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G.R. No. L-30671 November 28, 1973

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE
PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY
OF MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD.,
GAVINO UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION, respondents.
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner.
Andres T. Velarde and Marcelo B. Fernan for respondents.

FERNANDO, J.:
The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an
order issued by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I,
1
declaring a decision final and executory and of an alias writ of execution directed against the funds of the
Armed Forces of the Philippines subsequently issued in pursuance thereof, the alleged ground being excess
of jurisdiction, or at the very least, grave abuse of discretion. As thus simply and tersely put, with the facts
being undisputed and the principle of law that calls for application indisputable, the outcome is
predictable. The Republic of the Philippines is entitled to the writs prayed for. Respondent Judge ought not
to have acted thus. The order thus impugned and the alias writ of execution must be nullified.
In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth
thus: "7. On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of
respondents P. J. Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against
the petitioner herein, confirming the arbitration award in the amount of P1,712,396.40, subject of Special
Proceedings. 8. On June 24, 1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring
the aforestated decision of July 3, 1961 final and executory, directing the Sheriffs of Rizal Province, Quezon
City [as well as] Manila to execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the
corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On the strength of the
afore-mentioned Alias Writ of Execution dated June 26, 1969, the Provincial Sheriff of Rizal (respondent
herein) served notices of garnishment dated June 28, 1969 with several Banks, specially on the "monies
due the Armed Forces of the Philippines in the form of deposits sufficient to cover the amount mentioned in
the said Writ of Execution"; the Philippine Veterans Bank received the same notice of garnishment on June
30, 1969 .... 11. The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly,
with the Philippine Veterans Bank and the Philippine National Bank [or] their branches are public funds duly
appropriated and allocated for the payment of pensions of retirees, pay and allowances of military and
civilian personnel and for maintenance and operations of the Armed Forces of the Philippines, as per
Certification dated July 3, 1969 by the AFP Controller,..." 2. The paragraph immediately succeeding in such
petition then alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction
[or] with grave abuse of discretion amounting to lack of jurisdiction in granting the issuance of an alias writ
of execution against the properties of the Armed Forces of the Philippines, hence, the Alias Writ of
Execution and notices of garnishment issued pursuant thereto are null and void." 3 In the answer filed by
respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted
with the only qualification being that the total award was in the amount of P2,372,331.40. 4
The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition
proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. .
It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the
state as well as its government is immune from suit unless it gives its consent. It is readily understandable

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why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of
any formal conception or obsolete theory, but on the logical and practical ground that there can be no
legal right as against the authority that makes the law on which the right depends." 5 Sociological
jurisprudence supplies an answer not dissimilar. So it was indicated in a recent decision, Providence
Washington Insurance Co. v. Republic of the Philippines, 6 with its affirmation that "a continued adherence
to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused
private parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the availability of judicial
remedy were not thus restricted. With the well known propensity on the part of our people to go to court,
at the least provocation, the loss of time and energy required to defend against law suits, in the absence of
such a basic principle that constitutes such an effective obstacle, could very well be imagined." 7
This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It
is therein expressly provided: "The State may not be sued without its consent." 8 A corollary, both dictated
by logic and sound sense from a basic concept is that public funds cannot be the object of a garnishment
proceeding even if the consent to be sued had been previously granted and the state liability adjudged.
Thus in the recent case of Commissioner of Public Highways v. San Diego, 9 such a well-settled doctrine
was restated in the opinion of Justice Teehankee: "The universal rule that where the State gives its consent
to be sued by private parties either by general or special law, it may limit claimant's action 'only up to the
completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when
the judgment is rendered, since government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation as required by law. The
functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific objects, as appropriated by law." 10 Such a
principle applies even to an attempted garnishment of a salary that had accrued in favor of an employee.
Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as ponente left
no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money in the
hands of public officers, although it may be due government employees, is not liable to the creditors of
these employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty,
may not be sued in its own courts except by express authorization by the Legislature, and to subject its
officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as they remain in the hands of the disbursing officer of the
Government, belong to the latter, although the defendant in garnishment may be entitled to a specific
portion thereof. And still another reason which covers both of the foregoing is that every consideration of
public policy forbids it." 12
In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully
allege a legitimate grievance.
WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order
of June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution
issued thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made
permanent.
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.

Anacleto Badoy for respondent Atanacio Mallari.

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

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.) CARLOS P.
GARCIA
(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

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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

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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

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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 respondentsappellees "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

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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.
I
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. 3132, 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.

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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 6page 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.

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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:

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10

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 void ab 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 petitionerappellant 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

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11

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,

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12

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. L11078, 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. L14407, 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).

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13

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).
V
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 petitionerappellant'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,

G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee,
vs.
PABLO FELICIANO and INTERMEDIATE APPELLATE COURT, respondents-appellants.

YAP, J.:

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14

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

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setting aside the order denying intervenors' motion for postponement. The case was reopened to allow
intervenors to present their evidence. Unable to secure a reconsideration of Judge Navarro's order, the
plaintiff went to the Intermediate Appellate Court on a petition for certiorari. Said petition was, however,
denied by the Intermediate Appellate Court, and petitioners brought the matter to this Court in G.R. No.
36163, which was denied on May 3, 1973 Consequently, the case was remanded to the court a quo for
further proceedings.
On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground that the Republic of
the Philippines cannot be sued without its consent and hence the action cannot prosper. The motion was
opposed by the plaintiff.
On August 21, 1980, the trial court, through Judge Esteban Lising, issued the questioned order dismissing
the case for lack of jurisdiction. Respondent moved for reconsideration, while the Solicitor General, on
behalf of the Republic of the Philippines filed its opposition thereto, maintaining that the dismissal was
proper on the ground of non-suability of the State and also on the ground that the existence and/or
authenticity of the purported possessory information title of the respondents' predecessor-in-interest had
not been demonstrated and that at any rate, the same is not evidence of title, or if it is, its efficacy has
been lost by prescription and laches.
Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate Appellate Court on
petition for certiorari. On April 30, 1985, the respondent appellate court rendered its decision reversing the
order of Judge Lising and remanding the case to the court a quo for further proceedings. Hence this
petition.
We find the petition meritorious. The doctrine of non-suability of the State has proper application in this
case. The plaintiff has impleaded the Republic of the Philippines as defendant in an action for recovery of
ownership and possession of a parcel of land, bringing the State to court just like any private person who is
claimed to be usurping a piece of property. A suit for the recovery of property is not an action in rem, but
an action in personam. 1 It is an action directed against a specific party or parties, and any judgment
therein binds only such party or parties. The complaint filed by plaintiff, the private respondent herein, is
directed against the Republic of the Philippines, represented by the Land Authority, a governmental
agency created by Republic Act No. 3844.
By its caption and its allegation and prayer, the complaint is clearly a suit against the State, which under
settled jurisprudence is not permitted, except upon a showing that the State has consented to be sued,
either expressly or by implication through the use of statutory language too plain to be misinterpreted. 2
There is no such showing in the instant case. Worse, the complaint itself fails to allege the existence of
such consent. This is a fatal defect, 3 and on this basis alone, the complaint should have been dismissed.
The failure of the petitioner to assert the defense of immunity from suit when the case was tried before the
court a quo, as alleged by private respondent, is not fatal. It is now settled that such defense "may be
invoked by the courts sua sponte at any stage of the proceedings." 4
Private respondent contends that the consent of petitioner may be read from the Proclamation itself, when
it established the reservation " subject to private rights, if any there be. " We do not agree. No such
consent can be drawn from the language of the Proclamation. The exclusion of existing private rights from
the reservation established by Proclamation No. 90 can not be construed as a waiver of the immunity of
the State from suit. Waiver of immunity, being a derogation of sovereignty, will not be inferred lightly. but
must be construed in strictissimi juris. 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

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16

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. PHILIPPINE NATIONAL BANK, petitioner,
vs.
HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III, La Union, AGOO
TOBACCO PLANTERS ASSOCIATION, INC., PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, and
PANFILO P. JIMENEZ, Deputy Sheriff, La Union, respondents.
Conrado E. Medina, Edgardo M. Magtalas & Walfrido Climaco for petitioner.
Felimon A. Aspirin fit respondent Agoo 'Tobacco Planters Association, Inc.
Virgilio C. Abejo for respondent Phil. Virginia Tobacco Administration.

17
Page

FERNANDO, Acting C.J.:

The reliance of petitioner Philippine National Bank in this certiorari and prohibition proceeding against
respondent Judge Javier Pabalan who issued a writ of execution, 1 followed thereafter by a notice of
garnishment of the funds of respondent Philippine Virginia Tobacco Administration, 2 deposited with it, is on
the fundamental constitutional law doctrine of non-suability of a state, it being alleged that such funds are
public in character. This is not the first time petitioner raised that issue. It did so before in Philippine
National Bank v. Court of industrial Relations, 3 decided only last January. It did not meet with success, this
Court ruling in accordance with the two previous cases of National Shipyard and Steel Corporation 4 and
Manila Hotel Employees Association v. Manila Hotel Company, 5 that funds of public corporations which can
sue and be sued were not exempt from garnishment. As respondent Philippine Virginia Tobacco
Administration is likewise a public corporation possessed of the same attributes, 6 a similar outcome is
indicated. This petition must be dismissed.
It is undisputed that the judgment against respondent Philippine Virginia Tobacco Administration had
reached the stage of finality. A writ of execution was, therefore, in order. It was accordingly issued on
December 17, 1970. 7 There was a notice of garnishment for the full amount mentioned in such writ of
execution in the sum of P12,724,66. 8 In view of the objection, however, by petitioner Philippine National
Bank on the above ground, coupled with an inquiry as to whether or not respondent Philippine Virginia
Tobacco Administration had funds deposited with petitioner's La Union branch, it was not until January 25,
1971 that the order sought to be set aside in this certiorari proceeding was issued by respondent Judge. 9
Its dispositive portion reads as follows: Conformably with the foregoing, it is now ordered, in accordance
with law, that sufficient funds of the Philippine Virginia Tobacco Administration now deposited with the
Philippine National Bank, La Union Branch, shall be garnished and delivered to the plaintiff immediately to
satisfy the Writ of Execution for one-half of the amount awarded in the decision of November 16, 1970." 10
Hence this certiorari and prohibition proceeding.
As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of non-suability. It is
to be admitted that under the present Constitution, what was formerly implicit as a fundamental doctrine
in constitutional law has been set forth in express terms: "The State may not be sued without its consent."
11
If the funds appertained to one of the regular departments or offices in the government, then, certainly,
such a provision would be a bar to garnishment. Such is not the case here. Garnishment would lie. Only
last January, as noted in the opening paragraph of this decision, this Court, in a case brought by the same
petitioner precisely invoking such a doctrine, left no doubt that the funds of public corporations could
properly be made the object of a notice of garnishment. Accordingly, this petition must fail.
1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was sought to be justified
on the failure of respondent Judge to set aside the notice of garnishment of funds belonging to respondent
Philippine Virginia Tobacco Administration. This excerpt from the aforecited decision of Philippine National
Bank v. Court of Industrial Relations makes manifest why such an argument is far from persuasive. "The
premise that the funds could be spoken as public character may be accepted in the sense that the People
Homesite and Housing Corporation was a government-owned entity. It does not follow though that they
were exempt. from garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is
squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief Justice, Concepcion:
"The allegation to the effect that the funds of the NASSCO are public funds of the government, and that, as
such, the same may not be garnished, attached or levied upon, is untenable for, as a government owned
and controlled corporation, the NASSCO has a personality of its own. distinct and separate from that of the
Government. It has pursuant to Section 2 of Executive Order No. 356, dated October 23, 1950 ... ,
pursuant to which The NASSCO has been established all the powers of a corporation under the
Corporation Law ... ." Accordingly, it may be sue and be sued and may be subjected to court processes just
like any other corporation (Section 13, Act No. 1459, as amended.)" ... To repeat, the ruling was the
appropriate remedy for the prevailing party which could proceed against the funds of a corporate entity
even if owned or controlled by the government." 12

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18

2. The National Shipyard and Steel Corporation decision was not the first of its kind. The ruling therein
could be inferred from the judgment announced in Manila Hotel Employees Association v. Manila Hotel
Company, decided as far back as 1941. 13 In the language of its ponente Justice Ozaeta "On the other
hand, it is well-settled that when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. (Bank of the United States v. Planters'
Bank, 9 Wheat. 904, 6 L.ed. 244). By engaging in a particular business thru the instrumentality of a
corporation, the 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." 14 It is worth mentioning that
Justice Ozaeta could find support for such a pronouncement from the leading American Supreme Court
case of united States v. Planters' Bank, 15 with the opinion coming from the illustrious Chief Justice
Marshall. It was handed down more than one hundred fifty years ago, 1824 to be exact. It is apparent,
therefore, that petitioner Bank could it legally set forth as a bar or impediment to a notice of garnishment
the doctrine of non-suability.
WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.
DEPARTMENT OF AGRICULTURE, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Roy Lago Salcedo for private respondents.

VITUG, J.:
For consideration are the incidents that flow from the familiar doctrine of non-suability of the state.
In this petition for certiorari, the Department of Agriculture seeks to nullify the Resolution, 1 dated 27
November 1991, of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City,
denying the petition for injunction, prohibition and mandamus that prays to enjoin permanently the NLRC's
Regional Arbitration Branch X and Cagayan de Oro City Sheriff from enforcing the decision 2 of 31 May
1991 of the Executive Labor Arbiter and from attaching and executing on petitioner's property.
The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a contract 3 on
01 April 1989 for security services to be provided by the latter to the said governmental entity. Save for
the increase in the monthly rate of the guards, the same terms and conditions were also made to apply to
another contract, dated 01 May 1990, between the same parties. Pursuant to their arrangements, guards
were deployed by Sultan Agency in the various premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security Agency filed a complaint for underpayment
of wages, non-payment of 13th month pay, uniform allowances, night shift differential pay, holiday pay and
overtime pay, as well as for damages, 4 before the Regional Arbitration Branch X of Cagayan de Oro City,
docketed as NLRC Case No. 10-09-00455-90 (or 10-10-00519-90, its original docket number), against the
Department of Agriculture and Sultan Security Agency.
The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner and jointly and
severally liable with Sultan Security Agency for the payment of money claims, aggregating P266,483.91, of
the complainant security guards. The petitioner and Sultan Security Agency did not appeal the decision of
the Labor Arbiter. Thus, the decision became final and executory.
On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the City Sheriff to enforce and
execute the judgment against the property of the two respondents. Forthwith, or on 19 July 1991, the City
Sheriff levied on execution the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit
Toyota Mini Cruiser, and one (1) unit Toyota Crown. 6 These units were put under the custody of Zacharias

Page

19

Roa, the property custodian of the petitioner, pending their sale at public auction or the final settlement of
the case, whichever would come first.
A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of injunction was filed
by the petitioner with the National Labor Relations Commission (NLRC), Cagayan de Oro, alleging, inter
alia, that the writ issued was effected without the Labor Arbiter having duly acquired jurisdiction over the
petitioner, and that, therefore, the decision of the Labor Arbiter was null and void and all actions pursuant
thereto should be deemed equally invalid and of no legal, effect. The petitioner also pointed out that the
attachment or seizure of its property would hamper and jeopardize petitioner's governmental functions to
the prejudice of the public good.
On 27 November 1991, the NLRC promulgated its assailed resolution; viz:
WHEREFORE, premises considered, the following orders are issued:
1. The enforcement and execution of the judgments against petitioner in NLRC RABX Cases
Nos. 10-10-00455-90; 10-10-0481-90 and 10-10-00519-90 are temporarily suspended for a
period of two (2) months, more or less, but not extending beyond the last quarter of
calendar year 1991 to enable petitioner to source and raise funds to satisfy the judgment
awards against it;
2. Meantime, petitioner is ordered and directed to source for funds within the period abovestated and to deposit the sums of money equivalent to the aggregate amount. it has been
adjudged to pay jointly and severally with respondent Sultan Security Agency with the
Regional Arbitration Branch X, Cagayan de Oro City within the same period for proper
dispositions;
3. In order to ensure compliance with this order, petitioner is likewise directed to put up and
post sufficient surety and supersedeas bond equivalent to at least to fifty (50%) percent of
the total monetary award issued by a reputable bonding company duly accredited by the
Supreme Court or by the Regional Trial Court of Misamis Oriental to answer for the
satisfaction of the money claims in case of failure or default on the part of petitioner to
satisfy the money claims;
4. The City Sheriff is ordered to immediately release the properties of petitioner levied on
execution within ten (10) days from notice of the posting of sufficient surety or supersedeas
bond as specified above. In the meanwhile, petitioner is assessed to pay the costs and/or
expenses incurred by the City Sheriff, if any, in connection with the execution of the
judgments in the above-stated cases upon presentation of the appropriate claims or
vouchers and receipts by the city Sheriff, subject to the conditions specified in the NLRC
Sheriff, subject to the conditions specified in the NLRC Manual of Instructions for Sheriffs;
5. The right of any of the judgment debtors to claim reimbursement against each other for
any payments made in connection with the satisfaction of the judgments herein is hereby
recognized pursuant to the ruling in the Eagle Security case, (supra). In case of dispute
between the judgment debtors, the Executive Labor Arbiter of the Branch of origin may upon
proper petition by any of the parties conduct arbitration proceedings for the purpose and
thereby render his decision after due notice and hearings;
7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of preliminary
injunction previously issued is Lifted and Set Aside and in lieu thereof, a Temporary Stay of
Execution is issued for a period of two (2) months but not extending beyond the last quarter
of calendar year 1991, conditioned upon the posting of a surety or supersedeas bond by
petitioner within ten (10) days from notice pursuant to paragraph 3 of this disposition. The

SO ORDERED.

Page

20

motion to admit the complaint in intervention is Denied for lack of merit while the motion to
dismiss the petition filed by Duty Sheriff is Noted

In this petition for certiorari, the petitioner charges the NLRC with grave abuse of discretion for refusing to
quash the writ of execution. The petitioner faults the NLRC for assuming jurisdiction over a money claim
against the Department, which, it claims, falls under the exclusive jurisdiction of the Commission on Audit.
More importantly, the petitioner asserts, the NLRC has disregarded the cardinal rule on the non-suability of
the State.
The private respondents, on the other hand, argue that the petitioner has impliedly waived its immunity
from suit by concluding a service contract with Sultan Security Agency.
The basic postulate enshrined in the constitution that "(t)he State may not be sued without its consent," 7
reflects nothing less than a recognition of the sovereign character of the State and an express affirmation
of the unwritten rule effectively insulating it from the jurisdiction of courts. 8 It is based on the very
essence of sovereignty. As has been aptly observed, by Justice Holmes, a sovereign is exempt from suit,
not because of any formal conception or obsolete theory, but on the logical and practical ground that there
can be no legal right as against the authority that makes the law on which the right depends. 9 True, the
doctrine, not too infrequently, is derisively called "the royal prerogative of dishonesty" because it grants
the state the prerogative to defeat any legitimate claim against it by simply invoking its non-suability. 10
We have had occasion, to explain in its defense, however, that a continued adherence to the doctrine of
non-suability cannot be deplored, for the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions would be far greater in severity than the inconvenience that may
be caused private parties, if such fundamental principle is to be abandoned and the availability of judicial
remedy is not to be accordingly restricted. 11
The rule, in any case, is not really absolute for it does not say that the state may not be sued under any
circumstances. On the contrary, as correctly phrased, the doctrine only conveys, "the state may not be
sued without its consent;" its clear import then is that the State may at times be sued. 12 The States'
consent may be given expressly or impliedly. Express consent may be made through a general law 13 or a
special law. 14 In this jurisdiction, the general law waiving the immunity of the state from suit is found in
Act No. 3083, where the Philippine government "consents and submits to be sued upon any money claims
involving liability arising from contract, express or implied, which could serve as a basis of civil action
between private parties." 15 Implied consent, on the other hand, is conceded when the State itself
commences litigation, thus opening itself to a counterclaim 16 or when it enters into a contract. 17 In this
situation, the government is deemed to have descended to the level of the other contracting party and to
have divested itself of its sovereign immunity. This rule, relied upon by the NLRC and the private
respondents, is not, however, without qualification. Not all contracts entered into by the government
operate as a waiver of its non-suability; distinction must still be made between one which is executed in
the exercise of its sovereign function and another which is done in its proprietary capacity. 18
In the Unites States of America vs. Ruiz, 19 where the questioned transaction dealt with improvements on
the wharves in the naval installation at Subic Bay, we held:
The traditional rule of immunity exempts a State from being sued in the courts of another
State without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not
petrified; they are constantly developing and evolving. And because the activities of states
have multiplied, it has been necessary to distinguish them between sovereign and
governmental acts ( jure imperii) and private, commercial and proprietary act ( jure
gestionisis). 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.

21

xxx xxx xxx

Page

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 this be deemed to have actually given its consent to be sued only when it
enters into business contracts. It does not apply where the contracts 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 not dedicated to
commercial or business purposes.
In the instant case, the Department of Agriculture has not pretended to have assumed a capacity apart
from its being a governmental entity when it entered into the questioned contract; nor that it could have,
in fact, performed any act proprietary in character.
But, be that as it may, the claims of private respondents, i.e. for underpayment of wages, holiday pay,
overtime pay and similar other items, arising from the Contract for Service, clearly constitute money
claims. Act No. 3083, aforecited, gives the consent of the State to be "sued upon any moneyed claim
involving liability arising from contract, express or implied, . . . Pursuant, however, to Commonwealth Act
("C.A.") No. 327, as amended by Presidential Decree ("P.D.") No. 1145, the money claim first be brought to
the Commission on Audit. Thus, in Carabao, Inc., vs. Agricultural Productivity Commission, 20 we ruled:
(C)laimants have to prosecute their money claims against the Government under
Commonwealth Act 327, stating that Act 3083 stands now merely as the general law waiving
the State's immunity from suit, subject to the general limitation expressed in Section 7
thereof that "no execution shall issue upon any judgment rendered by any Court against the
Government of the (Philippines), and that the conditions provided in Commonwealth Act 327
for filing money claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions of C.A. No. 327 and the
Labor Code with respect to money claims against the State. The Labor code, in relation to Act No. 3083,
provides the legal basis for the State liability but the prosecution, enforcement or satisfaction thereof must
still be pursued in accordance with the rules and procedures laid down in C.A. No. 327, as amended by P.D.
1445.
When the state gives its consent to be sued, it does thereby necessarily consent to unrestrained execution
against it. tersely put, when the State waives its immunity, all it does, in effect, is to give the other party
an opportunity to prove, if it can, that the State has a liability. 21 In Republic vs. Villasor 22 this Court, in
nullifying the issuance of an alias writ of execution directed against the funds of the Armed Forces of the
Philippines to satisfy a final and executory judgment, has explained, thus
The universal rule that where the State gives its consent to be sued by private parties either
by general or special law, it may limit the claimant's action "only up to the completion of
proceedings anterior to the stage of execution" and that the power of the Courts ends when
the judgment is rendered, since government funds and properties may not be seized under
writs or execution or garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must be covered by the
correspondent appropriation as required by law. The functions and public services rendered
by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law. 23
WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991, is hereby REVERSED and
SET ASIDE. The writ of execution directed against the property of the Department of Agriculture is nullified,
and the public respondents are hereby enjoined permanently from doing, issuing and implementing any

SO ORDERED.

Page

22

and all writs of execution issued pursuant to the decision rendered by the Labor Arbiter against said
petitioner.

DALE SANDERS, AND A.S. MOREAU, JR, petitioners,

vs.
HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I, Court of First Instance of
Zambales, Olongapo City, ANTHONY M. ROSSI and RALPH L. WYERS, respondents.

CRUZ, J.:
The basic issue to be resolved in this case is whether or not the petitioners were performing their official
duties when they did the acts for which they have been sued for damages by the private respondents.
Once this question is decided, the other answers will fall into place and this petition need not detain us any
longer than it already has.
Petitioner Sanders was, at the time the incident in question occurred, the special services director of the
U.S. Naval Station (NAVSTA) in Olongapo City. 1 Petitioner Moreau was the commanding officer of the Subic
Naval Base, which includes the said station. 2 Private respondent Rossi is an American citizen with
permanent residence in the Philippines, 3 as so was private respondent Wyer, who died two years ago. 4
They were both employed as gameroom attendants in the special services department of the NAVSTA, the
former having been hired in 1971 and the latter in 1969. 5
On October 3, 1975, the private respondents were advised that their employment had been converted
from permanent full-time to permanent part-time, effective October 18, 1975. 6 Their reaction was to
protest this conversion and to institute grievance proceedings conformably to the pertinent rules and
regulations of the U.S. Department of Defense. The result was a recommendation from the hearing officer
who conducted the proceedings for the reinstatement of the private respondents to permanent full-time
status plus backwages. The report on the hearing contained the observation that "Special Services
management practices an autocratic form of supervision." 7
In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the complaint), Sanders
disagreed with the hearing officer's report and asked for the rejection of the abovestated recommendation.
The letter contained the statements that: a ) "Mr. Rossi tends to alienate most co-workers and
supervisors;" b) "Messrs. Rossi and Wyers have proven, according to their immediate supervisors, to be
difficult employees to supervise;" and c) "even though the grievants were under oath not to discuss the
case with anyone, (they) placed the records in public places where others not involved in the case could
hear."
On November 7, 1975, before the start of the grievance hearings, a-letter (Annex "B" of the complaint)
purportedly corning from petitioner Moreau as the commanding general of the U.S. Naval Station in Subic
Bay was sent to the Chief of Naval Personnel explaining the change of the private respondent's
employment status and requesting concurrence therewith. The letter did not carry his signature but was
signed by W.B. Moore, Jr. "by direction," presumably of Moreau.
On the basis of these antecedent facts, the private respondent filed in the Court of First Instance of
Olongapo City a for damages against the herein petitioners on November 8, 1976. 8 The plaintiffs claimed
that the letters contained libelous imputations that had exposed them to ridicule and caused them mental
anguish and that the prejudgment of the grievance proceedings was an invasion of their personal and
proprietary rights.

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23

The private respondents made it clear that the petitioners were being sued in their private or personal
capacity. However, in a motion to dismiss filed under a special appearance, the petitioners argued that the
acts complained of were performed by them in the discharge of their official duties and that, consequently,
the court had no jurisdiction over them under the doctrine of state immunity.
After extensive written arguments between the parties, the motion was denied in an order dated March 8,
1977, 9 on the main ground that the petitioners had not presented any evidence that their acts were
official in nature and not personal torts, moreover, the allegation in the complaint was that the defendants
had acted maliciously and in bad faith. The same order issued a writ of preliminary attachment,
conditioned upon the filing of a P10,000.00 bond by the plaintiffs, against the properties of petitioner
Moreau, who allegedly was then about to leave the Philippines. Subsequently, to make matters worse for
the defendants, petitioner Moreau was declared in a default by the trial court in its order dated August 9,
1977. The motion to lift the default order on the ground that Moreau's failure to appear at the pre-trial
conference was the result of some misunderstanding, and the motion for reconsideration of the denial of
the motion to dismiss, which was filed by the petitioner's new lawyers, were denied by the respondent
court on September 7, 1977.
This petition for certiorari, prohibition and preliminary injunction was thereafter filed before this Court, on
the contention that the above-narrated acts of the respondent court are tainted with grave abuse of
discretion amounting to lack of jurisdiction.
We return now to the basic question of whether the petitioners were acting officially or only in their private
capacities when they did the acts for which the private respondents have sued them for damages.
It is stressed at the outset that the mere allegation that a government functionary is being sued in his
personal capacity will not automatically remove him from the protection of the law of public officers and, if
appropriate, the doctrine of state immunity. By the same token, the mere invocation of official character
will not suffice to insulate him from suability and liability for an act imputed to him as a personal tort
committed without or in excess of his authority. These well-settled principles are applicable not only to the
officers of the local state but also where the person sued in its courts pertains to the government of a
foreign state, as in the present case.
The respondent judge, apparently finding that the complained acts were prima facie personal and tortious,
decided to proceed to trial to determine inter alia their precise character on the strength of the evidence to
be submitted by the parties. The petitioners have objected, arguing that no such evidence was needed to
substantiate their claim of jurisdictional immunity. Pending resolution of this question, we issued a
temporary restraining order on September 26, 1977, that has since then suspended the proceedings in this
case in the court a quo.
In past cases, this Court has held that where the character of the act complained of can be determined
from the pleadings exchanged between the parties before the trial, it is not necessary for the court to
require them to belabor the point at a trial still to be conducted. Such a proceeding would be superfluous,
not to say unfair to the defendant who is subjected to unnecessary and avoidable inconvenience.
Thus, in Baer v. Tizon, 10 we held that a motion to dismiss a complaint against the commanding general of
the Olongapo Naval Base should not have been denied because it had been sufficiently shown that the act
for which he was being sued was done in his official capacity on behalf of the American government. The
United States had not given its consent to be sued. It was the reverse situation in Syquia v. Almeda Lopez,"
where we sustained the order of the lower court granting a where we motion to dismiss a complaint
against certain officers of the U.S. armed forces also shown to be acting officially in the name of the
American government. The United States had also not waived its immunity from suit. Only three years ago,
in United States of America v. Ruiz, 12 we set aside the denial by the lower court of a motion to dismiss a
complaint for damages filed against the United States and several of its officials, it appearing that the act
complained of was governmental rather than proprietary, and certainly not personal. In these and several
other cases 13 the Court found it redundant to prolong the other case proceedings after it had become

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24

clear that the suit could not prosper because the acts complained of were covered by the doctrine of state
immunity.
It is abundantly clear in the present case that the acts for which the petitioners are being called to account
were performed by them in the discharge of their official duties. Sanders, as director of the special services
department of NAVSTA, undoubtedly had supervision over its personnel, including the private respondents,
and had a hand in their employment, work assignments, discipline, dismissal and other related matters. It
is not disputed that the letter he had written was in fact a reply to a request from his superior, the other
petitioner, for more information regarding the case of the private respondents. 14 Moreover, even in the
absence of such request, he still was within his rights in reacting to the hearing officer's criticismin effect
a direct attack against him-that Special Services was practicing "an autocratic form of supervision."
As for Moreau,what he is claimed to have done was write the Chief of Naval Personnel for concurrence with
the conversion of the private respondents' type of employment even before the grievance proceedings had
even commenced. Disregarding for the nonce the question of its timeliness, this act is clearly official in
nature, performed by Moreau as the immediate superior of Sanders and directly answerable to Naval
Personnel in matters involving the special services department of NAVSTA In fact, the letter dealt with the
financial and budgetary problems of the department and contained recommendations for their solution,
including the re-designation of the private respondents. There was nothing personal or private about it.
Given the official character of the above-described letters, we have to conclude that the petitioners were,
legally speaking, being sued as officers of the United States government. As they have acted on behalf of
that government, and within the scope of their authority, it is that government, and not the petitioners
personally, that is responsible for their acts. Assuming that the trial can proceed and it is proved that the
claimants have a right to the payment of damages, such award will have to be satisfied not by the
petitioners in their personal capacities but by the United States government as their principal. This will
require that government to perform an affirmative act to satisfy the judgment, viz, the appropriation of the
necessary amount to cover the damages awarded, thus making the action a suit against that government
without its consent.
There should be no question by now that such complaint cannot prosper unless the government sought to
be held ultimately liable has given its consent to' be sued. So we have ruled not only in Baer but in many
other decisions where we upheld the doctrine of state immunity as applicable not only to our own
government but also to foreign states sought to be subjected to the jurisdiction of our courts. 15
The practical justification for the doctrine, as Holmes put it, is that "there can be no legal right against the
authority which makes the law on which the right depends. 16 In the case of foreign states, the rule is
derived from the principle of the sovereign equality of states which wisely admonishes that par in parem
non habet imperium and that a contrary attitude would "unduly vex the peace of nations." 17 Our
adherence to this precept is formally expressed in Article II, Section 2, of our Constitution, where we
reiterate from our previous charters that the Philippines "adopts the generally accepted principles of
international law as part of the law of the land.
All this is not to say that in no case may a public officer be sued as such without the previous consent of
the state. To be sure, there are a number of well-recognized exceptions. It is clear that a public officer may
be sued as such to compel him to do an act required by law, as where, say, a register of deeds refuses to
record a deed of sale; 18 or to restrain a Cabinet member, for example, from enforcing a law claimed to be
unconstitutional; 19 or to compel the national treasurer to pay damages from an already appropriated
assurance fund; 20 or the commissioner of internal revenue to refund tax over-payments from a fund
already available for the purpose; 21 or, in general, to secure a judgment that the officer impleaded may
satisfy by himself without the government itself having to do a positive act to assist him. We have also
held that where the government itself has violated its own laws, the aggrieved party may directly implead
the government even without first filing his claim with the Commission on Audit as normally required, as
the doctrine of state immunity "cannot be used as an instrument for perpetrating an injustice." 22

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25

This case must also be distinguished from such decisions as Festejo v. Fernando, 23 where the Court held
that a bureau director could be sued for damages on a personal tort committed by him when he acted
without or in excess of authority in forcibly taking private property without paying just compensation
therefor although he did convert it into a public irrigation canal. It was not necessary to secure the
previous consent of the state, nor could it be validly impleaded as a party defendant, as it was not
responsible for the defendant's unauthorized act.
The case at bar, to repeat, comes under the rule and not under any of the recognized exceptions. The
government of the United States has not given its consent to be sued for the official acts of the petitioners,
who cannot satisfy any judgment that may be rendered against them. As it is the American government
itself that will have to perform the affirmative act of appropriating the amount that may be adjudged for
the private respondents, the complaint must be dismissed for lack of jurisdiction.
The Court finds that, even under the law of public officers, the acts of the petitioners are protected by the
presumption of good faith, which has not been overturned by the private respondents. Even mistakes
concededly committed by such public officers are not actionable as long as it is not shown that they were
motivated by malice or gross negligence amounting to bad faith. 24 This, to, is well settled . 25 Furthermore,
applying now our own penal laws, the letters come under the concept of privileged communications and
are not punishable, 26 let alone the fact that the resented remarks are not defamatory by our standards. It
seems the private respondents have overstated their case.
A final consideration is that since the questioned acts were done in the Olongapo Naval Base by the
petitioners in the performance of their official duties and the private respondents are themselves American
citizens, it would seem only proper for the courts of this country to refrain from taking cognizance of this
matter and to treat it as coming under the internal administration of the said base.
The petitioners' counsel have submitted a memorandum replete with citations of American cases, as if
they were arguing before a court of the United States. The Court is bemused by such attitude. While these
decisions do have persuasive effect upon us, they can at best be invoked only to support our own
jurisprudence, which we have developed and enriched on the basis of our own persuasions as a people,
particularly since we became independent in 1946.
We appreciate the assistance foreign decisions offer us, and not only from the United States but also from
Spain and other countries from which we have derived some if not most of our own laws. But we should
not place undue and fawning reliance upon them and regard them as indispensable mental crutches
without which we cannot come to our own decisions through the employment of our own endowments We
live in a different ambience and must decide our own problems in the light of our own interests and needs,
and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and
justice.
The private respondents must, if they are still sominded, pursue their claim against the petitioners in
accordance with the laws of the United States, of which they are all citizens and under whose jurisdiction
the alleged offenses were committed. Even assuming that our own laws are applicable, the United States
government has not decided to give its consent to be sued in our courts, which therefore has not acquired
the competence to act on the said claim,.
WHEREFORE, the petition is GRANTED. The challenged orders dated March 8,1977, August 9,1977, and
September 7, 1977, are SET ASIDE. The respondent court is directed to DISMISS Civil Case No. 2077-O. Our
Temporary restraining order of September 26,1977, is made PERMANENT. No costs.
G.R. No. L-23139

December 17, 1966

MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,

vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

BENGZON, J.P., J.:

Page

26

Alejandro Basin, Jr. and Associates for plaintiff-appellant.

Felipe T. Cuison for defendants-appellees.

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November of 1962,
consigned to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of Manila on April
10, 1963, and was discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of
Customs then handling arrastre operations therein. The Customs Arrastre Service later delivered to the
broker of the consignee three cases only of the shipment.
On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against
the Customs Arrastre Service and the Bureau of Customs to recover the value of the undelivered case in
the amount of P18,493.37 plus other damages.
On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being
persons under the law, defendants cannot be sued.
After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that
neither the Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the
order of dismissal.
Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts
stated.
Appellant contends that not all government entities are immune from suit; that defendant Bureau of
Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary functions and
as such, can be sued by private individuals.
The Rules of Court, in Section 1, Rule 3, provide:
SECTION 1. Who may be parties.Only natural or juridical persons or entities authorized by law
may be parties in a civil action.
Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity
authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs
Arrastre Service, is a person. They are merely parts of the machinery of Government. The Bureau of
Customs is a bureau under the Department of Finance (Sec. 81, Revised Administrative Code); and as
stated, the Customs Arrastre Service is a unit of the Bureau of Custom, set up under Customs
Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Motion to Dismiss, pp. 13-15, Record an
Appeal). It follows that the defendants herein cannot he sued under the first two abovementioned
categories of natural or juridical persons.
Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law
thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the nature of this
function (arrastre service) is proprietary, not governmental. Thus, insofar as arrastre operation is
concerned, appellant would put defendants under the third category of "entities authorized by law" to be
sued. Stated differently, it is argued that while there is no law expressly authorizing the Bureau of Customs
to sue or be sued, still its capacity to be sued is implied from its very power to render arrastre service at
the Port of Manila, which it is alleged, amounts to the transaction of a private business.
The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and
Customs Code, effective June 1, 1957), and it states:

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27

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.The Bureau of Customs shall
have exclusive supervision and control over the receiving, handling, custody and delivery of articles
on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby
authorized to acquire, take over, operate and superintend such plants and facilities as may be
necessary for the receiving, handling, custody and delivery of articles, and the convenience and
comfort of passengers and the handling of baggage; as well as to acquire fire protection equipment
for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and
delivery of articles can be carried on by private parties with greater efficiency, the Commissioner
may, after public bidding and subject to the approval of the department head, contract with any
private party for the service of receiving, handling, custody and delivery of articles, and in such
event, the contract may include the sale or lease of government-owned equipment and facilities
used in such service.
In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6, 1963,
this Court indeed held "that the foregoing statutory provisions authorizing the grant by contract to any
private party of the right to render said arrastre services necessarily imply that the same is deemed by
Congress to be proprietary or non-governmental function." The issue in said case, however, was whether
laborers engaged in arrastre service fall under the concept of employees in the Government employed in
governmental functions for purposes of the prohibition in Section 11, Republic Act 875 to the effect that
"employees in the Government . . . shall not strike," but "may belong to any labor organization which does
not impose the obligation to strike or to join in strike," which prohibition "shall apply only to employees
employed in governmental functions of the Government . . . .
Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter
of the case, but not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the
resolution stating only that "the issue on the personality or lack of personality of the Bureau of Customs to
be sued does not affect the jurisdiction of the lower court over the subject matter of the case, aside from
the fact that amendment may be made in the pleadings by the inclusion as respondents of the public
officers deemed responsible, for the unfair labor practice acts charged by petitioning Unions".
Now, the fact that a non-corporate government entity performs a function proprietary in nature does not
necessarily result in its being suable. If said non-governmental function is undertaken as an incident to its
governmental function, there is no waiver thereby of the sovereign immunity from suit extended to such
government entity. This is the doctrine recognized in Bureau of Printing, et al. vs. Bureau of Printing
Employees Association, et al., L-15751, January 28, 1961:
The Bureau of Printing is an office of the Government created by the Administrative Code of 1916
(Act No. 2657). As such instrumentality of the Government, it operates under the direct supervision
of the Executive Secretary, Office of the President, and is "charged with the execution of all printing
and binding, including work incidental to those processes, required by the National Government and
such other work of the same character as said Bureau may, by law or by order of the (Secretary of
Finance) Executive Secretary, be authorized to undertake . . . ." (Sec. 1644, Rev. Adm. Code.) It has
no corporate existence, and its appropriations are provided for in the General Appropriations Act.
Designed to meet the printing needs of the Government, it is primarily a service bureau and,
obviously, not engaged in business or occupation for pecuniary profit.
xxx

xxx

xxx

. . . Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot be
pretended that it is thereby an industrial or business concern. The additional work it executes for
private parties is merely incidental to its function, and although such work may be deemed
proprietary in character, there is no showing that the employees performing said proprietary
function are separate and distinct from those emoloyed in its general governmental functions.
xxx

xxx

xxx

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28

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of
Printing cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it
were to produce any effect, would actually be a suit, action or proceeding against the Government
itself, and the rule is settled that the Government cannot be sued without its consent, much less
over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al.
vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.)
The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department
of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of the national
government. Its primary function is governmental, that of assessing and collecting lawful revenues from
imported articles and all other tariff and customs duties, fees, charges, fines and penalties (Sec. 602, R.A.
1937). To this function, arrastre service is a necessary incident. For practical reasons said revenues and
customs duties can not be assessed and collected by simply receiving the importer's or ship agent's or
consignee's declaration of merchandise being imported and imposing the duty provided in the Tariff law.
Customs authorities and officers must see to it that the declaration tallies with the merchandise actually
landed. And this checking up requires that the landed merchandise be hauled from the ship's side to a
suitable place in the customs premises to enable said customs officers to make it, that is, it requires
arrastre operations.1
Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of
the primary and governmental function of the Bureau of Customs, so that engaging in the same does not
necessarily render said Bureau liable to suit. For otherwise, it could not perform its governmental function
without necessarily exposing itself to suit. Sovereign immunity, granted as to the end, should not be
denied as to the necessary means to that end.
And herein lies the distinction between the present case and that of National Airports Corporation vs.
Teodoro, 91 Phil. 203, on which appellant would rely. For there, the Civil Aeronautics Administration was
found have for its prime reason for existence not a governmental but a proprietary function, so that to it
the latter was not a mere incidental function:
Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute
contracts of any kind, to purchase property, and to grant concessions rights, and under Section 4,
to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies,
and rentals for the use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue
and be sued. The power to sue and be sued is implied from the power to transact private business. .
..
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. . . .
Regardless of the merits of the claim against it, the State, for obvious reasons of public policy, cannot be
sued without its consent. Plaintiff should have filed its present claim to the General Auditing Office, it being
for money under the provisions of Commonwealth Act 327, which state the conditions under which money
claims against the Government may be filed.
It must be remembered that statutory provisions waiving State immunity from suit are strictly construed
and that waiver of immunity, being in derogation of sovereignty, will not be lightly inferred. (49 Am. Jur.,
States, Territories and Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S.
275, 3 L. Ed. 804, 79 S. Ct. 785). From the provision authorizing the Bureau of Customs to lease arrastre

Page

29

operations to private parties, We see no authority to sue the said Bureau in the instances where it
undertakes to conduct said operation itself. The Bureau of Customs, acting as part of the machinery of the
national government in the operation of the arrastre service, pursuant to express legislative mandate and
as a necessary incident of its prime governmental function, is immune from suit, there being no statute to
the contrary.
WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So
ordered.
G.R. No. L-5122

April 30, 1952

NATIONAL AIRPORTS CORPORATION, petitioner,

vs.
JOSE TEODORO, SR., as Judge of the Court of First Instance of Negros Occidental and
PHILIPPINE AIRLINES, INC., respondents.
Office of the Solicitor General Pompeyo Diaz and Solicitor Augusto M. Luciano for petitioner.
Ozeata, Roxas, Lichauco and Picazo for respondents.
TUASON, J.:
The National Airports Corporation was organized under Republic Act No. 224, which expressly made the
provisions of the Corporation Law applicable to the said corporation. On November 10, 1950, the National
Airports Corporation was abolished by Executive Order No. 365 and to take its place the Civil Aeronautics
Administration was created. Before the abolition, the Philippine Airlines, Inc. paid to the National Airports
Corporation P65,245 as fees for landing and parking on Bacolod Airport No. 2 for the period up to and
including July 31, 1948. These fees are said to have been due and payable to the Capitol Subdivision, Inc.
which owned the land used by the National Airports Corporation as airport, and the owner commenced an
action in the Court of First Instance of Negros Occidental against the Philippine Airlines, Inc., in 1951 to
recover the above amount. The Philippine Airlines, Inc. countered with a third-party complaint against the
National Airports Corporation, which by that time had been dissolved, and served summons on the Civil
Aeronautics Administration. The third party plaintiff alleged that it had paid to the National Airports
Corporation the fees claimed by the Capitol Subdivision, Inc. "on the belief and assumption that the third
party defendant was the lessee of the lands subject of the complaint and that the third party defendant
and its predecessors in interest were the operators and maintainers of said Bacolod Airport No. 2 and,
further, that the third party defendant would pay to the landowners, particularly the Capitol Subdivision,
Inc., the reasonable rentals for the use of their lands."
The Solicitor General, after answering the third party complaint, filed a motion to dismiss on the ground
that the court lacks jurisdiction to entertain the third- party complaint, first, because the National Airports
Corporation "has lost its juridical personality," and, second, because agency of the Republic of the
Philippines, unincorporated and not possessing juridical personality under the law, is incapable of suing
and being sued."
Section 7 of Executive Order No. 365 reads:
All records, properties, equipment, assets, rights, choses in action, obligations, liabilities and
contracts of the National Airport Corporation abolished under this Order, are hereby transferred to,
vested in, and assumed by, the Civil Aeronautics Administration. All works, construction, and
improvements made by the National Airports Corporation or any agency of the National
Government in or upon government airfields, including all appropriations or the unreleased and
unexpended balances thereof, shall likewise be transferred to the Civil Aeronautics Administration.
Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute
contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge

Page

30

landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the
use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be
sued. The power to sue and be sued is implied from the power to transact private business. And if it has
the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should
have the power to prosecute and defend suits for and against the National Airports Corporation, having
acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny
the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics
Administration is to say that the government could impair the obligation of its corporations by the simple
expedient of converting them into unincorporated agencies.
But repudiation of the National Airports Corporation's obligation was far from the intention in its dissolution
and the setting up of the Civil Aeronautics Administration. Nor would such scheme work even if the
executive order had so expressly provided.
Not all government entities, whether corporate or non corporate, are immune from suits. Immunity from
suits is determined by the character of the obligations 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 nongovernment 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.)
This rule has been applied to such government agencies as State Dock Commissions carrying on business
relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 26 Fed. (2d) 480),
and State Highway Commissions created to build public roads, and given appropriations in advance to
discharge obligations incurred in that behalf (Arkansas State Highway Commission of Missouri vs. Bates,
269, S W 418.)
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.
In the light of a well-established precedents, and as a matter of simple justice to the parties who dealt with
the National Airports Corporation on the faith of equality in the enforcement of their mutual commitments,
the Civil Aeronautics Administration may not, and should not, claim for itself the privileges and immunities
of the sovereign state.
The case of National Airports Corporation vs. Hon. V. Jimenez Yanzon et al., (89 Phil. 745), relied upon by
counsel, is not controlling. That was a labor dispute and can be distinguished from the case at bar in at
least one fundamental respect.
Involving labor demands and labor- management relations, any decision in that case would, if given force
and effect, operate prospectively and for an indefinite period against the Civil Aeronautics Administration
whose rights and obligations with respect to its officers and employees were regulated by the regular law
on civil service. Moreover, some of the petitioners might already have ceased. By Sections 5 and 8 of
Executive Order No. 365 all employees of the National Airports Corporation were, upon the latter's

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31

dissolution, automatically separated from the service, and the part of the personnel whose employment
was "necessary and convenient" to the Civil Aeronautics Administration would have to be reappointed and,
what was more important, "in accordance with the Civil Service rules and regulations." If the petitioners in
that case had been absorbed into the Civil Aeronautics Administration, the Matters raised in their petition
were outside the jurisdiction of the Court of Industrial Relations, and of this Court on Appeal, to entertain.
Their rights, privileges, hours of work, and rates of compensation were already governed by the Civil
Service Law.
The Philippine Airlines' third party-complaint is premised on the assumption that the National Airports
Corporation is still in existence, at least for the limited object of winding up its affairs under Section 77 of
the Corporation Law. Our opinion is that by its abolition that corporation stands abolished for all purposes.
No trustees, assignees or receivers have been designated to make a liquidation and, what is more, there is
nothing to liquidate. Everything the National Airports Corporation had, has been taken over by the Civil
Aeronautics Administration. 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 then should have been to make the
Civil Aeronautics Administration the third party defendant instead of the National Airports Corporation. The
error, however, is purely procedural, not put in issue, and may be corrected by amendment of the
pleadings if deemed necessary.
Wherefore, the petition is denied with costs against the Civil Aeronautics Administration.