition

prayed for are hereby granted, and the temporary
restraining order heretofore issued against execution
or enforcement of the questioned search warrant,
which is hereby declared null and void, is hereby made
permanent. The respondent court is hereby
commanded to desist from further proceedings in the
matter. No costs, none having been prayed for.

The clerk of court is hereby directed to furnish a copy

of this decision to the Secretary of Justice for such
action as he may find appropriate with regard to the
matters mentioned in paragraph 3 hereof. So ordered.

Concepcion, C.J., Makalintal, Zaldivar, Fernando,

Barredo, Makasiar, Antonio and Esguerra, JJ., concur.
Castro, J., reserves his vote.

Facts:

Dr. Leonce Verstuyft was assigned by WHO to its

regional office in Manila as Acting Assistant Director of
Health Services. His personal effects, contained in
twelve (12) crates, were allowed free entry from
duties and taxes. Constabulary Offshore Action Center
(COSAC) suspected that the crates contain large
quantities of highly dutiable goods beyond the
official needs of Verstuyft. Upon application of the
COSAC officers, Judge Aquino issued a search warrant
for the search and seizure of the personal effects of
Verstuyft.

Secretary of Foreign Affairs Carlos P. Romulo advised

Judge Aquino that Dr. Verstuyft is entitled to immunity
from search in respect for his personal baggage as
accorded to members of diplomatic missions pursuant
to the Host Agreement and requested that the search
warrant be suspended. The Solicitor General
accordingly joined Verstuyft for the quashal of the
search warrant but respondent judge nevertheless
summarily denied the quashal. Verstuyft, thus, filed a
petition for certiorari and prohibition with the SC.
WHO joined Verstuyft in asserting diplomatic
immunity.

Issue:

Whether or not personal effect of Verstuyft can be

exempted from search and seizure under the
diplomatic immunity.

Held:

Yes. The executive branch of the Phils has expressly

recognized that Verstuyft is entitled to diplomatic
immunity, pursuant to the provisions of the Host
Agreement. The DFA formally advised respondent
judge of the Philippine Government's official position.
The Solicitor General, as principal law officer of the
gorvernment, likewise expressly affirmed said
petitioner's right to diplomatic immunity and asked for
the quashal of the search warrant.

It is a recognized principle of international law and

under our system of separation of powers that
diplomatic immunity is essentially a political question
and courts should refuse to look beyond a
determination by the executive branch of the
government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is
then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the
principal law officer of the government, the Solicitor
General in this case, or other officer acting under his
discretion. Courts may not so exercise their
jurisdiction by seizure and detention of property, as to
embarass the executive arm of the government in
conducting foreign relations.

The Court, therefore, holds the respondent judge

acted without jurisdiction and with grave abuse of
discretion in not ordering the quashal of the search
warrant issued by him in disregard of the diplomatic
immunity of petitioner Verstuyft. (World Health
Organization vs. Aquino, G.R. No. L-35131, November
29, 1972, 48 SCRA 243)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 79156 June 22, 1989

ISIDRO, ZENAIDA, IRWIN, ZENDA and DORNET, all

surnamed ANIMOS, petitioners,
vs.
PHILIPPINE VETERANS AFFAIRS OFFICE, its
Administrator, JUAN L. GACAD and THE COURT OF
APPEALS, respondents.

Duran and Associates for petitioners.

SARMIENTO, J.:

The Court grants this petition assailing the decision of

the Court of Appeals. *

The case originated from a suit for mandamus

commenced by the petitioners against the respondent,
the Philippine Veterans Affairs Office, to compel
payment by the said respondent of full pension
benefits, retroactive to 1947, under Republic Act No.
65 as amended. The Regional Trial Court ** dismissed
the case on the ground of lack of jurisdiction. The
petitioners then appealed to the respondent, the
Court of Appeals, which however rendered an
affirmance.

The antecedent facts are stated by the Solicitor

General. We quote:

Isidro Animos is a veteran of World War II, having

been a member of the USAFFE and later of the guerilla
forces during the war.

On October 18, 1946, Republic Act No. 65 was

approved, providing for a Bill of Rights for Officers and
Enlisted Men of the Philippine Army, Recognized and
Deserving Guerilla Organizations, and Veterans of the
Philippine Revolution. Section 9 thereof provides:

SEC. 9. The persons mentioned in sections one and

two hereof who are permanently incapacitated from
work owing to sickness, disease, or injuries sustained
in line of duty, shall be given a life pension of fifty
pesos a month unless they are actually receiving a
similar pension from other Government funds, and
shall receive, in addition, the necessary
hospitalization and medical care.

Pursuant to the above provision, Animos filed with the

Philippine Veterans Board (now Philippine Veterans
Affairs Office, or PVAO for short) a claim for disability
pension benefit. Upon medical examination, Animos
was found to have incurred partial physical disability
due to a gunshot wound, and was awarded 25%
pension benefit effective November 18, 1947, in the
amount of P12.50 a month.

On June 21, 1957, Republic Act No. 1920 was approved

amending Sec. 9 of Rep. Act No. 65, which increased
the life pension from P50.00 to P100.00, plus P10.00 a
month for each unmarried minor child below 18 years
of age. Subsequently, on June 22, 1969, Rep. Act No.
5373 took effect which further amended said Sec. 9
and increased the basic monthly pension from P100.00
to P200.00, plus P30.00 a month for the wife and
P30.00 a month for each unmarried child below 18
years.
It appears that on September 27, 1955, Animos filed
an application for dependents' pension benefits. The
application was however disapproved on September 4,
1956, on the ground that Animos was not totally
incapacitated.

Upon the required re-evaluation of his partial physical

disability, Animos was re-rated to be 30% disabled on
November 25, 1964 and was correspondingly granted
a P30.00 monthly pension. Again, on August 4, 1970,
Animos was re-rated to be 50% disabled and was
granted a P50.00 monthly pension. Reassessments
made on April 22, 1975 and June 11, 1982 showed that
Animos' partial disability remained unchanged at 50%.

Animos' numerous written requests to be granted the

maximum pension benefit as well as dependents'
pension benefits were all disapproved. Thus, on
November 23, 1982, Animos, his wife and children
filed a petition for mandamus with the then Court of
First Instance of Albay against the PVAO to compel
that office to increase his monthly pension, alleging
that since the rules on disability rating of the latter
are contrary to law, Animos, who was granted a
lifetime pension for his disability should be paid the
maximum pension benefits, including pension for his
wife and minor children. 1

In dismissing the petition, the trial court held that

"should petitioner's claim be upheld for the
satisfaction of veteran's benefits for the years up to
the present, or a period of about 40 years, the
defendant may not be in a position, legally and
budgetary wise, to comply with the court's award as
sufficient treasury funds therefor could only be
appropriated for that purpose by the legislature," 2
and ruled that the petition was "in effect a money
claim against the government" 3 over which it did not
have jurisdiction. In sustaining the trial court, the
Court of Appeals added that mandamus does not lie to
interfere with discretion, and that the petitioner had
failed to exhaust administrative remedies.

On the question of procedure, the controlling

precedents are Begoso v. Chairman, Philippine
Veterans Administration 4 and Teoxon v. Members of
the Board of Administrators, Philippine Veterans
Administration, 5 in which we held:
1. The fourth assignment of error assails what it
considers to be the failing of the lower court in not
holding that the complaint in this case is in effect a
suit against the State which has not given its consent
thereto. We have recently had occasion to reaffirm the
force and primacy of the doctrine of non-suability. It
does not admit of doubt, then, that if the suit were in
fact against the State, the lower court should have
dismissed the complaint. Nor is it to be doubted that
while ostensibly an action may be against a public
official, the defendant may in reality be the
government. As a result, it is equally well-settled that
where a litigation may have adverse consequences on
the public treasury, whether in the disbursements of
funds or loss of property, the public official proceeded
against not being liable in his personal capacity, then
the doctrine of non-suability may appropriately be
invoked. It has no application, however, where the suit
against such a functionary had to be instituted
because of his failure to comply with the duty imposed
by statute appropriating public funds for the benefit
of plaintiff or petitioner. Such is the present case.

The doctrine announced by us in Ruiz v. Cabahug finds

relevance: "We hold that under the facts and
circumstances alleged in the amended complaint,
which should be taken on its face value, the suit is not
one against the Government, or a claim against it, but
one against the officials to compel them to act in
accordance with the rights to be established by the
contending architects, or to prevent them from
making payment and recognition until the contending
architects have established their respective rights and
interests in the funds retained and in the credit for
the work done." As a matter of fact, in an earlier case
where we sustained the power of a private citizen
claiming title to and right of possession of a certain
property to sue an officer or agent of the government
alleged to be illegally withholding the same, we
likewise expressed this caveat: "However, and this is
important, where the judgment in such a case would
result not only in the recovery of possession of the
property in favor of said citizen but also in a charge
against or financial liability to the Government, then
the suit should be regarded as one against the
government itself, and, consequently, it cannot
prosper or be validly entertained by the courts except
with the consent of said Government.
2. Nor is the third assignment of error to the effect
that the lower court did not require appellee to
exhaust his administrative remedies before coming to
court any more persuasive. An excerpt from the
leading case of Gonzales v. Hechanova, the opinion
being penned by the present Chief Justice, clearly
demonstrates why appellants' argument in this
respect is unavailing: "Respondents assail petitioner's
right to the reliefs prayed for because he 'has not
exhausted all administrative remedies available to him
before coming to court. We have already held,
however, that the principle requiring the previous
exhaustion of administrative remedies is not
applicable 'where the question in dispute is purely a
legal one', or where the controverted act is patently
illegal or was performed without jurisdiction or in
excess of jurisdiction, or where the respondent is a
department secretary, whose acts as an alter-ego of
the President bear the implied or assumed approval of
the latter, unless actually disapproved by him, or
where there are circumstances indicating the urgency
of judicial intervention." The Gonzales doctrine, it is to
be noted, summarized the views announced in earlier
cases. The list of subsequent cases reiterating such a
doctrine is quite impressive. To be more specific,
where there is a stipulation of facts, as in this case,
the question before the lower court being solely one
of law and on the face of the decision, the actuation of
appellants being patently illegal, the doctrine of
exhaustion of administrative remedies certainly does
not come into play. 6

Mandamus therefore lies, and failure to exhaust

remedies is no defense against payment.

We come to the merits.

The denial of the petitioner's claim was predicated on

the finding that his disabilities were, based on the
respondent's "Rules on Disability Ratings", partial
rather than total, a condition that precludes payment
of maximum pension benefits. The petitioner submits
that the very rating system adopted by the
respondent veterans' office is null and void.

The applicable provision is Section 9 of Republic Act

No. 65, as amended, as follows:
SEC. 9. The persons mentioned in sections one and
two hereof who are permanently incapacitated from
work owing to sickness, disease, or injuries sustained
in line of duty, shall be given a life pension of two
hundred pesos a month, and thirty pesos a month for
his wife and each of his unmarried minor children
below eighteen years of age, unless they are actually
receiving a similar pension from other Government
funds, and shall receive, in addition, the necessary
hospitalization and medical care. 7

In Begoso, supra, as well as Teoxon, supra, this Court

held that bare rules promulgated by the Philippine
Veterans Administration, now the Philippine Veterans'
Affairs Office, cannot overrule the mandate of statute,
on the fundamental principle that "an administrative
agency 'cannot amend an act of Congress.' " 8 In the
case at bar, there is no gainsaying the fact that the
petitioner had been enjoying pension benefits, albeit
partial, pursuant to the provisions of Section 9, supra,
upon the premise that he was qualified thereto.
Hence, the Government must pay him maximum
pension benefits. The fact that his injuries, based on
the respondent's ratings, have been classified as
"partial" cannot erase the equal fact that he is
"permanently incapacitated" under the law. Section 9
refers simply to "permanent incapacity" and makes no
distinctions as a condition sine qua non to
compensability. It does not require such an incapacity
to be total or partial and neither does it authorize the
PVAO to make a gradation of injuries. It is axiomatic
that where the law does not distinguish, let no one
distinguish. The classifications or ratings formulated
by the respondent body amount to an amendment of
the law at the administrative level, and to that extent,
they are null and void.

The case of Board of administrators, PVA v. Agcaoili, 9

which the Solicitor General invokes does not apply. In
that case, we denied pension for the plain reason that
the applicant was not permanently incapacitated. But
we did not, consequently, uphold, expressly or by
implication, the PVAO's rules in said case, the
applicant being disqualified in any event. If we did, it
was because their validity was not specifically
challenged. Needless to state, we did not abandon
either Begoso or Teoxon therein.
It is pure conjecture to say that the petitioner "had no
more service-connected disability to hang on and
should not have been denied continued disability
pension were it not for the compassionate regard by
respondents to the veterans of World War II." 10 The
fact of the matter is that the respondent had
consistently paid the petitioner pension benefits for
the past forty years, meaning to say that he was (is)
entitled thereto. It would be an act of injustice to deny
him now what, by strong constitutional presumptions,
is due him.

Neither is it a matter of charity or compassion. The

PVAO is vested with no discretion to deny payment
where payment is due and conversely, to pay when
payment is not due.

"The State," declares the Constitution (1973), "shall

establish, maintain, and ensure adequate social
services in the field of education, health, housing,
employment, welfare, and social security to guarantee
the enjoyment by the people of a decent standard of
living." 11 Under the present Constitution, the State's
concern for war veterans finds an even more emphatic
expression:

SEC. 9. The State shall promote a just and dynamic

social order that will ensure the prosperity and
independence of the nation and free the people from
poverty through policies that provides adequate social
services, promote full employment, a rising standard
of living, and an improved quality of life for all . 12

xxx xxx xxx

SEC. 7. The State shall provide immediate and

adequate care, benefits, and other forms of assistance
to war veterans and veterans of military campaigns,
their surviving spouses and orphans. Funds shall be
provided therefor and due consideration shall be given
them in the disposition of agricultural lands of the
public domain and, in appropriate cases, in the
utilization of natural resources. 13

In the face of clear State policy, the burden is

consequently on the Government to show that the
applicant is not qualified for pension. The applicant
enjoys a presumed qualification upon a simple
demonstration that he had fought in the war and had
suffered a permanent incapacity as a result thereof .

The records show that the petitioner suffered various

injuries, in his ear arising from a bombing in
Atimonan, Quezon (where elements of the Japanese
Imperial Army landed, after they had established a
beachhead at Vigan, Ilocos Sur, two days after the
Pearl Harbor bombing which commenced World War II
in the Pacific area), and other parts of his body due to
bullets and bayonets. 14 There is no showing that his
wounds have since healed. Hence, they are
"permanent" within the intendment of the veterans'
Bill of Rights. As we said, the fact that they are partial
rather than total is of no moment. "Permanent
incapacity", under Republic Act No. 65, contemplates
an injury or ailment sustained in battle, permanent or
incurable in character, and such that it impedes
nominal work. But the statute does not require that
the veteran be utterly unable to work by reason of the
injury or ailment, or otherwise, "totally disabled". To
say that it does is to reduce the law into a simple
social security measure, similar to workmen's
compensation, rather than an act of gratitude by the
State to the brave veterans of the last two wars in the
country.

Further, to say that Republic Act No. 26 applies only to

veterans totally disabled for work is to make the Act
the veterans' sole source of income (by virtue of the
prohibition against multiple compensations under
Sections 9 and 10). Certainly, P230.00 a month 15
the amount of pension under the Act is hardly
"compensation" for any common tao, let alone a
totally disabled citizen. This could not have been the
intent of the legislature.

The clear implication is that the PVAO may not rate

disabilities in the same manner they are evaluated
under our laws on employees' compensation. So long
as a veteran's incapacity is permanent, the veteran is
entitled to payment.

Alleged budgetary constraints or lack of appropriation

are no obstacles to payment. In Espaol v. Chairman,
Philippine Veterans Administration, 16 we ordered
"the restoration of [the petitioner's] monthly pension
and her children's monthly dependent's pension
provided for by R.A. No. 65, as amended, the coverage
of which Congress had already appropriated funds
[for]." 17 The instant case presents a similar situation.
In asking for retroactive pension, what the petitioner
in reality seeks is the "restoration" of full pension
benefits long denied him on account of the PVAO's
improper application of Republic Act No. 65, and the
funds for which have been undoubtedly appropriated.

To the extent that this decision is incompatible with

our decision in PVAO vs. Asterio Q. Tamayo,
promulgated on July 29, 1988, G.R. No. 74322, the
latter is therefore considered changed.

The war veterans loom as the forgotten heroes of this

generation. This is the reality both unfortunate and
tragic. What has been lost on many is the fact that it
was because of their bravery and sacrifice that we are
a free people today.

They stand as shining mementos of our struggle for

emancipation from the colonial yoke With crude boloes
and primitive spears but with abundant courage in
their hearts they fought the white man's arsenal of
rifles and cannons, overcame it, and finished a
revolution. They fought with no anticipation of a prize,
reward, or medal, but in obedient and unquestioning
response to duty to country.

It was they who, four decades later, would lead the

resistance against the Japanese invaders. Poorly
trained, fed, and equipped but encouraged by a
firmness of will, they offered their lives and many
forfeited theirs amid superior firepower from the
enemy. Like the revolutionaries, they were not
conscripts but volunteers. And like them, they fought
without any expectation of laurels or citations but in
order that liberty shall dawn upon the land.

The Court strongly stresses that Republic Act No. 65,

the veterans' Bill of Rights, was not meant to
compensate alone veterans for the wounds of war. It
is, above all, a gesture of gratitude on the part of the
State and a tribute to their gallantry and selfless love
of country. Though valor cannot be measured in terms
of money, money is the best we can offer for the
moment. And if we cannot do more, let us do no less.
This case should not have indeed reached this Court
had not insensitivity gotten the better of Government
functionaries.
WHEREFORE, the petition is GRANTED.

The respondent, the Philippine Veterans Affairs Office,

is ORDERED to pay the petitioner, his spouse, and
qualified children, full pension benefits plus such
other and further increments as may be provided for
by law, effective November 18, 1947. No costs.

SO ORDERED.

Melencio-Herrera, Gutierrez, Jr., Cruz, Paras,

Gancayco, Padilla, Bidin, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.

Separate Opinions

FERNAN, C.J., dissenting:

Without detracting from the great honor and gratitude

our nation owes its war heroes and veterans I regret
that I am unable to concur with the opinion expressed
by the majority relative to the power of the Philippine
Veterans Affairs Office PVAO to rate the disability or
incapacity from work of war veterans seeking
entitlement to the pension benefits provided under
Republic Act No. 65 and its amendments.

As conceded in my earlier ponencia in G.R. No. 74322

entitled "The Philippine Veterans Affairs Office vs.
Asterio Q. Tamayo", promulgated on July 29, 1988,
R.A. No. 65 itself did not contain a disability rating
schedule. However, it did repose upon the Philippine
Veterans Board, predecessor of the PVAO, rulemaking
powers which by their tenor are sufficiently broad and
encompassing to include this authority to rate
disabilities. Thus, from its enactment in 1946, or for
more than forty (40) years, the governmental agency
specially created and charged with implementing the
provisions of R.A. No. 65 and its amendments, from
the Philippine Veterans Board, the Philippine Veterans
Administration to the present PVAO had consistently
done so in accordance with the assailed disability
rating schedule. Although technically not binding and
controlling on the courts, the construction given by
the agency or entity charged with the enforcement of
a statute should be given great weight and respect (In
re Allen, 2 Phil. 630, 640), particularly so if such
construction, as in the case at bar, has been uniform
and consistent, and has been observed and acted on
for a long period of time (Molina vs. Rafferty 38 Phil.
167; Madrigal vs. Rafferty 38 Phil. 414; Philippine
Sugar Central vs. Collector of Customs, 51 Phil. 143).

Neither should we lose sight of the fact that the basic

law, R.A. No. 65, has undergone a number of
amendments, without the legislature deeming it wise
or proper to discontinue or proscribe this practice of
the implementing agency of rating the veterans'
disabilities. This, to my mind, is a strong indication,
nay, conclusive proof that the construction given by
the PVAO and its predecessors is in accord with the
legislative intent, for a basic rule in statutory
construction is that the legislature is presumed to
know the effect which statutes originally had, and by
re-enactment to intend that they should again have
the same effect (In re McCullough Dick, 39 Phil. 41).
There is implied legislative approval by the
legislature's failure to change a longstanding
administrative construction (Asturias Sugar Central,
Inc. vs. Commissioner of Customs, 29 SCRA 617).

It is regretable that the majority has missed the

wisdom of the construction given by the veterans
board to Section 9 of R.A. No. 65, and the undeniable
fact that it is through the veterans board's authority
to rate disabilities that the spirit and intent of the law
are being given their most beneficial effects. Note that
Section 9 of R.A. No. 65 uses the phrase "permanently
incapacitated from work" as the qualifying condition
for the full pension benefits provided thereunder. As
stated in the case of Board of Administrators vs.
Agcaoili, 58 SCRA 72, these words "have a restrictive
signification which cannot be conveniently
disregarded." An amendment, R.A. No. 5753 * enacted
on June 21, 1969, employs the equally restrictive term
"totally disabled". The literal import flowing from the
interchangeable and synonymous use of the phrases
"permanently incapacitated from work" and "total
disability", is that the legislature intended to give the
full amount of pension benefits provided under the
law only to war veterans who are permanently and
totally unable to engage in any gainful occupation or
employment by reason of the sickness, disease or
injury sustained in line of duty. The veterans board
could have easily interpreted and applied the law in
this wise, but did not. It is to its great credit that
giving due consideration to the spirit and intent of the
law, rather than adhering to its letters, the veterans
board correctly construed the law as setting a
maximum amount of pension benefits for the worst
kind or condition of incapacity from work (i.e.,
permanent), and leaving to the administering agency
thru its ample rule-making powers the task of
providing for proportional benefits for corresponding
varying degrees of incapacity or disability. Thus, it is
thru the now assailed rating power of the veterans
board that less than permanently incapacited war
veterans are enjoying the benefits, albeit partial, of
the law, which a literal reading thereof would seem to
preclude.

In what it probably perceives as a most charitable and

generous move, the majority lightly casts aside the
construction given and followed by the veterans board
for more than 40 years. The majority likewise
completely failed to make the very crucial and
significant distinction between "permanent incapacity"
and "permanent incapacity from work", and in the
process, unwittingly gave rise to an absurd, if not
inequitable situation, in that all war veterans are
deemed entitled to the same amount of pension
benefits regardless of the nature and effect of the
sickness, disease or injury sustained in line of duty.
Certaintly, the legislature could not have intended
such patent inequality. It is safer and more logical to
assume that the law intended to give equal benefits to
those similarly situated, a circumstance best attained
through the adoption by the veterans board of a
standard classification of disability or incapacity.

Moreover, to entitle all war veterans to the full amount

of pension benefits mentioned in the law regardless of
the extent of their disability would involve a
staggering sum of money. While there is no gainsaying
that the amount prescribed by law is far from
adequate, we must, however, realize that the
Philippines is a relatively poor country. It wants to
reward its war heroes and veterans for their valor and
gallantry but harsh economic reality deters it from
adequately doing so. It does what it can under the
circumstances, without the Judiciary adding to its
financial troubles and burden through what I firmly
believe to be an unwarranted interpretation of a law.

Feliciano, J., concur.

NARVASA, J., dissenting:

I dissent and vote to adhere to the ruling in G.R. No.

74322 (Phil. Veterans Affairs Office v. Tamayo, July 29,
1988.)

Separate Opinions

FERNAN, C.J., dissenting:

Without detracting from the great honor and gratitude

our nation owes its war heroes and veterans I regret
that I am unable to concur with the opinion expressed
by the majority relative to the power of the Philippine
Veterans Affairs Office PVAO to rate the disability or
incapacity from work of war veterans seeking
entitlement to the pension benefits provided under
Republic Act No. 65 and its amendments.

As conceded in my earlier ponencia in G.R. No. 74322

entitled "The Philippine Veterans Affairs Office vs.
Asterio Q. Tamayo", promulgated on July 29, 1988,
R.A. No. 65 itself did not contain a disability rating
schedule. However, it did repose upon the Philippine
Veterans Board, predecessor of the PVAO, rulemaking
powers which by their tenor are sufficiently broad and
encompassing to include this authority to rate
disabilities. Thus, from its enactment in 1946, or for
more than forty (40) years, the governmental agency
specially created and charged with implementing the
provisions of R.A. No. 65 and its amendments, from
the Philippine Veterans Board, the Philippine Veterans
Administration to the present PVAO had consistently
done so in accordance with the assailed disability
rating schedule. Although technically not binding and
controlling on the courts, the construction given by
the agency or entity charged with the enforcement of
a statute should be given great weight and respect (In
re Allen, 2 Phil. 630, 640), particularly so if such
construction, as in the case at bar, has been uniform
and consistent, and has been observed and acted on
for a long period of time (Molina vs. Rafferty 38 Phil.
167; Madrigal vs. Rafferty 38 Phil. 414; Philippine
Sugar Central vs. Collector of Customs, 51 Phil. 143).

Neither should we lose sight of the fact that the basic

law, R.A. No. 65, has undergone a number of
amendments, without the legislature deeming it wise
or proper to discontinue or proscribe this practice of
the implementing agency of rating the veterans'
disabilities. This, to my mind, is a strong indication,
nay, conclusive proof that the construction given by
the PVAO and its predecessors is in accord with the
legislative intent, for a basic rule in statutory
construction is that the legislature is presumed to
know the effect which statutes originally had, and by
re-enactment to intend that they should again have
the same effect (In re McCullough Dick, 39 Phil. 41).
There is implied legislative approval by the
legislature's failure to change a longstanding
administrative construction (Asturias Sugar Central,
Inc. vs. Commissioner of Customs, 29 SCRA 617).

It is regretable that the majority has missed the

wisdom of the construction given by the veterans
board to Section 9 of R.A. No. 65, and the undeniable
fact that it is through the veterans board's authority
to rate disabilities that the spirit and intent of the law
are being given their most beneficial effects. Note that
Section 9 of R.A. No. 65 uses the phrase "permanently
incapacitated from work" as the qualifying condition
for the full pension benefits provided thereunder. As
stated in the case of Board of Administrators vs.
Agcaoili, 58 SCRA 72, these words "have a restrictive
signification which cannot be conveniently
disregarded." An amendment, R.A. No. 5753 * enacted
on June 21, 1969, employs the equally restrictive term
"totally disabled". The literal import flowing from the
interchangeable and synonymous use of the phrases
"permanently incapacitated from work" and "total
disability", is that the legislature intended to give the
full amount of pension benefits provided under the
law only to war veterans who are permanently and
totally unable to engage in any gainful occupation or
employment by reason of the sickness, disease or
injury sustained in line of duty. The veterans board
could have easily interpreted and applied the law in
this wise, but did not. It is to its great credit that
giving due consideration to the spirit and intent of the
law, rather than adhering to its letters, the veterans
board correctly construed the law as setting a
maximum amount of pension benefits for the worst
kind or condition of incapacity from work (i.e.,
permanent), and leaving to the administering agency
thru its ample rule-making powers the task of
providing for proportional benefits for corresponding
varying degrees of incapacity or disability. Thus, it is
thru the now assailed rating power of the veterans
board that less than permanently incapacited war
veterans are enjoying the benefits, albeit partial, of
the law, which a literal reading thereof would seem to
preclude.

In what it probably perceives as a most charitable and

generous move, the majority lightly casts aside the
construction given and followed by the veterans board
for more than 40 years. The majority likewise
completely failed to make the very crucial and
significant distinction between "permanent incapacity"
and "permanent incapacity from work", and in the
process, unwittingly gave rise to an absurd, if not
inequitable situation, in that all war veterans are
deemed entitled to the same amount of pension
benefits regardless of the nature and effect of the
sickness, disease or injury sustained in line of duty.
Certaintly, the legislature could not have intended
such patent inequality. It is safer and more logical to
assume that the law intended to give equal benefits to
those similarly situated, a circumstance best attained
through the adoption by the veterans board of a
standard classification of disability or incapacity.

Moreover, to entitle all war veterans to the full amount

of pension benefits mentioned in the law regardless of
the extent of their disability would involve a
staggering sum of money. While there is no gainsaying
that the amount prescribed by law is far from
adequate, we must, however, realize that the
Philippines is a relatively poor country. It wants to
reward its war heroes and veterans for their valor and
gallantry but harsh economic reality deters it from
adequately doing so. It does what it can under the
circumstances, without the Judiciary adding to its
financial troubles and burden through what I firmly
believe to be an unwarranted interpretation of a law.

Feliciano, J., concur.

NARVASA, J., dissenting:

I dissent and vote to adhere to the ruling in G.R. No.
74322 (Phil. Veterans Affairs Office v. Tamayo, July 29,
1988.)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 79253 March 1, 1993

UNITED STATES OF AMERICA and MAXINE BRADFORD,

petitioners,
vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22,
Regional Trial Court of Cavite, and NELIA T. MONTOYA,
respondents.

Luna, Sison & Manas for petitioners.

Evelyn R. Dominguez for private respondent.

DAVIDE, JR., J.:

This is a petition for certiorari and prohibition under

Rule 65 of the Rules of Court. Petitioners would have
Us annul and set aside, for having been issued with
grave abuse of discretion amounting to lack of
jurisdiction, the Resolution of 17 July 1987 of Branch
22 of the Regional Trial Court (RTC) of Cavite in Civil
Case No. 224-87. The said resolution denied, for lack
of merit, petitioners' motion to dismiss the said case
and granted the private respondent's motion for the
issuance of a writ of preliminary attachment. Likewise
sought to be set aside is the writ of attachment
subsequently issued by the RTC on 28 July 1987.

The doctrine of state immunity is at the core of this

controversy.

The readings disclose the following material operative

facts:
Private respondent, hereinafter referred to as
Montoya, is an American citizen who, at the time
material to this case, was employed as an
identification (I.D.) checker at the U.S. Navy Exchange
(NEX) at the Joint United States Military Assistance
Group (JUSMAG) headquarters in Quezon City. She is
married to one Edgardo H. Montoya, a Filipino-
American serviceman employed by the U.S. Navy and
stationed in San Francisco, California. Petitioner
Maxine Bradford, hereinafter referred to as Bradford,
is likewise an American citizen who was the activity
exchange manager at the said JUSMAG Headquarters.

As a consequence of an incident which occurred on 22

January 1987 whereby her body and belongings were
searched after she had bought some items from the
retail store of the NEX JUSMAG, where she had
purchasing privileges, and while she was already at
the parking area, Montoya filed on
7 May 1987 a complaint 1 with the Regional Trial Court
of her place of residence Cavite against Bradford
for damages due to the oppressive and discriminatory
acts committed by the latter in excess of her authority
as store manager of the NEX JUSMAG. The complaint,
docketed as Civil Case No. 224-87 and subsequently
raffled off to Branch 22 at Imus, Cavite, alleges the
following, material operative facts:

xxx xxx xxx

3. That on January 22, 1987, after working as the

duty ID checker from 7:45 to 11:45 a.m., plaintiff went
shopping and left the store at l2:00 noon of that day;

4. That on the way to her car while already outside

the store, Mrs. Yong Kennedy, also an ID checker, upon
the instruction of the store manager, Ms. Maxine
Bradford, approached plaintiff and informed her that
she needed to search her bags;

5. That plaintiff went to defendant, who was then

outside the store talking to some men, to protest the
search but she was informed by the defendant that
the search is to be made on all Jusmag employees that
day;

6. That the search was thereafter made on the

person, car and bags of the plaintiff by Mrs. Yong
Kennedy in the presence of the defendant and
numerous curious onlookers;

7. That having found nothing irregular on her person

and belongings, plaintiff was allowed to leave the
premises;

8. That feeling aggrieved, plaintiff checked the

records and discovered that she was the only one
whose person and belonging was (sic) searched that
day contrary to defendant's allegation as set forth in
par. 5 hereof and as evidenced by the memorandum
dated January 30, 1987 made by other Filipino Jusmag
employees, a photocopy of which is hereto attached as
ANNEX "A" and made integral (sic) part hereof:

9. That moreover, a check with Navy Exchange

Security Manager, R.L. Roynon on January 27, 1987
was made and she was informed by Mr. Roynon that it
is a matter of policy that customers and employees of
NEX Jusmag are not searched outside the store unless
there is a very strong evidence of a wrongdoing;

10. That plaintiff knows of no circumstances sufficient

to trigger suspicion of a wrongdoing on her part but
on the other hand, is aware of the propensity of
defendant to lay suspicion on Filipinos for theft and/or
shoplifting;

11. That plaintiff formally protested the illegal search

on February 14, 1987 in a letter addressed to Mr. R.L.
Roynon, a photocopy of which is hereto attached as
ANNEX "B" and made integral (sic) part hereof; but no
action was undertaken by the said officer;

12. That the illegal search on the person and

belongings of the plaintiff in front of many people has
subjected the plaintiff to speculations of theft,
shoplifting and such other wrongdoings and has
exposed her to contempt and ridicule which was
caused her undue embarrassment and indignity;

13. That since the act could not have been motivated
by other (sic) reason than racial discrimination in our
own land, the act constitute (sic) a blow to our
national pride and dignity which has caused the
plaintiff a feeling of anger for which she suffers
sleepless nights and wounded feelings;
14. That considering the above, plaintiff is entitled to
be compensated by way of moral damages in the
amount of P500,000.00;

15. That to serve as a deterrent to those inclined to

follow the oppressive act of the defendant, exemplary
damages in the amount of P100,000.00 should also be
awarded. 2

She then prayed for judgment ordering Bradford to

pay her P500,000.00 as moral damages, P100,000.00
as exemplary damages and reasonable attorney's fees
plus the costs of the suit. 3

Summons and a copy of the complaint were served on

Bradford on 13 May 1987. In response thereto, she
filed two (2) motions for extension of time to file her
Answer which were both granted by the trial court.
The first was filed through Atty. Miguel Famularcano,
Jr., who asked for a 20-day extension from 28 May
1987. The second, filed through the law firm of Luna,
Sison and Manas, sought a 15-day extension from 17
June 1987. 4 Thus, Bradford had up to 1 July 1987 to
file her Answer. Instead of doing so, however, she,
together with the government of the United States of
America (hereinafter referred to as the public
petitioner), filed on 25 June 1987, also through the law
firm of Luna, Sison and Manas, a Motion to Dismiss 5
based on the following grounds:

1) (This) action is in effect a suit against the United

States of America, a foreign sovereign immune from
suit without its consent for the cause of action
pleaded in the complaint; and

2) Defendant, Maxine Bradford, as manager of the

US Navy Exchange Branch at JUSMAG, Quezon City, is
immune from suit for act(s) done by her in the
performance of her official functions under the
Philippines-United States Military Assistance
Agreement of 1947 and Military Bases Agreement of
1947, as amended. 6

In support of the motion, the petitioners claimed that

JUSMAG, composed of an Army, Navy and Air Group,
had been established under the Philippine-United
States Military Assistance Agreement entered into on
21 March 1947 to implement the United States'
program of rendering military assistance to the
Philippines. Its headquarters in Quezon City is
considered a temporary installation under the
provisions of Article XXI of the Military Bases
Agreement of 1947. Thereunder, "it is mutually agreed
that the United States shall have the rights, power
and authority within the bases which are necessary for
the establishment, use and operation and defense
thereof or appropriate for the control thereof." The
1979 amendment of the Military Bases Agreement
made it clear that the United States shall have "the
use of certain facilities and areas within the bases and
shall have effective command and control over such
facilities and over United States personnel,
employees, equipment and material." JUSMAG
maintains, at its Quezon City headquarters, a Navy
Exchange referred to as the NEX-JUSMAG. Checking of
purchases at the NEX is a routine procedure observed
at base retail outlets to protect and safeguard
merchandise, cash and equipment pursuant to
paragraphs 2 and 4(b) of NAVRESALEACT SUBIC INST.
5500.1. 7 Thus, Bradford's order to have purchases of
all employees checked on 22 January 1987 was made
in the exercise of her duties as Manager of the NEX-
JUSMAG.

They further claimed that the Navy Exchange (NAVEX),

an instrumentality of the U.S. Government, is
considered essential for the performance of
governmental functions. Its mission is to provide a
convenient and reliable source, at the lowest
practicable cost, of articles and services required for
the well-being of Navy personnel, and of funds to be
used for the latter's welfare and recreation. Montoya's
complaint, relating as it does to the mission, functions
and responsibilities of a unit of the United States
Navy, cannot then be allowed. To do so would
constitute a violation of the military bases agreement.
Moreover, the rights, powers and authority granted by
the Philippine government to the United States within
the U.S. installations would be illusory and academic
unless the latter has effective command and control
over such facilities and over American personnel,
employees, equipment and material. Such rights,
power and authority within the bases can only be
exercised by the United States through the officers
and officials of its armed forces, such as Bradford.
Baer vs. Tizon 8 and United States of America vs.
Ruiz 9 were invoked to support these claims.
On 6 July 1987, Montoya filed a motion for preliminary
attachment 10 on the ground that Bradford was about
to depart from the country and was in the process of
removing and/or disposing of her properties with
intent to defraud her creditors. On 14 July 1987,
Montoya filed her opposition to the motion to dismiss
11 alleging therein that the grounds proffered in the
latter are bereft of merit because (a) Bradford, in
ordering the search upon her person and belongings
outside the NEX JUSMAG store in the presence of
onlookers, had committed an improper, unlawful and
highly discriminatory act against a Filipino employee
and had exceeded the scope of her authority; (b)
having exceeded her authority, Bradford cannot rely
on the sovereign immunity of the public petitioner
because her liability is personal; (c) Philippine courts
are vested with jurisdiction over the case because
Bradford is a civilian employee who had committed
the challenged act outside the U.S. Military Bases;
such act is not one of those exempted from the
jurisdiction of Philippine courts; and (d) Philippine
courts can inquire into the factual circumstances of
the case to determine whether or not Bradford had
acted within or outside the scope of her authority.

On 16 July 1987, public petitioner and Bradford filed a

reply to Montoya's opposition and an opposition to the
motion for preliminary attachment. 12

On 17 July 1987, 13 the trial court 14 resolved both

the motion to dismiss and the motion for preliminary
attachment in this wise:

On the motion to dismiss, the grounds and arguments

interposed for the dismissal of this case are
determined to be not indubitable. Hence, the motion is
denied for lack of merit.

The motion for preliminary attachment is granted in

the interest of justice, upon the plaintiff's filing of a
bond in the sum of P50,000.00.

Upon Montoya's filing of the required bond, the trial

court issued on 28 July 1987 an Order 15 decreeing
the issuance of a writ of attachment and directing the
sheriff to serve the writ immediately at the expense of
the private respondent. The writ of attachment was
issued on that same date. 16
Instead of filing a motion to reconsider the last two (2)
orders, or an answer insofar as Bradford is
concerned both the latter and the public petitioner
filed on 6 August 1987 the instant petition to annul
and set aside the above Resolution of 17 July 1987 and
the writ of attachment issued pursuant thereto. As
grounds therefor, they allege that:

10. The respondent judge committed a grave abuse of

discretion amounting to lack of jurisdiction in denying
the motion to dismiss the complaint in Civil Case No.
224-87 "for lack of merit." For the action was in effect
a suit against the United States of America, a foreign
sovereign immune from suit without its consent for
the cause of action pleaded in the complaint, while its
co-petitioner was immune from suit for act(s) done by
her in the performance of her official functions as
manager of the US Navy Exchange Branch at the
Headquarters of JUSMAG, under the Philippines-United
States Military Assistance Agreement of 1947 and
Military Bases Agreement of 1947, as amended. 17

On 5 August 1987, the trial court set Civil Case No.

224-87 for pre-trial and trial on 27 August 1987 at
9:30 a.m. 18

On 12 August 1987, this Court resolved to require the

respondents to comment on the petition. 19

On 19 August 1987, petitioners filed with the trial

court a Motion
to Suspend Proceedings 20 which the latter denied in
its Order of 21 August 1987. 21

In the meantime, however, for failure to file an answer,

Bradford was declared in default in Civil Case No. 224-
87 and Montoya was allowed to present her evidence
ex-parte. 22 She thus took the witness stand and
presented Mrs. Nam Thi Moore and Mrs. Miss Yu as her
witnesses.

On 10 September 1987, the trial court rendered its

decision 23 in Civil Case No. 224-87, the dispositive
portion of which reads:

Prescinding from the foregoing, it is hereby

determined that the unreasonable search on the
plaintiff's person and bag caused (sic) done recklessly
and oppressively by the defendant, violated, impaired
and undermined the plaintiff's liberty guaranteed by
the Constitution, entitling her to moral and exemplary
damages against the defendant. The search has
unduly subjected the plaintiff to intense humiliation
and indignities and had consequently ridiculed and
embarrassed publicly said plaintiff so gravely and
immeasurably.

WHEREFORE, judgment is hereby rendered for the

plaintiff and against the defendant Maxine Bradford
assessing the latter to pay unto the former the sums
of P300,000.00 for moral damages, P100,000.00 for
exemplary damages and P50,000.00 for actual
expenses and attorney's fees.

No costs.

SO ORDERED. 24

Bradford received a copy of the decision on 21

September 1987. On that same date, she and the
public petitioner filed with this Court a Petition for
Restraining Order 25 which sought to have the trial
court's decision vacated and to prevent the execution
of the same; it was also prayed that the trial court be
enjoined from continuing with Civil Case No. 224-87.
We noted this pleading in the Resolution of 23
September 1987. 26

In the meantime, since no motion for reconsideration

or appeal had been interposed by Bradford
challenging the 10 September 1987 Decision which
she had received on 21 September 1987, respondent
Judge issued on 14 October 1987 an order directing
that an entry of final judgment be made. A copy
thereof was received by Bradford on 21 October, 1987.
27

Also on 14 October 1987, Montoya filed her Comment

with Opposition to the Petition for Restraining Order.
28 Respondent Judge had earlier filed his own
Comment to the petition on 14 September 1987. 29

On 27 October 1987, Montoya filed before the trial

court a motion for the execution of the Decision of 10
September 1987 which petitioners opposed on the
ground that although this Court had not yet issued in
this case a temporary restraining order, it had
nevertheless resolved to require the respondents to
comment on the petition. It was further averred that
execution thereof would cause Bradford grave injury;
moreover, enforcement of a writ of execution may lead
to regrettable incidents and unnecessarily complicate
the situation in view of the public petitioner's position
on the issue of the immunity of its employees. In its
Resolution of 11 November 1987, the trial court
directed the issuance of a writ of execution. 30

Consequently, the petitioners filed on 4 December

1987, a Manifestation and Motion reciting the
foregoing incidents obtaining before the trial court
and praying that their petition for a restraining order
be resolved. 31

On 7 December 1987, this Court issued a Temporary

Restraining Order "ENJOINING the respondents and
the Provincial Sheriff of Pasig, Metro Manila, from
enforcing the Decision dated September 10, 1987, and
the Writs of Attachment and Execution issued in Civil
Case No. 224-87." 32

On 28 November 1988, after the private respondent

filed a Rejoinder to the Consolidated Reply to the
Comments filed by the petitioners, this Court gave due
course to the petition and required the parties to
submit their respective memoranda-Petitioners filed
their Memorandum on 8 February
1989 33 while private respondent filed her
Memorandum on 14 November
1990. 34

The kernel issue presented in this case is whether or

not the trial court committed grave abuse of
discretion in denying the motion to dismiss based on
the following grounds: (a) the complaint in Civil Case
No. 224-87 is in effect a suit against the public
petitioner, a foreign sovereign immune from suit which
has not given consent to such suit and (b) Bradford is
immune from suit for acts done by her in the
performance of her official functions as manager of
the U.S. Navy Exchange of JUSMAG pursuant to the
Philippines-United States Military Assistance
Agreement of 1947 and the Military Bases Agreement
of 1947, as amended.

Aside from maintaining the affirmative view, the public

petitioner and Bradford even go further by asserting
that even if the latter's act were ultra vires she would
still be immune from suit for the rule that public
officers or employees may be sued in their personal
capacity for ultra vires and tortious acts is "domestic
law" and not applicable in International Law. It is
claimed that the application of the immunity doctrine
does not turn upon the lawlessness of the act or
omission attributable to the foreign national for if this
were the case, the concept of immunity would be
meaningless as inquiry into the lawlessness or
illegality of the act or omission would first have to be
made before considering the question of immunity; in
other words, immunity will lie only if such act or
omission is found to be lawful.

On the other hand, Montoya submits that Bradford is

not covered by the protective mantle of the doctrine
of sovereign immunity from suit as the latter is a mere
civilian employee of JUSMAG performing non-
governmental and proprietary functions. And even
assuming arguendo that Bradford is performing
governmental functions, she would still remain
outside the coverage of the doctrine of state immunity
since the act complained of is ultra vires or outside
the scope of her authority. What is being questioned is
not the fact of search alone, but also the manner in
which the same was conducted as well as the fact of
discrimination against Filipino employees. Bradford's
authority to order a search, it is asserted, should have
been exercised with restraint and should have been in
accordance with the guidelines and procedures laid
down by the cited "NAVRESALEACT, Subic Inst."
Moreover, ultra vires acts of a public officer or
employee, especially tortious and criminal acts, are
his private acts and may not be considered as acts of
the State. Such officer or employee alone is
answerable for any liability arising therefrom and may
thus be proceeded against in his personal capacity.

Montoya further argues that both the acts and person

of Bradford are not exempt from the Philippine courts'
jurisdiction because (a) the search was conducted in a
parking lot at Scout Borromeo, Quezon City, outside
the JUSMAG store and, therefore, outside the
territorial control of the U.S. Military Bases in the
Philippines; (b) Bradford does not possess diplomatic
immunity under Article 16(b) of the 1953 Military
Assistance Agreement creating the JUSMAG which
provides that only the Chief of the Military Advisory
Group and not more than six (6) other senior members
thereof designated by him will be accorded diplomatic
immunity; 35 and (c) the acts complained of do not fall
under those offenses where the U.S. has been given
the right to exercise its jurisdiction (per Article 13 of
the 1947 Military Bases Agreement, as amended by
the, Mendez-Blair Notes of 10 August 1965). 36

Finally, Montoya maintains that at the very least,

Philippine courts may inquire into the factual
circumstances of the case to determine whether
petitioner Bradford is immune from suit or exempt
from Philippine jurisdiction. To rule otherwise would
render the Philippine courts powerless as they may be
easily divested of their jurisdiction upon the mere
invocation of this principle of immunity from suit.

A careful review of the records of this case and a

judicious scrutiny of the arguments of both parties
yield nothing but the weakness of the petitioners'
stand. While this can be easily demonstrated, We shall
first consider some procedural matters.

Despite the fact that public petitioner was not

impleaded as a defendant in Civil Case No. 224-87, it
nevertheless joined Bradford in the motion to dismiss
on the theory that the suit was in effect against it
without, however, first having obtained leave of court
to intervene therein. This was a procedural lapse, if
not a downright improper legal tack. Since it was not
impleaded as an original party, the public petitioner
could, on its own volition, join in the case only by
intervening therein; such intervention, the grant of
which is discretionary upon the court, 37 may be
allowed only upon a prior motion for leave with notice
to all the parties in the action. Of course, Montoya
could have also impleaded the public petitioner as an
additional defendant by amending the complaint if she
so believed that the latter is an indispensible or
necessary party.

Since the trial court entertained the motion to dismiss

and the subsequent pleadings filed by the public
petitioner and Bradford, it may be deemed to have
allowed the public petitioner to intervene. Corollarily,
because of its voluntary appearance, the public
petitioner must be deemed to have submitted itself to
the jurisdiction of the trial court.
Moreover, the said motion does not specify any of the
grounds for a motion to dismiss enumerated in Section
1, Rule 16 of the Rules of Court. It merely recites state
immunity on the part of the public petitioner and
immunity on the part of Bradford for the reason that
the act imputed to her was done in the performance of
her official functions. The upshot of this contention is
actually lack of cause of action a specific ground for
dismissal under the aforesaid Rule because
assuming arguendo that Montoya's rights had been
violated by the public petitioner and Bradford,
resulting in damage or injury to the former, both
would not be liable therefor, and no action may be
maintained thereon, because of the principle of state
immunity.

The test of the sufficiency of the facts to constitute a

cause of action is whether or not, admitting the facts
alleged in the complaint, the court could render a
valid judgment upon the same, in accordance with the
prayer in the complaint. 38

A motion to dismiss on the ground of failure to state a

cause of action hypothetically admits the truth of the
allegations in the complaint.

In deciding a motion to dismiss, a court may grant,

deny, allow amendments to the pleadings or defer the
hearing and determination of the same if the ground
alleged does not appear to be indubitable. 39 In the
instant case, while the trial court concluded that "the
grounds and arguments interposed for the dismissal"
are not "indubitable," it denied the motion for lack of
merit. What the trial court should have done was to
defer there solution on the motion instead of denying
it for lack of merit.

In any event, whatever may or should have been done,

the public petitioner and Bradford were not expected
to accept the verdict, making their recourse to this
Court via the instant petition inevitable. Thus,
whether the trial court should have deferred
resolution on or denied outright the motion to dismiss
for lack of merit is no longer pertinent or relevant.

The complaint in Civil Case No. 224-87 is for damages

arising from what Montoya describes as an "illegal
search" on her "person and belongings" conducted
outside the JUSMAG premises in front of many people
and upon the orders of Bradford, who has the
propensity for laying suspicion on Filipinos for theft or
shoplifting. It is averred that the said search was
directed only against Montoya.

Howsoever viewed, it is beyond doubt that Montoya's

cause of action is premised on the theory that the acts
complained of were committed by Bradford not only
outside the scope of her authority or more
specifically, in her private capacity but also outside
the territory where she exercises such authority, that
is, outside the NEX-JUSMAG particularly, at the
parking area which has not been shown to form part of
the facility of which she was the manager. By their
motion to dismiss, public petitioner and Bradford are
deemed to have hypothetically admitted the truth of
the allegation in the complaint which support this
theory.

The doctrine of state immunity and the exceptions

thereto are summarized in Shauf vs. Court of Appeals,
40 thus:

I. The rule that a state may not be sued without its

consent, now expressed in Article XVI Section 3, of the
1987 Constitution, is one of the generally accepted
principles of international law that we have adopted
as part of the law of our land under Article II, Section
2. This latter provision merely reiterates a policy
earlier embodied in the 1935 and 1973 Constitutions
and also intended to manifest our resolve to abide by
the rules of the international community. 41

While the doctrine appears to prohibit only suits

against the state without its consent, it is also
applicable to complaints filed against officials of the
state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the
judgment against such officials will require the state
itself to perform an affirmative act to satisfy the same,
such as the appropriation of the amount needed to
pay the damages awarded against them, the suit must
be regarded as against the state itself although it has
not been formally impleaded. 42 It must be noted,
however, that the rule is not so all-encompassing as to
be applicable under all circumstances.

It is a different matter where the public official is

made to account in his capacity as such for acts
contrary to law and injurious to the rights of plaintiff.
As was clearly set forth by Justice Zaldivar in Director
of the Bureau of Telecommunications, et al. vs.
Aligaen, etc., et al. 43 "Inasmuch as the State
authorizes only legal acts by its officers, unauthorized
acts of government officials or officers are not acts of
the State, and an action against the officials or officers
by one whose rights have been invaded or violated by
such acts, for the protection of his rights, is not a suit
against the State within the rule of immunity of the
State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State
officer or the director of a State department on the
ground that, while claiming to act or the State, he
violates or invades the personal and property rights of
the plaintiff, under an unconstitutional act or under an
assumption of authority which he does not have, is not
a suit against the State within
the constitutional provision that the State may not be
sued without its consent." 44 The rationale for this
ruling is that the doctrinaire of state immunity cannot
be used as an instrument for perpetrating an injustice.
45

In the case of Baer, etc. vs. Tizon, etc., et al., 46 it was

ruled that:

There should be no misinterpretation of the scope of

the decision reached by this Court. Petitioner, as the
Commander of the United States Naval Base in
Olongapo, does not possess diplomatic immunity. He
may therefore be proceeded against in his personal
capacity, or when the action taken by him cannot be
imputed to the government which he represents.

Also, in Animos, et al. vs. Philippine Veterans Affairs

Office, et al., 47 we held that:

. . . it is equally well-settled that where a litigation

may have adverse consequences on the public
treasury, whether in the disbursements of funds or
loss of property, the public official proceeded against
not being liable in his personal capacity, then the
doctrine of non-suability may appropriately be
invoked. It has no application, however, where the suit
against such a functionary had to be instituted
because of his failure to comply with the duty imposed
by statute appropriating public funds for the benefit
of plaintiff or petitioner. . . . .
The aforecited authorities are clear on the matter.
They state that the doctrine of immunity from suit will
not apply and may not be invoked where the public
official is being sued in his private and personal
capacity as an ordinary citizen. The cloak of protection
afforded the officers and agents of the government is
removed the moment they are sued in their individual
capacity. This situation usually arises where the public
official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of
law that a public official may be liable in his personal
private capacity for whatever damage he may have
caused by his act done
with malice and in bad faith, or beyond the scope of
his authority or jurisdiction. 48

The agents and officials of the United States armed

forces stationed in Clark Air Base are no exception to
this rule. In the case of United States of America, et al.
vs. Guinto, etc., et al., ante, 49 we declared:

It bears stressing at this point that the above

observations do not confer on the United States of
America Blanket immunity for all acts done by it or its
agents in the Philippines. Neither may the other
petitioners claim that they are also insulated from suit
in this country merely because they have acted as
agents of the United States in the discharge of their
official functions.

Since it is apparent from the complaint that Bradford

was sued in her private or personal capacity for acts
allegedly done beyond the scope and even beyond her
place of official functions, said complaint is not then
vulnerable to a motion to dismiss based on the
grounds relied upon by the petitioners because as a
consequence of the hypothetical admission of the
truth of the allegations therein, the case falls within
the exception to the doctrine of state immunity.

In the recent cases of Williams vs. Rarang 50 and

Minucher vs. Court of Appeals, 51 this Court reiterated
this exception. In the former, this Court observed:

There is no question, therefore, that the two (2)

petitioners actively participated in screening the
features and articles in the POD as part of their official
functions. Under the rule that U.S. officials in the
performance of their official functions are immune
from suit, then it should follow that petitioners may
not be held liable for the questioned publication.

It is to be noted, however, that the petitioners were

sued in their personal capacities for their alleged
tortious acts in publishing a libelous article.

The question, therefore, arises are American naval

officers who commit a crime or tortious act while
discharging official functions still covered by the
principle of state immunity from suit? Pursuing the
question further, does the grant of rights, power, and
authority to the United States under the RP-US Bases
Treaty cover immunity of its officers from crimes and
torts? Our answer is No.

In the latter, even on the claim of diplomatic immunity

which Bradford does not in fact pretend to have in
the instant case as she is not among those granted
diplomatic immunity under Article 16(b) of the 1953
Military Assistance Agreement creating the JUSMAG 52
this Court ruled:

Even Article 31 of the Vienna Convention on

Diplomatic Relations admits of exceptions. It reads:

1. A diplomatic agent shall enjoy immunity from the

criminal jurisdiction of the receiving State. He shall
also enjoy immunity from its civil and administrative
jurisdiction except in the case of:

xxx xxx xxx

(c) an action relating to any professional or

commercial activity exercised by the diplomatic agent
in the receiving State outside his official functions
(Emphasis supplied).

There can be no doubt that on the basis of the

allegations in the complaint, Montoya has a sufficient
and viable cause of action. Bradford's purported non-
suability on the ground of state immunity is then a
defense which may be pleaded in the answer and
proven at the trial.

Since Bradford did not file her Answer within the

reglementary period, the trial court correctly declared
her in default upon motion of the private respondent.
The judgment then rendered against her on 10
September 1987 after the ex parte reception of the
evidence for the private respondent and before this
Court issued the Temporary Restraining Order on 7
December 1987 cannot be impugned. The filing of the
instant petition and the knowledge thereof by the trial
court did not prevent the latter from proceeding with
Civil Case No.
224-87. "It is elementary that the mere pendency of a
special civil action for certiorari, commenced in
relation to a case pending before a lower Court, does
not interrupt the course of the latter when there is no
writ of injunction restraining it." 53

WHEREFORE, the instant petition is DENIED for lack of

merit. The Temporary Restraining Order of 7 December
1987 is hereby LIFTED.

Costs against petitioner Bradford.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Grio-

Aquino, Regalado, Romero, Nocon, Bellosillo, Melo and
Campos, Jr., JJ., concur.

Quiason, J., took no part.

Gutierrez, Jr., J., is on leave.

UNITED STATES OF AMERICA and MAXINE BRADFORD,

petitioners,
vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22,
Regional Trial Court of Cavite, and NELIA T. MONTOYA,
respondents.
Petition for certiorari and prohibition under Rule 65 of
the Rules of Court. Petitioners would have Us annul
and set aside, for having been issued with grave
abuse of discretion amounting to lack of jurisdiction,
the Resolution of 17 July 1987 of Branch 22 of the
Regional Trial Court (RTC)
FACTS:
- Nelia Montoya, respondent, is an American citizen
who, at the time material to this case, was employed
as an identification (I.D.) checker at the U.S. Navy
Exchange (NEX) at the Joint United States Military
Assistance Group (JUSMAG) headquarters in Quezon
City.
- Petitioner Maxine Bradford, hereinafter referred
to as Bradford, is likewise an American citizen who
was the activity exchange manager at the said
JUSMAG Headquarters.
- Respondents body and belongings were searched
by Yong Kennedy, also an ID checker, upon the
instruction of the store manager, Ms. Maxine Bradford
while she was already at the parking area in the
presence of the defendant and numerous curious
onlookers;
- she was informed by the defendant that the
search is to be made on all Jusmag employees that
day; but checking the records, its only she.
- Montoya formally protested the illegal search on
February 14, 1987 in a letter addressed to Mr. R.L.
Roynon; but no action was undertaken by the said
officer;
Process:
- Montoya filed complaint with RTC-Cavite for
damages due to the oppressive and discriminatory
acts committed by the latter in excess of her authority
as store manager
- Bradford filed two (2) motions for extension of
time to file her Answer which were both granted by
the trial court, but instead of answering, she, together
with USA, filed Motion to Dismiss on ff. grounds:
o (This) action is in effect a suit against the United
States of America, a foreign sovereign immune from
suit without its consent for the cause of action
pleaded in the complaint; and
o Bradford, as manager of the US Navy Exchange
Branch at JUSMAG, Quezon City, is immune from suit
for act(s) done by her in the performance of her
official functions under the Philippines-United States
Military Assistance Agreement of 1947 and Military
Bases Agreement of 1947, as amended. Checking of
purchases at the NEX is a routine procedure observed
at base retail outlets to protect and safeguard
merchandise, cash and equipment pursuant to
paragraphs 2 and 4(b) of NAVRESALEACT SUBIC INST.
5500.1. 7Thus, Bradford's order to have purchases of
all employees checked on 22 January 1987 was made
in the exercise of her duties as Manager of the NEX-
JUSMAG.
- Montoya filed her opposition alleging:
o Bradford, in ordering the search upon her person
and belongings outside the NEX JUSMAG store in the
presence of onlookers, had committed an improper,
unlawful and highly discriminatory act against a
Filipino employee and had exceeded the scope of her
authority
o having exceeded her authority, Bradford cannot
rely on the sovereign immunity of the public petitioner
because her liability is personal
o Philippine courts are vested with jurisdiction over
the case because Bradford is a civilian employee who
had committed the challenged act outside the U.S.
Military Bases; such act is not one of those exempted
from the jurisdiction of Philippine courts
o Philippine courts can inquire into the factual
circumstances of the case to determine whether or not
Bradford had acted within or outside the scope of her
authority.
- They exchanged replies until Bradford was
declared in default for failure to answer, so Montoya
presented her evidence ex-parte. This default also
showed admission of truth of allegation.
ISSUES: whether or not the trial court committed
grave abuse of discretion in denying the motion to
dismiss based on the following grounds:
- the complaint in Civil Case No. 224-87 is in effect
a suit against the public petitioner, a foreign
sovereign immune from suit which has not given
consent to such suit and
- Bradford is immune from suit for acts done by her
in the performance of her official functions as manager
of the U.S. Navy Exchange of JUSMAG pursuant to the
Philippines-United States Military Assistance
Agreement of 1947 and the Military Bases Agreement
of 1947, as amended.
HELD: Petition denied for lack of merit.
- Montoya has a sufficient and viable cause of
action that Bradford acted not only outside the scope
of her authority or more specifically, in her private
capacity but also outside the territory where she
exercises such authority, that is, outside the NEX-
JUSMAG particularly, at the parking area which has
not been shown to form part of the facility of which
she was the manager..
- the doctrine of immunity from suit will not apply
and may not be invoked where the public official is
being sued in his private and personal capacity as an
ordinary citizen. The cloak of protection afforded the
officers and agents of the government is removed the
moment they are sued in their individual capacity. This
situation usually arises where the public official acts
without authority or in excess of the powers vested in
him. agents and officials of the United States armed
forces stationed in Clark Air Base are no exception to
this rule.

USA and Bradford v. Hon. Luis R. Reyes and Montoya

[219 SCRA 192, March 1, 1993]
G.R. No. 79253

Facts:

Private respondent [Montoya] is an American citizen

was employed as an identification (I.D.) checker at the
U.S. Navy Exchange (NEX) at the Joint United States
Military Assistance Group (JUSMAG) headquarters in
Quezon City. Petitioner [Bradford] also worked at NEX
JUSMAG as an activity manager. There was an
incident on 22 January 1987 whereby Bradford had
Montoyas person and belongings searched in front of
many curious onlookers. This caused Montoya to feel
aggrieved and to file a suit for damages.

Contentions:
Bradford claimed that she was immune from suit
because:
1) (This) action is in effect a suit against the United
States of America, a foreign sovereign immune from
suit without its consent for the cause of action
pleaded in the complaint; and

2) Defendant, Maxine Bradford, as manager of the US

Navy Exchange Branch at JUSMAG, Quezon City, is
immune from suit for act(s) done by her in the
performance of her official functions under the
Philippines-United States Military Assistance
Agreement of 1947 and Military Bases Agreement of
1947, as amended.

Montoya argued that:

(a) Bradford, in ordering the search upon her person
and belongings outside the NEX JUSMAG store in the
presence of onlookers, had committed an improper,
unlawful and highly discriminatory act against a
Filipino employee and had exceeded the scope of her
authority; (b) having exceeded her authority, Bradford
cannot rely on the sovereign immunity of the public
petitioner because her liability is personal; (c)
Philippine courts are vested with jurisdiction over the
case because Bradford is a civilian employee who had
committed the challenged act outside the U.S. Military
Bases; such act is not one of those exempted from the
jurisdiction of Philippine courts; and (d) Philippine
courts can inquire into the factual circumstances of
the case to determine whether or not Bradford had
acted within or outside the scope of her authority.

The doctrine of state immunity is at the core of this

controversy.

Doctrine of State Immunity:

The doctrine of state immunity and the exceptions

thereto are summarized in Shauf vs. Court of Appeals,
thus:

I. The rule that a state may not be sued without its

consent, now expressed in Article XVI Section 3, of the
1987 Constitution, is one of the generally accepted
principles of international law that we have adopted
as part of the law of our land under Article II, Section
2. This latter provision merely reiterates a policy
earlier embodied in the 1935 and 1973 Constitutions
and also intended to manifest our resolve to abide by
the rules of the international community.

While the doctrine appears to prohibit only suits

against the state without its consent, it is also
applicable to complaints filed against officials of the
state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the
judgment against such officials will require the state
itself to perform an affirmative act to satisfy the same,
such as the appropriation of the amount needed to
pay the damages awarded against them, the suit must
be regarded as against the state itself although it has
not been formally impleaded. It must be noted,
however, that the rule is not so all-encompassing as to
be applicable under all circumstances.

It is a different matter where the public official is

made to account in his capacity as such for acts
contrary to law and injurious to the rights of plaintiff.
As was clearly set forth by Justice Zaldivar in Director
of the Bureau of Telecommunications, et al. vs.
Aligaen, etc., et al. "Inasmuch as the State authorizes
only legal acts by its officers, unauthorized acts of
government officials or officers are not acts of the
State, and an action against the officials or officers by
one whose rights have been invaded or violated by
such acts, for the protection of his rights, is not a suit
against the State within the rule of immunity of the
State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State
officer or the director of a State department on the
ground that, while claiming to act or the State, he
violates or invades the personal and property rights of
the plaintiff, under an unconstitutional act or under an
assumption of authority which he does not have, is not
a suit against the State within the constitutional
provision that the State may not be sued without its
consent." The rationale for this ruling is that the
doctrinaire of state immunity cannot be used as an
instrument for perpetrating an injustice.

In the case of Baer, etc. vs. Tizon, etc., et al., it was

ruled that:

There should be no misinterpretation of the scope of

the decision reached by this Court. Petitioner, as the
Commander of the United States Naval Base in
Olongapo, does not possess diplomatic immunity. He
may therefore be proceeded against in his personal
capacity, or when the action taken by him cannot be
imputed to the government which he represents.

Also, in Animos, et al. vs. Philippine Veterans Affairs

Office, et al., we held that:

. . . it is equally well-settled that where a litigation

may have adverse consequences on the public
treasury, whether in the disbursements of funds or
loss of property, the public official proceeded against
not being liable in his personal capacity, then the
doctrine of non-suability may appropriately be
invoked. It has no application, however, where the suit
against such a functionary had to be instituted
because of his failure to comply with the duty imposed
by statute appropriating public funds for the benefit
of plaintiff or petitioner. . . . .

The aforecited authorities are clear on the matter.

They state that the doctrine of immunity from suit will
not apply and may not be invoked where the public
official is being sued in his private and personal
capacity as an ordinary citizen. The cloak of protection
afforded the officers and agents of the government is
removed the moment they are sued in their individual
capacity. This situation usually arises where the public
official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of
law that a public official may be liable in his personal
private capacity for whatever damage he may have
caused by his act donewith malice and in bad faith, or
beyond the scope of his authority or jurisdiction.

The agents and officials of the United States armed

forces stationed in Clark Air Base are no exception to
this rule. [footnotes omitted]

In the present case, it appears that Bradford was sued

for acts done beyond the scope and beyond her place
of official functions. Thus she may not avail of
immunity.

She may not even avail of diplomatic immunity

because Article 31 of the Vienna Convention on
Diplomatic Relations admits of exceptions. It reads:

1. A diplomatic agent shall enjoy immunity from the

criminal jurisdiction of the receiving State. He shall
also enjoy immunity from its civil and administrative
jurisdiction except in the case of:

xxx xxx xxx

(c) an action relating to any professional or

commercial activity exercised by the diplomatic agent
in the receiving State outside his official functions
(Emphasis supplied).

Disposition:
Petition was dismissed.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 102918. March 30, 1993.

JOSE V. NESSIA, petitioner, vs. JESUS M. FERMIN and

MUNICIPALITY OF VICTORIAS, NEGROS OCCIDENTAL,
respondents.
Christine V . Nessia in for petitioner.
Rolando Magbanua Antiquiera for Jesus Fermin.

DECISION

BELLOSILLO, J.:

Article 27 of the Civil Code accords judicial relief to

"[a]ny person suffering material or moral loss because
a public servant or employee refuses or neglects,
without just cause, to perform his official duty." This
the trial court 1 applied in finding respondent Jesus M.
Fermin, Mayor of Victorias, Negros Occidental, liable
for damages for maliciously refusing to act on the
vouchers of petitioner Jose V. Nessia covering the
latter's claim for reim-bursement of travel expense
allowances. The Court of Appeals 2 however ruled that
evidence as well as the complaint itself did not
establish unjust inaction, hence, it reversed the court
a quo and dismissed the case for lack of cause of
action. Considering the disparity in the findings and
conclusions of the lower courts, the version of the
appellate court cannot readily be accepted, hence, We
are constrained to scrutinize them more judiciously.

This recourse originated from the complaint filed

against respondents Jesus M. Fermin and the
Municipality of Victorias, Negros Occidental, by
petitioner Jose V. Nessia for recovery of damages and
reimbursement of expenses incurred in the
performance of his official duties as the then Deputy
Municipal Assessor of Victorias. The complaint
theorized that Fermin deliberately ignored and caused
the non-payment of the vouchers in question because
Nessia defied the former's request to all municipal
officials to register and vote in Victorias in the 1980
local elections.

In his answer with counterclaim, Fermin disputed the

allegations in the complaint and countered that the
claims of Nessia could not be approved because they
exceeded the budgetary appropriations therefor.

On its part, Victorias concurred with the arguments of

Fermin, and added that plaintiff Nessia was blamable
for his predicament because he neither gave Fermin
the justification for drawing funds in excess of the
budgetary appropriations nor amended his vouchers
to conform thereto.
Issues having been joined, the parties presented their
evidence, except for Victorias which was declared in
default for non-appearance at the pre-trial conference.
3 On 24 April 1987, judgment was rendered by the
trial court in favor of Nessia. 4 On the basis of the
evidence, the trial court found that Fermin maliciously
refused to act on plaintiffs vouchers, bolstered by his
inaction on Nessia's follow-up letters inquiring on the
status thereof.

The court ruled that the vouchers were received by

the secretary of Fermin thereby negating his
contention that the vouchers were not received by
him. But even if the vouchers never reached him, the
trial court nevertheless held Mayor Fermin answerable
because he should have made inquiries into their
whereabouts upon receipt of Nessia's follow-up
letters. In view of the foregoing, and the admission of
Fermin at the trial that he did nothing on the
vouchers, the court of origin awarded damages to
Nessia, although less than what he prayed for.

Both Nessia and Fermin elevated the case to the Court

of Appeals, Nessia praying for an increase in the
award of moral and exemplary damages, and Fermin
seeking exoneration from liability.

The Municipality of Victorias did not appeal.

On 19 July 1991, respondent appellate court dismissed

Nessia's complaint on the ground of lack of cause of
action because the complaint itself as well as Nessia's
own testimony admitted that Fermin acted on the
vouchers as may be drawn from the allegations that
Fermin denied/refused the claims.

On the basis of its own findings, the Court of Appeals

held that the real "situation before us is one in which
plaintiff-appellant accuses defendant-appellant of
failing to act on vouchers which are not shown to have
been received by the latter; and even if received,
could not be approved for payment because they were
submitted late and were not supported by an
appropriation."

Nessia now comes to Us on appeal under Rule 45 of

the Rules of Court raising four (4) issues, namely: (1)
whether respondent court may reverse the decision of
the trial court which has become final and executory
as against Victorias for failure to appeal therefrom; (2)
whether respondent appellate court may grant
affirmative relief to Victorias which did not appeal the
trial court's decision; (3) whether respondent court
erred in exonerating Fermin from malicious refusal to
act on petitioner's claims; and, (4) whether
respondent court erred in exonerating Fermin and
Victorias from liabilities, which may be summarized
into whether Fermin maliciously refused to act on the
vouchers, hence, liable under Art. 27, and whether the
dismissal of the complaint by respondent court
absolved Victorias from liability, even though it did
not appeal the decision of the trial court.

Before disposing of the merits of the case, We first

resolve the issue raised by the Office of the Solicitor
General that the assailed decision attached to the
petition is not a certified true copy as required in
Circular 1-88, par. 3, hence, the petition should have
been dismissed. The allegation is erroneous because
the challenged decision, Annex "A" of the petition, 5 is
actually certified by Atty. Leandro D. Rebong, a
Division Clerk of Court of respondent Court of Appeals.

On the first question, We are inclined to sustain the

trial court primarily because its appraisal of conflicting
testimonies is afforded greater weight and respect.
Likewise, finding no error in its appreciation of the
contradictory testimonies relating to the dispute on
the receipt of the vouchers, the determination of the
trial court that they were actually received should be
followed. Consequently, as between the findings of the
Court of Appeals drawn simply from the reading of the
records and the transcript of stenographic notes, and
the determination of the trial court which heard the
case, the opinion of the latter deserves greater
acceptance, even if both conclusions are supported by
evidence.

The claim that the name inscribed on the lower left

portion of the transmittal letter does not appear to be
the customary signature of the Mayor's secretary does
not convincingly show that she did not receive the
vouchers, nor was it convincingly shown that the
signature purportedly hers was not actually her
handwriting. Since proof of the receipt of the vouchers
has not been confuted, the secretary should have
indicated on the letter she received that the
enclosures therein were not so enclosed or attached,
otherwise, it could be presumed that they were
actually enclosed or attached thereto, and properly
received by the addressee. Moreover, the version
favoring receipt of the vouchers carries the
presumption of regularity in official acts, more so that
the handwritten name of the secretary, which closely
resembles her signature, immediately follows the list
of enclosures.

As regards the alleged response of Fermin to Nessia,

i.e., 'Basta indi lang ako 'mag-approve sang vouchers
mo", the same should have been interpreted in
Ilonggo as "refusal to approve or disapprove"
considering that Nessia testified on it to clarify an
earlier statement that "I presented him my vouchers
but he did not act on it (sic)." 6

In Roque v. Baun We held 7

"If the decision of the Court of Appeals on the

controversial matter suffers, as it does, from some
ambiguity, the doubt should be resolved to sustain the
trial court in the light of the familiar and accepted rule
that 'the judge who tries a case in the court below, has
vastly superior advantage for the ascertainment of
truth and the detection of falsehood over an appellate
court sitting as a court of review. The appellate court
can merely follow with the eye, the cold words of the
witness as transcribed upon the record, knowing at
the same time, from actual experience, that more or
less, of what the witness actually did say, is always
lost in the process of transcribing. But the main
difficulty does not lie here. There is an inherent
impossibility of determining with any degree of
accuracy what credit is justly due to a witness from
merely reading the words spoken by him, even if there
was no doubt as to the identity of the words' (Moran,
Comments on the Rules of Court)."

It is further contended that Nessia may not claim relief

under Art. 27 because his theory of unjust inaction is
incompatible with his allegations in the complaint that
Fermin denied/refused the vouchers. In support of this
view, the cases of Sta. Ana v. Maliwa 8 and Cunanan v.
Amparo 9 were cited, where We ruled that a pleader is
not allowed to contradict his own pleading.
We do not agree, however, that the allegations in the
complaint alluded to, i.e., "plaintiff presented the said
claims to the defendant Mayor Jesus Fermin, but
refused and continued to refuse the payments thereof'
and "defendants refused and continue to refuse to
pay," should be construed as admission of the act of
disapproval of the claims. Refusal to pay is not
inferred solely from disapproval of claims but from
inaction thereon as well. Accordingly, the said
allegations cannot be considered as contradictory to
Nessia's theory of unjust inaction.

On the defense of lack of appropriation, while it is true

that Fermin may not be compelled by mandamus to
approve vouchers because they exceeded the
budgetary appropriations, he may, nevertheless, be
held liable for damages under Art. 27 for malicious
inaction because he did not act on the vouchers. This
provision against official inaction finds its ally in Sec.
3, par. (f), of R.A. 3019, as amended, otherwise known
as the "Anti-Graft and Corrupt Practices Act," which
criminalizes "[n]eglecting or refusing, after due
demand or request, without sufficient justification, to
act within a reasonable time on any matter pending
before him for the purpose of . . . discriminating
against any interested party."

It is apparent that public officials are called upon to

act expeditiously on matters pending before them. For
only in acting thereon either by signifying approval or
disapproval may the plaintiff continue on to the next
step of the bureaucratic process. On the other hand,
official inaction brings to a standstill the
administrative process and the plaintiff is left in the
darkness of uncertainty. In this regard, official
"inaction" cannot be equated with "disapproval."

In Baldivia v. Lota, We dismissed on appeal the

petition to compel by mandamus approval of certain
vouchers, even though the disapproval was politically
motivated, on the basis that respondent Mayor was
bound to disapprove vouchers not supported by
appropriations. 10 In the penultimate paragraph, We
made the following pronouncement:

"Indeed, respondent could have, and should have,

either included the claim of petitioners herein in the
general budget he is bound to submit, pursuant to
section 2295 of the Revised Administrative Code, or
prepared a special budget for said claim, and urged
the municipal council to appropriate the sum
necessary therefor. In any event, if the municipal
mayor fails or refuses to make the necessary
appropriation, petitioners may bring an action against
the municipality for the recovery of what is due them
and after securing a judgment therefor, seek a writ of
mandamus against the municipal council and the
municipal mayor to compel the enactment and
approval of the appropriation ordinance necessary
therefor (19 R.C.L. 1951-1052; 34 Am. Jur., 950-951; 35
Am. Jur., 21)."

This is precisely what the petitioner did; he filed a

collection case to establish his claim against Fermin
and the Municipality of Victorias, which Nessia
satisfactorily proved.

As regards the second question, it is settled that a

non-appellant cannot, on appeal, seek an affirmative
relief. We ruled in Medida v. Court of Appeals 11 that

"[A]n appellee who has not himself appealed cannot

obtain from the appellate court any affirmative relief
other than the ones granted in the decision of the
court below (Alba vs. Santander, et al. 160 SCRA
8[1988]). He cannot impugn the correctness of a
judgment not appealed from by him. He cannot assign
such errors as are designed to have the judgment
modified. All that said appellee can do is to make a
counter-assignment of errors or to argue on issues
raised at the trial only for the purpose of sustaining
the judgment in his favor, even on grounds not
included in the decision of the court a quo nor raised
in the appellant's assignment of errors or arguments
(Aparri vs. Court of Appeals, et al., 13 SCRA 611
[1965]; Carbonel vs. Court of Appeals, et al., 147 SCRA
565 [1987]; Dizon, Jr. vs. National Labor Relations
Commission, et al., 181 SCRA 472 [1990])."

That the decision of respondent court essentially

exonerated the Municipality of Victorias from liability
is a mere consequence of the dismissal of the case for
lack of cause of action, although erroneously. In any
case, this matter has become irrelevant considering
the conclusion herein reached.
Incidentally, in his memorandum, counsel for private
respondent insinuates that the lower courts may have
overlooked that 6 April 1980, the alleged date when
Nessia supposedly went to Fermin's office and told the
latter to go to court instead, was a Sunday. This is not
correct, for it is apparent from the transcript of
stenographic notes that the date is actually 16 April
1980, a Wednesday. Indeed, such allusion that is
intended merely to gain undue advantage over the
opponent does not square well with the sporting
tenets of fair play.

WHEREFORE, the petition is GRANTED and the assailed

decision of 19 July 1991 of respondent Court of
Appeals as well as its 19 November 1991 Resolution
denying Nessia's motion for reconsideration are SET
ASIDE, and the decision of 24 April 1987 of the
Regional Trial Court, Branch LXI, Kabankalan, Negros
Occidental, 12 is REINSTATED and AFFIRMED.

SO ORDERED.

Cruz, Grio-Aquino and Quiason, JJ ., concur.

Nessia vs. Fermin

[GR 102918, 30 March 1993]
First Division, Bellosillo (J): 3 concur

Facts: Jose V. Nessia filed a complaint against Jesus M.

Fermin and the Municipality of Victorias, Negros
Occidental for recovery of damages and
reimbursement of expenses incurred in the
performance of his official duties as the then Deputy
Municipal Assessor of Victorias. The complaint
theorized that Fermin deliberately ignored and caused
the non-payment of the vouchers in question because
Nessia defied the former's request to all municipal
officials to register and vote in Victorias in the 1980
local elections. In his answer with counterclaim,
Fermin disputed the allegations in the complaint and
countered that the claims of Nessia could not be
approved because they exceeded the budgetary
appropriations therefor. On its part, Victorias
concurred with the arguments of Fermin, and added
that Nessia was blamable for his predicament because
he neither gave Fermin the justification for drawing
funds in excess of the budgetary appropriations nor
amended his vouchers to conform thereto. Issues
having been joined, the parties presented their
evidence, except for Victorias which was declared in
default for non-appearance at the pre-trial conference.
On 24 April 1987, judgment was rendered by the trial
court in favor of Nessia. On the basis of the evidence,
the trial court found that Fermin maliciously refused
to act on Nessia's vouchers, bolstered by his inaction
on Nessia's follow-up letters inquiring on the status
thereof. Both Nessia and Fermin elevated the case to
the Court of Appeals, Nessia praying for an increase in
the award of moral and exemplary damages, and
Fermin seeking exoneration from liability. The
Municipality of Victorias did not appeal. On 19 July
1991, the appellate court dismissed Nessia's
complaint on the ground of lack of cause of action
because the complaint itself as well as Nessia's own
testimony admitted that Fermin acted on the vouchers
as may be drawn from the allegations that Fermin
denied/refused the claims. Nessia appealed.

Issue: Whether the approval of certain vouchers,

which are not supported by appropriations, may be
compelled by mandamus.

Held: In Baldivia v. Lota, the Supreme Court dismissed

on appeal the petition to compel by mandamus
approval of certain vouchers, even though the
disapproval was politically motivated, on the basis
that respondent Mayor was bound to disapprove
vouchers not supported by appropriations. In the
penultimate paragraph, We made the following
pronouncement, "Indeed, respondent could have, and
should have, either included the claim of petitioners
herein in the general budget he is bound to submit,
pursuant to section 2295 of the Revised
Administrative Code, or prepared a special budget for
said claim, and urged the municipal council to
appropriate the sum necessary therefor. In any event,
if the municipal mayor fails or refuses to make the
necessary appropriation, petitioners may bring an
action against the municipality for the recovery of
what is due them and after securing a judgment
therefor, seek a writ of mandamus against the
municipal council and the municipal mayor to compel
the enactment and approval of the appropriation
ordinance necessary therefor." Herein, this is precisely
what Nessia did; he filed a collection case to establish
his claim against Fermin and the Municipality of
Victorias, which Nessia satisfactorily proved.
THIRD DIVISION
[G.R. No. 107271. September 10, 2003]

CITY OF CALOOCAN and NORMA M. ABRACIA,

petitioners, vs. HON. MAURO T. ALLARDE, Presiding
Judge of Branch 123, RTC of Caloocan City, ALBERTO A.
CASTILLO, Deputy Sheriff of Branch 123, RTC of
Caloocan City, and DELFINA HERNANDEZ SANTIAGO
and PHILIPPINE NATIONAL BANK (PNB), respondents.
DECISION
CORONA, J.:

Assailed in this petition for certiorari is the decision[1]

dated August 31, 1992, of the Court of Appeals in CA
G.R. SP No. 27423, ordering the Regional Trial Court of
Caloocan City, Branch 123, to implement an alias writ
of execution dated January 16, 1992. The dispositive
portion read as follows:

WHEREFORE the petition is hereby granted ordering

the Regional Trial Court of Kaloocan City, Branch 123,
to immediately effect the alias writ of execution dated
January 16, 1992 without further delay.

Counsel for the respondents are warned that a

repetition of their contemptuous act to delay the
execution of a final and executory judgment will be
dealt with more severely.

SO ORDERED.[2]

It is important to state at the outset that the dispute

between petitioner and private respondent has been
litigated thrice before this Court: first, in G.R. No. L-
39288-89, entitled Heirs of Abelardo Palomique, et al.
vs. Marcial Samson, et al., decided on January 31,
1985; second, in G.R. No. 98366, entitled City
Government of Caloocan vs. Court of Appeals, et al.,
resolved on May 16, 1991, and third, in G.R. No.
102625, entitled Santiago vs. Sto. Tomas, et al.,
decided on August 1, 1995. This is not to mention the
numerous concurrent efforts by the City Government
of Caloocan to seek relief from other judicial and
quasi-judicial bodies. The present petition for
certiorari is the fourth time we are called upon to
resolve the dispute.

The factual and procedural antecedents follow.

Sometime in 1972, Marcial Samson, City Mayor of
Caloocan City, through Ordinance No. 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. Respondent
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 this Court,
docketed as G.R. No. L-39288-89, Heirs of Abelardo
Palomique, et al. vs. Marcial Samson, et al. In our
Resolution dated January 31, 1985, we 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 February 27, 1985.

In 1986, the City Government of Caloocan paid

respondent 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.[3] In
1987, the City of Caloocan appropriated funds for her
unpaid back salaries. This was included in
Supplemental Budget No. 3 for the fiscal year 1987.
Surprisingly, however, the City later refused to release
the money to respondent Santiago.

Respondent 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 February 12, 1991, Judge Mauro T. Allarde, RTC of
Caloocan City, Branch 123, issued a writ of execution
for the payment of the remainder of respondent
Santiagos back salaries and other emoluments.[4]

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.[5] 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.

And for the second time, the City Government of

Caloocan appealed to this Court in G.R. No. 98366,
City Government of Caloocan vs. Court of Appeals, et
al. The petition was dismissed, through our Resolution
of May 16, 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 July 29, 1991.

On motion of private respondent Santiago, Judge

Mauro T. Allarde ordered the issuance of an alias writ
of execution on March 3, 1992. The City Government
of Caloocan moved to reconsider the order, insisting in
the main that respondent Santiago was not entitled to
backwages from 1983 to 1986. The court a quo 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 July 27, 1992, Sheriff Alberto A. Castillo levied and

sold at public auction one of the motor vehicles of the
City Government of Caloocan, with plate no. SBH-165,
for P100,000. The proceeds of the sale were turned
over to respondent Santiago in partial satisfaction of
her claim, thereby leaving a balance of P439,377.14,
inclusive of interest. Petitioners filed a motion
questioning the validity of the auction sale of the
vehicle with plate no. SBH-165, and a supplemental
motion maintaining that the properties of the
municipality were exempt from execution. In his Order
dated October 1, 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 - [6]
ONE (1) Unit Motor Vehicle (Hunter Station Wagon);
Motor No. C-240-199629; Chassis No. MBB-910369C;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);

Engine No. 4FB1-174328, Chassis No. MBB-910345C;
Plate No. SDL-653;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);

Engine No. 4FB-165196; Chassis No. MBB 910349C.

All the vehicles, including that previously sold in the

auction sale, were owned by the City and assigned for
the use of herein petitioner 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 respondent Santiago was considered to
have rendered services from 1983-1986 as to be
entitled to backwages for that period. In its Resolution
No. 91-1124, the CSC ruled in the negative.

On November 22, 1991, private respondent Santiago

challenged the CSC resolution before this Court in G.R.
No. 102625, Santiago vs. Sto. Tomas, et al. On July 8,
1993, we initially dismissed the petition for lack of
merit; however, we reconsidered the dismissal of the
petition in our Resolution dated August 1, 1995, this
time ruling in favor of respondent Santiago:

The issue of petitioner Santiagos right to back salaries

for the period from October 1983 to December 1986
having been resolved in G.R. No. 98366 on 16 May
1991, CSC Resolution No. 91-1124 promulgated later
on 24 September 1991 in particular, its ruling on the
extent of backwages due petitioner Santiago was in
fact moot and academic at the time of its
promulgation. CSC Resolution No. 91-1124 could not,
of course, set aside what had been judicially decided
with finality x x x x the court considers that resort by
the City Government of Caloocan to respondent CSC
was but another attempt to deprive petitioner
Santiago of her claim to back salaries x x x and a
continuation of the Citys abuse and misuse of the
rules of judicial procedure. The Citys acts have
resulted in wasting the precious time and resources of
the courts and respondent CSC. (Underscoring
supplied).
On October 5, 1992, the City Council of Caloocan
passed Ordinance No. 0134, Series of 1992, which
included the amount of P439,377.14 claimed by
respondent Santiago as back salaries, plus interest.[7]
Pursuant to the subject ordinance, Judge Allarde
issued an order dated November 10, 1992, decreeing
that:

WHEREFORE, the City Treasurer (of Caloocan),

Norberto Azarcon is hereby ordered to deliver to this
Court within five (5) days from receipt hereof, (a)
managers check covering the amount of P439,378.00
representing the back salaries of petitioner Delfina H.
Santiago in accordance with Ordinance No. 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
respondent Santiagos claims. This, despite the fact
that he was one of the signatories of the ordinance
authorizing such payment. On April 29, 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 December 11, 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 April 15, 1993,
and that he doubted whether he had authority to sign
the same.[8]

Thus, in an order dated May 7, 1993, Judge Allarde

ordered Sheriff Alberto A. Castillo to immediately
garnish the funds of the City Government of Caloocan
corresponding to the claim of respondent Santiago.[9]
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 private respondent Santiago was finally settled in
full.

On June 4, 1993, however, while the instant petition

was pending, the City Government of Caloocan filed
yet another motion with this Court, a Motion to
Declare in Contempt of Court; to Set Aside the
Garnishment and Administrative Complaint against
Judge Allarde, respondent Santiago and PNB.
Subsequently, the City Government of Caloocan filed a
Supplemental Petition formally impleading PNB as a
party-respondent in this case.

The instant 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. More specifically, petitioners insist that
Judge Allarde gravely abused his discretion in:

(a) ordering the garnishment of the funds of the City

of Caloocan deposited with the PNB, since it is settled
that public funds are beyond the reach of garnishment
and even with the appropriation passed by the City
Council, the authority of the Mayor is still needed for
the release of the appropriation;

(b) ordering the levy and sale at public auction of

three (3) motor vehicles owned by the City of
Caloocan, which vehicles are necessary for public use
and cannot be attached nor sold in an execution sale
to satisfy a money judgment against the City of
Caloocan;

(c) peremptorily denying petitioner City of Caloocans

urgent motions to vacate and set aside the auction
sale of the motor vehicle with PLATE NO. SBH-165,
notwithstanding that the auction sale by the Sheriff
was tainted with serious irregularities, more
particularly:

i. non-compliance with the mandatory posting of the

notice of sale;

ii. non-observance of the procedure that a sale

through public auction has to be made and
consummated at the time of the auction, at the
designated place and upon actual payment of the
purchase price by the winning bidder;

iii. violation of Sec. 21, Rule 39 of the Rules of Court to

the effect that sale of personal property capable of
manual delivery must be sold within the view of those
attending the sale; and,

iv. the Sheriffs Certificate of Sale contained false

narration of facts respecting the actual time of the
public auction;

(d) the enforcement of the levy made by the Sheriff

covering the three (3) motor vehicles based on an
alias writ that has long expired.

The petition has absolutely no merit. The trial court

committed no grave abuse of discretion in
implementing the alias writ of execution to settle the
claim of respondent Santiago, the satisfaction of
which petitioner had been maliciously evading for 21
years.

Petitioner argues that the garnishment of its funds in

PNB was invalid inasmuch as these were public funds
and thus exempt from execution. 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.[10]

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:
[11]

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.
[12]

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.[13]

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.

Thus, in the similar case of Pasay City Government, et

al. vs. CFI of Manila, Br. X, et al.,[14] where petitioners
challenged the trial courts order garnishing its funds
in payment of the contract price for the construction
of the City Hall, we ruled that, while government funds
deposited in the PNB are exempt from execution or
garnishment, this rule does not apply if an ordinance
has already been enacted for the payment of the Citys
obligations

Upon the issuance of the writ of execution, the

petitioner-appellants moved for its quashal alleging
among other things the exemption of the government
from execution. This move on the part of petitioner-
appellants is at first glance laudable for all
government funds deposited with the Philippine
National Bank by any agency or instrumentality of the
government, whether by way of general or special
deposit, remain government funds and may not be
subject to garnishment or levy. But inasmuch as an
ordinance has already been enacted expressly
appropriating the amount of P613,096.00 as payment
to the respondent-appellee, then the herein case is
covered by the exception to the general rule x x x x
In the instant case, the City Council of Caloocan
already approved and passed Ordinance No. 0134,
Series of 1992, allocating the amount of P439,377.14
for respondent Santiagos back salaries plus interest.
Thus this case fell squarely within the exception. For
all intents and purposes, Ordinance No. 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.

Indeed, this conclusion is further buttressed by the

Certification issued on December 23, 1992 by Norberto
C. Azarcon, City Treasurer of Caloocan:

CERTIFICATION

This is to certify that according to the records

available in this Office the claim for backwages of the
HON. JUDGE DELFINA H. SANTIAGO has been properly
obligated and can be collected in accordance with
existing accounting and auditing rules and
regulations.

This is to certify further that in case the claim is not

collected within the present fiscal year, such claim
shall be entered in the books of Accounts Payable and
can still be collected in the next fiscal year x x x x
(Underscoring supplied)

Petitioners reliance on Municipality of Makati vs. Court

of Appeals, et al.,[15] and Commissioner of Public
Highways vs. San Diego,[16] does not help their
cause.[17] Both cases implicitly affirmed that public
funds may be garnished if there is a statute which
appropriated the amount so garnished. Thus, in
Municipality of Makati, citing San Diego, we
unequivocally held that:

In this jurisdiction, well-settled is the rule that public

funds are not subject to levy and execution, unless
otherwise provided by statute x x x x

Similarly, we cannot agree with petitioners argument

that the appropriation ordinance of the City Council
did not authorize PNB to release the funds because
only the City Mayor could authorize the release
thereof. A valid appropriation of public funds lifts its
exemption from execution. Here, the appropriation
passed by the City Council of Caloocan providing for
the payment of backwages to respondent was duly
approved and signed by both the council and then
Mayor Macario Asistio, Jr. The mayors signature
approving the budget ordinance was his assent to the
appropriation of funds for respondent Santiagos
backwages. If he did not agree with such allocation,
he could have vetoed the item pursuant to Section 55
of the Local Government Code.[18] There was no such
veto.

In view of the foregoing discourse, we dismiss

petitioners unfounded assertion, probably made more
out of sheer ignorance of prevailing jurisprudence
than a deliberate attempt to mislead us, that the rule
that public funds (are) beyond the reach of levy and
garnishment is not qualified by any condition.[19]

We now come to the issue of the legality of the levy on

the three motor vehicles belonging to the City of
Caloocan which petitioners claimed to be exempt from
execution, and which levy was based on an alias writ
that had purportedly expired. Suffice it to say that
Judge Allarde, in his Order dated November 10, 1992,
[20] already lifted the levy on the three vehicles,
thereby formally discharging them from the
jurisdiction of the court and turning them over to the
City Government of Caloocan:

x x x x the levy of the three (3) vehicles made by

Sheriff Alberto Castillo pursuant to the Orders of this
Court dated October 1 and 8, 1992 is hereby lifted and
the said Sheriff is hereby ordered to return the same
to the City Government in view of the satisfaction of
the decision in these cases x x x x

It is thus unnecessary for us to discuss a moot issue.

We turn to the third issue raised by petitioners that

the auction sale by Sheriff Alberto A. Castillo of the
motor vehicle with plate no. SBH-165 was tainted with
serious irregularities. We need not emphasize that the
sheriff enjoys the presumption of regularity in the
performance of the functions of his office. This
presumption prevails in the absence of substantial
evidence to the contrary and cannot be overcome by
bare and self-serving allegations. The petitioners
failed to convince us that the auction sale conducted
by the sheriff indeed suffered from fatal flaws. No
evidence was adduced to prove that the sheriff had
been remiss in the performance of his duties during
the public auction sale. Indeed it would be injudicious
for us to assume, as petitioners want us to do, that
the sheriff failed to follow the established procedures
governing public auctions.

On the contrary, a review of the records shows that

the sheriff complied with the rules on public auction.
The sale of the Citys vehicle was made publicly in
front of the Caloocan City Hall on the date fixed in the
notice July 27, 1992. In fact, petitioners in their Motion
to Declare in Contempt of Court; to Set Aside the
Garnishment and Administrative Complaint admitted
as much:

On July 27, 1992, by virtue of an alias writ of execution

issued by the respondent court, a vehicle owned by
the petitioner xxx was levied and sold at public
auction for the amount of P100,000.00 and which
amount was immediately delivered to the private
respondent x x x x[21]

Hence, petitioners cannot now be heard to impugn the

validity of the auction sale.

Petitioners, in desperation, likewise make much of the

proceedings before the trial court on October 8, 1992,
wherein petitioner Norma Abracia, Superintendent of
the Division of City Schools of Caloocan, was
commanded to appear and show cause why she should
not be cited in contempt for delaying the execution of
judgment. This was in connection with her failure (or
refusal) to surrender the three motor vehicles
assigned to the Division of City Schools to the custody
of the sheriff. Petitioner Abracia, assisted by Mr.
Ricardo Nagpacan of the Division of City Schools,
appeared during the hearing but requested a ten-day
period within which to refer the matter of contempt to
a counsel of her choice. The request was denied by
Judge Allarde in his assailed order dated October 8,
1992. Thus petitioner Abracia claimed, inter alia, that:
(a) she was denied due process; (b) the silence of the
order of Judge Allarde on her request for time violated
an orderly and faithful recording of the proceedings,
and (c) she was coerced into agreeing to surrender the
vehicles.

We do not think so. What violates due process is the

absolute lack of opportunity to be heard. That
opportunity, the Court is convinced, was sufficiently
accorded to petitioner Abracia. She was notified of the
contempt charge against her; she was effectively
assisted by counsel when she appeared during the
hearing on October 8, 1992; and she was afforded
ample opportunity to answer and refute the charge
against her. The circumstance that she opted not to
avail of her chance to be heard on that occasion by
asking for an extension of time within which to hire a
counsel of her choice, a request denied by the trial
court, did not transgress nor deprive her of her right
to due process.

Significantly, during the hearing on October 8, 1992,

Mr. Nagpacan manifested in open court that, after
conferring with petitioner Abracia, the latter was
willing to surrender these vehicles into the custody of
the sheriff on the condition that the standing motion
(for contempt) be withdrawn.[22] Her decision was
made freely and voluntarily, and after conferring with
her counsel. Moreover, it was petitioner Abracia
herself who imposed the condition that respondent
Santiago should withdraw her motion for contempt in
exchange for her promise to surrender the subject
vehicles. Thus, petitioner Abracias claim that she was
coerced into surrendering the vehicles had no basis.

Even assuming ex gratia argumenti that there indeed

existed certain legal infirmities in connection with the
assailed orders of Judge Allarde, still, considering the
totality of circumstances of this case, the nullification
of the contested orders would be way out of line. For
21 long years, starting 1972 when this controversy
started up to 1993 when her claim was fully paid out
of the garnished funds of the City of Caloocan,
respondent Santiago was cruelly and unjustly
deprived of what was due her. It would be, at the very
least, merciless and unchristian to make private
respondent refund the City of Caloocan the amount
already paid to her, only to force her to go through the
same nightmare all over again.
At any rate, of paramount importance to us is that
justice has been served. No right of the public was
violated and public interest was preserved.

Finally, we cannot simply pass over in silence the

deplorable act of the former Mayor of Caloocan City in
refusing to sign the check in payment of the Citys
obligation to private respondent. It was an open
defiance of judicial processes, smacking of political
arrogance, and a direct violation of the very ordinance
he himself approved. Our Resolution in G.R. No.
98366, City Government of Caloocan vs. Court of
Appeals, et al., dated May 16, 1991, dismissing the
petition of the City of Caloocan assailing the issuance
of a writ of execution by the trial court, already
resolved with finality all impediments to the execution
of judgment in this case. Yet, the City Government of
Caloocan, in a blatant display of malice and bad faith,
refused to comply with the decision. Now, it has the
temerity to come to this Court once more and continue
inflicting injustice on a hapless citizen, as if all the
harm and prejudice it has already heaped upon
respondent Santiago are still not enough.

This Court will not condone the repudiation of just

obligations contracted by municipal corporations. On
the contrary, we will extend our aid and every judicial
facility to any citizen in the enforcement of just and
valid claims against abusive local government units.

WHEREFORE, the petition is hereby DISMISSED for

utter lack of merit. The assailed orders of the trial
court dated October 1, 1992, October 8, 1992 and May
7, 1993, respectively, are AFFIRMED.

Petitioners and their counsels are hereby warned

against filing any more pleadings in connection with
the issues already resolved with finality herein and in
related cases.

Costs against petitioners.

SO ORDERED.

Panganiban, (Acting Chairman), Sandoval-Gutierrez,

and Carpio-Morales, JJ., concur.
Puno, (Chairman), J., on official leave.
DIGEST

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 L-39288-89,
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 91-
1124 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.