Case list: 56- 65

United States of America v. Guinto, G.R. No. 76607, 79470, 80018, 80258,
[February 26, 1990]
Republic of Indonesia v. Vinzon, G.R. No. 154705, [June 26, 2003]
Ministerio v. Court of First Instance of Cebu, G.R. No. L-31635, [August 31, 1971
Sanders v. Veridiano II, G.R. No. L-46930, [June 10, 1988]
Merritt v. Government of the Philippine Islands, G.R. No. 11154, [March 21, 1916]
Spouses Fontanilla v. Maliaman, G.R. Nos. 55963 & 61045 (Resolution), [February
27, 1991]
Republic v. Villasor, G.R. No. L-30671, [November 28, 1973]
Municipality of Makati v. Court of Appeals, G.R. Nos. 89898-99 (Resolution),
[October 1, 1990]
National Housing Authority v. Heirs of Guivelondo, G.R. No. 154411, [June 19,
2003]
University of the Philippines v. Dizon, G.R. No. 171182, [August 23, 2012]

|||United States of America v. Guinto, G.R. No. 76607, 79470, 80018, 80258,
[February 26, 1990]
EN BANC
[G.R. No. 76607. February 26, 1990.]
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE
REEVES, petitioners, vs. HON. ELIODORO B. GUINTO, Presiding Judge,
Branch LVII, Regional Trial Court, Angeles City, ROBERTO T. VALENCIA,
EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.
[G.R. No. 79470. February 26, 1990.]
UNITED

STATES

WILFREDO

OF

AMERICA,

BELSA,

ANTHONY

PETER

LAMACHIA,

ORASCION

T/SGT.
AND

USAF,
ROSE

CARTALLA, petitioners, vs. HON. RODOLFO D. RODRIGO, as Presiding

Judge of Branch 7, Regional Trial Court (BAGUIO CITY), La Trinidad,
Benguet and FABIAN GENOVE, respondents.
[G.R. No. 80018. February 26, 1990.]
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.
BOSTICK, petitioners, vs. HON. JOSEFINA D. CEBALLOS, As
Judge,

Regional

Trial

Court,

Branch

66, Capas, Tarlac,

Presiding
and

LUIS

BAUTISTA, respondents.
[G.R. No. 80258. February 26, 1990.]
UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC
ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES,

SGT.

THOMAS

MITCHELL,

AL., petitioners, vs. HON.

SGT.

CONCEPCION

WAYNE
S.

L.

ALARCON

BENJAMIN,
VERGARA,

ET
as

Presiding Judge, Branch 62 REGIONAL TRIAL COURT, Angeles City, and

RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN
MARIANO, AKA JESSIE DOLORES SANGALANG, ET AL., respondents.
Luna, Sison & Manas Law Office for petitioners.
SYLLABUS
1. CONSTITUTIONAL LAW; DOCTRINE OF STATE IMMUNITY FROM SUIT; GENERALLY
ACCEPTED

PRINCIPLE

OF

INTERNATIONAL

LAW;

EMBODIED

IN PHILIPPINE

CONSTITUTION. The rule that a state may not be sued without its consent, now
expressed in Article XVI, Section 3, of the 1987 Constitution, is one of the
generally accepted principles of international law that we have adopted as part of
the law of our land under Article II, Section 2. This latter provision merely
reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and also
intended to manifest our resolve to abide by the rules of the international
community.
2. ID., ID., ID., PRINCIPLE DEEMED INCORPORATED IN THE LAW OF EVERY
CIVILIZED STATE; STATE IS AUTOMATICALLY OBLIGATED TO COMPLY WITH THE
PRINCIPLE. Even without such affirmation, we would still be bound by the
generally accepted principles of international law under the doctrine of
incorporation. Under this doctrine, as accepted by the majority of states, such
principles are deemed incorporated in the law of every civilized state as a
condition and consequence of its membership in the society of nations. Upon its
admission to such society, the state is automatically obligated to comply with
these principles in its relations with other states.
3. ID.; ID.; BASIS. As applied to the local state, the doctrine of state immunity is
based on the justification given by Justice Holmes that "there can be no legal right
against the authority which makes the law on which the right depends." There are
other practical reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction, the added inhibition
is expressed in the maxim par in parem, non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary

disposition would, in the language of a celebrated case, "unduly vex the peace of
nations."
4. ID., ID., APPLIES TO OFFICIALS OF THE STATE FOR ACTS PERFORMED IN THE
DISCHARGE OF THEIR DUTIES. While the doctrine appears to prohibit only suits
against the state without its consent, it is also applicable to complaints filed
against officials of the state for acts allegedly performed by them in the discharge
of their duties. The rule is that if the judgment against such officials will require
the state itself to perform an affirmative act to satisfy the same, such as the
appropriation of the amount needed to pay the damages awarded against them,
the suit must be regarded as against the state itself although it has not been
formally impleaded. In such a situation, the state may move to dismiss the
complaint on the ground that it has been filed without its consent.
5. ID., ID., NOT ABSOLUTE AND MAY BE SUED IF STATE GIVES CONSENT. The
doctrine is sometimes derisively called "the royal prerogative of dishonesty"
because of the privilege it grants the state to defeat any legitimate claim against
it by simply invoking its non-suability. That is hardly fair, at least in democratic
societies, for the state is not an unfeeling tyrant unmoved by the valid claims of
its citizens. In fact, the doctrine is not absolute and does not say the state may
not be sued under any circumstance. On the contrary, the rule says that the state
may not be sued without its consent, which clearly imports that it may be sued if
it consents.
6. ID., ID., ID., CONSENT MAY BE GIVEN EXPRESSLY OR IMPLIEDLY. The consent
of the state to be sued may be manifested expressly or impliedly. Express consent
may be embodied in a general law or a special law. Consent is implied when the
state enters into a contract or it itself commences litigation.
7. ID., ID., ID., ID., WAIVER OF IMMUNITY; INSTANCES. The general law waiving
the immunity of the state from suit is found in Act No. 3083, under which the
Philippine government "consents and submits to be sued upon any moneyed
claim involving liability arising from contract, express or implied, which could
serve as a basis of civil action between private parties." In Merritt v. Government
of the Philippine Islands, a special law was passed to enable a person to sue the
government for an alleged tort. When the government enters into a contract, it is
deemed to have descended to the level of the other contracting party and
divested of its sovereign immunity from suit with its implied consent. Waiver is

also implied when the government files a complaint, thus opening itself to a
counterclaim.
8. ID., ID., ID., ID., ID., ID., EXCEPTIONS. The above rules are subject to
qualification. Express consent is effected only by the will of the legislature through
the medium of a duly enacted statute. We have held that not all contracts entered
into by the government will operate as a waiver of its non-suability; distinction
must be made between its sovereign and proprietary acts. As for the filing of a
complaint by the government, suability will result only where the government is
claiming affirmative relief from the defendant.
9. ID., ID., ID., ID., ID., UNITED STATES OF AMERICA DEEMED TO HAVE IMPLIEDLY
WAIVED ITS NON-SUABILITY IF IT HAS ENTERED INTO A CONTRACT IN ITS
PROPRIETARY CAPACITY. There is no question that the United States of America,
like any other state, will be deemed to have impliedly waived its non-suability if it
has entered into a contract in its proprietary or private capacity. It is only when
the contract involves its sovereign or governmental capacity that no such waiver
may be implied. This was our ruling in United States of America v. Ruiz, where the
transaction in question dealt with the improvement of the wharves in the naval
installation at Subic Bay. As this was a clearly governmental function, we held that
the contract did not operate to divest the United States of its sovereign immunity
from suit.
10. ID., ID., ID., ID., ID., CHARGES MAY NOT BE SUMMARILY DISMISSED ON MERE
ASSERTION THAT ACTS ARE IMPUTABLE TO THE UNITED STATES OF AMERICA.
The other petitioners in the cases before us all aver they have acted in the
discharge of their official functions as officers or agents of the United States.
However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to the
United States of America, which has not given its consent to be sued. In fact, the
defendants are sought to be held answerable for personal torts in which the
United States itself is not involved. If found liable, they and they alone must
satisfy the judgment.
11. ID., ID., ID., ID., ID., PETITIONERS CHARGED WITH THE ENFORCEMENT OF LAW
REGARDING PROHIBITED DRUGS ARE AGENTS OF THE UNITED STATES. It is
clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they

conducted the buy-bust operation against the complainant and thereafter testified
against him at his trial. The said petitioners were in fact connected with the Air
Force Office of Special Investigators and were charged precisely with the function
of preventing the distribution, possession and use of prohibited drugs and
prosecuting those guilty of such acts. It cannot for a moment be imagined that
they were acting in their private or unofficial capacity when they apprehended
and later testified against the complainant. It follows that for discharging their
duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued.
12. ID., ID., ID., ID., ID., SUABILITY AND LIABILITY, DIFFERENTIATED. There
seems to be a failure to distinguish between suability and liability and a
misconception that the two terms are synonymous. Suability depends on the
consent of the state to be sued, liability on the applicable law and the established
facts. The circumstance that a state is suable does not necessarily mean that it is
liable; on the other hand, it can never be held liable if it does not first consent to
be sued. Liability is not conceded by the mere fact that the state has allowed
itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable.
13. ID., ID., ID., ID., ID., ARTICLE 2180 OF THE CIVIL CODE ESTABLISHES A RULE
OF LIABILITY. The private respondent invokes Article 2180 of the Civil Code
which holds the government liable if it acts through a special agent. The
argument, it would seem, is premised on the ground that since the officers are
designated "special agents," the United States government should be liable for
their torts. The said article establishes a rule of liability, not suability. The
government may be held liable under this rule only if it first allows itself to be
sued through any of the accepted forms of consent.

14. ID., ID., ID., ID., ID., AN AGENT PERFORMING REGULAR FUNCTIONS IS NOT A
SPECIAL AGENT EVEN IF SO DENOMINATED; ARTICLE APPLIES ONLY TO PHILIPPINE
GOVERNMENT. Moreover, the agent performing his regular functions is not a
special agent even if he is so denominated, as in the case at bar. No less
important, the said provision appears to regulate only the relations of the local
state with its inhabitants and, hence, applies only to the Philippine government
and not to foreign governments impleaded in our courts.

15. ID., ID., ID., ID., ID., EXPRESS WAIVER MUST BE EFFECTED THROUGH A DULYENACTED STATUTE. We reject the conclusion of the trial court that the answer
filed by the special counsel of the Office of the Sheriff Judge Advocate of Clark Air
Base was a submission by the United States government to its jurisdiction. As we
noted in Republic v. Purisima, express waiver of immunity cannot be made by a
mere counsel of the government but must be effected through a duly-enacted
statute. Neither does such answer come under the implied forms of consent as
earlier discussed.
16. ID., ID., ID., ID., ID., INQUIRY MUST BE MADE AS TO WHAT CAPACITY
PETITIONERS WERE ACTING. But even as we are certain that individual
petitioners in G.R. No. 80018 were acting in the discharge of their official
functions, we hesitate to make the same conclusion in G.R. No. 80258. The
contradictory factual allegations in this case deserve in our view a closer study of
what actually happened to the plaintiffs. The record is too meager to indicate if
the defendants were really discharging their official duties or had actually
exceeded their authority when the incident in question occurred. Lacking this
information, this Court cannot directly decide this case. The needed inquiry must
first be made by the lower court so it may assess and resolve the conflicting
claims of the parties on the basis of the evidence that has yet to be presented at
the trial. Only after it shall have determined in what capacity the petitioners were
acting at the time of the incident in question will this Court determine, if still
necessary, if the doctrine of state immunity is applicable.
17. ID., ID., ID., ID., ID., DOCTRINE CANNOT BE INVOKED WHERE THE STATE
ENTERED INTO A CONTRACT IN THE DISCHARGE OF ITS PROPRIETARY FUNCTION;
CASE AT BAR. From the circumstances, the Court can assume that the
restaurant services offered at the John Hay Air Station partake of the nature of a
business enterprise undertaken by the United States government in its proprietary
capacity. Such services are not extended to the American servicemen for free as a
perquisite of membership in the Armed Forces of the United States. Neither does
it appear that they are exclusively offered to these servicemen; on the contrary, it
is well known that they are available to the general public as well, including the
tourists in Baguio City, many of whom make it a point to visit John Hay for this
reason. All persons availing themselves of this facility pay for the privilege like all
other customers as in ordinary restaurants. Although the prices are concededly
reasonable and relatively low, such services are undoubtedly operated for profit,

as a commercial and not a governmental activity. The consequence of this finding

is that the petitioners cannot invoke the doctrine of state immunity to justify the
dismissal of the damage suit against them by Genove. Such defense will not
prosper even if it be established that they were acting as agents of the United
States when they investigated and later dismissed Genove. For that matter, not
even the United States government itself can claim such immunity. The reason is
that by entering into the employment contract with Genove in the discharge of its
proprietary functions, it impliedly divested itself of its sovereign immunity from
suit.
18. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; DISMISSAL
FOR THE UNBELIEVABLY NAUSEATING ACT IS PROPER. The dismissal of the
private respondent was decided upon only after a thorough investigation where it
was established beyond doubt that he had polluted the soup stock with urine. The
investigation, in fact, did not stop there. Despite the definitive finding of Genove's
guilt, the case was still referred to the board of arbitrators provided for in the
collective bargaining agreement. This board unanimously affirmed the findings of
the investigators and recommended Genove's dismissal. There was nothing
arbitrary about the proceedings. The petitioners acted quite properly in
terminating the private respondent's employment for his unbelievably nauseating
act. It is surprising that he should still have the temerity to file his complaint for
damages after committing his utterly disgusting offense.
19. ID.; ID.; BARBERSHOPS ARE NOT AGENCIES OF THE UNITED STATES ARMED
FORCES; IMMUNITY FROM SUIT CANNOT BE INVOKED. Concerning G.R. No.
76607, we also find that the barbershops subject of the concessions granted by
the United States government are commercial enterprises operated by private
persons. They are not agencies of the United States Armed Forces nor are their
facilities demandable as a matter of right by the American servicemen. This being
the case, the petitioners cannot plead any immunity from the complaint filed by
the private respondents in the court below. The contracts in question being
decidedly commercial, the conclusion reached in the United States of America v.
Ruiz case cannot be applied here.

DECISION

CRUZ, J p:
These cases have been consolidated because they all involve the doctrine of state
immunity. The United States of America was not impleaded in the complaints
below but has moved to dismiss on the ground that they are in effect suits against
it to which it has not consented. It is now contesting the denial of its motions by
the respondent judges. cdll
In G.R. No. 76607, the private respondents are suing several officers of the U.S.
Air Force stationed in Clark Air Base in connection with the bidding conducted by
them for contracts for barbering services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area
Exchange, U.S. Air Force, solicited bids for such contracts through its contracting
officer, James F. Shaw. Among those who submitted their bids were private
respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar.
Valencia had been a concessionaire inside Clark for 34 years; del Pilar for 12
years; and Tanglao for 50 years. LLjur
The bidding was won by Ramon Dizon, over the objection of the private
respondents, who claimed that he had made a bid for four facilities, including the
Civil Engineering Area, which was not included in the invitation to bid.
The private respondents complained to the Philippine Area Exchange (PHAX). The
latter, through its representatives, petitioners Yvonne Reeves and Frederic M.
Smouse, explained that the Civil Engineering concession had not been awarded to
Dizon as a result of the February 24, 1986 solicitation. Dizon was already
operating this concession, then known as the NCO club concession, and the
expiration of the contract had been extended from June 30, 1986 to August 31,
1986. They further explained that the solicitation of the CE barbershop would be
available only by the end of June and the private respondents would be
notified. Cdpr
On June 30,1986, the private respondents filed a complaint in the court below to
compel PHAX and the individual petitioners to cancel the award to defendant
Dizon, to conduct a rebidding for the barbershop concessions and to allow the
private respondents by a writ of preliminary injunction to continue operating the
concessions pending litigation. 1

Upon the filing of the complaint, the respondent court issued an ex parte order
directing the individual petitioners to maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the
petition for preliminary injunction on the ground that the action was in effect a
suit against the United States of America, which had not waived its non-suability.
The individual defendants, as officials/employees of the U.S. Air Force, were also
immune from suit.
On the same date, July 22, 1986, the trial court denied the application for a writ of
preliminary injunction.
On October 10, 1988, the trial court denied the petitioners' motion to dismiss,
holding in part as follows:
From the pleadings thus far presented to this Court by the parties, the
Court's attention is called by the relationship between the plaintiffs as
well as the defendants, including the US Government in that prior to
the bidding or solicitation in question, there was a binding contract
between the plaintiffs as well as the defendants, including the US
Government. By virtue of said contract of concession, it is the Court's
understanding that neither the US Government nor the herein
principal defendants would become the employer/s of the plaintiffs
but that the latter are the employers themselves of the barbers, etc.
with the employer, the plaintiffs herein, remitting the stipulated
percentage of commissions to the Philippine Area Exchange. The
same circumstance would become m effect when the Philippine Area
Exchange opened for bidding or solicitation the questioned barber
shop concessions. To this extent, therefore, indeed a commercial
transaction has been entered, and for purposes of the said
solicitation, would necessarily be entered between the plaintiffs as
well as the defendants.
The Court, further, is of the view that Article XVIII of the RP-US Bases
Agreement does not cover such kind of services falling under the
concessionaireship, such as a barber shop concession. 2

On December 11, 1986, following the filing of the herein petition for certiorari and
prohibition with preliminary injunction, we issued a temporary restraining order
against further proceedings in the court below. 3

In G.R. No. 79470, Fabian Genove filed a complaint for damages against
petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter Orascion
for his dismissal as cook in the U.S. Air Force Recreation Center at the John Hay Air
Station in Baguio City. It had been ascertained after investigation, from the
testimony of Belsa, Cartalla and Orascion, that Genove had poured urine into the
soup stock used in cooking the vegetables served to the club customers.
Lamachia, as club manager, suspended him and thereafter referred the case to a
board of arbitrators conformably to the collective bargaining agreement between
the Center and its employees. The board unanimously found him guilty and
recommended his dismissal. This was effected on March 5, 1986, by Col. David C.
Kimball, Commander of the 3rd Combat Support Group, PACAF Clark Air Force
Base. Genove's reaction was to file his complaint in the Regional Trial Court of
Baguio City against the individual petitioners. 4
On March 13, 1987, the defendants, joined by the United States of America,
moved to dismiss the complaint, alleging that Lamachia, as an officer of the U.S.
Air Force stationed at John Hay Air Station, was immune from suit for the acts
done by him in his official capacity. They argued that the suit was in effect against
the United States, which had not given its consent to be sued. Cdpr
This motion was denied by the respondent judge on June 4, 1987, in an order
which read in part:
It is the understanding of the Court, based on the allegations of the
complaint which have been hypothetically admitted by defendants
upon the filing of their motion to dismiss that although defendants
acted initially in their official capacities, their going beyond what their
functions called for brought them out of the protective mantle of
whatever immunities they may have had in the beginning. Thus, the
allegation that the acts complained of were "illegal," done, with
"extreme bad faith" and with "pre-conceived sinister plan to harass
and finally dismiss" the plaintiff, gains significance. 5

The petitioners then came to this Court seeking certiorari and prohibition with
preliminary injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp
O'Donnell, an extension of Clark Air Base, was arrested following a buy-bust
operation conducted by the individual petitioners herein, namely, Tomi J. King,
Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special
agents of the Air Force Office of Special Investigators (AFOSI). On the basis of the
sworn statements made by them, an information for violation of R.A. 6425,
otherwise known as the Dangerous Drugs Act, was filed against Bautista in the
Regional Trial Court of Tarlac. The above-named officers testified against him at
his trial. As a result of the filing of the charge, Bautista was dismissed from his
employment. He then filed a complaint for damages against the individual
petitioners herein claiming that it was because of their acts that he was
removed. 6
During the period for filing of the answer, Mariano Y. Navarro, a special counsel
assigned to the International Law Division, Office of the Staff Judge Advocate of
Clark Air Base, entered a special appearance for the defendants and moved for an
extension within which to file an "answer and/or other pleadings." His reason was
that the Attorney General of the United States had not yet designated counsel to
represent the defendants, who were being sued for their official acts. Within the
extended period, the defendants, without the assistance of counsel or authority
from the U.S. Department of Justice, filed their answer. They alleged therein as
affirmative defenses that they had only done their duty in the enforcement of the
laws of the Philippines inside the American bases pursuant to the RP-US Military
Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to
represent the defendants, filed with leave of court a motion to withdraw the
answer and dismiss the complaint. The ground invoked was that the defendants
were acting in their official capacity when they did the acts complained of and
that the complaint against them was in effect a suit against the United States
without its consent. prcd
The motion was denied by the respondent judge in his order dated September 11,
1987, which held that the claimed immunity under the Military Bases Agreement

covered only criminal and not civil cases. Moreover, the defendants had come
under the jurisdiction of the court when they submitted their answer. 7
Following the filing of the herein petition for certiorari and prohibition with
preliminary injunction, we issued on October 14, 1987, a temporary restraining
order. 8
In G.R. No. 80258, a complaint for damages was filed by the private respondents
against the herein petitioners (except the United States of America), for injuries
allegedly

sustained

by

the

plaintiffs

as

result

of

the

acts

of

the

defendants. 9 There is a conflict of factual allegations here. According to the

plaintiffs, the defendants beat them up, handcuffed them and unleashed dogs on
them which bit them in several parts of their bodies and caused extensive injuries
to them. The defendants deny this and claim the plaintiffs were arrested for theft
and were bitten by the dogs because they were struggling and resisting arrest.
The defendants stress that the dogs were called off and the plaintiffs were
immediately taken to the medical center for treatment of their wounds.
In a motion to dismiss the complaint, the United States of America and the
individually named defendants argued that the suit was in effect a suit against the
United States, which had not given its consent to be sued. The defendants were
also immune from suit under the RP-US Bases Treaty for acts done by them in the
performance of their official functions.
The motion to dismiss was denied by the trial court in its order dated August 10,
1987, reading in part as follows:
The defendants certainly cannot correctly argue that they are
immune from suit. The allegations, of the complaint which is sought
to be dismissed, had to be hypothetically admitted and whatever
ground the defendants may have, had to be ventilated during the trial
of the case on the merits. The complaint alleged criminal acts against
the individually-named defendants and from the nature of said acts it
could not be said that they are Acts of State, for which immunity
should be invoked. If the Filipinos themselves are duty bound to
respect, obey and submit themselves to the laws of the country, with
more reason, the members of the United States Armed Forces who
are being treated as guests of this country should respect, obey and
submit themselves to its laws. 10

and so was the motion for reconsideration. The defendants submitted their
answer as required but subsequently filed their petition for certiorari and
prohibition with preliminary injunction with this Court. We issued a temporary
restraining order on October 27, 1987. 11
II
The rule that a state may not be sued without its consent, now expressed
in Article XVI, Section 3, of the 1987 Constitution, is one of the generally accepted
principles of international law that we have adopted as part of the law of our land
under Article II, Section 2. This latter provision merely reiterates a policy earlier
embodied in the 1935 and 1973 Constitutions and also intended to manifest our
resolve to abide by the rules of the international community.
Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this
doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of
its membership in the society of nations. Upon its admission to such society, the
state is automatically obligated to comply with these principles in its relations
with other states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that "there can be no legal right against the
authority which makes the law on which the right depends." 12 There are other
practical reasons for the enforcement of the doctrine. In the case of the foreign
state sought to be impleaded in the local jurisdiction, the added inhibition is
expressed in the maxim par in parem, non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary
disposition would, in the language of a celebrated case, "unduly vex the peace of
nations." 13
While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state for
acts allegedly performed by them in the discharge of their duties. The rule is that
if the judgment against such officials will require the state itself to perform an
affirmative act to satisfy the same, such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded as
against the state itself although it has not been formally impleaded. 14 In such a

situation, the state may move to dismiss the complaint on the ground that it has
been filed without its consent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty"
because of the privilege it grants the state to defeat any legitimate claim against
it by simply invoking its non-suability. That is hardly fair, at least in democratic
societies, for the state is not an unfeeling tyrant unmoved by the valid claims of
its citizens. In fact, the doctrine is not absolute and does not say the state may
not be sued under any circumstance. On the contrary, the rule says that the state
may not be sued without its consent, which clearly imports that it may be sued if
it consents.

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

Express consent may be embodied in a general law or a special law. Consent is
implied when the state enters into a contract or it itself commences litigation.
The general law waiving the immunity of the state from suit is found in Act No.
3083, under which the Philippine government "consents and submits to be sued
upon any moneyed claim involving liability arising from contract, express or
implied, which could serve as a basis of civil action between private parties."
In Merritt v. Government of the Philippine Islands, 15 a special law was passed to
enable a person to sue the government for an alleged tort. When the government
enters into a contract, it is deemed to have descended to the level of the other
contracting party and divested of its sovereign immunity from suit with its implied
consent. 16 Waiver is also implied when the government files a complaint, thus
opening itself to a counterclaim. 17
The above rules are subject to qualification. Express consent is effected only by
the will of the legislature through the medium of a duly enacted statute. 18 We
have held that not all contracts entered into by the government will operate as a
waiver of its non-suability; distinction must be made between its sovereign and
proprietary acts.19 As for the filing of a complaint by the government, suability
will result only where the government is claiming affirmative relief from the
defendant. 20

In the case of the United States of America, the customary rule of international
law on state immunity is expressed with more specificity in the RP-US Bases
Treaty.Article III thereof provides as follows:
It is mutually agreed that the United States shall have the rights,
power and authority within the bases which are necessary for the
establishment, use, operation and defense thereof or appropriate for
the control thereof and all the rights, power and authority within the
limits of the territorial waters and air space adjacent to, or in the
vicinity of, the bases which are necessary to provide access to them
or appropriate for their control.
The petitioners also rely heavily on Baer v. Tizon, 21 along with several other
decisions, to support their position that they are not suable in the cases below,
the United States not having waived its sovereign immunity from suit. It is
emphasized that in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign state
without its consent is appropriate. More specifically, insofar as alien
armed forces is concerned, the starting point is Raquiza v. Bradford, a
1945 decision. In dismissing a habeas corpus petition for the release
of petitioners confined by American army authorities, Justice Hilado,
speaking for the Court, cited Coleman v. Tennessee, where it was
explicitly declared: `It is well settled that a foreign army, permitted to
march through a friendly country or to be stationed in it, by
permission of its government or sovereign, is exempt from the civil
and criminal jurisdiction of the place.' Two years later, in Tubb and
Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford
and cited in support thereof excerpts from the works of the following
authoritative writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim,
Westlake, Hyde, and McNair and Lauterpacht. Accuracy demands the
clarification that after the conclusion of the Philippine-American
Military Bases Agreement, the treaty provisions should control on
such matter, the assumption being that there was a manifestation of
the submission to jurisdiction on the part of the foreign power
whenever appropriate. More to the point is Syquia v. Almeda Lopez,
where plaintiffs as lessors sued the Commanding General of the

United States Army in the Philippines, seeking the restoration to them

of the apartment buildings they owned leased to the United States
armed forces stationed in the Manila area. A motion to dismiss on the
ground of non-suability was filed and upheld by respondent Judge.
The matter was taken to this Court in a mandamus proceeding. It
failed. It was the ruling that respondent Judge acted correctly
considering that the `action must be considered as one against the
U.S. Government.' The opinion of Justice Montemayor continued: `It is
clear that the courts of the Philippines including the Municipal Court
of Manila have no jurisdiction over the present case for unlawful
detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government
has not given its consent to the filing of this suit which is essentially
against her, though not in name. Moreover, this is not only a case of a
citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign
government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The
principles of law behind this rule are so elementary and of such
general acceptance that we deem it unnecessary to cite authorities in
support thereof.' Then came Marvel Building Corporation v. Philippine
War Damage Commission, where respondent, a United States Agency
established to compensate damages suffered by the Philippines
during World War II was held as falling within the above doctrine as
the suit against it `would eventually be a charge against or financial
liability of the United States Government because . . ., the
Commission has no funds of its own for the purpose of paying money
judgments.' The Syquia ruling was again explicitly relied upon in
Marquez Lim v. Nelson, involving a complaint for the recovery of a
motor launch, plus damages, the special defense interposed being
`that the vessel belonged to the United States Government, that the
defendants merely acted as agents of said Government, and that the
United States Government is therefore the real party in interest.' So it
was in Philippine Alien Property Administration v. Castelo, where it
was held that a suit against Alien Property Custodian and the
Attorney General of the United States involving vested property under

the Trading with the Enemy Act is in substance a suit against the
United States. To the same effect is Parreno v. McGranery, as the
following excerpt from the opinion of Justice Tuazon clearly shows: `It
is a widely accepted principle of international law, which is made a
part of the law of the land (Article II, Section 3 of the Constitution),
that a foreign state may not be brought to suit before the courts of
another state or its own courts without its consent.' Finally, there is
Johnson v. Turner, an appeal by the defendant, then Commanding
General, Philippine Command (Air Force, with office at Clark Field)
from a decision ordering the return to plaintiff of the confiscated
military payment certificates known as scrip money. In reversing the
lower court decision, this Tribunal, through Justice Montemayor, relied
on Syquia v. Almeda Lopez, explaining why it could not be
sustained. LLphil
It bears stressing at this point that the above observations do not confer on the
United States of America a blanket immunity for all acts done by it or its agents in
the Philippines. Neither may the other petitioners claim that they are also
insulated from suit in this country merely because they have acted as agents of
the United States in the discharge of their official functions.
There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract
in its proprietary or private capacity. It is only when the contract involves its
sovereign or governmental capacity that no such waiver may be implied. This was
our ruling inUnited States of America v. Ruiz, 22 where the transaction in question
dealt with the improvement of the wharves in the naval installation at Subic Bay.
As this was a clearly governmental function, we held that the contract did not
operate to divest the United States of its sovereign immunity from suit. In the
words of Justice Vicente Abad Santos:
The traditional rule of immunity exempts a State from being sued in
the courts of another State without its consent or waiver. This rule is a
necessary consequence of the principles of independence and
equality of States. However, the rules of International Law are not
petrified; they are constantly developing and evolving. And because
the activities of states have multiplied, it has been necessary to

distinguish them between sovereign and governmental acts (jure

imperii) and private, commercial and proprietary acts (jure gestionis).
The result is that State immunity now extends only to acts jure
imperii. The restrictive application of State immunity is now the rule
in the United States, the United Kingdom and other states in Western
Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of an
individual and can thus be deemed to have tacitly given its consent
to be sued only when it enters into business contracts. It does not
apply where the contract relates to the exercise of its sovereign
functions. In this case the projects are an integral part of the naval
base which is devoted to the defense of both the United States and
the Philippines, indisputably a function of the government of the
highest order; they are not utilized for nor dedicated to commercial or
business purposes.
The other petitioners in the cases before us all aver they have acted in the
discharge of their official functions as officers or agents of the United States.
However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to the
United States of America, which has not given its consent to be sued. In fact, the
defendants are sought to be held answerable for personal torts in which the
United States itself is not involved. If found liable, they and they alone must
satisfy the judgment.

In Festejo v. Fernando, 23 a bureau director, acting without any authority

whatsoever, appropriated private land and converted it into public irrigation
ditches. Sued for the value of the lots invalidly taken by him, he moved to dismiss
the complaint on the ground that the suit was in effect against the Philippine
government, which had not given its consent to be sued. This Court sustained the

denial of the motion and held that the doctrine of state immunity was not
applicable. The director was being sued in his private capacity for a personal tort.
With these considerations in mind, we now proceed to resolve the cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that the individuallynamed petitioners therein were acting in the exercise of their official functions
when they conducted the buy-bust operation against the complainant and
thereafter testified against him at his trial. The said petitioners were in fact
connected with the Air Force Office of Special Investigators and were charged
precisely with the function of preventing the distribution, possession and use of
prohibited drugs and prosecuting those guilty of such acts. It cannot for a moment
be imagined that they were acting in their private or unofficial capacity when they
apprehended and later testified against the complainant. It follows that for
discharging their duties as agents of the United States, they cannot be directly
impleaded for acts imputable to their principal, which has not given its consent to
be sued. As we observed in Sanders v. Veridiano: 24
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.
The private respondent invokes Article 2180 of the Civil Code which holds the
government liable if it acts through a special agent. The argument, it would seem,
is premised on the ground that since the officers are designated "special agents,"
the United States government should be liable for their torts.
There seems to be a failure to distinguish between suability and liability and a
misconception that the two terms are synonymous. Suability depends on the
consent of the state to be sued, liability on the applicable law and the established
facts. The circumstance that a state is suable does not necessarily mean that it is
liable; on the other hand, it can never be held liable if it does not first consent to
be sued. Liability is not conceded by the mere fact that the state has allowed

itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable.
The said article establishes a rule of liability, not suability. The government may
be held liable under this rule only if it first allows itself to be sued through any of
the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent even if
he is so denominated, as in the case at bar. No less important, the said provision
appears to regulate only the relations of the local state with its inhabitants and,
hence, applies only to the Philippine government and not to foreign governments
impleaded in our courts.
We reject the conclusion of the trial court that the answer filed by the special
counsel of the Office of the Sheriff Judge Advocate of Clark Air Base was a
submission by the United States government to its jurisdiction. As we noted
in Republic v. Purisima, 25 express waiver of immunity cannot be made by a mere
counsel of the government but must be effected through a duly-enacted statute.
Neither does such answer come under the implied forms of consent as earlier
discussed. Cdpr
But even as we are certain that the individual petitioners in G.R. No. 80018 were
acting in the discharge of their official functions, we hesitate to make the same
conclusion in G.R. No. 80258. The contradictory factual allegations in this case
deserve in our view a closer study of what actually happened to the plaintiffs. The
record is too meager to indicate if the defendants were really discharging their
official duties or had actually exceeded their authority when the incident in
question occurred. Lacking this information, this Court cannot directly decide this
case. The needed inquiry must first be made by the lower court so it may assess
and resolve the conflicting claims of the parties on the basis of the evidence that
has yet to be presented at the trial. Only after it shall have determined in what
capacity the petitioners were acting at the time of the incident in question will this
Court determine, if still necessary, if the doctrine of state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed as a cook in the
Main Club located at the U.S. Air Force Recreation Center, also known as the Open
Mess Complex, at John Hay Air Station. As manager of this complex, petitioner
Lamachia is responsible for eleven diversified activities generating an annual
income of $2 million. Under his executive management are three service

restaurants, a cafeteria, a bakery, a Class VI store, a coffee and pantry shop, a

main cashier cage, an administrative office, and a decentralized warehouse which
maintains a stock level of $200,000.00 per month in resale items. He supervises
167 employees, one of whom was Genove, with whom the United States
government has concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the restaurant services
offered at the John Hay Air Station partake of the nature of a business enterprise
undertaken by the United States government in its proprietary capacity. Such
services are not extended to the American servicemen for free as a perquisite of
membership in the Armed Forces of the United States. Neither does it appear that
they are exclusively offered to these servicemen; on the contrary, it is well known
that they are available to the general public as well, including the tourists in
Baguio City, many of whom make it a point to visit John Hay for this reason. All
persons availing themselves of this facility pay for the privilege like all other
customers as in ordinary restaurants. Although the prices are concededly
reasonable and relatively low, such services are undoubtedly operated for profit,
as a commercial and not a governmental activity.
The consequence of this finding is that the petitioners cannot invoke the doctrine
of state immunity to justify the dismissal of the damage suit against them by
Genove. Such defense will not prosper even if it be established that they were
acting as agents of the United States when they investigated and later dismissed
Genove. For that matter, not even the United States government itself can claim
such immunity. The reason is that by entering into the employment contract with
Genove in the discharge of its proprietary functions, it impliedly divested itself of
its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the complaint against the
petitioners in the court below must still be dismissed. While suable, the
petitioners are nevertheless not liable. It is obvious that the claim for damages
cannot be allowed on the strength of the evidence before us, which we have
carefully examined.
The dismissal of the private respondent was decided upon only after a thorough
investigation where it was established beyond doubt that he had polluted the
soup stock with urine. The investigation, in fact, did not stop there. Despite the
definitive finding of Genove's guilt, the case was still referred to the board of

arbitrators provided for in the collective bargaining agreement. This board

unanimously affirmed the findings of the investigators and recommended
Genove's dismissal. There was nothing arbitrary about the proceedings. The
petitioners

acted

quite

properly

in

terminating

the

private

respondent's

employment for his unbelievably nauseating act. It is surprising that he should

still have the temerity to file his complaint for damages after committing his
utterly disgusting offense.
Concerning G.R. No. 76607, we also find that the barbershops subject of the
concessions granted by the United States government are commercial enterprises
operated by private persons. They are not agencies of the United States Armed
Forces nor are their facilities demandable as a matter of right by the American
servicemen. These establishments provide for the grooming needs of their
customers and offer not only the basic haircut and shave (as required in most
military organizations) but such other amenities as shampoo, massage, manicure
and other similar indulgences. And all for a fee. Interestingly, one of the
concessionaires, private respondent Valencia, was even sent abroad to improve
his tonsorial business, presumably for the benefit of his customers . No less
significantly, if not more so, all the barbershop concessionaires are, under the
terms of their contracts, required to remit to the United States government fixed
commissions in consideration of the exclusive concessions granted to them in
their respective areas.
This being the case, the petitioners cannot plead any immunity from the
complaint filed by the private respondents in the court below. The contracts in
question being decidedly commercial, the conclusion reached in the United States
of America v. Ruiz case cannot be applied here.
The Court would have directly resolved the claims against the defendants as we
have done in G.R. No. 79470, except for the paucity of the record in the case at
hand. The evidence of the alleged irregularity in the grant of the barbershop
concessions is not before us. This means that, as in G.R. No. 80258, the
respondent court will have to receive that evidence first, so it can later determine
on the basis thereof if the plaintiffs are entitled to the relief they seek.
Accordingly, this case must also be remanded to the court below for further
proceedings.

IV
There are a number of other cases now pending before us which also involve the
question of the immunity of the United States from the jurisdiction of the
Philippines. This is cause for regret, indeed, as they mar the traditional friendship
between two countries long allied in the cause of democracy. It is hoped that the
so-called "irritants" in their relations will be resolved in a spirit of mutual
accommodation and respect, without the inconvenience and asperity of litigation
and always with justice to both parties.
WHEREFORE, after considering all the above premises, the Court hereby renders
judgment as follows:
1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is
directed to proceed with the hearing and decision of Civil Case No. 4772. The
temporary restraining order dated December 11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is
DISMISSED.
3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is
DISMISSED. The temporary restraining order dated October 14, 1987, is made
permanent.
4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is
directed to proceed with the hearing and decision of Civil Case No. 4996. The
temporary restraining order dated October 27, 1987, is LIFTED. LibLex
All without any pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ.,
concur.

Republic of Indonesia v. Vinzon, G.R. No. 154705, [June 26, 2003]

EN BANC
[G.R. No. 154705. June 26, 2003.]
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR
SOERATMIN,

and

MINISTER

COUNSELLOR

AZHARI

KASIM, petitioners, vs. JAMES VINZON, doing business under the

name and style of VINZON TRADE AND SERVICES, respondent.
Quasha Ancheta Pena & Nolasco for petitioners.
Fornier Fornier Sao & Lagumbay Law Firm for J. Vinzon.
SYNOPSIS
In August 1995, petitioner Republic of Indonesia entered into a Maintenance
Agreement for its specified buildings in the embassy with respondent James
Vinzon as sole proprietor of Vinzon Trade and Services. The said Agreement was
effective for four years and will renew itself automatically unless cancelled by
either party by giving thirty days prior written notice from the date of expiry.
Before August 1999, respondent was informed that the renewal of the agreement
shall be at the discretion of the incoming Chief of Administration, petitioner
Minister Counsellor Azhari Kasim. On August 31, 2000, the Indonesian Embassy
terminated the said agreement. Respondent claimed that the said termination
was arbitrary and unlawful. Thus, he filed a complaint against petitioners in the
Regional Trial Court of Makati, Branch 145. In response, petitioners filed a motion
to dismiss by alleging that the Republic of Indonesia has sovereign immunity from

suit and that Ambassador Soeratmin and Minister Counsellor Kasim enjoy
diplomatic immunity. The trial court denied petitioners' motion to dismiss. The
Court of Appeals likewise denied petitioners' petition forcertiorari and prohibition
in relation thereto. Hence, this petition for review on certiorari.
The Court held that the immunity of the sovereign is recognized only with regard
to public acts or acts jure imperii, but not with regard to private acts or acts jure
gestionis. In this case, there is no dispute that the establishment of a diplomatic
mission is an act jure imperii. A sovereign state does not merely establish a
diplomatic mission and leave it at that; the establishment of a diplomatic mission
encompasses its maintenance and upkeep. Hence, the State may enter into
contracts with private entities to maintain the premises, furnishings and
equipment of the embassy and the living quarters of its agents and officials. It is,
therefore, clear that petitioner Republic of Indonesia was acting in pursuit of a
sovereign activity when it entered into a contract with respondent for the upkeep
or maintenance of the air conditioning units, generator sets, electrical facilities,
water heaters, and water motor pumps of the Indonesian Embassy and the official
residence of the Indonesian ambassador.
Moreover, the act of petitioners Ambassador Soeratmin and Minister Counsellor
Kasim in terminating the Maintenance Agreement is not covered by the
exceptions provided in Article 31 of the Vienna Convention on Diplomatic
Relations. Accordingly, the petition was granted and the complaint against
petitioners was dismissal.
SYLLABUS
1. PUBLIC INTERNATIONAL LAW; DOCTRINE OF SOVEREIGN IMMUNITY; NECESSARY
CONSEQUENCE OF THE PRINCIPLE OF INDEPENDENCE AND EQUALITY OF STATES.
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution. The rule that a State may
not be sued without its consent is a necessary consequence of the principles of
independence and equality of States. As enunciated in Sanders v. Veridiano II, the
practical justification for the doctrine of sovereign immunity is that there can be
no legal right against the authority that makes the law on which the right
depends. In the case of foreign States, the rule is derived from the principle of the

sovereign equality of States, as expressed in the maxim par in parem non habet
imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary attitude would "unduly vex the peace of nations."
2. ID.; ID.; RECOGNIZED WITH REGARD TO PUBLIC ACTS ONLY. The rules of
International Law, however, are neither unyielding nor impervious to change. The
increasing need of sovereign States to enter into purely commercial activities
remotely connected with the discharge of their governmental functions brought
about a new concept of sovereign immunity. This concept, the restrictive theory,
holds that the immunity of the sovereign is recognized only with regard to public
acts or actsjure imperii, but not with regard to private acts or acts jure gestionis.
3. ID.; ID.; ID.; ENTERING INTO A CONTRACT BY FOREIGN STATE WITH PRIVATE
PARTY CANNOT BE THE ULTIMATE TEST OF WHETHER OR NOT IT IS A PUBLIC OR
PRIVATE ACT. In United States v. Ruiz, for instance, we held that the conduct of
public bidding for the repair of a wharf at a United States Naval Station is an
act jure imperii. On the other hand, we considered as an act jure gestionis the
hiring of a cook in the recreation center catering to American servicemen and the
general public at the John Hay Air Station in Baguio City, as well as the bidding for
the operation of barber shops in Clark Air Base in Angeles City. Apropos the
present case, the mere entering into a contract by a foreign State with a private
party cannot be construed as the ultimate test of whether or not it is an act jure
imperii or jure gestionis. Such act is only the start of the inquiry. Is the foreign
State engaged in the regular conduct of a business? If the foreign State is not
engaged regularly in a business or commercial activity, and in this case it has not
been shown to be so engaged, the particular act or transaction must then be
tested by its nature. If the act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii.
4. ID.; ID.; PROVISION IN A CONTRACT THAT ANY LEGAL ACTION ARISING OUT OF
THE AGREEMENT SHALL BE SETTLED ACCORDING TO PHILIPPINE LAWS IS NOT A
WAIVER OF SOVEREIGN IMMUNITY FROM SUIT. [T]he existence alone of a
paragraph in a contract stating that any legal action arising out of the agreement
shall be settled according to the laws of the Philippines and by a specified court of
the Philippines is not necessarily a waiver of sovereign immunity from suit. The
aforesaid provision contains language not necessarily inconsistent with sovereign
immunity. On the other hand, such provision may also be meant to apply where

the sovereign party elects to sue in the local courts, or otherwise waives its
immunity by any subsequent act. The applicability of Philippine laws must be
deemed to include Philippine laws in its totality, including the principle
recognizing sovereign immunity. Hence, the proper court may have no proper
action, by way of settling the case, except to dismiss it.
5. ID.; ID.; ID.; SUBMISSION BY A FOREIGN STATE TO LOCAL JURISDICTION MUST
BE CLEAR AND UNEQUIVOCAL. Submission by a foreign state to local
jurisdiction must be clear and unequivocal. It must be given explicitly or by
necessary implication. CaDSHE
6. ID.; ID.; MAINTENANCE OF THE PREMISES, FURNISHINGS AND EQUIPMENT OF
THE EMBASSY AND THE LIVING QUARTERS OF THE AGENTS AND OFFICIALS OF A
FOREIGN STATE IS A PUBLIC ACT. There is no dispute that the establishment of
a diplomatic mission is an act jure imperii. A sovereign State does not merely
establish a diplomatic mission and leave it at that; the establishment of a
diplomatic mission encompasses its maintenance and upkeep. Hence, the State
may enter into contracts with private entities to maintain the premises,
furnishings and equipment of the embassy and the living quarters of its agents
and officials. It is therefore clear that petitioner Republic of Indonesia was acting
in pursuit of a sovereign activity when it entered into a contract with respondent
for the upkeep or maintenance of the air conditioning units, generator sets,
electrical facilities, water heaters, and water motor pumps of the Indonesian
Embassy and the official residence of the Indonesian ambassador. cSATEH
7. ID.; VIENNA CONVENTION ON DIPLOMATIC RELATIONS; IMMUNITY FROM SUITS
OF DIPLOMATIC, AGENTS, APPLICABLE IN CASE AT BAR. On the matter of
whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim
may be sued herein in their private capacities, Article 31 of the Vienna Convention
on Diplomatic Relations provides: " . . . 1. A diplomatic agent shall enjoy immunity
from the criminal jurisdiction of the receiving State. He shall also enjoy immunity
from its civil and administrative jurisdiction, except in the case of: (a) a real action
relating to private immovable property situated in the territory of the receiving
State, unless he holds it on behalf of the sending State for the purposes of the
mission; (b) an action relating to succession in which the diplomatic agent is
involved as executor, administrator, heir or legatee as a private person and not on
behalf of the sending State; (c) an action relating to any professional or

commercial activity exercised by the diplomatic agent in the receiving State

outside his official functions. . . . " The act of petitioners Ambassador Soeratinin
and Minister Counsellor Kasim in terminating the Maintenance Agreement is not
covered by the exceptions provided in the abovementioned provision. The
Solicitor General believes that said act may fall under subparagraph (c) thereof,
but said provision clearly applies only to a situation where the diplomatic agent
engages in any professional or commercial activity outside official functions,
which is not the case herein.

DECISION

AZCUNA, J p:
This is a petition for review on certiorari to set aside the Decision of the Court of
Appeals dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R.
SP No. 66894 entitled "The Republic of Indonesia, His Excellency Ambassador
Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria,
Presiding Judge, RTC Branch 145, Makati City, and James Vinzon, doing business
under the name and style of Vinzon Trade and Services."

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah,

entered into a Maintenance Agreement in August 1995 with respondent James
Vinzon, sole proprietor of Vinzon Trade and Services. The Maintenance Agreement
stated that respondent shall, for a consideration, maintain specified equipment at
the Embassy Main Building, Embassy Annex Building and the Wisma Duta, the
official residence of petitioner Ambassador Soeratmin. The equipment covered by
the Maintenance Agreement are air conditioning units, generator sets, electrical
facilities, water heaters, and water motor pumps. It is likewise stated therein that
the agreement shall be effective for a period of four years and will renew itself
automatically unless cancelled by either party by giving thirty days prior written
notice from the date of expiry. 1
Petitioners claim that sometime prior to the date of expiration of the said
agreement, or before August 1999, they informed respondent that the renewal of
the agreement shall be at the discretion of the incoming Chief of Administration,

Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000.
When Minister Counsellor Kasim assumed the position of Chief of Administration in
March 2000, he allegedly found respondent's work and services unsatisfactory
and not in compliance with the standards set in the Maintenance Agreement.
Hence, the Indonesian Embassy terminated the agreement in a letter dated
August 31, 2000. 2Petitioners claim, moreover, that they had earlier verbally
informed respondent of their decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary
and unlawful. Respondent cites various circumstances which purportedly negated
petitioners' alleged dissatisfaction over respondent's services: (a) in July 2000,
Minister Counsellor Kasim still requested respondent to assign to the embassy an
additional full-time worker to assist one of his other workers; (b) in August 2000,
Minister Counsellor Kasim asked respondent to donate a prize, which the latter
did, on the occasion of the Indonesian Independence Day golf tournament; and (c)
in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked
respondent for sponsoring a prize and expressed his hope that the cordial
relations happily existing between them will continue to prosper and be
strengthened in the coming years.
Hence, on December 15, 2000, respondent filed a complaint 3 against petitioners
docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati,
Branch 145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging
that the Republic of Indonesia, as a foreign sovereign State, has sovereign
immunity from suit and cannot be sued as a party-defendant in the Philippines.
The said motion further alleged that Ambassador Soeratmin and Minister
Counsellor Kasim are diplomatic agents as defined under the Vienna Convention
on Diplomatic Relations and therefore enjoy diplomatic immunity. 4 In turn,
respondent filed on March 20, 2001, an Opposition to the said motion alleging that
the Republic of Indonesia has expressly waived its immunity from suit. He based
this claim upon the following provision in the Maintenance Agreement:
"Any legal action arising out of this Maintenance Agreement shall be
settled according to the laws of the Philippines and by the proper
court of Makati City, Philippines."

Respondent's Opposition likewise alleged that Ambassador Soeratmin and

Minister Counsellor Kasim can be sued and held liable in their private capacities
for tortious acts done with malice and bad faith. 5
On May 17, 2001, the trial court denied herein petitioners' Motion to Dismiss. It
likewise denied the Motion for Reconsideration subsequently filed.
The trial court's denial of the Motion to Dismiss was brought up to the Court of
Appeals by herein petitioners in a petition for certiorari and prohibition. Said
petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely
abused its discretion in ruling that the Republic of Indonesia gave its consent to
be sued and voluntarily submitted itself to the laws and jurisdiction of Philippine
courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim
waived their immunity from suit.
On May 30, 2002, the Court of Appeals rendered its assailed decision denying the
petition for lack of merit. 6 On August 16, 2002, it denied herein petitioners'
motion for reconsideration. 7
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of
Appeals erred in sustaining the trial court's decision that petitioners have waived
their immunity from suit by using as its basis the abovementioned provision in the
Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution. 8 The rule that a State
may not be sued without its consent is a necessary consequence of the principles
of independence and equality of States. 9 As enunciated in Sanders v. Veridiano
II, 10 the practical justification for the doctrine of sovereign immunity is that there
can be no legal right against the authority that makes the law on which the right
depends. In the case of foreign States, the rule is derived from the principle of the
sovereign equality of States, as expressed in the maxim par in parem non habet
imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. 11 A contrary attitude would "unduly vex the peace of nations." 12

The rules of International Law, however, are neither unyielding nor impervious to
change. The increasing need of sovereign States to enter into purely commercial
activities remotely connected with the discharge of their governmental functions
brought about a new concept of sovereign immunity. This concept, the restrictive
theory, holds that the immunity of the sovereign is recognized only with regard to
public acts or acts jure imperii, but not with regard to private acts or acts jure
gestionis. 13
In United States v. Ruiz, 14 for instance, we held that the conduct of public
bidding for the repair of a wharf at a United States Naval Station is an act jure
imperii. On the other hand, we considered as an act jure gestionis the hiring of a
cook in the recreation center catering to American servicemen and the general
public at the John Hay Air Station in Baguio City, 15 as well as the bidding for the
operation of barber shops in Clark Air Base in Angeles City. 16
Apropos the present case, the mere entering into a contract by a foreign State
with a private party cannot be construed as the ultimate test of whether or not it
is an actjure imperii or jure gestionis. Such act is only the start of the inquiry. Is
the foreign State engaged in the regular conduct of a business? If the foreign
State is not engaged regularly in a business or commercial activity, and in this
case it has not been shown to be so engaged, the particular act or transaction
must then be tested by its nature. If the act is in pursuit of a sovereign activity, or
an incident thereof, then it is an act jure imperii. 17
Hence, the existence alone, of a paragraph in a contract stating that any legal
action arising out of the agreement shall be settled according to the laws of the
Philippines and by a specified court of the Philippines is not necessarily a waiver
of sovereign immunity from suit. The aforesaid provision contains language not
necessarily inconsistent with sovereign immunity. On the other hand, such
provision may also be meant to apply where the sovereign party elects to sue in
the local courts, or otherwise waives its immunity by any subsequent act. The
applicability of Philippine laws must be deemed to include Philippine laws in its
totality, including the principle recognizing sovereign immunity. Hence, the proper
court may have no proper action, by way of settling the case, except to dismiss
it. AEaSTC

Submission by a foreign state to local jurisdiction must be clear and unequivocal.

It must be given explicitly or by necessary implication. We find no such waiver in
this case.
Respondent concedes that the establishment of a diplomatic mission is a
sovereign function. On the other hand, he argues that the actual physical
maintenance of the premises of the diplomatic mission, such as the upkeep of its
furnishings and equipment, is no longer a sovereign function of the State. 18
We disagree. There is no dispute that the establishment of a diplomatic mission is
an act jure imperii. A sovereign State does not merely establish a diplomatic
mission and leave it at that; the establishment of a diplomatic mission
encompasses its maintenance and upkeep. Hence, the State may enter into
contracts with private entities to maintain the premises, furnishings and
equipment of the embassy and the living quarters of its agents and officials. It is
therefore clear that petitioner Republic of Indonesia was acting in pursuit of a
sovereign activity when it entered into a contract with respondent for the upkeep
or maintenance of the air conditioning units, generator sets, electrical facilities,
water heaters, and water motor pumps of the Indonesian Embassy and the official
residence of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, "the Maintenance
Agreement was entered into by the Republic of Indonesia in the discharge of its
governmental functions. In such a case, it cannot be deemed to have waived its
immunity from suit." As to the paragraph in the agreement relied upon by
respondent, the Solicitor General states that it "was not a waiver of their
immunity from suit but a mere stipulation that in the event they do waive their
immunity, Philippine laws shall govern the resolution of any legal action arising
out of the agreement and the proper court in Makati City shall be the agreed
venue thereof. 19

On the matter of whether or not petitioners Ambassador Soeratmin and Minister

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

1. A diplomatic agent shall enjoy immunity from the criminal

jurisdiction of the receiving State. He shall also enjoy immunity from
its civil and administrative jurisdiction, except in the case of:
(a) a real action relating to private immovable property situated
in the territory of the receiving State, unless he holds it on
behalf of the sending State for the purposes of the mission;
(b) an action relating to succession in which the diplomatic
agent is involved as executor, administrator, heir or legatee as a
private person and not on behalf of the sending State;
(c) an action relating to any professional or commercial activity
exercised by the diplomatic agent in the receiving State outside
his official functions.
xxx xxx xxx
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in
terminating the Maintenance Agreement is not covered by the exceptions
provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c)
thereof, 20 but said provision clearly applies only to a situation where the
diplomatic agent engages in any professional or commercial activity outside
official functions, which is not the case herein.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the
Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the
complaint in Civil Case No. 18203 against petitioners is DISMISSED. EcIaTA
No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Carpio, Corona, Carpio Morales, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on official leave.
||| ____________________

Ministerio v CFI of CEBU

SECOND DIVISION
[G.R. No. L-31635. August 31, 1971.]
ANGEL

MINISTERIO

and

ASUNCION

SADAYA, petitioners, vs. THE

COURT OF FIRST INSTANCE OF CEBU, Fourth Branch, Presided by the

Honorable,

Judge

JOSE

C.

BORROMEO,

THE

PUBLIC

HIGHWAY

COMMISSIONER, and THE AUDITOR GENERAL, respondents.

Erilerto Seno for petitioners.
Solicitor General Felix Q. Antonio, Acting First Assistant Solicitor General Antonio
A. Torres and Solicitor Norberto P. Eduardo for respondents.
SYLLABUS
1. POLITICAL LAW; STATE; IMMUNITY FROM SUIT WITHOUT CONSENT; WHEN THE
LITIGATIONS WOULD RESULT IN FINANCIAL RESPONSIBILITY. The government is
immune from suit without its consent. Nor is it indispensable that it be the party
proceeded against. If it appears that the action would in fact hold it liable, the
doctrine calls for application. It follows then that even if the defendants named
were public officials, such a principle could still be an effective bar. This is clearly
so where a litigation would result in a financial responsibility for the government,
whether in the disbursements of funds or loss of property. Under such
circumstances, the liability of the official sued is not personal. The party that
could be adversely affected is the government. Hence the defense of non-suability
may be interposed.

2. ID.; ID.; ID.; UNAUTHORIZED ACTS OF GOVERNMENT OFFICIALS, NOT WITHIN

THE RULE OF IMMUNITY. It is a different matter where the public official is made
to account in his capacity as such for acts contrary to law and injurious to the
rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the
Bureau of Telecommunications vs. Aligaen (33 SCRA 368): "Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government officials
or officers are not acts of the State, and an action against the officials or officers
by one whose rights have been invaded or violated by such acts, for the
protection of his rights, is not a suit against the State within the rule of immunity
of the State from suit. In the same tenor, it has been said that an action at law or
suit in equity against a State officer or the director of a State department on the
ground that, while claiming to act for the State, he violates or invades the
personal and property rights of the plaintiff, under an unconstitutional act or
under an assumption of authority which he does not have, is not a suit against the
State within the constitutional provision that the State may not be sued without
its consent."
3. ID.; ID.; ID.; ID.; DOCTRINE CANNOT SERVE AS AN INSTRUMENT FOR
PERPETRATING AN INJUSTICE ON A CITIZEN. If the constitutional mandate that
the owner be compensated for property taken for public use were to be respected,
as it should, then a suit of this character should not be summarily dismissed. The
doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice on a citizen. It is unthinkable then that precisely because
there was a failure to abide by what the law requires, the government would stand
to benefit. It is just as important, if not more so, that there be fidelity to legal
norms on the part of officialdom if the rule of law were to be maintained. It is not
too much to say that when the government takes any property for public use,
which is conditioned upon the payment of just compensation, to be judicially
ascertained, it makes manifest that it submits to the jurisdiction of a court. There
is no thought then that the doctrine of immunity from suit could still be
appropriately invoked.

DECISION

FERNANDO, J p:

What is before this Court for determination in this appeal by certiorari to review a
decision of the Court of First Instance of Cebu is the question of whether or not
plaintiffs, now petitioners, seeking the just compensation to which they are
entitled under the Constitution for the expropriation of their property necessary
for the widening of a street, no condemnation proceeding having been filed, could
sue defendants Public Highway Commissioner and the Auditor General, in their
capacity as public officials without thereby violating the principle of government
immunity from suit without its consent. The lower court, relying on what it
considered to be authoritative precedents, held that they could not and dismissed
the suit. The matter was then elevated to us. After a careful consideration and
with a view to avoiding the grave inconvenience, not to say possible injustice
contrary to the constitutional mandate, that would be the result if no such suit
were permitted, this Court arrives at a different conclusion and sustains the right
of the plaintiff to file a suit of this character. Accordingly, we reverse.
Petitioners as plaintiffs in a complaint filed with the Court of First Instance of
Cebu, dated April 13, 1966, sought the payment of just compensation for a
registered lot, containing an area of 1045 square meters, alleging that in 1927 the
National Government through its authorized representatives took physical and
material possession of it and used it for the widening of the Gorordo Avenue, a
national road, Cebu City, without paying just compensation and without any
agreement, either written or verbal. There was an allegation of repeated demands
for the payment of its price or return of its possession, but defendants Public
Highway Commissioner and the Auditor General refused to restore its possession.
It was further alleged that on August 25, 1965, the appraisal committee of the
City of Cebu approved Resolution No. 90, appraising the reasonable and just price
of Lot No. 647-B at P50.00 per square meter or a total price of P52,250.00.
Thereafter, the complaint was amended on June 30, 1966 in the sense that the
remedy prayed for was in the alternative, either the restoration of possession or
the payment of the just compensation.
In the answer filed by defendants, now respondents, through the then Solicitor
General, now Associate Justice, Antonio P. Barredo, the principal defense relied
upon was that the suit in reality was one against the government and therefore
should be dismissed, no consent having been shown. Then on July 11, 1969, the
parties submitted a stipulation of facts to this effect: "That the plaintiffs are the
registered owners of Lot 647-B of the Banilad estate described in the Survey plan

RS-600 GLRO Record No. 5988 and more particularly described in Transfer
Certificate of Title No. RT-5963 containing an area of 1,045 square meters; That
the National Government in 1927 took possession of Lot 647-B Banilad estate, and
used the same for the widening of Gorordo Avenue; That the Appraisal Committee
of Cebu City approved Resolution No. 90, Series of 1965 fixing the price of Lot No.
647-B at P50.00 per square meter; That Lot No. 647-B is still in the possession of
the National Government the same being utilized as part of the Gorordo Avenue,
Cebu City, and that the National Government has not as yet paid the value of the
land which is being utilized for public use." 1
The lower court decision now under review was promulgated on January 30, 1969.
As is evident from the excerpt to be cited, the plea that the suit was against the
government without its consent having been manifested met with a favorable
response. Thus: "It is uncontroverted that the land in question is used by the
National Government for road purposes. No evidence was presented whether or
not there was an agreement or contract between the government and the original
owner and whether payment was paid or not to the original owner of the land. It
may be presumed that when the land was taken by the government the payment
of its value was made thereafter and no satisfactory explanation was given why
this case was filed only in 1966. But granting that no compensation was given to
the owner of the land, the case is undoubtedly against the National Government
and there is no showing that the government has consented to be sued in this
case. It may be contended that the present case is brought against the Public
Highway Commissioner and the Auditor General and not against the National
Government. Considering that the herein defendants are sued in their official
capacity the action is one against the National Government who should have been
made a party in this case, but, as stated before, with its consent." 2
Then came this petition for certiorari to review the above decision. The principal
error assigned would impugn the holding that the case being against the national
government which was sued without its consent should be dismissed, as it was in
fact dismissed. As was indicated in the opening paragraph of this opinion, this
assignment of error is justified. The decision of the lower court cannot stand. We
shall proceed to explain why.
1. The government is immune from suit without its consent. 3 Nor is it
indispensable that it be the party proceeded against. If it appears that the action

would in fact hold it liable, the doctrine calls for application. It follows then that
even if the defendants named were public officials, such a principle could still be
an effective bar. This is clearly so where a litigation would result in a financial
responsibility for the government, whether in the disbursements of funds or loss
of property. Under such circumstances, the liability of the official sued is not
personal. The party that could be adversely affected is the government. Hence
the defense of non-suability may be interposed. 4
So it has been categorically set forth in Syquia v. Almeda Lopez: 5 "However, and
this is important, where the judgment in such a case would result not only in the
recovery of possession of the property in favor of said citizen but also in a charge
against or financial liability to the Government, then the suit should be regarded
as one against the government itself, and, consequently, it cannot prosper or be
validly entertained by the courts except with the consent of said Government." 6

2. It is a different matter where the public official is made to account in his

capacity as such for acts contrary to law and injurious to the rights of plaintiff. As
was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications v. Aligean: 7 "Inasmuch as the State authorizes only legal
acts by its officers, unauthorized acts of government officials or officers are not
acts of the State, and an action against the officials or officers by one whose
rights have been invaded or violated by such acts, for the protection of his rights,
is not a suit against the State within the rule of immunity of the State from suit. In
the same tenor, it has been said that an action at law or suit in equity against a
State officer or the director of a State department on the ground that, while
claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of
authority which he does not have, is not a suit against the State within the
constitutional provision that the State may not be sued without its consent." 8
3. It would follow then that the prayer in the amended complaint of petitioners
being in the alternative, the lower court, instead of dismissing the same, could
have passed upon the claim of plaintiffs there, now petitioners, for the recovery of
the possession of the disputed lot, since no proceeding for eminent domain, as
required by the then Code of Civil Procedure, was instituted. 9 However, as noted
in Alfonso v. Pasay City, 10 this Court speaking through Justice Montemayor,

restoration would be "neither convenient nor feasible because it is now and has
been used for road purposes." 11 The only relief, in the opinion of this Court,
would be for the government "to make due compensation, . . .," 12 It was made
clear in such decision that compensation should have been made "as far back as
the date of the taking." Does it result, therefore, that petitioners would be
absolutely remediless since recovery of possession is in effect barred by the
above decision? If the constitutional mandate that the owner be compensated for
property taken for public use 13 were to be respected, as it should, then a suit of
this character should not be summarily dismissed. The doctrine of governmental
immunity from suit cannot serve as an instrument for perpetrating an injustice on
a citizen. Had the government followed the procedure indicated by the governing
law at the time, a complaint would have been filed by it, and only upon payment
of the compensation fixed by the judgment, or after tender to the party entitled to
such payment of the amount fixed, may it "have the right to enter in and upon the
land so condemned" to appropriate the same to the public use defined in the
judgment." 14 If there were an observance of procedural regularity, petitioners
would not be in the sad plaint they are now. It is unthinkable then that precisely
because there was a failure to abide by what the law requires, the government
would stand to benefit. It is just as important, if not more so, that there be fidelity
to legal norms on the part of officialdom if the rule of law were to be maintained.
It is not too much to say that when the government takes any property for public
use, which is conditioned upon the payment of just compensation, to be judicially
ascertained, it makes manifest that it submits to the jurisdiction of a court. There
is no thought then that the doctrine of immunity from suit could still be
appropriately invoked. 15
Accordingly, the lower court decision is reversed so that the court may proceed
with the complaint and determine the compensation to which petitioners are
entitled, taking into account the ruling in the above Alfonso case: "As to the value
of the property, although the plaintiff claims the present market value thereof, the
rule is that to determine due compensation for lands appropriated by the
Government, the basis should be the price or value at the time that it was taken
from the owner and appropriated by the Government." 16
WHEREFORE, the lower court decision of January 30, 1969 dismissing the
complaint is reversed and the case remanded to the lower court for proceedings
in accordance with law.

Reyes,

J.B.L.,

Dizon,

Makalintal,

Zaldivar,

Castro,

Teehankee,

Villamor and Makasiar, JJ ., concur.

Concepcion, C .J ., took no part.
Barredo, J ., did not take part.

Sanders v Veridiano II
FIRST DIVISION
[G.R. No. L-46930. June 10, 1988.]
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.

DECISION

CRUZ, J p:

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 coming 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 complaint 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.
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 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. LLjur
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, 11 where we sustained the order of the lower court
granting a 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 proceedings
after it had become 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 criticism in 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. cdrep

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 immumity 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." 16In 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 imperiumand 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 wellrecognized 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 overpayments 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

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, too, 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. LLjur
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 so minded, 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.
SO ORDERED.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Merrit V Govt of the Philippine Islands

FIRST DIVISION
[G.R. No. 11154. March 21, 1916.]
E. MERRITT, plaintiff-appellant, vs. GOVERNMENT OF THE PHILIPPINE
ISLANDS, defendant-appellant.
Crossfield & O'Brien for plaintiff.
Attorney-General Avancea for defendant.
SYLLABUS
1. DAMAGES; MEASURE OF. Where the evidence shows that the plaintiff
was wholly incapacitated for six months it is an error to restrict the damages to
a shorter period during which he was confined in the hospital.
2. SPECIAL

STATUTES;

CONSENT

OF

THE

STATE

TO

BE

SUED;

CONSTRUCTION. The Government of the Philippine Islands having been

"modeled after the federal and state governments of the United States' the
decisions of the high courts of that country may be used in determining the
scope and purpose of a special statute.
3. ID.; ID.; ID. The state not being liable to suit except by its express
consent, an act abrogating that immunity will be strictly construed.

4. ID.; ID.; ID. An act permitting a suit against the state gives rise to no
liability not previously existing unless it is clearly expressed in the act.
5. GOVERNMENT OF THE PHILIPPINE ISLANDS; LIABILITY FOR THE
NEGLIGENT ACTS OF ITS OFFICERS, AGENTS, AND EMPLOYEES. The
Government of the Philippine Islands in only liable for the negligent acts of its
officers, agents, and employees when they are acting as special agents within
the meaning of paragraph 5 of article 1903 of the Civil code, and a chauffeur of
the General Hospital is not such a special agent.

DECISION

TRENT, J p:
This is an appeal by both partied from a judgment of the Court of First
Instance of the city of Manila in favor of the plaintiff for the sum of P14,741,
together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the
general damages which the plaintiff suffered to P5,000, instead of P25,000 as
claimed in the complaint," and (2) "in limiting the time when plaintiff was
entirely disabled to two months and twenty-one days and fixing the damage
accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint."
The Attorney-General on behalf of the defendant urges that the trial court
erred: (a) in finding that the collision between the plaintiff's motorcycle and the
ambulance of the General Hospital was due to the negligence of the chauffeur;
(b) in holding that the Government of the Philippine Islands is liable for the
damages sustained by the plaintiff as a result of the collision, even if it be true
that collision was due to the negligence of the chauffeur; and (c) in rendering
judgment against the defendant for the sum of P14,741.
The trial court's findings of fact, which are fully supported by the record,
are as follows:
"It is a fact not disputed by counsel for the defendant that when
the plaintiff, riding on a motorcycle, was going toward the western

part of Calle Padre Faura, passing along the west side thereof at a
speed of ten to twelve miles and hour, upon crossing Taft Avenue and
when he was ten feet from the southwestern intersection of said
streets, the General Hospital ambulance, upon reaching said avenue,
instead of turning toward the south, after passing the center thereof,
so that it would be on the left side of said avenue, as is prescribed by
the ordinance and the Motor Vehicle Act, turned suddenly and
unexpectedly and long before reaching the center of the street, into
the right side of Taft Avenue, without having sounded any whistle or
horn, by which movement it struck the plaintiff, who was already six
feet from the southwestern point or from the post placed there.
"By reason of the resulting collision, the plaintiff was so severely
injured that, according to Dr. Saleeby, who examined him on the very
same day that he was taken to the General Hospital, he was suffering
from a depression in the left parietal region, a wound in the same
place and in beck part of his head, while blood issued from his nose
and he was entirely unconscious.
"The marks revealed that he had one or more fractures of the
skull and that the grey matter and brain mass had suffered material
injury. At ten o'clock of the night in question, which was the time set
for performing the operation, his pulse was so weak and so irregular
that, in his opinion, there was little hope that he would live. His right
leg was broken in such a way that the fracture extended to the outer
skin in such manner that it might be regarded as double and the
wound would be expose to infection, for which reason it was of the
most serious nature.
"At another examination six days before the day of the trial, Dr.
Saleeby notice that the plaintiff's leg showed a contraction of an inch
and a half and a curvature that made his leg very weak and painful at
the point of the fracture. Examination of his head revealed a notable
re-adjustment of the functions of the brain and nerves. The patient
apparently was slightly deaf, had a slight weakness in his eyes and in
his mental condition. This latter weakness was always noticed when
the plaintiff had to do any difficult mental labor, especially when he
attempted to use his memory for mathematical calculations.

"According to the various merchants who testified as witnesses,

the plaintiff's mental and physical condition prior to the accident was
excellent, and that after having received the injuries that have been
discussed, his physical condition had undergone a noticeable
depreciation, for he had lost the agility, energy, and ability that he
had constantly displayed before the accident as one of the best
constructors of wooden buildings and he could not now earn even a
half of the income that he had secured for his work because he had
lost 50 per cent of his efficiency. As a contractor, he could no longer,
as he had before done, climb up ladders and scaffoldings to reach the
highest parts of the building.
"As a consequence of the loss the plaintiff suffered in the
efficiency of his work as a contractor, he had to dissolve the
partnership he had formed with the engineer, Wilson, because he was
incapacitated from making mathematical calculations on account of
the condition of his leg and of his mental faculties, and he had to give
up a contract he had for the construction of the Uy Chaco building."
We may say at the outset that we are in full accord with the trial court to
the effect that the collision between the plaintiff's motorcycle and the
ambulance of the General Hospital was due solely to the negligence of the
chauffeur.
The two items which constitute a part of the P14,741 and which are
drawn in question by the plaintiff are (a) P5,000, the amount awarded for
permanent injuries, and (b) the P2,666, the amount allowed for the loss of
wages during the time the plaintiff was incapacitated from pursuing his
occupation. We fund nothing in the record which would justify us in increasing
the amount of the first. as to the second, the record shows, and the trial court
so found, that the plaintiff's services as a contractor were worth P1,000 per
month. The court, however, limited the time to two months and twenty-one
days, which the plaintiff was actually confined in the hospital. In this we think
there was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of sex months. The mere fact that he remained in the
hospital only two months and twenty-one days while the remainder of the six
months was spent in his home, would not prevent recovery for the whole time.

We, therefore, find that the amount of damages sustained by the plaintiff,
without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by an
agent or employee of the Government, the inquiry at once arises whether the
Government is legally liable for the damages resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:
"An act authorizing E. Merritt to bring suit against the
Government of the Philippine Islands and authorizing the AttorneyGeneral of said Islands to appear in said suit.
"Whereas a claim has been filed against the Government of the
Philippine Islands by Mr. E. Merritt, of Manila, for damages resulting
from a collision between his motorcycle and the ambulance of the
General Hospital on March twenty-fifth, nineteen hundred and
thirteen;
"Whereas it is not known who is responsible for the accident nor
is it possible to determine the amount of damages, if any , to which
the claimant is entitled; and
"Whereas the Director of Public Works and the Attorney-General
recommend that an act be passed by the Legislature authorizing Mr.
E. Merritt to bring suit in the courts against the Government, in order
that said questions may be decided: Now, therefore,
"By authority of the United States, be it enacted by the
Philippine Legislature, that:
"SECTION 1. E. Merritt is hereby authorized to bring suit in the
Court of First Instance of the city of Manila against the Government of
the Philippine Islands in order to fix the responsibility for the collision
between his motorcycle and the ambulance of the General Hospital,
and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, and the attorneyGeneral of the Philippine Islands is hereby authorized and directed to
appear at the trial on the behalf of the Government of said Islands, to
defend said Government at the same.
"SEC. 2. This Act shall take effect on its passage.

"Enacted, February 3, 1915."

Did the defendant, in enacting the above quoted act, simply waive its
immunity from suit or did it also concede its liability to the plaintiff? If only the
former, then it cannot be held that the Act created any new cause of action in
favor of the plaintiff or extended the defendant's liability to any case not
previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by
an individual without its consent. It is also admitted that the instant case is one
against the Government. As the consent of the Government to be sued by the
plaintiff was entirely voluntary on its part, it is our duty to look carefully into
the terms of the consent, and render judgment accordingly.

The plaintiff was authorized to bring this action against the Government
"in order to fix the responsibility for the collision between his motorcycle and
the ambulance of the General Hospital and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said
collision, . . . ." These were the two questions submitted to the court for
determination. The Act was passed "in order that said questions may be
decided." We have "decided" that the accident was due solely to the
negligence of the chauffeur, who was at the time an employee of the
defendant, and we have also fixed the amount of damages sustained by the
plaintiff as a result of the collision. Does the Act authorize us to hold that the
Government is legally liable for that amount? If not, we must look elsewhere for
such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the
Federal and state Governments in the United States," we may look to the
decisions of the high courts of that country for aid in determining the purpose
and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts
committed by its officers or agents whom it employs, except when expressly
made so by legislative enactment, is well settled. "The Government," says
Justice Story, "does not undertake to guarantee to any person the fidelity of the
officers or agents whom it employs, since that would involve it in all its
operations in endless embarrassments, difficulties and losses, which would be

subversive of the public interest." (Claussen vs. City of Luverne, 103 Minn.,
491, citing U.S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs. State,
20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State ( 121 Cal., 16), the plaintiff sought to
recover damages from the state for personal injuries received on account of
the negligence of the state officers at the state fair, a state institution created
by the legislature for the purpose of improving agricultural and kindred
industries; to disseminate information calculated to educate and benefit the
industrial classes; and to advance to educate and benefit the industrial classes;
and to advance by such means the material interests of the state, being
objects similar to those sought by the public school system. In passing upon
the question of the state's liability for the negligent acts of its officers or
agents, the court said:
"No claim arises against any government in favor of an
individual, by reason of the misfeasance, laces, or unauthorized
exercise of powers by its officers or agents." (Citing Gibbons vs. U.S.,
8 Wall., 269; Clodfelter vs. State, 86 N.C., 51, 53; 41 Am. Rep., 440;
Chapman vs. State,

104

Cal.,

690;

43

Am.

St.

Rep.,

158;

Green vs.State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St.
Rep., 203; Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the
state where the cause of action arises out of either tort or contract, the rule is
stated in 36 Cyc., 915, thus:
"By consenting to be sued a state simply waives its immunity
from suit. It does not thereby concede its liability to plaintiff, or create
any cause of action in his favor, or extend its liability to any cause not
previously recognized. It merely gives a remedy to enforce a
preexisting liability and submits itself to the jurisdiction of the court,
subject to its right to interpose any lawful defense."
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April
16, 1915, the Act of 1913, which authorized the bringing of this suit, read:
"SECTION 1. Authority is hereby given to George Apfelbacher, of
the town of Summit, Waukesha County, Wisconsin, to bring suit in
such court or courts and in such form or forms as he may be advised

for the purpose of settling and determining all controversies which he

may now have with the State of Wisconsin, or its duly authorizes
officers and agents, relative to the mill property of said George
Apfelbacher, the fish hatchery of the State Wisconsin on the Bark
River, and the mill property of Evan Humphrey at the lower end of
Nagawicka Lake, and relative to the use of the waters of said Bark
River and Nagawicka Lake, all in the county of Waukesha, Wisconsin."
In determining the scope of this act, the court said;
"Plaintiff claims that by the enactment of this law the legislature
admitted liability on the part of the state for the acts of its officers,
and that the suit now stands just as it would stand between private
parties. It is difficult to see how the act does, or was intended to do,
more than remove the state's immunity from suit. It simply gives
authority commence suit for the purpose of settling plaintiff's
controversies with the state. Nowhere in the act is there a whisper or
suggestion that the court or courts in the disposition of the suit shall
depart from well established principles of law, or that the amount of
damages is the only question to be settled. The act opened the door
of the court to the plaintiff. It did not pass upon the question of
liability, but left the suit just where it would be in the absence of the
state's immunity from suit. If the Legislature had intended to change
the rule that obtained in this state so long and to declare liability on
the part of the state, it would not have left so important a matter to
mere inference but would have done so in express terms. (Murdoc
Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N. E., 854; 8 L. R.A.,
399)"
In Denning vs. state (123 Cal., 316), the provisions of the Act of 1893,
relied upon and considered, are as follows:
"All persons who have, or shall hereafter have claims on
contract or for negligence against the state not allowed by the state
board of examiners, are hereby authorized, on the terms and
conditions herein contained, to bring suit thereon against the state in
any of the courts of this state of competent jurisdiction, and
prosecute the same to final judgment. The rules of practice in civil
cases shall apply to such suits, except as herein otherwise provided."

And the court said:

"This statute has been considered by this court in at least two
cases, arising under different facts, and in both it was held that said
statute did not create any liability or cause of action against the state
where none existed before, but merely gave an additional remedy to
enforce such liability as would have existed if the statute had not
been enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep.,
158; Melvin vs. State, 121 Cal., 16.)"
A statute of Massachusetts enacted in 1887 gave to the superior court
"jurisdiction of all claims against the commonwealth, whether at law or in
equity," with an exception not necessary to be here mentioned. In construing
this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28),
said:
"The statute we are discussing discloses no intention to create
against the state a new and heretofore unrecognized class of
liabilities, but only an intention to provide a judicial tribunal where
well recognized existing liabilities can be adjudicated."
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims
had, by the terms of the statute of New York, jurisdiction of claims for damages
for injuries in the management of the canals such as the plaintiff had
sustained, Chief Justice Ruger remarks; "It must be conceded
that the state can be made liable for injuries arising from the negligence
of its agents or servants, only by force of some positive statute assuming such
liability."
It being quite clear that Act No. 2457 does not operate to extend the
Government's liability to any cause not previously recognized, we will now
examine the substantive law touching the defendant's liability for the negligent
acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the
civil Code reads:
"The state is liable in this sense when it acts through a special
agent, but not when the damage should have been caused by the
official to whom properly it pertained to do the act performed, in
which

case

applicable."

the

provisions

of

the

preceding

article

shall

be

The supreme court of Spain in defining the scope of this paragraph said:
"That the obligation to indemnify for damages which a third
person causes another by his fault or negligence is based, as is
evidenced by the same Law 3, Title 15, Partida 7, on that the person
obligated, by his own fault or negligence, takes part in the act or
omission of the third party who caused the damage. It follows
therefrom that the state by virtue of such provision of law, is not
responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of
the functions pertaining to their office, because neither fault nor even
negligence can be presumed on the part of the state in the
organization of branches of the public service and in the appointment
of its agents; on the contrary, we must presuppose all foresight
humanly possible on its part in order that each branch of service
serves the general weal and that of private persons interested in its
operation. Between these latter and the state therefore, no relations
of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring
rights and contracting obligations." (Supreme Court of Spain, January
7, 1898; 83 Jur. Civ., 24.)
"That the Civil Code in chapter 2, title 16, book 4, regulates the
obligations which arise out of fault or negligence; and whereas in the
first articles thereof, No. 1902, where the general principle is laid
down that where a person who by an act or omission causes damage
to another through fault or negligence, shall be obliged to repair the
damage so done, reference is made to acts or omissions of the
persons who directly or indirectly cause the damage, the following
article refers to third persons and imposes an identical obligation
upon those who maintain fixed relations of authority and superiority
over the authors of the damage, because the law presumes that in
consequence of such relations the evil caused by their own fault or
negligence is imputable to them. This legal presumption gives way to
proof, however, because, as held in the last paragraph of article
1903, responsibility for acts of third persons ceases when the persons
mentioned in said article prove that they employed all the diligence

of a good father of a family to avoid the damage, and among these

persons, called up[on to answer in a direct and not a subsidiary
manner, are found, in addition to the mother or the father in a proper
case, guardians and owners or director of an establishment or
enterprise, the state, but not always, except when it acts through the
agency of a special agent, doubtless because and only in this case,
the fault or negligence, which is the original basis of this kind of
objections, must be presumed to lie with the state.

"That although in some cases the state might by virtue of the

general principle set forth in article 1902 respond for all the damage
that is occasioned to private parties by orders or resolutions which by
fault

or

negligence

are

made

by

branches

of

the

central

administration acting in the name and representation of the state

itself and as an external expression of its sovereignty in the exercise
of its executive powers, yet said article is not applicable in the case of
damages said to have been occasioned to the petitioners by
an executive official, acting

in the exercise of his powers, in

proceedings to enforce the collections of certain property taxes owing

by the owner of the property which they hold in sublease.
"That the responsibility of the state is limited by article 1903 to the case
wherein it acts through a special agent (and a special agent, in the sense in
which these words are employed, is one who receives a definite and fixed order
or commission, foreign to the exercise of the duties of his office if he is a
special official) so that in representation of the state and being bound to act as
an agent thereof he executed the trust confided to him. this concept does not
apply to any executive agent who is an employee of the active administration
and who in his own responsibility performs the functions which are inherent in
and naturally pertain to his office and which are regulated by law and the
regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)
"That according to paragraph 5 of article 1903 of the Civil Code
and the principle laid down in a decision, among others, of the 18th of
May, 1904, in a damage case, the responsibility of the state is limited
to that which it contracts through a special agent, duly empowered by
a definite order or commission to perform some act or charged with

some definite purpose which gives rise to the claim, and not where
the claim is based on acts or omissions imputable to a public official
charge with some administrative or technical office who can be held
to the proper responsibility in the manner laid down by the law of civil
responsibility. Consequently, the trial court in not so deciding and in
sentencing the said entity to the payment of damages, caused by an
official

of

the

second

class

referred

to,

has

by

erroneous

interpretation infringed the provisions of articles 1902 and 1903 of

the Civil Code." (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ.,
146)
It is, therefore, evident that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the Supreme
Court of Spain, for the acts of its agents, officers and employees when they act
as special agents within the meaning of paragraph 5 of article 1903, supra, and
that the chauffeur of the ambulance of the General Hospital was not such an
agent.
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make itself
legally liable for the amount of damages above set forth, which the plaintiff has
sustained by reason of the negligent acts of one of its employees, by legislative
enactment and by appropriating sufficient funds therefor, we are not called
upon to determine. This matter rests solely with the Legislature and not with
the courts.
Arellano, C.J., Torres, Johnson and Moreland, JJ., concur.
______________

SPS Fontanilla v Maliaman

EN BANC
[G.R. Nos. 55963 & 61045. February 27, 1991.]

SPOUSES

JOSE

FONTANILLA

and

VIRGINIA

FONTANILLA, petitioners, vs. HONORABLE INOCENCIO D. MALIAMAN

and NATIONAL IRRIGATION ADMINISTRATION, respondents.
NATIONAL

IRRIGATION

ADMINISTRATION, petitioners, vs. SPOUSES

JOSE FONTANILLA and VIRGINIA FONTANILLA, respondents.

RESOLUTION

PARAS, J p:
In its Motion for Reconsideration 1 of the Court's Second Division decision in G.R.
No. 55963 and G.R. No. 61045, the National Irrigation Administration (NIA, for
brevity),

through

the

Solicitor

General,

maintains

that,

on

the

strength

of Presidential Decree No. 552 (which amended certain provisions of Republic Act
3601, the law creating the NIA) and the case of Angat River Irrigation System, et
al. vs. Angat River Workers' Union, et al., 102 Phil. 790 "the NIA does not perform
solely and primarily proprietary functions but is an agency of the government
tasked with governmental functions, and is therefore not liable for the tortious act
of its driver Hugo Garcia, who was not its special agent."
Although the majority opinion in the cited case of Angat System declares that the
Angat System (like the NIA) exercised a governmental function because the
nature of the powers and functions of said agency does not show that it was
intended to "bring to the Government any special corporate benefit or pecuniary
profit," there is a strong dissenting opinion penned by then Associate Justice and
later Chief Justice Roberto Concepcion and concurred in by then Associate Justice
J.B.L. Reyes which held the contrary view that the Angat River System is a
government entity exercising proprietary functions. To buttress said stand, the
former Chief Justice cited some authorities which will be useful in the proper
resolution of this case.
Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal
Corporations, 3rd ed., Vol. 18, pp. 423-424:

"In undertaking to supply water at price, municipality is not

performing governmental function but is engaged in trade, and is
liable first as private company would be for any negligence in laying
out of its pipes, in keeping them in repair, or in furnishing potable
water through them. Harvard Furniture Co., Inc. vs. City of Cambridge,
320 Mass. 227, 68 N.E. (2d) 684."
"Municipality in contracting to provide water supply acts under its
proprietary

power

and

not

under

its

legislative,

public

or

governmental powers. Farmers' State Bank vs. Conrad, 100 Mont.

415, 47 P. (2d) 853."
In this connection, the opinion is that irrigation districts in the United States are
basically identical to our irrigation systems under Act No. 2152. Because of such
similarity, it is found appropriate to consider certain doctrines from American
jurisprudence, which are as follows, to wit:
"An irrigation district is a public quasi corporation, organized,
however, to conduct a business for the private benefit of the owners
of land within its limits. They are members of the corporation, control
its affairs, and alone are benefited by its operations. It is, in the
administration of its business, the owner of its system in a proprietary
rather than a public capacity, and must assume and bear the burdens
of proprietary ownership." (Nampa vs. Nampa & M. Irrig. Dist. 19
Idaho, 779, 115 Pac. 979)
". . . the plaintiff sought damages for injuries to crops on his land
during 1923, 1924, 1925, and 1926, caused by water seeping,
percolating, and escaping from the defendant's canal. The defendant
contended that irrigation districts were agencies of the state, and
were, therefore, not liable for the negligent construction or operation
of their canals or ditches. The court, after a careful review of the
authorities defining an irrigation district, conceded that such a quasi
public

corporation

exercised

some

possessed
governmental

some

governmental

functions,

but

powers

held

that

and
the

construction and operation of its irrigation canals and ditches was a

proprietary rather than a governmental function, and hence the

district was responsible in damages for the negligent construction or

operation of its canal system." (69 A.L.R., p. 1233)
It may not be amiss to state at this point that the functions of government have
been classified into governmental or constituent and proprietary or ministrant.
The former involves the exercise of sovereignty and considered as compulsory;
the latter connotes merely the exercise of proprietary functions and thus
considered as optional. The Solicitor General argues that the reasons presented
by P.D. 552 for the existence of the NIA (the WHEREAS clauses of said decree)
indubitably reveal that the responsibility vested in said agency concerns public
welfare and public benefit, and is therefore an exercise of sovereignty. On the
contrary, We agree with the former Chief Justice Concepcion in saying that the
same purpose such as public benefit and public welfare may be found in the
operation of certain enterprises (those engaged in the supply of electric power, or
in supplying telegraphic, telephonic, and radio communication, or in the
production and distribution of prime necessities, etc.) yet it is certain that the
functions performed by such enterprises are basically proprietary in nature. Thus,
as held in Holderbaum vs. Hidalgo County Water Improvement District (297 S.W.
865, aff'd in 11 S.W. [2d] 506) cited in the dissenting opinion by Justice
Concepcion:
". . . Primarily, a water improvement district is in no better position
than a city is when exercising its purely local powers and duties. Its
general purposes are not essentially public in their nature, but are
only incidentally so; those purposes may be likened to those of a city
which is operating a waterworks system, or an irrigation system. . . .
A water improvement district can do nothing, it has and furnishes no
facilities, for the administration of the sovereign government. Its
officers have no power or authority to exercise any of the functions of
the general government, or to enforce any of the laws of the state or
any of its other subdivisions, or collect taxes other than those
assessed by the district. They have no more power or authority than
that of the officers of a private corporation organized for like
purposes. As a practical matter, the primary objects and purposes of
such district are of a purely local nature, for the district is created and
operated for the sole benefit of its own members, and an analysis of
those objects and purposes discloses that they directly benefit only

the landowners who reside within and whose lands form a part of the
district, to the exclusion of all other residents therein. It is true, of
course, that the state and the general public are greatly benefited by
the proper operation of the district, and to that extent its objects and
accomplishments are public in their nature, but this characteristic is
only incidental to the primary and chief object of the corporation,
which is the irrigation of lands forming a part of the district. It is
obvious, then, that the purposes and duties of such districts do not
come within the definition of public rights, purposes, and duties which
would entitle the district to the exemption raised by the common law
as a protection to corporations having a purely public purpose and
performing essentially public duties."
Of equal importance is the case of National Waterworks and Sewerage Authority
(NAWASA) vs. NWSA Consolidated Unions, 11 SCRA 766, which propounds the
thesis that "the NAWASA is not an agency performing governmental functions;
rather it performs proprietary functions . . . ." The functions of providing water
supply and sewerage service are regarded as mere optional functions of
government even though the service rendered caters to the community as a
whole and the goal is for the general interest of society. The business of furnishing
water supply and sewerage service, as held in the case of Metropolitan Water
District vs. Court of Industrial Relations, et al., 91 Phil. 840, "may for all practical
purposes be likened to an industry engaged in by coal companies, gas companies,
power plants, ice plants, and the like." Withal, it has been enunciated that
"although the State may regulate the service and rates of water plants owned and
operated by municipalities, such property is not employed for governmental
purposes and in the ownership and operation thereof the municipality acts in its
proprietary

capacity,

free

from

legislative

interference."

(1

McQuillin,

p.

683) LLphil
Like the NAWASA, the National Irrigation Administration was not created for
purposes of local government. While it may be true that the NIA was essentially a
service agency of the government aimed at promoting public interest and public
welfare, such fact does not make the NIA essentially and purely a "governmentfunction" corporation. NIA was created for the purpose of "constructing,
improving, rehabilitating, and administering all national irrigation systems in the
Philippines, including all communal and pump irrigation projects." Certainly, the

state and the community as a whole are largely benefited by the services the
agency renders, but these functions are only incidental to the principal aim of the
agency, which is the irrigation of lands. Cdpr
We must not lose sight of the fact that the NIA is a government agency invested
with a corporate personality separate and distinct from the government, thus is
governed by the Corporation Law. Section 1 of Republic Act No. 3601 provides:
"Section 1. Name and Domicile A body corporate is hereby created
which shall be known as the National Irrigation Administration. . . .
which shall be organized immediately after the approval of this Act. It
shall have its principal seat of business in the City of Manila and shall
have representatives in all provinces, for the proper conduct of its
business." (Emphasis supplied).
Besides, Section 2, subsection b of P.D. 552 provides that:
"(b) To charge and collect from the beneficiaries of the water from all
irrigation systems constructed by or under its administration, such
fees or administration charges as may be necessary to cover the cost
of operation, maintenance and insurance, and to recover the cost of
construction within a reasonable period of time to the extent
consistent with government policy; to recover funds or portions
thereof expended for the construction and/or rehabilitation of
communal irrigation systems which funds shall accrue to a special
fund for irrigation development under section 2 hereof;

Unpaid irrigation fees or administration charges shall be preferred

liens first, upon the land benefited, and then on the crops raised
thereon, which liens shall have preference over all other liens except
for taxes on the land, and such preferred liens shall not be removed
until all fees or administration charges are paid or the property is
levied upon and sold by the National Irrigation Administration for the
satisfaction thereof. . . ."
The same section also provides that NIA may sue and be sued in court. Thus,
"b) . . . Judicial actions for the collection of unpaid irrigation fees or
charges, drainage fees or other charges which the National Irrigation

Administration is authorized to impose and collect, shall henceforth

be governed by the provisions of the Rules of Court of the Philippines
for similar actions, the provisions of other laws to the contrary
notwithstanding."
xxx xxx xxx
"(e) . . .
xxx xxx xxx
xxx xxx xxx
All actions for the recovery of compensation and damages against the
National Irrigation Administration under paragraphs (1), (2), and (3)
hereof, shall be filed with a competent court within five (5) years from
the date of entry of the land or destruction of the improvements or
crops, after which period, the right of possession and/or ownership of
the National Irrigation Administration shall be considered vested and
absolute. All other actions for the recovery of compensation and
damages to private property and improvements occasioned by the
construction, operation and maintenance of irrigation facilities and
other hydraulic structures under the administration of the National
Irrigation Administration, which have accrued ten (10) or more years
prior to the approval of this decree are deemed to have prescribed
and are barred forever."
It has its own assets and liabilities. It also has corporate powers to be exercised
by a Board of Directors. To quote Section 2, subsection (f):
"(f) . . . and to transact such business, as are directly or indirectly
necessary, incidental or conducive to the attainment of the above
powers and objectives, including the power to establish and maintain
subsidiaries, and in general, to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not
inconsistent with the provisions of this Act." (Emphasis supplied).
On the basis of the foregoing considerations, We conclude that the National
Irrigation Administration is a government agency with a juridical personality
separate and distinct from the government. It is not a mere agency of the
government but a corporate body performing proprietary functions. Therefore, it

may be held liable for the damages caused by the negligent act of its driver who
was not its special agent.
ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED
WITH FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045
dated December 1, 1989 is hereby AFFIRMED.
Gancayco, Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Fernan, C.J., Melencio-Herrera and Gutierrez, Jr., JJ., concur in the result.

Republic v Villasor
SECOND DIVISION
[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

CORPORATION, respondents.

INTERNATIONAL

CONSTRUCTION

Solicitor General Felix V . Makasiar and Solicitor Bernardo P. Pardo for petitioner.
Andres T . Velarde & Marcelo B. Fernan for respondents.

DECISION

FERNANDO, J p:
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

Comptroller, . . ." 2 The paragraph immediately succeeding in such petition then

alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of
jurisdiction [or] with grave abuse of discretion amounting to lack of jurisdiction in
granting the issuance of an alias writ of execution against the properties of the
Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of
garnishment issued pursuant thereto are null and void." 3 In the answer filed by
respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts
set forth were admitted with the only qualification being that the total award was
in the amount of P2,372,331.40. 4
The Republic of the Philippines, as mentioned at the outset, did right in filing this
certiorari and prohibition proceeding. What was done by respondent Judge is not
in conformity with the dictates of the Constitution.
It is a fundamental postulate of constitutionalism flowing from the juristic concept
of sovereignty that the state as well as its government is immune from suit unless
it gives its consent. It is readily understandable why it must be so. In the classic
formulation of Holmes: "A sovereign is exempt from suit, not because of any
formal conception or obsolete theory, but on the logical and practical ground that
there can be no legal right as against the authority that makes the law on which
the right depends." 5 Sociological jurisprudence supplies an answer not dissimilar.
So it was indicated in a recent decision, Providence Washington Insurance Co. v.
Republic of the Philippines, 6 with its affirmation that "a continued adherence to
the doctrine of non-suability is not to be deplored for as against the inconvenience
that may be caused private parties, the loss of governmental efficiency and the
obstacle to the performance of its multifarious functions are far greater if such a
fundamental principle were abandoned and the availability of judicial remedy
were not thus restricted. With the well known propensity on the part of our people
to go to court, at the least provocation, the loss of time and energy required to
defend against law suits, in the absence of such a basic principle that constitutes
such an effective obstacle, could very well be imagined." 7

This fundamental postulate underlying the 1935 Constitution is now made explicit
in the revised charter. It is therein expressly provided: "The State may not be sued
without its consent." 8 A corollary, both dictated by logic and sound sense from
such 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.
Zaldivar, Antonio, Fernandez and Aquino, JJ ., concur.

Municipality of Makati V CA

THIRD DIVISION
[G.R. Nos. 89898-99. October 1, 1990.]
MUNICIPALITY OF MAKATI, petitioner, vs. THE HONORABLE COURT OF
APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati,
Branch CXLII, ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and
SHERIFF SILVINO R. PASTRANA, respondents.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium,
Inc.

RESOLUTION

CORTES, J p:
The present petition for review is an off-shoot of expropriation proceedings
initiated by petitioner Municipality of Makati against private respondent Admiral
Finance Creditors Consortium, Inc., Home Building System & Realty Corporation
and one Arceli P. Jo, involving a parcel of land and improvements thereon located
at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P.
Jo under TCT No. S-5499. LLpr
It appears that the action for eminent domain was filed on May 20, 1986,
docketed as Civil Case No. 13699. Attached to petitioner's complaint was a
certification that a bank account (Account No. S/A 265-537154-3) had been
opened with the PNB Buendia Branch under petitioner's name containing the sum
of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due
hearing where the parties presented their respective appraisal reports regarding
the value of the property, respondent RTC judge rendered a decision on June 4,
1987, fixing the appraised value of the property at P5,291,666.00, and ordering
petitioner to pay this amount minus the advanced payment of P338,160.00 which
was earlier released to private respondent.

After this decision became final and executory, private respondent moved for the
issuance of a writ of execution. This motion was granted by respondent RTC judge.
After issuance of the writ of execution, a Notice of Garnishment dated January 14,
1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of
the PNB Buendia Branch. However, respondent sheriff was informed that a "hold
code" was placed on the account of petitioner. As a result of this, private
respondent filed a motion dated January 27, 1988 praying that an order be issued
directing the bank to deliver to respondent sheriff the amount equivalent to the
unpaid balance due under the RTC decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of
payment of the expropriation amount should be done in installments which the
respondent RTC judge failed to state in his decision. Private respondent filed its
opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20, 1988 a
"Manifestation" informing the court that private respondent was no longer the
true and lawful owner of the subject property because a new title over the
property had been registered in the name of Philippine Savings Bank, Inc. (PSB).
Respondent RTC judge issued an order requiring PSB to make available the
documents pertaining to its transactions over the subject property, and the PNB
Buendia Branch to reveal the amount in petitioner's account which was garnished
by respondent sheriff. In compliance with this order, PSB filed a manifestation
informing the court that it had consolidated its ownership over the property as
mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987.
After several conferences, PSB and private respondent entered into a compromise
agreement whereby they agreed to divide between themselves the compensation
due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988
which: (1) approved the compromise agreement; (2) ordered PNB Buendia Branch
to immediately release to PSB the sum of P4,953,506.45 which corresponds to the
balance of the appraised value of the subject property under the RTC decision
dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB
and private respondent to execute the necessary deed of conveyance over the
subject property in favor of petitioner. Petitioner's motion to lift the garnishment
was denied. LibLex

Petitioner filed a motion for reconsideration, which was duly opposed by private
respondent. On the other hand, for failure of the manager of the PNB Buendia
Branch to comply with the order dated September 8, 1988, private respondent
filed two succeeding motions to require the bank manager to show cause why he
should not be held in contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio
Bautista, informed the court that he was still waiting for proper authorization from
the PNB head office enabling him to make a disbursement for the amount so
ordered. For its part, petitioner contended that its funds at the PNB Buendia
Branch could neither be garnished nor levied upon execution, for to do so would
result in the disbursement of public funds without the proper appropriation
required

under

the

law,

citing

the

case

of Republic

of

the

Philippines

v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899].

Respondent trial judge issued an order dated December 21, 1988 denying
petitioner's motion for reconsideration on the ground that the doctrine enunciated
inRepublic v. Palacio did not apply to the case because petitioner's PNB Account
No. S/A 265-537154-3 was an account specifically opened for the expropriation
proceedings of the subject property pursuant to Pres. Decree No. 42. Respondent
RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered
his arrest and detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate
petitions for certiorari with the Court of Appeals, which were eventually
consolidated. In a decision promulgated on June 28, 1989, the Court of Appeals
dismissed both petitions for lack of merit, sustained the jurisdiction of respondent
RTC judge over the funds contained in petitioner's PNB Account No. 265-537154-3,
and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals,
petitioner now files the present petition for review with prayer for preliminary
injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order
enjoining respondent RTC judge, respondent sheriff, and their representatives,
from enforcing and/or carrying out the RTC order dated December 21, 1988 and

the writ of garnishment issued pursuant thereto. Private respondent then filed its
comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the
Court of Appeals, but also alleges for the first time that it has actually two
accounts with the PNB Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 exclusively for the expropriation
of the subject property, with an outstanding balance of P99,743.94.
(2) Account No. S/A 263-530850-7 for statutory obligations and
other purposes of the municipal government, with a balance of
P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the existence of
two bank accounts, it may fairly be asked whether the second account was
opened only for the purpose of undermining the legal basis of the assailed orders
of respondent RTC judge and the decision of the Court of Appeals, and
strengthening its reliance on the doctrine that public funds are exempted from
garnishment or execution as enunciated in Republic v. Palacio [supra.] At any rate,
the Court will give petitioner the benefit of the doubt, and proceed to resolve the
principal issues presented based on the factual circumstances thus alleged by
petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for
expropriation proceedings it had initiated over the subject property, petitioner
poses no objection to the garnishment or the levy under execution of the funds
deposited therein amounting to P99,743.94. However, it is petitioner's main
contention that inasmuch as the assailed orders of respondent RTC judge involved
the net amount of P4,965,506.45, the funds garnished by respondent sheriff in
excess of P99,743.94, which are public funds earmarked for the municipal
government's other statutory obligations, are exempted from execution without
the proper appropriation required under the law.

There is merit in this contention. The funds deposited in the second PNB Account
No. S/A 263-530850-7 are public funds of the municipal government. In this
jurisdiction, well-settled is the rule that public funds are not subject to levy and
execution,

unless

otherwise

provided

for

by

statute

[Republic

v.

Palacio, supra.; TheCommissioner of Public Highways v. San Diego, G.R. No. L30098, February 18, 1970, 31 SCRA 616]. More particularly, the properties of a
municipality, whether real or personal, which are necessary for public use cannot
be attached and sold at execution sale to satisfy a money judgment against the
municipality. Municipal revenues derived from taxes, licenses and market fees,
and which are intended primarily and exclusively for the purpose of financing the
governmental activities and functions of the municipality, are exempt from
execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52
(1926); The Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil. 629
(1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25,
1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar.
Absent a showing that the municipal council of Makati has passed an ordinance
appropriating from its public funds an amount corresponding to the balance due
under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited
in Account No. S/A 265-537154-3, no levy under execution may be validly effected
on the public funds of petitioner deposited in Account No. S/A 263-530850-7. llcd

Nevertheless, this is not to say that private respondent and PSB are left with no
legal recourse. Where a municipality fails or refuses, without justifiable reason, to
effect payment of a final money judgment rendered against it, the claimant may
avail of the remedy of mandamus in order to compel the enactment and approval
of the necessary appropriation ordinance, and the corresponding disbursement of
municipal funds therefor [See Viuda De Tan Toco v. The Municipal Council of
Iloilo, supra;Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108
Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated June 4, 1987 is not
disputed by petitioner. No appeal was taken therefrom. For three years now,
petitioner has enjoyed possession and use of the subject property notwithstanding
its inexcusable failure to comply with its legal obligation to pay just compensation.
Petitioner has benefited from its possession of the property since the same has

been the site of Makati West High School since the school year 1986-1987. This
Court will not condone petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact initiated. It cannot be overemphasized that, within the context of the State's inherent power of eminent
domain,
. . . [j]ust compensation means not only the correct determination of
the amount to be paid to the owner of the land but also the payment
of the land within a reasonable time from its taking. Without prompt
payment, compensation cannot be considered "just" for the property
owner is made to suffer the consequence of being immediately
deprived of his land while being made to wait for a decade or more
before actually receiving the amount necessary to cope with his loss
[Coscolluela v. The Honorable Court of Appeals, G.R. No. 77765,
August 15, 1988, 164 SCRA 393, 400. See also Provincial Government
of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27,
1987, 153 SCRA 291].
The State's power of eminent domain should be exercised within the bounds of
fair play and justice. In the case at bar, considering that valuable property has
been taken, the compensation to be paid fixed and the municipality is in full
possession and utilizing the property for public purpose, for three (3) years, the
Court finds that the municipality has had more than reasonable time to pay full
compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to
immediately pay Philippine Savings Bank, Inc. and private respondent the amount
of P4,953,506.45. Petitioner is hereby required to submit to this Court a report of
its compliance with the foregoing order within a non-extendible period of SIXTY
(60) DAYS from the date of receipt of this resolution. LLjur
The order of respondent RTC judge dated December 21, 1988, which was
rendered in Civil Case No. 13699, is SET ASIDE and the temporary restraining
order issued by the Court on November 20, 1989 is MADE PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

CF NHA v Guivelondo
FIRST DIVISION
[G.R. No. 154411. June 19, 2003.]
NATIONAL HOUSING AUTHORITY, petitioner, vs. HEIRS OF ISIDRO
GUIVELONDO, COURT OF APPEALS, HON. ISAIAS DICDICAN, Presiding
Judge, Regional Trial Court, Branch 11, Cebu City, and PASCUAL Y.
ABORDO,

Sheriff,

Regional

Trial

Court,

Branch

11,

Cebu

City, respondents.
Serecio Matthew B. Jo for respondents.
SYNOPSIS
Petitioner herein filed this petition for review raising the issues of whether or not
the State can be compelled by the courts to exercise or continue with the exercise
of its inherent power of eminent domain, and whether or not writs of execution
and garnishment may be issued against the State in an expropriation case
wherein the exercise of the power of eminent domain will not serve public use or
purpose. This case arose from a complaint for eminent domain which was filed by
herein petitioner against private respondents. However, after finding that the just
compensation set by the court for the land sought to be expropriated was too high
for the implementation of a socialized housing project, the petitioner filed with the
trial court a motion to dismiss the expropriation case. The motion was denied by
the trial court on the ground that the partial judgment for fixing the just

compensation had already become final and executory. Petitioner filed a petition
for certiorari with the Court of Appeals. In the meantime, the sheriff of the trial
court served on petitioner a notice of levy pursuant to a writ of execution issued
to enforce the trial court's partial judgment and later, he levied on the funds and
personal properties of petitioner. The Court of Appeals, issued the assailed order
dismissing the petition forcertiorari. Hence, this appeal.
According to the Supreme Court, the petitioner did not appeal the order of the
trial court, which declared that it had a lawful right to expropriate the properties
of private respondent. Hence, the order became final and may no longer be a
subject of review or reversal in any court. Respondent landowners had already
been prejudiced by the expropriation case. Petitioner cannot be permitted to
institute condemnation proceedings against respondents only to abandon it later
when it finds the amount of just compensation unacceptable. As to the issue of
garnishment, the Court ruled that it was important to know the true character of
the government entity to determine whether it could not be the object of
garnishment proceedings. If the funds belong to a public corporation clothed with
a personality of its own, separate and distinct from the government, then its funds
are not exempt from garnishment, then its funds are not exempt from
garnishment. This is so because when a government entity entered into a
commercial business, it abandoned its sovereign capacity like any other
corporation. Here the funds of petitioner NHA are not exempt from garnishment or
execution. The instant petition was denied and the decision of the Court of Appeal
was affirmed.
SYLLABUS
1. POLITICAL LAW; STATE; POWER OF EMINENT DOMAIN; TWO STAGES OF
EXPROPRIATION; CONSTRUED. Expropriation proceedings consists of two
stages: first, condemnation of the property after it is determined that its
acquisition will be for a public purpose or public use and, second, the
determination of just compensation to be paid for the taking of private property to
be made by the court with the assistance of not more than three commissioners.
Thus: There are two (2) stages in every action for expropriation. The first is
concerned with the determination of the authority of the plaintiff to exercise the
power of eminent domain and the propriety of its exercise in the context of the

facts involved in the suit. It ends with an order, if not of dismissal of the action, "of
condemnation declaring that the plaintiff has a lawful right to take the property
sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the
date of the filing of the complaint." An order of dismissal, if this be ordained,
would be a final one, of course, since it finally disposes of the action and leaves
nothing more to be done by the Court on the merits. So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the
proceedings before the Trial Court, "no objection to the exercise of the right of
condemnation (or the propriety thereof) shall be filled or heard." The second
phase of the eminent domain action is concerned with the determination by the
Court of "the just compensation for the property sought to be taken." This is done
by the Court with the assistance of not more than three (3) commissioners. The
order fixing the just compensation on the basis of the evidence before, and
findings of, the commissioners would be final, too. It would finally dispose of the
second stage of the suit, and leave nothing more to be done by the Court
regarding the issue. Obviously, one or another of the parties may believe the
order to be erroneous in its appreciation of the evidence or findings of fact or
otherwise. Obviously, too, such a dissatisfied party may seek a reversal of the
order by taking an appeal therefrom. The outcome of the first phase of
expropriation proceedings, which is either an order of expropriation or an order of
dismissal, is final since it finally disposes of the case. On the other hand, the
second phase ends with an order fixing the amount of just compensation. Both
orders, being final, are appealable. An order of condemnation or dismissal is final,
resolving the question of whether or not the plaintiff has properly and legally
exercised its power of eminent domain. Once the first order becomes final and no
appeal thereto is taken, the authority to expropriate and its public use can no
longer be questioned. AIHECa
2. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENTS; A FINAL AND EXECUTORY
DECISION OR ORDER CAN NO LONGER BE DISTURBED OR REOPENED NO MATTER
HOW ERRONEOUS IT MAY BE. In the case at bar, petitioner did not appeal the
Order of the trial court dated December 10, 1999, which declared that it has a
lawful right to expropriate the properties of respondent Heirs of Isidro Guivelondo.
Hence, the Order became final and may no longer be subject to review or reversal
in any court. A final and executory decision or order can no longer be disturbed or

reopened no matter how erroneous it may be. Although judicial determinations

are not infallible, judicial error should be corrected through appeals, not through
repeated suits on the same claim.

DECISION

YNARES-SANTIAGO, J p:
On February 23, 1999, petitioner National Housing Authority filed with the
Regional Trial Court of Cebu City, Branch 11, an Amended Complaint for eminent
domain against Associacion Benevola de Cebu, Engracia Urot and the Heirs of
Isidro Guivelondo, docketed as Civil Case No. CEB-23386. Petitioner alleged that
defendant Associacion Benevola de Cebu was the claimant/owner of Lot 108-C
located in the Banilad Estate, Cebu City; that defendant Engracia Urot was the
claimant/owner of Lots Nos. 108-F, 108-I, 108-G, 6019-A and 6013-A, all of the
Banilad

Estate;

that

defendant

Heirs

of

Isidro

Guivelondo

were

the

claimants/owners of Cadastral Lot No. 1613-D located at Carreta, Mabolo, Cebu

City; and that the lands are within a blighted urban center which petitioner
intends to develop as a socialized housing project. 1
On November 12, 1999, the Heirs of Isidro Guivelondo, respondents herein, filed a
Manifestation stating that they were waiving their objections to petitioner's power
to expropriate their properties. Hence, the trial court issued an Order as follows:
WHEREFORE, the Court hereby declares that the plaintiff has a lawful
right to expropriate the properties of the defendants who are heirs of
Isidro Guivelondo.
The appointment of commissioners who would ascertain and report to
the Court the just compensation for said properties will be done as
soon as the parties shall have submitted to the Court the names of
persons desired by them to be appointed as such commissioners.
SO ORDERED. 2
Thereafter, the trial court appointed three Commissioners to ascertain the correct
and just compensation of the properties of respondents. On April 17, 2000, the
Commissioners submitted their report wherein they recommended that the just

compensation of the subject properties be fixed at P11,200.00 per square

meter. 3 On August 7, 2000, the trial court rendered Partial Judgment adopting the
recommendation of the Commissioners and fixing the just compensation of the
lands of respondent Heirs of Isidro Guivelondo at P11,200.00 per square meter, to
wit:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by the Court in this case fixing the just compensation for
the lands of the defendants who are the heirs of Isidro Guivelondo,
more particularly Lots Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15,
16, 19, 20, 6016-F, 6016-H, 6016-E and 6016-D of Csd-10219, which
were sought to be expropriated by the plaintiff at P11,200.00 per
square meter and ordering the plaintiff to pay to the said defendants
the just compensation for the said lands computed at P11,200.00 per
square meter.
IT IS SO ORDERED. 4
Petitioner NHA filed two motions for reconsideration dated August 30, 2000 and
August 31, 2000, assailing the inclusion of Lots 12, 13 and 19 as well as the
amount of just compensation, respectively. Respondent Heirs also filed a motion
for reconsideration of the Partial Judgment. On October 11, 2000, the trial court
issued an Omnibus Order denying the motion for reconsideration of respondent
Heirs and the August 31, 2000 motion of petitioner, on the ground that the fixing
of the just compensation had adequate basis and support. On the other hand, the
trial court granted petitioner's August 30, 2000 motion for reconsideration on the
ground that the Commissioner's Report did not include Lots 12, 13 and 19 within
its coverage. Thus:

WHEREFORE, in view of the foregoing premises, the Court hereby

denies the motion of the heirs of Isidro Guivelondo (with the
exception

of

Carlota

Mercado

and

Juanita

Suemith)

for

reconsideration of the partial judgment rendered in this case on

August 7, 2000 and plaintiff's motion for reconsideration of said
judgment, dated August 31, 2000. EASCDH

However,

the

Court

reconsideration

of

hereby

said

grants

judgment,

the

plaintiff's

dated

August

motion
30,

for

2000.

Accordingly, the judgment rendered in this case on August 7, 2000 is

hereby set aside insofar as it has fixed just compensations for Lots
Nos. 12, 13 and 19 of Csd-10219 because the fixing of said just
compensations appears to lack adequate basis.
SO ORDERED. 5
Petitioner filed with the Court of Appeals a petition for certiorari, which was
docketed as CA-G.R. SP No. 61746. 6 Meanwhile, on October 31, 2000, the trial
court issued an Entry of Judgment over the Partial Judgment dated August 7, 2000
as modified by the Omnibus Order dated October 11, 2000. 7 Subsequently,
respondent Heirs filed a Motion for Execution, which was granted on November
22, 2000.
On January 31, 2001, the Court of Appeals dismissed the petition for certiorari on
the ground that the Partial Judgment and Omnibus Order became final and
executory when petitioner failed to appeal the same. 8
Petitioner's

Motion

for

Reconsideration

and

Urgent Ex-Parte Motion

for

Clarificatory Ruling were denied in a Resolution dated March 18, 2001. 9 A petition
for review was filed by petitioner with this Court, which was docketed as G.R. No.
147527. However, the same was denied in a Minute Resolution dated May 9, 2001
for failure to show that the Court of Appeals committed a reversible error. 10
Petitioner filed a Motion for Reconsideration which was however denied with
finality on August 20, 2001. 11
Prior to the aforesaid denial of the Motion for Reconsideration, petitioner, on July
16, 2001, filed with the trial court a Motion to Dismiss Civil Case No. CEB-23386,
complaint for eminent domain, alleging that the implementation of its socialized
housing project was rendered impossible by the unconscionable value of the land
sought to be expropriated, which the intended beneficiaries can not afford. 12 The
Motion was denied on September 17, 2001, on the ground that the Partial
Judgment had already become final and executory and there was no just and
equitable reason to warrant the dismissal of the case. 13 Petitioner filed a Motion
for Reconsideration, which was denied in an Order dated November 20, 2001. 14

Petitioner thus filed a petition for certiorari with the Court of Appeals, which was
docketed as CA-G.R. SP No. 68670, praying for the annulment of the Order of the
trial court denying its Motion to Dismiss and its Motion for Reconsideration. 15
On February 5, 2002, the Court of Appeals summarily dismissed the petition.
Immediately thereafter, respondent Sheriff Pascual Y. Abordo of the Regional Trial
Court of Cebu City, Branch 11, served on petitioner a Notice of Levy pursuant to
the Writ of Execution issued by the trial court to enforce the Partial Judgment of
August 7, 2000 and the Omnibus Order of October 11, 2000. 16
On February 18, 2002, the Court of Appeals set aside the dismissal of the petition
and reinstated the same. 17 Thereafter, a temporary restraining order was issued
enjoining respondent sheriff to preserve the status quo. 18
On May 27, 2002, respondent sheriff served on the Landbank of the Philippines a
Notice of Third Garnishment against the deposits, moneys and interests of
petitioner therein. 19 Subsequently, respondent sheriff levied on funds and
personal properties of petitioner. 20
On July 16, 2002, the Court of Appeals rendered the assailed decision dismissing
the petition for certiorari. 21
Hence, petitioner filed this petition for review, raising the following issues:
1) WHETHER OR NOT THE STATE CAN BE COMPELLED AND COERCED
BY THE COURTS TO EXERCISE OR CONTINUE WITH THE
EXERCISE OF ITS INHERENT POWER OF EMINENT DOMAIN;
2) WHETHER

OR

EXECUTORY

NOT
AND

JUDGMENT
IF

ESTOPPEL

HAS
OR

BECOME

FINAL

LACHES

APPLIES

AND
TO

GOVERNMENT;
3) WHETHER OR NOT WRITS OF EXECUTION AND GARNISHMENT MAY
BE ISSUED AGAINST THE STATE IN AN EXPROPRIATION WHEREIN
THE EXERCISE OF THE POWER OF EMINENT DOMAIN WILL NOT
SERVE PUBLIC USE OR PURPOSE {APPLICATION OF SUPREME
COURT ADMINISTRATIVE CIRCULAR NO. 10-2000}. 22
Respondent Heirs of Isidro Guivelondo filed their Comment, arguing as follows:
I

AS EARLIER UPHELD BY THE HONORABLE COURT, THE JUDGMENT OF

THE TRIAL COURT IS ALREADY FINAL AND EXECUTORY, HENCE,
COULD NO LONGER BE DISTURBED NOR SET ASIDE
II
THE FUNDS AND ASSETS OF THE PETITIONER ARE NOT EXEMPT FROM
LEVY AND GARNISHMENT
III
THE ISSUES RAISED IN THIS SECOND PETITION FOR REVIEW WERE
ALREADY RESOLVED BY THE HONORABLE COURT 23
In the early case of City of Manila v. Ruymann, 24 the Court was confronted with
the question: May the petitioner, in an action for expropriation, after he has been
placed in possession of the property and before the termination of the action,
dismiss the petition? It resolved the issue in the affirmative and held:
The right of the plaintiff to dismiss an action with the consent of the
court is universally recognized with certain well-defined exceptions. If
the plaintiff discovers that the action which he commenced was
brought for the purpose of enforcing a right or a benefit, the
advisability or necessity of which he later discovers no longer exists,
or that the result of the action would be different from what he had
intended, then he should be permitted to withdraw his action, subject
to the approval of the court. The plaintiff should not be required to
continue the action, subject to some well-defined exceptions, when it
is not to his advantage to do so. Litigation should be discouraged and
not encouraged. Courts should not require parties to litigate when
they no longer desire to do so. Courts, in granting permission to
dismiss an action, of course, should always take into consideration
the effect which said dismissal would have upon the rights of the
defendant. 25
Subsequently, in Metropolitan Water District v. De Los Angeles, 26 the Court had
occasion to apply the above-quoted ruling when the petitioner, during the
pendency of the expropriation case, resolved that the land sought to be
condemned was no longer necessary in the maintenance and operation of its
system of waterworks. It was held:

It is not denied that the purpose of the plaintiff was to acquire the
land in question for a public use. The fundamental basis then of all
actions brought for the expropriation of lands, under the power of
eminent domain, is public use. That being true, the very moment that
it appears at any stage of the proceedings that the expropriation is
not for a public use, the action must necessarily fail and should be
dismissed, for the reason that the action cannot be maintained at all
except when the expropriation is for some public use. That must be
true even during the pendency of the appeal of at any other stage of
the proceedings. If, for example, during the trial in the lower court, it
should be made to appear to the satisfaction of the court that the
expropriation is not for some public use, it would be the duty and the
obligation of the trial court to dismiss the action. And even during the
pendency of the appeal, if it should be made to appear to the
satisfaction of the appellate court that the expropriation is not for
public use, then it would become the duty and the obligation of the
appellate court to dismiss it. 27
Notably, the foregoing cases refer to the dismissal of an action for eminent
domain at the instance of the plaintiff during the pendency of the case. The rule is
different where the case had been decided and the judgment had already become
final and executory. CAIHTE
Expropriation proceedings consists of two stages: first, condemnation of the
property after it is determined that its acquisition will be for a public purpose or
public use and, second, the determination of just compensation to be paid for the
taking of private property to be made by the court with the assistance of not more
than three commissioners. 28 Thus:
There are two (2) stages in every action for expropriation. The first is
concerned with the determination of the authority of the plaintiff to
exercise the power of eminent domain and the propriety of its
exercise in the context of the facts involved in the suit. It ends with
an order, if not of dismissal of the action, "of condemnation declaring
that the plaintiff has a lawful right to take the property sought to be
condemn, for the public use or purpose described in the complaint,
upon the payment of just compensation to be determined as of the

date of the complaint." An order of dismissal, if this be ordained,

would be a final one, of course, since it finally disposes of the action
and leaves nothing more to be done by the Court on the merits. So,
too, would an order of condemnation be a final one, for thereafter, as
the Rules expressly state, in the proceedings before the Trial Court,
"no objection to the exercise of the right of condemnation (or the
propriety thereof) shall be filled or heard."
The second phase of the eminent domain action is concerned with
the determination by the Court of "the just compensation for the
property sought to be taken." This is done by the Court with the
assistance of not more than three (3) commissioners. The order fixing
the just compensation on the basis of the evidence before, and
findings of, the commissioners would be final, too. It would finally
dispose of the second stage of the suit, and leave nothing more to be
done by the Court regarding the issue. Obviously, one or another of
the parties may believe the order to be erroneous in its appreciation
of the evidence or findings of fact or otherwise. Obviously, too, such a
dissatisfied party may seek a reversal of the order by taking an
appeal therefrom. 29

The outcome of the first phase of expropriation proceedings, which is either an

order of expropriation or an order of dismissal, is final since it finally disposes of
the case. On the other hand, the second phase ends with an order fixing the
amount of just compensation. Both orders, being final, are appealable. 30 An
order of condemnation or dismissal is final, resolving the question of whether or
not the plaintiff has properly and legally exercised its power of eminent
domain. 31 Once the first order becomes final and no appeal thereto is taken, the
authority to expropriate and its public use can no longer be questioned. 32
The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil Procedure,
which provides:
Order of expropriation. If the objections to and the defenses
against the right of the plaintiff to expropriate the property are
overruled, or when no party appears to defend as required by this
Rule, the court may issue an order of expropriation declaring that the

plaintiff has a lawful right to take the property sought to be

expropriated, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined
as of the date of the taking of the property or the filing of the
complaint, whichever came first.
A final order sustaining the right to expropriate the property may be
appealed by any party aggrieved thereby. Such appeal, however,
shall not prevent the court from determining the just compensation to
be paid.
After the rendition of such an order, the plaintiff shall not be
permitted to dismiss or discontinue the proceeding except on such
terms as the court deems just and equitable. (italics supplied)
In the case at bar, petitioner did not appeal the Order of the trial court dated
December 10, 1999, which declared that it has a lawful right to expropriate the
properties of respondent Heirs of Isidro Guivelondo. Hence, the Order became
final and may no longer be subject to review or reversal in any court. 33 A final
and executory decision or order can no longer be disturbed or reopened no matter
how erroneous it may be. Although judicial determinations are not infallible,
judicial error should be corrected through appeals, not through repeated suits on
the same claim. 34
Petitioner anchors its arguments on the last paragraph of the above-quoted Rule
67, Section 4. In essence, it contends that there are just and equitable grounds to
allow dismissal or discontinuance of the expropriation proceedings. More
specifically, petitioner alleges that the intended public use was rendered nugatory
by the unreasonable just compensation fixed by the court, which is beyond the
means of the intended beneficiaries of the socialized housing project. The
argument is tenuous.
Socialized housing has been recognized as public use for purposes of exercising
the power of eminent domain.
Housing is a basic human need. Shortage in housing is a matter of state concern
since it directly and significantly affects public health, safety, the environment
and in sum, the general welfare. The character of housing measures does not
change because units in housing projects cannot be occupied by all but only by

those who satisfy prescribed qualifications. A beginning has to be made, for it is

not possible to provide housing for all who need it, all at once.
xxx xxx xxx.
In the light of the foregoing, this Court is satisfied that "socialized
housing" falls with the confines of "public use". . . . . . . . . .. Provisions
on economic opportunities inextricably linked with low-cost housing,
or slum clearance, relocation and resettlement, or slum improvement
emphasize the public purpose of the project. 35
The public purpose of the socialized housing project is not in any way diminished
by the amount of just compensation that the court has fixed. The need to provide
decent housing to the urban poor dwellers in the locality was not lost by the mere
fact that the land cost more than petitioner had expected. It is worthy to note that
petitioner pursued its petition for certiorari with the Court of Appeals assailing the
amount of just compensation and its petition for review with this Court which
eloquently indicates that there still exists a public use for the housing project. It
was only after its appeal and petitions for review were dismissed that petitioner
made a compete turn-around and decided it did not want the property
anymore. IEAaST
Respondent landowners had already been prejudiced by the expropriation case.
Petitioner cannot be permitted to institute condemnation proceedings against
respondents only to abandon it later when it finds the amount of just
compensation unacceptable. Indeed, our reprobation in the case of Cosculluela v.
Court of Appeals 36 is apropos:
It is arbitrary and capricious for a government agency to initiate expropriation
proceedings, seize a person's property, allow the judgment of the court to become
final and executory and then refuse to pay on the ground that there are no
appropriations for the property earlier taken and profitably used. We condemn in
the strongest possible terms the cavalier attitude of government officials who
adopt such a despotic and irresponsible stance.
In order to resolve the issue of the propriety of the garnishment against
petitioner's funds and personal properties, there is a need to first determine its
true character as a government entity. Generally, funds and properties of the

government cannot be the object of garnishment proceedings even if the consent

to be sued had been previously granted and the state liability adjudged. 37
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. 38
However, if the funds belong to a public corporation or a government-owned or
controlled corporation which is clothed with a personality of its own, separate and
distinct from that of the government, then its funds are not exempt from
garnishment. 39 This is so because when the government enters into commercial
business, it abandons its sovereign capacity and is to be treated like any other
corporation. 40
In the case of petitioner NHA, the matter of whether its funds and properties are
exempt from garnishment has already been resolved squarely against its
predecessor, the People's Homesite and Housing Corporation (PHHC), to wit:
The plea for setting aside the notice of garnishment was premised on
the funds of the People's Homesite and Housing Corporation
deposited with petitioner being "public in character." There was not
even a categorical assertion to that effect. It is only the possibility of
its being "public in character." The tone was thus irresolute, the
approach diffident. The premise that the funds could be spoken of as
public in character may be accepted in the sense that the People's
Homesite and Housing Corporation was a government-owned entity. It
does not follow though that they were exempt from garnishment. 41
This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v.
Board of Liquidators: 42

Having a juridical personality separate and distinct from the

government, the funds of such government-owned and controlled
corporations and non-corporate agency, although considered public in
character, are not exempt from garnishment. This doctrine was
applied

to

suits

filed

against

the

Philippine

Virginia

Tobacco

Administration (PNB vs. Pabalan, et al., 83 SCRA 695); the National

Shipyard & Steel Corporation (NASSCO vs. CIR, 118 Phil. 782); the
Manila Hotel Company (Manila Hotel Employees Asso. vs. Manila
Hotel Co., 73 Phil. 374); and the People's Homesite and Housing
Corporation (PNB vs. CIR, 81 SCRA 314). [emphasis supplied]
Hence, it is clear that the funds of petitioner NHA are not exempt from
garnishment or execution. Petitioner's prayer for injunctive relief to restrain
respondent Sheriff Pascual Abordo from enforcing the Notice of Levy and
Garnishment against its funds and properties must, therefore, be denied.
WHEREFORE, in view of the foregoing, the instant petition for review is DENIED.
The decision of the Court of Appeals in CA-G.R. SP No. 68670, affirming the trial
court's Order denying petitioner's Motion to Dismiss the expropriation proceedings
in Civil Case No. CEB-23386, is AFFIRMED. Petitioner's prayer for injunctive relief
against the levy and garnishment of its funds and personal properties is DENIED.
The Temporary Restraining Order dated January 22, 2003 is LIFTED.
SO ORDERED.

UP v Dizon
FIRST DIVISION
[G.R. No. 171182. August 23, 2012.]
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE
GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P.
DAVID,

CASIANO

S.

ABRIGO,

and

JOSEFINA

R.

LICUANAN, petitioners, vs. HON. AGUSTIN S. DIZON, in his capacity as

Presiding Judge of the Regional Trial Court of Quezon City, Branch 80,
STERN BUILDERS, INC., and SERVILLANO DELA CRUZ, respondents.

DECISION

BERSAMIN, J p:
Trial judges should not immediately issue writs of execution or garnishment
against the Government or any of its subdivisions, agencies and instrumentalities
to enforce money judgments. 1 They should bear in mind that the primary
jurisdiction to examine, audit and settle all claims of any sort due from the
Government or any of its subdivisions, agencies and instrumentalities pertains to
the

Commission

on

Audit

(COA)

pursuant

to Presidential

Decree

No.

1445 (Government Auditing Code of the Philippines).

The Case
On appeal by the University of the Philippines and its then incumbent officials
(collectively,

the

UP)

is

the

decision

promulgated

on

September

16,

2005, 2 whereby the Court of Appeals (CA) upheld the order of the Regional Trial
Court (RTC), Branch 80, in Quezon City that directed the garnishment of public
funds amounting to P16,370,191.74 belonging to the UP to satisfy the writ of
execution issued to enforce the already final and executory judgment against the
UP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V. Abueva, entered
into

General

Construction

Agreement

with

respondent

Stern

Builders

Corporation (Stern Builders), represented by its President and General Manager

Servillano dela Cruz, for the construction of the extension building and the
renovation of the College of Arts and Sciences Building in the campus of the
University of the Philippines in Los Baos (UPLB). 3 IASTDE
In the course of the implementation of the contract, Stern Builders submitted
three progress billings corresponding to the work accomplished, but the UP paid
only two of the billings. The third billing worth P273,729.47 was not paid due to its
disallowance by the Commission on Audit (COA). Despite the lifting of the
disallowance, the UP failed to pay the billing, prompting Stern Builders and dela
Cruz to sue the UP and its co-respondent officials to collect the unpaid billing and
to recover various damages. The suit, entitled Stern Builders Corporation and
Servillano R. Dela Cruz v. University of the Philippines Systems, Jose V. Abueva,

Raul P. de Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David,

Casiano S. Abrigo, and Josefina R. Licuanan, was docketed as Civil Case No. Q-9314971 of the Regional Trial Court in Quezon City (RTC). 4
After trial, on November 28, 2001, the RTC rendered its decision in favor of the
plaintiffs, 5 viz.:
Wherefore, in the light of the foregoing, judgment is hereby rendered
in favor of the plaintiff and against the defendants ordering the latter
to pay plaintiff, jointly and severally, the following, to wit:
1. P503,462.74

amount

of

the

third

billing,

additional

accomplished work and retention money

2. P5,716,729.00 in actual damages
3. P10,000,000.00 in moral damages
4. P150,000.00 and P1,500.00 per appearance as attorney's
fees; and
5. Costs of suit.
SO ORDERED.
Following the RTC's denial of its motion for reconsideration on May 7, 2002, 6 the
UP filed a notice of appeal on June 3, 2002. 7 Stern Builders and dela Cruz
opposed the notice of appeal on the ground of its filing being belated, and moved
for the execution of the decision. The UP countered that the notice of appeal was
filed within the reglementary period because the UP's Office of Legal Affairs (OLS)
in Diliman, Quezon City received the order of denial only on May 31, 2002. On
September 26, 2002, the RTC denied due course to the notice of appeal for having
been filed out of time and granted the private respondents' motion for
execution. 8 CDESIA
The RTC issued the writ of execution on October 4, 2002, 9 and the sheriff of the
RTC served the writ of execution and notice of demand upon the UP, through its
counsel, on October 9, 2002. 10 The UP filed an urgent motion to reconsider the
order dated September 26, 2002, to quash the writ of execution dated October 4,
2002, and to restrain the proceedings. 11 However, the RTC denied the urgent
motion on April 1, 2003. 12

On June 24, 2003, the UP assailed the denial of due course to its appeal through a
petition for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No.
77395. 13
On February 24, 2004, the CA dismissed the petition for certiorari upon finding
that the UP's notice of appeal had been filed late, 14 stating:
Records clearly show that petitioners received a copy of the Decision
dated November 28, 2001 and January 7, 2002, thus, they had until
January 22, 2002 within which to file their appeal. On January 16,
2002 or after the lapse of nine (9) days, petitioners through their
counsel Atty. Nolasco filed a Motion for Reconsideration of the
aforesaid decision, hence, pursuant to the rules, petitioners still had
six (6) remaining days to file their appeal. As admitted by the
petitioners in their petition (Rollo, p. 25), Atty. Nolasco received a
copy of the Order denying their motion for reconsideration on May 17,
2002, thus, petitioners still has until May 23, 2002 (the remaining six
(6) days) within which to file their appeal. Obviously, petitioners were
not able to file their Notice of Appeal on May 23, 2002 as it was only
filed on June 3, 2002.
In view of the said circumstances, We are of the belief and so holds
that the Notice of Appeal filed by the petitioners was really filed out of
time, the same having been filed seventeen (17) days late of the
reglementary period. By reason of which, the decision dated
November 28, 2001 had already become final and executory. "Settled
is the rule that the perfection of an appeal in the manner and within
the period permitted by law is not only mandatory but jurisdictional,
and failure to perfect that appeal renders the challenged judgment
final and executory. This is not an empty procedural rule but is
grounded on fundamental considerations of public policy and sound
practice." (Ram's Studio and Photographic Equipment, Inc. vs. Court
of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco received the
order of denial of the Motion for Reconsideration on May 17, 2002 but
filed a Notice of Appeal only on June 3, 3003. As such, the decision of
the lower court ipso facto became final when no appeal was perfected

after the lapse of the reglementary period. This procedural caveat

cannot be trifled with, not even by the High Court. 15 TDEASC
The UP sought a reconsideration, but the CA denied the UP's motion for
reconsideration on April 19, 2004. 16
On May 11, 2004, the UP appealed to the Court by petition for review
on certiorari (G.R. No. 163501).
On June 23, 2004, the Court denied the petition for review. 17 The UP moved for
the reconsideration of the denial of its petition for review on August 29,
2004, 18 but the Court denied the motion on October 6, 2004. 19 The denial
became final and executory on November 12, 2004. 20
In the meanwhile that the UP was exhausting the available remedies to overturn
the denial of due course to the appeal and the issuance of the writ of execution,
Stern Builders and dela Cruz filed in the RTC their motions for execution despite
their previous motion having already been granted and despite the writ of
execution having already issued. On June 11, 2003, the RTC granted another
motion for execution filed on May 9, 2003 (although the RTC had already issued
the writ of execution on October 4, 2002). 21
On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of
garnishment on the UP's depository banks, namely: Land Bank of the Philippines
(Buendia

Branch)

and

the

Development

Bank

of

the

Philippines

(DBP),

Commonwealth Branch. 22 The UP assailed the garnishment through an urgent

motion to quash the notices of garnishment; 23 and a motion to quash the writ of
execution dated May 9, 2003. 24
On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance
of a release order. 25
On October 14, 2003, the RTC denied the UP's urgent motion to quash, and
granted Stern Builders and dela Cruz's ex parte motion for issuance of a release
order. 26
The UP moved for the reconsideration of the order of October 14, 2003, but the
RTC denied the motion on November 7, 2003. 27
On January 12, 2004, Stern Builders and dela Cruz again sought the release of the
garnished funds. 28 Despite the UP's opposition, 29 the RTC granted the motion to

release the garnished funds on March 16, 2004. 30 On April 20, 2004, however,
the RTC held in abeyance the enforcement of the writs of execution issued on
October 4, 2002 and June 3, 2003 and all the ensuing notices of garnishment,
citing Section 4, Rule 52, Rules of Court, which provided that the pendency of a
timely

motion

for

reconsideration

stayed

the

execution

of

the

judgment. 31 cDCIHT
On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon,
authorized the release of the garnished funds of the UP, 32 to wit:
WHEREFORE, premises considered, there being no more legal
impediment for the release of the garnished amount in satisfaction of
the judgment award in the instant case, let the amount garnished be
immediately released by the Development Bank of the Philippines,
Commonwealth Branch, Quezon City in favor of the plaintiff.
SO ORDERED.
The UP was served on January 3, 2005 with the order of December 21, 2004
directing DBP to release the garnished funds. 33
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct
contempt of court for its non-compliance with the order of release. 34
Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA
to challenge the jurisdiction of the RTC in issuing the order of December 21, 2004
(CA-G.R. CV No. 88125). 35 Aside from raising the denial of due process, the UP
averred that the RTC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in ruling that there was no longer any legal impediment to
the release of the garnished funds. The UP argued that government funds and
properties could not be seized by virtue of writs of execution or garnishment, as
held in Department of Agriculture v. National Labor Relations Commission, 36 and
citing Section 84 ofPresidential Decree No. 1445 to the effect that "[r]evenue
funds shall not be paid out of any public treasury or depository except in
pursuance of an appropriation law or other specific statutory authority;" and that
the order of garnishment clashed with the ruling in University of the Philippines
Board of Regents v. Ligot-Telan 37 to the effect that the funds belonging to the UP
were public funds.

On January 19, 2005, the CA issued a temporary restraining order (TRO) upon
application by the UP. 38
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended
motion for sheriff's assistance to implement the release order dated December
21, 2004, stating that the 60-day period of the TRO of the CA had already
lapsed. 39 The UP opposed the amended motion and countered that the
implementation of the release order be suspended. 40
On May 3, 2005, the RTC granted the amended motion for sheriff's assistance and
directed the sheriff to proceed to the DBP to receive the check in satisfaction of
the judgment. 41
The UP sought the reconsideration of the order of May 3, 2005. 42
On May 16, 2005, DBP filed a motion to consign the check representing the
judgment award and to dismiss the motion to cite its officials in contempt of
court. 43
On May 23, 2005, the UP presented a motion to withhold the release of the
payment of the judgment award. 44 HSDIaC
On July 8, 2005, the RTC resolved all the pending matters, 45 noting that the DBP
had

already

delivered

to

the

sheriff

Manager's

Check

No.

811941

for

P16,370,191.74 representing the garnished funds payable to the order of Stern

Builders and dela Cruz as its compliance with the RTC's order dated December 21,
2004. 46 However, the RTC directed in the same order that Stern Builders and
dela Cruz should not encash the check or withdraw its amount pending the final
resolution of the UP's petition for certiorari, to wit: 47
To enable the money represented in the check in question (No.
00008119411) to earn interest during the pendency of the defendant
University of the Philippines application for a writ of injunction with
the Court of Appeals the same may now be deposited by the plaintiff
at the garnishee Bank (Development Bank of the Philippines), the
disposition of the amount represented therein being subject to the
final outcome of the case of the University of the Philippines, et al. vs.
Hon. Agustin S. Dizon, et al., (CA G.R. 88125) before the Court of
Appeals.

Let it be stated herein that the plaintiff is not authorized to encash

and withdraw the amount represented in the check in question and
enjoy the same in the fashion of an owner during the pendency of the
case between the parties before the Court of Appeals which may or
may not be resolved in plaintiff's favor.
With the end in view of seeing to it that the check in question is
deposited by the plaintiff at the Development Bank of the Philippines
(garnishee bank), Branch Sheriff Herlan Velasco is directed to
accompany and/or escort the plaintiff in making the deposit of the
check in question.
SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision dismissing the
UP's petition for certiorari, ruling that the UP had been given ample opportunity to
contest the motion to direct the DBP to deposit the check in the name of Stern
Builders and dela Cruz; and that the garnished funds could be the proper subject
of garnishment because they had been already earmarked for the project, with
the UP holding the funds only in a fiduciary capacity, 48 viz.:
Petitioners next argue that the UP funds may not be seized for
execution

or

garnishment

Citing Department

of

to

Agriculture

satisfy
vs.

the

judgment

NLRC,

University

award.
of

the

Philippines Board of Regents vs. Hon. Ligot-Telan, petitioners contend

that UP deposits at Land Bank and the Development Bank of the
Philippines, being government funds, may not be released absent an
appropriations bill from Congress. TcIAHS
The argument is specious. UP entered into a contract with private
respondents for the expansion and renovation of the Arts and
Sciences Building of its campus in Los Baos, Laguna. Decidedly,
there was already an appropriations earmarked for the said project.
The said funds are retained by UP, in a fiduciary capacity, pending
completion of the construction project.
We agree with the trial Court [sic] observation on this score:
"4. Executive Order No. 109 (Directing all National Government
Agencies to Revert Certain Accounts Payable to the Cumulative

Result of Operations of the National Government and for Other

Purposes) Section 9. Reversion of Accounts Payable, provides
that, all 1995 and prior years documented accounts payable
and all undocumented accounts regardless of the year they
were incurred shall be reverted to the Cumulative Result of
Operations of the National Government (CROU). This shall apply
to accounts payable of all funds, except fiduciary funds, as long
as the purpose for which the funds were created have not been
accomplished and accounts payable under foreign assisted
projects for the duration of the said project. In this regard, the
Department of Budget and Management issued Joint-Circular
No. 99-6 4.0 (4.3) Procedural Guidelines which provides that all
accounts payable that reverted to the CROU may be considered
for payment upon determination thru administrative process, of
the existence, validity and legality of the claim. Thus, the
allegation of the defendants that considering no appropriation
for the payment of any amount awarded to plaintiffs appellee
the funds of defendant-appellants may not be seized pursuant
to a writ of execution issued by the regular court is misplaced.
Surely when the defendants and the plaintiff entered into the
General Construction of Agreement there is an amount already
allocated by the latter for the said project which is no longer
subject of future appropriation." 49
After the CA denied their motion for reconsideration on December 23, 2005, the
petitioners appealed by petition for review.
Matters Arising During the Pendency of the Petition
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders
and dela Cruz's motion to withdraw the deposit, in consideration of the UP's
intention to appeal to the CA, 50 stating:
Since it appears that the defendants are intending to file a petition for
review of the Court of Appeals resolution in CA-G.R. No. 88125 within
the reglementary period of fifteen (15) days from receipt of
resolution, the Court agrees with the defendants stand that the
granting of plaintiffs' subject motion is premature.

Let it be stated that what the Court meant by its Order dated July 8,
2005 which states in part that the "disposition of the amount
represented therein being subject to the final outcome of the case of
the University of the Philippines, et al. vs. Hon. Agustin S. Dizon, et
al., (CA G.R. No. 88125 before the Court of Appeals) is that the
judgment or resolution of said court has to be final and executory, for
if the same will still be elevated to the Supreme Court, it will not
attain finality yet until the highest court has rendered its own final
judgment or resolution. 51 CAScIH
However, on January 22, 2007, the UP filed an Urgent Application for A Temporary
Restraining Order and/or A Writ of Preliminary Injunction, 52 averring that on
January 3, 2007, Judge Maria Theresa dela Torre-Yadao (who had meanwhile
replaced Judge Dizon upon the latter's appointment to the CA) had issued another
order allowing Stern Builders and dela Cruz to withdraw the deposit, 53 to wit:
It bears stressing that defendants' liability for the payment of the
judgment obligation has become indubitable due to the final and
executory nature of the Decision dated November 28, 2001. Insofar
as the payment of the [sic] judgment obligation is concerned, the
Court believes that there is nothing more the defendant can do to
escape liability. It is observed that there is nothing more the
defendant can do to escape liability. It is observed that defendant U.P.
System had already exhausted all its legal remedies to overturn, set
aside or modify the decision (dated November 28, 2001 (rendered
against it. The way the Court sees it, defendant U.P. System's petition
before the Supreme Court concerns only with the manner by which
said judgment award should be satisfied. It has nothing to do with the
legality or propriety thereof, although it prays for the deletion
of [sic] reduction of the award of moral damages.
It must be emphasized that this Court's finding, i.e., that there was
sufficient appropriation earmarked for the project, was upheld by the
Court of Appeals in its decision dated September 16, 2005. Being a
finding of fact, the Supreme Court will, ordinarily, not disturb the
same was said Court is not a trier of fact. Such being the case,

defendants' arguments that there was no sufficient appropriation for

the payment of the judgment obligation must fail.
While it is true that the former Presiding Judge of this Court in its
Order dated January 30, 2006 had stated that:
Let it be stated that what the Court meant by its Order dated
July 8, 2005 which states in part that the "disposition of the
amount represented therein being subject to the final outcome
of the case of the University of the Philippines, et al. vs. Hon.
Agustin S. Dizon, et al., (CA G.R. No. 88125 before the Court of
Appeals) is that the judgment or resolution of said court has to
be final and executory, for if the same will still be elevated to
the Supreme Court, it will not attain finality yet until the highest
court has rendered its own final judgment or resolution. ITDHcA
it should be noted that neither the Court of Appeals nor the Supreme
Court issued a preliminary injunction enjoining the release or
withdrawal of the garnished amount. In fact, in its present petition for
review before the Supreme Court, U.P. System has not prayed for the
issuance of a writ of preliminary injunction. Thus, the Court doubts
whether such writ is forthcoming.
The Court honestly believes that if defendants' petition assailing the
Order of this Court dated December 31, 2004 granting the motion for
the release of the garnished amount was meritorious, the Court of
Appeals would have issued a writ of injunction enjoining the same.
Instead, said appellate [c]ourt not only refused to issue a wit of
preliminary injunction prayed for by U.P. System but denied the
petition, as well. 54
The UP contended that Judge Yadao thereby effectively reversed the January 30,
2006 order of Judge Dizon disallowing the withdrawal of the garnished amount
until after the decision in the case would have become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and
all persons acting pursuant to her authority from enforcing her order of January 3,
2007, 55 it appears that on January 16, 2007, or prior to the issuance of the TRO,
she had already directed the DBP to forthwith release the garnished amount to

Stern Builders and dela Cruz; 56 and that DBP had forthwith complied with the
order on January 17, 2007 upon the sheriff's service of the order of Judge
Yadao. 57
These intervening developments impelled the UP to file in this Court a
supplemental petition on January 26, 2007, 58 alleging that the RTC (Judge Yadao)
gravely erred in ordering the immediate release of the garnished amount despite
the pendency of the petition for review in this Court.
The UP filed a second supplemental petition 59 after the RTC (Judge Yadao) denied
the UP's motion for the redeposit of the withdrawn amount on April 10,
2007, 60 to wit:
This resolves defendant U.P. System's Urgent Motion to Redeposit
Judgment Award praying that plaintiffs be directed to redeposit the
judgment award to DBP pursuant to the Temporary Restraining Order
issued by the Supreme Court. Plaintiffs opposed the motion and
countered that the Temporary Restraining Order issued by the
Supreme Court has become moot and academic considering that the
act sought to be restrained by it has already been performed. They
also alleged that the redeposit of the judgment award was no longer
feasible as they have already spent the same.
It bears stressing, if only to set the record straight, that this Court did
not in its Order dated January 3, 2007 (the implementation of
which was restrained by the Supreme Court in its Resolution dated
January 24, 2002) direct that that garnished amount "be deposited
with the garnishee bank (Development Bank of the Philippines)". In
the first place, there was no need to order DBP to make such deposit,
as the garnished amount was already deposited in the account of
plaintiffs with the DBP as early as May 13, 2005. What the Court
granted in its Order dated January 3, 2007 was plaintiff's motion to
allow the release of said deposit. It must be recalled that the Court
found plaintiff's motion meritorious and, at that time, there was no
restraining order or preliminary injunction from either the Court of
Appeals or the Supreme Court which could have enjoined the release
of plaintiffs' deposit. The Court also took into account the following
factors: DCASIT

a) the Decision in this case had long been final and executory
after it was rendered on November 28, 2001;
b) the propriety of the dismissal of U.P. System's appeal was
upheld by the Supreme Court;
c) a writ of execution had been issued;
d) defendant U.P. System's deposit with DBP was garnished
pursuant to a lawful writ of execution issued by the Court;
and
e) the garnished amount had already been turned over to the
plaintiffs and deposited in their account with DBP.
The garnished amount, as discussed in the Order dated January 16,
2007, was already owned by the plaintiffs, having been delivered to
them by the Deputy Sheriff of this Court pursuant to par. (c), Section
9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the
judgment obligation has already been fully satisfied as per Report of
the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme Court,
the same has become functus oficio, having been issued after the
garnished amount had been released to the plaintiffs. The judgment
debt was released to the plaintiffs on January 17, 2007, while the
Temporary Restraining Order issued by the Supreme Court was
received by this Court on February 2, 2007. At the time of the
issuance of the Restraining Order, the act sought to be restrained had
already been done, thereby rendering the said Order ineffectual.
After a careful and thorough study of the arguments advanced by the
parties, the Court is of the considered opinion that there is no legal
basis to grant defendant U.P. System's motion to redeposit the
judgment amount. Granting said motion is not only contrary to law,
but it will also render this Court's final executory judgment nugatory.
Litigation must end and terminate sometime and somewhere, and it
is essential to an effective administration of justice that once a
judgment has become final the issue or cause involved therein should
be laid to rest. This doctrine of finality of judgment is grounded on

fundamental considerations of public policy and sound practice. In

fact, nothing is more settled in law than that once a judgment attains
finality it thereby becomes immutable and unalterable. It may no
longer be modified in any respect, even if the modification is meant
to correct what is perceived to be an erroneous conclusion of fact or
law, and regardless of whether the modification is attempted to be
made by the court rendering it or by the highest court of the land.
WHEREFORE, premises considered, finding defendant U.P. System's
Urgent Motion to Redeposit Judgment Award devoid of merit, the
same is hereby DENIED. AScHCD
SO ORDERED.
Issues
The UP now submits that:
I
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING
THE PETITION, ALLOWING IN EFFECT THE GARNISHMENT OF UP
FUNDS, WHEN IT RULED THAT FUNDS HAVE ALREADY BEEN
EARMARKED FOR THE CONSTRUCTION PROJECT; AND THUS, THERE
IS NO NEED FOR FURTHER APPROPRIATIONS.
II
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING
GARNISHMENT OF A STATE UNIVERSITY'S FUNDS IN VIOLATION OF
ARTICLE XIV, SECTION 5(5) OFTHE CONSTITUTION.
III
IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE
REVIEW POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT
TOTALLY DELETE THE AWARD OF P10 MILLION AS MORAL DAMAGES
TO RESPONDENTS.
IV
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER

DATED 3 JANUARY 2007 ON THE GROUND OF EQUITY AND JUDICIAL

COURTESY. IHDCcT
V
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER
DATED 16 JANUARY 2007 ON THE GROUND THAT PETITIONER
UNIVERSITY STILL HAS A PENDING MOTION FOR RECONSIDERATION
OF THE ORDER DATED 3 JANUARY 2007.
VI
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING
THE REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN
VIOLATION OF THE CLEAR LANGUAGE OF THE SUPREME COURT
RESOLUTION DATED 24 JANUARY 2007.
The UP argues that the amount earmarked for the construction project had been
purposely set aside only for the aborted project and did not include incidental
matters like the awards of actual damages, moral damages and attorney's fees. In
support of its argument, the UP cited Article 12.2 of the General Construction
Agreement, which stipulated that no deductions would be allowed for the
payment of claims, damages, losses and expenses, including attorney's fees, in
case of any litigation arising out of the performance of the work. The UP insists
that the CA decision was inconsistent with the rulings in Commissioner of Public
Highways v. San Diego 61 andDepartment of Agriculture v. NLRC 62 to the effect
that government funds and properties could not be seized under writs of
execution or garnishment to satisfy judgment awards.
Furthermore, the UP contends that the CA contravened Section 5, Article XIV
of the Constitution by allowing the garnishment of UP funds, because the
garnishment resulted in a substantial reduction of the UP's limited budget
allocated for the remuneration, job satisfaction and fulfillment of the best
available teachers; that Judge Yadao should have exhibited judicial courtesy
towards the Court due to the pendency of the UP's petition for review; and that
she should have also desisted from declaring that the TRO issued by this Court
had become functus officio.

Lastly, the UP states that the awards of actual damages of P5,716,729.00 and
moral damages of P10 million should be reduced, if not entirely deleted, due to its
being unconscionable, inequitable and detrimental to public service. aECSHI
In contrast, Stern Builders and dela Cruz aver that the petition for review was
fatally defective for its failure to mention the other cases upon the same issues
pending between the parties (i.e., CA-G.R. No. 77395 and G.R. No. 163501); that
the UP was evidently resorting to forum shopping, and to delaying the satisfaction
of the final judgment by the filing of its petition for review; that the ruling
in Commissioner of Public Works v. San Diego had no application because there
was an appropriation for the project; that the UP retained the funds allotted for
the project only in a fiduciary capacity; that the contract price had been
meanwhile adjusted to P22,338,553.25, an amount already more than sufficient to
cover the judgment award; that the UP's prayer to reduce or delete the award of
damages had no factual basis, because they had been gravely wronged, had been
deprived of their source of income, and had suffered untold miseries, discomfort,
humiliation and sleepless years; that dela Cruz had even been constrained to sell
his house, his equipment and the implements of his trade, and together with his
family had been forced to live miserably because of the wrongful actuations of the
UP; and that the RTC correctly declared the Court's TRO to be already functus
officio by reason of the withdrawal of the garnished amount from the DBP.
The decisive issues to be considered and passed upon are, therefore: (a) whether
the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UP's prayer for the deletion of the awards of
actual damages of P5,716,729.00, moral damages of P10,000,000.00 and
attorney's fees of P150,000.00 plus P1,500.00 per appearance could be granted
despite the finality of the judgment of the RTC.
Ruling
The petition for review is meritorious.
I.
UP's

funds,

being

government

funds,

are not subject to garnishment

The UP was founded on June 18, 1908 through Act 1870 to provide advanced
instruction in literature, philosophy, the sciences, and arts, and to give

professional

and

technical

training

to

deserving

students. 63 Despite

its

establishment as a body corporate, 64 the UP remains to be a "chartered

institution" 65 performing a legitimate government function. It is an institution of
higher learning, not a corporation established for profit and declaring any
dividends. 66 In enacting Republic Act No. 9500(The University of the Philippines
Charter

of

2008),

Congress

has

declared

the

UP

as

the

national

university 67 "dedicated to the search for truth and knowledge as well as the
development of future leaders." 68 ASIDTa
Irrefragably, the UP is a government instrumentality, 69 performing the State's
constitutional mandate of promoting quality and accessible education. 70 As a
government instrumentality, the UP administers special funds sourced from the
fees and income enumerated under Act No. 1870 and Section 1 of Executive
Order No. 714, 71 and from the yearly appropriations, to achieve the purposes
laid down by Section 2 of Act 1870, as expanded in Republic Act No. 9500. 72 All
the funds going into the possession of the UP, including any interest accruing from
the deposit of such funds in any banking institution, constitute a "special trust
fund," the disbursement of which should always be aligned with the UP's mission
and purpose, 73 and should always be subject to auditing by the COA. 74
Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes
in the possession of an agency of the government or of a public officer as trustee,
agent or administrator, or that is received for the fulfillment of some
obligation. 75 A trust fund may be utilized only for the "specific purpose for which
the trust was created or the funds received." 76
The funds of the UP are government funds that are public in character. They
include the income accruing from the use of real property ceded to the UP that
may be spent only for the attainment of its institutional objectives. 77 Hence, the
funds subject of this action could not be validly made the subject of the RTC's writ
of execution or garnishment. The adverse judgment rendered against the UP in a
suit to which it had impliedly consented was not immediately enforceable by
execution against the UP, 78 because suability of the State did not necessarily
mean its liability. 79
A marked distinction exists between suability of the State and its liability. As the
Court succinctly stated in Municipality of San Fernando, La Union v. Firme: 80

A distinction should first be made between suability and liability.

"Suability depends on the consent of the state to be sued, liability on
the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the
other hand, it can never be held liable if it does not first consent to be
sued. Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can,
that the defendant is liable.
Also, in Republic v. Villasor, 81 where 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 was nullified, the Court said: CDaTAI
. . . 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.
The UP correctly submits here that the garnishment of its funds to satisfy the
judgment awards of actual and moral damages (including attorney's fees) was not
validly made if there was no special appropriation by Congress to cover the
liability. It was, therefore, legally unwarranted for the CA to agree with the RTC's
holding in the order issued on April 1, 2003 that no appropriation by Congress to
allocate and set aside the payment of the judgment awards was necessary
because "there (were) already an appropriations (sic) earmarked for the said
project." 82 The CA and the RTC thereby unjustifiably ignored the legal restriction
imposed

on the trust

funds

of the

Government and

its

agencies

and

instrumentalities to be used exclusively to fulfill the purposes for which the trusts

were created or for which the funds were received except upon express
authorization by Congress or by the head of a government agency in control of
the funds, and subject to pertinent budgetary laws, rules and regulations. 83
Indeed, an appropriation by Congress was required before the judgment that
rendered the UP liable for moral and actual damages (including attorney's fees)
would be satisfied considering that such monetary liabilities were not covered by
the "appropriations earmarked for the said project." The Constitution strictly
mandated that "(n)o money shall be paid out of the Treasury except in pursuance
of an appropriation made by law." 84 TEacSA
II
COA

must

adjudicate

private

respondents'

claim

before execution should proceed

The execution of the monetary judgment against the UP was within the primary
jurisdiction of the COA. This was expressly provided in Section 26 of Presidential
Decree No. 1445, to wit:
Section 26. General jurisdiction. The authority and powers of the
Commission shall extend to and comprehend all matters relating
to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers
pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons
respecting funds or property received or held by them in an
accountable

capacity,

as

well

as the

examination,

audit,

and

settlement of all debts and claims of any sort due from or owing to
the

Government

or

any

of

its

subdivisions,

agencies

and

instrumentalities. The said jurisdiction extends to all governmentowned or controlled corporations, including their subsidiaries, and
other self-governing boards, commissions, or agencies

of the

Government, and as herein prescribed, including non-governmental

entities subsidized by the government, those funded by donations
through the government, those required to pay levies or government
share, and those for which the government has put up a counterpart
fund or those partly funded by the government.

It was of no moment that a final and executory decision already validated the
claim against the UP. The settlement of the monetary claim was still subject to the
primary jurisdiction of the COA despite the final decision of the RTC having already
validated the claim. 85 As such, Stern Builders and dela Cruz as the claimants had
no alternative except to first seek the approval of the COA of their monetary
claim.
On its part, the RTC should have exercised utmost caution, prudence and
judiciousness in dealing with the motions for execution against the UP and the
garnishment of the UP's funds. The RTC had no authority to direct the immediate
withdrawal of any portion of the garnished funds from the depository banks of the
UP. By eschewing utmost caution, prudence and judiciousness in dealing with the
execution and garnishment, and by authorizing the withdrawal of the garnished
funds of the UP, the RTC acted beyond its jurisdiction, and all its orders and
issuances thereon were void and of no legal effect, specifically: (a) the order Judge
Yadao issued on January 3, 2007 allowing Stern Builders and dela Cruz to
withdraw the deposited garnished amount; (b) the order Judge Yadao issued on
January 16, 2007 directing DBP to forthwith release the garnish amount to Stern
Builders and dela Cruz; (c) the sheriff's report of January 17, 2007 manifesting the
full satisfaction of the writ of execution; and (d) the order of April 10, 2007 deying
the UP's motion for the redeposit of the withdrawn amount. Hence, such orders
and issuances should be struck down without exception. ScHADI
Nothing extenuated Judge Yadao's successive violations of Presidential Decree No.
1445. She was aware of Presidential Decree No. 1445, considering that the Court
circulated to all judges its Administrative Circular No. 10-2000, 86 issued on
October 25, 2000, enjoining them "to observe utmost caution, prudence and
judiciousness in the issuance of writs of execution to satisfy money judgments
against government agencies and local government units" precisely in order to
prevent the circumvention of Presidential Decree No. 1445, as well as of the rules
and procedures of the COA, to wit:
In order to prevent possible circumvention of the rules and
procedures of the Commission on Audit, judges are hereby enjoined
to observe utmost caution, prudence and judiciousness in the
issuance of writs of execution to satisfy money judgments against
government agencies and local government units.

Judges should bear in mind that in Commissioner of Public Highways

v. San Diego (31 SCRA 617, 625 [1970]), this Court explicitly stated:
"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
Court 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. IaHSCc
Moreover, it is settled jurisprudence that upon determination of State
liability, the prosecution, enforcement or satisfaction thereof must
still be pursued in accordance with the rules and procedures laid
down in P.D. No. 1445, otherwise known as the Government Auditing
Code of the Philippines (Department of Agriculture v. NLRC, 227 SCRA
693, 701-02 [1993] citing Republic vs. Villasor, 54 SCRA 84 [1973]).
All money claims against the Government must first be filed with the
Commission on Audit which must act upon it within sixty days.
Rejection of the claim will authorize the claimant to elevate the
matter to the Supreme Court on certiorari and in effect, sue the State
thereby (P.D. 1445, Sections 49-50).
However, notwithstanding the rule that government properties are
not subject to levy and execution unless otherwise provided for by
statute (Republic v. Palacio, 23 SCRA 899 [1968]; Commissioner of
Public Highways v. San Diego, supra) or municipal ordinance
(Municipality of Makati v. Court of Appeals, 190 SCRA 206 [1990]), the
Court has, in various instances, distinguished between government
funds and properties for public use and those not held for public use.
Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil. 52

[1926]), the Court ruled that "[w]here property of a municipal or other

public corporation is sought to be subjected to execution to satisfy
judgments recovered against such corporation, the question as to
whether such property is leviable or not is to be determined by the
usage and purposes for which it is held." The following can be culled
from Viuda de Tan Toco v. Municipal Council of Iloilo:
1. Properties held for public uses and generally everything held for
governmental purposes are not subject to levy and sale under
execution against such corporation. The same rule applies to funds in
the hands of a public officer and taxes due to a municipal corporation.
2. Where a municipal corporation owns in its proprietary capacity, as
distinguished from its public or government capacity, property not
used or used for a public purpose but for quasi-private purposes, it is
the general rule that such property may be seized and sold under
execution against the corporation.
3. Property held for public purposes is not subject to execution merely
because it is temporarily used for private purposes. If the public use
is wholly abandoned, such property becomes subject to execution.
This Administrative Circular shall take effect immediately and the
Court Administrator shall see to it that it is faithfully implemented.
Although Judge Yadao pointed out that neither the CA nor the Court had issued as
of then any writ of preliminary injunction to enjoin the release or withdrawal of the
garnished amount, she did not need any writ of injunction from a superior court to
compel her obedience to the law. The Court is disturbed that an experienced
judge

like

her

should

look

at

public

laws

like Presidential

Decree

No.

1445 dismissively instead of loyally following and unquestioningly implementing

them. That she did so turned her court into an oppressive bastion of mindless
tyranny instead of having it as a true haven for the seekers of justice like the
UP. TaCDIc
III
Period
service
Fresh

of

appeal
of

decision
period

did

not
upon

start

without

effective

of

record;

counsel
rule announced

in

Neypes

v.

Court

of

Appeals

can be given retroactive application

The UP next pleads that the Court gives due course to its petition for review in the
name of equity in order to reverse or modify the adverse judgment against it
despite its finality. At stake in the UP's plea for equity was the return of the
amount of P16,370,191.74 illegally garnished from its trust funds. Obstructing the
plea is the finality of the judgment based on the supposed tardiness of UP's
appeal, which the RTC declared on September 26, 2002. The CA upheld the
declaration of finality on February 24, 2004, and the Court itself denied the UP's
petition for review on that issue on May 11, 2004 (G.R. No. 163501). The denial
became final on November 12, 2004.
It is true that a decision that has attained finality becomes immutable and
unalterable, and cannot be modified in any respect, 87 even if the modification is
meant to correct erroneous conclusions of fact and law, and whether the
modification is made by the court that rendered it or by this Court as the highest
court of the land. 88Public policy dictates that once a judgment becomes final,
executory and unappealable, the prevailing party should not be deprived of the
fruits of victory by some subterfuge devised by the losing party. Unjustified delay
in the enforcement of such judgment sets at naught the role and purpose of the
courts to resolve justiciable controversies with finality. 89 Indeed, all litigations
must at some time end, even at the risk of occasional errors.
But the doctrine of immutability of a final judgment has not been absolute, and
has admitted several exceptions, among them: (a) the correction of clerical
errors; (b)the so-called nunc pro tunc entries that cause no prejudice to any
party; (c) void judgments; and (d) whenever circumstances transpire after the
finality

of

the

decision

that

render

its

execution

unjust

and

inequitable. 90 Moreover, in Heirs of Maura So v. Obliosca, 91 we stated that

despite the absence of the preceding circumstances, the Court is not precluded
from brushing aside procedural norms if only to serve the higher interests of
justice and equity. Also, in Gumaru v. Quirino State College, 92the Court nullified
the proceedings and the writ of execution issued by the RTC for the reason that
respondent state college had not been represented in the litigation by the Office
of the Solicitor General.

We rule that the UP's plea for equity warrants the Court's exercise of the
exceptional power to disregard the declaration of finality of the judgment of the
RTC for being in clear violation of the UP's right to due process. aAcHCT
Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of
appeal to be tardy. They based their finding on the fact that only six days
remained of the UP's reglementary 15-day period within which to file the notice of
appeal because the UP had filed a motion for reconsideration on January 16,
2002 vis- -vis the RTC's decision the UP received on January 7, 2002; and that
because the denial of the motion for reconsideration had been served upon Atty.
Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only
until May 23, 2002 within which to file the notice of appeal.
The UP counters that the service of the denial of the motion for reconsideration
upon Atty. Nolasco was defective considering that its counsel of record was not
Atty. Nolasco of the UPLB Legal Office but the OLS in Diliman, Quezon City; and
that the period of appeal should be reckoned from May 31, 2002, the date when
the OLS received the order. The UP submits that the filing of the notice of appeal
on June 3, 2002 was well within the reglementary period to appeal.
We agree with the submission of the UP.
Firstly, the service of the denial of the motion for reconsideration upon Atty.
Nolasco of the UPLB Legal Office was invalid and ineffectual because he was
admittedly not the counsel of record of the UP. The rule is that it is on the counsel
and not the client that the service should be made. 93 That counsel was the OLS
in Diliman, Quezon City, which was served with the denial only on May 31, 2002.
As such, the running of the remaining period of six days resumed only on June 1,
2002, 94 rendering the filing of the UP's notice of appeal on June 3, 2002 timely
and well within the remaining days of the UP's period to appeal.
Verily, the service of the denial of the motion for reconsideration could only be
validly made upon the OLS in Diliman, and no other. The fact that Atty. Nolasco
was in the employ of the UP at the UPLB Legal Office did not render the service
upon him effective. It is settled that where a party has appeared by counsel,
service must be made upon such counsel. 95 Service on the party or the party's
employee is not effective because such notice is not notice in law. 96 This is clear
enough from Section 2, second paragraph, of Rule 13, Rules of Court, which
explicitly states that: "If any party has appeared by counsel, service upon him

shall be made upon his counsel or one of them, unless service upon the party
himself is ordered by the court. Where one counsel appears for several parties, he
shall only be entitled to one copy of any paper served upon him by the opposite
side." As such, the period to appeal resumed only on June 1, 2002, the date
following the service on May 31, 2002 upon the OLS in Diliman of the copy of the
decision of the RTC, not from the date when the UP was notified. 97 TaEIcS
Accordingly, the declaration of finality of the judgment of the RTC, being devoid of
factual and legal bases, is set aside.
Secondly, even assuming that the service upon Atty. Nolasco was valid and
effective, such that the remaining period for the UP to take a timely appeal would
end by May 23, 2002, it would still not be correct to find that the judgment of the
RTC became final and immutable thereafter due to the notice of appeal being filed
too late on June 3, 2002.
In so declaring the judgment of the RTC as final against the UP, the CA and the
RTC applied the rule contained in the second paragraph of Section 3, Rule 41 of
the Rules of Court to the effect that the filing of a motion for reconsideration
interrupted the running of the period for filing the appeal; and that the period
resumed upon notice of the denial of the motion for reconsideration. For that
reason, the CA and the RTC might not be taken to task for strictly adhering to the
rule then prevailing.
However, equity calls for the retroactive application in the UP's favor of the freshperiod rule that the Court first announced in mid-September of 2005 through its
ruling in Neypes v. Court of Appeals, 98 viz.:
To standardize the appeal periods provided in the Rules and to afford
litigants fair opportunity to appeal their cases, the Court deems it
practical to allow a fresh period of 15 days within which to file the
notice of appeal in the Regional Trial Court, counted from receipt of
the order dismissing a motion for a new trial or motion for
reconsideration.
The retroactive application of the fresh-period rule, a procedural law that aims "to
regiment or make the appeal period uniform, to be counted from receipt of the
order denying the motion for new trial, motion for reconsideration (whether full or
partial) or any final order or resolution," 99 is impervious to any serious challenge.

This is because there are no vested rights in rules of procedure. 100 A law or
regulation is procedural when it prescribes rules and forms of procedure in order
that courts may be able to administer justice. 101 It does not come within the
legal conception of a retroactive law, or is not subject of the general rule
prohibiting the retroactive operation of statutes, but is given retroactive effect in
actions pending and undetermined at the time of its passage without violating any
right of a person who may feel that he is adversely affected. AEIcSa
We have further said that a procedural rule that is amended for the benefit of
litigants in furtherance of the administration of justice shall be retroactively
applied

to

likewise

favor

actions

then

pending,

as

equity

delights

in

equality. 102 We may even relax stringent procedural rules in order to serve
substantial justice and in the exercise of this Court's equity jurisdiction. 103 Equity
jurisdiction aims to do complete justice in cases where a court of law is unable to
adapt its judgments to the special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction. 104
It is cogent to add in this regard that to deny the benefit of the fresh-period rule to
the UP would amount to injustice and absurdity injustice, because the judgment
in question was issued on November 28, 2001 as compared to the judgment
in Neypes that was rendered in 1998; absurdity, because parties receiving notices
of judgment and final orders issued in the year 1998 would enjoy the benefit of
the fresh-period rule but the later rulings of the lower courts like that herein would
not. 105
Consequently, even if the reckoning started from May 17, 2002, when Atty.
Nolasco received the denial, the UP's filing on June 3, 2002 of the notice of appeal
was not tardy within the context of the fresh-period rule. For the UP, the fresh
period of 15-days counted from service of the denial of the motion for
reconsideration would end on June 1, 2002, which was a Saturday. Hence, the UP
had until the next working day, or June 3, 2002, a Monday, within which to appeal,
conformably with Section 1 of Rule 22, Rules of Court, which holds that: "If the last
day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal
holiday in the place where the court sits, the time shall not run until the next
working day."
IV

Awards
being

of
devoid

monetary
of

factual

and

damages,
legal

bases,

did not attain finality and should be deleted

Section 14 of Article VIII of the Constitution prescribes that express findings of fact
and of law should be made in the decision rendered by any court, to wit:
Section 14. No decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on
which it is based.
No petition for review or motion for reconsideration of a decision of
the court shall be refused due course or denied without stating the
legal basis therefor. cDHAES
Implementing the constitutional provision in civil actions is Section 1 of Rule
36, Rules of Court, viz.:
Section 1. Rendition of judgments and final orders. A judgment or
final order determining the merits of the case shall be in writing
personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him,
and filed with the clerk of the court. (1a)
The Constitution and the Rules of Court apparently delineate two main essential
parts of a judgment, namely: the body and the decretal portion. Although the
latter is the controlling part, 106 the importance of the former is not to be lightly
regarded because it is there where the court clearly and distinctly states its
findings of fact and of law on which the decision is based. To state it differently,
one without the other is ineffectual and useless. The omission of either inevitably
results in a judgment that violates the letter and the spirit of the Constitution and
the Rules of Court.
The term findings of fact that must be found in the body of the decision refers to
statements of fact, not to conclusions of law. 107 Unlike in pleadings where
ultimate facts alone need to be stated, the Constitution and the Rules of
Court require not only that a decision should state the ultimate facts but also that
it should specify the supporting evidentiary facts, for they are what are called the
findings of fact.

The importance of the findings of fact and of law cannot be overstated. The
reason and purpose of the Constitution and the Rules of Court in that regard are
obviously to inform the parties why they win or lose, and what their rights and
obligations are. Only thereby is the demand of due process met as to the parties.
As Justice Isagani A. Cruz explained in Nicos Industrial Corporation v. Court of
Appeals: 108
It is a requirement of due process that the parties to a litigation be
informed of how it was decided, with an explanation of the factual
and legal reasons that led to the conclusions of the court. The court
cannot simply say that judgment is rendered in favor of X and against
Y and just leave it at that without any justification whatsoever for its
action. The losing party is entitled to know why he lost, so he may
appeal to a higher court, if permitted, should he believe that the
decision should be reversed. A decision that does not clearly and
distinctly state the facts and the law on which it is based leaves the
parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible
errors of the court for review by a higher tribunal. AECacS
Here, the decision of the RTC justified the grant of actual and moral damages, and
attorney's fees in the following terse manner, viz.:
. . . The Court is not unmindful that due to defendants' unjustified
refusal to pay their outstanding obligation to plaintiff, the same
suffered losses and incurred expenses as he was forced to remortgage his house and lot located in Quezon City to Metrobank (Exh.
"CC") and BPI Bank just to pay its monetary obligations in the form of
interest and penalties incurred in the course of the construction of the
subject project. 109
The statement that "due to defendants' unjustified refusal to pay their
outstanding obligation to plaintiff, the same suffered losses and incurred expenses
as he was forced to re-mortgage his house and lot located in Quezon City to
Metrobank (Exh. "CC") and BPI Bank just to pay its monetary obligations in the
form of interest and penalties incurred in the course of the construction of the
subject project" was only a conclusion of fact and law that did not comply with the
constitutional and statutory prescription. The statement specified no detailed

expenses or losses constituting the P5,716,729.00 actual damages sustained by

Stern Builders in relation to the construction project or to other pecuniary
hardships. The omission of such expenses or losses directly indicated that Stern
Builders did not prove them at all, which then contravened Article 2199, Civil
Code, the statutory basis for the award of actual damages, which entitled a
person to an adequate compensation only for such pecuniary loss suffered by
him as he has duly proved. As such, the actual damages allowed by the RTC,
being bereft of factual support, were speculative and whimsical. Without the clear
and distinct findings of fact and law, the award amounted only to an ipse dixit on
the part of the RTC, 110 and did not attain finality.
There was also no clear and distinct statement of the factual and legal support for
the award of moral damages in the substantial amount of P10,000,000.00. The
award was thus also speculative and whimsical. Like the actual damages, the
moral damages constituted another judicial ipse dixit, the inevitable consequence
of which was to render the award of moral damages incapable of attaining finality.
In addition, the grant of moral damages in that manner contravened the law that
permitted the recovery of moral damages as the means to assuage "physical
suffering,

mental anguish,

fright,

serious

anxiety,

besmirched

reputation,

wounded feelings, moral shock, social humiliation, and similar injury." 111 The
contravention of the law was manifest considering that Stern Builders, as an
artificial

person,

was

sufferings. 112 Assuming

incapable
that

in

of

experiencing

granting

the

pain

substantial

and

moral

amount

of

P10,000,000.00 as moral damages, the RTC might have had in mind that dela
Cruz had himself suffered mental anguish and anxiety. If that was the case, then
the RTC obviously disregarded his separate and distinct personality from that of
Stern Builders. 113 Moreover, his moral and emotional sufferings as the President
of Stern Builders were not the sufferings of Stern Builders. Lastly, the RTC violated
the basic principle that moral damages were not intended to enrich the plaintiff at
the expense of the defendant, but to restore the plaintiff to his status quo ante as
much as possible. Taken together, therefore, all these considerations exposed the
substantial amount of P10,000,000.00 allowed as moral damages not only to be
factually baseless and legally indefensible, but also to be unconscionable,
inequitable and unreasonable. cSTDIC
Like the actual and moral damages, the P150,000.00, plus P1,500.00 per
appearance, granted as attorney's fees were factually unwarranted and devoid of

legal basis. The general rule is that a successful litigant cannot recover attorney's
fees as part of the damages to be assessed against the losing party because of
the policy that no premium should be placed on the right to litigate. 114 Prior to
the effectivity of the present Civil Code, indeed, such fees could be recovered only
when there was a stipulation to that effect. It was only under the present Civil
Code that the right to collect attorney's fees in the cases mentioned in Article
2208 115 of

the Civil

Code came

to

be

recognized. 116 Nonetheless,

with

attorney's fees being allowed in the concept of actual damages, 117 their
amounts must be factually and legally justified in the body of the decision and not
stated for the first time in the decretal portion. 118 Stating the amounts only in
the dispositive portion of the judgment is not enough; 119 a rendition of the
factual and legal justifications for them must also be laid out in the body of the
decision. 120
That the attorney's fees granted to the private respondents did not satisfy the
foregoing requirement suffices for the Court to undo them. 121 The grant was
ineffectual for being contrary to law and public policy, it being clear that the
express findings of fact and law were intended to bring the case within the
exception and thereby justify the award of the attorney's fees. Devoid of such
express findings, the award was a conclusion without a premise, its basis being
improperly left to speculation and conjecture. 122
Nonetheless, the absence of findings of fact and of any statement of the law and
jurisprudence on which the awards of actual and moral damages, as well as of
attorney's fees, were based was a fatal flaw that invalidated the decision of the
RTC only as to such awards. As the Court declared in Velarde v. Social Justice
Society, 123the failure to comply with the constitutional requirement for a clear
and distinct statement of the supporting facts and law "is a grave abuse of
discretion amounting to lack or excess of jurisdiction" and that "(d)ecisions or
orders issued in careless disregard of the constitutional mandate are a patent
nullity and must be struck down as void." 124 The other item granted by the RTC
(i.e., P503,462.74) shall stand, subject to the action of the COA as stated herein.
WHEREFORE,

the

Court GRANTS the

petition

for

review

on certiorari; REVERSES and SETS ASIDE the decision of the Court of Appeals
under review; ANNULS the orders for the garnishment of the funds of the
University of the Philippines and for the release of the garnished amount to Stern

Builders Corporation and Servillano dela Cruz; and DELETES from the decision of
the Regional Trial Court dated November 28, 2001 for being void only the awards
of actual damages of P5,716,729.00, moral damages of P10,000,000.00, and
attorney's fees of P150,000.00, plus P1,500.00 per appearance, in favor of Stern
Builders Corporation and Servillano dela Cruz.
The Court ORDERS Stern Builders Corporation and Servillano dela Cruz to
redeposit the amount of P16,370,191.74 within 10 days from receipt of this
decision.
Costs of suit to be paid by the private respondents.
SO ORDERED. TaHDAS
Leonardo-de Castro, Del Castillo, Villarama, Jr. and Perlas-Bernabe, JJ., concur.