Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee,

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

YAP, J.:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Neither is there merit in respondent's submission, which the respondent appellate court sustained,
on the basis of our decision in the Begosa case, 6 that the present action is not a suit against the State
within the rule of State immunity from suit, because plaintiff does not seek to divest the Government of
any of its lands or its funds. It is contended that the complaint involves land not owned by the State, but
private land belonging to the plaintiff, hence the Government is not being divested of any of its properties.
There is some sophistry involved in this argument, since the character of the land sought to be recovered
still remains to be established, and the plaintiff's action is directed against the State precisely to compel
the latter to litigate the ownership and possession of the property. In other words, the plaintiff is out to
establish that he is the owner of the land in question based, incidentally, on an informacion posesoria of
dubious value, and he seeks to establish his claim of ownership by suing the Republic of the Philippines
in an action in personam.

The inscription in the property registry of an informacion posesoria under the Spanish Mortgage Law
was a means provided by the law then in force in the Philippines prior to the transfer of sovereignty
from Spain to the United States of America, to record a claimant's actual possession of a piece of
land, established through an ex parte proceeding conducted in accordance with prescribed
rules. 7 Such inscription merely furnishes, at best, prima facie evidence of the fact that at the time the
proceeding was held, the claimant was in possession of the land under a claim of right as set forth in his
application. 8 The possessory information could ripen into a record of ownership after the lapse of 20
years (later reduced to 10 years), upon the fulfillment of the requisites prescribed in Article 393 of the
Spanish Mortgage Law.

There is no showing in the case at bar that the informacion posesoria held by the respondent had
been converted into a record of ownership. Such possessory information, therefore, remained at
best mere prima facie evidence of possession. Using this possessory information, the respondent
could have applied for judicial confirmation of imperfect title under the Public Land Act, which is an
action in rem. However, having failed to do so, it is rather late for him to pursue this avenue at this
time. Respondent must also contend, as the records disclose, with the fact admitted by him and
stated in the decision of the Court a quo that settlers have been occupying and cultivating the land in
question since even before the outbreak of the war, which puts in grave doubt his own claim of
possession.

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

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

SO ORDERED.

Narvasa, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Melencio-Herrera, J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L- 24548 October 27, 1983

WENCESLAO VlNZONS TAN, THE DIRECTOR OF FORESTRY, APOLONIO THE SECRETARY

OF AGRICULTURE AND NATURAL RESOURCES JOSE Y. FELICIANO, respondents-appelllees,
vs.
THE DIRECTOR OF FORESTRY, APOLONIO RIVERA, THE SECRETARY OF AGRICULTURE
AND N ATURAL RESOURCES JOSE Y. FELICIANO, respon dents-appellees,RAVAGO
COMMERCIAL CO., JORGE LAO HAPPICK and ATANACIO MALLARI, intervenors,

Camito V Pelianco Jr. for petitioner-appellant.

Solicitor General for respondent Director.

Estelito P. Mendoza for respondent Ravago Comm'l Co.

Anacleto Badoy for respondent Atanacio Mallari.

Mariano de Joya, Jr. for respondent Jorge Lao Happick, Jr.

MAKASIAR, J:

This is an appeal from the order dated January 20, 1965 of the then Court of First Instance of
Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari, prohibition and mandamus with
preliminary prohibitory injunction (p. 2. rec.), which dismissed the petition of petitioner-appellant
Wenceslao Vinzons Tan on the ground that it does not state a sufficient cause of action, and upon
the respondents-appellees' (Secretary of Agriculture and Natural resources and the Director of
Forestry) motion to dismiss (p. 28, rec.).

Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising for public
bidding a certain tract of public forest land situated in Olongapo, Zambales, provided tenders were
received on or before May 22, 1961 (p. 15, CFI rec.). This public forest land, consisting of 6,420
hectares, is located within the former U.S. Naval Reservation comprising 7,252 hectares of
timberland, which was turned over by the United States Government to the Philippine Government
(P. 99, CFI rec.).

On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his application in due form
after paying the necessary fees and posting tile required bond therefor. Nine other applicants
submitted their offers before the deadline (p. 29, rec.).

Thereafter, questions arose as to the wisdom of having the area declared as a forest reserve or
allow the same to be awarded to the most qualified bidder. On June 7, 1961, then President Carlos
P. Garcia issued a directive to the Director of the Bureau of Forestry, which read as follows:
 It is desired that the area formerly covered by the Naval Reservation be made a
forest reserve for watershed purposes. Prepare and submit immediately a draft of a
proclamation establishing the said area as a watershed forest reserve for Olongapo,
Zambales. It is also desired that the bids received by the Bureau of Forestry for the
issuance of the timber license in the area during the public bidding conducted last
May 22, 1961 be rejected in order that the area may be reserved as above stated. ...

(SGD.)
CARL
OS P.
GARCI
A

(pp. 98, CFI rec.).

On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources sustained the
findings and re comendations of the Director of Forestry who concluded that "it would be beneficial
to the public interest if the area is made available for exploitation under certain conditions," and

We quote:

Respectfully forwarded to the honorable, the Executive Secretary Malacanang.

Manila inviting particular attention to the comment and recommendation of the
Director of Forestry in the proceeding in indorsement in which this Of fice fully
concurs.

The observations of responsible forest officials are most revealing of their zeal to
promote forest conservation and watershed protection especially in Olongapo,
Zambales area. In convincing fashion, they have demonstrated that to declare the
forest area involved as a forest reserve ratify than open it for timber exploitation
under license and regulation would do more harm than of to the public interest. To
convert the area into a forest reserve without an adequate forest protection force,
would make of it a 'Free Zone and Logging Paradise,' to the ever 'Problem Loggers'
of Dinalupihan, Bataan . . . an open target of timber smugglers, kaingineros and
other forms of forest vandals and despoilers. On the other hand, to award the area,
as planned, to a reputable and responsible licensee who shall conduct logging
operations therein under the selective logging method and who shall be obliged to
employ a sufficient number of forest guards to patrol and protect the forest
consecration and watershed protection.

Worthy of mention is the fact that the Bureau of Forestry had already conducted a
public bidding to determine the most qualified bidder to whom the area advertised
should be awarded. Needless to stress, the decision of the Director of Forestry to
dispose of the area thusly was arrived at after much thought and deliberation and
after having been convinced that to do so would not adversely affect the watershed
in that sector. The result of the bidding only have to be announced. To be sure, some
of the participating bidders like Mr. Edgardo Pascual, went to much expense in the
hope of winning a virgin forest concession. To suddenly make a turn about of this
decision without strong justifiable grounds, would cause the Bureau of Forestry and
this Office no end of embarrassment.
 In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed
to proceed with the announcement of the results of the bidding for the subject forest
area (p. 13, CFI rec.).

The Office of the President in its 4th Indorsement dated February 2, 1962, signed by Atty. Juan
Cancio, Acting Legal Officer, "respectfully returned to the Honorable Secretary of the Department of
Agriculture and Natural Resources for appropriate action," the papers subject of Forestry Notice No.
2087 which was referred to the Bureau of Forestry for decision (p. 14, CFI rec.).

Finally, of the ten persons who submitted proposed the area was awarded to herein petitioner-
appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of Forestry (p. 17, CFI rec.).
Against this award, bidders Ravago Commercial Company and Jorge Lao Happick filed motions for
reconsideration which were denied by the Director of Forestry on December 6, 1963.

On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M. Gozon — who
succeeded Secretary Cesar M. Fortich in office — issued General Memorandum Order No. 46,
series of 1963, pertinent portions of which state:

xxx xxx xxx

SUBJECT: ... ... ...

(D)elegation of authority to the Director of Forestry to grant ordinary timber licenses.

1. ... ... ...

2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(be the extension of ordinary timber licenses for areas not exceeding 5,000 hectares
each;

3. This Order shall take effect immediately (p. 267, CFI rec.).

Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and Natural
Resources, replacing secretary Benjamin M. Gozon. Upon assumption of office he Immediately
promulgate on December 19, 19b3 General memorandum Order No. 60, revoking the authority
delegated to the Director of Forestry, under General Memorandum order No. 46, to grant ordinary
timber licenses, which order took effect on the same day, December 19, 1963. Pertinent portions of
the said Order read as follows:

xxx xxx xxx

SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963 —

1. In order to acquaint the undersigned with the volume and Nature of the work of the
Department, the authority delegated to the Director of forestry under General
Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(b) the extension of ordinary timber licenses for areas not exceeding 3,000 hectares
each is hereby revoked. Until further notice, the issuance of' new licenses , including
 amendments thereto, shall be signed by the secretary of Agriculture and Natural
Resources.

2. This Order shall take effect immediately and all other previous orders, directives,
circulars, memoranda, rules and regulations inconsistent with this Order are hereby
revoked (p. 268, CFl rec.; Emphasis supplied).

On the same date that the above-quoted memorandum took effect, December 19, 1963, Ordinary
Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name of Wenceslao Vinzons Tan, was
signed by then Acting Director of Forestry Estanislao R. Bernal without the approval of the Secretary
of Agriculture and Natural Resources. On January 6, 1964, the license was released by the Office of
the Director of Forestry (p. 30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of Agriculture
and Natural Resources as required by Order No. 60 aforequoted.

On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary of Agriculture
and Natural Resources shall be considered by tile Natural Resources praying that, pending
resolution of the appeal filed by Ravago Commercial Company and Jorge Lao Happick from the
order of the Director of Forestry denying their motion for reconsideration, OTI No. 20-'64 in the name
of Wenceslao V. Tan be cancelled or revoked on the ground that the grant thereof was irregular,
anomalous and contrary to existing forestry laws, rules and regulations.

On March 9, 1964, acting on the said representation made by Ravago Commercial Company, the
Secretary of Agriculture and Natural Resources promulgated an order declaring Ordinary Timber
License No. 20-'64 issued in the name of Wenceslao Vinzons Tan, as having been issued by the
Director of Forestry without authority, and is therefore void ab initio. The dispositive portion of said
order reads as follows:

WHEREFORE, premises considered, this Office is of the opinion and so holds that
O.T. License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as
hereby it is, REVOKED AND DECLARED without force and effect whatsoever from
the issuance thereof.

The Director of Forestry is hereby directed to stop the logging operations of

Wenceslao Vinzons Tan, if there be any, in the area in question and shall see to it
that the appellee shall not introduce any further improvements thereon pending the
disposition of the appeals filed by Ravago Commercial Company and Jorge lao
Happick in this case" (pp. 30-31, CFI rec.).

Petitioner-appellant moved for a reconsideration of the order, but the Secretary of Agriculture and
Natural Resources denied the motion in an Order dated March 25, 1964, wherein this paragraph
appears:

In this connection, it has been observed by the Acting Director of Forestry in his 2nd
indorsement of February 12, 1964, that the area in question composes of water basin
overlooking Olongapo, including the proposed Olongapo watershed Reservation; and
that the United States as well as the Bureau of Forestry has earmarked this entire
watershed for a watershed pilot forest for experiment treatment Concerning erosion
and water conservation and flood control in relation to wise utilization of the forest,
denudation, shifting cultivation, increase or decrease of crop harvest of agricultural
areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.).
On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the separate
appeals filed by Jorge Lao Happick and Ravago Commercial Company, from the order of the
Director of Forestry dated April 15, 1963, awarding to Wenceslao Vinzons Tan the area under Notive
No. 2087, and rejecting the proposals of the other applicants covering the same area, promulgated
an order commenting that in view of the observations of the Director of Forestry just quoted, "to grant
the area in question to any of the parties herein, would undoubtedly adversely affect public interest
which is paramount to private interests," and concluding that, "for this reason, this Office is of the
opinion and so holds, that without the necessity of discussing the appeals of the herein appellants,
the said appeals should be, as hereby they are, dismissed and this case is considered a closed
matter insofar as this Office is concerned" (p. 78, rec.).

On April 18, 1964, on the basis of the denial of his motion for reconsideration by the Secretary of
Agriculture and Natural Resources, petitioner-appellant filed the instant case before tile court a
quo (Court of First Instance, Manila), Special Civil Action No. 56813, a petition for certiorari,
prohibition and mandamus with preliminary prohibitory injunction (pp. 1-12, CFI rec.). Petitioner-
appellant claims that the respondents-appellees "unlawfully, illegally whimsically, capriciously and
arbitrarily acted without or in excess of their jurisdiction, and/or with grave abuse of discretion by
revoking a valid and existing timber license without just cause, by denying petitioner-appellant of the
equal protection of the laws, by depriving him of his constitutional right to property without due
process of law, and in effect, by impairing the obligation of contracts" (P. 6, CFI rec.). Petitioner-
appellant prayed for judgment making permanent the writ of preliminary injunction against the
respondents- appellees; declaring the orders of the Secretary of Agriculture and Natural Resources
dated March 9, March 25, and April 11, 1964, as well as all his acts and those of the Director of
Forestry implementing said orders, and all the proceedings in connection therewith, null and void,
unlawful and of no force and effect; ordering the Director of Forestry to renew OTI No. 20-'64 upon
expiration, and sentencing the respondents, jointly and severally, to pay the petitioner-appellant the
sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary damage, One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary damages, and Thirty Thousand
Pesos (P30,000-00) as attorney's fees and costs. The respondents-appellees separately filed
oppositions to the issuance of the writ of preliminary injunction, Ravago Commercial Company,
Jorge Lao, Happick and Atanacio Mallari, presented petitions for intervention which were granted,
and they too opposed the writ.

The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the following grounds:
(1) that the court has no jurisdiction; (2) that the respondents may not be sued without their consent;
(3) that the petitioner has not exhausted all available administrative remedies; (4) that the petition
does not state a cause of action; and (5) that purely administrative and discretionary functions of
administrative officials may not be interfered with by the courts. The Secretary of Agriculture and
Natural Resources joined the motion to dismiss when in his answer of May 18, 1964, he avers the
following special and affirmative defenses: (1) that the court has no jurisdiction to entertain the action
for certiorari, prohibition and mandamus; (2) that the petitioner has no cause of action; (3) that venue
is improperly laid; (4) that the State is immune from suit without its consent; (5) that the court has no
power to interfere in purely administrative functions; and (6) that the cancellation of petitioner's
license was dictated by public policy (pp. 172-177, rec.). Intervenors also filed their respective
answers in intervention with special and affirmative defenses (pp. 78-79, rec.). A hearing was held
on the petition for the issuance of writ of preliminary injunction, wherein evidence was submitted by
all the parties including the intervenors, and extensive discussion was held both orally and in writing.

After the said hearing, on January 20, 1965, the court a quo, from the evidence received, resolved
not only the question on the issuance of a writ of preliminary injunction but also the motion to
dismiss, declared that the petition did not state a sufficient cause of action, and dismissed the same
accordingly. To justify such action, the trial court, in its order dismissing the petition, stated that "the
court feels that the evidence presented and the extensive discussion on the issuance of the writ of
preliminary mandatory and prohibitory injunction should also be taken into consideration in resolving
not only this question but also the motion to dismiss, because there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). His motion for
reconsideration having been denied (p. 488, CFI rec.), petitioner-appellant Wenceslao Vinzons Tan
appealed directly to this Court.

Petitioner-appellant now comes before this Court, claiming that the trial court erred in:

(1) holding that the petition does not state a sufficient cause of action: and

(2) dismissing the petition [p.27,rec. ].

He argues that the sole issue in the present case is, whether or not the facts in the petition constitute
a sufficient cause of action (p. 31, rec.). Petitioner-appellant, in his brief, presented a lengthy
discussion on the definition of the term cause of action wherein he contended that the three
essential elements thereon, — namely, the legal right of the plaintiff, the correlative obligation of the
defendants and the act or omission of the defendant in violation of that right — are satisfied in the
averments of this petition (pp. 31-32, rec.). He invoked the rule that when the ground for dismissal is
that the complaint states no cause of action, such fact can be determined only from the facts alleged
in the complaint and from no other, and the court cannot consider other matters aliunde He further
invoked the rule that in a motion to dismiss based on insufficiency of cause of action, the facts
alleged in the complaint are deemed hypothetically admitted for the purpose of the motion (pp. 32-
33, rec.).

A perusal of the records of the case shows that petitioner-appellant's contentions are untenable. As
already observed, this case was presented to the trial court upon a motion to dismiss for failure of
the petition to state a claim upon which relief could be granted (Rule 16 [g], Revised Rules of Court),
on the ground that the timber license relied upon by the petitioner- appellant in his petition was
issued by the Director of Forestry without authority and is therefore void ab initio. This motion
supplanted the general demurrer in an action at law and, as a rule admits, for the purpose of the
motion, ail facts which are well pleaded however while the court must accept as true all well pleaded
facts, the motion does not admit allegations of which the court will take judicial notice are not true,
nor does the rule apply to legally impossible facts, nor to facts inadmissible in evidence, nor to facts
which appear by record or document included in the pleadings to be unfounded (Vol. 1, Moran's
Comments on the Rules of Court, 1970 ed., p. 505, citing cases).

It must be noted that there was a hearing held in the instant case wherein answers were interposed
and evidence introduced. In the course of the hearing, petitioner-appellant had the opportunity to
introduce evidence in support of tile allegations iii his petition, which he readily availed of.
Consequently, he is estopped from invoking the rule that to determine the sufficiency of a cause of
action on a motion to dismiss, only the facts alleged in the complaint must be considered. If there
were no hearing held, as in the case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the
case was presented to District Court upon a motion to dismiss because of alleged failure of
complaint to state a claim upon which relief could be granted, and no answer was interposed and no
evidence introduced, the only facts which the court could properly consider in passing upon the
motion were those facts appearing in the complaint, supplemented be such facts as the court
judicially knew.

In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru Justice Conrado V.
Sanchez, held that the trial court can properly dismiss a complaint on a motion to dismiss due to lack
of cause of action even without a hearing, by taking into consideration the discussion in said motion
and the opposition thereto. Pertinent portion of said decision is hereby quoted:

Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court
below granted the motion, dismissed the petition. The motion to reconsider failed.
Offshoot is this appeal.

1. The threshold questions are these: Was the dismissal order issued
without any hearing on the motion to dismiss? Is it void?

WE go to the record. The motion to dismiss was filed on February 1, 1961 and set for
hearing on February 10 following. On February 8, 1961 petitioner's counsel
telegraphed the court, (r)equest postponement motion dismissal till written opposition
filed.' He did not appear at the scheduled hearing. But on March 4, 1961, he followed
up his wire, with his written opposition to the motion to dismiss. Adverting to the 5-
page motion to dismiss and the 6-page opposition thereto, We find that the
arguments pro and con on the question of the board's power to abolish petitioner's
position to discussed the problem said profusely cited authorities. The May 15, 1961
8-page court order recited at length the said arguments and concluded that petitioner
made no case.

One good reason for the statutory requirement of hearing on a motion as to enable
the suitors to adduce evidence in support of their opposing claims. But here the
motion to dismiss is grounded on lack of cause of action. Existence of a cause of
action or lack of it is determined be a reference to the facts averred in the challenged
pleading. The question raised in the motion is purely one of law. This legal issue was
fully discussed in said motion and the opposition thereto. In this posture, oral
arguments on the motion are reduced to an unnecessary ceremony and should be
overlooked. And, correctly so, because the other intendment of the law in requiring
hearing on a motion, i.e., 'to avoid surprises upon the opposite party and to give to
the latter time to study and meet the arguments of the motion,' has been sufficiently
met. And then, courts do not exalt form over substance (Emphasis supplied).

Furthermore even if the complaint stated a valid cause of action, a motion to dismiss for-
insufficiency of cause of action will be granted if documentary evidence admitted by stipulation
disclosing facts sufficient to defeat the claim enabled the court to go beyond disclosure in the
complaint (LOCALS No. 1470, No. 1469, and No. 1512 of the International Longshoremen's
Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals,
Fifth Circuit, Dec. 7, 1952; 131 F. 2d 605). Thus, although the evidence of the parties were
presented on the question of granting or denying petitioner-appellant's application for a writ of
preliminary injunction, the trial court correctly applied said evidence in the resolution of the motion to
dismiss. Moreover, in applying said evidence in the resolution of the motion to dismiss, the trial
court, in its order dismissing the petition, pointed out that, "there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). Petitioner-appellant did
not interpose any objection thereto, nor presented new arguments in his motion for reconsideration
(pp. 482-484, CFI rec.). This omission means conformity to said observation, and a waiver of his
right to object, estopping him from raising this question for the first time on appeal. " I question not
raised in the trial court cannot be raised for the first time on appeal" (Matienzo vs. Servidad, Sept.
10, 1981, 107 SCRA 276).

Moreover, petitioner-appellant cannot invoke the rule that, when the ground for asking dismissal is
that the complaint states no cause of action, its sufficiency must be determined only from the
allegations in the complaint. "The rules of procedure are not to be applied in a very rigid, technical
sense; rules of procedure are used only to help secure substantial justice. If a technical and rigid
enforcement of the rules is made, their aim would be defeated. Where the rules are merely
secondary in importance are made to override the ends of justice; the technical rules had been
misapplied to the prejudice of the substantial right of a party, said rigid application cannot be
countenanced" (Vol. 1, Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases).

What more can be of greater importance than the interest of the public at large, more particularly the
welfare of the inhabitants of Olongapo City and Zambales province, whose lives and properties are
directly and immediately imperilled by forest denudation.

The area covered by petitioner-appellant's timber license practically comprises the entire Olongapo
watershed (p. 265, CFI rec.). It is of public knowledge that watersheds serves as a defense against
soil erosion and guarantees the steady supply of water. As a matter of general policy, the Philippine
Constitution expressly mandated the conservation and proper utilization of natural resources, which
includes the country's watershed. Watersheds in the Philippines had been subjected to rampant
abusive treatment due to various unscientific and destructive land use practices. Once lush
watersheds were wantonly deforested due to uncontrolled timber cutting by licensed
concessionaries and illegal loggers. This is one reason why, in paragraph 27.of the rules and
regulations included in the ordinary timber license it is stated:

The terms and conditions of this license are subject to change at the discretion of the
Director of Forestry, and that this license may be made to expire at an earlier date,
when public interests so require (Exh. D, p. 22, CFI rec.).

Considering the overriding public interest involved in the instant case, We therefore take judicial
notice of the fact that, on April 30, 1964, the area covered by petitioner-appellant's timber license
has been established as the Olongapo Watershed Forest Reserve by virtue of Executive
Proclamation No. 238 by then President Diosdado Macapagal which in parts read as follows:

Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as

amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw
from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve
for watershed, soil protection, and timber production purposes, subject to private
rights, if any there be, under the administration and control of the Director of
Forestry, xx the following parcels of land of the public domain situated in the
municipality of Olongapo, province of Zambales, described in the Bureau of Forestry
map No. FR-132, to wit: ... ... (60 O.G. No. 23, 3198).

Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his alleged right over
the timber concession in question. He argues thus: "The facts alleged in the petition show: (1) the
legal right of the petitioner to log in the area covered by his timber license; (2) the legal or
corresponding obligation on the part of the respondents to give effect, recognize and respect the
very timber license they issued to the petitioner; and (3) the act of the respondents in arbitrarily
revoking the timber license of the petitioner without giving him his day in court and in preventing him
from using and enjoying the timber license issued to him in the regular course of official business" (p.
32, rec.).

In the light of petitioner-appellant's arguments, it is readily seen that the whole controversy hinges on
the validity or invalidity of his timber license.
WE fully concur with the findings of the trial court that petitioner- appellant's timber license was
signed and released without authority by then Acting Director Estanislao R. Bernal of Forestry, and
is therefore void ab initio. WE hereby quote such findings:

In the first place, in general memorandum order No. 46 dated May 30, 1963, the
Director of Forestry was authorized to grant a new ordinary timber license only where
the area covered thereby was not more than 3,000 hectares; the tract of public forest
awarded to the petitioner contained 6,420 hectares (Exhs. 2-A and 2-B Ravago,
embodied in Annex B; Exh. B). The petitioner contends that only 1,756 hectares of
the said area contain commercial and operable forest; the authority given to the
Director of Forestry to grant a new ordinary timber license of not more than 3,000
hectares does not state that the whole area should be commercial and operable
forest. It should be taken into consideration that the 1,756 hectares containing
commercial and operable forest must have been distributed in the whole area of
6,420 hectares. Besides the license states, 'Please see attached sketch and
technical description,' gives an area of 6,420 hectares and does not state what is the
area covered of commmercial and operable forest (Exh. Ravago Also Annex B of the
petition, which was marked as Exhibit B, states:

Under Notice No. 2087, a tract of public forest containing 6,420

hectares located in Olongapo, Zambales was declared available for
timber utilization and development. Pursuant to this Notice, there
were received bid proposals from the following persons: ...

Wherefore, confirming the findings of said Committee, the area described in Notice
No. 2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan,
subject to the following conditions: ... ...

In the second place, at the time it was released to the petitioner, the Acting Director
of Forestry had no more authority to grant any license. The license was signed by the
Acting Director of Forestry on December 19, 1963, and released to the petitioner on
January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to
grant a new ordinary timber license was contained in general memorandum order
No. 46 dated May 30, 1963. This was revoked by general memorandum order No.
60, which was promulgated on December 19, 1963. In view thereof, the Director of
Forestry had no longer any authority to release the license on January 6, 1964, and
said license is therefore voidab initio (pp. 479480, CFI rec.).

The release of the license on January 6, 1964, gives rise to the impression that it was ante-dated to
December 19, 1963 on which date the authority of the Director of Forestry was revoked. But, what is
of greatest importance is the date of the release or issuance, and not the date of the signing of the
license. While petitioner-appellant's timber license might have been signed on December 19, 1963 it
was released only on January 6, 1964. Before its release, no right is acquired by the licensee. As
pointed out by the trial court, the Director of Forestry had no longer any authority to release the
license on January 6, 1964. Therefore, petitioner-appellant had not acquired any legal right under
such void license. This is evident on the face of his petition as supplemented by its annexes which
includes Ordinary Timber License No. 20-'64 (NEW). Thus, in the case of World Wide Insurance &
Surety Co., Inc. vs. Macrohon, et al. (105 Phil. 250, Feb. 28, 1959), this Court held that if from the
face of the complaint, as supplemented by its annexes, plaintiff is not the owner, or entitled to the
properties it claims to have been levied upon and sold at public auction by the defendants and for
which it now seeks indemnity, the said complaint does not give plaintiff any right of action against the
defendants. In the same case, this Court further held that, in acting on a motion to dismiss, the court
cannot separate the complaint from its annexes where it clearly appears that the claim of the plaintiff
to be the A owner of the properties in question is predicated on said annexes. Accordingly,
petitioner-appellant's petition must be dismissed due to lack of cause of action.

II

Petitioner-appellant, in his petition, alleged that he has exhausted all his administrative remedies to
no avail as respondents-appellees have failed, neglected, refused and continue to refuse to allow
petitioner-appellant to continue operation in the area covered by his timber license. He further
alleged that he has neither recourse by way of appeal, nor any plain, speedy and adequate remedy
in the ordinary course of law except thru this special civil action, as the last official act of the
respondent-appellee Secretary of Agriculture and Natural Resources in declaring void the timber
license referred to above after denying petitioner-appellant's motion for reconsideration, is the last
administrative act. Petitioner-appellant relies on the case of Demaisip vs. The Court of Appeals, et
al. (106 Phil. 237, Sept. 24, 1959), wherein it was held that the failure of the plaintiff to appeal from
the adverse decision of the Secretary to the President cannot preclude the plaintiff from taking court
action in view of the theory that the Secretary of a department is merely an alter-ego of the
President. The presumption is that the action of the Secretary bears the implied sanction of the
President unless the same is disapproved by the latter (Villena vs. the Secretary of Interior, 67 Phil.
451; p. 7, CFI rec.).

To this We cannot agree. Petitioner-appellant did not appeal the order of the respondent Secretary
of Agriculture and Natural Resources to the President of the Philippines, who issued Executive
Proclamation No. 238 withdrawing the area from private exploitation, and establishing it as the
Olongapo Watershed Forest Reserve. Considering that the President has the power to review on
appeal the orders or acts of the respondents-appellees, the failure of the petitioner-appellant to take
that appeal is failure on his part to exhaust his administrative remedies. Thus, this Court, in the case
of Calo vs. Fuertes (5 SCRA 399, 400, June 29, 1962), held that:

At any rate, the appellant's contention that, as the Secretary of Agriculture and
Natural Resources is the alter ego of the President and his acts or decisions are also
those of the latter, he need not appeal from the decision or opinion of the former to
the latter, and that, such being the case, after he had appealed to the Secretary of
Agriculture and Natural Resources from the decision or opinion of the Director of
Lands he had exhausted the administrative remedies, is untenable.

The withdrawal of the appeal taken to the President of the Philippines is tantamount
to not appealing all thereto. Such withdrawal is fatal, because the appeal to the
President is the last step he should take in an administrative case.

In 1912, in the case of Lamb vs. Phipps (22 Phil. 491-92, July 22, 1912), this Court stressed the
doctrine of exhaustion of administrative remedies, thus:

When a plain, adequate and speedy remedy is afforded by and within the executive
department of the government the courts will not interfere until at least that remedy
has been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S.
651; U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs.
U.S., 28 Sup. Ct. Rep. 201). The administrative remedies afforded by law must first
be exhausted before resort can be had to the courts, especially when the
administrative remedies are by law exclusive and final. Some matters and some
questions are by law delegated entirely and absolutely to the discretion of particular
branches of the executive department of the government. When the law confers
 exclusive and final jurisdiction upon the executive department of the government to
dispose of particular questions, their judgments or the judgments of that particular
department are no more reviewable by the courts than the final judgment or
decisions of the courts are subject to be reviewed and modified by them" (emphasis
supplied).

Moreover, this being a special civil action, petitioner-appellant must allege and prove that he has no
other speedy and adequate remedy (Diego vs. The Court of Appeals, et al., 54 Off. Gaz., No. 4,
956). In the case at bar, petitioner- appellant's speedy and adequate remedy is an appeal to the
President of the Philippines.

Accordingly, "it is settled to the point of being elementary that the only question involved n certiorari
is jurisdiction, either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the
issuance of the extraordinary remedy of certiorari when the same is so grave as when the power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal hostility,
and it must be so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal
to perform a duty enjoined, or to act at all in contemplation of law" FS Divinagracia Agro-Commercial
Inc. vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The foregoing is on the assumption that
there is any irregularity, albeit there is none in the acts or omissions of the respondents-appellees.
certiorari is not a substitute for appeal as held time and again by this Court (People vs. Villanueva,
110 SCRA 465), "it being a time honored and well known principle that before seeking judicial
redress, a party must first exhaust the administrative remedies available" (Garcia vs. Teehankee, 27
SCRA 944, April 18, 1969).

Moreover, from the decision of the Secretary of Agriculture and Natural Resources complained of,
petitioners had a plain, speedy and adequate remedy by appealing therefrom to the Chief Executive.
In other words, before filing the present action for certiorari in the court below, they should have
availed of this administrative remedy and their failure to do so must be deemed fatal to their case
[Calo vs. Fuertes, et al., G.R. No. L-16537, June 29,1962]. To place petitioners' case beyond the
pale of this rule, they must show that their case falls — which it does not — within the cases where,
in accordance with our decisions, the aggrieved party need not exhaust administrative remedies
within his reach in the ordinary course of the law [Tapales vs. The President and the Board of
Regents of the U.P., G.R. No. L-17532, March 30, 1963; Mangubat vs. Osmena, G.R. No. L- 12837,
April 30, 1959; Baguio vs. Hon. Jose Rodriguez, G. R. No. L-11078, May 27, 1959; Pascual vs.
Provincial Board, G.R. No. L-11959, Oct. 31, 1959; Marinduque Iron Mines, etc. vs. Secretary of
Public Works, G.R. No. L-15982, May 31, 1963; Alzate vs. Aldaba, G.R. No. L-14407, Feb. 29, 1960
and Demaisip vs. Court of Appeals, G.R. No. L- 13000, Sept. 25, 1959] (Ganob vs. Ramas, 27
SCRA 1178, April 28, 1969).

III

Petitioner-appellant not only failed to exhaust his administrative remedies, but also failed to note that
his action is a suit against the State which, under the doctrine of State immunity from suit, cannot
prosper unless the State gives its consent to be sued Kawananakoa vs. Polybank, 205 U.S. 349;
Siren vs. U.S., 7 Wall. 152; Sec. 16, Art. XV, 1973 Constitution).

The respondents-appellees, in revoking the petitioner-appellant's timber license, were acting within
the scope of their authority. Petitioner-appellant contends that "this case is not a suit against the
State but an application of a sound principle of law whereby administrative decisions or actuations
may be reviewed by the courts as a protection afforded the citizens against oppression" (p. 122, CFI
rec.). But, piercing the shard of his contention, We find that petitioner-appellant's action is just an
attempt to circumvent the rule establishing State exemption from suits. He cannot use that principle
of law to profit at the expense and prejudice of the State and its citizens. The promotion of public
welfare and the protection of the inhabitants near the public forest are property, rights and interest of
the State. Accordingly, "the rule establishing State exeraiption from suits may not be circumvented
by directing the action against the officers of the State instead of against the State itself. In such
cases the State's immunity may be validly invoked against the action as long as it can be shown that
the suit really affects the property, rights, or interests of the State and not merely those of the officer
nominally made party defendant" (SINCO, Phil. Political Law, 10th ed., p. 35; Salgado vs. Ramos, 64
Phil. 724; see also Angat River Irrigation System vs. Angat River Workers' Union, G.R. No. L-10943-
44, Dec. 28, 1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre Service, 18 SCRA 1120,
1121-1125; Bureau of Printing vs. Bureau of Printing Employees' Association, 1 SCRA 340, 341,
343).

Both the Secretary of Agriculture and Natural Resources and the Director of Forestry acted in their
capacity as officers of the State, representatives of the sovereign authority discharging governmental
powers. A private individual cannot issue a timber license.

Consequently, a favorable judgment for the petitioner-appellant would result in the government
losing a substantial part of its timber resources. This being the case, petitioner-appellant's action
cannot prosper unless the State gives its consent to be sued.

IV

Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-appellees can
validly revoke his timber license. As pointed out earlier, paragraph 27 of the rules and regulations
included in the ordinary timber license states: "The terms and conditions of this license are subject to
change at the discretion of the Director of Forestry, and that this license may be made to expire at
an earlier date, when public interests so require" (Exh. D, p. 22, CFI rec.). A timber license is an
instrument by which the State regulates the utilization and disposition of forest resources to the end
that public welfare is promoted. A timber license is not a contract within the purview of the due
process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this ceise

"A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority, federal, state, or municipal, granting it and the person to whom it is
granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation"
(37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights,
neither is it property or property rights (People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs.
Provincial Board of Rizal (56 Phil. 123), it was held that:

A license authorizing the operation and exploitation of a cockpit is not property of

which the holder may not be deprived without due process of law, but a mere
privilege which may be revoked when public interests so require.

The welfare of the people is the supreme law. Thus, no franchise or right can be availed of to defeat
the proper exercise of police power (Surigao Electric Co., Inc. vs. Municipality of Surigao, 24 SCRA
898, Aug. 30, 1968). The State has inherent power enabling it to prohibit all things hurtful to comfort,
safety, and welfare of society (Edu vs. Ericta, 35 SCRA 481, Oct. 24,1970).

As provided in the aforecited provision, timber licenses are subject to the authority of the Director of
Forestry. The utilization and disposition of forest resources is directly under the control and
supervision of the Director of Forestry. However, "while Section 1831 of the Revised Administrative
Code provides that forest products shall be cut, gathered and removed from any forest only upon
license from the Director of Forestry, it is no less true that as a subordinate officer, the Director of
Forestry is subject to the control of the Department Head or the Secretary of Agriculture and Natural
Resources (See. 79[c], Rev. Adm. Code), who, therefore, may impose reasonable regulations in the
exercise of the powers of the subordinate officer" (Director of Forestry vs. Benedicto, 104 SCRA
309, May 5, 1981). The power of control of the Department Head over bureaus and offices includes
the power to modify, reverse or set aside acts of subordinate officials (Province of Pangasinan vs.
Secretary of Public Works and Communications, 30 SCRA 134, Oct. 31, 1969; Montano vs. Silvosa,
97 Phil. 143, 144, 147-148). Accordingly, respondent-appellee Secretary of Agriculture and Natural
Resources has the authority to revoke, on valid grounds, timber licenses issued by the Director of
Forestry. There being supporting evidence, the revocation of petitioner-appellant's timber license
was a wise exercise of the power of the respondent- appellee (Secretary of Agriculture and Natural
Resources) and therefore, valid.

Thus, "this Court had rigorously adhered to the principle of conserving forest resources, as corollary
to which the alleged right to them of private individuals or entities was meticulously inquired into and
more often than not rejected. We do so again" (Director of Forestry vs. Benedicto, supra). WE
reiterate Our fidelity to the basic policy of conserving the national patrimony as ordained by the
Constitution.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED FROM IS HEREBY
.AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-APPELLANT.

SO ORDERED,

Concepcion Jr., Guerrero, Abad Santos and Escolin, JJ., concur.

Aquino, J, concurs in the result.

De Castro, JJ., is on leave.

 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.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-52179 April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR., SOR
MARIETA BANIÑA, MONTANO BANIÑA, ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents.

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by the
respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-
BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated November 4, 1975;
July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering
defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally,
the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of
Macario Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo
N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of
La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Baniña,
Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña are
heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg before the
aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger
jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and
sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the
Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Baniña Sr. died as a result of the injuries they
sustained and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch
I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge
and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7,
1975, the private respondents amended the complaint wherein the petitioner and its regular
employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer
and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger jeepney
as the proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July
13, 1976 filed by the Municipality and Bislig for having been filed out of time;

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing
that parties have not yet submitted their respective memoranda despite the court's direction;
and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted
as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to
pay jointly and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B. Surell, Laureano
Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano Baniña, Orja Baniña and Lydia
B. Baniña the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected
earnings of the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.
 The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo
Balagot.

SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion
which was then pending. However, respondent judge issued another order dated November 7, 1979
denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of
time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants
municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979,
such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition.

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and
adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the
petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner
has not considered that every court, including respondent court, has the inherent power to amend
and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed
grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the
State amounting to lack of jurisdiction in a motion to dismiss.

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the
State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve
such defense, proceeded with the trial and thereafter rendered a decision against the municipality
and its driver.

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment
it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the
municipality. However, said judge acted in excess of his jurisdiction when in his decision dated
October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular
employee.

The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."

Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act No.
3083. A special law may be passed to enable a person to sue the government for an alleged quasi-
delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)
Consent is implied when the government enters into business contracts, thereby descending to the
level of the other contracting party, and also when the State files a complaint, thus opening itself to a
counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they
are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions because their
charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent
of the state to be sued, liability on the applicable law and the established facts. The circumstance
that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be
held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of
America vs. Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee,
the test of liability of the municipality depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As emphasized in the case of
Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the 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.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of
Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are twofold. 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 them, 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." (112 N.E., 994-
995) (Ibid, pp. 605-606.)

It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only if it
can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued,
the State merely gives the claimant the right to show that the defendant was not acting in its
governmental capacity when the injury was committed or that the case comes under the exceptions
recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to
the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that
the driver of the dump truck was performing duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer,
and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which
the truck and the driver worked at the time of the accident are admittedly governmental activities."

After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its regular employee, who was then
engaged in the discharge of governmental functions. Hence, the death of the passenger –– tragic
and deplorable though it may be –– imposed on the municipality no duty to pay monetary
compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

 FIRST DIVISION

[G.R. No. 129169. November 17, 1999]

NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner,

vs. HONORABLE COURT OF APPEALS (4th Division),
CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, and
HYDRO RESOURCES CONTRACTORS
CORPORATION, respondents.

DECISION
DAVIDE, JR., C.J.:

In this special civil action for certiorari under Rule 65 of the Rules of Court, the
National Irrigation Administration (hereafter NIA), seeks to annul and set aside the
Resolutions[1]of the Court of Appeals in CA-GR. SP No. 37180 dated 28 June 1996 and
24 February 1997, which dismissed respectively NIAs petition
for certiorari and prohibition against the Construction Industry Arbitration
Commission (hereafter CIAC), and the motion for reconsideration thereafter filed.
Records show that in a competitive bidding held by NIA in August 1978, Hydro
Resources Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-C-
2 for the construction of the main civil works of the Magat River Multi-Purpose
Project. The contract provided that HYDRO would be paid partly in Philippine pesos
and partly in U.S. dollars. HYDRO substantially completed the works under the
contract in 1982 and final acceptance by NIA was made in 1984. HYDRO thereafter
determined that it still had an account receivable from NIA representing the dollar rate
differential of the price escalation for the contract.[2]
After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994,
filed with the CIAC a Request for Adjudication of the aforesaid claim. HYDRO
nominated six arbitrators for the arbitration panel, from among whom CIAC appointed
Engr. Lauro M. Cruz. On 6 January 1995, NIA filed its Answer wherein it questioned
the jurisdiction of the CIAC alleging lack of cause of action, laches and estoppel in
view of HYDROs alleged failure to avail of its right to submit the dispute to arbitration
within the prescribed period as provided in the contract. On the same date, NIA filed a
Compliance wherein it nominated six arbitrators, from among whom CIAC appointed
Atty. Custodio O. Parlade, and made a counterclaim for P1,000,000 as moral damages;
at least P100,000 as exemplary damages;P100,000 as attorneys fees; and the costs of
the arbitration.[3]
The two designated arbitrators appointed Certified Public Accountant Joven B.
Joaquin as Chairman of the Arbitration Panel. The parties were required to submit
copies of the evidence they intended to present during the proceedings and were
provided the draft Terms of Reference.[4]
At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the
Office of the Government Corporate Counsel, manifested that it could not admit the
genuineness of HYDROs evidence since NIAs records had already been destroyed. NIA
requested an opportunity to examine the originals of the documents which HYDRO
agreed to provide.[5]
After reaching an accord on the issues to be considered by the arbitration panel, the
parties scheduled the dates of hearings and of submission of simultaneous memoranda. [6]
On 13 March 1995, NIA filed a Motion to Dismiss[7]alleging lack of jurisdiction
over the disputes. NIA contended that there was no agreement with HYDRO to submit
the dispute to CIAC for arbitration considering that the construction contract was
executed in 1978 and the project completed in 1982, whereas the Construction Industry
Arbitration Law creating CIAC was signed only in 1985; and that while they have
agreed to arbitration as a mode of settlement of disputes, they could not have
contemplated submission of their disputes to CIAC. NIA further argued that records
show that it had not voluntarily submitted itself to arbitration by CIAC citing TESCO
Services, Inc. v. Hon. Abraham Vera, et al.,[8] wherein it was ruled:

CIAC did not acquire jurisdiction over the dispute arising from the sub-contract
agreement between petitioner TESCO and private respondent LAROSA. The records
do not show that the parties agreed to submit the disputes to arbitration by the CIAC
xxxx. While both parties in the sub-contract had agreed to submit the matter to
arbitration, this was only between themselves, no request having been made by both
with the CIAC. Hence, as already stated, the CIAC, has no jurisdiction over the
dispute. xxxx. Nowhere in the said article (sub-contract) does it mention the CIAC,
much less, vest jurisdiction with the CIAC.

On 11 April 1995, the arbitral body issued an order [9] which deferred the
determination of the motion to dismiss and resolved to proceed with the hearing of the
case on the merits as the grounds cited by NIA did not seem to be indubitable. NIA filed
a motion for reconsideration of the aforesaid Order. CIAC in denying the motion for
reconsideration ruled that it has jurisdiction over the HYDROs claim over NIA pursuant
to E.O 1008 and that the hearing should proceed as scheduled.[10]
 On 26 May 1996, NIA filed with the Court of Appeals an original action
of certiorari and prohibition with prayer for restraining order and/or injunction, seeking
to annul the Orders of the CIAC for having been issued without or in excess of
jurisdiction. In support of its petition NIA alleged that:
A

RESPONDENT CIAC HAS NO AUTHORITY OR JURIDICTION TO HEAR AND

TRY THIS DISPUTE BETWEEN THE HEREIN PARTIES AS E.O. NO. 1008 HAD
NO RETROACTIVE EFFECT.
B

THE DISPUTE BETWEEN THE PARTIES SHOULD BE SETTLED IN

ACCORDANCE WITH GC NO. 25, ART. 2046 OF THE CIVIL CODE AND R.A.
NO. 876 THE GOVERNING LAWS AT THE TIME CONTRACT WAS
EXECUTED AND TERMINATED.
C

E.O. NO. 1008 IS A SUBSTANTIVE LAW, NOT MERELY PROCEDURAL AS

RULED BY THE CIAC.
D

AN INDORSEMENT OF THE AUDITOR GENERAL DECIDING A

CONTROVERSY IS A DECISION BECAUSE ALL THE ELEMENTS FOR
JUDGMENT ARE THERE; THE CONTROVERSY, THE AUTHORITY TO
DECIDE AND THE DECISION. IF IT IS NOT APPEALED SEASONABLY, THE
SAME BECOMES FINAL.
E

NIA HAS TIMELY RAISED THE ISSUE OF JURISDICTION. IT DID NOT

WAIVE NOR IS IT ESTOPPED FROM ASSAILING THE SAME.
F

THE LEGAL DOCTRINE THAT JURISDICTION IS DETERMINED BY THE STATUTE IN

FORCE AT THE TIME OF THE COMMENCEMENT OF THE ACTION DOES NOT ONLY
APPLY TO THE INSTANT CASE.[11]

The Court of Appeals, after finding that there was no grave abuse of discretion on
the part of the CIAC in issuing the aforesaid Orders, dismissed the petition in its
Resolution dated 28 June 1996. NIAs motion for reconsideration of the said decision
was likewise denied by the Court of Appeals on 26 February 1997.
On 2 June 1997, NIA filed before us an original action for certiorari and prohibition
with urgent prayer for temporary restraining order and writ of preliminary injunction,
praying for the annulment of the Resolutions of the Court of Appeals dated 28 June
1996 and 24 February 1997. In the said special civil action, NIA merely reiterates the
issues it raised before the Court of Appeals. [12]
We take judicial notice that on 10 June 1997, CIAC rendered a decision in the main
case in favor of HYDRO.[13] NIA assailed the said decision with the Court of Appeals. In
view of the pendency of the present petitions before us the appellate court issued a
resolution dated 26 March 1998 holding in abeyance the resolution of the same until
after the instant petitions have been finally decided.[14]
At the outset, we note that the petition suffers from a procedural defect that warrants
its outright dismissal. The questioned resolutions of the Court of Appeals have already
become final and executory by reason of the failure of NIA to appeal therefrom. Instead
of filing this petition for certiorari under Rule 65 of the Rules of Court, NIA should
have filed a timely petition for review under Rule 45.
There is no doubt that the Court of Appeals has jurisdiction over the special civil
action for certiorari under Rule 65 filed before it by NIA. The original jurisdiction of
the Court of Appeals over special civil actions for certiorari is vested upon it under
Section 9(1) of B.P. 129. This jurisdiction is concurrent with the Supreme Court[15] and
with the Regional Trial Court.[16]
Thus, since the Court of Appeals had jurisdiction over the petition under Rule 65,
any alleged errors committed by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not by a special civil action
of certiorari.[17] If the aggrieved party fails to do so within the reglementary period, and
the decision accordingly becomes final and executory, he cannot avail himself of the
writ of certiorari, his predicament being the effect of his deliberate inaction.[18]
The appeal from a final disposition of the Court of Appeals is a petition for review
under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now
Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. [19] Rule 45 is
clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to this
Court by filing a petition for review, which would be but a continuation of the appellate
process over the original case.[20] Under Rule 45 the reglementary period to appeal is
fifteen (15) days from notice of judgment or denial of motion for reconsideration. [21]
In the instant case the Resolution of the Court of Appeals dated 24 February 1997
denying the motion for reconsideration of its Resolution dated 28 June 1997 was
received by NIA on 4 March1997.Thus, it had until 19 March 1997 within which to
perfect its appeal. NIA did not appeal. What it did was to file an original action
for certiorari before this Court, reiterating the issues and arguments it raised before the
Court of Appeals.
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner
must show that he has no plain, speedy and adequate remedy in the ordinary course of
law against its perceived grievance.[22] A remedy is considered plain, speedy and
adequate if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency.[23] In this case, appeal was not only
available but also a speedy and adequate remedy.
Obviously, NIA interposed the present special civil action of certiorari not because
it is the speedy and adequate remedy but to make up for the loss, through omission or
oversight, of the right of ordinary appeal. It is elementary that the special civil action
of certiorari is not and cannot be a substitute for an appeal, where the latter remedy is
available, as it was in this case. A special civil action under Rule 65 of the Rules of
Court will not be a cure for failure to timely file a petition for review on certiorari under
Rule 45 of the Rules of Court. [24] Rule 65 is an independent action that cannot be availed
of as a substitute for the lost remedy of an ordinary appeal, including that under Rule
45,[25] especially if such loss or lapse was occasioned by ones own neglect or error in the
choice of remedies.[26]
For obvious reasons the rules forbid recourse to a special civil action for certiorari if
appeal is available, as the remedies of appeal and certiorari are mutually exclusive and
not alternative or successive.[27] Although there are exceptions to the rules, none is
present in the case at bar. NIA failed to show circumstances that will justify a deviation
from the general rule as to make available a petition forcertiorari in lieu of taking an
appropriate appeal.
Based on the foregoing, the instant petition should be dismissed.
In any case, even if the issue of technicality is disregarded and recourse under Rule
65 is allowed, the same result would be reached since a review of the questioned
resolutions of the CIAC shows that it committed no grave abuse of discretion.
Contrary to the claim of NIA, the CIAC has jurisdiction over the
controversy. Executive Order No.1008, otherwise known as the Construction Industry
Arbitration Law which was promulgated on 4 February 1985, vests upon CIAC original
and exclusive jurisdiction over disputes arising from, or connected with contracts
entered into by parties involved in construction in the Philippines, whether the dispute
arises before or after the completion of the contract, or after the abandonment or breach
thereof. The disputes may involve government or private contracts. For the Board to
acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration.[28]
The complaint of HYDRO against NIA on the basis of the contract executed
between them was filed on 7 December 1994, during the effectivity of E.O. No.
1008. Hence, it is well within the jurisdiction of CIAC. The jurisdiction of a court is
determined by the law in force at the time of the commencement of the action.[29]
NIAs argument that CIAC had no jurisdiction to arbitrate on contract which
preceded its existence is untenable. E.O. 1008 is clear that the CIAC has jurisdiction
over all disputes arising from or connected with construction contract whether the
dispute arises before or after the completion of the contract. Thus, the date the parties
entered into a contract and the date of completion of the same, even if these occurred
before the constitution of the CIAC, did not automatically divest the CIAC of
jurisdiction as long as the dispute submitted for arbitration arose after the constitution
of the CIAC. Stated differently, the jurisdiction of CIAC is over the dispute, not the
contract; and the instant dispute having arisen when CIAC was already constituted, the
arbitral board was actually exercising current, not retroactive, jurisdiction. As such,
there is no need to pass upon the issue of whether E.O. No. 1008 is a substantive or
procedural statute.
NIA also contended that the CIAC did not acquire jurisdiction over the dispute since
it was only HYDRO that requested for arbitration. It asserts that to acquire jurisdiction
over a case, as provided under E.O. 1008, the request for arbitration filed with CIAC
should be made by both parties, and hence the request by one party is not enough.
It is undisputed that the contracts between HYDRO and NIA contained an
arbitration clause wherein they agreed to submit to arbitration any dispute between them
that may arise before or after the termination of the agreement. Consequently, the claim
of HYDRO having arisen from the contract is arbitrable. NIAs reliance with the ruling
on the case of Tesco Services Incorporated v. Vera,[30] is misplaced.
The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case
had been duly amended by CIAC Resolutions No. 2-91 and 3-93, Section 1 of Article
III of which read as follows:

Submission to CIAC Jurisdiction - An arbitration clause in a construction contract or a

submission to arbitration of a construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the reference to a different
arbitration institution or arbitral body in such contract or submission. When a contract
contains a clause for the submission of a future controversy to arbitration, it is not
necessary for the parties to enter into a submission agreement before the claimant may
invoke the jurisdiction of CIAC.
 Under the present Rules of Procedure, for a particular construction contract to fall
within the jurisdiction of CIAC, it is merely required that the parties agree to submit the
same to voluntary arbitration.Unlike in the original version of Section 1, as applied in
the Tesco case, the law as it now stands does not provide that the parties should agree
to submit disputes arising from their agreement specifically to the CIAC for the latter
to acquire jurisdiction over the same. Rather, it is plain and clear that as long as the
parties agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if
they specifically choose another forum, the parties will not be precluded from electing
to submit their dispute before the CIAC because this right has been vested upon each
party by law, i.e., E.O. No. 1008.[31]
Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to
the CIAC. NIA through its counsel actively participated in the arbitration proceedings
by filing an answer with counterclaim, as well as its compliance wherein it nominated
arbitrators to the proposed panel, participating in the deliberations on, and the
formulation of, the Terms of Reference of the arbitration proceeding, and examining
the documents submitted by HYDRO after NIA asked for the originals of the said
documents.[32]
As to the defenses of laches and prescription, they are evidentiary in nature which
could not be established by mere allegations in the pleadings and must not be resolved
in a motion to dismiss. Those issues must be resolved at the trial of the case on the
merits wherein both parties will be given ample opportunity to prove their respective
claims and defenses.[33] Under the rule[34] the deferment of the resolution of the said issues
was, thus, in order. An allegation of prescription can effectively be used in a motion to
dismiss only when the complaint on its face shows that indeed the action has already
prescribed.[35] In the instant case, the issue of prescription and laches cannot be resolved
on the basis solely of the complaint. It must, however, be pointed that under the new
rules,[36] deferment of the resolution is no longer permitted. The court may either grant
the motion to dismiss, deny it, or order the amendment of the pleading.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of
Appeals is hereby DIRECTED to proceed with reasonable dispatch in the disposition
of C.A. G.R. No. 44527 and include in the resolution thereof the issue of laches and
prescription.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 70547 January 22, 1993

PHILIPPINE NATIONAL RAILWAYS and HONORIO CABARDO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT, INC., respondents.

The Solicitor General for petitioner.

Leopoldo Sta. Maria for private respondents.

MELO, J.:

The imputation of culpa on the part of herein petitioners as a result of the collision between its strain,
bound for Manila from La Union, with a Baliwag transit bus at the railroad crossing on the road going
to Hagonoy, Bulacan on August l0, 1974, is the subject of the petition at bar directed against the
judgment of affirmance rendered by respondent court, through the Fourth Civil Cases Division
(Sison, Bidin (P), Veloso, JJ.), vis-a-vis the decretal portion handed down by the court of origin in:

1. Ordering the defendants, jointly and severally to pay the plaintiff the amount of
P179,511.52 as actual damages.

2. Ordering the defendants jointly and severally to pay the plaintiff P436,642.03 as
reimbursement for the damages paid by the plaintiff to death, injury and damage
claimants.

3. Ordering the defendants jointly and severally to pay exemplary damages in the
amount of P50, 000.00 to the plaintiff.

4. Ordering the defendants jointly and severally to pay the plaintiff attorney's fees in
the amount of P5, 000.00.

5. Ordering the defendants, jointly and severally to pay the plaintiff interest at the
legal rate on the above amounts due the plaintiff from August 10, 1974 until fully
paid.

6. Ordering the defendants to pay the cost of this suit.

7. Ordering the dismissal of the defendants' counterclaim for lack of factual and legal
basis. (p. 101, Record on Appeal; p. 103. Rollo.)
Culled from the text of the assailed disposition are the facts of the case at bar which are hereunder
adoptedverbatim:

The case arose from a collision of a passenger express train of defendant Philippine
National Railways, (PNR) coming from San Fernando, La Union and bound for
Manila and a passenger bus of Baliwag Transit, Inc. which was on its way to
Hagonoy, Bulacan, from Manila, but upon reaching the railroad crossing at Barrio
Balungao, Calumpit, Bulacan at about 1:30 in the afternoon of August 10, 1974, got
stalled and was hit by defendant's express train causing damages to plaintiff's bus
and its passengers, eighteen (18) of whom died and fifty-three (53) others suffered
physical injuries. Plaintiff alleging that the proximate cause of the collision was the
negligence and imprudence of defendant PNR and its locomotive engineer, Honorio
Cirbado, in operating its passenger train in a busy intersection without any bars,
semaphores, signal lights, flagman or switchman to warn the public of approaching
train that would pass through the crossing, filed the instant action for Damages
against defendants. The defendants, in their Answer traversed the material allegation
of the Complaint and as affirmative defense alleged that the collision was caused by
the negligence, imprudence and lack of foresight of plaintiff's bus driver, Romeo
Hughes.

At the pre-trial conference held on June 23, 1976, the parties agreed on a partial
stipulation of facts and issues which as amplified at the continuation of the pre-trial
conference, on July 12, 1976, are as follows:

1 That plaintiff is a duly constituted corporation registered with the

Securities and Exchange Commission engaged in the business of
transportation and operating public utility buses for the public with
lines covering Manila, Caloocan City, Quezon City, Malabon, Rizal,
Bulacan, Pampanga and Nueva Ecija, and particularly from Manila to
Hagonoy, Bulacan and return in the month of August, l974 passing
thru the town of Calumpit Bulacan, temporarily while the bridge at
Hagonoy, Bulacan was under construction;

2 That defendant Philippine National Railways is a purely government

owned and controlled corporation duly registered and existing virtue
of Presidential Decree No. 741, with capacity to sue and be sued,
and is likewise engaged in transporting passengers and cargoes by
trains and buses and that, it operates a train line between San
Fernando, La Union and Manila particularly Passenger Express Train
with Body No. 73, passing along the intersection of Barrio Balungao,
Calumpit, Bulacan, in going to San Fernando, La Union from Manila
and return;

3. That on August 10, 1974, at about 1:20 o'clock in the afternoon, a

Baliuag Transit Bus with Body No. 1066 and Plate No. XS-929 PUB-
Bulacan '74 was driven by its authorized driver Romeo Hughes and
PNR Train No. 73 was operated by Train Engineer Honorio Cabardo
alias Honorio Cirbado and at the railroad intersection at Barrio
Balungao, Calumpit, Bulacan, said passenger train No. 73 hit and
bumped the right mid portion of the plaintiff's passenger bus No.
1066, while the rear portion of said bus was at the railroad track and
its direction was towards Hagonoy, Bulacan at about 1:30 o'clock in
the afternoon;

4. That at the time of the collision there was a slight rainfall in the
vicinity of the scene of the accident and that there was at said
intersection no bars, semaphores, and signal lights that would warn
the public of the approaching train that was about to pass through the
intersection and likewise there was no warning devices to passing
trains showing that they were about to pass an intersection in going
to Manila from San Fernando, La Union and back;

5. That on account of said collision, the Baliuag Transit Bus with Body
No. 1066 driven by Romeo Hughes was damaged and eighteen (18)
of its passengers died and the rest who were more than fifty three
(53) passengers suffered physical injuries;

6. That after the investigation the Chief of Police of Calumpit,

Bulacan, filed a criminal case of Reckless Imprudence Causing
Multiple Homicide with Multiple Physical Injuries and Damage to
Property against Romeo Hughes y Parfan, driver of the Baliuag
Transit bus docketed under Crim. Case No. 2392; while the train
Engineer Honorio Cabardo alias Honorio Cirbado was not included as
an accused in said case, although his train No. 73 was the one that
hit and bumped the right rear portion of the said bus;

7. That immediately after the said accident Major Manuel A. Macam,

Chief of the Municipal Police of Calumpit, Bulacan, together with
some of his policemen conducted an investigation of the accident;

8. That at the railroad crossing in Calumpit, Bulacan where the

accident took place there is no railroad crossing bar, however, during
the pre-war days there was a railroad crossing bar at said
intersection; that, however, there was only one sign of railroad
crossing "Stop, Look and Listen" placed on a concrete slab and
attached to a concrete post existing at the approach of the railroad
track from the Highway going towards Hagonoy, Bulacan and that
after the said railroad track there was a designated jeep parking area
at the right side in the direction from the Highway to Hagonoy
Bulacan;

9. That the train No. 73 driven by Train Engineer Honorio Cabardo

alias Honorio Cirbado stopped after passing the railroad crossing at a
distance of about 50 meters from the said intersection after the
collision on August, 1974;

10. That the expected time of arrival of said Train No. 73 in Manila
was 2:41 P.M. and its departure time from San Fernando, La Union
was 9:00 A.M. and its expected arrival at Calumpit, Bulacan was 1:41
P.M. with no stop at Calumpit, Bulacan.

SIMPLIFICATION OF ISSUES
 11. That the principal issue in the instant case is who between the
driver Romeo Hughes of Baliuag Transit, Incorporated and the train
engineer Honorio Cabardo alias Honorio Cirbado of the Philippine
National Railways was negligent or whether or not both are negligent;
that likewise which of said companies was negligent at said railroad
intersection;

12. That another additional issue is whether the Baliuag Transit

Incorporated has exercised the diligence of a good father of the
family in the selection and supervision of its employees. (pp.
85-87, Record on Appeal). ( Annex A, Petition; pp. 79-82, Rollo)

In addition, respondent court deemed it necessary to reflect the salient findings of the case for
damages as formulated by the trial court:

Posed for resolution are the following issues: Who between the driver Romeo
Hughes of the Baliuag Transit Incorporated and Honorio Cabardo, train Engineer of
the Philippine National Railways was negligent in the operation of their respective
vehicles, or whether or both were negligent? Could either of the companies Baliuag
Transit Incorporated and the Philippine National Railways be held accountable for
the collision because of negligence?

The defendants presented several statements or affidavits of alleged witnesses to

the collision, specifically Exhibits 2, 3, 4, 5, 6, 11, 13, 14, 15, 16, 17, 18 and 19; the
Court is at a loss as to why the persons who gave the said statements were not
presented as witnesses during the trial of the
case, as aptly said, the statements are hearsay evidence (Azcueta v. Cabangbang,
— 45 O.G. 144); at most they be taken as proof only of the fact that statements of
said persons were taken and that investigation was conducted of the incident; the
Court cannot consider the averments in said statements as testimonies or evidence
of truth.

Defendants endeavored to show that the proximate and immediate cause of the
collision was the negligence of the bus driver because the driver did not make a stop
before ascending the railtrack; he did not heed the warning or shoutings of
bystanders and passengers and proceeded in traversing the railtrack at a fast speed;
that the bus driver was in fact violating Section 42(d) of R.A. 4136, otherwise known
as the Land Transportation and Traffic Code for failure to "stop, look, and listen" at
the intersection, before crossing the railtrack; that it is incumbent upon him to take
the necessary precautions at the intersection because the railroad track is in itself a
warning; and the bus driver ignored such a warning and must assume the
responsibility for the result of the motion taken by him (U.S. v. Mananquil, 42 Phil.
90)

Except the testimony of the train engineer Cabardo, there is no admissible evidence
to show that indeed, the bus driver did not take the necessary precaution in
traversing the track. Note that he first noticed the bus when it was only 15 meters
away from him; he could not have possibly noticed the position of the bus before
negotiating the track.

On the other hand, it was shown by plaintiff that the bus driver Romeo Hughes took
the necessary precautions in traversing the track.
The bus driver had stopped before traversing the track and in fact asked the
conductor to alight and made a "Look and Listen" before proceeding; the conductor
had done just that and made a signal to proceed when he did not see any oncoming
train. (TSN, October 2l, 1976, p. 4); plaintiff's bus drivers and conductors are
enjoined to observe such a precautionary measure in seminars conducted by the
company. (TSN, September 23, 1976. pp. 26-27).

The evidence disclosed that the train was running fast because by his own
testimony, the train engineer had testified that before reaching the station of Calumpit
the terrain was downgrade and levelled only after passing the Calumpit bridge (TSN,
July 28, 1976, p. 14 ); the tendency of the train, coming from a high point is to
accelerate as the gravity will necessarily make it so, especially when it is pulling
seven coaches loaded with goods and passengers.

Moreover, upon impact, the bus loaded with passengers was dragged and thrown
into a ditch several meters away; the train had stopped only after the engine portion
was about 190 meters away from the fallen bus; several passengers were injured
and at least 20 died; such facts conclusively indicate that the train was speeding,
because if it were moving at moderate speed, it would not run some 190 meters after
impact and throw the bus at quite a distance especially so when it is claimed that the
train's emergency brakes were applied.

Further, the train was an express train; its departure was 9:00 A.M. at San Fernando,
La Union and expected in Manila at 2:41 P.M.; the collision occurred at 1:30 P.M. or
4 1/2 hours after it left La Union; surely, the train could have not negotiated such a
distance in so short a time if it were not running at fast speed.

It may be argued that a railroad is not subject to the same restrictions to the speed of
its train as a motorists (Mckelvey v. Delaware L. and W.R. Co. 253 App. D.V. 109,
300 NYS 1263 ); but it does not follow that a train will be permitted to run fast under
all conditions at any rate of speed it may choose. It must regulate its speed with
proper regard for the safety of human life and property (Johnson v. Southern Pacific
Company (Cal. App. 288 p. 81), considering the surrounding circumstances
particularly the nature of the locality (Atchinson, T. and SFR Co. v. Nicks (Arts) 165
p. 2d 167).

Cabardo's route included the passage over the said intersection; he could have
noticed that it is a very busy intersection because the crossroad leads to the
Calumpit Poblacion as well as to the neighboring town of Hagonoy; there was a
parking lot by the side of the track whereat passengers board jeepneys for the
neighboring barrios and towns; stalls abound in the vicinity and bystanders
congregate nearby. A prudent train operator must, under the circumstances, slacken
his speed almost for the protection of motorists and pedestrians, not only when a
collision is inevitable but even if no hindrance is apparent on the way;

Moreover, there was an intermittent rain at the time of the collision (see stipulation of
facts and photographs); the condition of the weather was such that even if for this
reason alone, the train engineer should have foreseen that danger of collision lurked
because of poor visibility of slippery road; he should have taken extra precaution by
considerably slackening its speed. This he failed to do even if the nature of his job
required him to observe care exercised by a prudent man.
Contributory negligence may not be ascribed to the bus driver; it was evident that he
had taken the necessary precautions before passing over the railway track; if the bus
was hit, it was for reasons beyond the control of the bus driver because he had no
place to go; there were vehicles to his left which prevented him in swerving towards
that direction; his bus stalled in view of the obstructions in his front where a sand and
gravel truck stopped because of a jeep maneuvering into a garage up front. All the
wheels at the bus have already passed the rail portion of the track and only the rear
portion of the bus' body occupied or covered the railtrack. This was evident because
the part of the bus hit by the train was the rear since the bus fell on a nearby ditch.
Otherwise, if the bus was really hit in mid-body, the bus could have been halved into
two because of the force of the impact.

The stipulation of facts between the parties show that there was no crossing bar at
the railroad intersection at Calumpit, Bulacan at the time of collision (par. 8,
Stipulation of Facts); the plaintiff contended and the defendants did not deny, that
there were no signal lights, semaphores, flagman or switchman thereat; the absence
of such devices, the plaintiff argues constitute negligence on the part of the
Philippine National Railways.

A railroad is not required to have a gate (crossing bar) or a flagman, or to maintain

signals at every intersection; only at such places reasonably necessary; what is
considered reasonably necessary will depend on the amount of travel upon the road,
the frequency with which trains pass over it and the view which could be obtained of
trains as they approach the crossing, and other conditions (Pari v. Los Angeles, Ry.
Corporation (Cal A2d) 128 p2d 563; Swdyk v. Indiana Harbor Belt R. Co. 148 F. 2d
795, and others).

As has been amply discussed, the crossroad at the intersection at Calumpit is one
which is a busy thoroughfare; it leads to the Poblacion at Calumpit and other barrios
as well as the town of Hagonoy; the vicinity is utilized as a parking and waiting area
for passengers of jeepneys that ply between the barrios, clearly, the flow of vehicular
traffic thereat is huge. It can be said also that, since there is no other railtrack going
North except that one passing at Calumpit, trains pass over it frequently;

A portion of the intersection is being used as a parking area with stalls and other
obstructions present making it difficult, if not impossible, to see approaching trains
(see photographs).

The failure of the Philippine National Railways to put a cross bar, or signal light,
flagman or switchman, or semaphores is evidence of negligence and disregard of the
safety of the public, even if there is no law or ordinance requiring it, because public
safety demands that said devices or equipments be installed, in the light of aforesaid
jurisprudence. In the opinion of this Court the X sign or the presence of "STOP,
LOOK, LISTEN" warnings would not be sufficient protection of the motoring public as
well as the pedestrians, in the said intersection;

The parties likewise have stipulated that during the pre-war days, there was a
railroad crossing bar at the said intersection (Par-8, Stipulation of Facts). It appears
that it was a self imposed requirement which has been abandoned. In a case it was
held that where the use of a flagman was self imposed, the abandonment thereof
may constitute negligence. (Fleming v. Missouri and A. Ry. Co. 198 ARDC 290, 128
S.W. 2d 286 and others; cited in Sec. 1082 SCRWARTZ, Vol. 2). Similarly, the
 abandonment by the PNR of the use of the crossing bar at the intersection at
Calumpit constitutes negligence, as its installation has become imperative, because
of the prevailing circumstances in the place.

A railroad company has been adjudged guilty of negligence and civilly liable for
damages when it failed to install semaphores, or where it does not see to it that its
flagman or switchman comply with their duties faithfully, to motorist injured by a
crossing train as long as he had crossed without negligence on his part (Lilius vs.
MRR, 39 Phil. 758). (Decision, pages 94-100, R A.; pp. 83-89,Rollo).

On the aspect of whether the Philippine National Railways enjoys immunity from suit, respondent
court initially noted that an exculpation of this nature that was raised for the first time on appeal may
no longer be entertained in view of the proscription under Section 2, Rule 9 of the Revised Rules of
Court, apart from the fact that the lawyer of petitioner agreed to stipulate inter alia that the railroad
company had capacity to sue and be sued. This being so, respondent court continued, PNR was
perforce estopped from disavowing the prejudicial repercussion of an admission in judicio. Even as
the laws governing the creation and rehabilitation of the PNR were entirely mute on its power to sue
and be sued, respondent court nonetheless opined that such prerogative was implied from the
general power to transact business pertinent or indispensable to the attainment of the goals of the
railroad company under Section 4 of Republic Act No. 4156 as amended by Republic Act No. 6366:

Sec. 4 General Powers — The Philippine National Railways shall have the following
general powers:

(a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the
corporation; and

(b) Generally, to exercise all powers of a railroad corporation under the Corporation
law.

in conjunction with Section 2(b) of Presidential Decree No. 741:

(b) To own or operate railroad transways, bus lines, trucklines, subways, and other
kinds of land transportation, vessels, and pipelines, for the purpose of transporting
for consideration, passengers, mail and property between any points in the
Philippines;

Thus, respondent court utilized the doctrine of implied powers announced in National Airports
Corporation vs. Teodoro, Sr. and Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the
power to sue and be sued is implicit from the faculty to transact private business. At any rate,
respondent court characterized the railroad company as a private entity created not to discharge a
governmental function but, among other things, to operate a transport service which is essentially a
business concern, and thus barred from invoking immunity from suit.

In brushing aside petitioners' asseveration that the bus driver outraced the train at the crossing,
respondent court observed that the bus was hit by the train at its rear portion then protruding over
the tracks as the bus could not move because another truck at its front was equally immobile due to
a jeep maneuvering into a nearby parking area. Under these tight conditions, respondent court
blamed the train engineer who admitted to have seen the maneuvering jeep at a distance (TSN, July
28, 1976, page 18) and had the last clear chance to apply the brakes, knowing fully well that the
vehicles following the jeep could not move away from the path of the train. Apart from these
considerations, it was perceived below that the train was running fast during the entire trip since the
train stopped 190 meters from the point of impact and arrived at Calumpit, Bulacan earlier than its
expected time of arrival thereat.

Moreover, respondent court agreed with the conclusion reached by the trial court that the absence of
a crossing bar, signal light, flagman or switchman to warn the public of an approaching train
constitutes negligence per the pronouncement of this Court in Lilius vs. Manila Railroad
Company (59 Phil 758 [1934]).

Concerning the exercise of diligence normally expected of an employer in the selection and
supervision of its employees, respondent court expressed the view that PNR was remiss on this
score since it allowed Honorio Cabardo, who finished only primary education and became an
engineer only through sheer experience, to operate the locomotive, not to mention the fact that such
plea in avoidance was not asserted in the answer and was thus belatedly raised on appeal.

Petitioner moved to reconsider, but respondent court was far from persuaded. Hence, the petition
before Us which, in essence, incorporates similar disputations anent PNR's immunity from suit and
the attempt to toss the burden of negligence from the train engineer to the bus driver of herein
private respondent.

The bone of contention for exculpation is premised on the familiar maxim in political law that the
State, by virtue of its sovereign nature and as reaffirmed by constitutional precept, is insulated from
suits without its consent (Article 16, Section 3, 1987 Constitution). However, equally conceded is the
legal proposition that the acquiescence of the State to be sued can be manifested expressly through
a general or special law, or indicated implicitly, as when the State commences litigation for the
purpose of asserting an affirmative relief or when it enters into a contract (Cruz, Philippine Political
Law, 1991 edition, page 33; Sinco, Philippine Political Law, Eleventh Edition, 1962, page 34). When
the State participates in a covenant, it is deemed to have descended from its superior position to the
level of an ordinary citizen and thus virtually opens itself to judicial process. Of course, We realize
that this Court qualified this form of consent only to those contracts concluded in a proprietary
capacity and therefore immunity will attach for those contracts entered into in a governmental
capacity, following the ruling in the 1985 case ofUnited States of America vs. Ruiz (136 SCRA 487
[1985]; cited by Cruz, supra at pages 36-37). But the restrictive interpretation laid down therein is of
no practical worth nor can it give rise to herein petitioner PNR's exoneration since the case
of Malong vs. Philippine National Railways (138 SCRA 63, [1985]); 3 Padilla, 1987 Constitution with
Comments and Cases, 1991 edition, page 644), decided three months after Ruiz was promulgated,
was categorical enough to specify that the Philippine National Railways "is not performing any
governmental function" (supra, at page 68).

In Malong, Justice Aquino, speaking for the Court en banc, declared:

The Manila Railroad Company, the PNR's predecessor, as a common carrier, was
not immune from suit under Act No. 1510, its charter.

The PNR Charter, Republic Act No. 4156, as amended by Republic Act No. 6366
and Presidential Decree No. 741, provides that the PNR is a government
instrumentality under government ownership during its 50-year term, 1964 to 2014. It
is under the Office of the President of the Philippines. Republic Act No. 6366
provides:

Sec. 1-a. Statement of policy. — The Philippine National Railways,

being a factor for socio-economic development and growth, shall be a
 part of the infrastructure program of the government and as such
shall remain in and under government ownership during its corporate
existence. The Philippine National Railways must be administered
with the view of serving the interests of the public by providing them
the maximum of service and, while aiming at its greatest utility by the
public, the economy of operation must be ensured so that service can
be rendered at the minimum passenger and freight prices possible.

The charter also provides:

Sec. 4. General powers. — The Philippine National Railways shall

have the following general powers:

(a) To do all such other things and to transact all such business
directly or indirectly necessary, incidental or conducive to the
attainment of the purpose of the corporation; and

(b) Generally, to exercise all powers of a railroad corporation under

the Corporation Law. (This refers to Sections 81 to 102 of the
Corporation Law on railroad corporations, not reproduced in the
Corporation Code.)

Section 36 of the Corporation Code provides that every corporation has the power to sue and be
sued in its corporate name. Section 13(2) of the Corporation Law provides that every corporation
has the power to sue and be sued in any court.

A sovereign is exempt from suit, not because of any formal conception or obsolete
theory, but on the logical and practical ground that there can be no legal right as
against the authority that makes the law on which the right depends (Justice Holmes
in Kawananakoa vs. Polyblank, 205 U.S. 353, 51 L. 3d 834).

The public service would be hindered, and public safety endangered, if the supreme
authority could be subjected to suit at the instance of every citizen and,
consequently, controlled in the use and disposition of the means required for the
proper administration of the Government (The Siren vs. U.S., 7 Wall. 152, 19 L. ed.
129). (at pp.
65-66).

To the pivotal issue of whether the State acted in a sovereign capacity when it organized the PNR
for the purpose of engaging in transportation, Malong continued to hold that:

. . . in the instant case the State divested itself of its sovereign capacity when it
organized the PNR which is no different from its predecessor, the Manila Railroad
Company. The PNR did not become immune from suit. It did not remove itself from
the operation of Articles 1732 to 1766 of the Civil Code on common carriers.

The correct rule is that "not all government entities, whether corporate or
noncorporate, are immune from suits. Immunity from suit is determined by the
character of the objects for which the entity was organized." (Nat. Airports Corp. vs.
Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs. Santos, 92 Phil. 281,
285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).
Suits against State agencies with respect to matters in which they have assumed to
act in a private or nongovernmental capacity are not suits against the State (81
C.J.S. 1319).

Suits against State agencies with relation to matters in which they

have assumed to act in a private or nongovernmental capacity, and
various suits against certain corporations created by the State for
public purposes, but to engage in matters partaking more of the
nature of ordinary business rather than functions of a governmental
or political character, are not regarded as suits against the State.

The latter is true, although the State may own the stock or property of
such a corporation, for by engaging in business operations through a
corporation the State divests itself so far of its sovereign character,
and by implicating consents to suits against the corporation. (81
C.J.S. 1319).

The foregoing rule was applied to State Dock Commissions carrying on business
relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs.
U.S., 27 Fed. 2nd 370) and to State Highways Commissions created to build public
roads and given appropriations in advance to discharge obligations incurred in their
behalf (Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State
Highway Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports
case).

The point is that when the government enters into a commercial business it
abandons its sovereign capacity and is to be treated like any other private
corporation (Bank of the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L ed. 244, cited in
Manila Hotel Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374,
388). The Manila Hotel case also relied on the following rulings:

By engaging in a particular business through the instrumentality of a

corporation, the government divests itself pro hac vice of its
sovereign character, so as to render the corporation subject to the
rules of law governing private corporations.

When the State acts in its proprietary capacity, it is amenable to all

the rules of law which bind private individuals.

There is not one law for the sovereign and another for the subject, but
when the sovereign engages in business and the conduct of business
enterprises, and contracts with individuals, whenever the contract in
any form comes before the courts, the rights and obligation of the
contracting parties must be adjusted upon the same principles as if
both contracting parties were private persons. Both stand upon
equality before the law, and the sovereign is merged in the dealer,
contractor and suitor (People vs. Stephens, 71 N.Y. 549).

It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc.,
L-31948, July 25, 1978, 84 SCRA 223, it was held that the PNR funds could be
garnished at the instance of a labor union.
 It would be unjust if the heirs of the victim of an alleged negligence of the PNR
employees could not sue the PNR for damages. Like any private common carrier, the
PNR is subject to the obligations of persons engaged in that private enterprise. It is
not performing any governmental function.

Thus, the National Development Company is not immune from suit. It does not
exercise sovereign functions. It is an agency for the performance of purely corporate,
proprietary or business functions (National Development Company vs. Tobias, 117
Phil. 703, 705 and cases cited therein; National Development Company vs. NDC
Employees and Workers' Union, L-32387, August 19, 1975, 66 SCRA 18l, 184).

Other government agencies not enjoying immunity from suit are the Social Security
System (Social Security System vs. Court of Appeals,
L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank
(Republic vs. Philippine National Bank, 121 Phil. 26). (at pp. 66-68).

We come now to the question of whether respondent court properly agreed with the trial court in
imputing negligence on the part of the train engineer and his employer.

It was demonstrated beyond cavil in the course of the pre-trial hearings held for the purpose of
stipulating on crucial facts that the bus was hit on the rear portion thereof after it crossed the railroad
tracks. Then, too the train engineer was frank enough to say that he saw the jeep maneuvering into
a parking area near the crossing which caused the obstruction in the flow of traffic such that the
gravel and sand truck including the bus of herein private respondent were not able to move forward
or to take the opposite lane due to other vehicles. The unmindful demeanor of the train engineer in
surging forward despite the obstruction before him is definitely anathema to the conduct of a prudent
person placed under the same set of perceived danger. Indeed:

When it is apparent, or when in the exercise of reasonable diligence commensurate

with the surroundings it should be apparent, to the company that a person on its
track or to get on its track is unaware of his danger or cannot get out of the way, it
becomes the duty of the company to use such precautions, by warnings, applying
brakes, or otherwise, as may be reasonably necessary to avoid injury to him. (65 Am.
Jur., Second Edition. p. 649).

Likewise, it was established that the weather condition was characterized with intermittent rain which
should have prompted the train engineer to exercise extra precaution. Also, the train reached
Calumpit, Bulacan ahead of scheduled arrival thereat, indicating that the train was travelling more
than the normal speed of 30 kilometers per hour. If the train were really running at 30 kilometers per
hour when it was approaching the intersection, it would probably not have travelled 190 meters more
from the place of the accident (page 10, Brief for Petitioners). All of these factors, taken collectively,
engendered the concrete and yes, correct conclusion that the train engineer was negligent who,
moreover, despite the last opportunity within his hands vis-a-vis the weather condition including the
presence of people near the intersection, could have obviated the impending collision had he
slackened his speed and applied the brakes (Picart vs. Smith, 37 Phil. 809 [1918]).Withal, these
considerations were addressed to the trial judge who, unlike appellate magistrates, was in a better
position to assign weight on factual questions. Having resolved the question of negligence between
the train engineer and the bus driver after collating the mass of evidence, the conclusion reached
thereafter thus commands great respect especially so in this case where respondent court gave its
nod of approval to the findings of the court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206
[1991]); Amigo vs. Teves, 50 O.G. 5799; Regalado, Remedial Law Compendium, Fifth edition, page
353).
What exacerbates against petitioners' contention is the authority in this jurisdiction to the effect that
the failure of a railroad company to install a semaphore or at the very least, to post a flagman or
watchman to warn the public of the passing train amounts to negligence (Lilius vs. Manila Railroad
Company, 59 Phil. 758 [1934]).

WHEREFORE, the petition is hereby DISMISSED and the decision of respondent court AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Davide, Jr. and Romero, JJ., concur.

Bidin, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

HIRD DIVISION

G.R. No. 42204 January 21, 1993

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

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

The Solicitor General for petitioner.

Jorge G. Macapagal counsel for respondent.

Aurea Aragon-Casiano for Bagong Buhay Trading.

ROMERO, J.:

This is a petition for review on certiorari which seeks to annul and set aside the decision of the Court
of Tax Appeals dated December 27, 1974 (CTA Case No. 2490) reversing the decision of the
Commissioner of Customs which affirmed the decision of the Collector of Customs. 1

The undisputed facts are as follows:

On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at the Port of
Manila carrying, among others, 80 bales of screen net consigned to Bagong Buhay Trading (Bagong
Buhay). Said importation was declared through a customs broker under Entry No. 8651-72 as 80
bales of screen net of 500 rolls with a gross weight of 12,777 kilograms valued at $3,750.00 and
classified under Tariff Heading No. 39.06-B of the Tariff and Customs Code 2 at 35% ad valorem.
Since the customs examiner found the subject shipment reflective of the declaration, Bagong Buhay paid
the duties and taxes due in the amount of P11,350.00 which was paid through the Bank of Asia under
Official Receipt No. 042787 dated February 1, 1972. Thereafter, the customs appraiser made a return of
duty.

Acting on the strength of an information that the shipment consisted of "mosquito net" made of nylon
dutiable under Tariff Heading No. 62.02 of the Tariff and Customs Code, the Office of the Collector
of Customs ordered a
re-examination of the shipment. A report on the re-examination revealed that the shipment consisted
of 80 bales of screen net, each bale containing 20 rolls or a total of 1,600 rolls. 3 Re-appraised, the
shipment was valued at $37,560.00 or $10.15 per yard instead of $.075 per yard as previously declared.
Furthermore, the Collector of Customs determined the subject shipment as made of synthetic
(polyethylene) woven fabric classifiable under Tariff Heading No. 51.04-B at 100% ad valorem. Thus,
Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on the shipment in
question. 4 Since the shipment was also misdeclared as to quantity and value, the Collector of Customs
forfeited the subject shipment in favor of the government. 5
Private respondent then appealed the decision of the Collector of Customs by filing a petition for
review with the Commissioner of Customs. On November 25, 1972 the Commissioner affirmed the
Collector of Customs. 6 Private respondent moved for reconsideration but the same was denied on
January 22, 1973. 7

From the Commissioner of Customs, private respondent elevated his case before the Court of Tax
Appeals. Upon review, the Court of Tax Appeals reversed the decision of the Commissioner of
Customs. It ruled that the Commissioner erred in imputing fraud upon private respondent because
fraud is never presumed and thus concluded that the forfeiture of the articles in question was not in
accordance with law. Moreover, the appellate court stated that the imported articles in question
should be classified as "polyethylene plastic" at the rate of 35%ad valorem instead of "synthetic
(polyethylene) woven fabric" at the rate of 100% ad valorem based upon the results conducted by
the Bureau of Customs Laboratory. Consequently, the Court of Tax Appeals ordered the release of
the said article upon payment of the corresponding duties and taxes. (C.T.A. Case No. 2490). 8

Thereafter, the Commissioner of Customs moved for reconsideration. On November 19, 1975, the
Court of Tax Appeals denied said motion for reconsideration. 9

On August 20, 1976, private respondent filed a petition asking for the release of the questioned
goods which this Court denied. After several motions for the early resolution of this case and for the
release of goods and in view of the fact that the goods were being exposed to the natural elements,
we ordered the release of the goods on June 2, 1986. Consequently, on July 26, 1986, private
respondent posted a cash bond of P149,443.36 to secure the release of 64 bales 10 out of the 80
bales 11 originally delivered on January 30, 1972. Sixteen bales 12 remain missing.

Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong Buhay, only
116,950 yards were in good condition and the 26,504 yards were in bad condition. Consequently,
private respondent demands that the Bureau of Customs be ordered to pay for damages for the
43,050 yards 13 it actually lost. 14

Hence, this petition, the issues being; a) whether or not the shipment in question is subject to
forfeiture under Section 2530-M subparagraphs (3), (4) and (5) of the Tariff and Customs Code; b)
whether or not the shipment in question falls under Tariff Heading No. 39.06-B (should be 39.02-B)
of the Tariff and Customs Code subject to ad valorem duty of 35% instead of Tariff Heading No.
51.04-B with ad valorem of 100% and c) whether or not the Collector of Customs may be held liable
for the 43,050 yards actually lost by private respondent.

Section 2530, paragraph m, subparagraphs (3), (4) and (5) states:

Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. — Any
vehicle, vessel or aircraft, cargo, article and other objects shall, under the following
conditions be subjected to forfeiture:

xxx xxx xxx

m. Any article sought to be imported or exported.

xxx xxx xxx

(3) On the strength of a false declaration or affidavit or affidavit

executed by the owner, importer, exporter or consignee concerning
the importation of such article;
 (4) On the strength of a false invoice or other document executed by
the owner, importer, exporter or consignee concerning the
importation or exportation of such article; and.

(5) Through any other practice or device contrary

to law by means of which such articles was entered through a
custom-house to the prejudice of government. (Emphasis supplied).

Petitioner contends that there has been a misdeclaration as to the quantity in rolls of the shipment in
question, the undisputed fact being that the said shipment consisted of 1,600 rolls and not 500 rolls
as declared in the import entry. We agree with the contention of the petitioner. In declaring the
weight of its shipment in an import entry, through its customs broker as 12,777 kilograms when in
truth and in fact the actual weight is 13,600 kilograms, an apparent misdeclaration as to the weight
of the questioned goods was committed by private respondent. Had it not been for a re-examination
and re-appraisal of the shipment by the Collector of Customs which yielded a difference of 823
kilograms, the government would have lost revenue derived from customs duties.

Although it is admitted that indeed there was a misdeclaration, such violation, however, does not
warrant forfeiture for such act was not committed directly by the owner, importer, exporter or
consignee as set forth in Section 2530, paragraph m, subparagraph (3), and/or (4).

In defense of its position denying the commission of misdeclaration, private respondent contends
that its import entry was based solely on the shipping documents and that it had no knowledge of
any flaw in the said documents at the time the entry was filed. For this reason, private respondent
believes that if there was any discrepancy in the quantity of the goods as declared and as examined,
such discrepancy should not be attributed to Bagong Buhay. 15

Private respondent's argument is persuasive. Under Section 2530, paragraph m, subparagraphs (3)
and (4), the requisites for forfeiture are: (1) the wrongful making by the owner, importer, exporter or
consignees of any declaration or affidavit, or the wrongful making or delivery by the same persons of
any invoice, letter or paper — all touching on the importation or exportation of merchandise; and (2)
that such declaration, affidavit, invoice, letter or paper is false. 16

In the case at bar, although it cannot be denied that private respondent caused to be prepared
through its customs broker a false import entry or declaration, it cannot be charged with the wrongful
making thereof because such entry or declaration merely restated faithfully the data found in the
corresponding certificate of origin, 17 certificate of manager of the shipper, 18 the packing lists 19 and the
bill of lading 20 which were all prepared by its
suppliers abroad. If, at all, the wrongful making or falsity of the documents above-mentioned can only be
attributed to Bagong Buhay's foreign suppliers or shippers.

With regard to the second requirement on falsity, it bears mentioning that the evidence on record,
specifically, the decisions of the Collector of Customs and the Commissioner of Customs, do not
reveal that the importer or consignee, Bagong Buhay Trading had any knowledge of any falsity on
the subject importation.

Since private respondent's misdeclaration can be traced directly to its foreign suppliers, Section
2530, paragraph m, subparagraphs (3) and (4) cannot find application.

Applying subparagraph (5), fraud must be committed by an importer/consignee to evade payment of

the duties due. 21 We support the stance of the Court of Tax Appeals that the Commissioner of Customs
failed to show that fraud had been committed by the private respondent. The fraud contemplated by law
must be actual and not constructive. It must be intentional fraud, consisting of deception willfully and
deliberately done or resorted to in order to induce another to give up some right. 22 As explained earlier,
the import entry was prepared on the basis of the shipping documents provided by the foreign supplier or
shipper. Hence, Bagong Buhay Trading can be considered to have acted in good faith when it relied on
these documents.

Proceeding now to the question of the correct classification of the questioned shipments, petitioner
contends that the same falls under Tariff Heading No. 51.04 being a "synthetic (polyethylene) woven
fabric." On the other hand, private respondent contends that these fall under Tariff Heading No.
39.06 (should be 39.02), having been found to be made of polyethylene plastic.

Heading No. 39.02 of the Tariff and Customs Code provides:

39.02 — Polymerisation and copolymerisation products (for example, polyethylene,

polytetrahaloethylene, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl
acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and
polymethacrylic derivatives, coumaroneindene resins).

The principal products included in this heading are:

(1) Polymerization products of ethylene or its substitution derivatives, particularly the

halogen derivatives.

Examples of these are polyethylene, polytetrafluro-ethylene and polychlorotrifluro-

ethylene. Their characteristic is that they are translucent, flexible and light in
weight. They are used largely for insulating electric wire. 23

On the other hand, Tariff Heading No. 51.04 provides:

51.04. — Woven fabrics of man-made fibers (continuous) including woven fabrics of

monofil or strip of heading No. 51.01 or 51.02.

This heading covers woven fabrics (as described in Part [I] [C] of the General
Explanatory Note on Section XI) made of yarns of continuous man-made fibers, or of
monofil or strip of heading 51.01 and 51.02; it includes a very large variety of dress
fabrics, linings, curtain materials, furnishing fabrics, tyre fabrics, tent fabrics,
parachute fabrics, etc. 24 (Emphasis supplied)

To correctly classify the subject importation, we need to refer to chemical analysis submitted before
the Court of Tax Appeals. Mr. Norberto Z. Manuel, an Analytical Chemist of the Bureau of Customs
and an Assistant to the Chief of the Customs Laboratory, testified that a chemical test was
conducted on the sample 25 and "the result is that the attached sample submitted under Entry No. 8651
was found to be made wholly of Polyethylene plastic." 26

A similar result conducted by the Adamson University Testing Laboratories provides as follows:

The submitted sample, being insoluble in 10% sodium carbonate; hydrochloric acid,
glacial acetic acid, toluene, acetone, formic acid, and nitric acid, does not belong to
the man-made fibers, i.e., cellulosic and alginate rayons, poly (vinyl chloride),
polyacrylonitrile, copolymer or polyester silicones including Dolan, Dralon, Orlin,
PAN, Redon, Courtelle, etc., Tarylene, Dacron; but it is a type of plastic not
possessing, the properties of the man-made fibers. 27 (Emphasis supplied)
Consequently, the Court of Tax Appeals, relying on the laboratory findings of the Bureau of Customs
and Adamson University correctly classified the questioned shipment as polyethylene plastic taxable
under Tariff Heading No. 39.02 instead of synthetic (polyethylene) woven fabric under Tariff Heading
51.04, to wit:

While it is true that the finding and conclusion of the Collector of Customs with
respect to classification of imported articles are presumptively correct, yet as matters
that require laboratory tests or analysis to arrive at the proper classification, the
opinion of the Collector must yield to the finding of an expert whose opinion is based
on such laboratory test or analysis unless such laboratory analysis is shown to be
erroneous. And this is especially so in this case where the test and analysis were
made in the laboratory of the Bureau of Customs itself. It has not been shown why
such laboratory finding was disregarded. There is no claim or pretense that an error
was committed by the laboratory technician. Significantly, the said finding of the
Chief, Customs Laboratory finds support in the "REPORT OF ANALYSIS" submitted
by the Adamson University Testing Laboratories, dated September 21, 1966. 28

On the third issue, we opine that the Bureau of Customs cannot be held liable for actual damages
that the private respondent sustained with regard to its goods. Otherwise, to permit private
respondent's claim to prosper would violate the doctrine of sovereign immunity. Since it demands
that the Commissioner of Customs be ordered to pay for actual damages it sustained, for which
ultimately liability will fall on the government, it is obvious that this case has been converted
technically into a suit against the state. 29

On this point, the political doctrine that "the state may not be sued without its consent," categorically
applies. 30 As an unincorporated government agency without any separate juridical personality of its own,
the Bureau of Customs enjoys immunity from suit. Along with the Bureau of Internal Revenue, it is
invested with an inherent power of sovereignty, namely, taxation. As an agency, the Bureau of Customs
performs the governmental function of collecting revenues which is definitely not a proprietary function.
Thus, private respondent's claim for damages against the Commissioner of Customs must fail.

WHEREFORE, the decision of the respondent Court of Tax Appeals is AFFIRMED. The Collector of
Customs is directed to expeditiously re-compute the customs duties applying Tariff Heading 39.02 at
the rate of 35% ad valorem on the 13,600 kilograms of polyethylene plastic imported by private
respondent.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-51806 November 8, 1988

CIVIL AERONAUTICS ADMINISTRATION, petitioner,

vs.
COURT OF APPEALS and ERNEST E. SIMKE, respondents.

The Solicitor General for petitioner.

Ledesma, Guytingco, Veleasco & Associates for respondent Ernest E. Simke.

CORTES, J.:

Assailed in this petition for review on certiorari is the decision of the Court of Appeals affirming the
trial court decision which reads as follows:

WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the

amount of P15,589.55 as full reimbursement of his actual medical and hospital
expenses, with interest at the legal rate from the commencement of the suit; the
amount of P20,200.00 as consequential damages; the amount of P30,000.00 as
moral damages; the amount of P40,000.00 as exemplary damages; the further
amount of P20,000.00 as attorney's fees and the costs [Rollo, p. 24].

The facts of the case are as follows:

Private respondent is a naturalized Filipino citizen and at the time of the incident was the Honorary
Consul Geileral of Israel in the Philippines.

In the afternoon of December 13, 1968, private respondent with several other persons went to the
Manila International Airport to meet his future son-in-law. In order to get a better view of the
incoming passengers, he and his group proceeded to the viewing deck or terrace of the airport.

While walking on the terrace, then filled with other people, private respondent slipped over an
elevation about four (4) inches high at the far end of the terrace. As a result, private respondent fell
on his back and broke his thigh bone.

The next day, December 14, 1968, private respondent was operated on for about three hours.

Private respondent then filed an action for damages based on quasi-delict with the Court of First
Instance of Rizal, Branch VII against petitioner Civil Aeronautics Administration or CAA as the entity
empowered "to administer, operate, manage, control, maintain and develop the Manila International
Airport ... ." [Sec. 32 (24), R.A. 776].
Said claim for damages included, aside from the medical and hospital bills, consequential damages
for the expenses of two lawyers who had to go abroad in private respondent's stead to finalize
certain business transactions and for the publication of notices announcing the postponement of
private respondent's daughter's wedding which had to be cancelled because of his accident [Record
on Appeal, p. 5].

Judgment was rendered in private respondent's favor prompting petitioner to appeal to the Court of
Appeals. The latter affirmed the trial court's decision. Petitioner then filed with the same court a
Motion for, Reconsideration but this was denied.

Petitioner now comes before this Court raising the following assignment of errors:

1. The Court of Appeals gravely erred in not holding that the present the CAA is
really a suit against the Republic of the Philippines which cannot be sued without its
consent, which was not given in this case.

2. The Court of Appeals gravely erred in finding that the injuries of respondent Ernest
E. Simke were due to petitioner's negligence — although there was no substantial
evidence to support such finding; and that the inference that the hump or elevation
the surface of the floor area of the terrace of the fold) MIA building is dangerous just
because said respondent tripped over it is manifestly mistaken — circumstances that
justify a review by this Honorable Court of the said finding of fact of respondent
appellate court (Garcia v. Court of Appeals, 33 SCRA 622; Ramos v. CA, 63 SCRA
331.)

3. The Court of Appeals gravely erred in ordering petitioner to pay actual,

consequential, moral and exemplary damages, as well as attorney's fees to
respondent Simke — although there was no substantial and competent proof to
support said awards I Rollo, pp. 93-94 1.

Invoking the rule that the State cannot be sued without its consent, petitioner contends that being an
agency of the government, it cannot be made a party-defendant in this case.

This Court has already held otherwise in the case of National Airports Corporation v. Teodoro, Sr.
[91 Phil. 203 (1952)]. Petitioner contends that the said ruling does not apply in this case because:
First, in the Teodoro case, the CAA was sued only in a substituted capacity, the National Airports
Corporation being the original party. Second, in the Teodoro case, the cause of action was
contractual in nature while here, the cause of action is based on a quasi-delict. Third, there is no
specific provision in Republic Act No. 776, the law governing the CAA, which would justify the
conclusion that petitioner was organized for business and not for governmental purposes. [Rollo, pp.
94-97].

Such arguments are untenable.

First, the Teodoro case, far from stressing the point that the CAA was only substituted for the
National Airports Corporation, in fact treated the CAA as the real party in interest when it stated that:

xxx xxx xxx

 ... To all legal intents and practical purposes, the National Airports Corporation is
dead and the Civil Aeronautics Administration is its heir or legal representative,
acting by the law of its creation upon its own rights and in its own name. The better
practice there should have been to make the Civil Aeronautics Administration the
third party defendant instead of the National Airports Corporation. [National Airports
Corp. v. Teodoro, supra, p. 208.]

xxx xxx xxx

Second, the Teodoro case did not make any qualification or limitation as to whether or not the CAA's
power to sue and be sued applies only to contractual obligations. The Court in the Teodoro case
ruled that Sections 3 and 4 of Executive Order 365 confer upon the CAA, without any qualification,
the power to sue and be sued, albeit only by implication. Accordingly, this Court's pronouncement
that where such power to sue and be sued has been granted without any qualification, it can include
a claim based on tort or quasi-delict [Rayo v. Court of First Instance of Bulacan, G.R. Nos. 55273-
83, December 19,1981, 1 1 0 SCRA 4561 finds relevance and applicability to the present case.

Third, it has already been settled in the Teodoro case that the CAA as an agency is not immune
from suit, it being engaged in functions pertaining to a private entity.

xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity.
Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of
travel and the convenience of the travelling public. It is engaged in an enterprise
which, far from being the exclusive prerogative of state, may, more than the
construction of public roads, be undertaken by private concerns. [National Airports
Corp. v. Teodoro, supra, p. 207.]

xxx xxx xxx

True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365
(Reorganizing the Civil Aeronautics Administration and Abolishing the National Airports Corporation).
Republic Act No. 776 (Civil Aeronautics Act of the Philippines), subsequently enacted on June 20,
1952, did not alter the character of the CAA's objectives under Exec, Order 365. The pertinent
provisions cited in the Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which led the
Court to consider the CAA in the category of a private entity were retained substantially in Republic
Act 776, Sec. 32 (24) and (25). Said Act provides:
<äre|| anº• 1àw>

Sec. 32. Powers and Duties of the Administrator. Subject to the general — control
and supervision of the Department Head, the Administrator shall have among others,
the following powers and duties:

xxx xxx xxx

(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government-owned aerodromes except those controlled
or operated by the Armed Forces of the Philippines including such powers and duties
as: (a) to plan, design, construct, equip, expand, improve, repair or alter aerodromes
or such structures, improvement or air navigation facilities; (b) to enter into, make
 and execute contracts of any kind with any person, firm, or public or private
corporation or entity; ... .

(25) To determine, fix, impose, collect and receive landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under its management and
control.

xxx xxx xxx

From the foregoing, it can be seen that the CAA is tasked with private or non-governmental functions
which operate to remove it from the purview of the rule on State immunity from suit. For the correct
rule as set forth in the Tedoro case states:

xxx xxx xxx

Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity functions suits is determined by the character of the objects for which
the entity was organized. The rule is thus stated in Corpus Juris:

Suits against State agencies with relation to matters in which they

have assumed to act in private or non-governmental capacity, and
various suits against certain corporations created by the state for
public purposes, but to engage in matters partaking more of the
nature of ordinary business rather than functions of a governmental
or political character, are not regarded as suits against the state. The
latter is true, although the state may own stock or property of such a
corporation for by engaging in business operations through a
corporation, the state divests itself so far of its sovereign character,
and by implication consents to suits against the corporation. (59 C.J.,
313) [National Airport Corporation v. Teodoro, supra, pp. 206-207;
Emphasis supplied.]

This doctrine has been reaffirmed in the recent case of Malong v. Philippine National Railways [G.R.
No. L-49930, August 7, 1985, 138 SCRA 631, where it was held that the Philippine National
Railways, although owned and operated by the government, was not immune from suit as it does not
exercise sovereign but purely proprietary and business functions. Accordingly, as the CAA was
created to undertake the management of airport operations which primarily involve proprietary
functions, it cannot avail of the immunity from suit accorded to government agencies performing
strictly governmental functions.

II

Petitioner tries to escape liability on the ground that there was no basis for a finding of negligence.
There can be no negligence on its part, it alleged, because the elevation in question "had a
legitimate purpose for being on the terrace and was never intended to trip down people and injure
them. It was there for no other purpose but to drain water on the floor area of the terrace" [Rollo, P.
99].

To determine whether or not the construction of the elevation was done in a negligent manner, the
trial court conducted an ocular inspection of the premises.
 xxx xxx xxx

... This Court after its ocular inspection found the elevation shown in Exhs. A or 6-A
where plaintiff slipped to be a step, a dangerous sliding step, and the proximate
cause of plaintiffs injury...

xxx xxx xxx

This Court during its ocular inspection also observed the dangerous and defective
condition of the open terrace which has remained unrepaired through the years. It
has observed the lack of maintenance and upkeep of the MIA terrace, typical of
many government buildings and offices. Aside from the litter allowed to accumulate
in the terrace, pot holes cause by missing tiles remained unrepaired and unattented.
The several elevations shown in the exhibits presented were verified by this Court
during the ocular inspection it undertook. Among these elevations is the one (Exh. A)
where plaintiff slipped. This Court also observed the other hazard, the slanting or
sliding step (Exh. B) as one passes the entrance door leading to the terrace [Record
on Appeal, U.S., pp. 56 and 59; Emphasis supplied.]

The Court of Appeals further noted that:

The inclination itself is an architectural anomaly for as stated by the said witness, it is
neither a ramp because a ramp is an inclined surface in such a way that it will
prevent people or pedestrians from sliding. But if, it is a step then it will not serve its
purpose, for pedestrian purposes. (tsn, p. 35, Id.) [rollo, p. 29.]

These factual findings are binding and conclusive upon this Court. Hence, the CAA cannot disclaim
its liability for the negligent construction of the elevation since under Republic Act No. 776, it was
charged with the duty of planning, designing, constructing, equipping, expanding, improving,
repairing or altering aerodromes or such structures, improvements or air navigation facilities [Section
32, supra, R.A. 776]. In the discharge of this obligation, the CAA is duty-bound to exercise due
diligence in overseeing the construction and maintenance of the viewing deck or terrace of the
airport.

It must be borne in mind that pursuant to Article 1173 of the Civil Code, "(t)he fault or negligence of
the obligor consists in the omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstances of the person, of the time and of the place." Here, the
obligation of the CAA in maintaining the viewing deck, a facility open to the public, requires that CAA
insure the safety of the viewers using it. As these people come to the viewing deck to watch the
planes and passengers, their tendency would be to look to where the planes and the incoming
passengers are and not to look down on the floor or pavement of the viewing deck. The CAA should
have thus made sure that no dangerous obstructions or elevations exist on the floor of the deck to
prevent any undue harm to the public.

The legal foundation of CAA's liability for quasi-delict can be found in Article 2176 of the Civil Code
which provides that "(w)hoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done... As the CAA knew of the existence of the
dangerous elevation which it claims though, was made precisely in accordance with the plans and
specifications of the building for proper drainage of the open terrace [See Record on Appeal, pp. 13
and 57; Rollo, p. 391, its failure to have it repaired or altered in order to eliminate the existing hazard
constitutes such negligence as to warrant a finding of liability based on quasi-delict upon CAA.
The Court finds the contention that private respondent was, at the very least, guilty of contributory
negligence, thus reducing the damages that plaintiff may recover, unmeritorious. Contributory
negligence under Article 2179 of the Civil Code contemplates a negligent act or omission on the part
of the plaintiff, which although not the proximate cause of his injury, contributed to his own damage,
the proximate cause of the plaintiffs own injury being the defendant's lack of due care. In the instant
case, no contributory negligence can be imputed to the private respondent, considering the following
test formulated in the early case of Picart v. Smith, 37 Phil. 809 (1918):

The test by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent man would have used in the
same situation? If not, then he is guilty of negligence. The law here in effect adopts
the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of the negligence in a given
case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by
that.

The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculations cannot be
here of much value but this much can be profitably said: Reasonable men-overn their
conduct by the circumstances which are before them or known to them. They are
not, and are not supposed to be omniscient of the future. Hence they can be
expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a
result of the course actually pursued' If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm, followed by
the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist.... [Picart v. Smith, supra, p. 813; Emphasis
supplied.]

The private respondent, who was the plaintiff in the case before the lower court, could not have
reasonably foreseen the harm that would befall him, considering the attendant factual
circumstances. Even if the private respondent had been looking where he was going, the step in
question could not easily be noticed because of its construction. As the trial court found:

In connection with the incident testified to, a sketch, Exhibit O, shows a section of the
floorings oil which plaintiff had tripped, This sketch reveals two pavements adjoining
each other, one being elevated by four and one-fourth inches than the other. From
the architectural standpoint the higher, pavement is a step. However, unlike a step
commonly seen around, the edge of the elevated pavement slanted outward as one
walks to one interior of the terrace. The length of the inclination between the edges of
the two pavements is three inches. Obviously, plaintiff had stepped on the inclination
because had his foot landed on the lower pavement he would not have lost his
balance. The same sketch shows that both pavements including the inclined portion
are tiled in red cement, and as shown by the photograph Exhibit A, the lines of the
tilings are continuous. It would therefore be difficult for a pedestrian to see the
inclination especially where there are plenty of persons in the terrace as was the
situation when plaintiff fell down. There was no warning sign to direct one's attention
to the change in the elevation of the floorings. [Rollo, pp. 2829.]
III

Finally, petitioner appeals to this Court the award of damages to private respondent. The liability of
CAA to answer for damages, whether actual, moral or exemplary, cannot be seriously doubted in
view of one conferment of the power to sue and be sued upon it, which, as held in the case of Rayo
v. Court of First Instance, supra, includes liability on a claim for quasi-dilict. In the aforestated case,
the liability of the National Power Corporation to answer for damages resulting from its act of
sudden, precipitate and simultaneous opening of the Angat Dam, which caused the death of several
residents of the area and the destruction of properties, was upheld since the o,rant of the power to
sue and be sued upon it necessarily implies that it can be held answerable for its tortious acts or any
wrongful act for that matter.

With respect to actual or compensatory damages, the law mandates that the same be proven.

Art. 2199. Except as provided by law or by stipulation, one are entitled to an

adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual on compensatory damages [New
Civil Code].

Private respondent claims P15,589.55 representing medical and hospitalization bills. This Court
finds the same to have been duly proven through the testimony of Dr. Ambrosio Tangco, the
physician who attended to private respondent (Rollo, p. 26) and who Identified Exh. "H" which was
his bill for professional services [Rollo, p. 31].

Concerning the P20,200.00 alleged to have been spent for other expenses such as the
transportation of the two lawyers who had to represent private respondent abroad and the
publication of the postponement notices of the wedding, the Court holds that the same had also
been duly proven. Private respondent had adequately shown the existence of such losses and the
amount thereof in the testimonies before the trial court [CA decision, p. 81. At any rate, the findings
of the Court of Appeals with respect to this are findings of facts [One Heart Sporting Club, Inc. v.
Court of Appeals, G.R. Nos. 5379053972, Oct. 23, 1981, 108 SCRA 4161 which, as had been held
time and again, are, as a general rule, conclusive before this Court [Sese v. Intermediate Appellate
Court, G.R. No. 66186, July 31, 1987,152 SCRA 585].

With respect to the P30,000.00 awarded as moral damages, the Court holds private respondent
entitled thereto because of the physical suffering and physical injuries caused by the negligence of
the CAA [Arts. 2217 and 2219 (2), New Civil Code].

With respect to the award of exemplary damages, the Civil Code explicitly, states:

Art. 2229. Exemplary or corrective damages, are imposed, by way of example or

correction for the public good, in addition to the moral, liquidated or compensatory

Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant

acted with gross negligence.

Gross negligence which, according to the Court, is equivalent to the term "notorious negligence" and
consists in the failure to exercise even slight care [Caunan v. Compania General de Tabacos, 56
Phil. 542 (1932)] can be attributed to the CAA for its failure to remedy the dangerous condition of the
questioned elevation or to even post a warning sign directing the attention of the viewers to the
change in the elevation of the floorings notwithstanding its knowledge of the hazard posed by such
elevation [Rollo, pp. 28-29; Record oil Appeal, p. 57]. The wanton disregard by the CAA of the safety
of the people using the viewing deck, who are charged an admission fee, including the petitioner
who paid the entrance fees to get inside the vantage place [CA decision, p. 2; Rollo, p. 25] and are,
therefore, entitled to expect a facility that is properly and safely maintained — justifies the award of
exemplary damages against the CAA, as a deterrent and by way of example or correction for the
public good. The award of P40,000.00 by the trial court as exemplary damages appropriately
underscores the point that as an entity changed with providing service to the public, the CAA. like all
other entities serving the public. has the obligation to provide the public with reasonably safe service.

Finally, the award of attorney's fees is also upheld considering that under Art. 2208 (1) of the Civil
Code, the same may be awarded whenever exemplary damages are awarded, as in this case,
and,at any rate, under Art. 2208 (11), the Court has the discretion to grant the same when it is just
and equitable.

However, since the Manila International Airport Authority (MIAA) has taken over the management
and operations of the Manila International Airport [renamed Ninoy Aquino International Airport under
Republic Act No. 6639] pursuant to Executive Order No. 778 as amended by executive Orders Nos.
903 (1983), 909 (1983) and 298 (1987) and under Section 24 of the said Exec. Order 778, the MIAA
has assumed all the debts, liabilities and obligations of the now defunct Civil Aeronautics
Administration (CAA), the liabilities of the CAA have now been transferred to the MIAA.

WHEREFORE, finding no reversible error, the Petition for review on certiorari is DENIED and the
decision of the Court of Appeals in CA-G.R. No. 51172-R is AFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 90314 November 27, 1990

LOIDA Q. SHAUF and JACOB SHAUF, Petitioners,

vs.
HON. COURT OF APPEALS, DON E. DETWILER and ANTHONY PERSI, Respondents.

REGALADO, J.:

In this petition for review on certiorari, petitioners would have us reverse and set aside the decision
rendered by respondent Court of Appeals on August 22, 1989, in CA-G.R. CV No. 17932, entitled
"Loida Shauf and Jacob Shauf, Plaintiffs-Appellants, versus Don Detwiler and Anthony Persi,
Defendants-Appellants,"1 dismissing petitioners’ complaint for damages filed before the Regional
Trial Court, Branch LVI, Angeles City, in Civil Case No. 2783 thereof, and its subsequent resolution
denying petitioners’ motion for the reconsideration of its aforesaid decision.

As found by respondent court,2 Clark Air Base is one of the bases established and maintained by the
United States by authority of the agreement between the Philippines and the United States
concerning military bases which entered into force on March 26, 1947.

The Third Combat Support Group, a unit of Clark Air Base, maintains a Central Civilian Personnel
Office (CCPO) charged with the responsibility for civilian personnel management and administration.
It is through its civilian personnel officer that the base commander is responsible for direction and
administration of civilian personnel program, including advising management and operating officials
on civilian personnel matters. Acting for the commander, the civilian personnel officer is the
administrative official in charge of the activities of the CCPO, and the commander relies on him to
carry out all aspects of the civilian personnel program. The CCPO personnel program encompasses
placement and staffing, position management and classification.

The Third Combat Support Group also maintains an Education Branch, Personnel Division, which
provides an education program for military personnel, U.S. civilian employees, and adult
dependents, assigned or attached to Clark Air Base. Its head, the education director, is responsible
directly to the base director of personnel for administering the education services program for Clark
Air Base. In this capacity, and within broad agency policies, is delegated to him the full responsibility
and authority for the technical, administrative and management functions of the program. As part of
his duties, the education director provides complete academic and vocational guidance for military
dependents, including counseling, testing and test interpretation. During the time material to the
complaint, private respondent Don Detwiler was civilian personnel officer, while private respondent
Anthony Persi was education director.3

Petitioner Loida Q. Shauf, a Filipino by origin and married to an American who is a member of the
United States Air Force, applied for the vacant position of Guidance Counselor, GS17109, in the
Base Education Office at Clark Air Base, for which she is eminently qualified. As found by the trial
court, she received a Master of Arts degree from the University of Sto. Tomas, Manila, in 1971 and
has completed 34 semester hours in psychology-guidance and 25 quarter hours in human
behavioral science; she has also completed all course work in human behavior and counseling
psychology for a doctoral degree; she is a civil service eligible; and, more importantly, she had
functioned as a Guidance Counselor at the Clark Air Base at the GS 1710-9 level for approximately
four years at the time she applied for the same position in 1976.4

By reason of her non-selection to the position, petitioner Loida Q. Shauf filed an equal employment
opportunity complaint against private respondents, for alleged discrimination against the former by
reason of her nationality and sex. The controversy was investigated by one Rudolph Duncan, an
appeals and grievance examiner assigned to the Office of Civilian Personnel Operations, Appellate
Division, San Antonio, Texas, U.S.A. and what follows are taken from his findings embodied in a
report duly submitted by him to the Equal Opportunity Officer on February 22, 1977.5

On or about October 1976, the position of Guidance Counselor, GS 1710-9, became vacant in the
Base Education Office, Clark Air Base. A standard Form 52 was submitted to the Civilian Personnel
Office to fill said position. The Civilian Personnel Division took immediate steps to fill the position by
advertisement in the Clark Air Base Daily Bulletin #205 dated October 21, 1976. As a result of the
advertisement, one application was received by the Civilian Personnel Office and two applications
were retrieved from the applicants supply file in the Civilian Personnel Office. These applications
were that of Mrs. Jean Hollenshead, an employee of the DOD Schools at Clark Air Base, Mrs. Lydia
B. Gaillard, an unemployed dependent, and Mrs. Loida Q. Shauf. All three applications were
reviewed and their experiences were considered qualifying for the advertised position.

On November 11, 1976, the application of Loida Q. Shauf was referred to Mr. Anthony Persi, with
the applications of Mrs. Jean Hollenshead and Mrs. Lydia Gaillard, to be considered for the position
of Guidance Counselor, GS 1710-9, Mr. Persi, after review of the applications, stated that upon
screening the applications he concluded that two applicants had what he considered minimum
qualifications for the position. The two applicants were Mrs. Hollenshead and Mrs. Gaillard. In the
case of Loida Q. Shauf, Mr. Persi felt that her application was quite complete except for a reply to an
inquiry form attached to the application. This inquiry form stated that the National Personnel Records
Center, St. Louis, Missouri, was unable to find an official personnel folder for Loida Q. Shauf. Mr.
Persi said that as a result of the National Personnel Records Center, GSA, not being able to find any
records on Loida Q. Shauf, this raised some questions in his mind as to the validity of her work
experience. As a result of his reservations on Loida Q. Shauf’s work experience and his conclusions
that the two other applications listed minimum qualifications, Mr. Persi decided to solicit additional
names for consideration.

Subsequently in his correspondence dated November 12, 1976, Mr. Persi returned the three
applications to the Civilian Personnel Office without a selection decision. Mr. Persi also requested in
his correspondence that the Civilian Personnel Office initiate immediate inquiry to the Central
Oversea Rotation and Recruiting Office (CORRO) for the submission of a list of highly qualified
candidates. He further stated in his correspondence that the three applicants who had indicated an
interest would be considered with the CORRO input for selection.

As a result of Mr. Persi’s request, an AF Form 1188 "Oversea Civilian Personnel Request" was
submitted to CORRO on November 12, 1976. This request in fact asked for one Guidance
Counselor, GS 1710-9. The form listed the fact that local candidates are available. However, instead
of getting a list of candidates for consideration, Mr. Persi was informed by CORRO, through the
Civilian Personnel Office in their December 15, 1976 message that a Mr. Edward B. Isakson from
Loring AFB, Maine, was selected for the position. Mr. Persi stated, when informed of CORRO’s
selection, that he had heard of Mr. Isakson and, from what he had heard, Mr. Isakson was highly
qualified for the position; therefore, he wished to have the selection stand. This statement was
denied by Mr. Persi. Mr. Isakson was placed on the rolls at Clark Air Base on January 24, 1977.6
Said examiner, however, also stated in his findings that, by reason of petitioner Loida Q. Shauf’s
credentials which he recited therein, she is and was at the time of the vacancy,7 highly qualified for
the position of Guidance Counselor, GS 1710-9. In connection with said complaint, a Notice of
Proposed Disposition of Discrimination Complaint, dated May 16, 1977,8 was served upon petitioner
Loida Q. Shauf stating that because the individual selected did not meet the criteria of the
qualification requirements, it was recommended "that an overhire GS 1710-9 Assistant Education
Advisor position be established for a 180 day period. x x x. The position should be advertised for
local procurement on a best qualified basis with the stipulation that if a vacancy occurs in a
permanent GS 1710-9 position the selectee would automatically be selected to fill the vacancy. If a
position is not vacated in the 180 day period the temporary overhire would be released but would be
selected to fill a future vacancy if the selectee is available."

During that time, private respondents already knew that a permanent GS 1710-9 position would
shortly be vacant, that is, the position of Mrs. Mary Abalateo whose appointment was to expire on
August 6, 1977 and this was exactly what private respondent Detwiler had in mind when he denied
on June 27, 1977 Mrs. Abalateo’s request for extension of March 31, 1977. However, private
respondents deny that Col. Charles J. Corey represented to petitioner Loida Q. Shauf that she would
be appointed to the overhire position and to a permanent GS 1710-9 position as soon as it became
vacant, which allegedly prompted the latter to accept the proposed disposition.

Contrary to her expectations, petitioner Loida Q. Shauf was never appointed to the position occupied
by Mrs. Abalateo whose appointment was extended indefinitely by private respondent Detwiler.9

Feeling aggrieved by what she considered a shabby treatment accorded her, petitioner Loida Q.
Shauf wrote the U.S. Civil Service Commission questioning the qualifications of Edward Isakson.
Thereafter, said commission sent a communication addressed to private respondent
Detwiler,10 finding Edward Isakson not qualified to the position of Guidance Counselor, GS 1710-9,
and requesting that action be taken to remove him from the position and that efforts be made to
place him in a position for which he qualifies. Petitioner Loida Q. Shauf avers that said
recommendation was ignored by private respondent Detwiler and that Isakson continued to occupy
said position of guidance counselor.

Petitioner Loida Q. Shauf likewise wrote the Base Commander of Clark Air Base requesting a
hearing on her complaint for discrimination. Consequently, a hearing was held on March 29, 1978
before the U.S. Department of Air Force in Clark Air Base.11

Before the Department of Air Force could render a decision, petitioner Loida Q. Shauf filed a
complaint for damages, dated April 27, 1978, against private respondents Don Detwiler and Anthony
Persi before the Regional Trial Court, Branch LVI at Angeles City, docketed as Civil Case No. 2783,
for the alleged discriminatory acts of herein private respondents in maliciously denying her
application for the GS 1710-9 position.

Private respondents, as defendants in Civil Case No. 2783, filed a motion to dismiss on the ground
that as officers of the United States Armed Forces performing official functions in accordance with
the powers vested in them under the Philippine-American Military Bases Agreement, they are
immune from suit. The motion to dismiss was denied by the trial court. A motion for reconsideration
was likewise denied.

Consequently, private respondents filed an Answer reiterating the issue of jurisdiction and
alleging, inter alia, that defendant Persi’s request to Central Oversea Rotation and Recruiting Office
(CORRO) was not for appointment of a person to the position of Guidance Counselor, GS 1710-9,
but for referrals whom defendant Persi would consider together with local candidates for the position;
that the extension of the employment of Mrs. Abalato was in accordance with applicable regulation
and was not related to plaintiff Loida Q. Shauf’s discrimination complaint; that the decision was a
joint decision of management and CCPO reached at a meeting on June 29, 1977 and based on a
letter of the deputy director of civilian personnel, Headquarters Pacific Air Forces, dated June 15,
1977; and that the ruling was made known to and amplified by the director and the deputy director of
civilian personnel in letters to petitioner Loida Q. Shauf dated August 30, 1977 and September 19,
1977.

The parties submitted a Partial Stipulation of Facts in the court a quo providing, in part, as follows:

a) In October 1976, the position of guidance counselor, GS-1710-9, at Clark Air Base was
vacant;

b) Plaintiff Loida Q, Shauf, a qualified dependent locally available, was among those who
applied for said vacant position of guidance counselor, GS-1710-9;

c) Plaintiff Loida Q. Shauf at the time she filed her aforesaid application was qualified for the
position of guidance counselor, GS-1710-9;

d) Civilian Personnel Office accomplished and forwarded to CORRO an AF Form 1188

covering the position of guidance counselor, GS-1710-9, applied for by plaintiff Loida Q.
Shauf;

e) U.S. Department of Defense Instructions (DODI) No. 1400.23 under Policy and
Procedures provides that-

"Where qualified dependents of military or civilian personnel of the Department of Defense are
locally available for appointment to positions in foreign areas which are designated for U.S. citizen
occupancy and for which recruitment outside the current work force is appropriate, appointment to
the position will be limited to such dependents unless precluded by treaties or other agreements
which provide for preferential treatment for local nationals."

And Air Force Regulation 40-301 dated 12 May 1976 in par. 2 c (1) thereof provides that-

"c. Selection or Referral of Eligible Applicants From the 50 States:

(1)CORRO makes selection, except as provided in (3) below, for oversea positions of
Grades GS-11 and below (and wage grade equivalents) for which it has received an AF
Form 1188, and for higher grade positions if requested by the oversea activity."12

Likewise, a Supplement to Partial Stipulation of Facts was filed by the parties on October 6, 1978,
which reads:

1. Under date of 30 September 1978, plaintiff Loida Q. Shauf through her counsel, Quasha Asperilla
Ancheta Valmonte Peña & Marcos, lodged an appeal before the Civil Service Commission, Appeals
Review Board, from the decision of the Secretary of the Air Force dated 1 September 1978 affirming
the EEO Complaints Examiner’s Findings and Recommended Decision in the Discrimination
Complaint of Mrs. Loida Q. Shauf, No. SF 071380181 dated 3 July 1978, x x x;

2. The aforesaid appeal has not been decided up to now by the Civil Service Commission, Appeals
Review Board; and
3. Plaintiff Loida Q. Shauf has not instituted any action before any federal district court of the United
States impugning the validity of the decision of the Secretary of the Air Force dated 1 September
1978 affirming the EEO Complaints Examiner’s Findings and Recommended Decision in the
Discrimination Complaint of Mrs. Loida Q. Shauf, No. SF 071380181 dated 3 July 1978.13

Thereafter, on March 8, 1988, the trial court rendered judgment in favor of herein petitioner Loida Q.
Shauf, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally to pay the
plaintiffs:

1) The amount $39,662.49 as actual damages or its equivalent in Philippine pesos in

October 1976 as reported by the Central Bank of the Philippines or any authorized agency of
the Government;

2) The amount of P100,000.00 as moral and exemplary damages;

3) Twenty (20%) percent of $39,662.49 or its equivalent in Philippine Pesos in October 1976
as reported by the Central Bank of the Philippines or any authorized agency of the
Government, as attorney’s gees, and;

4) Cost(s) of suit.

SO ORDERED.14

Both parties appealed from the aforecited decision to respondent Court of Appeals.

In their appeal, plaintiffs-appellants (herein petitioners) raised the following assignment of errors:

1. Lower court gravely erred in holding that the actual and exemplary damages and
attorney’s fees may be paid in Philippine Pesos based on the exchange rate prevailing
during October 1976 as determined by the Central Bank;

2. Lower court gravely erred in limiting the amount of moral and exemplary damages
recoverable by plaintiff to P100,000.0015

On the other hand, defendants-appellants (private respondents herein) argued that:

1. The trial court erred in not dismissing the complaint on the ground that defendants-
appellants, as officers/officials of the United States Armed Forces, are immune from suit for
acts done or statements made by them in the performance of their official governmental
functions in accordance with the powers possessed by them under the Philippine-American
Military Bases Agreement of 1947, as amended;

2. The trial court erred in not dismissing the complaint for a) non-exhaustion of administrative
remedies; and b) lack of jurisdiction of the trial court over the subject matter of the case in
view of the exclusive jurisdiction of an appropriate U.S. District Court over an appeal from an
agency decision on a complaint of discrimination under the U.S. Federal Law on Equality of
opportunity for civilian employees;
 3. The trial court erred in holding that plaintiff-appellant Loida Q. Shauf was refused
appointment as guidance counselor by the defendants-appellants on account of her six
(female), color (brown), and national origin (Filipino by birth) and that the trial court erred in
awarding damages to plaintiffs-appellants.16

As stated at the outset, respondent Court of Appeals reversed the decision of the trial court,
dismissed herein petitioners’complaint and denied their motion for reconsideration. Hence this
petition, on the basis of he following grounds:

The respondent Honorable Court of Appeals has decided a question of substance not in accord with
law and/or with applicable decisions of this Honorable Court. Respondent court committed grave
error in dismissing plaintiffs-appellants’ complaint and-

(a) in holding that private respondents are immune from suit for discriminatory acts
performed without or in excess of, their authority as officers of the U.S. Armed Forces;

(b) for applying the doctrine of state immunity from suit when it is clear that the suit is not
against the U.S. Government or its Armed Forces; and

(c) for failing to recognize the fact that the instant action is a pure and simple case for
damages based on the discriminatory and malicious acts committed by private respondents
in their individual capacity who by force of circumstance and accident are officers of the U.S.
Armed Forces, against petitioner Loida Shauf solely on account of the latter’s sex (female),
color (brown), and national origin (Filipino).17

Petitioners aver that private respondents are being sued in their private capacity for discriminatory
acts performed beyond their authority, hence the instant action is not a suit against the United States
Government which would require its consent.

Private respondents, on the other hand, claim that in filing the case, petitioners sought a judicial
review by a Philippine court of the official actuations of respondents as officials of a military unit of
the U.S. Air Force stationed at Clark Air Base. The acts complained of were done by respondents
while administering the civil service laws of the United States. The acts sued upon being a
governmental activity of respondents, the complaint is barred by the immunity of the United States,
as a foreign sovereign, from suit without its consent and by the immunity of the officials of the United
States armed forces for acts committed in the performance of their official functions pursuant to the
grant to the United States armed forces of rights, power and authority within the bases under the
Military Bases Agreement. It is further contended that the rule allowing suits against public officers
and employees for unauthorized acts, torts and criminal acts is a rule of domestic law, not of
international law. It applies to cases involving the relations between private suitors and their
government or state, not the relations between one government and another from which springs the
doctrine of immunity of a foreign sovereign.

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.18

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 been formally impleaded.19 It must be noted, however, that the rule is not also
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 we clearly set forth by Justice Zaldivar
in Director of the Bureau of Telecommunications, et al. Vs. Aligaen, etc., et al.:20 "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."21 The rationale for this ruling is that the doctrine of state immunity cannot be
used as an instrument for perpetrating an injustice.22

In the case of Baer, etc. vs. Tizon, etc., et al.,23 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.,24 we held that:

"x x x 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. x x x.

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.25

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,26 we declared:

It bears stressing at this point that the above observation 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.
II. The court below, in finding that private respondents are guilty of discriminating against petitioner
Loida Q. Shauf on account of her sex, color and origin, categorically emphasized that:

There is ample evidence to sustain plaintiffs’ complaint that plaintiff Loida Q. Shauf was refused
appointment as Guidance Counselor by the defendants on account of her sex, color and origin.

She is a female, brown in color and a Filipino by origin, although married to an American who is a
member of the United States Air Force. She is qualified for the vacant position of Guidance
Counselor in the office of the education director at Clark Air Base. She received a Master of Arts
Degree from the University of Santo Tomas, Manila, in 1971 and has completed 34 semester hours
in psychology-guidance and 25 quarter hours in human behavioral science. She has also completed
all course work in human behavior and counseling psychology for a doctoral degree. She is a civil
service eligible. More important, she had functioned as a Guidance Counselor at the Clark Air Base
at the GS-1710-9 level for approximately four years at the time she applied for the same position in
1976.

In filling the vacant position of Guidance Counselor, defendant Persi did not even consider the
application of plaintiff Loida Q. Shauf, but referred the vacancy to CORRO which appointed Edward
B. Isakson who was not eligible to the position.

In defending his act, defendant Persi gave as his excuse that there was a question in his mind
regarding validity of plaintiff Loida Q. Shauf’s work experience because of lack of record. But his
assertion is belied by the fact that plaintiff Loida Q. Shauf had previously been employed as
Guidance Counselor at the Clark Air Base in 1971 and this would have come out if defendant Persi
had taken the trouble of interviewing her. Nor can defendant free himself from any blame for the
non-appointment of plaintiff Loida Q. Shauf by claiming that it was CORRO that appointed Edward
B. Isakson. This would not have happened if defendant Persi adhered to the regulation that limits the
appointment to the position of Guidance Counselor, GS-1710-9 to qualified dependents of military
personnel of the Department of Defense who are locally available like the plaintiff Loida Q. Shauf.
He should not have referred the matter to CORRO. Furthermore, defendant Persi should have
protested the appointment of Edward B. Isakson who was ineligible for the position. He, however,
remained silent because he was satisfied with the appointment.

Likewise, the acts of the defendant Detwiler in rejecting the appointment of plaintiff Loida Q. Shauf
were undoubtedly discriminatory.

Plaintiff Loida Q. Shauf twice applied for the position of Guidance Counselor sometime in 1975 and
in October 1978. Although she was qualified for the postision, her appointment was rejected ny the
defendant Detwiler. The two who were appointed, a certain Petrucci and Edward B. Isakson, were
ordered removed by the U.S. Civil Service Commission. Instead of replacing Petrucci with the
plaintiff Loida Q. Shauf, the defendant Detwiler had the position vacated by Petrucci abolished. And
in the case of Edward Isakson, the defendant Detwiler ignored the order of the U.S. Civil Service
Commission to have him removed according to the testimony of plaintiff Loida Q. Shauf.

In connection with her complaint against the defendants, plaintiff Loida Q. Shauf was presented a
Notice of Proposed Disposition of her Discrimination Complaint by Col. Charles J. Corey, Vice
Commander, Third Combat Support Group, Clark Air Base, which would entitle her to a temporary
appointment as Guidance Counselor with the implied assurance that she would be appointed in a
permanent capacity in the event of a vacancy.

At the time of the issuance of said Notice, defendants knew that there would be a vacancy in a
permanent position as Guidance Counselor occupied by Mrs. Mary Abalateo and it was understood
between Col. Corey and plaintiff Loida Q. Shauf that this position would be reserved for her.
Knowing this arrangement, defendant Detwiler rejected the request for extension of services of Mrs.
Mary Abalateo. However, after plaintiff Loida Q. Shauf consented to the terms of the Notice of
Proposed Disposition of her Discrimination Complaint, defendant Detwiler extended the services of
Mrs. Mary Abalateo indefinitely. This act barred plaintiff Loida Q. Shauf from applying for the position
of Mrs. Mary Abalateo.

To rebut the evidence of the plaintiffs, defendant cited the findings and conclusions of Mr. Rudolph
Duncan, who was appointed to investigate plaintiff Loida Q. Shauf’s complaint for discrimination and
Col. Charles J. Corey, Vice Commander, Third Combat Support Group that defendants were not
guilty of Discrimination.

It is pointed out, however, that Mr. Rudolph Duncan found plaintiff loida Q. Shauf to be highly
qualified for the position of Guidance Counselor at the GS-1710-9 level and that management
should have hired a local applicant. While Col. Corey characterized the act of defendant Persi as
sloppy and recommend that he be reprimanded. In any event their findings and conclusions are not
binding with this Court.

To blunt the accusation of discrimination against them, defendants maintained that the extension of
the appointment of Mrs. Mary Abalateo was a joint decision of management and Central Civilian
Personnel Office, Clark Air Base. Nonetheless, having earlier rejected by himself the request for
extension of the services of Mrs. Mary Abalateo, defendant Detwiler should not have concurred to
such an extension as the reversal of his stand gave added substance to the charge of discrimination
against him.

To further disprove the charge that the defendants discriminated against plaintiff Loida Q. Shauf for
her non-appointment as Guidance Counselor on account of her being a Filipino and a female,
counsel for the defendants cited the following: (1) that Mrs. Mary Abalateo whose appointment was
extended by the defendant Detwiler is likewise a female and a Filipino by origin; (2) that there are
Filipinos employed in the office of the defendant Persi; and (3) that there were two other women who
applied in 1976 with the plaintiff Loida Q. Shauf for the position of Guidance Counselor.

The contention of the defendants based on the allegations enumerated in Nos. 1 and 2 of the
preceding paragraph is without merit as there is no evidence to show that Mrs. Mary Abalateo and
the Filipinos in the office of the defendant Persi were appointed by the defendants. Moreover, faced
with a choice between plaintiff Loida Q. Shauf or Mrs. Mary Abalateo, it was to be expected that
defendant Detwiler chose to retain Mrs. Mary Abalateo as Guidance Counselor in retaliation for the
complaint of discrimination filed against him by plaintiff Loida Q. Shauf. Finally, as to the contention
based on the allegation in No. 3 of the preceding paragraph that there were two other women
applicants in 1976 with plaintiff Loida Q. Shauf, the record reveals that they had minimum
qualifications unlike plaintiff Loida Q. Shauf who was highly qualified.27

Elementary is the rule that the conclusions and findings of fact of the trial court are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent reasons.28 Absent any
substancial proof, therefore, that the trial court’s decision was grounded entirely on speculations,
surmises or conjectures, the same must be accorded full consideration and respect. This should be
so because the trial court is, after all, in a much better position to observe and correctly appreciate
the respective parties’ evidence as they were presented.29

In the case at bar, there is nothing in the record which suggests any arbitrary, irregular or abusive
conduct or motive on the part of the trial judge in ruling that private respondents committed acts of
discrimination for which they should be held personally liable. His conclusion on the matter is
sufficiently borne out by the evidence on record. We are thus constrained to uphold his findings of
fact.

Respondent Court of Appeals, in its questioned decision, states that private respondents did, in fact,
discriminate against petitioner Loida Q. Shauf. However, it deemed such acts insufficient to prevent
an application of the doctrine of state immunity, contrary to the findings made by the trial court. It
reasons out that "the parties invoked are all American citizens (although plaintiff is a Filipina by
origin) and the appointment of personnel inside the base is clearly a sovereign act of the United
States. This is an internal affair in which we cannot interfere without having to touch some delicate
constitutional issues."30 In other words, it believes that the alleged discriminatory acts are not so
grave in character as would justify the award of damages.

In view of the apparent discrepancy between the findings of fact of respondent Court of Appeals and
the trial court, we are tasked to review the evidence in order to arrive at the correct findings based
on the record. A consideration of the evidence presented supports our view that the court a quo was
correct in holding herein private respondents personally liable and in ordering the indemnification of
petitioner Loida Q. Shauf. The records are clear that even prior to the filing of the complaint in this
case, there were various reports and communications issued on the matter which, while they make
no categorical statement of the private respondents’ liability, nevertheless admit of facts from which
the intent of private respondents to discriminate against Loida Q. Shauf is easily discernible. Witness
the following pertinent excerpts from the documents extant in the folder of Plaintiff’s Exhibits:

1. Notice of Proposed Disposition of Discrimination Complaint, dated May 16, 1977 (Exhibit "G").

B. Mr. Anthony Persi was totally inept in the recruitment practices employed in attempting on fill the
GS 1710-9 Assistant Education applicable DOD regulations. In addition, he failed to conduct an
interview of qualified personnel in the local environment and when the qualifications of the
complainant (sic) were questioned by Mr. Persi he did not request a review by the CCPO nor
request an interview with the complainant (sic). Mr. Persi failed to follow Department of Defense
Instructions Number 1400.23, under Policy and Procedures which states-"Where qualified
dependents of military or civilian personnel of the Department of Defense are locally available for
appointment to positions in foreign areas which are designated for US citizen occupancy and for
which recruitment outside the current work force is appropriate, appointment to the positions will be
limited to such dependents unless precluded by treaties or other agreements which provide for
preferential treatment for local nationals." Attachment to Air Force Supplement to FFM 213.2106 (b)
(6) lists the positions of Guidance Counsellor, GS 1710-9, as positions to be filled by locally available
dependents. An added point is the lack of qualifications of the individual selected for the GS 1710-9
positions as outlined under X-118 Civil Service Handbook. x x x31

2. Letter of the Director of the U.S. Civil Service Commission, San Francisco Region, dated October
27, 1977, addressed to Mr. Don Detwiler, concerning Mr. Edward B. Isakson whose file was
reviewed by the Commission (Exhibit "K").

The position of Guidance Counsellor is one for which the Commission has established a mandatory
education requirement that may not be waived. An individual may not be assigned to such a position
without meeting the minimum qualification requirements. The requirements, as given in Handbook X-
118, are completion of all academic requirements for a bachelor’s degree from an accredited college
or university and successful completion of a teacher education program under an "approved
program" or successful completion of required kinds of courses.

On review of his record, we find that Mr. Isakson has a bachelor’s degree but he does not show
completion of a teacher education program. To qualify for Guidance Counselor on the basis of
coursework and semester hour credit, he would need to have 24 semester hours in Education and
12 semester hours in a combination of Psychology and Guidance subjects directly related to
education. We do not find that he meets these requirements.

xxx

We can appreciate the fact that Mr. Isakson may be working toward meeting the Guidance
Counselor requirements. Nonetheless, he does not appear to meet them at this time. We must,
therefore, request that action be taken to remove him from the position and that efforts be made to
place him in a position for which he qualifies.32

3. Letter of the Staff Judge Advocate of the Department of the Airforce addressed to Mr. Detwiler,
dated January 25, 1977 (Exhibit "L").

1. The attached memo from Captain John Vento of this office is forwarded for your review
and any action you deem appropriate. I concur with his conclusion that there is no evidence
of sex or ethnic bias in this matter. I also concur, however, that there were certain
irregularities in the handling of this selection.

xxx

3. Considering the above, it is most unfortunate that the filing of this latest Guidance
Counselor vacancy was not handled wholly in accordance with prescribed policies and
regulations. This is not to suggest that Mrs. Shauf should necessarily have been hired. But,
she and other qualified candidates should have been given the consideration to which they
were entitled. (At no time now or in the past have Mrs. Shauf’s qualifications ever been
questioned.) Had that happened and management chose to select some qualified candidate
other than Mrs. Shauf, there would be no basis for her complaint.

4. It is my understanding that Mrs. Shauf has filed a formal EEO complaint. While I am
convinced that there was no discrimination in this case, my experience with EEO complaints
teaches me that, if Civil Service Commission finds that nonselection resulted from any kind
of management malpractice, it is prone to brand it as a "discriminatory practice." This usually
results in a remedial order which can often be distasteful to management. x x x.33

The initial burden is on the plaintiff to establish a prima facie case or discrimination. Once the
discriminatory act is proven, the burden shifts to the defendant to articulate some legitimate,
undiscriminatory reason for the plaintiff’s rejection.34 Any such justification is wanting in the case at
bar, despite the prima facie case for petitioner Loida Q. Shauf. Private respondents’ defense is
based purely on outright denials which are insufficient to discharge theonus probandi imposed upon
them. They equally rely on the assertion that they are immune from suit by reason of their official
functions. As correctly pointed out by petitioners in their Memorandum, the mere invocation by
private respondents of the official character of their duties cannot shield them from liability especially
when the same were clearly done beyond the scope of their authority, again citing
the Guinto, case, supra:

The other petitioners in the case before us all aver they have acted in the discharge of their official
functions as officers or agents of the United States. However, this is a matter of evidence. The
charges against them may not be summarily dismissed on their mere assertion that their acts are
imputable to the United States of America, which has not given its consent to be sued. In fact, the
defendants are sought to be held answerable for personal torts in which the United States itself is
not involved. If found liable, they and they alone must satisfy the judgment.
III. Article XIII, Section 3, of the 1987 Constitution provides that the State shall afford full protection
to labor, local and overseas, organized and unorganized, and promote full employment and equality
of employment opportunities for all. This is a carry-over from Article II, Section 9, of the 1973
Constitution ensuring equal work opportunities regardless of sex, race, or creed.

Under the Constitution of the United States, the assurance of equality in employment and work
opportunities regardless of sex, race, or creed is also given by the equal protection clause of the Bill
of Rights. The 14th Amendment, in declaring that no state shall deprive a person of his life, liberty, or
property without due process of law or deny to any person within its jurisdiction the equal protection
of the laws, undoubtedly intended not only that there should be no arbitrary spoliation of property,
but that equal protection and security should be given to all under like circumstances in the
enjoyment of their personal and civil rights, and that all persons should be equally entitled to pursue
their happiness ands acquire and enjoy property. It extends its protection to all persons without
regard to race, color, or class. It means equality of opportunity to all in like circumstances.35

The words "life, liberty, and property" as used in constitutions are representative terms and are
intended to cover every right to which a member of the body politic in entitled under the law. These
terms include the right of self-defense, freedom of speech, religious and political freedom, exemption
from arbitrary arrests, the right to freely buy and sell as others may, the right to labor, to contract, to
terminate contracts, to acquire property, and the right to all our liberties, personal, civil and political-
in short, all that makes life worth living.36

There is no doubt that private respondents Persi and Detwiler, in committing the acts complained of
have, in effect, violated the basic constitutional right of petitioner Loida Q. Shauf to earn a living
which is very much an integral aspect of the right to life. For this, they should be held accountable.

While we recognize petitioner Loida Q. Shauf’s entitlement to an award of moral damages, we

however find no justification for the award of actual or compensatory damages, based on her
supposedly unearned income from March, 1975 up to April, 1978 in the total amount of $39,662.49,
as erroneously granted by the trial court.

Evidence that the plaintiff could have bettered her position had it not been for the defendants’
wrongful act cannot serve as basis for an award of damages, because it is highly
speculative.37 Petitioner Loida Q. Shauf’s claim is merely premised on the possibility that had she
been employed, she would have earned said amount. But, the undeniable fact remains that she was
never so employed. Petitioner never acquired any vested right to the salaries pertaining to the
position of GS 1710-9 to which she was never appointed. Damages which are merely possible are
speculative.38 In determining actual damages, the court cannot rely on speculation, conjecture or
guesswork. Without the actual proof of loss, the award of actual damages is
erroneous.39 Consequently, the award of actual damages made by the trial court should be deleted.
Attorney’s fees, however, may be granted and we believe that an award thereof in the sum of
P20,000.00 is reasonable under the circumstances. 1âw phi 1

IV. Finally, private respondents postulate that petitioner Loida Q. Shauf failed to avail herself of her
remedy under the United States federal legislation on equality of opportunity for civilian employees,
which is allegedly exclusive of any other remedy under American law, let alone remedies before a
foreign court and under a foreign law such as the Civil Code of the Philippines.

In a letter of the Department of the Air Force in Washington, D.C., dated September 1, 1978 and
addressed to petitioner Loida Q. Shauf,40 the appeal rights of the latter from the Air Force decision
were enumerated as follows:
 -You may appeal to the Civil Service Commission within 15 calendar days of receipt of the
decision. Your appeal should be addressed to the Civil Service Commission, Appeals
Review Board, 1990 E Street, N.Q., Washington, D.C. 20415. The appeal and any
representation in support thereof must be submitted in duplicate.

-In lieu of an appeal to the Commission you may file a civil action in an appropriate U.S.
District Court within 30 days of receipt of the decision.

-If you elect to appeal to the Commission’s Appeals Review Board, you may file a civil action
in a U.S. District Court within 30 days of receipt of the Commission’s final decision.

-A civil action may also be filed anytime after 180 days of the date of initial appeal to the
Commission, if a final decision has not been rendered.

As earlier noted, in a Supplement to Partial Stipulation of Facts filed by the parties on October 6,
1978, it was manifested to the trial court that an appeal was lodged by counsel for petitioners on
September 30, 1978 before the Civil Service Commission. Appeals Review Board from the decision
of the Secretary of the Air Force in the discrimination case filed by petitioner Loida Q. Shauf, No. SF
071380181. Said appeal has not been decided up to now.

Furthermore, it is basic that remedial statutes are to be construed liberally. The term "may," as used
in adjective rules, is only permissive and not mandatory, and we see no reason why the so-called
rules on the above procedural options communicated to said petitioner should depart from this
fundamental . petitioner Loida Q. Shauf is not limited to these remedies, but is entitled as a matter of
plain and simple justice to choose that remedy, not otherwise proscribed, which will best advance
and protect her interests. There is, thus, nothing to enjoin her from seeking redress in Philippine
courts which should not be ousted of jurisdiction on the dubious and inconclusive representations of
private respondents on that score.

WHEREFORE, the challenged decision and resolution of respondent Court of Appeals in CA-G.R.
CV No. 17932 are hereby ANNULLED and SET ASIDE. Private respondents are hereby ORDERED,
jointly and severally, to pay petitioners the sum of P100,000.00 as moral damages, P20,000.00 as
and for attorney’s fees, and the costs of suit.

SO ORDERED.

Melencio-Herrera (Chairman), Paras, Padilla and Sarmiento, jj., concur.

Decision and resolution annulled and set aside.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74135 May 28, 1992

M. H. WYLIE and CAPT. JAMES WILLIAMS, petitioners,

vs.
AURORA I. RARANG and THE HONORABLE INTERMEDIATE APPELLATE
COURT, respondents.

GUTIERREZ, JR., J.:

The pivotal issue in this petition centers on the extent of the "immunity from suit" of the officials of a
United States Naval Base inside Philippine territory.

In February, 1978, petitioner M. H. Wylie was the assistant administrative officer while petitioner
Capt. James Williams was the commanding officer of the U. S. Naval Base in Subic Bay, Olongapo
City. Private respondent Aurora I. Rarang was an employee in the office of the Provost Marshal
assigned as merchandise control guard.

M. H. Wylie, in his capacity as assistant administrative officer of the U.S. Naval Station supervised
the publication of the "Plan of the Day" (POD) which was published daily by the US Naval Base
station. The POD featured important announcements, necessary precautions, and general matters
of interest to military personnel. One of the regular features of the POD was the "action line inquiry."
On February 3, 1978, the POD published, under the "NAVSTA ACTION LINE INQUIRY" the
following:

Question: I have observed that Merchandise Control inspector/inspectress are (sic)

consuming for their own benefit things they have confiscated from Base Personnel.
The observation is even more aggravated by consuming such confiscated items as
cigarettes and food stuffs PUBLICLY. This is not to mention "Auring" who is in
herself, a disgrace to her division and to the Office of the Provost Marshal. In lieu of
this observation, may I therefore, ask if the head of the Merchandise Control Division
is aware of this malpractice?

Answer: Merchandise Control Guards and all other personnel are prohibited from
appropriating confiscated items for their own consumption or use. Two locked
containers are installed at the Main Gate area for deposit of confiscated items and
the OPM evidence custodian controls access to these containers.

Merchandise Control Guards are permitted to eat their meals at their worksite due to
heavy workload. Complaints regarding merchandise control guards procedure or
actions may be made directly at the Office of the Provost Marshal for immediate and
necessary action. Specific dates and time along with details of suspected violations
 would be most appreciated. Telephone 4-3430/4-3234 for further information or to
report noted or suspected irregularities. Exhibits E & E-1. (Rollo, pp. 11-12)

The private respondent was the only one who was named "Auring" in the Office of the Provost
Marshal. That the private respondent was the same "Auring" referred to in the POD was conclusively
proven when on February 7, 1978, petitioner M. H. Wylie wrote her a letter of apology for the
"inadvertent" publication. The private respondent then commenced an action for damages in the
Court of First Instance of Zambales (now Regional Trial Court) against
M. H. Wylie, Capt. James Williams and the U. S. Naval Base. She alleged that the article constituted
false, injurious, and malicious defamation and libel tending to impeach her honesty, virtue and
reputation exposing her to public hatred, contempt and ridicule; and that the libel was published and
circulated in the English language and read by almost all the U. S. Naval Base personnel. She
prayed that she be awarded P300,000.00 as moral damages; exemplary damages which the court
may find proper; and P50,000.00 as attorney's fees.

In response to the complaint, the defendants filed a motion to dismiss anchored on three grounds:

1. Defendants M. H. Wylie and Capt. James Williams acted in the performance of

their official functions as officers of the United States Navy and are, therefore,
immune from suit;

2. The United States Naval Base is an instrumentality of the US government which

cannot be sued without its consent; and

3. This Court has no jurisdiction over the subject matter as well as the parties in this
case. (Record on Appeal, pp. 133-134)

The motion was, however, denied.

In their answer, the defendants reiterated the lack of jurisdiction of the court over the case.

In its decision, the trial court ruled that the acts of defendants M. H. Wylie and Cpt. James Williams
were not official acts of the government of the United States of America in the operation and control
of the Base but personal and tortious acts which are exceptions to the general rule that a sovereign
country cannot be sued in the court of another country without its consent. In short, the trial court
ruled that the acts and omissions of the two US officials were not imputable against the US
government but were done in the individual and personal capacities of the said officials. The trial
court dismissed the suit against the US Naval Base. The dispositive portion of the decision reads as
follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants jointly and severally, as follows:

1) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff
Aurora Rarang the sum of one hundred thousand (P100,000.00) pesos by way of
moral and exemplary damages;

2) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff the
sum of thirty thousand (P30,000.00) pesos by way of attorney's fees and expenses of
litigation; and
 3) To pay the costs of this suit.

Counterclaims are dismissed.

Likewise, the suit against the U.S. Naval Base is ordered dismissed. (Record on
Appeal, p. 154)

On appeal, the petitioners reiterated their stance that they are immune from suit since the subject
publication was made in their official capacities as officers of the U. S. Navy. They also maintained
that they did not intentionally and maliciously cause the questioned publication.

The private respondent, not satisfied with the amount of damages awarded to her, also appealed the
trial court's decision.

Acting on these appeals, the Intermediate Appellate Court, now Court of Appeals, modified the trial
court's decision, to wit:

WHEREFORE, the judgment of the court below is modified so that the defendants
are ordered to pay the plaintiff, jointly and severally, the sum of P175,000.00 as
moral damages and the sum of P60,000.00 as exemplary damages. The rest of the
judgment appealed from is hereby affirmed in toto. Costs against the defendants-
appellants. (Rollo, p. 44)

The appellate court denied a motion for reconsideration filed by the petitioners.

Hence, this petition.

In a resolution dated March 9, 1987, we gave due course to the petition.

The petitioners persist that they made the questioned publication in the performance of their official
functions as administrative assistant, in the case of M. H. Wylie, and commanding officer, in the case
of Capt. James Williams of the US Navy assigned to the U. S. Naval Station, Subic Bay, Olongapo
City and were, therefore, immune from suit for their official actions.

In the case of United States of America v. Guinto (182 SCRA 644 [1990]), we discussed the principle
of the state immunity from suit as follows:

The rule that a state may not be sued without its consent, now expressed in Article
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles
of international law that we have adopted as part of the law of our land under Article
II, Section 2.

xxx xxx xxx

Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this doctrine,
as accepted by the majority of states, such principles are deemed incorporated in the
law of every civilized state as a condition and consequence of its membership in the
society of nations. Upon its admission to such society, the state is automatically
obligated to comply with these principles in its relations with other states.
 As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that "there can be no legal right against the
authority which makes the law on which the right depends." (Kawanakoa v.
Polybank, 205 U.S. 349) There are other practical reasons for the enforcement of the
doctrine. In the case of the foreign state sought to be impleaded in the local
jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet
imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary disposition would, in the language of a celebrated case, "unduly
vex the peace of nations." (Da Haber v. Queen of Portugal, 17 Q. B. 171)

While the doctrine appears to prohibit only suits against the state without its consent,
it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy
the same, such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although
it has not been formally impleaded. (Garcia v. Chief of Staff, 16 SCRA 120) In such a
situation, the state may move to dismiss the complaint on the ground that it has been
filed without its consent.

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

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

The consent of the state to be sued may be manifested expressly or impliedly.

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

xxx xxx xxx

The above rules are subject to qualification. Express consent is effected only by the
will of the legislature through the medium of a duly enacted statute. (Republic v.
Purisima, 78 SCRA 470) We have held that not all contracts entered into by the
government will operate as a waiver of its non-suability; distinction must be made
between its sovereign and proprietary acts. (United States of America v. Ruiz, 136
SCRA 487) As for the filing of a complaint by the government, suability will result only
where the government is claiming affirmative relief from the defendant. (Lim v.
Brownell, 107 Phil. 345) (at pp. 652-655)

In the same case we had opportunity to discuss extensively the nature and extent of immunity from
suit of United States personnel who are assigned and stationed in Philippine territory, to wit:

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

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

The petitioners also rely heavily on Baer v. Tizon, (57 SCRA 1) along with several
other decisions, to support their position that they are not suable in the cases below,
the United States not having waived its sovereign immunity from suit. It is
emphasized that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign state

without its consent is appropriate. More specifically, insofar as alien
armed forces is concerned, the starting point is Raquiza
v. Bradford, a 1945 decision. In dismissing a habeas corpus petition
for the release of petitioners confined by American army authorities,
Justice Hilado, speaking for the Court, cited Coleman
v. Tennessee, where it was explicitly declared: "It is well settled that a
foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is
exempt from the civil and criminal jurisdiction of the place." Two years
later, in Tubb and Tedrow v. Griess, this Court relied on the ruling
in Raquiza v. Bradford and cited in support thereof excerpts from the
works of the following authoritative writers: Vattel, Wheaton, Hall,
Lawrence, Oppenheim, Westlake, Hyde, and McNair and
Lauterpacht. Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement, the
treaty provisions should control on such matter, the assumption being
that there was a manifestation of the submission to jurisdiction on the
part of the foreign power whenever appropriate. More to the point
is Syquia v. Almeda Lopez, where plaintiffs as lessors sued the
Commanding General of the United States Army in the Philippines,
seeking the restoration to them of the apartment buildings they
owned leased to the United States armed forces station in the Manila
area. A motion to dismiss on the ground of non-suability was filed and
upheld by respondent Judge. The matter was taken to this Court in
a mandamus proceeding. It failed. It was the ruling that respondent
Judge acted correctly considering that the "action must be considered
as one against the U.S. Government." The opinion of Justice
Montemayor continued: "It is clear that the courts of the Philippines
including the Municipal Court of Manila have no jurisdiction over the
present case for unlawful detainer. The question of lack of jurisdiction
was raised and interposed at the very beginning of the action. The
U.S. Government has not given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this is
not only a case of a citizen filing a suit against his own Government
without the latter's consent but it is of a citizen filing an action against
a foreign government without said government's consent, which
renders more obvious the lack of jurisdiction of the courts of his
country. The principles of law behind this rule are so elementary and
of such general acceptance that we deem it unnecessary to cite
authorities in support thereof."
 xxx xxx xxx

It bears stressing at this point that the above observations do not confer on the
United States of America a blanket immunity for all acts done by it or its agents in the
Philippines. Neither may the other petitioners claim that they are also insulated from
suit in this country merely because they have acted as agents of the United States in
the discharge of their official functions.

There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in
its proprietary or private capacity. It is only when the contract involves its sovereign
or governmental capacity that no such waiver may be implied. This was our ruling
in United States of America v. Ruiz, (136 SCRA 487) where the transaction in
question dealt with the improvement of the wharves in the naval installation at Subic
Bay. As this was a clearly governmental function, we held that the contract did not
operate to divest the United States of its sovereign immunity from suit. In the words
of Justice Vicente Abad Santos:

The traditional rule of immunity excepts a State from being sued in

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

xxx xxx xxx

The restrictive application of State immunity is proper only when the

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

The other petitioners in the cases before us all aver they have acted in the discharge
of their official functions as officers or agents of the United States. However, this is a
matter of evidence. The charges against them may not be summarily dismissed on
their mere assertion that their acts are imputable to the United States of America,
which has not given its consent to be sued. In fact, the defendants are sought to be
 held answerable for personal torts in which the United States itself is not involved. If
found liable, they and they alone must satisfy the judgment. (At pp. 655-658)

In the light of these precedents, we proceed to resolve the present case.

The POD was published under the direction and authority of the commanding officer, U.S. Naval
Station Subic Bay. The administrative assistant, among his other duties, is tasked to prepare and
distribute the POD. On February 3, 1978, when the questioned article was published in the POD,
petitioner Capt. James Williams was the commanding officer while petitioner M.H. Wylie was the
administrative assistant of the US Naval Station at Subic bay.

The NAVSTA ACTION LINE INQUIRY is a regular feature of the POD. It is a telephone answering
device in the office of the Administrative Assistant. The Action Line is intended to provide personnel
access to the Commanding Officer on matters they feel should be brought to his attention for
correction or investigation. The matter of inquiry may be phoned in or mailed to the POD. (TSN,
September 9, 1980, pp. 12-13, Jerry Poblon) According to
M. H. Wylie, the action line naming "Auring" was received about three (3) weeks prior to its being
published in the POD on February 3, 1978. It was forwarded to Rarang's office of employment, the
Provost Marshal, for comment. The Provost Marshal office's response ". . . included a short note
stating that if the article was published, to remove the name." (Exhibit 8-A, p. 5) The Provost
Marshal's response was then forwarded to the executive officer and to the commanding officer for
approval. The approval of the Commanding officer was forwarded to the office of the Administrative
Assistant for inclusion in the POD. A certain Mrs. Dologmodin, a clerk typist in the office of the
Administrative Assistant prepared the smooth copy of the POD. Finally, M. H. Wylie, the
administrative assistant signed the smooth copy of the POD but failed to notice the reference to
"Auring" in the action line inquiry. (Exh. 8-A, pp. 4-5, Questions Nos. 14-15).

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 the
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.

Killing a person in cold blood while on patrol duty, running over a child while driving with reckless
imprudence on an official trip, or slandering a person during office hours could not possibly be
covered by the immunity agreement. Our laws and, we presume, those of the United States do not
allow the commission of crimes in the name of official duty.

The case of Chavez v. Sandiganbayan, 193 SCRA 282 [1991] gives the law on immunity from suit of
public officials:

The general rule is that public officials can be held personally accountable for acts
claimed to have been performed in connection with official duties where they have
acted ultra vires or where there is showing of bad faith.
 xxx xxx xxx

Moreover, the petitioner's argument that the immunity proviso under Section 4(a) of
Executive Order No. 1 also extends to him is not well-taken. A mere invocation of the
immunity clause does not ipso facto result in the charges being automatically
dropped.

In the case of Presidential Commission on Good Government v. Peña (159 SCRA

556 [1988] then Chief Justice Claudio Teehankee, added a clarification of the
immunity accorded PCGG officials under Section 4(a) of Executive Order No. 1 as
follows:

With respect to the qualifications expressed by Mr. Justice Feliciano

in his separate opinion, I just wish to point out two things: First, the
main opinion does not claim absolute immunity for the members of
the Commission. The cited section of Executive Order No. 1 provides
the Commission's members immunity from suit thus: "No civil action
shall lie against the Commission or any member thereof for anything
done or omitted in the discharge of the task contemplated by this
order." No absolute immunity like that sought by Mr. Marcos in his
Constitution for himself and his subordinates is herein involved. It is
understood that the immunity granted the members of the
Commission by virtue of the unimaginable magnitude of its task to
recover the plundered wealth and the State's exercise of police power
was immunity from liability for damages in the official discharge of the
task granted the members of the Commission much in the same
manner that judges are immune from suit in the official discharge of
the functions of their office.
. . . (at pp. 581-582)

xxx xxx xxx

Immunity from suit cannot institutionalize irresponsibility and non-accountability nor

grant a privileged status not claimed by any other official of the Republic. (id., at page
586)

Where the petitioner exceeds his authority as Solicitor General, acts in bad faith, or,
as contended by the private respondent, "maliciously conspir(es) with the PCGG
commissioners in persecuting respondent Enrile by filing against him an evidently
baseless suit in derogation of the latter's constitutional rights and liberties" (Rollo, p.
417), there can be no question that a complaint for damages does not confer a
license to persecute or recklessly injure another. The actions governed by Articles
19, 20, 21, and 32 of the Civil Code on Human Relations may be taken against public
officers or private citizens alike. . . . (pp. 289-291)

We apply the same ruling to this case.

The subject article in the US Newsletter POD dated February 3, 1978 mentions a certain "Auring" as
". . a disgrace to her division and to the Office of the Provost Marshal." The same article explicitly
implies that Auring was consuming and appropriating for herself confiscated items like cigarettes and
foodstuffs. There is no question that the Auring alluded to in the Article was the private respondent
as she was the only Auring in the Office of the Provost Marshal. Moreover, as a result of this article,
the private respondent was investigated by her supervisor. Before the article came out, the private
respondent had been the recipient of commendations by her superiors for honesty in the
performance of her duties.

It may be argued that Captain James Williams as commanding officer of the naval base is far
removed in the chain of command from the offensive publication and it would be asking too much to
hold him responsible for everything which goes wrong on the base. This may be true as a general
rule. In this particular case, however, the records show that the offensive publication was sent to the
commanding officer for approval and he approved it. The factual findings of the two courts below are
based on the records. The petitioners have shown no convincing reasons why our usual respect for
the findings of the trial court and the respondent court should be withheld in this particular case and
why their decisions should be reversed.

Article 2176 of the Civil Code prescribes a civil liability for damages caused by a person's act or
omission constituting fault or negligence, to wit:

Art. 2176. Whoever by act or omission, causes damage to another, there being fault
or negligence is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.

"Fault" or "negligence" in this Article covers not only acts "not punishable by law" but also acts
criminal in character, whether intentional or voluntary or negligent." (Andamo v. Intermediate
Appellate Court, 191 SCRA 195 [1990]).

Moreover, Article 2219(7) of the Civil Code provides that moral damages may be recovered in case
of libel, slander or any other form of defamation. In effect, the offended party in these cases is given
the right to receive from the guilty party moral damages for injury to his feelings and reputation in
addition to punitive or exemplary damages. (Occena v. Icamina, 181 SCRA 328 [1990]). In another
case, Heirs of Basilisa Justiva v. Gustilo, 7 SCRA 72 [1963], we ruled that the allegation of forgery of
documents could be a defamation, which in the light of Article 2219(7) of the Civil Code could by
analogy be ground for payment of moral damages, considering the wounded feelings and
besmirched reputation of the defendants.

Indeed the imputation of theft contained in the POD dated February 3, 1978 is a defamation against
the character and reputation of the private respondent. Petitioner Wylie himself admitted that the
Office of the Provost Marshal explicitly recommended the deletion of the name Auring if the article
were published. The petitioners, however, were negligent because under their direction they issued
the publication without deleting the name "Auring." Such act or omission is ultra vires and cannot be
part of official duty. It was a tortious act which ridiculed the private respondent. As a result of the
petitioners' act, the private respondent, according to the record, suffered besmirched reputation,
serious anxiety, wounded feelings and social humiliation, specially so, since the article was baseless
and false. The petitioners, alone, in their personal capacities are liable for the damages they caused
the private respondent.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision and resolution of the
then Intermediate Appellate Court, now Court of Appeals, are AFFIRMED.

Bidin, Davide, Jr. and Romero, JJ., concur.

Feliciano, J., took no part.

 Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 142476 March 20, 2001

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
THE HONORABLE SANDIGANBAYAN (FIRST DIVISION), respondent.

SANDOVAL-GUTIERREZ, J.:

The issue in the petition is whether or not the Republic of the Philippines may withdraw funds
derived from the sale of an erroneously sequestered aircraft and ordered by this Court to be
deposited in escrow for the benefit of the person who may be legally entitled to the funds.

Before us is the petition for certiorari and mandamus under Section 65 of the 1997 Rules of
Procedure, as amended, filed by the Republic of the Philippines (Republic) assailing the Resolution
of the Sandiganbayan dated September 3, 1999 in Civil Case No. 0033, "Republic of the Philippines
vs. Eduardo M. Cojuangco, Jr., et al." and its Resolution dated February 17, 2000. 1âwphi1.nêt

On July 31, 1987, petitioner Republic and the Presidential Commission on Good Government
(PCGG) filed with respondent Sandiganbayan the said Civil Case No. 0033 for reconveyance,
reversion, accounting, restitution and damages against Eduardo Cojuangco, Jr. and 60 other
defendants. On the strength of this complaint, the PCGG issued several sequestration orders, one of
which covers an aircraft, more particularly described as follows:

Avions Dassault - Breguet Falcon 50

Jet Model - 1982

Manufacturer's Serial No. 082

Cert. of Reg. No. RP-C754

The records show that:

1. The Falcon jet was leased by the United Coconut Chemicals Inc. (Unichem) from
Faysound Ltd., a company in the United States;

2. The lease over the aircraft lapsed in 1987, at which time the aircraft should have been
returned by Unichem to Faysound Ltd., its owner-lessor;

3. In Civil Case No. 0033, Cojuangco or any of the defendants has not claimed ownership or
interest in the Falcon jet;

4. Unichem has not been sequestered. Only the shares of Cojuangco in Unichem were
sequestered; and
 5. But no one, not even the owner, Faysound Ltd., came forward or questioned before the
Sandiganbayan the legality of PCGG's sequestration of the aircraft.

On March 20, 1989, or two (2) years after the lease of the Falcon Falcon jet expired, the PCGG filed
with the Sandiganbayan a "Motion For Authority To Sell Sequestered Aircraft Pending Litigation" on
the ground that it is fast deteriorating. The Sandiganbayan, in its Resolution dated May 18, 1989,
denied PCGG's motion, holding that it found "no justification prima facie or otherwise xxx for the
seizure from the lessee." Forthwith, the PCGG filed with this Court a petition for certiorari (G.R. No.
88336) alleging in the main that the Sandiganbayan acted with grave abuse of discretion in denying
its motion to sell the aircraft and praying that the Resolution of May 18, 1989 be nullified. On June 6,
1989, this Court issued a temporary restraining order directing the Sandiganbayan to cease and
desist from enforcing its assailed May 18, 1989 Resolution. This TRO aimed to "prevent the
Sandiganbayan from taking further actions proceeding upon or pursuant to its assumption that the
airplane has been unlawfully sequestered and should not be in, the custody of the PCGG, since that
was the bone of contention to be resolved at that posture of the case."

Relying on the temporary restraining order issued by this Court, the PCGG, on September 28, 1989,
sold the aircraft to Walter Fuller Aircraft, Inc., (Fuller Aircraft), a US corporation, for US
$7,138,168.65 which was deposited in escrow with the PNB.1 The sale was without authority from
the Sandiganbayan.

On December 26, 1990, the Supreme Court en banc dismissed PCGG's petition in G.R. No. 88336,
now in 192 SCRA 743, holding that "the decision to sell the aircraft is not within the limited
administrative powers of the PCGGbut requires the sanction of the Sandiganbayan which can grant
or withhold the same in the exercise of sound discretion and on the basis of the evidence before it."
The dispositive portion of this Court's Decision reads:

'WHEREFORE, the petition at bar is hereby DISMISSED. The PCGG is hereby ordered to
deposit the proceeds of the sale of the subject aircraft under a special time deposit with the
Philippine National Bank for the account of the Sandiganbayan in escrow for the person or
persons, natural or juridical, who may be adjudged lawfully entitled thereto. The Solicitor
General is also ordered to submit to this Court, within ten (10) days from notice hereof,
certified true copies of the bill of the sale and all other pertinent documents regarding the
sale of said aircraft to Walter Fuller Aircraft, Inc."2

According to petitioner Republic, the Certificate of Time Deposit No. 463109 dated July 28, 1999
shows that as of that date, the amount of US$8,568,905.55 was deposited with the PNB for the
account of the Sandiganbayan in trust for the beneficial owner.3

Meanwhile, Faysound Ltd., filed with the District Court of Arkansas in the United States an action
(No. LR-C-89-834) to recover the Falcon jet from Fuller Aircraft, the buyer in the 1989 PCGG sale.

In a judgment dated October 29, 1990, the District Court ordered that title to the Falcon jet be
returned by Fuller Aircraft to Faysound, Ltd., thus:

"Pursuant to the Memorandum Opinion filed contemporaneously herewith, summary

judgment is hereby granted in favor of plaintiff Faysound Limited. On the motion for summary
judgment filed by defendant Walter Fuller Aircraft Sales, Inc., the same is hereby denied and
judgment on said motion is rendered in favor of plaintiff Faysound Limited.

In conformity with this ruling, title to the Falcon 50, which is the subject of this litigation, is
vested in the plaintiff Faysound Limited free and clear of any and all encumbrances save for
 the costs of any repairs made on said plane by the Falcon Jet Corporation. The claim for
storage charged on behalf of Falcon Jet is denied since Faysound bears no responsibility for
the presence of the plane at the Falcon Jet facility in Little Rock Arkansas. At any rate,
Falcon Jet interpled the plane into the custody of the Court and under these circumstances
cannot claim storage for the plane. Storage charges may be claimed by Falcon jet against
Faysound Limited beginning with the date of this judgment."4

Considering that it was deprived of the aircraft sold to it, Fuller Aircraft sued the Republic and PCGG
for breach of warranty with damages (No. CA3-90-2785-R) in the District Court of Texas, Dallas
Division. On December 2, 1993, this court rendered against the Republic and PCGG a
decisions5 which partly reads:

"BE IT REMEMBERED, in accordance with the Court's findings of Fact and Conclusions of
Law, made on the 21st day of October, 1993, as follows:

"IT IS ORDERED, ADJUDGED, AND DECREED, that judgment be and the same is hereby
entered in favor of the Plaintiff Walter Fuller Aircraft Sales, Inc. and against the Defendants
The Republic of the Philippines and the Presidential Commission on Good Government,
jointly and severally, in the amount of Fourteen Million Nine-Hundred Twenty-Eight
Thousand Four Hundred Fifty-seven Dollars and Twenty-Nine Cents ($14,928,457.29). The
principal amount of this judgment includes pre-judgment interest at the rate of 10%
compounded on the attorney's fees award, for the period from April 9, 1990, through October
27, 1993, as follows:

$9,750,000.00

975,000.00 interest through April 1991

$10,725,000.00

1,072,500.00 interest through April 1992

$11,795,000.00

1,179,750.00 interest through April 1993

$12,977,250.00

718,193.01 interest through October 27, 1992 at $3,555.41 per day

($1,297.275 divided by 365 days x 202 days)

$13,945,443.01

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Defendants, jointly and
severally, shall pay post judgment interest at the legal rate of 3.385% per annum pursuant to
18 U.S.C. & 1961 from and after October 28, 1993, until such time as this Judgment is
satisfied in full.11

On October 14, 1996, the PCGG, in order to settle the money judgment against it, entered into an
"Agreement"6with Fuller Aircraft providing, among others, that the Republic of the Philippines agreed
to pay Fuller $11 million on October 15, 1996 and $3 million, in equal monthly installments,
beginning November 15, 1996 and ending October 15, 1997 in settlement of Fuller Aircraft's claim
which, per decision of the Texas Court, amounts to $14,928,457.29.

On April 13, 1998, the PCGG filed with the Sandiganbayan an "Ex-Parte Motion to Withdraw" dated
April 7, 1998 wherein it sought that:

"… the plaintiff's Urgent Motion to Withdraw Funds Deposited in Escrow dated October 9,
1996, be deemed withdrawn and the PNB be immediately directed to release the funds on
deposit to the Bureau of Treasury for transmission to Walter Fuller Sales, Inc., with the
above Agreement and decisions of the US Federal Courts,"

On September 3, 1999, the Sandiganbayan issued the first questioned Resolution denying
petitioner's motion to release the "Falcon Jet escrow account" because: (a) it does not appear from
the records that the person lawfully entitled to the escrow deposit has been determined; (b) the
motion contravenes the ruling of the Supreme Court in Republic v. Sandiganbayan7 requiring the
PCGG to deposit the proceeds of the sale of the sequestered aircraft with the PNB; and (c) although
the records disclose two authenticated copies of foreign judgments,8 there is no indication that
copies of the deed of sale of the aircraft and the compromise agreement have been duly
authenticated.

The PCGG then filed a motion for reconsideration but the same was denied by the Sandiganbayan
in its Resolution dated February 17, 2000.

Hence, the instant petition. Petitioner Republic contends that respondent Sandiganbayan gravely
abused its discretion when it denied PCGG'S motion to release the funds deposited in escrow with
the PNB to the Bureau of Treasury for transmission to Fuller Aircraft. 1âw phi 1.nêt

The Sandiganbayan failed to file a comment on the instant petition. Thus, this Court has no way of
determining why it failed to resolve in more than one decade who is lawfully entitled to the escrow
deposit.

As shown by the records, Faysound Ltd. is the owner of the Falcon jet. In fact, this is admitted by
petitioner Republic itself. As mentioned earlier, Cojuangco or any of the defendants in Civil Case No.
0033 has no interest in it. Clearly, this aircraft was erroneously sequestered. It is thus patently illegal
for the PCGG to sell it to Fuller Aircraft.

Petitioner does not disclaim its financial obligation to Fuller Aircraft under the "Agreement." Because
of its failure to fulfill the same, petitioner, as previously stated, filed with the Sandiganbayan a motion
for the release of the escrow deposit to the Bureau of Treasury for transmittal to Fuller Aircraft.
Petitioner alleged that for the delay in the final settlement of its financial liability, the Government of
the Philippines must pay an interest surcharge in favor of Fuller Aircraft in the sum of US$2,000.00 a
day Moreover, petitioner is under heavy diplomatic pressure.

Considering the circumstances obtaining in this case, we rule that petitioner Republic cannot be held
liable under the "Agreement." It must be stressed that petitioner did not authorize the PCGG to enter
into such contract with Fuller Aircraft. Granting that the PCGG was so authorized, however, it
exceeded its authority. Worse, the sale of the aircraft was without the approval of the
Sandiganbayan. This Court, in G.R. No. 88336, held:

"x x x From the preceding discussion of the cases hereinbefore cited and the contending
submissions of the parties in the present recourse, we cannot but make the observation that
 the decision to sell the aircraft is not within the limited administrative powers of the PCGG
but requires the sanction of the Sandiganbayan which can grant or withhold the same in the
exercise of sound discretion and on the basis of the evidence before it. Without such
approval by the judicial authority concerned, and no abuse of discretion on its part having
been established, it irresistibly follows that any sale of said aircraft under the circumstances
obtaining in this case would constitute a prohibited and invalid disposition by the
PCGG." (Underscoring supplied.)

Moreover, inasmuch as the sale of the aircraft by the PCGG to Fuller Aircraft is void, it follows that
the "Agreement" between the PCGG and Fuller Aircraft is likewise a nullity.

Correspondingly, petitioner Republic cannot be bound by the terms of the said "Agreement" and
thus, there can be no cause of action against it.

In Chavez vs. Sandiganbayan,9 this Court ruled that the PCGG or any of its member may be held
civilly liable if they did not act in good faith and within the scope of their authority in the performance
of their official duties. Likewise, in Director of Bureau of Communications vs. Aligaen,10 this Court
held that unauthorized acts by its government officials or officers are not acts of the State.

Petitioner must, therefore, take immediate appropriate action against the PCGG personnel involved
in the unauthorized sale of the aircraft.

Meanwhile, it is the legal duty of petitioner Republic to return to Fuller Aircraft, through the PCGG,
the escrow deposit in the sum of US $8,568,905.55 as of July 1999. Otherwise, petitioner may
enrich itself unjustly and may be held liable for keeping the said amount indefinitely to the prejudice
of Fuller Aircraft whose right to the escrow deposit has not been questioned by any party in Civil
Case No. 0033.

WHEREFORE, the petition is GRANTED. The challenged Resolutions dated September 3, 1999
and February 17, 2000 are REVERSED and SET ASIDE. Respondent Sandiganbayan is directed to
order the release of the subject escrow account to the PCGG for transmission to Walter Fuller
Aircraft Sales, Inc. Within ten (10) days from its compliance, the PCGG is ordered to submit to the
Sandiganbayan the corresponding report. No costs.

SO ORDERED.

Melo, Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

 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. 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.

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. 28Respondent 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 viresor 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.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 84607 March 19, 1993

REPUBLIC OF THE PHILIPPINES, GEN. RAMON MONTANO, GEN. ALFREDO LIM, GEN.
ALEXANDER AGUIRRE, COL. EDGAR DULA TORRES, COL. CEZAR NAZARENO, MAJ.
FILEMON GASMEN, PAT. NICANOR ABANDO, PFC SERAFIN CEBU, JR., GEN. BRIGIDO
PAREDES, COL. ROGELIO MONFORTE, PFC ANTONIO LUCERO, PAT. JOSE MENDIOLA,
PAT. NELSON TUASON, POLICE CORPORAL PANFILO ROGOS, POLICE LT. JUAN B.
BELTRAN, PAT. NOEL MANAGBAO, MARINE THIRD CLASS TRAINEE (3CT) NOLITO
NOGATO, 3CT ALEJANDRO B. NAGUIO, JR., EFREN ARCILLAS, 3CT AGERICO LUNA, 3CT
BASILIO BORJA, 3CT MANOLITO LUSPO, 3CT CRISTITUTO GERVACIO, 3CT MANUEL DELA
CRUZ, JR., MARINE (CDC) BN., (CIVIL DISTURBANCE CONTROL), MOBILE DISPERSAL
TEAM (MDT), LT. ROMEO PAQUINTO, LT. LAONGLAANG GOCE, MAJ. DEMETRIO DE LA
CRUZ, POLICE CAPTAIN RODOLFO NAVAL, JOHN DOE, RICHARD DOE, ROBERTO DOE
AND OTHER DOES, petitioners,
vs.
HON. EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch IX, ERLINDA C.
CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA
GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA YUMUL, MIGUEL ARABE,
TERESITA ARJONA, RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE
CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the deceased (ROBERTO
C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO BAUTISTA, DANTE EVANGELIO, ADELFA
ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and
(names of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE ROSEL, RUBEN
CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR., EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA,
WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS, TOMAS VALLOS, ARNOLD ENAJE,
MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORIANO QUIJANO, JOEY ADIME, RESIENO ADUL,
ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO ALMONTE,
BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO,
FABIAN CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS,
MARIO DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN
LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL SAYAO,
BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO
MEDINA, LITO NOVENARIO, and ROSELLA ROBALE, respondents.

G.R. No. 84645 March 19, 1993

ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA

EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA
YUMUL, MIGUEL ARABE, TERESITA ARJONA, RONALDO CAMPOMANES AND CARMENCITA
ARDONI VDA. DE CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the
deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO GRAMPA, ANGELITO
GUTIERREZ, BERNABE LAKINDANUM, ROBERTO YUMUL, LEOPOLDO ALONZO, ADELFA
ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and
(names of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE ROSEL, RUBEN
CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR. EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA,
WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS TOMAS VALLOS, ARNOLD ENAJE,
MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORINO QUIJANO, JOEY ADIME, RESIENO ADUL,
ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO ALMONTE,
BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO,
FABIAN CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS,
MARIO DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN
LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL SAYAO,
BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO
MEDINA, LITO NOVENARIO, ROSELLA ROBALE, petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, and HONORABLE EDILBERTO G. SANDOVAL, Regional
Trial Court of Manila, Branch 9, respondents.

The Solicitor General for the Republic of the Philippines.

Structural Alternative Legal Assistance for Grassroots for petitioners in 84645 & private
respondents in 84607.

CAMPOS, JR., J.:

People may have already forgotten the tragedy that transpired on January 22, 1987. It is quite
ironic that then, some journalists called it a Black Thursday, as a grim reminder to the nation
of the misfortune that befell twelve (12) rallyists. But for most Filipinos now, the Mendiola
massacre may now just as well be a chapter in our history books. For those however, who
have become widows and orphans, certainly they would not settle for just that. They seek
retribution for the lives taken that will never be brought back to life again.

Hence, the heirs of the deceased, together with those injured (Caylao group), instituted this
petition, docketed as G.R. No. 84645, under Section 1 of Rule 65 of the Rules of Court,
seeking the reversal and setting aside of the Orders of respondent Judge Sandoval, 1 dated
May 31 and August 8, 1988, dismissing the complaint for damages of herein petitioners against
the Republic of the Philippines in Civil Case No. 88-43351.

Petitioner, the Republic of the Philippines, through a similar remedy, docketed as G.R. No.
84607, seeks to set aside the Order of respondent Judge dated May 31, 1988, in Civil Case
No. 88-43351 entitled "Erlinda Caylao, et al. vs. Republic of the Philippines, et al."

The pertinent portion of the questioned Order 2 dated May 31, 1988, reads as follows:

With respect however to the other defendants, the impleaded Military Officers,
since they are being charged in their personal and official capacity, and
 holding them liable, if at all, would not result in financial responsibility of the
government, the principle of immunity from suit can not conveniently and
correspondingly be applied to them.

WHEREFORE, the case as against the defendant Republic of the Philippines is

hereby dismissed. As against the rest of the defendants the motion to dismiss
is denied. They are given a period of ten (10) days from receipt of this order
within which to file their respective pleadings.

On the other hand, the Order 3, dated August 8, 1988, denied the motions filed by both parties, for
a reconsideration of the abovecited Order, respondent Judge finding no cogent reason to disturb
the said order.

The massacre was the culmination of eight days and seven nights of encampment by
members of the militant Kilusang Magbubukid sa Pilipinas (KMP) at the then Ministry (now
Department) of Agrarian Reform (MAR) at the Philippine Tobacco Administration Building
along Elliptical Road in Diliman, Quezon City.

The farmers and their sympathizers presented their demands for what they called "genuine
agrarian reform". The KMP, led by its national president, Jaime Tadeo, presented their
problems and demands, among which were: (a) giving lands for free to farmers; (b) zero
retention of lands by landlords; and (c) stop amortizations of land payments.

The dialogue between the farmers and the MAR officials began on January 15, 1987. The two
days that followed saw a marked increase in people at the encampment. It was only on
January 19, 1987 that Jaime Tadeo arrived to meet with then Minister Heherson Alvarez, only
to be informed that the Minister can only meet with him the following day. On January 20,
1987, the meeting was held at the MAR conference room. Tadeo demanded that the minimum
comprehensive land reform program be granted immediately. Minister Alvarez, for his part,
can only promise to do his best to bring the matter to the attention of then President Aquino,
during the cabinet meeting on January 21, 1987.

Tension mounted the following day. The farmers, now on their seventh day of encampment,
barricaded the MAR premises and prevented the employees from going inside their offices.
They hoisted the KMP flag together with the Philippine flag.

At around 6:30 p.m. of the same day, Minister Alvarez, in a meeting with Tadeo and his
leaders, advised the latter to instead wait for the ratification of the 1987 Constitution and just
allow the government to implement its comprehensive land reform program. Tadeo, however,
countered by saying that he did not believe in the Constitution and that a genuine land reform
cannot be realized under a landlord-controlled Congress. A heated discussion ensued
between Tadeo and Minister Alvarez. This notwithstanding, Minister Alvarez suggested a
negotiating panel from each side to meet again the following day.

On January 22, 1987, Tadeo's group instead decided to march to Malacañang to air their
demands. Before the march started, Tadeo talked to the press and TV media. He uttered fiery
words, the most telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kinakailangan
alisin din niya ang barikada sa Mendiola sapagkat bubutasin din namin iyon at dadanak ang
dugo . . . ." 4
The farmers then proceeded to march to Malacañang, from Quezon Memorial Circle, at 10:00
a.m. They were later joined by members of other sectoral organizations such as the Kilusang
Mayo Uno (KMU), Bagong Alyansang Makabayan (BAYAN), League of Filipino Students (LFS)
and Kongreso ng Pagkakaisa ng Maralitang Lungsod (KPML).

At around 1:00 p.m., the marchers reached Liwasang Bonifacio where they held a brief
program. It was at this point that some of the marchers entered the eastern side of the Post
Office Building, and removed the steel bars surrounding the garden. Thereafter, they joined
the march to Malacañang. At about 4:30 p.m., they reached C.M. Recto Avenue.

In anticipation of a civil disturbance, and acting upon reports received by the Capital
Regional Command (CAPCOM) that the rallyists would proceed to Mendiola to break through
the police lines and rush towards Malacañang, CAPCOM Commander General Ramon E.
Montaño inspected the preparations and adequacy of the government forces to quell
impending attacks.

OPLAN YELLOW (Revised) was put into effect. Task Force Nazareno under the command of
Col. Cesar Nazareno was deployed at the vicinity of Malacañang. The civil disturbance
control units of the Western Police District under Police Brigadier General Alfredo S. Lim
were also activated.

Intelligence reports were also received that the KMP was heavily infiltrated by CPP/NPA
elements and that an insurrection was impending. The threat seemed grave as there were
also reports that San Beda College and Centro Escolar University would be forcibly occupied.

In its report, the Citizens' Mendiola Commission (a body specifically tasked to investigate the
facts surrounding the incident, Commission for short) stated that the government anti-riot
forces were assembled at Mendiola in a formation of three phalanges, in the following
manner:

(1) The first line was composed of policemen from police stations Nos. 3, 4, 6,
7, 8, 9 and 10 and the Chinatown detachment of the Western Police
District. Police Colonel Edgar Dula Torres, Deputy Superintendent of the
Western Police District, was designated as ground commander of the CDC first
line of defense. The WPD CDC elements were positioned at the intersection of
Mendiola and Legarda Streets after they were ordered to move forward from
the top of Mendiola bridge. The WPD forces were in khaki uniform and carried
the standard CDC equipment — aluminum shields, truncheons and gas masks.

(2) At the second line of defense about ten (10) yards behind the WPD
policemen were the elements of the Integrated National Police (INP) Field Force
stationed at Fort Bonifacio from the 61st and 62nd INP Field Force, who carried
also the standard CDC equipment — truncheons, shields and gas masks. The
INP Field Force was under the command of Police Major Demetrio dela Cruz.

(3) Forming the third line was the Marine Civil Disturbance Control Battalion
composed of the first and second companies of the Philippine Marines
stationed at Fort Bonifacio. The marines were all equipped with shields,
truncheons and M-16 rifles (armalites) slung at their backs, under the
command of Major Felimon B. Gasmin. The Marine CDC Battalion was
positioned in line formation ten (10) yards farther behind the INP Field Force.
 At the back of the marines were four (4) 6 x 6 army trucks, occupying the entire
width of Mendiola street, followed immediately by two water cannons, one on
each side of the street and eight fire trucks, four trucks on each side of the
street. The eight fire trucks from Fire District I of Manila under Fire
Superintendent Mario C. Tanchanco, were to supply water to the two water
cannons.

Stationed farther behind the CDC forces were the two Mobile Dispersal Teams
(MDT) each composed of two tear gas grenadiers, two spotters, an assistant
grenadier, a driver and the team leader.

In front of the College of the Holy Spirit near Gate 4 of Malacañang stood the
VOLVO Mobile Communications Van of the Commanding General of
CAPCOM/INP, General Ramon E. Montaño. At this command post, after
General Montaño had conferred with TF Nazareno Commander, Colonel Cezar
Nazareno, about the adequacy and readiness of his forces, it was agreed
that Police General Alfredo S. Lim would designate Police Colonel Edgar Dula
Torresand Police Major Conrado Francisco as negotiators with the marchers.
Police General Lim then proceeded to the WPD CDC elements already
positioned at the foot of Mendiola bridge to relay to Police Colonel Torres and
Police Major Francisco the instructions that the latter would negotiate with the
marchers. 5 (Emphasis supplied)

The marchers, at around 4:30 p.m., numbered about 10,000 to 15,000. From C.M. Recto
Avenue, they proceeded toward the police lines. No dialogue took place between the
marchers and the anti-riot squad. It was at this moment that a clash occurred and, borrowing
the words of the Commission "pandemonium broke loose". The Commission stated in its
findings, to wit:

. . . There was an explosion followed by throwing of pillboxes, stones and

bottles. Steel bars, wooden clubs and lead pipes were used against the police.
The police fought back with their shields and truncheons. The police line was
breached. Suddenly shots were heard. The demonstrators disengaged from
the government forces and retreated towards C.M. Recto Avenue. But sporadic
firing continued from the government forces.

After the firing ceased, two MDTs headed by Lt. Romeo Paquinto and Lt.
Laonglaan Gocesped towards Legarda Street and lobbed tear gas at the
remaining rallyist still grouped in the vicinity of Mendiola. After dispersing the
crowd, the two MDTs, together with the two WPD MDTs, proceeded to
Liwasang Bonifacio upon order of General Montaño to disperse the rallyists
assembled thereat. Assisting the MDTs were a number of policemen from the
WPD, attired in civilian clothes with white head bands, who were armed with
long firearms. 6(Emphasis ours)

After the clash, twelve (12) marchers were officially confirmed dead, although according to
Tadeo, there were thirteen (13) dead, but he was not able to give the name and address of
said victim. Thirty-nine (39) were wounded by gunshots and twelve (12) sustained minor
injuries, all belonging to the group of the marchers.

Of the police and military personnel, three (3) sustained gunshot wounds and twenty (20)
suffered minor physical injuries such as abrasions, contusions and the like.
In the aftermath of the confrontation, then President Corazon C. Aquino issued
Administrative Order No. 11, 7 (A.O. 11, for brevity) dated January 22, 1987, which created the
Citizens' Mendiola Commission. The body was composed of retired Supreme Court Justice
Vicente Abad Santos as Chairman, retired Supreme Court Justice Jose Y. Feria and Mr. Antonio U.
Miranda, both as members. A.O. 11 stated that the Commission was created precisely for the
"purpose of conducting an investigation of the disorder, deaths, and casualties that took place in
the vicinity of Mendiola Bridge and Mendiola Street and Claro M. Recto Avenue, Manila, in the
afternoon of January 22, 1987". The Commission was expected to have submitted its findings not
later than February 6, 1987. But it failed to do so. Consequently, the deadline was moved to
February 16, 1987 by Administrative Order No. 13. Again, the Commission was unable to meet this
deadline. Finally, on February 27, 1987, it submitted its report, in accordance with Administrative
Order No. 17, issued on February 11, 1987.

In its report, the Commission recapitulated its findings, to wit:

(1) The march to Mendiola of the KMP led by Jaime Tadeo, together with the
other sectoral groups, was not covered by any permit as required under Batas
Pambansa Blg. 880, the Public Assembly Act of 1985, in violation of paragraph
(a) Section 13, punishable under paragraph (a), Section 14 of said law.

(2) The crowd dispersal control units of the police and the military were armed
with .38 and .45 caliber handguns, and M-16 armalites, which is a prohibited
act under paragraph 4(g), Section 13, and punishable under paragraph (b),
Section 14 of Batas Pambansa Blg. 880.

(3) The security men assigned to protect the WPD, INP Field Force, the Marines
and supporting military units, as well as the security officers of the police and
military commanders were in civilian attire in violation of paragraph (a),
Section 10, Batas Pambansa 880.

(4) There was unnecessary firing by the police and military crowd dispersal
control units in dispersing the marchers, a prohibited act under paragraph (e),
Section 13, and punishable under paragraph (b), Section 14, Batas Pambansa
Blg. 880.

(5) The carrying and use of steel bars, pillboxes, darts, lead pipe, wooden
clubs with spikes, and guns by the marchers as offensive weapons are
prohibited acts punishable under paragraph (g), Section 13, and punishable
under paragraph (e), Section 14 of Batas Pambansa Blg. 880.

(6) The KMP farmers broke off further negotiations with the MAR officials and
were determined to march to Malacañang, emboldened as they are, by the
inflammatory and incendiary utterances of their leader, Jaime Tadeo —
"bubutasin namin ang barikada . . Dadanak and dugo . . . Ang nagugutom na
magsasaka ay gagawa ng sariling butas. . .

(7) There was no dialogue between the rallyists and the government forces.
Upon approaching the intersections of Legarda and Mendiola, the marchers
began pushing the police lines and penetrated and broke through the first line
of the CDC contingent.
 (8) The police fought back with their truncheons and shields. They stood their
ground but the CDC line was breached. There ensued gunfire from both sides.
It is not clear who started the firing.

(9) At the onset of the disturbance and violence, the water cannons and tear
gas were not put into effective use to disperse the rioting crowd.

(10) The water cannons and fire trucks were not put into operation because (a)
there was no order to use them; (b) they were incorrectly prepositioned; and
(c) they were out of range of the marchers.

(11) Tear gas was not used at the start of the disturbance to disperse the
rioters. After the crowd had dispersed and the wounded and dead were being
carried away, the MDTs of the police and the military with their tear gas
equipment and components conducted dispersal operations in the Mendiola
area and proceeded to Liwasang Bonifacio to disperse the remnants of the
marchers.

(12) No barbed wire barricade was used in Mendiola but no official reason was
given for its absence. 8

From the results of the probe, the Commission recommended 9 the criminal prosecution of four
unidentified, uniformed individuals, shown either on tape or in pictures, firing at the direction of
the marchers. In connection with this, it was the Commission's recommendation that the National
Bureau of Investigation (NBI) be tasked to undertake investigations regarding the identities of
those who actually fired their guns that resulted in the death of or injury to the victims of the
incident. The Commission also suggested that all the commissioned officers of both the Western
Police District and the INP Field Force, who were armed during the incident, be prosecuted for
violation of paragraph 4(g) of Section 13, Batas Pambansa Blg. 880, the Public Assembly Act of
1985. The Commission's recommendation also included the prosecution of the marchers, for
carrying deadly or offensive weapons, but whose identities have yet to be established. As for
Jaime Tadeo, the Commission said that he should be prosecuted both for violation of paragraph
(a), Section 13, Batas Pambansa Blg. 880 for holding the rally without a permit and for violation of
Article 142, as amended, of the Revised Penal Code for inciting to sedition. As for the following
officers, namely: (1) Gen. Ramon E. Montaño; (2) Police Gen. Alfredo S. Lim; (3) Police Gen. Edgar
Dula Torres; (4) Police Maj. Demetrio dela Cruz; (5) Col. Cezar Nazareno; and (5) Maj. Felimon
Gasmin, for their failure to make effective use of their skill and experience in directing the
dispersal operations in Mendiola, administrative sanctions were recommended to be imposed.

The last and the most significant recommendation of the Commission was for the deceased
and wounded victims of the Mendiola incident to be compensated by the government. It was
this portion that petitioners (Caylao group) invoke in their claim for damages from the
government.

Notwithstanding such recommendation, no concrete form of compensation was received by

the victims. Thus, on July 27, 1987, herein petitioners, (Caylao group) filed a formal letter of
demand for compensation from the Government. 10 This formal demand was indorsed by the
office of the Executive Secretary to the Department of Budget and Management (DBM) on August
13, 1987. The House Committee on Human Rights, on February 10, 1988, recommended the
expeditious payment of compensation to the Mendiola victims. 11

After almost a year, on January 20, 1988, petitioners (Caylao group) were constrained to
institute an action for damages against the Republic of the Philippines, together with the
military officers, and personnel involved in the Mendiola incident, before the trial court. The
complaint was docketed as Civil Case No. 88-43351.

On February 23, 1988, the Solicitor General filed a Motion to Dismiss on the ground that the
State cannot be sued without its consent. Petitioners opposed said motion on March 16,
1988, maintaining that the State has waived its immunity from suit and that the dismissal of
the instant action is contrary to both the Constitution and the International Law on Human
Rights.

Respondent Judge Sandoval, in his first questioned Order, dismissed the complaint as
against the Republic of the Philippines on the ground that there was no waiver by the State.
Petitioners (Caylao group) filed a Motion for Reconsideration therefrom, but the same was
denied by respondent judge in his Order dated August 8, 1988. Consequently, Caylao and her
co-petitioners filed the instant petition.

On the other hand, the Republic of the Philippines, together with the military officers and
personnel impleaded as defendants in the court below, filed its petition for certiorari.

Having arisen from the same factual beginnings and raising practically identical issues, the
two (2) petitions were consolidated and will therefore be jointly dealt with and resolved in this
Decision.

The resolution of both petitions revolves around the main issue of whether or not the State
has waived its immunity from suit.

Petitioners (Caylao group) advance the argument that the State has impliedly waived its
sovereign immunity from suit. It is their considered view that by the recommendation made
by the Commission for the government to indemnify the heirs and victims of the Mendiola
incident and by the public addresses made by then President Aquino in the aftermath of the
killings, the State has consented to be sued.

Under our Constitution the principle of immunity of the government from suit is expressly
provided in Article XVI, Section 3. The principle is based on the very essence of sovereignty,
and on the practical ground that there can be no legal right as against the authority that
makes the law on which the right depends. 12 It also rests on reasons of public policy — that
public service would be hindered, and the public endangered, if the sovereign authority could be
subjected to law suits at the instance of every citizen and consequently controlled in the uses and
dispositions of the means required for the proper administration of the government. 13

This is not a suit against the State with its consent.

Firstly, the recommendation made by the Commission regarding indemnification of the heirs
of the deceased and the victims of the incident by the government does not in any way mean
that liability automatically attaches to the State. It is important to note that A.O. 11 expressly
states that the purpose of creating the Commission was to have a body that will conduct an
"investigation of the disorder, deaths and casualties that took place." 14 In the exercise of its
functions, A.O. 11 provides guidelines, and what is relevant to Our discussion reads:

1 Its conclusions regarding the existence of probable cause for the

commission of any offense and of the persons probably guilty of the same
shall be sufficient compliance with the rules on preliminary investigation and
the charges arising therefrom may be filed directly with the proper court. 15
In effect, whatever may be the findings of the Commission, the same shall only serve as the
cause of action in the event that any party decides to litigate his/her claim. Therefore, the
Commission is merely a preliminary venue. The Commission is not the end in itself. Whatever
recommendation it makes cannot in any way bind the State immediately, such
recommendation not having become final and, executory. This is precisely the essence of it
being a fact-finding body.

Secondly, whatever acts or utterances that then President Aquino may have done or said, the
same are not tantamount to the State having waived its immunity from suit. The President's
act of joining the marchers, days after the incident, does not mean that there was an
admission by the State of any liability. In fact to borrow the words of petitioners (Caylao
group), "it was an act of solidarity by the government with the people". Moreover, petitioners
rely on President Aquino's speech promising that the government would address the
grievances of the rallyists. By this alone, it cannot be inferred that the State has admitted any
liability, much less can it be inferred that it has consented to the suit.

Although consent to be sued may be given impliedly, still it cannot be maintained that such
consent was given considering the circumstances obtaining in the instant case.

Thirdly, the case does not qualify as a suit against the State.

Some instances when a suit against the State is proper are: 16

(1) When the Republic is sued by name;

(2) When the suit is against an unincorporated government agency;

(3) When the, suit is on its face against a government officer but the case is such that
ultimate liability will belong not to the officer but to the government.

While the Republic in this case is sued by name, the ultimate liability does not pertain to the
government. Although the military officers and personnel, then party defendants, were
discharging their official functions when the incident occurred, their functions ceased to be
official the moment they exceeded their authority. Based on the Commission findings, there
was lack of justification by the government forces in the use of firearms. 17 Moreover, the
members of the police and military crowd dispersal units committed a prohibited act under B.P.
Blg. 880 18 as there was unnecessary firing by them in dispersing the marchers. 19

As early as 1954, this Court has pronounced that an officer cannot shelter himself by the plea
that he is a public agent acting under the color of his office when his acts are wholly without
authority. 20 Until recently in 1991, 21 this doctrine still found application, this Court saying that
immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a
privileged status not claimed by any other official of the Republic. The military and police forces
were deployed to ensure that the rally would be peaceful and orderly as well as to guarantee the
safety of the very people that they are duty-bound to protect. However, the facts as found by the
trial court showed that they fired at the unruly crowd to disperse the latter.

While it is true that nothing is better settled than the general rule that a sovereign state and
its political subdivisions cannot be sued in the courts except when it has given its consent, it
cannot be invoked by both the military officers to release them from any liability, and by the
heirs and victims to demand indemnification from the government. The principle of state
immunity from suit does not apply, as in this case, when the relief demanded by the suit
requires no affirmative official action on the part of the State nor the affirmative discharge of
any obligation which belongs to the State in its political capacity, even though the officers or
agents who are made defendants claim to hold or act only by virtue of a title of the state and
as its agents and servants. 22 This Court has made it quite clear that even a "high position in the
23
government does not confer a license to persecute or recklessly injure another."

The inescapable conclusion is that the State cannot be held civilly liable for the deaths that
followed the incident. Instead, the liability should fall on the named defendants in the lower
court. In line with the ruling of this court in Shauf vs. Court of Appeals, 24 herein public
officials, having been found to have acted beyond the scope of their authority, may be held liable
for damages.

WHEREFORE, finding no reversible error and no grave abuse of discretion committed by

respondent Judge in issuing the questioned orders, the instant petitions are hereby
DISMISSED.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero,
Nocon, Bellosillo, Melo and Quiason, JJ., concur.

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

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 102667 February 23, 2000

AMADO J. LANSANG, petitioner,

vs.
COURT OF APPEALS, GENERAL ASSEMBLY OF THE BLIND, INC., and JOSE
IGLESIAS, respondents.

QUISUMBING, J.:

Before us is a petition to review the decision of the Court of Appeals in C.A. G.R. CV No. 27244,
which set aside the ruling of the Regional Trial Court, Manila, Branch 8, in Civil Case No. 88-43887,
and ordered petitioner Amado J. Lansang to pay private respondent Jose Iglesias P50,000.00 in
moral damages, P10,000.00 in exemplary damages and P5,000.00 in attorney's fees.

Like public streets, public parks are beyond the commerce of man. However, private respondents
were allegedly awarded a "verbal contract of lease" in 1970 by the National Parks Development
Committee (NPDC), a government initiated civic body engaged in the development of national parks,
including Rizal Park,1 but actually administered by high profile civic leaders and journalists. Whoever
in NPDC gave such "verbal" accommodation to private respondents was unclear, for indeed no
document or instrument appears on record to show the grantor of the verbal license to private
respondents to occupy a portion of the government park dedicated to the national hero's memory.

Private respondents were allegedly given office and library space as well as kiosks area selling food
and drinks. One such kiosk was located along T.M. Kalaw St., in front of the Army and Navy Club.
Private respondent General Assembly of the Blind, Inc. (GABI) was to remit to NPDC, 40 percent of
the profits derived from operating the kiosks,2 without again anything shown in the record who
received the share of the profits or how they were used or spent.

With the change of government after the EDSA Revolution, the new Chairman of the NPDC, herein
petitioner, sought to clean up Rizal Park. In a written notice dated February 23, 1988 and received
by private respondents on February 29, 1988, petitioner terminated the so-called verbal agreement
with GABI and demanded that the latter vacate the premises and the kiosks it ran privately within the
public park.3 In another notice dated March 5, 1988, respondents were given until March 8, 1988 to
vacate.4

The latter notice was signed by private respondent Iglesias, GABI president, allegedly to indicate his
conformity to its contents. However, Iglesias, who is totally blind, claims that he was deceived into
signing the notice. He was allegedly told by Ricardo Villanueva, then chief warden of Rizal Park, that
he was merely acknowledging receipt of the notice. Although blind, Iglesias as president was
knowledgeable enough to run GABI as well as its business.

On the day of the supposed eviction, GABI filed an action for damages and injunction in the
Regional Trial Court against petitioner, Villanueva, and "all persons acting on their behalf".5 The trial
court issued a temporary restraining order on the same day.6
The TRO expired on March 28, 1988. The following day, GABI was finally evicted by NPDC.

GABI's action for damages and injunction was subsequently dismissed by the RTC, ruling that the
complaint was actually directed against the State which could not be sued without its consent.
Moreover, the trial court ruled that GABI could not claim damages under the alleged oral lease
agreement since GABI was a mere accommodation concessionaire. As such, it could only recover
damages upon proof of the profits it could realize from the conclusion. The trial court noted that no
such proof was presented. 1âwphi1.nêt

On appeal, the Court of Appeals reversed the decision of the trial court.

The Court of Appeals ruled that the mere allegation that a government official is being sued in his
official capacity is not enough to protect such official from liability for acts done without or in excess
of his authority.7 Granting that petitioner had the authority to evict GABI from Rizal Park, "the abusive
and capricious manner in which that authority was exercised amounted to a legal wrong for which he
must now be held liable for damages"8 according to the Court of Appeals.

The Court of Appeals noted that, as the trial court observed, the eviction of GABI came at the heels
of two significant incidents. First, after private respondent Iglesias extended monetary support to
striking workers of the NPDC, and second, after Iglesias sent the Tanodbayan, a letter on November
26, 1987, denouncing alleged graft and corruption in the NPDC.9 These, according to the Court of
Appeals, should not have been taken against GABI, which had been occupying Rizal Park for nearly
20 years. GABI was evicted purportedly for violating its verbal agreement with NPDC.10 However, the
Court of Appeals pointed out that NPDC failed to present proof of such violation.11

The Court of Appeals found petitioner liable for damages under Articles 19, 21, and 24 of the Civil
Code.12

The Court of Appeals absolved from liability all other persons impleaded in GABI's complaint since it
appeared that they were merely acting under the orders of petitioner. The new officers of NPDC,
additionally impleaded by GABI, were likewise absolved from liability, absent any showing that they
participated in the acts complained of. Petitioner was ordered to pay private respondent Iglesias
moral and exemplary damages and attorney's fees.

Hence, this petition, in which petitioner raises the following issues:

I. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT HOLDING THAT PRIVATE

RESPONDENTS' COMPLAINT AGAINST PETITIONER, AS CHAIRMAN OF NPDC, AND
HIS CO-DEFENDANTS IN CIVIL CASE NO. 88-43887, IS IN EFFECT A SUIT AGAINST
THE STATE WHICH CANNOT BE SUED WITHOUT ITS CONSENT.

II. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT HOLDING THAT

PETITIONER'S ACT OF TERMINATING RESPONDENT GABI'S CONCESSION IS VALID
AND DONE IN THE LAWFUL PERFORMANCE OF OFFICIAL DUTY.13

Petitioner insists that the complaint filed against him is in reality a complaint against the State, which
could not prosper without the latter's consent. He anchors his argument on the fact that NPDC is a
government agency, and that when he ordered the eviction of GABI, he was acting in his capacity as
chairman of NPDC. Petitioner avers that the mere allegation that he was being sued in his personal
capacity did not remove the case from the coverage of the law of public officers and the doctrine of
state immunity.
Petitioner points out that Iglesias signed the notice of eviction to indicate his conformity thereto. He
contends that as evidence of private respondents' bad faith, they sued petitioner instead of
complying with their undertaking to vacate their library and kiosk at Rizal Park.

Petitioner adds that during the actual eviction, no untoward incident occurred. GABI's properties
were properly inventoried and stored.

According to petitioner, the Court of Appeals' observation that the eviction was prompted by Iglesias'
support for striking NPDC workers and the letter-complaint sent to the Tanodbayan is merely
conjectural.

Finally, petitioner avers that the move to evict GABI and award the spaces it occupied to another
group was an executive policy decision within the discretion of NPDC. GABI's possession of the
kiosks as concessionaire was by mere tolerance of NPDC and, thus, such possession may be
withdrawn at any time, with or without cause.

On the other hand, private respondents aver that petitioner acted beyond the scope of his authority
when he showed malice and bad faith in ordering GABI's ejectment from Rizal Park. Quoting from
the decision of the Court of Appeals, private respondents argue that petitioner is liable for damages
for performing acts "to injure an individual rather than to discharge a public duty."14

While private respondents recognize the authority of petitioner to terminate the agreement with GABI
"if [the contract] is prejudicial to the interest of the NPDC,"15 they maintain that petitioner's personal
interest, and not that of the NPDC, was the root cause of GABI's ejecment.

The doctrine of state immunity from suit applies to complaints filed against public officials for acts
done in the performance of their duties. The rule is that the suit must be regarded as one against the
state where satisfaction of the judgment against the public official concerned will require the state
itself to perform a positive act, such as appropriation of the amount necessary to pay the damages
awarded to the plaintiff.16

The rule does not apply where the public official is charged in his official capacity for acts that are
unlawful and injurious to the rights of others.17 Public officials are not exempt, in their personal
capacity, from liability arising from acts committed in bad faith.18

Neither does it apply where the public official is clearly being sued not in his official capacity but in
his personal capacity, although the acts complained of may have been committed while he occupied
a public position.

We are convinced that petitioner is being sued not in his capacity as NPDC chairman but in his
personal capacity. The complaint filed by private respondents in the RTC merely identified petitioner
as chairman of the NPDC, but did not categorically state that he is being sued in that
capacity.19 Also, it is evident from paragraph 4 of said complaint that petitioner was sued allegedly
for having personal motives in ordering the ejectment of GABI from Rizal Park.

4. Defendant AMADO J. LANSANG, JR., the Chairman of the National Parks Development
Committee,acting under the spirit of revenge, ill-will, evil motive and personal resentment
against plaintiff JOSE IGLESIAS, served on the plaintiff corporation a letter, dated February
23, 1988 terminating plaintiffs lease agreement with a demand for the plaintiff corporation to
vacate its office premises. . .20 (Emphasis supplied.)
The parties do not dispute that it was petitioner who ordered the ejectment of GABI from their office
and kiosk at Rizal Park. There is also no dispute that petitioner, as chairman of the NPDC which was
the agency tasked to administer Rizal Park, had the authority to terminate the agreement with
GABI21 and order the organization's ejectment. The question now is whether or not petitioner abused
his authority in ordering the ejectment of private respondents.

We find, however, no evidence of such abuse of authority on record. As earlier stated, Rizal Park is
beyond the commerce of man and, thus, could not be the subject of a lease contract. Admittedly,
there was no written contract. That private respondents were allowed to occupy office and kiosk
spaces in the park was only a matter of accommodation by the previous administrator. This being
so, also admittedly, petitioner may validly discontinue the accommodation extended to private
respondents, who may be ejected from the park when necessary. Private respondents cannot and
does not claim a vested right to continue to occupy Rizal Park.

The Court of Appeals awarded private respondent Iglesias moral and exemplary damages and
attorney's fees. However, we find no evidence on record to support Iglesias' claim that he suffered
moral injury as a result of GABI's ejectment from Rizal Park. Absent any satisfactory proof upon
which the Court may base the amount of damages suffered, the award of moral damages cannot be
sustained.22

Neither can we sustain the award of exemplary damages, which may only be awarded in addition to
moral, temperate, liquidated, or compensatory damages.23 We also disallow the award for attorney's
fees, which can only be recovered per stipulation of the parties, which is absent in this case. There is
no showing that any of the exceptions justifying the award of attorney's fees absent a stipulation is
present in this case.24

WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in CA-G.R.
CV No. 27244 is hereby SET ASIDE, and the DISMISSAL of the complaint for damages by the trial
court for want of merit is AFFIRMED. No costs.

SO ORDERED. 1âw phi 1.nêt

Bellosillo, Mendoza and De Leon, Jr., JJ., concur.

Buena, J., on official leave.
 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.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO,

MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO,
SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all
represented by MARIANO R. ESPINA,petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION
(UNRFNRE) represented by its operations manager, DR. KYRIACOS LOUCA, OSCAR N.
ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of National Labor
Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING PETILLA,
Labor Arbiter of Butuan City, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the
Resolution dated January 25, 1993 of the National Labor Relations Commission (NLRC), Fifth
Division, Cagayan de Oro City.

We dismiss the petition.

Petitioners were dismissed from their employment with private respondent, the United Nations
Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a special fund and
subsidiary organ of the United Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91
and SRAB 10-07-00159-91 for illegal dismissal and damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction
over its personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the
Privileges and Immunities of the United Nations. In support thereof, private respondent attached a
letter from the Department of Foreign Affairs dated August 26, 1991, which acknowledged its
immunity from suit. The letter confirmed that private respondent, being a special fund administered
by the United Nations, was covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).
On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the
ground that private respondent was protected by diplomatic immunity. The dismissal was based on
the letter of the Foreign Office dated September 10, 1991.

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which
affirmed the dismissal of the complaints in its Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC
resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC
are final and executory. Thus, they may only be questioned through certiorari as a special civil action
under Rule 65 of the Revised Rules of Court.

Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first
filed before the respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty
Insurance Corporation v. Court of Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant
petition. Moreover, the petition lacks any explanation for such omission, which may merit its being
considered as falling under the recognized exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because of the implications of
the issue in our international relations.

Petitioners argued that the acts of mining exploration and exploitation are outside the official
functions of an international agency protected by diplomatic immunity. Even assuming that private
respondent was entitled to diplomatic immunity, petitioners insisted that private respondent waived it
when it engaged in exploration work and entered into a contract of employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to
labor and promote full employment and equality of employment opportunities for all (1987
Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is covered by the mantle of
diplomatic immunity. Private respondent is a specialized agency of the United Nations. Under Article
105 of the Charter of the United Nations:

1. The Organization shall enjoy in the territory of its Members such privileges and
immunities as are necessary for the fulfillment of its purposes.

2. Representatives of the Members of the United Nations and officials of the

Organization shall similarly enjoy such privileges and immunities as are necessary
for the independent exercise of their functions in connection with the organization.

Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty
Series, p. 621). We quote Sections 4 and 5 of Article III thereof:
 Sec. 4. The specialized agencies, their property and assets, wherever located and by
whomsoever held shall enjoy immunity from every form of legal process except
insofar as in any particular case they have expressly waived their immunity. It is,
however, understood that no waiver of immunity shall extend to any measure of
execution (Emphasis supplied).

Sec. 5. The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held,
shall be immune from search, requisition, confiscation, expropriation and any other
form of interference, whether by executive, administrative, judicial or legislative
action (Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the
generally accepted principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member
of the United Nations and a party to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine Government adheres to the doctrine of
immunity granted to the United Nations and its specialized agencies. Both treaties have the force
and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:

It is a recognized principle of international law and under our system of separation of

powers thatdiplomatic 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 or other officer acting under his
direction. 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 (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific universal endeavors,

such as health, agriculture, science and technology and environment. It is not surprising that their
existence has evolved into the concept of international immunities. The reason behind the grant of
privileges and immunities to international organizations, its officials and functionaries is to secure
them legal and practical independence in fulfilling their duties (Jenks, International Immunities 17
[1961]).

Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield
the affairs of international organizations, in accordance with international practice, from political
pressure or control by the host country to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions" (International Catholic Migration
Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there is no conflict between
the constitutional duty of the State to protect the rights of workers and to promote their welfare, and
the grant of immunity to international organizations. Clauses on jurisdictional immunity are now
standard in the charters of the international organizations to guarantee the smooth discharge of their
functions.

The diplomatic immunity of private respondent was sufficiently established by the letter of the
Department of Foreign Affairs, recognizing and confirming the immunity of UNRFNRE in accordance
with the 1946 Convention on Privileges and Immunities of the United Nations where the Philippine
Government was a party. The issue whether an international organization is entitled to diplomatic
immunity is a "political question" and such determination by the executive branch is conclusive on
the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No.
101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity,
which is not so in the case at bench (Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, Art. III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is
by virtue of a joint project entered into by the Philippine Government and the United Nations for
mineral exploration in Dinagat Island. Its mission is not to exploit our natural resources and gain
pecuniarily thereby but to help improve the quality of life of the people, including that of petitioners.

This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges
and Immunities of the Specialized Agencies of the United Nations states that "each specialized
agency shall make a provision for appropriate modes of settlement of: (a) disputes arising out of
contracts or other disputes of private character to which the specialized agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 97468-70 September 2, 1993

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER represented by its Chief, DR. FLOR
J. LACANILAO, petitioner,
vs.
DANILO ACOSTA in his capacity as Labor Arbiter of the National Labor Relations
Commission, Regional Arbitration, Branch VI, CORAZON CANTO, DAN BALIAO, ELIZABETH
SUPETRAN, CARMELITA FERRER, CATHRYN CONTRADOR, and DORIC
VELOSO, respondents.

Hector P. Teodosio for petitioner.

Cirilo Ganzon, Jr. for private respondents.

VITUG, J.:

This is an original petition for certiorari and prohibition, with a prayer for the issuance of a restraining
order, to set aside the order of respondent labor arbiter, dated 20 September 1990, denying herein
petitioner's motion to dismiss the cases subject matter of the petition for lack of jurisdiction.

Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB case No. VI - 0214-86, were
filed by the herein private respondents against the petitioner, Southeast Asian Fisheries
Development Center (SEAFDEC), before the National Labor Relations Commission (NLRC),
Regional Arbitration Branch, Iloilo City. In these cases, the private respondents claim having been
wrongfully terminated from their employment by the petitioner.

On 22 August 1990, the petitioner, contending to be an international inter-government organization,

composed of various Southeast Asian countries, filed a Motion to Dismiss, challenging the
jurisdiction of the public respondent in taking cognizance of the above cases.

On 20 September 1990, the public respondent issued the assailed order denying the Motion to
Dismiss. In due course, a Motion for Reconsideration was interposed but the same, in an order,
dated 07 January 1991, was likewise denied.

Hence, the instant petition. This Court, on 20 March 1991, issued the temporary restraining order
prayed for.

The private respondents, as well as respondent labor arbiter, allege that the petitioner is not immune
from suit and assuming that if, indeed, it is an international organization, it has, however, impliedly, if
not expressly, waived its immunity by belatedly raising the issue of jurisdiction.
The Solicitor General, on his part, filed a Manifestation and Motion, which the Court granted, praying
that he be excused from filing his comment for respondent Labor Arbiter, he not being in agreement
with the latter's position on this matter.

On 30 March 1992, this Court dismissed the instant petition in a resolution which reads:

. . . — Considering the allegations, issues and arguments adduced in the petition

for certiorari as well as the separate comments thereon of the public and private
respondents, and the consolidated reply thereto of the petitioner, the Court
RESOLVED to dismiss the petition for failure to sufficiently show that the questioned
judgment is tainted with grave abuse of discretion. The temporary restraining order
issued on March 20, 1991 is hereby LIFTED effective immediately.

In time, the petitioner moved for a reconsideration, arguing that the ground for its seeking the
allowance of the petition is the labor arbiter's lack of jurisdiction over the dispute.

The court is now asked to rule upon the motion for reconsideration.

We rule for the petitioner.

It is beyond question that petitioner SEAFDEC is an international agency enjoying diplomatic

immunity. This, we have already held in Southeast Asian Fisheries Development Center-Aquaculture
Department vs. National Labor Relations Commission, G.R. No. 86773, 206 SCRA 283/1992; see
also Lacanilao v. de Leon, G.R. No. 76532, 147 SCRA, 286/1987/, where we
said —

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department

(SEAFDEC-AQD) is an international agency beyond the jurisdiction of public
respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of

Indonesia, Japan, Kingdom of Laos, Malaysia, Republic of the Philippines, Republic
of Singapore, Kingdom of Thailand and Republic of Vietnam . . . .

The Republic of the Philippines became a signatory to the Agreement establishing

SEAFDEC on January 16, 1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the

fisheries development in Southeast Asia by mutual co-operation
among the member governments of the Center, hereinafter called the
'Members', and through collaboration with international organizations
and governments external to the Center.

(Agreement Establishing the SEAFDEC, Art. 1; . . .).

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on

July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of
SEAFDEC. . . . to be established in Iloilo for the promotion of research in
aquaculture. Paragraph 1, Article 6 of the Agreement establishing mandates:
 1. The Council shall be the supreme organ of the Center and all
powers of the Center shall be vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments

(AQD), enjoys functional independence and freedom from control of the state in
whose territory its office is located.

As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their
book, Public International Law (p. 83,1956 ed.):

Permanent international commissions and administrative bodies have

been created by the agreement of a considerable number of States
for a variety of international purposes, economic or social and mainly
non-political. Among the notable instances are the International Labor
Organization, the International Institute of Agriculture, the
International Danube Commission. In so far as they are autonomous
and beyond the control of any one State, they have a distinct juridical
personality independent of the municipal law of the State where they
are situated. As such, according to one leading authority they must
be deemed to possess a species of international personality of their
own. (Salonga and Yap, Public International Law, 83 [1956 ed.]

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines
agreed to be represented by one Director in governing SEAFDEC Council
(Agreement Establishing SEAFDEC, Art. 5, Par. 1,. . .), and that its national laws and
regulations shall apply only insofar as its contributions to SEAFDEC of "an agreed
amount of money, movable and immovable property and services necessary for the
establishment and operation of the Center" are concerned (Art. 11, ibid). It expressly
waived the application of the Philippine laws on the disbursement of funds of
petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).

The then Minister of Justice likewise opined that Philippine Courts have no
jurisdiction over SEAFDEC-AQD in Opinion No. 139, Series of 1984 —

4. One of the basic immunities of an international organization is immunity from local

jurisdiction, i.e., that it is immune from the legal writs and processes issued by the
tribunals of the country where it is found. (See Jenks, Id., pp. 37-44). The obvious
reason for this is that the subjection of such an organization to the authority of the
local courts would afford a convenient medium thru which the host government may
interfere in their operations or even influence or control its policies and decisions of
the organization; besides, such objection to local jurisdiction would impair the
capacity of such body to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by the National
Labor Relations Commission of Mr. Madamba's reinstatement cases would amount
to interference by the Philippine Government in the management decisions of the
SEARCA governing board; even worse, it could compromise the desired impartiality
of the organization since it will have to suit its actuations to the requirements of
Philippine law, which may not necessarily coincide with the interests of the other
member-states. It is precisely to forestall these possibilities that in cases where the
extent of the immunity is specified in the enabling instruments of international
organizations (jurisdictional immunity, is specified in the enabling instruments of
international organizations), jurisdictional immunity from the host country is invariably
 among the first accorded. (See Jenks, Id.; See Bowett. The Law of International
Institutions. pp. 284-285).

At its Sixth Meeting held at Kuala Lumpur, Malaysia, on 3 to 7 July 1973, the SEAFDEC Council
approved the formal establishment of its Aquaculture Department in the province of Iloilo,
Philippines, to promote research in Aquaculture as so expressed in the "Whereas" Clauses of
Presidential Decree No. 292 issued on 13 September 1973 1. Furthermore, Section 2 of the same
decree had provided for the autonomous character of SEAFDEC, thus:

. . . .All funds received by the Department shall be receipted and disbursed in

accordance with the Agreement establishing the Southeast Asian Fisheries
Development Center and pertinent resolutions duly approved by the SEAFDEC
Council.

As aptly pointed out by Associate Justice Isagani Cruz of this Court—

Certain administrative bodies created by agreement among states may be vested

with international personality when two conditions concur, to wit:, that their purposes
are mainly non-political and that they are autonomous, i.e., not subject to the control
of any state. 2

Anent the issue of waiver of immunity, suffice it to say at the moment that the petitioner has timely
raised the issue of jurisdiction. While the petitioner did not question the public respondent's lack of
jurisdiction at the early stages of the proceedings, it, nevertheless, did so before it rested its case
and certainly well before the proceedings thereat had terminated.

WHEREFORE, our resolution, dated 30 March 1992, dismissing the petition for certiorari, is hereby
reconsidered, and another is entered (a) granting due course to the petition; (b) setting aside the
order, dated 20 September 1990, of the public respondent; and (c) enjoining the public respondent
from further proceeding with RAB Case No. VI-0156-86 and RAB Case No. VI-0214-86. No costs.
SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

# Footnotes

1 WHEREAS, the Republic of the Philippines, on January 16, 1968, became a signatory to the
Agreement establishing the Southeast Asian Fisheries Development center (SEAFDEC);

WHEREAS, the SEAFDEC council, at its Sixth Meeting held at Kuala Lumpur (Malaysia) on July 3-
7, 1973, approved the formal establishment of its Aquaculture Department in the province of Iloilo,
Philippines;

WHEREAS, the SEAFDEC Aquaculture Department is designed to promote research in

aquaculture, especially in the production of prawns and shrimps, undertake the corresponding
training programs for fisheries experts and technicians and disseminate information on fisheries
research and development for SEAFDEC member-countries in Southeast Asia;

WHEREAS, the establishment of the SEAFDEC Aquaculture Department in the Philippines will
directly and immediately stimulate the development of the fisheries industry in the country, as well
as in neighboring nations in Southeast Asia.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR
RELATIONS AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN

LINE INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH
INSTITUTE, INC.,respondents.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by
the International Catholic Migration Commission (ICMC) and the International Rice Research
Institute, Inc. (IRRI) from the application of Philippine labor laws.

Facts and Issues

A. G.R. No. 85750 — the International Catholic Migration Commission (ICMC) Case.

As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international community.
In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine
Government and the United Nations High Commissioner for Refugees whereby an operating center
for processing Indo-Chinese refugees for eventual resettlement to other countries was to be
established in Bataan (Annex "A", Rollo, pp. 22-32).

ICMC was one of those accredited by the Philippine Government to operate the refugee processing
center in Morong, Bataan. It was incorporated in New York, USA, at the request of the Holy See, as
a non-profit agency involved in international humanitarian and voluntary work. It is duly registered
with the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status,
Category II. As an international organization rendering voluntary and humanitarian services in the
Philippines, its activities are parallel to those of the International Committee for Migration (ICM) and
the International Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-
87, ICMC v. Calleja, Vol. 1].

On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then
Ministry of Labor and Employment a Petition for Certification Election among the rank and file
members employed by ICMC The latter opposed the petition on the ground that it is an international
organization registered with the United Nations and, hence, enjoys diplomatic immunity.

On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for
lack of jurisdiction.

On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the
Med-Arbiter's Decision and ordered the immediate conduct of a certification election. At that time,
ICMC's request for recognition as a specialized agency was still pending with the Department of
Foreign Affairs (DEFORAF).

Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF,
granted ICMC the status of a specialized agency with corresponding diplomatic privileges and
immunities, as evidenced by a Memorandum of Agreement between the Government and ICMC
(Annex "E", Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking
the immunity expressly granted but the same was denied by respondent BLR Director who, again,
ordered the immediate conduct of a pre-election conference. ICMC's two Motions for
Reconsideration were denied despite an opinion rendered by DEFORAF on 17 October 1988 that
said BLR Order violated ICMC's diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction
assailing the BLR Order.

On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the
certification election.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of
the Court of Appeals, filed a Motion for Intervention alleging that, as the highest executive
department with the competence and authority to act on matters involving diplomatic immunity and
privileges, and tasked with the conduct of Philippine diplomatic and consular relations with foreign
governments and UN organizations, it has a legal interest in the outcome of this case.

Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.
On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the
submittal of memoranda by the parties, which has been complied with.

As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to
ICMC extends to immunity from the application of Philippine labor laws.

ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the
Philippine Government giving it the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN General Assembly on 21
November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May
1949 (the Philippine Instrument of Ratification was signed by the President on 30 August 1949 and
deposited with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution,
which declares that the Philippines adopts the generally accepted principles of international law as
part of the law of the land.

Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the
DEFORAF determination that the BLR Order for a certification election among the ICMC employees
is violative of the diplomatic immunity of said organization.

Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State
policy and Philippine labor laws to justify its assailed Order, particularly, Article II, Section 18 and
Article III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of the Labor Code, as
amended, ibid. In addition, she contends that a certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is not a suit against ICMC its property,
funds or assets, but is the sole concern of the workers themselves.

B. G.R. No. 89331 — (The International Rice Research Institute [IRRI] Case).

Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989,
resolved to consolidate G.R. No. 89331 pending before it with G.R. No. 85750, the lower-numbered
case pending with the Second Division, upon manifestation by the Solicitor General that both cases
involve similar issues.

The facts disclose that on 9 December 1959, the Philippine Government and the Ford and
Rockefeller Foundations signed a Memorandum of Understanding establishing the International Rice
Research Institute (IRRI) at Los Baños, Laguna. It was intended to be an autonomous, philanthropic,
tax-free, non-profit, non-stock organization designed to carry out the principal objective of conducting
"basic research on the rice plant, on all phases of rice production, management, distribution and
utilization with a view to attaining nutritive and economic advantage or benefit for the people of Asia
and other major rice-growing areas through improvement in quality and quantity of rice."

Initially, IRRI was organized and registered with the Securities and Exchange Commission as a
private corporation subject to all laws and regulations. However, by virtue of Pres. Decree No. 1620,
promulgated on 19 April 1979, IRRI was granted the status, prerogatives, privileges and immunities
of an international organization.

The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor
organization with an existing local union, the Kapisanan ng Manggagawa at TAC sa IRRI
(Kapisanan, for short) in respondent IRRI.

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV,
Regional Office of the Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an
international organization and granting it immunity from all civil, criminal and administrative
proceedings under Philippine laws.

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres.
Decree No. 1620 and dismissed the Petition for Direct Certification.

On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-
Arbiter's Order and authorized the calling of a certification election among the rank-and-file
employees of IRRI. Said Director relied on Article 243 of the Labor Code, as amended, infra and
Article XIII, Section 3 of the 1987 Constitution, 1and held that "the immunities and privileges granted to
IRRI do not include exemption from coverage of our Labor Laws." Reconsideration sought by IRRI was
denied.

On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's
Order, dismissed the Petition for Certification Election, and held that the grant of specialized agency
status by the Philippine Government to the IRRI bars DOLE from assuming and exercising
jurisdiction over IRRI Said Resolution reads in part as follows:

Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives,
privileges and immunities of an international organization is clear and explicit. It
provides in categorical terms that:

Art. 3 — The Institute shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as immunity has been expressly waived by the Director-
General of the Institution or his authorized representative.

Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or administrative
or quasi-judicial agency are enforceable as against the Institute. In the case at bar
there was no such waiver made by the Director-General of the Institute. Indeed, the
Institute, at the very first opportunity already vehemently questioned the jurisdiction
of this Department by filing an ex-parte motion to dismiss the case.

Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of discretion by
respondent Secretary of Labor in upholding IRRI's diplomatic immunity.

The Third Division, to which the case was originally assigned, required the respondents to comment
on the petition. In a Manifestation filed on 4 August 1990, the Secretary of Labor declared that it
was "not adopting as his own" the decision of the BLR Director in the ICMC Case as well as the
Comment of the Solicitor General sustaining said Director. The last pleading was filed by IRRI on 14
August 1990.

Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be
excused from filing a comment "it appearing that in the earlier case of International Catholic
Migration Commission v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor General had
sustained the stand of Director Calleja on the very same issue now before it, which position has
been superseded by respondent Secretary of Labor in G.R. No. 89331," the present case. The Court
acceded to the Solicitor General's prayer.

The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse
of discretion in dismissing the Petition for Certification Election filed by Kapisanan.
Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges,
prerogatives and immunities of an international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their fundamental and constitutional
right to form trade unions for the purpose of collective bargaining as enshrined in the 1987
Constitution.

A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining
IRRI'S appeal from the Order of the Director of the Bureau of Labor Relations directing the holding of
a certification election. Kapisanan contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of
the Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final and
unappeable and that, therefore, the Secretary of Labor had no more jurisdiction over the said appeal.

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep.
Act. No. 6715, which took effect on 21 March 1989, providing for the direct filing of appeal from the
Med-Arbiter to the Office of the Secretary of Labor and Employment instead of to the Director of the
Bureau of Labor Relations in cases involving certification election orders.

III

Findings in Both Cases.

There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.

Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides
that ICMC shall have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of
the Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the Philippine Senate through
Resolution No. 19 on 17 May 1949, explicitly provides:

Art. III, Section 4. The specialized agencies, their property and assets, wherever
located and by whomsoever held, shall enjoy immunity from every form of legal
process except insofar as in any particular case they have expressly waived their
immunity. It is, however, understood that no waiver of immunity shall extend to any
measure of execution.

Sec. 5. — The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held
shall be immune from search, requisition, confiscation, expropriation and any other
form of interference, whether by executive, administrative, judicial or legislative
action. (Emphasis supplied).

IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:

Art. 3. Immunity from Legal Process. — The Institute shall enjoy immunity from any
penal, civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.

Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity
when in a Memorandum, dated 17 October 1988, it expressed the view that "the Order of the
Director of the Bureau of Labor Relations dated 21 September 1988 for the conduct of Certification
Election within ICMC violates the diplomatic immunity of the organization." Similarly, in respect of
IRRI, the DEFORAF speaking through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a
letter, dated 17 June 1987, to the Secretary of Labor, maintained that "IRRI enjoys immunity from
the jurisdiction of DOLE in this particular instance."

The foregoing opinions constitute a categorical recognition by the Executive Branch of the
Government that ICMC and IRRI enjoy immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon the Courts in order not to
embarrass a political department of Government.

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 . . . or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction . .
. 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. 3

A brief look into the nature of international organizations and specialized agencies is in order. The
term "international organization" is generally used to describe an organization set up by agreement
between two or more states. 4 Under contemporary international law, such organizations are endowed
with some degree of international legal personality 5 such that they are capable of exercising specific
rights, duties and powers. 6 They are organized mainly as a means for conducting general international
business in which the member states have an interest. 7 The United Nations, for instance, is an
international organization dedicated to the propagation of world peace.

"Specialized agencies" are international organizations having functions in particular fields. The term
appears in Articles 57 8 and 63 9 of the Charter of the United Nations:

The Charter, while it invests the United Nations with the general task of promoting
progress and international cooperation in economic, social, health, cultural,
educational and related matters, contemplates that these tasks will be mainly fulfilled
not by organs of the United Nations itself but by autonomous international
organizations established by inter-governmental agreements outside the United
Nations. There are now many such international agencies having functions in many
different fields, e.g. in posts, telecommunications, railways, canals, rivers, sea
transport, civil aviation, meteorology, atomic energy, finance, trade, education and
culture, health and refugees. Some are virtually world-wide in their membership,
some are regional or otherwise limited in their membership. The Charter provides
that those agencies which have "wide international responsibilities" are to be brought
into relationship with the United Nations by agreements entered into between them
and the Economic and Social Council, are then to be known as "specialized
agencies." 10

The rapid growth of international organizations under contemporary international law has paved the
way for the development of the concept of international immunities.
 It is now usual for the constitutions of international organizations to contain
provisions conferring certain immunities on the organizations themselves,
representatives of their member states and persons acting on behalf of the
organizations. A series of conventions, agreements and protocols defining the
immunities of various international organizations in relation to their members
generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus: 1) international
institutions should have a status which protects them against control or interference by any one
government in the performance of functions for the effective discharge of which they are responsible
to democratically constituted international bodies in which all the nations concerned are represented;
2) no country should derive any national financial advantage by levying fiscal charges on common
international funds; and 3) the international organization should, as a collectivity of States members,
be accorded the facilities for the conduct of its official business customarily extended to each other
by its individual member States. 12 The theory behind all three propositions is said to be essentially
institutional in character. "It is not concerned with the status, dignity or privileges of individuals, but with
the elements of functional independence necessary to free international institutions from national control
and to enable them to discharge their responsibilities impartially on behalf of all their
members. 13 The raison d'etre for these immunities is the assurance of unimpeded performance of their
functions by the agencies concerned.

The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their
international character and respective purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in accordance with international practice, from
political pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered performance of their functions.

ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights,
which are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3
16
(supra), of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code, relied
on by the BLR Director and by Kapisanan.

For, ICMC employees are not without recourse whenever there are disputes to be settled. Section
31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations 17 provides that "each specialized agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the Memorandum of Agreement
between ICMC the the Philippine Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities accorded. Thus:

Art. IV. Cooperation with Government Authorities. — 1. The Commission shall

cooperate at all times with the appropriate authorities of the Government to ensure
the observance of Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any abuse of the privileges
and immunities granted its officials and alien employees in Article III of this
Agreement to the Commission.

2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be held
between the Government and the Commission to determine whether any such abuse
 has occurred and, if so, the Government shall withdraw the privileges and immunities
granted the Commission and its officials.

Neither are the employees of IRRI without remedy in case of dispute with management as, in fact,
there had been organized a forum for better management-employee relationship as evidenced by
the formation of the Council of IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented for purposes of maintaining mutual and
beneficial cooperation between IRRI and its employees." The existence of this Union factually and
tellingly belies the argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization, deprives its employees of the right to self-
organization.

The immunity granted being "from every form of legal process except in so far as in any particular
case they have expressly waived their immunity," it is inaccurate to state that a certification election
is beyond the scope of that immunity for the reason that it is not a suit against ICMC. A certification
election cannot be viewed as an independent or isolated process. It could tugger off a series of
events in the collective bargaining process together with related incidents and/or concerted activities,
which could inevitably involve ICMC in the "legal process," which includes "any penal, civil and
administrative proceedings." The eventuality of Court litigation is neither remote and from which
international organizations are precisely shielded to safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are said to be standard provisions in the constitutions
of international Organizations. "The immunity covers the organization concerned, its property and its
assets. It is equally applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo),
wherein TUPAS calls attention to the case entitled "International Catholic Migration Commission v.
NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that, having taken
cognizance of that dispute (on the issue of payment of salary for the unexpired portion of a six-
month probationary employment), the Court is now estopped from passing upon the question of
DOLE jurisdiction petition over ICMC.

We find no merit to said submission. Not only did the facts of said controversy occur between 1983-
1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized agency with
corresponding immunities, but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was
tacitly recognized as enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR
Director, dated 15 February 1989, had not become final because of a Motion for Reconsideration
filed by IRRI Said Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, which
provides for direct appeals from the Orders of the Med-Arbiter to the Secretary of Labor in
certification election cases either from the order or the results of the election itself, was already in
effect, specifically since 21 March 1989. Hence, no grave abuse of discretion may be imputed to
respondent Secretary of Labor in his assumption of appellate jurisdiction, contrary to Kapisanan's
allegations. The pertinent portion of that law provides:

Art. 259. — Any party to an election may appeal the order or results of the election
as determined by the Med-Arbiter directly to the Secretary of Labor and Employment
on the ground that the rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the election have been
violated. Such appeal shall be decided within 15 calendar days (Emphasis supplied).
En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two
departments of the executive branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the international community now,
hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the
Bureau of Labor Relations for certification election is SET ASIDE, and the Temporary Restraining
Order earlier issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having
been committed by the Secretary of Labor and Employment in dismissing the Petition for
Certification Election.

No pronouncement as to costs.

SO ORDERED.

Padilla, Sarmiento and Regalado, JJ., concur.

Paras, J., is on leave.

 SECOND DIVISION

[G.R. No. 131544. March 16, 2001]

EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING,

SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME
CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD
INC., PERFORMANCE BUILDERS DEVT. CO., DE LEON-
ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All
represented by their Atty. IN FACT, MARCELO D,
FORONDA, petitioners, vs. HON. GREGORIO R. VIGILAR, In His
Capacity as Secretary of Public Works and Highways, respondent.

DECISION
BUENA, J.:

Sought to be reversed in the instant Petition for Certiorari is the Decision, dated 07
November 1997, of the Regional Trial Court of Quezon City, Branch 226, in Civil Case
No. Q-96-29243,[1] dismissing the Petition for Mandamus filed by herein petitioners
against herein respondent Hon. Gregorio Vigilar, in his capacity as Secretary of the
Department of Public Works and Highways (DPWH).
The tapestry of facts unfurls.
In 1983, the Ministry of Human Settlement, through the BLISS Development
Corporation, initiated a housing project on a government property along the east bank
of the Manggahan Floodway in Pasig City. For this purpose, the Ministry of Human
Settlement entered into a Memorandum of Agreement (MOA) with the Ministry of
Public Works and Highways,[2] where the latter undertook to develop the housing site
and construct thereon 145 housing units.
By virtue of the MOA, the Ministry of Public Works and Highways forged
individual contracts with herein petitioners EPG Construction Co., Ciper Electrical and
Engineering, Septa Construction Co., Phil. Plumbing Co., Home Construction Inc.,
World Builders Inc., Glass World Inc., Performance Builders Development Co. and De
Leon Araneta Construction Co., for the construction of the housing units.Under the
contracts, the scope of construction and funding therefor covered only around 2/3 of
each housing unit.[3] After complying with the terms of said contracts, and by reason of
the verbal request and assurance of then DPWH Undersecretary Aber Canlas that
additional funds would be available and forthcoming, petitioners agreed to undertake
and perform additional constructions[4] for the completion of the housing units, despite
the absence of appropriations and written contracts to cover subsequent expenses for
the additional constructions.
Petitioners then received payment for the construction work duly covered by the
individual written contracts, thereby leaving an unpaid balance of
P5,918,315.63,[5] which amount represents the expenses for the additional constructions
for the completion of the existing housing units. On 14 November 1988, petitioners sent
a demand letter to the DPWH Secretary and submitted that their claim for payment was
favorably recommended by DPWH Assistant Secretary for Legal Services Dominador
Madamba, who recognized the existence of implied contracts covering the additional
constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined that
payment of petitioners money claims should be based on quantum meruit and should be
forwarded to the Commission on Audit (COA) for its due consideration and
approval. The money claims were then referred to COA which returned the same to the
DPWH Auditor for auditorial action. On the basis of the Inspection Report of the
Auditors Technical Staff, the DPWH Auditor interposed no objection to the payment
of the money claims subject to whatever action the COA may adopt.
In a Second Indorsement dated 27 July 1992, the COA returned the documents to
the DPWH, stating that funds should first be made available before COA could pass
upon and act on the money claims.In a Memorandum dated 30 July 1992, then DPWH
Secretary Jose De Jesus requested the Secretary of Budget and Management to release
public funds for the payment of petitioners money claims, stating that the amount is
urgently needed in order to settle once and for all this (sic) outstanding obligations of
the government. In a Letter of the Undersecretary of Budget and Management dated 20
December 1994, the amount of P5,819,316.00 was then released for the payment of
petitioners money claims, under Advise of Allotment No. A4-1303-04-41-303.
In an Indorsement dated 27 December 1995, the COA referred anew the money
claims to the DPWH pursuant to COA Circular 95-006, thus:

Respectfully returned thru the Auditor to the Honorable Secretary, Department of

Public Works and Highways, Port Area, Manila, the above-captioned subject (Re:
Claim of Ten (10) contractors for payment of Work accomplishments on the
construction of the COGEO II Housing Project, Pasig, Metro Manila) and reiterating
the policy of this office as embodied in COA Circular No. 95-006 dated May 18, 1995
totally lifting its pre-audit activities on all financial transactions of the agencies of the
government involving implementation/prosecution of projects and/or payment of
claims without exception so as to vest on agency heads the prerogative to exercise
fiscal responsibility thereon.

The audit of the transaction shall be done after payment.

 In a letter dated 26 August 1996, respondent DPWH Secretary Gregorio Vigilar
denied the subject money claims prompting herein petitioners to file before the
Regional Trial Court of Quezon City, Branch 226, a Petition for Mandamus praying
that herein respondent be ordered:
1) To pay petitioners the total of P5,819,316.00;
2) To pay petitioners moral and exemplary damages in the amount to be fixed by the Court and
sum of P500,000.00 as attorneys fees.

On 18 February 1997, the lower court conducted a pre-trial conference where the
parties appeared and filed their respective pre-trial briefs. Further, respondent submitted
a Memorandum to which petitioners filed a Rejoinder.
On 07 November 1997, the lower court denied the Petition for Mandamus, in a
Decision which disposed as follows:

WHEREFORE, in view of all the foregoing, the instant Petition for Mandamus is
dismissed. The order of September 24, 1997, submitting the Manifestation and Motion
for Resolution, is hereby withdrawn.

SO ORDERED.

Hence, this petition where the core issue for resolution focuses on the right of
petitioners-contractors to compensation for a public works housing project.
In the case before us, respondent, citing among others Sections 46 [6] and
47,[7] Chapter 7, Sub-Title B, Title I, Book V of the Administrative Code of 1987 (E.O
292), posits that the existence of appropriations and availability of funds as certified to
and verified by the proper accounting officials are conditions sine qua non for the
execution of government contracts.[8] Respondent harps on the fact that the additional
work was pursued through the verbal request of then DPWH Undersecretary Aber P.
Canlas, despite the absence of the corresponding supplemental contracts and
appropriate funding.[9]According to respondent, sans showing of certificate of
availability of funds, the implied contracts are considered fatally defective and
considered inexistent and void ab initio. Respondent concludes that inasmuch as the
additional work done was pursued in violation of the mandatory provisions of the laws
concerning contracts involving expenditure of public funds and in excess of the public
officials contracting authority, the same is not binding on the government and impose
no liability therefor.[10]
Although this Court agrees with respondents postulation that the implied contracts,
which covered the additional constructions, are void, in view of violation of applicable
laws, auditing rules and lack of legal requirements,[11] we nonetheless find the instant
petition laden with merit and uphold, in the interest of substantial justice, petitioners-
contractors right to be compensated for the "additional constructions" on the public
works housing project, applying the principle of quantum meruit.
Interestingly, this case is not of first impression. In Eslao vs. Commission on
Audit,[12] this Court likewise allowed recovery by the contractor on the basis of quantum
meruit, following our pronouncement in Royal Trust Construction vs. Commission on Audit,[13] thus:

In Royal Trust Construction vs. COA, a case involving the widening and deepening
of the Betis River in Pampanga at the urgent request of the local officials and with
the knowledge and consent of the Ministry of Public Works, even without a
written contract and the covering appropriation, the project was undertaken to
prevent the overflowing of the neighboring areas and to irrigate the adjacent
farmlands. The contractor sought compensation for the completed portion in the sum
of over P1 million. While the payment was favorably recommended by the
Ministry of Public Works, it was denied by the respondent COA on the ground of
violation of mandatory legal provisions as the existence of corresponding
appropriations covering the contract cost. Under COA Res. No. 36-58 dated
November 15, 1986, its existing policy is to allow recovery from covering contracts
on the basis of quantum meruit if there is delay in the accomplishment of the required
certificate of availability of funds to support a contract. (Emphasis ours)

In the Royal Construction case, this Court, applying the principle of quantum
meruit in allowing recovery by the contractor, elucidated:

The work done by it (the contractor) was impliedly authorized and later expressly
acknowledged by the Ministry of Public Works, which has twice recommended
favorable action on the petitioners request for payment. Despite the admitted
absence of a specific covering appropriation as required under COA Resolution
No. 36-58, the petitioner may nevertheless be compensated for the services
rendered by it, concededly for the public benefit, from the general fund allotted by
law to the Betis River project. Substantial compliance with the said resolution, in view
of the circumstances of this case, should suffice. The Court also feels that the
remedy suggested by the respondent, to wit, the filing of a complaint in court for
recovery of the compensation claimed, would entail additional expense,
inconvenience and delay which in fairness should be imposed on the petitioner.

Accordingly, in the interest of substantial justice and equity, the respondent

Commission on Audit is DIRECTED to determine on a quantum meruit basis the total
compensation due to the petitioner for the services rendered by it in the channel
improvement of the Betis River in Pampanga and to allow the payment thereof
immediately upon completion of the said determination. (Emphasis ours)
 Similarly, this Court applied the doctrine of quantum meruit in Melchor vs.
Commission on Audit[14] and explained that where payment is based on quantum meruit,
the amount of recovery would only be the reasonable value of the thing or services
rendered regardless of any agreement as to value.[15]
Notably, the peculiar circumstances present in the instant case buttress petitioners
claim for compensation for the additional constructions, despite the illegality and void
nature of the implied contracts forged between the DPWH and petitioners-contractors.
On this matter, it bears stressing that the illegality of the subject contracts proceeds from
an express declaration or prohibition by law,[16] and not from any intrinsic
illegality. Stated differently, the subject contracts are not illegal per se.
Of equal significance are circumstances attendant and peculiar in this case which
necessitate allowance of petitioners money claimson the basis of quantum meruit for
work accomplished on the government housing project.
To begin with, petitioners-contractors assented and agreed to undertake additional
constructions for the completion of the housing units, believing in good faith and in the
interest of the government and, in effect, the public in general, that appropriations to
cover the additional constructions and completion of the public works housing project
would be available and forthcoming. On this particular score, the records reveal that the
verbal request and assurance of then DPWH Undersecretary Canlas led petitioners-
contractors to undertake the completion of the government housing project, despite
the absence of covering appropriations, written contracts, and certification of
availability of funds, as mandated by law and pertinent auditing rules and issuances. To
put it differently, the implied contracts, declared void in this case, covered only
the completion and final phase of construction of the housing units, which structures,
concededly, were already existing, albeit not yet finished in their entirety at the time the
implied contracts were entered into between the government and the contractors.
Further, petitioners-contractors sent to the DPWH Secretary a demand letter
pressing for their money claims, on the strength of a favorable recommendation from
the DPWH Assistant Secretary for Legal Affairs to the effect that implied contracts
existed and that the money claims had ample basis applying the principle of quantum
meruit. Moreover, as can be gleaned from the records, even the DPWH Auditor
interposed no objection to the payment of the money claims, subject to whatever action
the COA may adopt.
Beyond this, the sum of P5,819,316.00 representing the amount of petitioners
money claims, had already been released by the Department of Budget and
Management (DBM), under Advise of Allotment No. A4-1303-04-41-303. Equally
important is the glaring fact that the construction of the housing units had already been
completed by petitioners-contractors and the subject housing units had been, since their
completion, under the control and disposition of the government pursuant to its public
works housing project.
To our mind, it would be the apex of injustice and highly inequitable for us to defeat
petitioners-contractors right to be duly compensated for actual work performed and
services rendered, where both the government and the public have, for years, received
and accepted benefits from said housing project and reaped the fruits of petitioners-
contractors honest toil and labor.
Incidentally, respondent likewise argues that the State may not be sued in the instant
case, invoking the constitutional doctrine of Non-suability of the State,[17] otherwise
known as the Royal Prerogative of Dishonesty.
Respondents argument is misplaced inasmuch as the Principle of State Immunity
finds no application in the case before us.
Under these circumstances, respondent may not validly invoke the Royal
Prerogative of Dishonesty and conveniently hide under the States cloak of invincibility
against suit, considering that this principle yields to certain settled exceptions. True
enough, the rule, in any case, is not absolute for it does not say that the state may not
be sued under any circumstance.[18]
Thus, in Amigable vs. Cuenca,[19] this Court, in effect, shred the protective shroud
which shields the State from suit, reiterating our decree in the landmark case of Ministerio
vs. CFI of Cebu[20] that the doctrine of governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice on a citizen. It is just as important, if not more
so, that there be fidelity to legal norms on the part of officialdom if the rule of law were
to be maintained.[21]
Although the Amigable and Ministerio cases generously tackled the issue of the
States immunity from suit vis a vis the payment of just compensation for expropriated
property, this Court nonetheless finds the doctrine enunciated in the aforementioned
cases applicable to the instant controversy, considering that the ends of justice would
be subverted if we were to uphold, in this particular instance, the States immunity from
suit.
To be sure, this Court as the staunch guardian of the citizens rights and welfare
cannot sanction an injustice so patent on its face, and allow itself to be an instrument in
the perpetration thereof. Justice and equity sternly demand that the States cloak of
invincibility against suit be shred in this particular instance, and that
petitionerscontractors be duly compensated on the basis of quantum meruit for
construction done on the public works housing project.
IN VIEW WHEREOF, the instant petition is GRANTED. The assailed decision
of the Regional Trial Court dated 07 November 1997 is REVERSED AND SET
ASIDE.
 ACCORDINGLY, the Commission on Audit is hereby directed to determine and
ascertain with dispatch, on a quantum meruit basis, the total compensation due to
petitioners-contractors for the additional constructions on the housing project and to
allow payment thereof upon the completion of said determination. No costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-48214 December 19, 1978

ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T.

SANTIAGO, petitioner,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the Director,
Bureau of Plant Industry, and the Regional Director, Region IX, Zamboanga City, respondent,

Ahmad D. Sahak for petitioner.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez and Solicitor
Mariano M. Martinez for respondents.

FERNANDO, J.:

The first impression yielded by a perusal of this petition for certiorari is its inherent weakness
considering the explicit provision in the present Constitution prohibiting a suit against the Republic
without its consent. 1 Here petitioner Ildefonso Santiago 2 filed on August 9, 1976 an action in the Court
of First Instance of Zamboanga City naming as defendant the government of the Republic of the
Philippines represented by the Director of the Bureau of Plant Industry. 3His plea was for the revocation of
a deed of donation executed by him and his spouse in January of 1971, 4 with the Bureau of Plant
Industry as the donee. As alleged in such complaint, such Bureau, contrary to the terms of the donation,
failed to "install lighting facilities and water system on the property donated and to build an office building
and parking [lot] thereon which should have been constructed and ready for occupancy on or before
December 7, 1974. 5 That led him to conclude that under the circumstances, he was exempt from
compliance with such an explicit constitutional command. The lower court, in the order challenged in this
petition, was of a different view. It sustained a motion to dismiss on the part of the defendant Republic of
the Philippines, now named as one of the respondents, the other respondent being the Court of First
Instance of Zamboanga City, Branch II. It premised such an order on the settled "rule that the state
cannot be sued without its consent. This is so, because the New Constitution of the Philippines expressly
provides that the state may not be sued without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in
the com ment on the petition filed with this Court, is for the affirmance of the order of dismissal of
respondent Court precisely to accord deference to the above categorical constitutional mandate.

On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is impressed
with the unique aspect of this petition for certiorari, dealing as it does with a suit for the revocation of
a donation to the Republic, which allegedly fatted to conform with what was agreed to by the donee.
If an order of dismissal would suffice, then the element of unfairness enters, the facts alleged being
hypothetically admitted. It is the considered opinion of this Court then that to conform to the high
dictates of equity and justice, the presumption of consent could be indulged in safely. That would
serve to accord to petitioner as plaintiff, at the very least, the right to be heard. certiorari lies.

1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in language
plain and unmistakable: "The State may not be sued without its consent. 8 The Republic cannot be
proceeded against unless it allows itself to be sued. Neither can a department, bureau, agency, office, or
instrumentality of the government where the suit, according to the then Justice, now Chief Justice, Castro
in Del Mar v. Philippine Veterans Administration, 9 may result "in adverse consequences to the public
treasury, whether in the disbursements of funds or loss of property. 10 Such a doctrine was reiterated in
the following cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v.
Francisco, 13 and Republic v. Purisima. 14

2. It is contended by counsel for petitioner that the above constitutional provision would be given a
retroactive application in this case if the suit for the revocation of donation were dismissed. That is
not the case at all. InRepublic v. Purisima, this Court made clear that such a basic postulate is part
and parcel of the system of government implanted in the Philippines from the time of the acquisition
of sovereignty by the United States, and therefore, was implicit in the 1935 Constitution even in the
absence of any explicit language to that effect. This it did in a citation from Switzerland General
Insurance Co., Ltd. v. Republic of the Philippines: 15 "The doctrine of non-suability recognized in this
jurisdiction even prior to the effectivity of the [1935] Constitution is a logical corollary of the positivist
concept of law which, to paraphrase Holmes, negates the assertion of any legal right as against the state,
in itself the source of the law on which such a right may be predicated. Nor is this all. Even if such a
principle does give rise to problems, considering the vastly expanded role of government enabling it to
engage in business pursuits to promote the general welfare, it is not obeisance to the analytical school of
thought alone that calls for its continued applicability. 16 That is the teaching of the leading case of Mobil
Philippines Exploration, Inc. v. Customs Arrastre Service, 17 promulgated in December of 1966. As a
matter of fact, the Switzerland General Insurance Co. decision was the thirty-seventh of its kind after
Mobil. Clearly, then, the contention that to dismiss the suit would be to give the applicable constitutional
provision a retroactive effect is, to put it at its mildest, untenable.

3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough analysis ought to
have cautioned him against reliance on such a case. It was therein clearly pointed out that the
government entity involved was originally the National Airports Corporation. Thereafter, it "was abolished
by Executive Order No. 365, series of 1950, and in its place and stead the Civil Aeronautics
Administration was created and took over all the assets and assumed all the liabilities of the abolished
corporation. The Civil Aeronautics Administration, even if it is not a juridical entity, cannot legally prevent
a party or parties from enforcing their proprietary rights under the cloak or shield of lack of juridical
personality, because to took over all the powers and assumed all the obligations of the defunct
corporation which had entered into the contract in question." 19Then came National Shipyard and Steel
Corporation v. Court of Industrial Relations, 20 a 1963 decision, where the then Justice, later Chief Justice,
Concepcion, as ponente, stated that a government-owned and controlled corporation "has a personality
of its own distinct and separate from that of the government. ... Accordingly, it may sue and be sued and
may be subjected to court processes just like any other corporation. (Section 13, Act 1459, as
amended). 21 In three recent decisions, Philippine National Bank v. Court of Industrial
Relations, 22 Philippine National Bank v. Honorable Judge Pabalan, 23 and Philippine National Railways v.
Union de Maquinistas, 24 this constitutional provision on non-suability was unavailing in view of the suit
being against a government-owned or controlled corporation. That point apparently escaped the attention
of counsel for petitioner. Hence Santos v. Santos is hardly controlling.

4. It is to be noted further that the trend against the interpretation sought to be fastened in the broad
language of Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M.
Gatmaitan, 25 decided in 1957, it was held that an action [against] Government officials, is essentially one
against the Government, ... . 26 In the same year, this Court, in Angat River Irrigation System v. Angat
River Workers 27 Union, after referring to the "basic and fundamental principle of the law that the
Government cannot be sued before courts of justice without its consent," pointed out that "this privilege of
non-suability of the Government" covers with the mantle of its protection "an entity," in this case, the
Angat River Irrigation System. 28 Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a
reaffirmation of the doctrine that a "claim [constituting] a charge against, or financial liability to, the
Government cannot be entertained by the courts except with the consent of said government. 30 Bureau
of Printing v. Bureau of Printing Employees Association 31 came a year later; it reiterated such a doctrine.
It was not surprising therefore that in 1966, Mobil Philippines Exploration, Inc. was decided the way it
was. The remedy, where the liability is based on contract, according to this Court, speaking through
Justice J. P. Bengzon, is for plaintiff to file a claim with the general office in accordance with the
controlling statute, Commonwealth Act No. 327. 32 To repeat, that doctrine has been adhered to ever
since. The latest case in point isTravelers Indemnity Company v. Barber Steamship Lines, Inc. 33 Justice
Aquino's opinion concluded with this paragraph: "It is settled that the Bureau of Customs, acting as part of
the machinery of the national government in the operation of the arrastre service, is immune from suit
under the doctrine of non-suability of the State. The claimant's remedy to recover the loss or damage to
the goods under the custody of the customs arrastre service is to file a claim with the Commission in Audit
as contemplated in Act No. 3083 and Commonwealth Act No. 327. 34 With the explicit provision found in
the present Constitution, the fundamental principle of non-suability becomes even more exigent in its
command.

5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily follow
that this suit cannot prosper. Nonetheless, as set forth at the outset, there is a novel aspect that
suffices to call for a contrary conclusion. It would be manifestly unfair for the Republic, as donee,
alleged to have violated the conditions under which it received gratuitously certain property,
thereafter to put as a barrier the concept of non-suitability. That would be a purely one-sided
arrangement offensive to one's sense of justice. Such conduct, whether proceeding from an
individual or governmental agency, is to be condemned. As a matter of fact, in case it is the latter
that is culpable, the affront to decency is even more manifest. The government, to paraphrase
Justice Brandeis, should set the example. If it is susceptible to the charge of having acted
dishonorably, then it forfeits public trust-and rightly so.

6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a suit may
be filed. Consent need not be express. It can be implied. So it was more than implied in Ministerio v.
Court of First Instance of Cebu: 35 "The doctrine of governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice on a citizen. 36 The fact that this decision arose from a suit against
the Public Highways Commissioner and the Auditor General for failure of the government to pay for land
necessary to widen a national highway, the defense of immunity without the consent proving unavailing,
is not material. The analogy is quite obvious. Where the government ordinarily benefited by the taking of
the land, the failure to institute the necessary condemnation proceedings should not be a bar to an
ordinary action for the collection of the just compensation due. Here, the alleged failure to abide by the
conditions under which a donation was given should not prove an insuperable obstacle to a civil action,
the consent likewise being presumed. This conclusion is strengthened by the fact that while a donation
partakes of a contract, there is no money claim, and therefore reliance on Commonwealth Act No. 327
would be futile.

7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the Republic
or any of its agency being the donee, is entitled to go to court in case of an alleged breach of the
conditions of such donation. He has the right to be heard. Under the circumstances, the fundamental
postulate of non-suability cannot stand in the way. It is made to accommodate itself to the demands
of procedural due process, which is the negation of arbitrariness and inequity. The government, in
the final analysis, is the beneficiary. It thereby manifests its adherence to the highest ethical
standards, which can only be ignored at the risk of losing the confidence of the people, the
repository of the sovereign power. The judiciary under this circumstance has the grave responsibility
of living up to the ideal of objectivity and impartiality, the very essence of the rule of law. Only by
displaying the neutrality expected of an arbiter, even if it happens to be one of the departments of a
litigant, can the decision arrived at, whatever it may be, command respect and be entitled to
acceptance.

WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of October 20,
1977 is nullified, set aside and declared to be without force and effect. The Court of First Instance of
Zamboanga City, Branch II, is hereby directed to proceed with this case, observing the procedure
set forth in the Rules of Court. No costs.
 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. 1âwphïl.nêt

"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.
 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; Compañia 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

SECOND DIVISION

G.R. No. 108813 December 15, 1994

JUSMAG PHILIPPINES, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO
SACRAMENTO, Union President, JPFCEA, respondents.

Juan, Luces, Luna and Associates for petitioner.

Galutera & Aguilar Law Offices for private respondent.

PUNO, J.:

The immunity from suit of the Joint United States Military Assistance Group to the Republic of the
Philippines (JUSMAG-Philippines) is the pivotal issue in the case at bench.

JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS
COMMISSION (public respondent), in NLRC NCR CASE NO. 00-03-02092-92, reversing the July
30, 1991 Order of the Labor Arbiter, and ordering the latter to assume jurisdiction over the complaint
for illegal dismissal filed by FLORENCIO SACRAMENTO (private respondent) against petitioner.

First, the undisputed facts.

Private respondent was one of the seventy-four (74) security assistance support personnel (SASP)
working at JUSMAG-Philippines. 1 He had been with JUSMAG from December 18, 1969, until his
dismissal on April 27, 1992. When dismissed, he held the position of Illustrator 2 and was the incumbent
President of JUSMAG PHILIPPINES-FILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a
labor organization duly registered with the Department of Labor and Employment. His services were
terminated allegedly due to the abolition of his position. 2 He was also advised that he was under
administrative leave until April 27, 1992, although the same was not charged against his leave.

On March 31, 1992, private respondent filed a complaint with the Department of Labor and
Employment on the ground that he was illegally suspended and dismissed from service by
JUSMAG. 3 He asked for his reinstatement.

JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United
States. It further alleged lack of employer-employee relationship and that it has no juridical
personality to sue and be sued.4

In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for
want of jurisdiction." 5 Private respondent appealed 6 to the National Labor Relations Commission (public
respondent), assailing the ruling that petitioner is immune from suit for alleged violation of our labor laws.
JUSMAG filed its Opposition, 7 reiterating its immunity from suit for its non-contractual, governmental
and/or public acts.

In a Resolution, dated January 29, 1993, the NLRC 8 reversed the ruling of the Labor Arbiter as it held
that petitioner had lost its right not to be sued. The resolution was predicated on two grounds: (1) the
principle of estoppel — that JUSMAG failed to refute the existence of employer-employee relationship
under the "control test"; and (2) JUSMAG has waived its right to immunity from suit when it hired the
services of private respondent on December 18, 1969.

The NLRC relied on the case of Harry Lyons vs. United States of America, 9 where the "United States
Government (was considered to have) waived its immunity from suit by entering into (a) contract of
stevedoring services, and thus, it submitted itself to the jurisdiction of the local courts."

Accordingly, the case was remanded to the labor arbiter for reception of evidence as to the issue on
illegal dismissal.

Hence, this petition, JUSMAG contends:

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND

IN NOT AFFIRMING THE DISMISSAL OF THE COMPLAINT IT
BEING A SUIT AGAINST THE UNITED STATES OF AMERICA
WHICH HAD NOT GIVEN ITS CONSENT TO BE SUED; AND

B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT;

II

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN JUSMAG AND PRIVATE RESPONDENT; AND

B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING

THAT PRIVATE RESPONDENT IS ITS EMPLOYEE FOR FAILURE
TO PRESENT PROOF TO THE CONTRARY.

We find the petition impressed with merit.

It is meet to discuss the historical background of the JUSMAG to determine its immunity from suit.

JUSMAG was created pursuant to the Military Assistance Agreement 10 dated March 21, 1947,
between the Government of the Republic of the Philippines and the Government of the United States of
America. As agreed upon, JUSMAG shall consist of Air, Naval and Army group, and its primary task was
to advise and assist the Philippines, on air force, army and naval matters. 11
Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services required by the
Group, including compensation of locally employed interpreters, clerks, laborers, and other
personnel, except personal servants, shall be borne by the Republic of the Philippines."

This set-up was to change in 1991. In Note No 22, addressed to the Department of Foreign Affairs
(DFA) of the Philippines, dated January 23, 1991, the United States Government, thru its Embassy,
manifested its preparedness "to provide funds to cover the salaries of security assistance support
personnel" and security guards, the rent of JUSMAG occupied buildings and housing, and the cost
of utilities. 12 This offer was accepted by our Government, thru the DFA, in Note No. 911725, dated April
18, 1991. 13

Consequently, a Memorandum of Agreement 14 was forged between the Armed Forces of the
Philippines and JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S. Brigadier General
Robert G. Sausser. The Agreement delineated the terms of the assistance-in-kind of JUSMAG for 1991,
the relevant parts of which read:

a. The term salaries as used in this agreement include those for the security guards
currently contracted between JUSMAG and A' Prime Security Services Inc., and
the Security Assistance Support Personnel (SASP). . . . .

b. The term Security Assistance Support Personnel (SASP) does not include active
duty uniformed members of the Armed Forces of the Philippines performing duty at
JUSMAG.

c. It is understood that SASP are employees of the Armed Forces of the

Philippines (AFP). Therefore, the AFP agrees to appoint, for service with JUSMAG,
no more than 74 personnel to designated positions with JUSMAG.

d. SASP are under the total operational control of the Chief, JUSMAG-Philippines.
The term "Operational Control" includes, but is not limited to, all personnel
administrative actions, such as: hiring recommendations; firing recommendations;
position classification; discipline; nomination and approval of incentive awards; and
payroll computation. Personnel administration will be guided by Annex E of
JUSMAG-Philippines Memo 10-2. For the period of time that there is an exceptional
funding agreement between the government of the Philippines and the United States
Government (USG), JUSMAG will pay the total payroll costs for the SASP
employees. Payroll costs include only regular salary; approved overtime, costs of
living allowance; medical insurance; regular contributions to the Philippine Social
Security System, PAG-IBIG Fund and Personnel Economic Relief Allowance
(PERA); and the thirteenth-month bonus. Payroll costs do not include gifts or other
bonus payments in addition to those previously defined above. Entitlements not
considered payroll costs under this agreement will be funded and paid by the AFP.

e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at
their current rate of pay and benefits up to 30 June 1991, with an annual renewal of
employment thereafter subject to renewal of their appointment with the AFP
(employees and rates of pay are indicated at Enclosure 3). No promotion or transfer
internal to JUSMAG of the listed personnel will result in the reduction of their pay and
benefits.

f. All SASP will, after proper classification, be paid salaries and benefits at
established AFP civilian rates. Rules for computation of pay and allowances will be
 made available to the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP.
Additionally, any legally mandated changes in salary levels or methods of
computation shall be transmitted within 48 hours of receipt by Comptroller, GHQ to
Comptroller, JUSMAG.

g. The AFP agrees not to terminate SASP without 60 days prior written notice to
Chief, JUSMAG-Philippines. Any termination of these personnel thought to be
necessary because of budgetary restrictions or manpower ceiling will be subject to
consultations between AFP and JUSMAG to ensure that JUSMAG's mission of
dedicated support to the AFP will not be degraded or harmed in any way.

h. The AFP agrees to assume the severance pay/retirement pay liability for all
appointed SASP. (Enclosure 3 lists the severance pay liability date for current
SASP). Any termination of services, other than voluntary resignations or termination
for cause, will result in immediate payments of AFP of all termination pay to the
entitled employee. Vouchers for severance/retirement pay and accrued bonuses and
annual leave will be presented to the Comptroller, GHQ, AFP, not later than 14
calendar days prior to required date of payment.

i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social
Security System.

A year later, or in 1992, the United States Embassy sent another note of similar import to the
Department of Foreign Affairs (No. 227, dated April 8, 1992), extending the funding agreement for
the salaries of SASP and security guards until December 31, 1992.

From the foregoing, it is apparent that when JUSMAG took the services of private respondent, it was
performing a governmental function on behalf of the United States pursuant to the Military
Assistance Agreement dated March 21, 1947. Hence, we agree with petitioner that the suit is, in
effect, one against the United States Government, albeit it was not impleaded in the complaint.
Considering that the United States has not waived or consented to the suit, the complaint against
JUSMAG cannot not prosper.

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as
part of the law of the land. 15 Immunity of State from suit is one of these universally recognized
principles. In international law, "immunity" is commonly understood as an exemption of the state and its
organs from the judicial jurisdiction of another state. 16 This is anchored on the principle of the sovereign
equality of states under which one state cannot assert jurisdiction over another in violation of the
maxim par in parem non habet imperium (an equal has no power over an equal).17

Under the traditional rule of State immunity, a state cannot be sued in the courts of another State,
without its consent or waiver. However, in Santos, et al., vs. Santos, et al., 18 we recognized an
exception to the doctrine of immunity from suit by a state, thus:

. . . . Nevertheless, if, where and when the state or its government enters into a
contract, through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or reciprocal
benefits accrue and rights and obligations arise therefrom, and if the law granting the
authority to enter into such contract does not provide for or name the officer against
whom action may be brought in the event of a breach thereof, the state itself may be
sued, even without its consent, because by entering into a contract, the sovereign
 state has descended to the level of the citizen and its consent to be sued is implied
from the very act of entering into such contract. . . . . (emphasis ours)

It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of
America 19 was decided.

In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United States
Government for stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought
to collect from the US government sums of money arising from the contract. One of the issues posed
in the case was whether or not the defunct Court of First Instance had jurisdiction over the defendant
United States, a sovereign state which cannot be sued without its consent. This Court upheld the
contention of Harry Lyons, Inc., 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."

The doctrine of state immunity from suit has undergone further metamorphosis. The view evolved
that the existence of a contract does not, per se, mean that sovereign states may, at all times, be
sued in local courts. The complexity of relationships between sovereign states, brought about by
their increasing commercial activities, mothered a more restrictive application of the doctrine. 20 Thus,
in United States of America vs. Ruiz, 21 we clarified that our pronouncement in Harry Lyons, supra, with
respect to the waiver of State immunity, was obiter and "has no value as an imperative authority."

As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign orgovernmental activities ( jure imperii). 22 The mantle of state
immunity cannot be extended to commercial, private and proprietary acts ( jure gestionis). As aptly stated
by this Court (En banc) in US vs. Ruiz, supra:

The restrictive application of State immunity is proper 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 thus can be deemed to have tacitly given its consent to be
used only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions. (emphasis ours)

We held further, that the application of the doctrine of state immunity depends on the legal nature of
the act. Ergo, since a governmental function was involved — the transaction dealt with the
improvement of the wharves in the naval installation at Subic Bay — it was held that the United
States was not deemed to have waived its immunity from suit.

Then came the case of United States vs. Hon. Rodrigo, et al. 23 In said case, Genove was employed
as a cook in the Main Club located at U.S. Air Force Recreation Center, John Hay Air Station. He was
dismissed from service after he was found to have polluted the stock of soup with urine. Genove
countered with a complaint for damages. Apparently, the restaurant services offered at the John Hay Air
Station partake of the nature of a business enterprise undertaken by the United States government in
its proprietary capacity. The Court then noted that the restaurant is well known and available to the
general public, thus, the services are operated for profit, as a commercial and not a governmental activity.
Speaking through Associate Justice Isagani Cruz, the Court (En Banc) said:

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

Conversely, if the contract was entered into in the discharge of its governmental functions, the
sovereign state cannot be deemed to have waived its immunity from suit. 24 Such is the case at
bench. Prescinding from this premise, we need not determine whether JUSMAG controls the employment
conditions of the private respondent.

We also hold that there appears to be no basis for public respondent to rule that JUSMAG is
stopped from denying the existence of employer-employee relationship with private respondent. On
the contrary, in its Opposition before the public respondent, JUSMAG consistently contended that
the (74) SASP, including private respondent, working in JUSMAG, are employees of the Armed
Forces of the Philippines. This can be gleaned from: (1) the Military Assistance Agreement, supra,
(2) the exchange of notes between our Government, thru Department of Foreign Affairs, and the
United States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21,
1991, supra between the Armed Forces of the Philippines and JUSMAG.

We symphatize with the plight of private respondent who had served JUSMAG for more than twenty
(20) years. Considering his length of service with JUSMAG, he deserves a more compassionate
treatment. Unfortunately, JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the
Executive branch, through the Department of Foreign Affairs and the Armed Forces of the
Philippines, can take the cudgel for private respondent and the other SASP working for JUSMAG,
pursuant to the aforestated Military Assistance Agreement.

IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly, the impugned
Resolution dated January 29, 1993 of the National Labor Relations Commission is REVERSED and
SET ASIDE. No costs.

SO ORDERED.

Narvasa, C.J., Regalado and Mendoza, JJ., concur.

[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. Petitioners claim, moreover, that
[2]

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 against [3]

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. In turn, respondent filed on March 20, 2001, an Opposition to the
[4]

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. On August 16, 2002, it denied herein
[6]

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. The rule that a
[8]

State may not be sued without its consent is a necessary consequence of the
principles of independence and equality of States. As enunciated in Sanders
[9]

v. Veridiano II, the practical justification for the doctrine of sovereign immunity
[10]

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. A contrary attitude would unduly vex the peace
[11]

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, for instance, we held that the conduct of public
[14]

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, as well as the bidding
[15]

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 orjure 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, but said provision clearly applies only to a situation where the
[20]

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.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 92432 February 23, 1995

T/SGT ALDORA LARKINS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. IRINEO BERNARDO, DANIEL HERRERA,
MARIETTA DE GUZMAN, JOSELITO CATACUTAN, JOSEPH GALANG, ROBERTO HERRERA,
DELPIN PECSON, CARLOS CORTEZ, JAIME CORTEZ, ARSENIO DIAZ, ROBERTO SAGAD and
MARCELO LOZANO, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the
Resolutions dated August 31, 1989 and February 5, 1990 of the National Labor Relations
Commission (NLRC) in NLRC Case No. RAB- III-08-0572-88.

We grant the petition.

Petitioner was a member of the United States Air Force (USAF) assigned to oversee the dormitories
of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base, Pampanga.

On August 10, 1988, 3 AGS terminated the contract for the maintenance and upkeep of the
dormitories with the De Guzman Custodial Services. The employees thereof, including private
respondents, were allowed to continue working for 3 AGS. It was left to the new contractor, the JAC
Maintenance Services owned by Joselito Cunanan, to decide whether it would retain their services.

Joselito Cunanan, however, chose to bring in his own workers. As a result, the workers of the De
Guzman Custodial Services were requested to surrender their base passes to Lt. Col. Frankhauser
or to petitioner.

On August 12, 1988, private respondents filed a complaint with the Regional Arbitration Branch No.
III of the NLRC, San Fernando, Pampanga, against petitioner, Lt. Col. Frankhauser, and Cunanan
for illegal dismissal and underpayment of wages (NLRC Case No. RAB-III-08-0572-88). On
September 9, 1988, private respondents amended their complaint and added therein claims for
emergency cost of living allowance, thirteenth-month pay, service incentive leave pay and holiday
premiums.

The Labor Arbiter, with the conformity of private respondents, ordered Cunanan dropped as party
respondent.
Petitioner and Lt. Col. Frankhauser failed to answer the complaint and to appear at the hearings.
They, likewise, failed to submit their position paper, which the Labor Arbiter deemed a waiver on
their part to do so. The case was therefore submitted for decision on the basis of private
respondents' position paper and supporting documents.

On November 21, 1988, the Labor Arbiter rendered a decision granting all the claims of private
respondents. He found both Lt. Col. Frankhauser and petitioner "guilty of illegal dismissal" and
ordered them to reinstate private respondents with full back wages, or if that is no longer possible, to
pay private respondents' separation pay (Rollo, p. 78).

Petitioner appealed to the NLRC claiming that the Labor Arbiter never acquired jurisdiction over her
person because no summons or copies of the complaints, both original and amended, were ever
served on her. In her "Supplemental Memorandum to Memorandum of Appeal," petitioner argued
that the attempts to serve her with notices of hearing were not in accordance with the provisions of
the R.P. — U.S. Military Bases Agreement of 1947 (Rollo, pp. 35-37).

On August 31, 1989, NLRC issued a Resolution affirming the decision of the Labor Arbiter, but
declared that:

In the event this decision is executed and/or enforced, and considering our finding
that the real party respondent is the United States Government through its Armed
Forces stationed at Clark Air Base, let such execution be made subject to existing
international agreements diplomatic protocol (Rollo, p. 95).

Petitioner moved for reconsideration, which NLRC denied on February 5, 1990 (Rollo, p. 101).

Petitioner then elevated the matter to us.

On July 11, 1990, the Office of the solicitor General filed a Manifestation stating that it "cannot legally
support the decision of the Labor Arbiter" and therefore prayed that it be relieved from the
responsibility of filing the required Comment for the public respondents (Rollo, pp. 117-118). In view
of this Manifestation, on July 18, 1990, we resolved to require NLRC to file its own comment to the
petition, which NLRC did on November 29, 1990 (Rollo, pp. 120, 133-139).

II

It is petitioner's contention that the questioned resolutions are null and void because respondent
Labor Arbiter did not acquire jurisdiction to entertain and decide the case. Petitioner alleges that she
never received nor was served, any summons or copies of the original and amended complaints,
and therefore the Labor Arbiter had no jurisdiction over her person under Article XIV of the R.P. —
U.S. Military Bases Agreement.

We agree.

The "Agreement Between the Republic of the Philippines and the United States of America
Concerning Military Bases," otherwise known as the R.P. — U.S. Military Bases Agreement,
governed the rights, duties, authority, and the exercise thereof by Philippine and American nationals
inside the U.S. military bases in the country.

Article XIV thereof, governing the procedure for service of summons on persons inside U.S. military
bases, provides that:
 . . . [N]o process, civil or criminal, shall be served within any base except with the
permission of the commanding officer of such base; but should the commanding
officer refuse to grant such permission he shall forthwith take the necessary steps . .
. . to serve such process, as the case may be, and to provide the attendance of the
server of such process before the appropriate court in the Philippines or procure
such server to make the necessary affidavit or declaration to prove such service as
the case may require.

Summonses and other processes issued by Philippine courts and administrative agencies for United
States Armed Forces personnel within any U.S. base in the Philippines could be served therein only
with the permission of the Base Commander. If he withholds giving his permission, he should
instead designate another person to serve the process, and obtain the server's affidavit for filing with
the appropriate court.

Respondent Labor Arbiter did not follow said procedure. He instead, addressed the summons to Lt.
Col. Frankhauser and not the Base Commander (Rollo, p. 11).

Respondents do not dispute petitioner's claim that no summons was ever issued and served on her.
They contend, however, that they sent notices of the hearings to her (Rollo, pp. 12-13).

Notices of hearing are not summonses. The provisions and prevailing jurisprudence in Civil
Procedure may be applied by analogy to NLRC proceedings (Revised Rules of the NLRC, Rule I,
Sec. 3). It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the
respondent without the latter being served with summons (cf. Vda. de Macoy v. Court of Appeals,
206 SCRA 244 [1992]; Filmerco Commercial Co., Inc. v. Intermediate Appellate Court, 149 SCRA
193 [1987]). In the absence of service of summons or a valid waiver thereof, the hearings and
judgment rendered by the Labor Arbiter are null and void (cf. Vda. de Macoy v. Court of
Appeals, supra.)

Petitioner, in the case at bench, appealed to the NLRC and participated in the oral argument before
the said body. This, however, does not constitute a waiver of the lack of summons and a voluntary
submission of her person to the jurisdiction of the Labor Arbiter. She may have raised in her
pleadings grounds other than lack of jurisdiction, but these grounds were discussed in relation to and
as a result of the issue of the lack of jurisdiction. In effect, petitioner set forth only one issue and that
is the absence of jurisdiction over her person. If an appearance before the NLRC is precisely to
question the jurisdiction of the said agency over the person of the defendant, then this appearance is
not equivalent to service of summons (De los Santos v. Montera, 221 SCRA 15 [1993]).

Be that as it may, on the assumption that petitioner validly waived service of summons on her, still
the case could not prosper. There is no allegation from the pleadings filed that Lt. Col. Frankhauser
and petitioner were being sued in their personal capacities for tortious acts (United States of
America v. Guinto, 182 SCRA 644 [1990]). However, private respondents named 3 AGS as one of
the respondents in their complaint (Rollo, p. 10).

It is worth noting that NLRC admitted that:

At the outset, let it be made clear that We are aware as to who is the real party
respondent in this case; it is the Government of the United States of America which
is maintaining military facilities in the Philippines, one of which is located inside Clark
Air Base. The 3 AGS where the appellees previously worked as dormitory attendants
is just one of the various units of the United States Armed Forces (USAF) inside the
said military base. While individual respondents, particularly Lt. Col. William
 Frankhauser and T/Sgt. Aldora Larkins, are mere elements of the USAF assigned to
the 3 AGS. Thus, whatever awards, monetary or otherwise, the appellees are entitled
to by virtue of this case are the primary liabilities of their real employer, the United
States Government (Rollo, pp. 91-92).

Private respondents were dismissed from their employment by Lt. Col. Frankhauser acting for and in
behalf of the U.S. Government. The employer of private respondents was not Lt. Col. Frankhauser
nor petitioner. The employer of private respondents, as found by NLRC, was the U.S. Government
which, by right of sovereign power, operated and maintained the dormitories at Clark Air Base for
members of the USAF (United States of America v. Guinto, 182 SCRA 644 [1990]; United States of
America v. Ruiz, 136 SCRA 487 [1985]).

Indeed, assuming that jurisdiction was acquired over the United States Government and the
monetary claims of private respondents proved, such awards will have to be satisfied not by Lt. Col.
Frankhauser and petitioner in their personal capacities, but by the United States government
(Sanders v. Veridiano II, 162 SCRA 88 [1988]).

Under the "Agreement Between the Government of the Republic of the Philippines and the
Government of the United States of America Relating to the Employment of Philippine Nationals in
the United States Military Bases in the Philippines" otherwise known as the Base Labor Agreement
of May 27, 1968, any dispute or disagreement between the United States Armed Forces and Filipino
employees should be settled under grievance or labor relations procedures established therein (Art.
II) or by the arbitration process provided in the Romualdez-Bosworth Memorandum of Agreement
dated September 5, 1985. If no agreement was reached or if the grievance procedure failed, the
dispute was appealable by either party to a Joint Labor Committee established in Article III of the
Base Labor Agreement.

Unquestionably therefore, no jurisdiction was ever acquired by the Labor Arbiter over the case and
the person of petitioner and the judgment rendered is null and void (Filmerco Commercial Co. v.
Intermediate Appellate Court,supra.; Sy v. Navarro, 81 SCRA 458 [1978]).

WHEREFORE, the petition for certiorari is GRANTED.

SO ORDERED.

Padilla, Davide, Jr. Bellosillo and Kapunan, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-61744 June 25, 1984

MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,

vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV,
Baliuag, Bulacan, The PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO,
ADORACION IMPERIO, RODOLFO IMPERIO, CONRADO IMPERIO, ERNESTO IMPERIO,
ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO and SPOUSES MARCELO
PINEDA and LUCILA PONGCO, respondents.

Pascual C. Liatchko for petitioner.

The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:

In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of
San Miguel, Bulacan, et al.", the then Court of First Instance of Bulacan, on April 28, 1978, rendered
judgment holding herein petitioner municipality liable to private respondents, as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiffs and against the defendant Municipal Government of San Miguel Bulacan,
represented by Mayor Mar Marcelo G. Aure and its Municipal Treasurer:

1. ordering the partial revocation of the Deed of Donation signed by the deceased
Carlos Imperio in favor of the Municipality of San Miguel Bulacan, dated October 27,
1947 insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11 of Subdivision Plan Psd-20831
are concerned, with an aggregate total area of 4,646 square meters, which lots are
among those covered and described under TCT No. T-1831 of the Register of Deeds
of Bulacan in the name of the Municipal Government of San Miguel Bulacan,

2. ordering the defendant to execute the corresponding Deed of Reconveyance over

the aforementioned five lots in favor of the plaintiffs in the proportion of the undivided
one-half (½) share in the name of plaintiffs Margarita D. Vda. de Imperio, Adoracion,
Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr. and Juan, all surnamed Imperio, and
the remaining undivided one-half (½) share in favor of plaintiffs uses Marcelo E.
Pineda and Lucila Pongco;

3. ordering the defendant municipality to pay to the plaintiffs in the proportion

mentioned in the immediately preceding paragraph the sum of P64,440.00
corresponding to the rentals it has collected from the occupants for their use and
occupation of the premises from 1970 up to and including 1975, plus interest thereon
at the legal rate from January 1970 until fully paid;
 4. ordering the restoration of ownership and possession over the five lots in question
in favor of the plaintiffs in the same proportion aforementioned;

5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's
fees; and to pay the cost of suit.

The counterclaim of the defendant is hereby ordered dismissed for lack of evidence
presented to substantiate the same.

SO ORDERED. (pp. 11-12, Rollo)

The foregoing judgment became final when herein petitioner's appeal was dismissed due to its
failure to file the record on appeal on time. The dismissal was affirmed by the then Court of Appeals
in CA-G.R. No. SP-12118 and by this Court in G.R. No. 59938. Thereafter, herein private
respondents moved for issuance of a writ of execution for the satisfaction of the judgment.
Respondent judge, on July 27, 1982, issued an order, to wit:

Considering that an entry of judgment had already been made on June 14, 1982 in
G. R. No. L-59938 and;

Considering further that there is no opposition to plaintiffs' motion for execution dated
July 23, 1983;

Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10,
Rollo)

Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the
municipality's property or funds are all public funds exempt from execution. The said motion to quash
was, however, denied by the respondent judge in an order dated August 23, 1982 and the alias writ
of execution stands in full force and effect.

On September 13, 1982, respondent judge issued an order which in part, states:

It is clear and evident from the foregoing that defendant has more than enough funds
to meet its judgment obligation. Municipal Treasurer Miguel C, Roura of San Miguel,
Bulacan and Provincial Treasurer of Bulacan Agustin O. Talavera are therefor hereby
ordered to comply with the money judgment rendered by Judge Agustin C. Bagasao
against said municipality. In like manner, the municipal authorities of San Miguel,
Bulacan are likewise ordered to desist from plaintiffs' legal possession of the property
already returned to plaintiffs by virtue of the alias writ of execution.

Finally, defendants are hereby given an inextendible period of ten (10) days from
receipt of a copy of this order by the Office of the Provincial Fiscal of Bulacan within
which to submit their written compliance, (p. 24, Rollo)

When the treasurers (provincial and municipal) failed to comply with the order of September 13,
1982, respondent judge issued an order for their arrest and that they will be release only upon
compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San Miguel,
Bulacan, in the hands of the provincial and municipal treasurers of Bulacan and San Miguel,
respectively, are public funds which are exempt from execution for the satisfaction of the money
judgment in Civil Case No. 604-B.

Well settled is the rule that public funds are not subject to levy and execution. The reason for this
was explained in the case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in
trust for the people, intended and used for the accomplishment of the purposes for which municipal
corporations are created, and that to subject said properties and public funds to execution would
materially impede, even defeat and in some instances destroy said purpose." And, in Tantoco vs.
Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not
only the public property but also the taxes and public revenues of such corporations Cannot be
seized under execution against them, either in the treasury or when in transit to it. Judgments
rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not
subject to execution unless so declared by statute." Thus, it is clear that all the funds of petitioner
municipality in the possession of the Municipal Treasurer of San Miguel, as well as those in the
possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are
exempt from execution.

Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration",
Section 2 (a), provides:

SEC. 2. Fundamental Principles. — Local government financial affairs, transactions,

and operations shall be governed by the fundamental principles set forth hereunder:

(a) No money shall be paid out of the treasury except in pursuance of a lawful
appropriation or other specific statutory authority.

xxx xxx xxx

Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly
passed by the Sangguniang Bayan before any money of the municipality may be paid out. In the
case at bar, it has not been shown that the Sangguniang Bayan has passed an ordinance to this
effect.

Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the
enforcement of money judgment:

(a) By levying on all the property of the debtor, whether real or personal, not
otherwise exempt from execution, or only on such part of the property as is sufficient
to satisfy the judgment and accruing cost, if he has more than sufficient property for
the purpose;

(b) By selling the property levied upon;

(c) By paying the judgment-creditor so much of the proceeds as will satisfy the
judgment and accruing costs; and

(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed
by judgment or order of the court.

The foregoing has not been followed in the case at bar.

ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982,
granting issuance of a writ of execution; the alias writ of execution, dated July 27, 1982; and the
order of respondent judge, dated September 13, 1982, directing the Provincial Treasurer of Bulacan
and the Municipal Treasurer of San Miguel, Bulacan to comply with the money judgments, are SET
ASIDE; and respondents are hereby enjoined from implementing the writ of execution.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ,. concur.
 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 dated August 31, 1992,
[1]

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. In 1987, the City of
[3]

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. One of the issues
[5]

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. Pursuant to the subject
[7]

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. On the same day, Sheriff
[9]

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., where petitioners challenged the trial courts order garnishing its
[14]

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., and Commissioner of Public Highways vs. San Diego, does not help their
[15] [16]

cause. Both cases implicitly affirmed that public funds may be garnished if
[17]

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. There was no [18]

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, already lifted the levy on the three vehicles, thereby
[20]

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. Her decision
[22]

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.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 89898-99 October 1, 1990

MUNICIPALITY OF MAKATI, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge
RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and
SHERIFF SILVINO R. PASTRANA,respondents.

Defante & Elegado for petitioner.

Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

RESOLUTION

CORTÉS, J.:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner
Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home
Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and
improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the
name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No.
13699. Attached to petitioner's complaint was a certification that a bank account (Account No. S/A
265-537154-3) had been opened with the PNB Buendia Branch under petitioner's name containing
the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal reports regarding the value of the property,
respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the
property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment
of P338,160.00 which was earlier released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of a writ
of execution. This motion was granted by respondent RTC judge. After issuance of the writ of
execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff
Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was
informed that a "hold code" was placed on the account of petitioner. As a result of this, private
respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank
to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC
decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the
expropriation amount should be done in installments which the respondent RTC judge failed to state
in his decision. Private respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing
the court that private respondent was no longer the true and lawful owner of the subject property
because a new title over the property had been registered in the name of Philippine Savings Bank,
Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the
amount in petitioner's account which was garnished by respondent sheriff. In compliance with this
order, PSB filed a manifestation informing the court that it had consolidated its ownership over the
property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After
several conferences, PSB and private respondent entered into a compromise agreement whereby
they agreed to divide between themselves the compensation due from the expropriation
proceedings.

Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved
the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the
sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject
property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and,
(3) ordered PSB and private respondent to execute the necessary deed of conveyance over the
subject property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.

Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the
other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated
September 8, 1988, private respondent filed two succeeding motions to require the bank manager to
show cause why he should not be held in contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed
the court that he was still waiting for proper authorization from the PNB head office enabling him to
make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at
the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would
result in the disbursement of public funds without the proper appropriation required under the law,
citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
899].

Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for
reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the
case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically opened
for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42.
Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and
detention until his compliance with the said order.

Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions
for certiorari with the Court of Appeals, which were eventually consolidated. In a decision
promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB
Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the
present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or carrying
out the RTC order dated December 21, 1988 and the writ of garnishment issued pursuant thereto.
Private respondent then filed its comment to the petition, while petitioner filed its reply.

Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but
also alleges for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:

xxx xxx xxx

(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject
property, with an outstanding balance of P99,743.94.

(2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of
the municipal government, with a balance of P170,098,421.72, as of July 12, 1989.

xxx xxx xxx

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it
may fairly be asked whether the second account was opened only for the purpose of undermining
the legal basis of the assailed orders of respondent RTC judge and the decision of the Court of
Appeals, and strengthening its reliance on the doctrine that public funds are exempted from
garnishment or execution as enunciated in Republic v. Palacio [supra.] At any rate, the Court will
give petitioner the benefit of the doubt, and proceed to resolve the principal issues presented based
on the factual circumstances thus alleged by petitioner.

Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation
proceedings it had initiated over the subject property, petitioner poses no objection to the
garnishment or the levy under execution of the funds deposited therein amounting to P99,743.94.
However, it is petitioner's main contention that inasmuch as the assailed orders of respondent RTC
judge involved the net amount of P4,965,506.45, the funds garnished by respondent sheriff in
excess of P99,743.94, which are public funds earmarked for the municipal government's other
statutory obligations, are exempted from execution without the proper appropriation required under
the law.

There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-
530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the rule
that public funds are not subject to levy and execution, unless otherwise provided for by statute
[Republic v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No. L-30098,
February 18, 1970, 31 SCRA 616]. More particularly, the properties of a municipality, whether real or
personal, which are necessary for public use cannot be attached and sold at execution sale to
satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses
and market fees, and which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from execution [See Viuda De
Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos
Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No.
61744, June 25, 1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent
a showing that the municipal council of Makati has passed an ordinance appropriating from its public
funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less
the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be
validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse.
Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money
judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel
the enactment and approval of the necessary appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [SeeViuda De Tan Toco v. The Municipal Council of
Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner.
No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of
the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay
just compensation. Petitioner has benefited from its possession of the property since the same has
been the site of Makati West High School since the school year 1986-1987. This Court will not
condone petitioner's blatant refusal to settle its legal obligation arising from expropriation
proceedings it had in fact initiated. It cannot be over-emphasized that, within the context of the
State's inherent power of eminent domain,

. . . [j]ust compensation means not only the correct determination of the amount to be
paid to the owner of the land but also the payment of the land within a reasonable
time from its taking. Without prompt payment, compensation cannot be considered
"just" for the property owner is made to suffer the consequence of being immediately
deprived of his land while being made to wait for a decade or more before actually
receiving the amount necessary to cope with his loss [Cosculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also
Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27,
1987, 153 SCRA 291].

The State's power of eminent domain should be exercised within the bounds of fair play and justice.
In the case at bar, considering that valuable property has been taken, the compensation to be paid
fixed and the municipality is in full possession and utilizing the property for public purpose, for three
(3) years, the Court finds that the municipality has had more than reasonable time to pay full
compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay
Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is
hereby required to submit to this Court a report of its compliance with the foregoing order within a
non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.

The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case
No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on November 20,
1989 is MADE PERMANENT.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-33777 January 30, 1990

PACIFIC PRODUCTS, INC., petitioner,

vs.
VICENTE S. ONG, respondent.

Bito, Misa & Lozada for petitioner.

Vicente S. Ong for respondent.

MEDIALDEA, J.:

This is an appeal by certiorari from the decision of the Court of Appeals (p. 45, Rollo) in CA-G.R. No.
34038-R entitled "Vicente S. Ong, Plaintiff-Appellant, versus Macario Ofilada, in his capacity as
Sheriff of Manila, The Pacific Products, Inc. and the First Quezon City Insurance Co., Inc.,
Defendants-Appellees," which reversed the decision (pp. 32-37, Record on Appeal, p. 26 Rollo) of
the Court of First Instance of Manila in Civil Case No. 53124.

The antecedent facts are as follows:

On February 15, 1963, Vicente Ong filed an action for damages against Macario Ofilada in his
capacity as Sheriff of Manila, the Pacific Products, Inc., and the First Quezon City Insurance, with
the Court of First Instance of Manila (Branch XIX) and docketed as Civil Case No. 53124. The
complaint prayed for damages as a result of defendants' refusal to favorably consider his third party
claim filed with the Sheriff of Manila in connection with Civil Case No. 50120, also of the Regional
Trial Court of Manila (Branch XVI). On July 2,1963, the parties submitted a partial stipulation of facts,
quoted herein as follows:

PARTIAL STIPULATION OF FACTS

COME NOW parties plaintiff and defendants, by their respective counsel, and to this
Honorable Court respectfully submit the following stipulation of facts:

1. That on April l2,1962, defendant Pacific Products, Inc. filed Civil Case No. 50120
entitled 'Pacific Products, Inc. vs H.D. Labrador', doing business under the name and
style of 'BML Trading and Supply,' with the Court of First Instance of Manila (Branch
XIV) for recovery of P9,111.70, plus interest, costs and attorney's fees;

2. That upon motion, the said Branch XIV of this Honorable Court issued an order
directing the Sheriff of Manila or any of his deputies to attach, 'the estate, real or
personal, of the said defendant H. D. Labrador, etc.;'
3. That pursuant to the said order the Sheriff of Manila, through Deputy Sheriff
Santiago Geronilla in a notice of garnishment dated October 17, 1962 garnished P
9,111.70 of the amount of P 10,500.00 payable to the BML Trading and Supply, the
name and style under which the defendant H.D. Labrador in said Civil Case No.
50120 is doing business, by the Bureau of Telecommunications, thereby stopping the
payment of the said P10,500.00;

4. That on December 21, 1962, this Honorable Court (Branch XVI) rendered its
decision in Civil Case No. 50120, the dispositive portion of which reads as follows:

WHEREFORE, defendant H.D. Labrador is sentenced to pay plaintiff the sum of P

9,111.70 with interest thereon at 6% per annum from April 12, 1962 when the
complaint was filed and until the decision in this case is fully complied with plus
attorney's fees which the Court fixes in the sum of P500.00 plus costs.'

5. That after the above decision became final, a writ of execution was issued, and the
sheriff of Manila, through Deputy Sheriff Santiago Geronilla, further garnished P
l,181.65 of the P10,500.00 mentioned in Par. 3 hereof;

6. That plaintiff in this case, as stated in paragraph 2 of the complaint entered into
and executed an AGREEMENT with the BML Trading and Supply on October 6,
1962 (Annex 'A' of the Complaint), but defendant Pacific Products, Inc. first came to
know of the same thru counsel on November 8, 1962 and defendant Sheriff of Manila
on November 9, 1962, when plaintiff filed a petition to Lift Attachment in Civil Case
No. 50120 of the Court of First Instance of Manila, Branch XVI; the Bureau of
Telecommunications was notified of the Agreement Annex 'A,' on or about November
15, 1962;

7. That Official Receipt No. 2174 and Official Invoice No. 6491, photostatic copies of
which are attached to the complaint as Annexes 'B' and 'C,' respectively, were issued
on October 8, 1962 when plaintiff paid the sum of P9,300.00 to the L & S Chemical
Supply of Malabon, Rizal as purchase price of 15,000 pounds of Bluestone copper
sulfate pursuant to the AGREEMENT (Annex 'A' of the complaint);

8. That, as stated in paragraph 4 of the complaint the 15,000 pounds of Bluestone

copper sulfate mentioned in the Agreement were duly received on October 8, 1962
by the Bureau of Telecommunications as evidenced by Invoice No. 125, photostatic
copy of which was attached to the complaint as Annex 'D;'

9. That pursuant to the AGREEMENT (Annex 'A' of the complaint), the BML Trading
and Supply executed on October 19, 1962 a Waiver and Assignment of Rights over
its share of 40% in the net profit in favor of the plaintiff, photostatic copy of which was
attached to the complaint as Annex 'E', but defendant Pacific Products, Inc. first
came to know of the same on November 16,1962 when it was served a copy of the
plaintiff's Third Party Claim to which a copy of said Waiver and Assignment of Rights
was attached, and defendant Sheriff of Manila first came to know of the same when
plaintiff filed his said Third Party Claim with the Office of the Sheriff of Manila on
November 19, 1962; the Bureau of Telecommunications was notified of the Waiver
and Assignment of Rights on or about November 15, 1962;

10. That plaintiff filed his Third Party Claim on November l9, 1962 with the Office of
the Sheriff of Manila and the defendant Pacific Products, Inc. filed on November 29,
1962 in Civil Case No. 50120 a Motion to Strike Out Third Party Claim which was
denied for lack of merit in an order of this Court, Branch XVI, dated December 21,
1962;

11. That plaintiff received from the Office of the, Sheriff of Manila a notice dated
January 22, 1963, simple copy of which is attached hereto as Annex 'A,' that
defendant Pacific Products, Inc. filed Indemnity Bond No. 3879 of the defendant First
Quezon City Insurance Co., and another notice dated April 30, 1963, a simple copy
of which is attached hereto as Annex 'B', that defendant Pacific Products, Inc. posted
an additional bond of P1,181.55, both to answer for the Third Party Claim;

12. That thereafter, on February 15, 1963 plaintiff filed the instant action;

13. That after being advised by the Sheriff of Manila in a letter dated April 30, 1963,
Annex "B," hereof. to secure an injunction inhibiting him from releasing the money in
question in the amount of Pl0,293.35, plaintiff is convinced that defendant Sheriff of
Manila is not unjustified and persistent in refusing to satisfy the Third Party Claim of
plaintiff;

14. That the letter of the Bureau of Telecommunications addressed to the Chief
Deputy Sheriff of Manila, dated November 5, 1962 and signed by its Acting Director
A. Soriano, was in reply to the notice of garnishment dated October 17, 1962, simple
copy of which is attached hereto as Annex "C;"

15. That the parties herein admit their respective capacity to sue and be sued.

WHEREFORE, the parties hereto respectfully submit the foregoing stipulation of

facts as part of the evidence in this case without prejudice to the presentation of
evidence as to matters not covered by this Stipulations of facts.

Manila, June 26, 1963.

MANUEL P. CALANOS & ASSOCIATES

By:

(Sgd.) JERRY P. REBUTOC

(T) JERRY P. REBUTOC

Counsel for the Plaintiff 404 Regina Building Escolta, Manila

ROSS, SELPH & CARRASCOSO

By:

(Sgd.) FELINO S. MEGINO

(T) FELINO S. MEGINO

 Attorneys for the Defendant Pacific Products, Inc. 405 FNCB Building Manila

(Sgd.) FERNANDO P. AGDAMAG

FERNANDO P. AGDAMAG

Assistant Fiscal Counsel for the Defendant Sheriff of Manila

(Record on Appeal, pp. 26-32)

As aforequoted, Pacific Products, Inc. (Pacific, for brevity) filed an action for sum of money against
Hilarion D. Labrador (hereinafter referred to as H.D. Labrador), "doing business under the name and
style of BML Trading and Supply," with the Court of First Instance of Manila (Br. XVI) and docketed
as Civil Case No. 50102. Upon Motion of Pacific, an order was issued directing the Sheriff of Manila
to attach the properties of the defendant.

Meanwhile, BML Trading and Supply (BML Trading, for brevity) won in a bid to supply the Bureau of
Telecommunications (Bureau, for brevity) with 15,000 pounds of bluestone copper sulfate worth
P10,500.00. H.D. Labrador, as agent of BML Trading delivered the compound. Before the Bureau
could release the payment to BML Trading, the Sheriff of Manila garnished P9,111.70 of P10,500.00
on October 17,1962.

Unknown to Pacific, BML Trading, through its attorney in-fact, H.D. Labrador assigned its tights over
the P10,500.00 to herein respondent, Vicente S. Ong on October 19,1962 (pp. 14-17, Record on
Appeal; p. 26,Rollo). It appears that it was Vicente Ong who advanced the necessary funds to
purchase the copper sulfate and the parties agreed that the profits will be shared by BML Trading
and Vicente Ong on a 40-60 percent basis. It was also their agreement that BML Trading will waive
its share in the net profits which may be realized from the transaction should it fail to secure the
release of the payment from the Bureau of Telecommunications within seven (7) days from the
delivery of the compound (pp. 9-13, Record on Appeal). Pacific learned about the assignment only
when a copy of the third party claim filed by Vicente Ong with the Office of the Sheriff of Manila was
served on them on November 19,1962.

On November 29,1962, Pacific filed a motion to strike out the third party claim of Vicente Ong, but
the same was denied for lack of merit.

H.D. Labrador was declared in default and was ordered to pay Pacific the sum of P 9,111.70 in a
decision which was rendered by the trial court on December 21, 1962, the dispositive portion of
which reads:

WHEREFORE, defendant H.D. Labrador is sentenced to pay plaintiff the sum of

P9,111.70 with interest thereon at 6% per annum from April 12, 1962 when the
complaint was filed and until the decision in this case is fully complied with plus
attorney's fees which the Court fixes in the sum of P500,000 plus cost. (P. 13, Rollo)

The corresponding writ of execution was issued and the Sheriff of Manila further garnished Pl,181.65
of the P10,500.00 in the possession of the Bureau.

Ong's third party claim was frustrated when Pacific filed an Indemnity Bond with the Office of the
Sheriff. Thus, the action for damages against the Sheriff, Pacific Products and First Quezon City
Insurance filed by Ong on February 14, 1963 to vindicate his claim on the amount garnished.
On February 21, 1964, judgment was rendered by the trial court, as follows:

WHEREFORE, judgment is hereby rendered, dismissing the complaint, without

special pronouncement as to costs. (p. 37, Record on Appeal)

Ong filed a notice of appeal on March 20, 1964 (p. 38, Record on Appeal; p. 26, Rollo) which was
approved on April 25, 1964 (p. 41, Record on Appeal; supra).

On May 7, 1971, the Court of Appeals reversed the decision of the trial court. The dispositive portion
of the decision reads:

WHEREFORE, the decision appealed from is reversed and judgment is hereby

rendered ordering the defendants, the Pacific Products, Inc., and the First Quezon
City Insurance Co., Inc., to pay jointly and severally, the plaintiff-appellant the sum of
ten thousand two hundred ninety three pesos and thirty-five centavos (P10,293.35),
with legal interest from November 19, 1962, the date of the filing of the third party
claim and the costs.

SO ORDERED. (p. 24, Rollo)

Pacific filed a Motion for Reconsideration which was denied on July 2, 1971 (p. 25, Rollo). Hence,
the instant appeal by certiorari filed by Pacific on July 17, 1971.

Petitioner assails the decision of the Court of Appeals when it held that the garnishment of the
amount of P10,500.00 payable to BML Trading and Supply while it was still in the possession of the
Bureau of Telecommunications was illegal and therefore, null and void. It is also petitioner's
contention that the cases ofDirector of Commerce and Industry v. Concepcion, 43 Phil. 384
and Avendano et al. vs. Alikpala, et al., G.R. No. L-21189, November 28, 1964, wherein this Court
declared null and void the garnishment of the salaries of government employees, relied upon by the
appellate court are not applicable because no garnishment of salaries of government official or
employee is involved in this case.

There is no merit in this petition.

It is noted that the notice of garnishment served upon the Bureau of Telecommunications was made
pursuant to an order of attachment issued by the trial court in the case for sum of money against
H.D. Labrador. At the time of such service, the amount against which the notice was issued was still
in the possession and control of the Bureau. The same situation obtains in the two cases relied upon
by the appellate court. While it is true that in the case at bar no salaries of public officials or
employees are involved, the reasons for the ruling in the two cited cases are clear. It was held, thus:

... By the process of garnishment, the plaintiff virtually sues the garnishee for a debt
due to the defendant. The debtor stranger becomes a forced intervenor. The Director
of the Bureau of Commerce and Industry, an officer of the Government of the
Philippine Islands, when served with the writ of attachment, thus became a party to
the action. (Tayabas Land Co. vs. Sharruf (1921), 41 Phil. 382).

A rule, which has never been seriously questioned, is that money in the hands of
public officers, although it may be due government employees, is not liable to the
creditors of these employees in the process of garnishment. One reason is, that the
State, by virtue of its sovereignty may not be sued in its own courts except by
 express authorization by the Legislature, and to Subject its officers to garnishment
would be to permit indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as it remains in the hands of the disbursing
officer of the Government, belong latter, although the defendant in garnishment may
be entitled to a specific portion thereof. And still another reason which covers both of
the foregoing is that every consideration of public policy forbids it. (Director of
Commerce and Industry v. Concepcion. 43 Phil. 386; Italics ours)

Against the first reason above-cited, petitioner contends that immunity from suit was waived when
the Bureau of Telecommunications entered into a business transaction with BML Trading since in
this jurisdiction, it is now "a well established doctrine that when the Government engages in
business, it abdicates part of its sovereign prerogatives and ascends to the level of a citizen" (Price
Stabilization Corporation v. Court of Industrial Relations, G.R. L-9797 and L-9834. November 29.
1957).

This contention is not correct. Suability would follow only if the contract entered into by the
government is in the exercise of a proprietary as distinguished from a governmental function (see
U.S.A vs. Ruiz, L-35645, May 22, 1985). The Bureau of Telecommunications is a service bureau
and is not engaged in business. There is also nothing in the records of this case from which it could
be concluded that in the purchase of the 15,000 pounds of bluestone copper sulfate, the Bureau was
engaging in business.

Likewise, petitioner contends that in this case, where the Bureau is authorized to enter into a
contract, the government "may sue and be sued and may be subjected to court processes just like
any other person," as was held in the case of National Shipyards and Steel Corporation (NASSCO)
vs. CIR, et al., G.R. L-17874, August 31, 1963, 8 SCRA 781.

There is no merit in this contention. NASSCO is a government owned and controlled corporation,
with a personality of its own, separate and distinct from that of the government. It has, pursuant to
Section 2 of Executive Order No. 356 dated October 23, 1950 (46 Official Gazette, 4677), which
established the NASSCO all the powers of a corporation under the Corporation Code. Accordingly, it
may sue and be sued and may be subjected to court processes just like any other corporation ..."
(supra). On the other hand, the Bureau of Telecommunications is a government agency created
under Section 78 of Executive Order No. 94, Series of 1947. It has no charter and no distinct
personality of its own. Being a government agency, the doctrine of State immunity from suit applies.

For the foregoing reasons, We affirm the ruling of the appellate court that the writ of garnishment
issued against the P10,500.00 payable to BML Trading while still in the possession of the Bureau of
Telecommunications is illegal and therefore, null and void. In view of the assignment and waiver by
BML Trading of the said amount in favor of Vicente Ong, the latter became the rightful owner
thereof.

Finally, petitioner claims that the Court of Appeals erred in ruling that the money due to BML Trading
and Supply in the hands of the Bureau cannot be made to answer for a personal judgment against
H.D. Labrador in Civil Case No. 50120. According to petitioner, Vicente Ong admitted in the
stipulation of facts that H.D. Labrador was "doing business under the name and style of BML Trading
and Supply" and that H.D. Labrador and BML Trading are one. A judgment rendered against H.D.
Labrador can therefore be satisfied from the funds the Bureau holds in favor of BML Trading.

We do not agree. There is nothing in the records from which it may be concluded that in the
transactions involved in Civil Case 50120, H.D. Labrador acted as an agent of BML Trading. On the
contrary, the judgment therein was rendered only against H.D. Labrador. Presumably, it was a
personal judgment against him. On the other hand, the P10,500.00 in the hands of the Bureau was
payable to BML Trading and Supply owned by Benedicta Labrador and represented in the
transaction by H.D. Labrador, There is also no evidence on record to support a conclusion that H.D.
Labrador held himself out as the owner of BML Trading in his transactions with the Bureau. In the
stipulation of facts, Vicente Ong never admitted that H.D. Labrador was doing business under the
name and style of BML Trading. What was admitted by Ong was the fact that Civil Case No. 50120
was entitled "Pacific Products, Inc. vs. H.D. Labrador, doing business under the name and style of
BML Trading and Supply."

ACCORDINGLY, the petition is DISMISSED. The decision of the Court of Appeals appealed from is
AFFIRMED.

No costs.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino JJ., concur.