On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui (Amb.
Wang), wrote a letter to DOF Secretary Jose Isidro Camacho (Sec. Camacho)
EN BANC
G.R. No. 185572 February 7, 2012
CHINA NATIONAL MACHINERY & EQUIPMENT CORP.
(GROUP), Petitioner,
vs.
HON. CESAR D. SANTAMARIA, in his official capacity as Presiding Judge of
Branch 145, Regional Trial Court of Makati City, HERMINIO HARRY L.
ROQUE, JR., JOEL R. BUTUYAN, ROGER R. RAYEL, ROMEL R. BAGARES,
CHRISTOPHER FRANCISCO C. BOLASTIG, LEAGUE OF URBAN POOR
FOR ACTION (LUPA), KILUSAN NG MARALITA SA MEYCAUAYAN (KMM-
LUPA CHAPTER), DANILO M. CALDERON, VICENTE C. ALBAN, MERLYN
M. VAAL, LOLITA S. QUINONES, RICARDO D. LANOZO, JR., CONCHITA G.
GOZO, MA. TERESA D. ZEPEDA, JOSEFINA A. LANOZO, and SERGIO C.
LEGASPI, JR., KALIPUNAN NG DAMAYANG MAHIHIRAP (KADAMAY), EDY
CLERIGO, RAMMIL DINGAL, NELSON B. TERRADO, CARMEN DEUNIDA,
and EDUARDO LEGSON, Respondents.
DECISION
SERENO, J.:
This is a Petition for Review on Certiorari with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and/or Preliminary Injunction assailing the 30
September 2008 Decision and 5 December 2008 Resolution of the Court of Appeals
(CA) in CA–G.R. SP No. 103351.1
On 14 September 2002, petitioner China National Machinery & Equipment Corp.
(Group) (CNMEG), represented by its chairperson, Ren Hongbin, entered into a
Memorandum of Understanding with the North Luzon Railways Corporation
(Northrail), represented by its president, Jose L. Cortes, Jr. for the conduct of a
feasibility study on a possible railway line from Manila to San Fernando, La Union
(the Northrail Project).2
On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the
Department of Finance of the Philippines (DOF) entered into a Memorandum of
Understanding (Aug 30 MOU), wherein China agreed to extend Preferential Buyer’s
Credit to the Philippine government to finance the Northrail Project.3 The Chinese
government designated EXIM Bank as the lender, while the Philippine government
named the DOF as the borrower.4 Under the Aug 30 MOU, EXIM Bank agreed to
extend an amount not exceeding USD 400,000,000 in favor of the DOF, payable in 20
years, with a 5-year grace period, and at the rate of 3% per annum.5
informing him of CNMEG’s designation as the Prime Contractor for the Northrail
Project.6
On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon Railway System from Caloocan
to Malolos on a turnkey basis (the Contract Agreement).7 The contract price for the
Northrail Project was pegged at USD 421,050,000.8
On 26 February 2004, the Philippine government and EXIM Bank entered into a
counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055 (the
Loan Agreement).9 In the Loan Agreement, EXIM Bank agreed to extend Preferential
Buyer’s Credit in the amount of USD 400,000,000 in favor of the Philippine
government in order to finance the construction of Phase I of the Northrail Project.10
On 13 February 2006, respondents filed a Complaint for Annulment of Contract and
Injunction with Urgent Motion for Summary Hearing to Determine the Existence of
Facts and Circumstances Justifying the Issuance of Writs of Preliminary Prohibitory
and Mandatory Injunction and/or TRO against CNMEG, the Office of the Executive
Secretary, the DOF, the Department of Budget and Management, the National
Economic Development Authority and Northrail.11 The case was docketed as Civil
Case No. 06-203 before the Regional Trial Court, National Capital Judicial Region,
Makati City, Branch 145 (RTC Br. 145). In the Complaint, respondents alleged that
the Contract Agreement and the Loan Agreement were void for being contrary to (a)
the Constitution; (b) Republic Act No. 9184 (R.A. No. 9184), otherwise known as the
Government Procurement Reform Act; (c) Presidential Decree No. 1445, otherwise
known as the Government Auditing Code; and (d) Executive Order No. 292, otherwise
known as the Administrative Code.12
RTC Br. 145 issued an Order dated 17 March 2006 setting the case for hearing on the
issuance of injunctive reliefs.13 On 29 March 2006, CNMEG filed an Urgent Motion for
Reconsideration of this Order.14 Before RTC Br. 145 could rule thereon, CNMEG filed
a Motion to Dismiss dated 12 April 2006, arguing that the trial court did not have
jurisdiction over (a) its person, as it was an agent of the Chinese government, making
it immune from suit, and (b) the subject matter, as the Northrail Project was a
product of an executive agreement.15
On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEG’s Motion to
Dismiss and setting the case for summary hearing to determine whether the
injunctive reliefs prayed for should be issued.16 CNMEG then filed a Motion for
Reconsideration,17 which was denied by the trial court in an Order dated 10 March
2008.18 Thus, CNMEG filed before the CA a Petition for Certiorari with Prayer for the
Issuance of TRO and/or Writ of Preliminary Injunction dated 4 April 2008. 19
In the assailed Decision dated 30 September 2008, the appellate court dismissed the
Petition for Certiorari.20Subsequently, CNMEG filed a Motion for
Reconsideration, which was denied by the CA in a Resolution dated 5 December
21
2008.22 Thus, CNMEG filed the instant Petition for Review on Certiorari dated 21
January 2009, raising the following issues: 23
Whether or not petitioner CNMEG is an agent of the sovereign People’s Republic of
China.
Whether or not the Northrail contracts are products of an executive agreement
between two sovereign states.
Whether or not the certification from the Department of Foreign Affairs is necessary
under the foregoing circumstances.
Whether or not the act being undertaken by petitioner CNMEG is an act jure imperii.
Whether or not the Court of Appeals failed to avoid a procedural limbo in the lower
court.
Whether or not the Northrail Project is subject to competitive public bidding.
Whether or not the Court of Appeals ignored the ruling of this Honorable Court in the
Neri case.
CNMEG prays for the dismissal of Civil Case No. 06-203 before RTC Br. 145 for lack
of jurisdiction. It likewise requests this Court for the issuance of a TRO and, later on,
a writ of preliminary injunction to restrain public respondent from proceeding with
the disposition of Civil Case No. 06-203.
The crux of this case boils down to two main issues, namely:
1. Whether CNMEG is entitled to immunity, precluding it from being sued
before a local court.
2. Whether the Contract Agreement is an executive agreement, such that it
cannot be questioned by or before a local court.
First issue: Whether CNMEG is entitled to immunity
This Court explained the doctrine of sovereign immunity in Holy See v. Rosario,24 to
wit:
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot,
without its consent, be made a respondent in the courts of another
sovereign. According to the newer or restrictive theory, the immunity of the
sovereign is recognized only with regard to public acts or acts jure
imperii of a state, but not with regard to private acts or acts jure
gestionis. (Emphasis supplied; citations omitted.)
xxx xxx xxx
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental
functions. This is particularly true with respect to the Communist states which took
control of nationalized business activities and international trading.
In JUSMAG v. National Labor Relations Commission,25 this Court affirmed the
Philippines’ adherence to the restrictive theory as follows:
The doctrine of state immunity from suit has undergone further metamorphosis. The
view evolved that the existence of a contract does not, per se, mean that sovereign
states may, at all times, be sued in local courts. The complexity of relationships
between sovereign states, brought about by their increasing commercial activities,
mothered a more restrictive application of the doctrine.
xxx xxx xxx
As it stands now, the application of the doctrine of immunity from suit has been
restricted to sovereign or governmental activities (jure imperii). The mantle of state
immunity cannot be extended to commercial, private and proprietary acts (jure
gestionis).26 (Emphasis supplied.)
Since the Philippines adheres to the restrictive theory, it is crucial to ascertain the
legal nature of the act involved – whether the entity claiming immunity performs
governmental, as opposed to proprietary, functions. As held in United States of
America v. Ruiz –27
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.28
A. CNMEG is engaged in a proprietary activity.
A threshold question that must be answered is whether CNMEG performs
governmental or proprietary functions. A thorough examination of the basic facts of
the case would show that CNMEG is engaged in a proprietary activity.
The parties executed the Contract Agreement for the purpose of constructing the
Luzon Railways, viz:29
WHEREAS the Employer (Northrail) desired to construct the railways form Caloocan
to Malolos, section I, Phase I of Philippine North Luzon Railways Project (hereinafter
referred to as THE PROJECT);
AND WHEREAS the Contractor has offered to provide the Project on Turnkey basis,
including design, manufacturing, supply, construction, commissioning, and training of
the Employer’s personnel;
AND WHEREAS the Loan Agreement of the Preferential Buyer’s Credit between
Export-Import Bank of China and Department of Finance of Republic of the
Philippines;
NOW, THEREFORE, the parties agree to sign this Contract for the Implementation
of the Project.
The above-cited portion of the Contract Agreement, however, does not on its own
reveal whether the construction of the Luzon railways was meant to be a proprietary
endeavor. In order to fully understand the intention behind and the purpose of the
entire undertaking, the Contract Agreement must not be read in isolation. Instead, it
must be construed in conjunction with three other documents executed in relation to
the Northrail Project, namely: (a) the Memorandum of Understanding dated 14
September 2002 between Northrail and CNMEG;30 (b) the letter of Amb. Wang dated
1 October 2003 addressed to Sec. Camacho;31 and (c) the Loan Agreement.32
1. Memorandum of Understanding dated 14 September 2002
The Memorandum of Understanding dated 14 September 2002 shows that CNMEG
sought the construction of the Luzon Railways as a proprietary venture. The relevant
parts thereof read:
WHEREAS, CNMEG has the financial capability, professional competence and
technical expertise to assess the state of the [Main Line North (MLN)] and
recommend implementation plans as well as undertake its rehabilitation and/or
modernization;
WHEREAS, CNMEG has expressed interest in the rehabilitation and/or
modernization of the MLN from Metro Manila to San Fernando, La Union passing
through the provinces of Bulacan, Pampanga, Tarlac, Pangasinan and La Union (the
‘Project’);
WHEREAS, the NORTHRAIL CORP. welcomes CNMEG’s proposal to undertake a
Feasibility Study (the "Study") at no cost to NORTHRAIL CORP.;
WHEREAS, the NORTHRAIL CORP. also welcomes CNMEG’s interest in
undertaking the Project with Supplier’s Credit and intends to employ CNMEG as the
Contractor for the Project subject to compliance with Philippine and Chinese laws,
rules and regulations for the selection of a contractor;
WHEREAS, the NORTHRAIL CORP. considers CNMEG’s proposal advantageous to
the Government of the Republic of the Philippines and has therefore agreed to assist
CNMEG in the conduct of the aforesaid Study;
xxx xxx xxx
II. APPROVAL PROCESS
2.1 As soon as possible after completion and presentation of the Study in accordance
with Paragraphs 1.3 and 1.4 above and in compliance with necessary governmental
laws, rules, regulations and procedures required from both parties, the parties shall
commence the preparation and negotiation of the terms and conditions of the Contract
(the "Contract") to be entered into between them on the implementation of the Project.
The parties shall use their best endeavors to formulate and finalize a Contract with a
view to signing the Contract within one hundred twenty (120) days from CNMEG’s
presentation of the Study.33 (Emphasis supplied)
Clearly, it was CNMEG that initiated the undertaking, and not the Chinese
government. The Feasibility Study was conducted not because of any diplomatic
gratuity from or exercise of sovereign functions by the Chinese government, but was
plainly a business strategy employed by CNMEG with a view to securing this
commercial enterprise.
2. Letter dated 1 October 2003
That CNMEG, and not the Chinese government, initiated the Northrail Project was
confirmed by Amb. Wang in his letter dated 1 October 2003, thus:
1. CNMEG has the proven competence and capability to undertake the
Project as evidenced by the ranking of 42 given by the ENR among 225 global
construction companies.
2. CNMEG already signed an MOU with the North Luzon Railways
Corporation last September 14, 2000 during the visit of Chairman Li Peng.
Such being the case, they have already established an initial working
relationship with your North Luzon Railways Corporation. This would
categorize CNMEG as the state corporation within the People’s Republic of
China which initiated our Government’s involvement in the Project.
3. Among the various state corporations of the People’s Republic of China,
only CNMEG has the advantage of being fully familiar with the current
requirements of the Northrail Project having already accomplished a
Feasibility Study which was used as inputs by the North Luzon Railways
 Corporation in the approvals (sic) process required by the Republic of the
Philippines.34 (Emphasis supplied.)
Thus, the desire of CNMEG to secure the Northrail Project was in the ordinary or
regular course of its business as a global construction company. The implementation
of the Northrail Project was intended to generate profit for CNMEG, with the
Contract Agreement placing a contract price of USD 421,050,000 for the
venture.35 The use of the term "state corporation" to refer to CNMEG was only
descriptive of its nature as a government-owned and/or -controlled corporation, and its
assignment as the Primary Contractor did not imply that it was acting on behalf of
China in the performance of the latter’s sovereign functions. To imply otherwise would
result in an absurd situation, in which all Chinese corporations owned by the state
would be automatically considered as performing governmental activities, even if they
are clearly engaged in commercial or proprietary pursuits.
3. The Loan Agreement
CNMEG claims immunity on the ground that the Aug 30 MOU on the financing of the
Northrail Project was signed by the Philippine and Chinese governments, and its
assignment as the Primary Contractor meant that it was bound to perform a
governmental function on behalf of China. However, the Loan Agreement, which
originated from the same Aug 30 MOU, belies this reasoning, viz:
Article 11. xxx (j) Commercial Activity The execution and delivery of this Agreement
by the Borrower constitute, and the Borrower’s performance of and compliance with
its obligations under this Agreement will constitute, private and commercial acts
done and performed for commercial purposes under the laws of the Republic
of the Philippines and neither the Borrower nor any of its assets is entitled
to any immunity or privilege (sovereign or otherwise) from suit, execution
or any other legal process with respect to its obligations under this
Agreement, as the case may be, in any jurisdiction. Notwithstanding the
foregoing, the Borrower does not waive any immunity with respect of its assets which
are (i) used by a diplomatic or consular mission of the Borrower and (ii) assets of a
military character and under control of a military authority or defense agency and (iii)
located in the Philippines and dedicated to public or governmental use (as
distinguished from patrimonial assets or assets dedicated to commercial use).
(Emphasis supplied.)
(k) Proceedings to Enforce Agreement In any proceeding in the Republic of the
Philippines to enforce this Agreement, the choice of the laws of the People’s Republic
of China as the governing law hereof will be recognized and such law will be applied.
The waiver of immunity by the Borrower, the irrevocable submissions of the Borrower
to the non-exclusive jurisdiction of the courts of the People’s Republic of China and the
appointment of the Borrower’s Chinese Process Agent is legal, valid, binding and
enforceable and any judgment obtained in the People’s Republic of China will be if
introduced, evidence for enforcement in any proceedings against the Borrower and its
assets in the Republic of the Philippines provided that (a) the court rendering
judgment had jurisdiction over the subject matter of the action in accordance with its
jurisdictional rules, (b) the Republic had notice of the proceedings, (c) the judgment of
the court was not obtained through collusion or fraud, and (d) such judgment was not
based on a clear mistake of fact or law.36
Further, the Loan Agreement likewise contains this express waiver of immunity:
15.5 Waiver of Immunity The Borrower irrevocably and unconditionally waives, any
immunity to which it or its property may at any time be or become entitled, whether
characterized as sovereign immunity or otherwise, from any suit, judgment, service of
process upon it or any agent, execution on judgment, set-off, attachment prior to
judgment, attachment in aid of execution to which it or its assets may be entitled in
any legal action or proceedings with respect to this Agreement or any of the
transactions contemplated hereby or hereunder. Notwithstanding the foregoing, the
Borrower does not waive any immunity in respect of its assets which are (i) used by a
diplomatic or consular mission of the Borrower, (ii) assets of a military character and
under control of a military authority or defense agency and (iii) located in the
Philippines and dedicated to a public or governmental use (as distinguished from
patrimonial assets or assets dedicated to commercial use).37
Thus, despite petitioner’s claim that the EXIM Bank extended financial assistance to
Northrail because the bank was mandated by the Chinese government, and not
because of any motivation to do business in the Philippines,38 it is clear from the
foregoing provisions that the Northrail Project was a purely commercial transaction.
Admittedly, the Loan Agreement was entered into between EXIM Bank and the
Philippine government, while the Contract Agreement was between Northrail and
CNMEG. Although the Contract Agreement is silent on the classification of the legal
nature of the transaction, the foregoing provisions of the Loan Agreement, which is an
inextricable part of the entire undertaking, nonetheless reveal the intention of the
parties to the Northrail Project to classify the whole venture as commercial or
proprietary in character.
Thus, piecing together the content and tenor of the Contract Agreement, the
Memorandum of Understanding dated 14 September 2002, Amb. Wang’s letter dated
1 October 2003, and the Loan Agreement would reveal the desire of CNMEG to
construct the Luzon Railways in pursuit of a purely commercial activity performed in
the ordinary course of its business.
B. CNMEG failed to adduce evidence that it is immune from suit under Chinese law.
Even assuming arguendo that CNMEG performs governmental functions, such claim
does not automatically vest it with immunity. This view finds support in Malong v.
Philippine National Railways, in which this Court held that "(i)mmunity from suit is
determined by the character of the objects for which the entity was organized."39
In this regard, this Court’s ruling in Deutsche Gesellschaft Für Technische
Zusammenarbeit (GTZ) v. CA40 must be examined. In Deutsche Gesellschaft,
Germany and the Philippines entered into a Technical Cooperation Agreement,
pursuant to which both signed an arrangement promoting the Social Health
Insurance–Networking and Empowerment (SHINE) project. The two governments
named their respective implementing organizations: the Department of Health (DOH)
and the Philippine Health Insurance Corporation (PHIC) for the Philippines, and GTZ
for the implementation of Germany’s contributions. In ruling that GTZ was not
immune from suit, this Court held:
The arguments raised by GTZ and the [Office of the Solicitor General (OSG)] are
rooted in several indisputable facts. The SHINE project was implemented pursuant to
the bilateral agreements between the Philippine and German governments. GTZ was
tasked, under the 1991 agreement, with the implementation of the contributions of
the German government. The activities performed by GTZ pertaining to the SHINE
project are governmental in nature, related as they are to the promotion of health
insurance in the Philippines. The fact that GTZ entered into employment contracts
with the private respondents did not disqualify it from invoking immunity from suit,
as held in cases such as Holy See v. Rosario, Jr., which set forth what remains valid
doctrine:
Certainly, the mere entering into a contract by a foreign state with a private party
cannot be the ultimate test. Such an act can only be the start of the inquiry. The
logical question is whether the foreign state is engaged in the activity in the regular
course of business. If the foreign state is not engaged regularly in a business or trade,
the particular act or transaction must then be tested by its nature. If the act is in
pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii,
especially when it is not undertaken for gain or profit.
Beyond dispute is the tenability of the comment points (sic) raised by GTZ and the
OSG that GTZ was not performing proprietary functions notwithstanding its entry
into the particular employment contracts. Yet there is an equally fundamental
premise which GTZ and the OSG fail to address, namely: Is GTZ, by conception, able
to enjoy the Federal Republic’s immunity from suit?
The principle of state immunity from suit, whether a local state or a foreign state, is
reflected in Section 9, Article XVI of the Constitution, which states that "the State
may not be sued without its consent." Who or what consists of "the State"? For one,
the doctrine is available to foreign States insofar as they are sought to be sued in the
courts of the local State, necessary as it is to avoid "unduly vexing the peace of
nations."
If the instant suit had been brought directly against the Federal Republic of Germany,
there would be no doubt that it is a suit brought against a State, and the only
necessary inquiry is whether said State had consented to be sued. However, the
present suit was brought against GTZ. It is necessary for us to understand what
precisely are the parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as "the implementing agency of the
Government of the Federal Republic of Germany," a depiction similarly adopted
by the OSG. Assuming that the characterization is correct, it does not
automatically invest GTZ with the ability to invoke State immunity from
suit. The distinction lies in whether the agency is incorporated or unincorporated.
xxx xxx xxx
State immunity from suit may be waived by general or special law. The special law
can take the form of the original charter of the incorporated government agency.
Jurisprudence is replete with examples of incorporated government agencies which
were ruled not entitled to invoke immunity from suit, owing to provisions in their
charters manifesting their consent to be sued.
xxx xxx xxx
It is useful to note that on the part of the Philippine government, it had designated
two entities, the Department of Health and the Philippine Health Insurance
Corporation (PHIC), as the implementing agencies in behalf of the Philippines. The
PHIC was established under Republic Act No. 7875, Section 16 (g) of which grants the
corporation the power "to sue and be sued in court." Applying the previously cited
jurisprudence, PHIC would not enjoy immunity from suit even in the performance of
its functions connected with SHINE, however, (sic) governmental in nature as (sic)
they may be.
Is GTZ an incorporated agency of the German government? There is some
mystery surrounding that question. Neither GTZ nor the OSG go beyond the
claim that petitioner is "the implementing agency of the Government of the
Federal Republic of Germany." On the other hand, private respondents asserted
before the Labor Arbiter that GTZ was "a private corporation engaged in the
implementation of development projects." The Labor Arbiter accepted that claim in
his Order denying the Motion to Dismiss, though he was silent on that point in his
Decision. Nevertheless, private respondents argue in their Comment that the finding
that GTZ was a private corporation "was never controverted, and is therefore deemed
admitted." In its Reply, GTZ controverts that finding, saying that it is a matter of
public knowledge that the status of petitioner GTZ is that of the "implementing
agency," and not that of a private corporation.
In truth, private respondents were unable to adduce any evidence to substantiate
their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly
in accepting such claim without explanation. But neither has GTZ supplied any
evidence defining its legal nature beyond that of the bare descriptive
"implementing agency." There is no doubt that the 1991 Agreement
designated GTZ as the "implementing agency" in behalf of the German
government. Yet the catch is that such term has no precise definition that is
responsive to our concerns. Inherently, an agent acts in behalf of a
principal, and the GTZ can be said to act in behalf of the German state. But
that is as far as "implementing agency" could take us. The term by itself does
not supply whether GTZ is incorporated or unincorporated, whether it is
owned by the German state or by private interests, whether it has juridical
personality independent of the German government or none at all.
xxx xxx xxx
Again, we are uncertain of the corresponding legal implications under
German law surrounding "a private company owned by the Federal Republic
of Germany." Yet taking the description on face value, the apparent
equivalent under Philippine law is that of a corporation organized under the
Corporation Code but owned by the Philippine government, or a
government-owned or controlled corporation without original charter. And
it bears notice that Section 36 of the Corporate Code states that "[e]very
corporation incorporated under this Code has the power and capacity x x x
to sue and be sued in its corporate name."
It is entirely possible that under German law, an entity such as GTZ or particularly
GTZ itself has not been vested or has been specifically deprived the power and
capacity to sue and/or be sued. Yet in the proceedings below and before this
Court, GTZ has failed to establish that under German law, it has not
consented to be sued despite it being owned by the Federal Republic of
Germany. We adhere to the rule that in the absence of evidence to the
contrary, foreign laws on a particular subject are presumed to be the same
as those of the Philippines, and following the most intelligent assumption we
can gather, GTZ is akin to a governmental owned or controlled corporation
without original charter which, by virtue of the Corporation Code, has
expressly consented to be sued. At the very least, like the Labor Arbiter and the
Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ
enjoys immunity from suit.41 (Emphasis supplied.)
Applying the foregoing ruling to the case at bar, it is readily apparent that CNMEG
cannot claim immunity from suit, even if it contends that it performs governmental
functions. Its designation as the Primary Contractor does not automatically grant it
immunity, just as the term "implementing agency" has no precise definition for
purposes of ascertaining whether GTZ was immune from suit. Although CNMEG
claims to be a government-owned corporation, it failed to adduce evidence that it has
not consented to be sued under Chinese law. Thus, following this Court’s ruling in
Deutsche Gesellschaft, in the absence of evidence to the contrary, CNMEG is to be
presumed to be a government-owned and -controlled corporation without an original
charter. As a result, it has the capacity to sue and be sued under Section 36 of the
Corporation Code.
C. CNMEG failed to present a certification from the Department of Foreign Affairs.
In Holy See,42 this Court reiterated the oft-cited doctrine that the determination by
the Executive that an entity is entitled to sovereign or diplomatic immunity is a
political question conclusive upon the courts, to wit:
In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of
the state where it is sued to convey to the court that said defendant is entitled to
immunity.
xxx xxx xxx
In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement
to the courts varies. In International Catholic Migration Commission v. Calleja, 190
SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the
Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to
make, in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the
"suggestion" in a Manifestation and Memorandum as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal
Affairs moved with this Court to be allowed to intervene on the side of petitioner. The
Court allowed the said Department to file its memorandum in support of petitioner’s
claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75
Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948];
United States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In
cases where the foreign states bypass the Foreign Office, the courts can inquire into
the facts and make their own determination as to the nature of the acts and
transactions involved.43 (Emphasis supplied.)
The question now is whether any agency of the Executive Branch can make a
determination of immunity from suit, which may be considered as conclusive upon the
courts. This Court, in Department of Foreign Affairs (DFA) v. National Labor
Relations Commission (NLRC),44 emphasized the DFA’s competence and authority to
provide such necessary determination, to wit:
The DFA’s function includes, among its other mandates, the determination of persons
and institutions covered by diplomatic immunities, a determination which, when
challenge, (sic) entitles it to seek relief from the court so as not to seriously impair the
conduct of the country's foreign relations. The DFA must be allowed to plead its case
whenever necessary or advisable to enable it to help keep the credibility of the
Philippine government before the international community. When international
agreements are concluded, the parties thereto are deemed to have likewise accepted
the responsibility of seeing to it that their agreements are duly regarded. In our
country, this task falls principally of (sic) the DFA as being the highest executive with a DFA certification, however, it must be remembered that this Court is not
department with the competence and authority to so act in this aspect of the precluded from making an inquiry into the intrinsic correctness of such certification.
international arena.45 (Emphasis supplied.)
D. An agreement to submit any dispute to arbitration may be construed as an implicit
Further, the fact that this authority is exclusive to the DFA was also emphasized in waiver of immunity from suit.
this Court’s ruling in Deutsche Gesellschaft:
In the United States, the Foreign Sovereign Immunities Act of 1976 provides for a
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was waiver by implication of state immunity. In the said law, the agreement to submit
imperative for petitioners to secure from the Department of Foreign Affairs "a disputes to arbitration in a foreign country is construed as an implicit waiver of
certification of respondents’ diplomatic status and entitlement to diplomatic privileges immunity from suit. Although there is no similar law in the Philippines, there is
including immunity from suits." The requirement might not necessarily be reason to apply the legal reasoning behind the waiver in this case.
imperative. However, had GTZ obtained such certification from the DFA, it would
have provided factual basis for its claim of immunity that would, at the very least, The Conditions of Contract,48 which is an integral part of the Contract
establish a disputable evidentiary presumption that the foreign party is indeed Agreement,49 states:
immune which the opposing party will have to overcome with its own factual
evidence. We do not see why GTZ could not have secured such certification or
33. SETTLEMENT OF DISPUTES AND ARBITRATION
endorsement from the DFA for purposes of this case. Certainly, it would have been
highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the
motion to dismiss. Still, even at this juncture, we do not see any evidence that the 33.1. Amicable Settlement
DFA, the office of the executive branch in charge of our diplomatic relations, has
indeed endorsed GTZ’s claim of immunity. It may be possible that GTZ tried, but Both parties shall attempt to amicably settle all disputes or controversies arising from
failed to secure such certification, due to the same concerns that we have discussed this Contract before the commencement of arbitration.
herein.
33.2. Arbitration
Would the fact that the Solicitor General has endorsed GTZ’s claim of State’s
immunity from suit before this Court sufficiently substitute for the DFA certification?
All disputes or controversies arising from this Contract which cannot be settled
Note that the rule in public international law quoted in Holy See referred to
between the Employer and the Contractor shall be submitted to arbitration in
endorsement by the Foreign Office of the State where the suit is filed, such foreign
accordance with the UNCITRAL Arbitration Rules at present in force and as may be
office in the Philippines being the Department of Foreign Affairs. Nowhere in the
amended by the rest of this Clause. The appointing authority shall be Hong Kong
Comment of the OSG is it manifested that the DFA has endorsed GTZ’s claim, or that
International Arbitration Center. The place of arbitration shall be in Hong Kong at
the OSG had solicited the DFA’s views on the issue. The arguments raised by the OSG
Hong Kong International Arbitration Center (HKIAC).
are virtually the same as the arguments raised by GTZ without any indication of any
special and distinct perspective maintained by the Philippine government on the
issue. The Comment filed by the OSG does not inspire the same degree of confidence Under the above provisions, if any dispute arises between Northrail and CNMEG,
as a certification from the DFA would have elicited.46 (Emphasis supplied.) both parties are bound to submit the matter to the HKIAC for arbitration. In case the
HKIAC makes an arbitral award in favor of Northrail, its enforcement in the
Philippines would be subject to the Special Rules on Alternative Dispute Resolution
In the case at bar, CNMEG offers the Certification executed by the Economic and
(Special Rules). Rule 13 thereof provides for the Recognition and Enforcement of a
Commercial Office of the Embassy of the People’s Republic of China, stating that the
Foreign Arbitral Award. Under Rules 13.2 and 13.3 of the Special Rules, the party to
Northrail Project is in pursuit of a sovereign activity.47Surely, this is not the kind of
arbitration wishing to have an arbitral award recognized and enforced in the
certification that can establish CNMEG’s entitlement to immunity from suit, as Holy
Philippines must petition the proper regional trial court (a) where the assets to be
See unequivocally refers to the determination of the "Foreign Office of the state where
attached or levied upon is located; (b) where the acts to be enjoined are being
it is sued."
performed; (c) in the principal place of business in the Philippines of any of the
parties; (d) if any of the parties is an individual, where any of those individuals
Further, CNMEG also claims that its immunity from suit has the executive resides; or (e) in the National Capital Judicial Region.
endorsement of both the OSG and the Office of the Government Corporate Counsel
(OGCC), which must be respected by the courts. However, as expressly enunciated in
Deutsche Gesellschaft, this determination by the OSG, or by the OGCC for that
matter, does not inspire the same degree of confidence as a DFA certification. Even
From all the foregoing, it is clear that CNMEG has agreed that it will not be afforded
immunity from suit. Thus, the courts have the competence and jurisdiction to
ascertain the validity of the Contract Agreement.
Second issue: Whether the Contract Agreement is an executive agreement
Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna Convention)
defines a treaty as follows:
APPLICABLE LAW AND GOVERNING LANGUAGE
The contract shall in all respects be read and construed in accordance with the laws of
the Philippines.
The contract shall be written in English language. All correspondence and other
documents pertaining to the Contract which are exchanged by the parties shall be
written in English language.

[A]n international agreement concluded between States in written form and governed Since the Contract Agreement explicitly provides that Philippine law shall be
by international law, whether embodied in a single instrument or in two or more applicable, the parties have effectively conceded that their rights and obligations
related instruments and whatever its particular designation. thereunder are not governed by international law.

In Bayan Muna v. Romulo, this Court held that an executive agreement is similar to a It is therefore clear from the foregoing reasons that the Contract Agreement does not
treaty, except that the former (a) does not require legislative concurrence; (b) is partake of the nature of an executive agreement. It is merely an ordinary commercial
usually less formal; and (c) deals with a narrower range of subject matters. 50 contract that can be questioned before the local courts.

Despite these differences, to be considered an executive agreement, the following
three requisites provided under the Vienna Convention must nevertheless concur: (a)
the agreement must be between states; (b) it must be written; and (c) it must
governed by international law. The first and the third requisites do not obtain in the
case at bar.
A. CNMEG is neither a government nor a government agency.
WHEREFORE, the instant Petition is DENIED. Petitioner China National
Machinery & Equipment Corp. (Group) is not entitled to immunity from suit, and the
Contract Agreement is not an executive agreement. CNMEG’s prayer for the issuance
of a TRO and/or Writ of Preliminary Injunction is DENIED for being moot and
academic. This case is REMANDED to the Regional Trial Court of Makati, Branch
145, for further proceedings as regards the validity of the contracts subject of Civil
Case No. 06-203.

The Contract Agreement was not concluded between the Philippines and China, but No pronouncement on costs of suit.
between Northrail and CNMEG.51 By the terms of the Contract Agreement, Northrail
is a government-owned or -controlled corporation, while CNMEG is a corporation duly SO ORDERED.
organized and created under the laws of the People’s Republic of China. 52 Thus, both
Northrail and CNMEG entered into the Contract Agreement as entities with
personalities distinct and separate from the Philippine and Chinese governments,
respectively.

Neither can it be said that CNMEG acted as agent of the Chinese government. As
previously discussed, the fact that Amb. Wang, in his letter dated 1 October
2003,53 described CNMEG as a "state corporation" and declared its designation as the
Primary Contractor in the Northrail Project did not mean it was to perform sovereign
functions on behalf of China. That label was only descriptive of its nature as a state-
owned corporation, and did not preclude it from engaging in purely commercial or
proprietary ventures.

B. The Contract Agreement is to be governed by Philippine law.

Article 2 of the Conditions of Contract,54 which under Article 1.1 of the Contract
Agreement is an integral part of the latter, states:
 THIRD DIVISION
G.R. No. 159402 February 23, 2011
AIR TRANSPORTATION OFFICE, Petitioner,
vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.
RESOLUTION
BERSAMIN, J.:
The State’s immunity from suit does not extend to the petitioner because it is an
agency of the State engaged in an enterprise that is far from being the State’s
exclusive prerogative.
Under challenge is the decision promulgated on May 14, 2003,1 by which the Court of
Appeals (CA) affirmed with modification the decision rendered on February 21, 2001
by the Regional Trial Court, Branch 61 (RTC), in Baguio City in favor of the
respondents.2
Antecedents
Spouses David and Elisea Ramos (respondents) discovered that a portion of their land
registered under Transfer Certificate of Title No. T-58894 of the Baguio City land
records with an area of 985 square meters, more or less, was being used as part of the
runway and running shoulder of the Loakan Airport being operated by petitioner Air
Transportation Office (ATO). On August 11, 1995, the respondents agreed after
negotiations to convey the affected portion by deed of sale to the ATO in consideration
of the amount of ₱778,150.00. However, the ATO failed to pay despite repeated verbal
and written demands.
Thus, on April 29, 1998, the respondents filed an action for collection against the ATO
and some of its officials in the RTC (docketed as Civil Case No. 4017-R and entitled
Spouses David and Elisea Ramos v. Air Transportation Office, Capt. Panfilo Villaruel,
Gen. Carlos Tanega, and Mr. Cesar de Jesus).
In their answer, the ATO and its co-defendants invoked as an affirmative defense the
issuance of Proclamation No. 1358, whereby President Marcos had reserved certain
parcels of land that included the respondents’ affected portion for use of the Loakan
Airport. They asserted that the RTC had no jurisdiction to entertain the action
without the State’s consent considering that the deed of sale had been entered into in
the performance of governmental functions.
On November 10, 1998, the RTC denied the ATO’s motion for a preliminary hearing of
the affirmative defense.
After the RTC likewise denied the ATO’s motion for reconsideration on December 10,
1998, the ATO commenced a special civil action for certiorari in the CA to assail the
RTC’s orders. The CA dismissed the petition for certiorari, however, upon its finding
that the assailed orders were not tainted with grave abuse of discretion.3
Subsequently, February 21, 2001, the RTC rendered its decision on the
merits,4 disposing:
WHEREFORE, the judgment is rendered ORDERING the defendant Air
Transportation Office to pay the plaintiffs DAVID and ELISEA RAMOS the following:
(1) The amount of ₱778,150.00 being the value of the parcel of land appropriated by
the defendant ATO as embodied in the Deed of Sale, plus an annual interest of 12%
from August 11, 1995, the date of the Deed of Sale until fully paid; (2) The amount of
₱150,000.00 by way of moral damages and ₱150,000.00 as exemplary damages; (3) the
amount of ₱50,000.00 by way of attorney’s fees plus ₱15,000.00 representing the 10,
more or less, court appearances of plaintiff’s counsel; (4) The costs of this suit.
SO ORDERED.
In due course, the ATO appealed to the CA, which affirmed the RTC’s decision on May
14, 2003,5 viz:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED,
with MODIFICATION that the awarded cost therein is deleted, while that of moral
and exemplary damages is reduced to ₱30,000.00 each, and attorney’s fees is lowered
to ₱10,000.00.
No cost.
SO ORDERED.
Hence, this appeal by petition for review on certiorari.
Issue
The only issue presented for resolution is whether the ATO could be sued without the
State’s consent.
Ruling
The petition for review has no merit.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State, is expressly provided in Article XVI of the
1987 Constitution, viz:
Section 3. The State may not be sued without its consent.
The immunity from suit is based on the political truism that the State, as a sovereign,
can do no wrong. Moreover, as the eminent Justice Holmes said in Kawananakoa v.
Polyblank:6
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178
US 436, 44 L ed 1140, 20 Sup. Ct. Rep. 919), and it took no objection to the
proceedings in the cases cited if it could have done so. xxx But in the case at bar it did
object, and the question raised is whether the plaintiffs were bound to yield. Some
doubts have been expressed as to the source of the immunity of a sovereign power
from suit without its own permission, but the answer has been public property since
before the days of Hobbes. Leviathan, chap. 26, 2. 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. "Car on peut bien recevoir loy d'autruy, mais il est
impossible par nature de se donner loy." Bodin, Republique, 1, chap. 8, ed. 1629, p.
132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur
necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol.
61.7
Practical considerations dictate the establishment of an immunity from suit in favor
of the State. Otherwise, and the State is suable at the instance of every other
individual, government service may be severely obstructed and public safety
endangered because of the number of suits that the State has to defend
against.8 Several justifications have been offered to support the adoption of the
doctrine in the Philippines, but that offered in Providence Washington Insurance Co.
v. Republic of the Philippines9 is "the most acceptable explanation," according to
Father Bernas, a recognized commentator on Constitutional Law, 10 to wit:
[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.
An unincorporated government agency without any separate juridical personality of
its own enjoys immunity from suit because it is invested with an inherent power of
sovereignty. Accordingly, a claim for damages against the agency cannot prosper;
otherwise, the doctrine of sovereign immunity is violated. 11 However, the need to
distinguish between an unincorporated government agency performing governmental
function and one performing proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is governmental or incidental to
such function;12 it has not been upheld in favor of the latter whose function was not in
pursuit of a necessary function of government but was essentially a business. 13
Should the doctrine of sovereignty immunity or non-suability of the State be extended
to the ATO?
In its challenged decision,14 the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us that the subject
contract of sale partook of a governmental character. Apropos, the lower court erred in
applying the High Court’s ruling in National Airports Corporation vs. Teodoro (91
Phil. 203 [1952]), arguing that in Teodoro, the matter involved the collection of
landing and parking fees which is a proprietary function, while the case at bar
involves the maintenance and operation of aircraft and air navigational facilities and
services which are governmental functions.
We are not persuaded.
Contrary to appellants’ conclusions, it was not merely the collection of landing and
parking fees which was declared as proprietary in nature by the High Court
in Teodoro, but management and maintenance of airport operations as a whole, as
well. Thus, in the much later case of Civil Aeronautics Administration vs. Court of
Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the pronouncements
laid down in Teodoro, declared that the CAA (predecessor of ATO) is an agency not
immune from suit, it being engaged in functions pertaining to a private entity. It went
on to explain in this wise:
xxx
The Civil Aeronautics Administration comes under the category of a private entity.
Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of travel
and the convenience of the travelling public. It is engaged in an enterprise which, far
from being the exclusive prerogative of state, may, more than the construction of
public roads, be undertaken by private concerns. [National Airports Corp. v.
Teodoro, supra, p. 207.]
xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec.
Order 365 (Reorganizing the Civil Aeronautics Administration and Abolishing the
National Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act of the
Philippines), subsequently enacted on June 20, 1952, did not alter the character of the
CAA’s objectives under Exec. Order 365. The pertinent provisions cited in
the Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which led the Court to
consider the CAA in the category of a private entity were retained substantially in
Republic Act 776, Sec. 32(24) and (25). Said Act provides:
Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and
supervision of the Department Head, the Administrator shall have among others, the
following powers and duties:
xxx
(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government-owned aerodromes except those controlled or
operated by the Armed Forces of the Philippines including such powers and duties as:
(a) to plan, design, construct, equip, expand, improve, repair or alter aerodromes or
such structures, improvement or air navigation facilities; (b) to enter into, make and
execute contracts of any kind with any person, firm, or public or private corporation or
entity; …
(25) To determine, fix, impose, collect and receive landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under its management and
control.
xxx
From the foregoing, it can be seen that the CAA is tasked with private or non-
governmental functions which operate to remove it from the purview of the rule on
State immunity from suit. For the correct rule as set forth in the Teodorocase states:
xxx
Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity from suits is determined by the character of the objects for which the
entity was organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they have assumed to
act in private or non-governmental capacity, and various suits against certain
corporations created by the state for public purposes, but to engage in matters
partaking more of the nature of ordinary business rather than functions of a
governmental or political character, are not regarded as suits against the state. The
latter is true, although the state may own stock or property of such a corporation for
by engaging in business operations through a corporation, the state divests itself so
far of its sovereign character, and by implication consents to suits against the
corporation. (59 C.J., 313) [National Airports Corporation v. Teodoro, supra, pp. 206-
207; Italics supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine National
Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 63], where it was held that
the Philippine National Railways, although owned and operated by the government,
was not immune from suit as it does not exercise sovereign but purely proprietary and
business functions. Accordingly, as the CAA was created to undertake the
management of airport operations which primarily involve proprietary functions, it
cannot avail of the immunity from suit accorded to government agencies performing
strictly governmental functions.15
In our view, the CA thereby correctly appreciated the juridical character of the ATO
as an agency of the Government not performing a purely governmental or sovereign
function, but was instead involved in the management and maintenance of the
Loakan Airport, an activity that was not the exclusive prerogative of the State in its
sovereign capacity. Hence, the ATO had no claim to the State’s immunity from suit.
We uphold the CA’s aforequoted holding.
We further observe the doctrine of sovereign immunity cannot be successfully invoked
to defeat a valid claim for compensation arising from the taking without just
compensation and without the proper expropriation proceedings being first resorted to
of the plaintiffs’ property.16 Thus, in De los Santos v. Intermediate Appellate
Court,17 the trial court’s dismissal based on the doctrine of non-suability of the State
of two cases (one of which was for damages) filed by owners of property where a road 9
meters wide and 128.70 meters long occupying a total area of 1,165 square meters and
an artificial creek 23.20 meters wide and 128.69 meters long occupying an area of
2,906 square meters had been constructed by the provincial engineer of Rizal and a
private contractor without the owners’ knowledge and consent was reversed and the
cases remanded for trial on the merits. The Supreme Court ruled that the doctrine of
sovereign immunity was not an instrument for perpetrating any injustice on a citizen.
In exercising the right of eminent domain, the Court explained, the State exercised its
jus imperii, as distinguished from its proprietary rights, or jus gestionis; yet, even in
that area, where private property had been taken in expropriation without just
compensation being paid, the defense of immunity from suit could not be set up by the
State against an action for payment by the owners.
Lastly, the issue of whether or not the ATO could be sued without the State’s consent
has been rendered moot by the passage of Republic Act No. 9497, otherwise known as
the Civil Aviation Authority Act of 2008.
R.A. No. 9497 abolished the ATO, to wit:
Section 4. Creation of the Authority. – There is hereby created an independent
regulatory body with quasi-judicial and quasi-legislative powers and possessing
corporate attributes to be known as the Civil Aviation Authority of the Philippines
(CAAP), herein after referred to as the "Authority" attached to the Department of
Transportation and Communications (DOTC) for the purpose of policy
coordination. For this purpose, the existing Air transportation Office created
under the provisions of Republic Act No. 776, as amended is hereby
abolished.
xxx
Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the
Civil Aviation Authority of the Philippines (CAAP), which thereby assumed all of the
ATO’s powers, duties and rights, assets, real and personal properties, funds, and
revenues, viz:
CHAPTER XII
TRANSITORTY PROVISIONS
Section 85. Abolition of the Air Transportation Office. – The Air Transportation Office
(ATO) created under Republic Act No. 776, a sectoral office of the Department of
Transportation and Communications (DOTC), is hereby abolished.1avvphi1
All powers, duties and rights vested by law and exercised by the
ATO is hereby transferred to the Authority.
All assets, real and personal properties, funds and revenues owned by or vested
in the different offices of the ATO are transferred to the Authority. All
contracts, records and documents relating to the operations of the abolished
agency and its offices and branches are likewise transferred to the
Authority. Any real property owned by the national government or
government-owned corporation or authority which is being used and
utilized as office or facility by the ATO shall be transferred and titled in favor of
the Authority.
Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP,
including the power to sue and be sued, to enter into contracts of every class, kind and
description, to construct, acquire, own, hold, operate, maintain, administer and lease
personal and real properties, and to settle, under such terms and conditions most
advantageous to it, any claim by or against it.18
With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the
obligations that the ATO had incurred by virtue of the deed of sale with the Ramos
spouses might now be enforced against the CAAP.
WHEREFORE, the Court denies the petition for review on certiorari, and affirms the
decision promulgated by the Court of Appeals.
No pronouncement on costs of suit.
SO ORDERED.
SECOND DIVISION
G.R. No. 152318 April 16, 2009
DEUTSCHE GESELLSCHAFT FÜR TECHNISCHE ZUSAMMENARBEIT, also
known as GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ)
HANS PETER PAULENZ and ANNE NICOLAY, Petitioners,
vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor
Arbiter of the Arbitration Branch, National Labor Relations Commission,
and BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO,
CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and
EDGARDO RAMILLO, Respondents.
DECISION
TINGA, J.:
On 7 September 1971, the governments of the Federal Republic of Germany and the
Republic of the Philippines ratified an Agreement concerning Technical Co-operation
(Agreement) in Bonn, capital of what was then West Germany. The Agreement
affirmed the countries’ "common interest in promoting the technical and economic
development of their States, and recogni[zed] the benefits to be derived by both States
from closer technical co-operation," and allowed for the conclusion of "arrangements
concerning individual projects of technical co-operation."1 While the Agreement
provided for a limited term of effectivity of five (5) years, it nonetheless was stated
that "[t]he Agreement shall be tacitly extended for successive periods of one year
unless either of the two Contracting Parties denounces it in writing three months
prior to its expiry," and that even upon the Agreement’s expiry, its provisions would
"continue to apply to any projects agreed upon x x x until their completion."2
On 10 December 1999, the Philippine government, through then Foreign Affairs
Secretary Domingo Siazon, and the German government, agreed to an Arrangement
in furtherance of the 1971 Agreement. This Arrangement affirmed the common
commitment of both governments to promote jointly a project called, Social Health
Insurance—Networking and Empowerment (SHINE), which was designed to "enable
Philippine families–especially poor ones–to maintain their health and secure health
care of sustainable quality."3 It appears that SHINE had already been in existence
even prior to the effectivity of the Arrangement, though the record does not indicate
when exactly SHINE was constituted. Nonetheless, the Arrangement stated the
various obligations of the Filipino and German governments. The relevant provisions
of the Arrangement are reproduced as follows:
3. The Government of the Federal Republic of Germany shall make the following
contributions to the project.
It shall - the cost of official travel by the experts referred to in sub-
paragraph (a) above within and outside the Republic of the
(a) second Philippines,

- one expert in health economy, insurance and health systems for up
to 48 expert/months,
- one expert in system development for up to 10 expert/months
- short-term experts to deal with special tasks for a total of up to 18
expert/months,
- the cost of seminars and courses,
- the cost of transport and insurance to the project site of inputs to be
supplied pursuant to sub-paragraph (c) above, excluding the charges
and storage fees referred to in paragraph 4(d) below,
- a proportion of the operating and administrative costs;

- project assistants/guest students as required, who shall work on xxx

the project as part of their basic and further training and assume
specific project tasks under the separately financed junior staff 4. The Government of the Republic of the Philippines shall make the following
promotion programme of the Deutsche Gesellschaft für Technische contributions to the project:
Zusammenarbeit (GTZ);
It shall
(b) provide in situ
(a) – provide the necessary Philippine experts for the project, in particular
- short-term experts to deal with diverse special tasks for a total of one project coordinator in the Philippine Health Insurance Corporation
up to 27 expert/months, (Philhealth), at least three further experts and a sufficient number of
administrative and auxiliary personnel, as well as health personnel in the
- five local experts in health economy, health insurance, community pilot provinces and in the other project partners, in particular one responsible
health systems, information technology, information systems, expert for each pilot province and for each association representing the
training and community mobilization for a total of up to 240 various target groups,
expert/months,
- release suitably qualified experts from their duties for attendance
- local and auxiliary personnel for a total of up to 120 months; at the envisaged basic and further training activities; it shall only
nominate such candidates as have given an undertaking to work on
the project for at least five years after completing their training and
(c) supply inputs, in particular shall ensure that these Philippine experts receive appropriate
remuneration,
- two cross-country vehicles,
- ensure that the project field offices have sufficient expendables,
- ten computers with accessories,
- make available the land and buildings required for the project;
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand (b) assume an increasing proportion of the running and operating costs of the
Deutsche Mark); project;

(c) meet (c) afford the seconded experts any assistance they may require in carrying
out the tasks assigned to them and place at their disposal all necessary
- the cost of accommodation for the seconded experts and their records and documents;
families in so far as this cost is not met by the seconded experts
themselves, (d) guarantee that
 - the project is provided with an itemized budget of its own in order
to ensure smooth continuation of the project.
- the necessary legal and administrative framework is created for the
project,
- the project is coordinated in close cooperation with other national
and international agencies relevant to implementation,
- the inputs supplied for the project on behalf of the Government of
the Federal Republic of Germany are exempted from the cost of
licenses, harbour dues, import and export duties and other public
charges and fees, as well as storage fees, or that any costs thereof
are met, and that they are cleared by customs without delay. The
aforementioned exemptions shall, at the request of the implementing
agencies also apply to inputs procured in the Republic of the
Philippines,
- the tasks of the seconded experts are taken over as soon as possible
by Philippine experts,
- examinations passed by Philippine nationals pursuant to this
Arrangement are recognized in accordance with their respective
standards and that the persons concerned are afforded such
opportunities with regard to careers, appointments and
advancement as are commensurate with their training.4
In the arraignment, both governments likewise named their respective implementing
organizations for SHINE. The Philippines designated the Department of Health
(DOH) and the Philippine Health Insurance Corporation (Philhealth) with the
implementation of SHINE. For their part, the German government "charge[d] the
Deustche Gesellschaft für Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn,
with the implementation of its contributions."7
Private respondents were engaged as contract employees hired by GTZ to work for
SHINE on various dates between December of 1998 to September of 1999. Bernadette
Carmela Magtaas was hired as an "information systems manager and project officer of
SHINE;"8 Carolina Dionco as a "Project Assistant of SHINE;"9 Christopher Ramos as
"a project assistant and liason personnel of NHI related SHINE activities by
GTZ;"10 Melvin Dela Paz and Randy Tamayo as programmers; 11 and Edgardo Ramilo
as "driver, messenger and multipurpose service man."12The employment contracts of
all six private respondents all specified Dr. Rainer Tollkotter, identified as an adviser
of GTZ, as the "employer." At the same time, all the contracts commonly provided that
"[i]t is mutually agreed and understood that [Dr. Tollkotter, as employer] is a
seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a
Philippine-German bilateral project named ‘Social Health Insurance—Networking
and Empowerment (SHINE)’ which will end at a given time."13
In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of
SHINE Project Manager. Disagreements eventually arose between Nicolay and
private respondents in matters such as proposed salary adjustments, and the course
Nicolay was taking in the implementation of SHINE different from her predecessors.
The dispute culminated in a letter14 dated 8 June 2000, signed by the private
respondents, addressed to Nicolay, and copies furnished officials of the DOH,
Philheath, and the director of the Manila office of GTZ. The letter raised several
issues which private respondents claim had been brought up several times in the past,
but have not been given appropriate response. It was claimed that SHINE under
Nicolay had veered away from its original purpose to facilitate the development of
social health insurance by shoring up the national health insurance program and
strengthening local initiatives, as Nicolay had refused to support local partners and
new initiatives on the premise that community and local government unit schemes
were not sustainable—a philosophy that supposedly betrayed Nicolay’s lack of
understanding of the purpose of the project. Private respondents further alleged that
as a result of Nicolay’s "new thrust, resources have been used inappropriately;" that
the new management style was "not congruent with the original goals of the project;"
that Nicolay herself suffered from "cultural insensitivity" that consequently failed to
sustain healthy relations with SHINE’s partners and staff.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very crucial to us in
working for the project. We could no longer find any reason to stay with the project
unless ALL of these issues be addressed immediately and appropriately. 15
In response, Nicolay wrote each of the private respondents a letter dated 21 June
2000, all similarly worded except for their respective addressees. She informed private
respondents that the "project’s orientations and evolution" were decided in consensus
with partner institutions, Philhealth and the DOH, and thus no longer subject to
modifications. More pertinently, she stated:
You have firmly and unequivocally stated in the last paragraph of your 8th June 2000
letter that you and the five other staff "could no longer find any reason to stay with
the project unless ALL of these issues be addressed immediately and appropriately."
Under the foregoing premises and circumstances, it is now imperative that I am to
accept your resignation, which I expect to receive as soon as possible.16
Taken aback, private respondents replied with a common letter, clarifying that their
earlier letter was not intended as a resignation letter, but one that merely intended to
raise attention to what they perceived as vital issues.17Negotiations ensued between
private respondents and Nicolay, but for naught. Each of the private respondents
received a letter from Nicolay dated 11 July 2000, informing them of the pre-
termination of their contracts of employment on the grounds of "serious and gross
insubordination, among others, resulting to loss of confidence and trust."18
On 21 August 2000, the private respondents filed a complaint for illegal dismissal
with the NLRC. Named as respondents therein where GTZ, the Director of its Manila
office Hans Peter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay.
On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground
that the Labor Arbiter had no jurisdiction over the case, as its acts were undertaken
in the discharge of the governmental functions and sovereign acts of the Government
of the Federal Republic of Germany. This was opposed by private respondents with
the arguments that GTZ had failed to secure a certification that it was immune from
suit from the Department of Foreign Affairs, and that it was GTZ and not the German
government which had implemented the SHINE Project and entered into the
contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order 19 denying the Motion to
Dismiss. The Order cited, among others, that GTZ was a private corporation which
entered into an employment contract; and that GTZ had failed to secure from the DFA
a certification as to its diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to
Dismiss," again praying that the Motion to Dismiss be granted on the jurisdictional
ground, and reprising the arguments for dismissal it had earlier raised.20 No action
was taken by the Labor Arbiter on this new motion. Instead, on 15 October 2001, the
Labor Arbiter rendered a Decision21 granting the complaint for illegal dismissal. The
Decision concluded that respondents were dismissed without lawful cause, there being
"a total lack of due process both substantive and procedural [sic]."22 GTZ was faulted
for failing to observe the notice requirements in the labor law. The Decision likewise
proceeded from the premise that GTZ had treated the letter dated 8 June 2000 as a
resignation letter, and devoted some focus in debunking this theory.
The Decision initially offered that it "need not discuss the jurisdictional aspect
considering that the same had already been lengthily discussed in the Order de[n]ying
respondents’ Motion to Dismiss."23 Nonetheless, it proceeded to discuss the
jurisdictional aspect, in this wise:
Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to
entertain the complaint on the following grounds:
Firstly, under the employment contract entered into between complainants and
respondents, specifically Section 10 thereof, it provides that "contract partners agree
that his contract shall be subject to the LAWS of the jurisdiction of the locality in
which the service is performed."
Secondly, respondent having entered into contract, they can no longer invoke the
sovereignty of the Federal Republic of Germany.
Lastly, it is imperative to be immune from suit, respondents should have secured from
the Department of Foreign Affairs a certification of respondents’ diplomatic status
and entitlement to diplomatic privileges including immunity from suits. Having failed
in this regard, respondents cannot escape liability from the shelter of sovereign
immunity.[sic]24
Notably, GTZ did not file a motion for reconsideration to the Labor Arbiter’s
Decision or elevate said decision for appeal to the NLRC. Instead, GTZ opted
to assail the decision by way of a special civil action for certiorari filed with
the Court of Appeals.25 On 10 December 2001, the Court of Appeals
promulgated a Resolution26dismissing GTZ’s petition, finding that "judicial
recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of
the petitioners [being] an appeal to the NLRC x x x."27 A motion for
reconsideration to this Resolution proved fruitless for GTZ.28
Thus, the present petition for review under Rule 45, assailing the decision and
resolutions of the Court of Appeals and of the Labor Arbiter. GTZ’s arguments center
on whether the Court of Appeals could have entertained its petition for certiorari
despite its not having undertaken an appeal before the NLRC; and whether the
complaint for illegal dismissal should have been dismissed for lack of jurisdiction on
account of GTZ’s insistence that it enjoys immunity from suit. No special arguments
are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay,
respectively the then Director and the then Project Manager of GTZ in the
Philippines; so we have to presume that the arguments raised in behalf of GTZ’s
alleged immunity from suit extend to them as well.
The Court required the Office of the Solicitor General (OSG) to file a Comment on the
petition. In its Comment dated 7 November 2005, the OSG took the side of GTZ, with
the prayer that the petition be granted on the ground that GTZ was immune from
suit, citing in particular its assigned functions in implementing the SHINE program—
a joint undertaking of the Philippine and German governments which was neither
proprietary nor commercial in nature.
The Court of Appeals had premised the dismissal of GTZ’s petition on its procedural
misstep in bypassing an appeal to NLRC and challenging the Labor Arbiter’s Decision
directly with the appellate court by way of a Rule 65 petition. In dismissing the
petition, the
Court of Appeals relied on our ruling in Air Service Cooperative v. Court of
Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter
rendered without jurisdiction over the subject matter may be annulled in a petition
before a Regional Trial Court. That case may be differentiated from the present case,
since the Regional Trial Court does not have original or appellate jurisdiction to
review a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as
affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by
way of its original certiorari jurisdiction, decisions ruling on complaints for illegal
dismissal.
Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the
proper recourse from the decision of the Labor Arbiter is to first appeal the same to
the NLRC. Air Services is in fact clearly detrimental to petitioner’s position in one
regard. The Court therein noted that on account of the failure to correctly appeal the
decision of the Labor Arbiter to the NLRC, such judgment consequently became final
and executory.30 GTZ goes as far as to "request" that the Court re-examine Air
Services, a suggestion that is needlessly improvident under the circumstances. Air
Services affirms doctrines grounded in sound procedural rules that have allowed for
the considered and orderly disposition of labor cases.
The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of
Appeals,31 that even when appeal is available, the Court has nonetheless allowed a
writ of certiorari when the orders of the lower court were issued either in excess of or
without jurisdiction. Indeed, the Court has ruled before that the failure to employ
available intermediate recourses, such as a motion for reconsideration, is not a fatal
infirmity if the ruling assailed is a patent nullity. This approach suggested by the
OSG allows the Court to inquire directly into what is the main issue–whether GTZ
enjoys immunity from suit.
The arguments raised by GTZ and the OSG are rooted in several indisputable facts.
The SHINE project was implemented pursuant to the bilateral agreements between
the Philippine and German governments. GTZ was tasked, under the 1991
agreement, with the implementation of the contributions of the German government.
The activities performed by GTZ pertaining to the SHINE project are governmental in
nature, related as they are to the promotion of health insurance in the Philippines.
The fact that GTZ entered into employment contracts with the private respondents
did not disqualify it from invoking immunity from suit, as held in cases such as Holy
See v. Rosario, Jr.,32 which set forth what remains valid doctrine:
Certainly, the mere entering into a contract by a foreign state with a private party
cannot be the ultimate test. Such an act can only be the start of the inquiry. The
logical question is whether the foreign state is engaged in the activity in the regular
course of business. If the foreign state is not engaged regularly in a business or trade,
the particular act or transaction must then be tested by its nature. If the act is in
pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii,
especially when it is not undertaken for gain or profit.33
Beyond dispute is the tenability of the comment points raised by GTZ and the OSG
that GTZ was not performing proprietary functions notwithstanding its entry into the
particular employment contracts. Yet there is an equally fundamental premise which
GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy the
Federal Republic’s immunity from suit?
The principle of state immunity from suit, whether a local state or a foreign state, is
reflected in Section 9, Article XVI of the Constitution, which states that "the State
may not be sued without its consent." Who or what consists of "the State"? For one,
the doctrine is available to foreign States insofar as they are sought to be sued in the
courts of the local State,34 necessary as it is to avoid "unduly vexing the peace of
nations."
If the instant suit had been brought directly against the Federal Republic of Germany,
there would be no doubt that it is a suit brought against a State, and the only
necessary inquiry is whether said State had consented to be sued. However, the
present suit was brought against GTZ. It is necessary for us to understand what
precisely are the parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as "the implementing agency of the Government
of the Federal Republic of Germany," a depiction similarly adopted by the OSG.
Assuming that characterization is correct, it does not automatically invest GTZ with
the ability to invoke State immunity from suit. The distinction lies in whether the
agency is incorporated or unincorporated. The following lucid discussion from Justice
Isagani Cruz is pertinent:
Where suit is filed not against the government itself or its officials but against one of
its entities, it must be ascertained whether or not the State, as the principal that may
ultimately be held liable, has given its consent to be sued. This ascertainment will
depend in the first instance on whether the government agency impleaded is
incorporated or unincorporated.
An incorporated agency has a charter of its own that invests it with a separate
juridical personality, like the Social Security System, the University of the
Philippines, and the City of Manila. By contrast, the unincorporated agency is so
called because it has no separate juridical personality but is merged in the general
machinery of the government, like the Department of Justice, the Bureau of Mines
and the Government Printing Office.
If the agency is incorporated, the test of its suability is found in its charter. The
simple rule is that it is suable if its charter says so, and this is true regardless of the
functions it is performing. Municipal corporations, for example, like provinces and
cities, are agencies of the State when they are engaged in governmental functions and
therefore should enjoy the sovereign immunity from suit. Nevertheless, they are
subject to suit even in the performance of such functions because their charter
provides that they can sue and be sued.35
State immunity from suit may be waived by general or special law.36 The special law
can take the form of the original charter of the incorporated government agency.
Jurisprudence is replete with examples of incorporated government agencies which
were ruled not entitled to invoke immunity from suit, owing to provisions in their
charters manifesting their consent to be sued. These include the National Irrigation
Administration,37 the former Central Bank,38 and the National Power
Corporation.39 In SSS v. Court of Appeals,40 the Court through Justice Melencio-
Herrera explained that by virtue of an express provision in its charter allowing it to
sue and be sued, the Social Security System did not enjoy immunity from suit:
We come now to the amendability of the SSS to judicial action and legal responsibility
for its acts. To our minds, there should be no question on this score considering that
the SSS is a juridical entity with a personality of its own. It has corporate powers
separate and distinct from the Government. SSS' own organic act specifically provides
that it can sue and be sued in Court. These words "sue and be sued" embrace all civil
process incident to a legal action. So that, even assuming that the SSS, as it claims,
enjoys immunity from suit as an entity performing governmental functions, by virtue
of the explicit provision of the aforecited enabling law, the Government must be
deemed to have waived immunity in respect of the SSS, although it does not thereby
concede its liability. That statutory law has given to the private citizen a remedy for
the enforcement and protection of his rights. The SSS thereby has been required to
submit to the jurisdiction of the Courts, subject to its right to interpose any lawful
defense. Whether the SSS performs governmental or proprietary functions thus
becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit
against it for varied objectives, such as, in this case, to obtain compensation in
damages arising from contract, and even for tort.
A recent case squarely in point anent the principle, involving the National Power
Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457
(1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
"It is not necessary to write an extended dissertation on whether or not the NPC
performs a governmental function with respect to the management and operation of
the Angat Dam. It is sufficient to say that the government has organized a private
corporation, put money in it and has allowed it to sue and be sued in any court under
its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the
Government. Moreover, the charter provision that the NPC can 'sue and be sued in
any court' is without qualification on the cause of action and accordingly it can include
a tort claim such as the one instituted by the petitioners."41
It is useful to note that on the part of the Philippine government, it had designated
two entities, the Department of Health and the Philippine Health Insurance
Corporation (PHIC), as the implementing agencies in behalf of the Philippines. The
PHIC was established under Republic Act No. 7875, Section 16(g) of which grants the
corporation the power "to sue and be sued in court." Applying the previously cited
jurisprudence, PHIC would not enjoy immunity from suit even in the performance of
its functions connected with SHINE, however, governmental in nature as they may
be.
Is GTZ an incorporated agency of the German government? There is some mystery
surrounding that question. Neither GTZ nor the OSG go beyond the claim that
petitioner is "the implementing agency of the Government of the Federal Republic of
Germany." On the other hand, private respondents asserted before the Labor Arbiter
that GTZ was "a private corporation engaged in the implementation of development
projects."42 The Labor Arbiter accepted that claim in his Order denying the Motion to
Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private
respondents argue in their Comment that the finding that GTZ was a private
corporation "was never controverted, and is therefore deemed admitted." 44 In its
Reply, GTZ controverts that finding, saying that it is a matter of public knowledge
that the status of petitioner GTZ is that of the "implementing agency," and not that of
a private corporation.45
In truth, private respondents were unable to adduce any evidence to substantiate
their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly
in accepting such claim without explanation. But neither has GTZ supplied any
evidence defining its legal nature beyond that of the bare descriptive "implementing
agency." There is no doubt that the 1991 Agreement designated GTZ as the
"implementing agency" in behalf of the German government. Yet the catch is that
such term has no precise definition that is responsive to our concerns. Inherently, an
agent acts in behalf of a principal, and the GTZ can be said to act in behalf of the
German state. But that is as far as "implementing agency" could take us. The term by
itself does not supply whether GTZ is incorporated or unincorporated, whether it is
owned by the German state or by private interests, whether it has juridical
personality independent of the German government or none at all.
GTZ itself provides a more helpful clue, inadvertently, through its own official
Internet website.46 In the "Corporate Profile" section of the English language version
of its site, GTZ describes itself as follows:
As an international cooperation enterprise for sustainable development with
worldwide operations, the federally owned Deutsche Gesellschaft für Technische
Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its
development-policy objectives. It provides viable, forward-looking solutions for
political, economic, ecological and social development in a globalised world. Working
under difficult conditions, GTZ promotes complex reforms and change processes. Its
corporate objective is to improve people’s living conditions on a sustainable basis.
GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was
founded in 1975 as a company under private law. The German Federal Ministry for
Economic Cooperation and Development (BMZ) is its major client. The company also
operates on behalf of other German ministries, the governments of other countries
and international clients, such as the European Commission, the United Nations and
the World Bank, as well as on behalf of private enterprises. GTZ works on a public-
benefit basis. All surpluses generated are channeled [sic] back into its own
international cooperation projects for sustainable development.47
GTZ’s own website elicits that petitioner is "federally owned," a "federal enterprise,"
and "founded in 1975 as a company under private law." GTZ clearly has a very
meaningful relationship with the Federal Republic of Germany, which apparently
owns it. At the same time, it appears that GTZ was actually organized not through a
legislative public charter, but under private law, in the same way that Philippine
corporations can be organized under the Corporation Code even if fully owned by the
Philippine government.
This self-description of GTZ in its own official website gives further cause for pause in
adopting petitioners’ argument that GTZ is entitled to immunity from suit because it
is "an implementing agency." The above-quoted statement does not dispute the
characterization of GTZ as an "implementing agency of the Federal Republic of
Germany," yet it bolsters the notion that as a company organized under private law, it
has a legal personality independent of that of the Federal Republic of Germany.
The Federal Republic of Germany, in its own official website,48 also makes reference
to GTZ and describes it in this manner:
x x x Going by the principle of "sustainable development," the German Technical
Cooperation (Deutsche Gesellschaft für Technische Zusammenarbeit GmbH, GTZ)
takes on non-profit projects in international "technical cooperation." The GTZ is a
private company owned by the Federal Republic of Germany.49
Again, we are uncertain of the corresponding legal implications under German law
surrounding "a private company owned by the Federal Republic of Germany." Yet
taking the description on face value, the apparent equivalent under Philippine law is
that of a corporation organized under the Corporation Code but owned by the
Philippine government, or a government-owned or controlled corporation without
original charter. And it bears notice that Section 36 of the Corporate Code states that
"[e]very corporation incorporated under this Code has the power and capacity x x x to
sue and be sued in its corporate name."50
It is entirely possible that under German law, an entity such as GTZ or particularly
GTZ itself has not been vested or has been specifically deprived the power and
capacity to sue and/or be sued. Yet in the proceedings below and before this Court,
GTZ has failed to establish that under German law, it has not consented to be sued
despite it being owned by the Federal Republic of Germany. We adhere to the rule
that in the absence of evidence to the contrary,
foreign laws on a particular subject are presumed to be the same as those of the
Philippines,51 and following the most intelligent assumption we can gather, GTZ is
akin to a governmental owned or controlled corporation without original charter
which, by virtue of the Corporation Code, has expressly consented to be sued. At the
very least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in
fact to conclude or presume that GTZ enjoys immunity from suit.
This absence of basis in fact leads to another important point, alluded to by the Labor
Arbiter in his rulings. Our ruling in Holy See v. Del Rosario 52 provided a template on
how a foreign entity desiring to invoke State immunity from suit could duly prove
such immunity before our local courts. The principles enunciated in that case were
derived from public international law. We stated then:
In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of
the state where it is sued to convey to the court that said defendant is entitled to
immunity.
In the United States, the procedure followed is the process of "suggestion," where the
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If
the Secretary of State finds that the defendant is immune from suit, he, in turn, asks
the Attorney General to submit to the court a "suggestion" that the defendant is
entitled to immunity. In England, a similar procedure is followed, only the Foreign
Office issues a certification to that effect instead of submitting a "suggestion"
(O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement
to the courts varies. In International Catholic Migration Commission v. Calleja, 190
SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the
Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to
make, in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the
"suggestion" in a Manifestation and Memorandum as amicus curiae.53
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was
imperative for petitioners to secure from the Department of Foreign Affairs "a
certification of respondents’ diplomatic status and entitlement to diplomatic privileges
including immunity from suits."54 The requirement might not necessarily be
imperative. However, had GTZ obtained such certification from the DFA, it would
have provided factual basis for its claim of immunity that would, at the very least,
establish a disputable evidentiary presumption that the foreign party is indeed
immune which the opposing party will have to overcome with its own factual
evidence. We do not see why GTZ could not have secured such certification or
endorsement from the DFA for purposes of this case. Certainly, it would have been
highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the
motion to dismiss. Still, even at this juncture, we do not see any evidence that the
DFA, the office of the executive branch in charge of our diplomatic relations, has
indeed endorsed GTZ’s claim of immunity. It may be possible that GTZ tried, but
failed to secure such certification, due to the same concerns that we have discussed
herein.
Would the fact that the Solicitor General has endorsed GTZ’s claim of State’s
immunity from suit before this Court sufficiently substitute for the DFA certification?
Note that the rule in public international law quoted in Holy See referred to
endorsement by the Foreign Office of the State where the suit is filed, such foreign
office in the Philippines being the Department of Foreign Affairs. Nowhere in the
Comment of the OSG is it manifested that the DFA has endorsed GTZ’s claim, or that
the OSG had solicited the DFA’s views on the issue. The arguments raised by the OSG
are virtually the same as the arguments raised by GTZ without any indication of any
special and distinct perspective maintained by the Philippine government on the
issue. The Comment filed by the OSG does not inspire the same degree of confidence
as a certification from the DFA would have elicited.1avvphi1
Holy See made reference to Baer v. Tizon,55 and that in the said case, the United
States Embassy asked the Secretary of Foreign Affairs to request the Solicitor
General to make a "suggestion" to the trial court, accomplished by way of a
Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the
Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated
in the text of Baer itself and was likely supplied in Holy See because its author,
Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer.
Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which
directed the OSG to intervene in behalf of the United States government in the Baer
case, and such fact is manifest enough of the endorsement by the Foreign Office. We
do not find a similar circumstance that bears here.
The Court is thus holds and so rules that GTZ consistently has been unable to
establish with satisfaction that it enjoys the immunity from suit generally enjoyed by
its parent country, the Federal Republic of Germany. Consequently, both the Labor
Arbiter and the Court of Appeals acted within proper bounds when they refused to
acknowledge that GTZ is so immune by dismissing the complaint against it. Our
finding has additional ramifications on the failure of GTZ to properly appeal the
Labor Arbiter’s decision to the NLRC. As pointed out by the OSG, the direct recourse
to the Court of Appeals while bypassing the NLRC could have been sanctioned had
the Labor Arbiter’s decision been a "patent nullity." Since the Labor Arbiter acted
properly in deciding the complaint, notwithstanding GTZ’s claim of immunity, we
cannot see how the decision could have translated into a "patent nullity."
As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by
filing directly with the Court of Appeals the petition for certiorari. It then follows that
the Court of Appeals acted correctly in dismissing the petition on that ground. As a
further consequence, since petitioners failed to perfect an appeal from the Labor
Arbiter’s Decision, the same has long become final and executory. All other questions
related to this case, such as whether or not private respondents were illegally
dismissed, are no longer susceptible to review, respecting as we do the finality of the
Labor Arbiter’s Decision.
A final note. This decision should not be seen as deviation from the more common
methodology employed in ascertaining whether a party enjoys State immunity from
suit, one which focuses on the particular functions exercised by the party and
determines whether these are proprietary or sovereign in nature. The nature of the
acts performed by the entity invoking immunity remains the most important
barometer for testing whether the privilege of State immunity from suit should apply.
At the same time, our Constitution stipulates that a State immunity from suit is
conditional on its withholding of consent; hence, the laws and circumstances
pertaining to the creation and legal personality of an instrumentality or agency
invoking immunity remain relevant. Consent to be sued, as exhibited in this decision,
is often conferred by the very same statute or general law creating the
instrumentality or agency.
WHEREFORE, the petition is DENIED. No pronouncement as to costs.
SO ORDERED.
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, 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.:
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 ₱
16,370,191.74 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
a 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 Baños (UPLB).3
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 ₱ 273,729.47 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-93-14971 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. ₱ 503,462.74 amount of the third billing, additional accomplished work and
retention money
2. ₱ 5,716,729.00 in actual damages
3. ₱ 10,000,000.00 in moral damages
4. ₱ 150,000.00 and ₱ 1,500.00 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
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
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
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 of
Presidential Decree No. 1445 to the effect that "revenue 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-Telan37 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
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 ₱ 16,370,191.74
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 to satisfy the judgment award. Citing Department of Agriculture vs.
NLRC, University 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.
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
Baños, 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
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.
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 court 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, 2007,58alleging 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 petition59 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:
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.
SO ORDERED.
Issues
The UP now submits that:
I losses and expenses, including attorney’s fees, in case of any litigation arising out of
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) OF THE 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 ₱ 10 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.
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,
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 and Department
of Agriculture v. NLRC62 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 ₱ 5,716,729.00 and moral
damages of ₱ 10 million should be reduced, if not entirely deleted, due to its being
unconscionable, inequitable and detrimental to public service.
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 ₱ 22,338,553.25, 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 ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00 and
attorney’s fees of ₱ 150,000.00 plus ₱ 1,500.00 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 university67 "dedicated to the search for truth and knowledge as well as
the development of future leaders."68
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:
xxx 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
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
government-owned 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.
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.
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 "where 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.
III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period 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 ₱
16,370,191.74 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.88 Public
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.89Indeed, 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,92 the
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.
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-à-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
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 fresh-
period 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 statues, 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.
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 of monetary damages,
being devoid of factual and 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.
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.
Here, the decision of the RTC justified the grant of actual and moral damages, and
attorney’s fees in the following terse manner, viz:
xxx 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 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.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 ₱
5,716,729.00 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 ₱ 10,000,000.00. 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 incapable of
experiencing pain and moral sufferings.112 Assuming that in granting the substantial
amount of ₱ 10,000,000.00 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 ₱ 10,000,000.00 allowed as moral damages not only to be factually baseless
and legally indefensible, but also to be unconscionable, inequitable and unreasonable.
Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 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 2208115 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,123 the 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., ₱ 503,462.74) 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 ₱
5,716,729.00, moral damages of ₱ 10,000,000.00, and attorney's fees of ₱ 150,000.00,
plus ₱ 1,500.00 per appearance, in favor of Stern Builders Corporation and Servillano
dela Cruz.
The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit
the amount of ₱ 16,370,191.74 within 10 days from receipt of this decision.
Costs of suit to be paid by the private respondents.
SO ORDERED.
FIRST DIVISION
G.R. No. 185918 April 18, 2012
LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC., Petitioner,
vs.
UNIVERSITY OF THE PHILIPPINES, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
6. WILFREDO ESCOBAR 80,160.63
Procedure, as amended, assailing the August 20, 2008 Amended Decision1 and
December 23, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91281.
7. FERDINAND VELASQUEZ 78,595.53
The antecedent facts of the case are as follows:

Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered into a 8. ANTHONY GONZALES 76,869.97
contract for security services with respondent University of the Philippines (UP).
9. SAMUEL ESCARIO 80,509.78
In 1998, several security guards assigned to UP filed separate complaints against
Lockheed and UP for payment of underpaid wages, 25% overtime pay, premium pay
for rest days and special holidays, holiday pay, service incentive leave pay, night shift 10. PEDRO FAILORINA 80,350.87
differentials, 13th month pay, refund of cash bond, refund of deductions for the
Mutual Benefits Aids System (MBAS), unpaid wages from December 16-31, 1998, and
attorney’s fees. 11. MATEO TANELA 70,590.58

On February 16, 2000, the Labor Arbiter rendered a decision as follows:

12. JOB SABALAS 59,362.40
WHEREFORE, premises considered, respondents Lockheed Detective and Watchman
Agency, Inc. and UP as job contractor and principal, respectively, are hereby declared 13. ANDRES DACANAYAN 77,403.73
to be solidarily liable to complainants for the following claims of the latter which are
found meritorious.
14. EDDIE OLIVAR 77,403.73
Underpaid wages/salaries, premium pay for work on rest day and special holiday,
holiday pay, 5 days service incentive leave pay, 13th month pay for 1998, refund of
cash bond (deducted at P50.00 per month from January to May 1996, P100.00 per
month from June 1996 and P200.00 from November 1997), refund of deduction for
Mutual Benefits Aids System at the rate of P50.00 a month, and attorney’s fees; in the P1,077,057.38
total amount of P1,184,763.12 broken down as follows per attached computation of the
Computation and [E]xamination Unit of this Commission, which computation forms
part of this Decision:

plus 10% attorney’s fees 107,705.74

1. JOSE SABALAS P77,983.62

2. TIRSO DOMASIAN 76,262.70

GRAND TOTAL AWARD P1,184,763.12

3. JUAN TAPEL 80,546.03

Third party respondent University of the Philippines is hereby declared to be liable to

4. DINDO MURING 80,546.03 Third Party Complainant and cross claimant Lockheed Detective and Watchman
Agency for the unpaid legislated salary increases of the latter’s security guards for the
years 1996 to 1998, in the total amount of P13,066,794.14, out of which amount the
5. ALEXANDER ALLORDE 80,471.78 amounts due complainants here shall be paid.
The other claims are hereby DISMISSED for lack of merit (night shift differential and
13th month pay) or for having been paid in the course of this proceedings (salaries for
December 15-31, 1997 in the amount of P40,140.44).
The claims of Erlindo Collado, Rogelio Banjao and Amor Banjao are hereby
DISMISSED as amicably settled for and in consideration of the amounts of
P12,315.72, P12,271.77 and P12,819.33, respectively.
SO ORDERED.3
Both Lockheed and UP appealed the Labor Arbiter’s decision. By Decision 4 dated
April 12, 2002, the NLRC modified the Labor Arbiter’s decision. The NLRC held:
WHEREFORE, the decision appealed from is hereby modified as follows:
1. Complainants’ claims for premium pay for work on rest day and special
holiday, and 5 days service incentive leave pay, are hereby dismissed for lack
of basis.
2. The respondent University of the Philippines is still solidarily liable with
Lockheed in the payment of the rest of the claims covering the period of their
service contract.
The Financial Analyst is hereby ordered to recompute the awards of the complainants
in accordance with the foregoing modifications.
SO ORDERED.5
The complaining security guards and UP filed their respective motions for
reconsideration. On August 14, 2002, however, the NLRC denied said motions.
As the parties did not appeal the NLRC decision, the same became final and executory
on October 26, 2002.6 A writ of execution was then issued but later quashed by the
Labor Arbiter on November 23, 2003 on motion of UP due to disputes regarding the
amount of the award. Later, however, said order quashing the writ was reversed by
the NLRC by Resolution7 dated June 8, 2004, disposing as follows:
WHEREFORE, premises considered, we grant this instant appeal. The Order dated
23 November 2003 is hereby reversed and set aside. The Labor Arbiter is directed to
issue a Writ of Execution for the satisfaction of the judgment award in favor of Third-
Party complainants.
SO ORDERED.8
UP moved to reconsider the NLRC resolution. On December 28, 2004, the NLRC
upheld its resolution but with modification that the satisfaction of the judgment
award in favor of Lockheed will be only against the funds of UP which are not
identified as public funds.
The NLRC order and resolution having become final, Lockheed filed a motion for the
issuance of an alias writ of execution. The same was granted on May 23, 2005.9
On July 25, 2005, a Notice of Garnishment10 was issued to Philippine National Bank
(PNB) UP Diliman Branch for the satisfaction of the award of ₱12,142,522.69
(inclusive of execution fee).
In a letter11 dated August 9, 2005, PNB informed UP that it has received an order of
release dated August 8, 2005 issued by the Labor Arbiter directing PNB UP Diliman
Branch to release to the NLRC Cashier, through the assigned NLRC Sheriff Max L.
Lago, the judgment award/amount of ₱12,142,522.69. PNB likewise reminded UP that
the bank only has 10 working days from receipt of the order to deliver the garnished
funds and unless it receives a notice from UP or the NLRC before the expiry of the 10-
day period regarding the issuance of a court order or writ of injunction discharging or
enjoining the implementation and execution of the Notice of Garnishment and Writ of
Execution, the bank shall be constrained to cause the release of the garnished funds
in favor of the NLRC.
On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment.12 UP
contended that the funds being subjected to garnishment at PNB are
government/public funds. As certified by the University Accountant, the subject funds
are covered by Savings Account No. 275-529999-8, under the name of UP System
Trust Receipts, earmarked for Student Guaranty Deposit, Scholarship Fund, Student
Fund, Publications, Research Grants, and Miscellaneous Trust Account. UP argued
that as public funds, the subject PNB account cannot be disbursed except pursuant to
an appropriation required by law. The Labor Arbiter, however, dismissed the urgent
motion for lack of merit on August 30, 2005.13
On September 2, 2005, the amount of ₱12,062,398.71 was withdrawn by the sheriff
from UP’s PNB account.14
On September 12, 2005, UP filed a petition for certiorari before the CA based on the
following grounds:
I.
The concept of "solidary liability" by an indirect employer notwithstanding,
respondent NLRC gravely abused its discretion in a manner amounting to
lack or excess of jurisdiction by misusing such concept to justify the
garnishment by the executing Sheriff of public/government funds belonging
to UP.
II.
 Respondents NLRC and Arbiter LORA acted without jurisdiction or gravely
abused their discretion in a manner amounting to lack or excess of
jurisdiction when, by means of an Alias Writ of Execution against petitioner
UP, they authorized respondent Sheriff to garnish UP’s public funds.
Similarly, respondent LORA gravely abused her discretion when she resolved
petitioner’s Motion to Quash Notice of Garnishment addressed to, and
intended for, the NLRC, and when she unilaterally and arbitrarily
disregarded an official Certification that the funds garnished are
public/government funds, and thereby allowed respondent Sheriff to
withdraw the same from PNB.
III.
Respondents gravely abused their discretion in a manner amounting to lack
or excess of jurisdiction when they, despite prior knowledge, effected the
execution that caused paralyzation and dislocation to petitioner’s
governmental functions.15
On March 12, 2008, the CA rendered a decision16 dismissing UP’s petition for
certiorari. Citing Republic v. COCOFED,17 which defines public funds as moneys
belonging to the State or to any political subdivisions of the State, more specifically
taxes, customs, duties and moneys raised by operation of law for the support of the
government or the discharge of its obligations, the appellate court ruled that the
funds sought to be garnished do not seem to fall within the stated definition.
On reconsideration, however, the CA issued the assailed Amended Decision. It held
that without departing from its findings that the funds covered in the savings account
sought to be garnished do not fall within the classification of public funds, it
reconsiders the dismissal of the petition in light of the ruling in the case of National
Electrification Administration v. Morales18 which mandates that all money claims
against the government must first be filed with the Commission on Audit (COA).
Lockheed moved to reconsider the amended decision but the same was denied in the
assailed CA Resolution dated December 23, 2008. The CA cited Manila International
Airport Authority v. Court of Appeals19 which held that UP ranks with MIAA, a
government instrumentality exercising corporate powers but not organized as a stock
or non-stock corporation. While said corporations are government instrumentalities,
they are loosely called government corporate entities but not government-owned and
controlled corporations in the strict sense.
Hence this petition by Lockheed raising the following arguments:
1. RESPONDENT UP IS A GOVERNMENT ENTITY WITH A SEPARATE
AND DISTINCT PERSONALITY FROM THE NATIONAL GOVERNMENT
AND HAS ITS OWN CHARTER GRANTING IT THE RIGHT TO SUE AND
BE SUED. IT THEREFORE CANNOT AVAIL OF THE IMMUNITY FROM
SUIT OF THE GOVERNMENT. NOT HAVING IMMUNITY FROM SUIT,
RESPONDENT UP CAN BE HELD LIABLE AND EXECUTION CAN THUS
ENSUE.
2. MOREOVER, IF THE COURT LENDS IT ASSENT TO THE
INVOCATION OF THE DOCTRINE OF STATE IMMUNITY, THIS WILL
RESULT [IN] GRAVE INJUSTICE.
3. FURTHERMORE, THE PROTESTATIONS OF THE RESPONDENT ARE
TOO LATE IN THE DAY, AS THE EXECUTION PROCEEDINGS HAVE
ALREADY BEEN TERMINATED.20
Lockheed contends that UP has its own separate and distinct juridical entity from the
national government and has its own charter. Thus, it can be sued and be held liable.
Moreover, Executive Order No. 714 entitled "Fiscal Control and Management of the
Funds of UP" recognizes that "as an institution of higher learning, UP has always
granted full management and control of its affairs including its financial
affairs."21 Therefore, it cannot shield itself from its private contractual liabilities by
simply invoking the public character of its funds. Lockheed also cites several cases
wherein it was ruled that funds of public corporations which can sue and be sued were
not exempt from garnishment.
Lockheed likewise argues that the rulings in the NEA and MIAA cases are
inapplicable. It contends that UP is not similarly situated with NEA because the
jurisdiction of COA over the accounts of UP is only on a post-audit basis. As to
the MIAA case, the liability of MIAA pertains to the real estate taxes imposed by the
City of Paranaque while the obligation of UP in this case involves a private
contractual obligation. Lockheed also argues that the declaration in MIAA specifically
citing UP was mere obiter dictum.
Lockheed moreover submits that UP cannot invoke state immunity to justify and
perpetrate an injustice. UP itself admitted its liability and thus it should not be
allowed to renege on its contractual obligations. Lockheed contends that this might
create a ruinous precedent that would likely affect the relationship between the public
and private sectors.
Lastly, Lockheed contends that UP cannot anymore seek the quashal of the writ of
execution and notice of garnishment as they are already fait accompli.
For its part, UP contends that it did not invoke the doctrine of state immunity from
suit in the proceedings a quo and in fact, it did not object to being sued before the
labor department. It maintains, however, that suability does not necessarily mean
liability. UP argues that the CA correctly applied the NEA ruling when it held that all
money claims must be filed with the COA.
As to alleged injustice that may result for invocation of state immunity from suit, UP
reiterates that it consented to be sued and even participated in the proceedings below.
Lockheed cannot now claim that invocation of state immunity, which UP did not
invoke in the first place, can result in injustice.
On the fait accompli argument, UP argues that Lockheed cannot wash its hands from
liability for the consummated garnishment and execution of UP’s trust fund in the
amount of ₱12,062,398.71. UP cites that damage was done to UP and the beneficiaries
of the fund when said funds, which were earmarked for specific educational purposes,
were misapplied, for instance, to answer for the execution fee of ₱120,123.98
unilaterally stipulated by the sheriff. Lockheed, being the party which procured the
illegal garnishment, should be held primarily liable. The mere fact that the CA set
aside the writ of garnishment confirms the liability of Lockheed to reimburse and
indemnify in accordance with law.
WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.
Petitioner Lockheed Detective and Watchman Agency, Inc. is ordered to REIMBURSE
respondent University of the Philippines the amount of ₱12,062,398.71 plus interest of
6% per annum, to be computed from September 12, 2005 up to the finality of this
Decision, and 12% interest on the entire amount from date of finality of this Decision
until fully paid.
No pronouncement as to costs.
SO ORDERED.

The petition has no merit.

FIRST DIVISION

We agree with UP that there was no point for Lockheed in discussing the doctrine of
G.R. No. 175299 September 14, 2011
state immunity from suit as this was never an issue in this case. Clearly, UP
consented to be sued when it participated in the proceedings below. What UP
questions is the hasty garnishment of its funds in its PNB account. REPUBLIC OF THE PHILIPPINES, represented by the Department of Public
Works and Highways, through the Hon. Secretary, HERMOGENES
This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a EBDANE, Petitioner,
juridical personality separate and distinct from the government and has the capacity vs.
ALBERTO A. DOMINGO, Respondent.
to sue and be sued. Thus, also like NEA, it cannot evade execution, and its funds may
be subject to garnishment or levy. However, before execution may be had, a claim for
payment of the judgment award must first be filed with the COA. Under DECISION
Commonwealth Act No. 327,22 as amended by Section 26 of P.D. No. 1445,23 it is the
COA which has primary jurisdiction to examine, audit and settle "all debts and claims LEONARDO – DE CASTRO, J.:
of any sort" due from or owing the Government or any of its subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, the
subsidiaries. With respect to money claims arising from the implementation of
Court is called upon to reverse and set aside the Decision2 dated May 19, 2006 and the
Republic Act No. 6758,24 their allowance or disallowance is for COA to decide, subject
Resolution3 dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813,
only to the remedy of appeal by petition for certiorari to this Court.25 1âwphi1
as well as to declare null and void the Decision4 dated February 18, 2003 of the
Regional Trial Court (RTC) of Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-
We cannot subscribe to Lockheed’s argument that NEA is not similarly situated with 2002.
UP because the COA’s jurisdiction over the latter is only on post-audit basis. A
reading of the pertinent Commonwealth Act provision clearly shows that it does not
As culled from the records, the factual antecedents of the case are as follows:
make any distinction as to which of the government subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their
subsidiaries whose debts should be filed before the COA. On April 26, 2002, herein respondent Alberto A. Domingo filed a Complaint for
Specific Performance with Damages5against the Department of Public Works and
Highways (DPWH), Region III, which was docketed as Civil Case No. 333-M-2002 in
As to the fait accompli argument of Lockheed, contrary to its claim that there is
the RTC of Malolos, Bulacan, Branch 18. Domingo averred that from April to
nothing that can be done since the funds of UP had already been garnished, since the
September 1992, he entered into seven contracts with the DPWH Region III for the
garnishment was erroneously carried out and did not go through the proper procedure
lease of his construction equipment to said government agency.6 The lease contracts
(the filing of a claim with the COA), UP is entitled to reimbursement of the garnished
were allegedly executed in order to implement the emergency projects of the DPWH
funds plus interest of 6% per annum, to be computed from the time of judicial demand
Region III, which aimed to control the flow of lahar from Mt. Pinatubo in the adjacent
to be reckoned from the time UP filed a petition for certiorari before the CA which
towns in the provinces of Tarlac and Pampanga. After the completion of the projects,
occurred right after the withdrawal of the garnished funds from PNB.
Domingo claimed that the unpaid rentals of the DPWH Region III amounted to
₱6,320,163.05. Despite repeated demands, Domingo asserted that the DPWH Region
III failed to pay its obligations. Domingo was, thus, compelled to file the above case for
the payment of the ₱6,320,163.05 balance, plus ₱200,000.00 as moral and
compensatory damages, ₱100,000.00 as exemplary damages, and ₱200,000.00 as
attorney’s fees.7
Thereafter, summons was issued by the RTC. The Proof of Service8 of the Sheriff
dated May 9, 2002 stated, thus:
PROOF OF SERVICE
The undersigned personally served the copy of the Summons together with the
complaint issued in the above-entitled case upon defendant The Department of Public
Works and Highways, Region III, San Fernando Pampanga on May 6, 2002 through
Nora Cortez, Clerk III of said office as shown by her signature and stamped mark
received by said office appearing on the original Summons.
WHEREFORE, the original Summons respectfully returned to the Court "DULY
SERVED", for its record and information.
Malolos, Bulacan, May 9, 2002.
Subsequently, on July 30, 2002, Domingo filed a Motion to Declare Defendant in
Default9 in view of the failure of the DPWH Region III to file a responsive pleading
within the reglementary period as required under the Rules of Court. During the
hearing of the motion on August 8, 2002, the RTC directed the counsel of Domingo to
submit proof of service of said motion on the DPWH Region III. Thereafter, the motion
was deemed submitted for resolution.10Counsel for Domingo timely filed a
Manifestation,11 showing compliance with the order of the trial court.
In an Order12 dated September 2, 2002, the RTC declared the DPWH Region III in
default and thereafter set the date for the reception of Domingo’s evidence ex parte.
After the ex parte presentation of Domingo’s evidence, the RTC rendered judgment on
February 18, 2003, finding that:
From the evidence presented by [Domingo], testimonial and documentary, it was
convincingly proven that [Domingo] is entitled to the relief prayed for.
In his seven causes of actions, [Domingo] has religiously undertaken what is
incumbent upon him in the contracts of lease signed by both [Domingo] and [the
DPWH Region III]. As a matter of course, the [DPWH Region III] has the duty to pay
[Domingo] the amount equivalent to the services performed by [Domingo] which [in]
this case now amount to ₱6,320,163.05 excluding interest.
Considering that there was a long delay in the payment of the obligation on the part
of the [DPWH Region III], Article 2209 of the New Civil Code finds application as to
imputation of legal interest at six (6%) percent per annum, in the absence of
stipulation of interest on the amount due.
With respect to the claim for attorney’s fees, although as a general rule, attorney’s
fees cannot be rewarded because of the policy that no premium should be placed on
the right to litigate, this rule does not apply in the case at bar in the face of the
stubborn refusal of [the DPWH Region III] to respect the valid claim of [Domingo] x x
x. Award of attorney’s fees in the amount of ₱30,000.00 appears proper. Moreover, as
to [the] demand for moral and exemplary damages, the same are hereby denied for
lack of persuasive and sufficient evidence.13
Thus, the RTC disposed:
Wherefore, premises considered, judgment is hereby rendered in favor of plaintiff
Alberto Domingo and against defendant DPWH Region III, ordering defendant to pay
plaintiff:
1. the sum of Six Million Three Hundred Twenty Thousand One Hundred
Sixty[-]Three and 05/100 Pesos (₱6,320,163.05) representing the principal
obligation of the defendant plus interest at six percent (6%) per annum from
1993 until the obligation is fully paid;
2. to pay attorney’s fees in the total amount of Thirty Thousand Pesos
(₱30,000.00) and
3. to pay the costs of suit.14
On March 12, 2003, Domingo filed a Motion for Issuance of Writ of
Execution,15 asserting that the DPWH Region III failed to file an appeal or a motion
for new trial and/or reconsideration despite its receipt of a copy of the RTC decision on
February 19, 2003. On March 20, 2003, the RTC granted the aforesaid motion of
Domingo.16 A Writ of Execution17 was then issued on March 24, 2003, commanding
the sheriff to enforce the RTC Decision dated February 18, 2003.
On August 27, 2003, the Republic of the Philippines, represented by the Office of the
Solicitor General (OSG), filed with the Court of Appeals a Petition for Annulment of
Judgment with Prayer for the Issuance of a Temporary Restraining Order and/or a
Writ of Preliminary Injunction.18 The petition was docketed as CA-G.R. SP No. 78813.
The Republic argued that it was not impleaded as an indispensable party in Civil
Case No. 333-M-2002. The seven contracts sued upon in the trial court stated that
they were entered into by the Regional Director, Assistant Regional Director and/or
Project Manager of the DPWH Region III for and in behalf of the Republic of the
Philippines, which purportedly was the real party to the contract. Moreover, the
Republic averred that, under the law, the statutory representatives of the government
for purposes of litigation are either the Solicitor General or the Legal Service Branch
of the Executive Department concerned. Since no summons was issued to either of
said representatives, the trial court never acquired jurisdiction over the Republic. The
absence of indispensable parties allegedly rendered null and void the subsequent acts
of the trial court because of its lack of authority to act, not only as to the absent
parties, but even as to those present. The Republic prayed for the annulment of the
RTC Decision dated February 18, 2003 and the dismissal of the said case, without
prejudice to the original action being refiled in the proper court.
On May 19, 2006, the Court of Appeals promulgated its decision, dismissing the
Petition for Annulment of Judgment filed by the Republic. The appellate court
elaborated that:
The hair-splitting distinction being made by [the Republic] between the DPWH as a
department under the Republic, and the Regional Office of the DPWH fails to
persuade Us. Instead, We uphold [Domingo’s] position that the regional office is an
extension of the department itself and service of summons upon the former is service
upon the latter. x x x.
xxxx
x x x [A] regional office of the DPWH is part of the composition of the department
itself and is therefore, not an entity that is altogether separate from the department.
This conclusion lends credence to [Domingo’s] position that service of summons upon
the regional office is service upon the department itself because the former is
essentially part of the latter. Indeed, what militates heavily against [the Republic’s]
theory is the simple fact that the regional office is not a different entity at all, but, as
can be gleaned from the manner of its creation, a part of the department itself, so
much so that it does not even have a juridical personality of its own. x x x.
Anent the claim that the procedure for service of summons upon the Republic was not
followed because service should have been made on the OSG or the Legal Service
Department of the DPWH, We are likewise not persuaded. A perusal of the Revised
Administrative Code of the Philippines suggests nothing of this import. x x x.
xxxx
Clearly, nothing [in the functions of the OSG] remotely suggests that service of
summons upon the Republic should be made exclusively on the OSG. What the
[provisions] merely state is that the OSG will represent the government in all
proceedings involving it. It cannot be deduced nor implied from this, however, that
summons should be served upon it alone.
The same conclusion applies to the legal service branch of the DPWH, as there is also
nothing in the law that suggests that service of summons on the DPWH should be
made upon it alone. x x x.
xxxx
Obviously, petitioner’s conclusion that the proper procedure for service of summons
was not observed is a mere conjecture because We find nothing in the provisions
invoked by it that such indeed is the procedure sanctioned by law. We are thus
inclined to give more credence to [the Republic’s] argument that it was the regional
office’s fault if it failed to bring the subject case to the attention of the OSG for proper
representation. To allow it to benefit from its own omission in order to evade its just
and valid obligation would be the height of injustice.
Finally, anent the argument that the Republic is estopped from questioning the
jurisdiction of the trial court, We rule in the negative. The existence of another case
against the regional office of the DPWH where the OSG appeared is of no moment as
it concerns a totally different transaction. Thus, it would be erroneous for Us to rule
on that basis alone, that the OSG is already acknowledging the service of summons
upon the regional office, especially considering the categorical stand taken by the OSG
on the matter in the case now before Us. Be that as it may, however, We still rule, as
We have discussed above, that [Domingo’s] position is more impressed with merit.
WHEREFORE, in view of the foregoing, the instant Petition for Annulment of
Judgment is hereby DISMISSED.19
The Republic filed a Motion for Reconsideration20 of the above decision, but the Court
of Appeals denied the same in the assailed Resolution dated October 25, 2006.
Consequently, the Republic filed the instant petition before this Court. In a
Resolution21 dated February 19, 2007, we denied the Republic’s petition for failure to
properly verify the petition and that the jurat in the verification and certification
against forum shopping did not contain any competent evidence of the affiant’s
identity. In addition, the Integrated Bar of the Philippines (IBP) dues payment (under
IBP O.R. No. 663485) of one of the counsels who signed the petition was not updated.
The Republic filed a Motion for Reconsideration22 of the above resolution.23On July 2,
2007, the Court resolved24 to grant the Republic’s motion, thereby reinstating its
petition.
In assailing the judgment of the Court of Appeals, the Republic brings to fore the
following arguments:
I.
If in the act by which the Republic consents to be sued, no designation is
made as to the officer to be served with summons, then the process can only
be served upon the Solicitor General.
[II.]
The State is not bound by the errors or mistakes of its agents.
 III.
Respondent can recover on the government contracts sued upon in Civil Case
No. [3]33-M-2002 only on a quantum meruit basis.25
In essence, the primary issue that must be resolved in the instant petition is whether
the Court of Appeals correctly dismissed the Petition for Annulment of Judgment filed
by the Republic.
Section 1, Rule 4726 of the Rules of Court provides for the remedy of annulment by the
Court of Appeals of judgments or final orders and resolutions of Regional Trial Courts
for which the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the petitioner.
Under the first paragraph of Section 2, Rule 4727 of the Rules of Court, the annulment
may be based only on the grounds of extrinsic fraud and lack of jurisdiction. As a
ground for annulment of judgment, lack of jurisdiction refers to either lack of
jurisdiction over the person of the defending party or over the subject matter of the
claim.28
In the petition at bar, the Republic argues that the RTC failed to acquire jurisdiction
over the former. The Republic reiterates that the service of summons upon the DPWH
Region III alone was insufficient. According to the Republic, the applicable rule of
procedure in this case is Section 13, Rule 14 of the Rules of Court, which mandates
that when the defendant is the Republic of the Philippines, the service of summons
may be effected on the Office of the Solicitor General (OSG). The DPWH and its
regional office are simply agents of the Republic, which is the real party in interest in
Civil Case No. 333-M-2002. The Republic posits that, since it was not impleaded in
the case below and the RTC did not acquire jurisdiction over it, the proceedings in
Civil Case No. 333-M-2002 are null and void.
On the other hand, Domingo argues that the DPWH Region III is part of the DPWH
itself; hence, a suit against the regional office is a suit against the said department
and the Republic as well. Domingo stresses that the case he filed was against the
Republic, that is, against the DPWH Region III, and it was clear that the summons
and a copy of the complaint was duly served on the said regional office. Likewise,
Domingo submits that the Republic is estopped from raising the issue of jurisdiction
in the instant case given that he has filed two other civil actions for specific
performance and damages against the DPWH Region III and, in the said cases, the
OSG formally entered its appearance for and in behalf of the Republic. Domingo
alleges that the foregoing action of the OSG proved that it recognized the validity of
the service of summons upon the DPWH Region III and the jurisdiction of the trial
court over the said regional office.
The Court finds merit in the Republic’s petition.
Summons is a writ by which the defendant is notified of the action brought against
him. Service of such writ is the means by which the court acquires jurisdiction over
his person. Jurisdiction over the person of the defendant is acquired through coercive
process, generally by the service of summons issued by the court, or through the
defendant's voluntary appearance or submission to the court.29
Section 13, Rule 14 of the Rules of Court states that:
SEC. 13. Service upon public corporations. – When the defendant is the Republic of
the Philippines, service may be effected on the Solicitor General; in case of a province,
city or municipality, or like public corporations, service may be effected on its
executive head, or on such other officer or officers as the law or the court may direct.
(Emphasis ours.)
Jurisprudence further instructs that when a suit is directed against an
unincorporated government agency, which, because it is unincorporated, possesses no
juridical personality of its own, the suit is against the agency's principal, i.e., the
State.30 In the similar case of Heirs of Mamerto Manguiat v. Court of Appeals,31 where
summons was served on the Bureau of Telecommunications which was an agency
attached to the Department of Transportation and Communications, we held that:
Rule 14, Section 13 of the 1997 Rules of Procedure provides:
SEC. 13. Service upon public corporations. — When the defendant is the Republic of
the Philippines, service may be effected on the Solicitor General; in case of a province,
city or municipality, or like public corporations, service may be effected on its
executive head, or on such other officer or officers as the law or the court may direct.
It is clear under the Rules that where the defendant is the Republic of the Philippines,
service of summons must be made on the Solicitor General. The BUTEL is an agency
attached to the Department of Transportation and Communications created under
E.O. No. 546 on July 23, 1979, and is in charge of providing telecommunication
facilities, including telephone systems to government offices. It also provides its
services to augment limited or inadequate existing similar private communication
facilities. It extends its services to areas where no communication facilities exist yet;
and assists the private sector engaged in telecommunication services by providing and
maintaining backbone telecommunication network. It is indisputably part of the
Republic, and summons should have been served on the Solicitor General.
We now turn to the question of whether summons was properly served according to
the Rules of Court. Petitioners rely solely on the sheriff's return to prove that
summons was properly served. We quote its contents, viz:
"THIS IS TO CERTIFY that on the 19th day of May 1999, the undersigned caused the
service of Summons and Complaint upon defendant J.A. Development Corporation at
the address indicated in the summons, the same having been received by a certain
Jacqueline delos Santos, a person employed thereat, of sufficient age and discretion to
receive such process, who signed on the lower portion of the Summons to acknowledge
receipt thereof.
Likewise, copy of the Summons and Complaint was served upon defendant Bureau of
Telecommunications at the address indicated in the Summons, a copy of the same was
received by a certain Cholito Anitola, a person employed thereat, who signed on the
lower portion of the Summons to acknowledge receipt thereof."
It is incumbent upon the party alleging that summons was validly served to prove
that all requirements were met in the service thereof. We find that this burden was
not discharged by the petitioners. The records show that the sheriff served summons
on an ordinary employee and not on the Solicitor General. Consequently, the trial
court acquired no jurisdiction over BUTEL, and all proceedings therein are null and
void.32 (Emphases supplied.)
In the instant case, the Complaint for Specific Performance with Damages filed by
Domingo specifically named as defendant the DPWH Region III. As correctly argued
by the Republic, the DPWH and its regional office are merely the agents of the former
(the Republic), which is the real party in interest in Civil Case No. 333-M-2002. Thus,
as mandated by Section 13, Rule 14 of the Rules of Court, the summons in this case
should have been served on the OSG.
the subsequent civil actions against the DPWH Region III, the latter most likely
brought the said cases to the attention of the OSG. On the other hand, Domingo
opines that the DPWH Region III apparently neglected to inform the OSG of the
pendency of Civil Case No. 333-M-2002. Accordingly, Domingo asserted that he should
not be faulted therefor. The Court disagrees. Domingo ought to bear in mind that it is
the duty of the plaintiff to implead all the necessary or indispensable parties for the
complete determination of the action.34 It was, thus, incumbent upon him to name and
implead the proper defendant in this case, i.e., the Republic, and cause the service of
summons to be made upon the officer mandated by law, that is, the OSG. As Domingo
failed to discharge this burden, he cannot now be allowed to shift the blame on the
DPWH Region III or hold in estoppel the OSG.1âwphi1
In sum, the Court holds that the Republic was not validly served with summons in
Civil Case No. 333-M-2002. Hence, the RTC failed to acquire jurisdiction over the
person of the Republic. Consequently, the proceedings had before the trial court and
its Decision dated February 18, 2003 are hereby declared void.
In accordance with Section 7, Rule 4735 of the Rules of Court, a judgment of
annulment shall set aside the questioned judgment or final order or resolution and
render the same null and void, without prejudice to the original action being refiled in
the proper court.

Quite inexplicably, the Court of Appeals failed to apply, nay, to even consider, the In view of the above ruling of the Court declaring the nullity of the proceedings in the
provisions of Section 13, Rule 14 of the Rules of Court in rendering its assailed RTC, the Court shall no longer pass upon the other issues raised by the parties in the
Decision. A perusal of the Decision dated May 19, 2006 shows that the appellate court instant petition.
mainly dissertated regarding the functions and organizational structures of the
DPWH and the OSG, as provided for in the Revised Administrative Code of 1987, in WHEREFORE, the petition is GRANTED. The Decision dated May 19, 2006 and the
an attempt to demonstrate the relationship between the DPWH and its regional Resolution dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813
offices, as well as to refute the claim that the service of summons upon the Republic are REVERSED. The Decision dated February 18, 2003 of the Regional Trial Court of
should be made exclusively upon the OSG. Such an oversight on the part of the Court Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-2002 is hereby ANNULLED
of Appeals is most unfortunate given the relevance and materiality of Section 13, Rule and SET ASIDE, without prejudice to the filing of the original action in the proper
14 of the Rules of Court to the instant case, in addition to the fact that the Republic Regional Trial Court.
itself quoted the aforesaid provision in its petition before the appellate court. 33
SO ORDERED.
The Court, nonetheless, subscribes to the ruling of the Court of Appeals that the
Republic is not estopped from raising the issue of jurisdiction in the case at bar in
view of the alleged entry of appearance of the OSG, in behalf of the Republic, in the
other civil cases supposedly filed by Domingo against the DPWH Region III. As held
by the appellate court, the other civil cases presumably pertained to transactions
involving Domingo and the DPWH Region III, which were totally different from the
contracts involved in the instant case. The fact that the OSG entered its appearance
in the other civil cases, notwithstanding that the summons therein were only served
upon the DPWH Region III, has no bearing in the case now before us. All this
indicates is that, despite the improper service of summons in these other civil cases,
there appeared to be notice to the OSG and voluntary appearance on the latter’s part.

Here, there was no indication, and Domingo did not insist otherwise, that the OSG
had any notice of the filing of Civil Case No. 333-M-2002. Domingo speculates that, in
G.R. No. 167807 December 6, 2011
MANOLITO AGRA, EDMUNDO P. AGUILAR, IMELDA I. AMERICA, EVELYN
R. CONCEPCION, DIOSDADO A. CORSIGA, PERCIVAL G. CRISOSTOMO,
CESAR E. FAELDON, MA. REGINA C. FILOTEO, ZARINA O. HIPOLITO,
JANICE F. MABILOG, ROBERTO MARTINEZ, JONATHAN MENDROS,
NORMAN MIRASOL, EDRICK V. MOZO, LORENZO A. PENOLIAR,
LOURDES QUINTERO, GLORIA GUDELIA SAMBO, DEMOSTHENES V.
ERENO, RHONEIL LIBUNAO, ILUGEN P. MABANSAG, JOSEPHINE
MAGBOO, MADELEINE ANN B. BAUTISTA, ULYSSES C. BIBON, ANGELINA
RAMOS, EDUARDO M. SUMAYOD, DOMINGO TAMAYO, HERACLEA M.
AFABLE, ANNA LISSA CREENCIA, CHONA O. DELA CRUZ, MERCY
NANETTE C. IBOY, JEAN A. LUPANGO, MARIE DELA O. NA-OBRE, PERLA
LUZ OCAMPO, ROUCHELLEJANE PAYURAN, ABIGAIL E. PORMENTO,
THERESITA A. RIVERA, MILAGROS ROBLES, JOSEPHINE ROSILLO,
ARSENIA M. SACDALAN, PRECILA TUBIO, IRENE H. VIRAY, WILFREDO O.
BUCSIT, BONIFACIO DAVID, ROSARIO P. DIZON, EXEQUIEL EVALE, JR.,
RONALD M. MANALO, HENRIETTA A. MARAMOT, FELICISIMO U. PULA,
JONAS F. SALVADOR, ERNESTO SILVANO, JR., ENRICO G. VELGADO,
FEDERICO VILLAR, JR., ARNEL C. ABEN, ABDULMALIK BACARAMAN,
VIRGINIA BORJA, ANTONIO CARANDANG, JR., RINA RIEL DOLINA,
MANOLITO FAJARDO, ARVIN B. GARDUQUE, CAYETANO JUAREZ, MA.
SHERYL LABONETE, HERCONIDA T. LAZARO, MARITESS MARTINEZ,
AURELIO L. MENDOZA, ARNEL M. NOGOT, GERARDO G. POMOY, DENCIO
RAMOS, CORAZON TAGUDIN, ANAFEL B. TIO, AGATONA S. ZALATAR,
MARGIE EULALIA CALMA, RENEE D. MELLA, ARLIQUIN AMERICA,
DEANNA B. AYSON, GERALDINE J. CALICA, CHESTER FERNANDEZ,
LUISA I. HERNANDEZ, CYNTHIA E. LISONDRA, ALONA S. LLVATA,
CLAIRE P. QUETUA, ROSEMARIE S. QUINTOS, RUTH S. RAMIREZ, LINO
VERMUDO, JR., ROLANDO R. APOLONIO, CELIA I. ACCAD, MA. ALMA
AYOS, PAMELA CASTILLO, ARNOLD DUPA, LAURENCE FELICIANO,
LEANDRO P. LIBRANDO, MARILOU B. LOPEZ, AMELITA P. LUCERO,
ESTERBELLE T. SIBALA, JONA ANDAL, ANDRES RATIO, MA. THERESA Q.
MALLANO, DANILO P. LIGUA, JOY ABOGADO, VIRGINIA C. STA. ANA,
ALBERNARD BAUTISTA, JUBANE DE PEDRO, PAUL DINDO C. DELA
CRUZ, ALEJO B. INCISO, SHERWIN MAÑADA, JESUS T. OBIDOS, JOEL B.
ARELLANO, ALFREDO CABRERA, MARY LYNN E. GELLOR, JOHN
JOSEPH M. MAGTULOY, MICHELLE MONTEMAYOR, RHINA ANGUE,
NORBERTO BAYAGA, JR., JUSTINO CALVEZ, EDWIN CONCEPCION, ALAN
JOSEPH IBE, CESAR JACINTO, JOSERITA MADRID, IRENE MARTIN,
GINA T. QUINDO, RENATO SUBIJANO, NIELMA E. VERZOSA, ALL
NATIONAL ELECTRIFICATION ADMINISTRATION EMPLOYEES,
REPRESENTED BY REGINA FILOTEO, Petitioners,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a special civil action via certiorari under Rule 65 in relation to Rule 64 of the
1997 Revised Rules of Civil Procedure from the Decision1 of the Commission on Audit
(COA) No. 2003-134 dated October 9, 2003, which denied the grant of rice allowance
to employees of the National Electrification Administration (NEA) who were hired
after June 30, 1989 (petitioners) and COA’s Resolution2 No. 2005-010 dated February
24, 2005, which likewise denied petitioners’ Motion for Reconsideration.
On July 1, 1989, Republic Act No. 6758 (the Compensation and Position Classification
Act of 1989) took effect, Section 12 of which provides:
Sec. 12. Consolidation of Allowances and Compensation. — All allowances, except for
representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed
abroad; and such other additional compensation not otherwise specified herein as may
be determined by the DBM, shall be deemed included in the standardized salary rates
herein prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee
paid from local funds of a local government unit shall be absorbed into the basic
salary of said official or employee and shall be paid by the National Government.
(Emphasis ours.)
Pursuant to its authority to implement Republic Act No. 6758 under Section 23
thereof, the Department of Budget and Management (DBM) on October 2, 1989 issued
Corporate Compensation Circular No. 10 (DBM-CCC No. 10), otherwise known as the
"Implementing Rules and Regulations of R.A. No. 6758." Paragraph 5.5 of DBM-CCC
No. 10 reads:
5.5 The following allowances/fringe benefits authorized to GOCCs/GFIs
pursuant to the aforementioned issuances are not likewise to be integrated
into the basic salary and allowed to be continued only for incumbents of
positions as of June 30, 1989 who are authorized and actually receiving said
allowances/benefits as of said date, at the same terms and conditions
prescribed in said issuances[:]
5.5.1 Rice Subsidy;
5.5.2 Sugar Subsidy;
5.5.3 Death Benefits other than those granted by the GSIS;
5.5.4 Medical/dental/optical allowances/benefits;
 5.5.5 Children’s Allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9 Teller’s Allowance. (Emphasis added.)
A group of NEA employees who were hired after October 31, 19893 claimed that they
did not receive meal, rice, and children’s allowances. Thus, on July 23, 1999, they filed
a special civil action for mandamus against NEA and its Board of Administrators
before the Regional Trial Court (RTC), Branch 88, Quezon City, docketed as SP. Civil
Action No. Q-99-38275, alleging violation of their right to the equal protection clause
under the Constitution.
On December 15, 1999, the RTC rendered its Decision4 in their favor, disposing of the
case in the following manner:
WHEREFORE, foregoing considered, the petition is hereby GRANTED directing the
respondent NEA, its Board of Administrators to forthwith settle the claims of the
petitioners and other employees similarly situated and extend to them the benefits
and allowances to which they are entitled but which until now they have been
deprived of as enumerated under Section 5 of DBM CCC No. 10 and their inclusion in
the Provident Funds Membership, retroactive from the date of their appointments up
to the present or until their separation from the service.5
At the instance of the complainants, the Branch Clerk of Court of RTC Branch 88,
Quezon City, Lily D. Labarda, issued a CERTIFICATION6 dated January 24, 2000,
which states:
This is to certify that the Decision dated December 16, 19997 of the above-entitled
case which reads the dispositive portion:
xxxx
is now final and executory.
This certification [is] issued upon the request of Ms. Blesilda B. Aguilar for whatever
legal purpose/s it may serve.8
Afterwards, the Presiding Judge of RTC Branch 88, Quezon City issued a Writ of
Execution9 in SP. Civil Action No. Q-99-38275 on February 22, 2000.10 Thereafter, the
RTC issued a Notice of Garnishment against the funds of NEA with Development
Bank of the Philippines (DBP) to the extent of ₱16,581,429.00.11
NEA questioned before the Court of Appeals the Orders of the lower court, and the
case was docketed as CA-G.R. SP No. 62919. On July 4, 2002, the Court of Appeals
rendered a Decision12 declaring null and void the December 11, 2000 Resolution as
well as the January 8, 2001 Order of the RTC, and ordering the implementation of a
writ of execution against the funds of NEA. Thus, NEA filed a Petition for Review
on Certiorari with this Court, docketed as G.R. No. 154200. Meanwhile, the RTC held
in abeyance the execution of its December 15, 1999 Decision pending resolution of this
Court of the review on certiorari in National Electrification Administration v.
Morales.13
On July 24, 2007, this Court reversed and set aside the Court of Appeals decision and
described the subsequent events relating to the case in this manner14 :
Meanwhile, in a letter dated June 28, 2000, former DBM Secretary Benjamin E.
Diokno informed NEA Administrator Conrado M. Estrella III of the denial of the NEA
request for a supplemental budget on the ground that the claims under R.A. No. 6758
which the RTC had ordered to be settled cannot be paid because Morales, et al. are not
"incumbents of positions as of July 1, 1989 who are actually receiving and enjoying
such benefits."
Moreover, in an Indorsement dated March 23, 2000, the Commission on Audit (COA)
advised NEA against making further payments in settlement of the claims of
Morales, et al. Apparently, COA had already passed upon claims similar to those of
Morales, et al. in its earlier "Decision No. 95-074" dated January 25, 1995. Portions of
the Indorsement read as follows:
This Office concurs with the above view. The court may have exceeded its
jurisdiction when it entertained the petition for the entitlement of the after-
hired employees which had already been passed upon by this Commission in
COA Decision No. 95-074 dated January 25, 1995. There, it was held that: "the
adverse action of this Commission sustaining the disallowance made by the Auditor,
NEA, on the payment of fringe benefits granted to NEA employees hired from July
1, 1989 to October 31, 1989 is hereby reconsidered. Accordingly, subject
disallowance is lifted."
Thus, employees hired after the extended date of October 31, 1989, pursuant to
the above COA decision cannot defy that decision by filing a petition for
mandamus in the lower court. Presidential Decree No. 1445 and the 1987
Constitution prescribe that the only mode for appeal from decisions of this
Commission is on certiorari to the Supreme Court in the manner provided by
law and the Rules of Court. Clearly, the lower court had no jurisdiction when
it entertained the subject case of mandamus. And void decisions of the lower
court can never attain finality, much less be executed. Moreover, COA was not
made a party thereto, hence, it cannot be compelled to allow the payment of
claims on the basis of the questioned decision.
PREMISES CONSIDERED, the auditor of NEA should post-audit the disbursement
vouchers on the bases of this Commission's decision particularly the above-cited COA
Decision No. 94-074 [sic] and existing rules and regulations, as if there is no decision
of the court in the subject special civil action for mandamus. At the same time,
management should be informed of the intention of this Office to question the validity
of the court decision before the Supreme Court through the Office of the Solicitor
General.
Parenthetically, the records at hand do not indicate when Morales, et al. were
appointed. Even the December [15], 1999 RTC Decision is vague for it merely states
that they were appointed after June 30, 1989, which could mean that they were
appointed either before the cut-off date of October 31, 1989 or after. Thus, there is not
enough basis for this Court to determine that the foregoing COA Decision No. 95-074
adversely affects Morales, et al.. Moreover, the records do not show whether COA
actually questioned the December 16, 1999 RTC Decision before this Court.15
The Court ruled that respondents therein could not proceed against the funds of NEA
"because the December [15], 1999 RTC Decision sought to be satisfied is not a
judgment for a specific sum of money susceptible of execution by garnishment; it is a
special judgment requiring petitioners to settle the claims of respondents in
accordance with existing regulations of the COA."16 The Court further held as follows:
In its plain text, the December [15], 1999 RTC Decision merely directs petitioners to
"settle the claims of [respondents] and other employees similarly situated." It does not
require petitioners to pay a certain sum of money to respondents. The judgment is
only for the performance of an act other than the payment of money, implementation
of which is governed by Section 11, Rule 39 of the Rules of Court, which provides:
Section 11. Execution of special judgments. - When a judgment requires the
performance of any act other than those mentioned in the two preceding sections, a
certified copy of the judgment shall be attached to the writ of execution and shall be
served by the officer upon the party against whom the same is rendered, or upon any
other person required thereby, or by law, to obey the same, and such party or person
may be punished for contempt if he disobeys such judgment.
xxxx
Garnishment is proper only when the judgment to be enforced is one for payment of a
sum of money.
The RTC exceeded the scope of its judgment when, in its February 22, 2000 Writ of
Execution, it directed petitioners to "extend to [respondents] the benefits and
allowances to which they are entitled but which until now they have been deprived of
as enumerated under Sec. 5 of DBM CCC No. 10 and x x x to cause their inclusion in
the Provident Fund Membership." Worse, it countenanced the issuance of a notice of
garnishment against the funds of petitioners with DBP to the extent of ₱16,581,429.00
even when no such amount was awarded in its December 16, 1999 Decision.
However, in its subsequent Orders dated May 17, 2000 and January 8, 2001, the RTC
attempted to set matters right by directing the parties to now await the outcome of
the legal processes for the settlement of respondents’ claims.
That is only right.
Without question, petitioner NEA is a GOCC -- a juridical personality separate and
distinct from the government, with capacity to sue and be sued. As such GOCC,
petitioner NEA cannot evade execution; its funds may be garnished or levied upon in
satisfaction of a judgment rendered against it. However, before execution may proceed
against it, a claim for payment of the judgment award must first be filed with the
COA.
Under Commonwealth Act No. 327, as amended by Section 26 of P.D. No. 1445, it is
the COA which has primary jurisdiction to examine, audit and settle "all debts and
claims of any sort" due from or owing the Government or any of its subdivisions,
agencies and instrumentalities, including government-owned or controlled
corporations and their subsidiaries. With respect to money claims arising from the
implementation of R.A. No. 6758, their allowance or disallowance is for COA to decide,
subject only to the remedy of appeal by petition for certiorari to this Court.
All told, the RTC acted prudently in halting implementation of the writ of execution to
allow the parties recourse to the processes of the COA. It may be that the tenor of the
March 23, 2000 Indorsement issued by COA already spells doom for respondents’
claims; but it is not for this Court to preempt the action of the COA on the post-audit
to be conducted by it per its Indorsement dated March 23, 2000.
In fine, it was grave error for the CA to reverse the RTC and direct immediate
implementation of the writ of execution through garnishment of the funds of
petitioners,
WHEREFORE, the petition is GRANTED. The July 4, 2002 Decision of the Court of
Appeals is REVERSED andSET ASIDE. The Resolution dated December 11, 2000
and Order dated January 8, 2001 of the Regional Trial Court, Branch 88, Quezon City
in Special Civil Action No. Q-99-38275 are REINSTATED.17
Meantime, the Civil Service Commission issued Resolution No. 001295 dated June 1,
200118 and interpreted Section 12 of Republic Act No. 6758 in this manner:
Material to the resolution of this instant request is Section 12 of SSL x x x.
xxxx
The Commission, x x x is of the view that this provision of law does not imply that
such other additional compensation not integrated into the salary rates shall not be
received by employees appointed after July 1, 1989. The word "only" before the phrase
"as of July 1, 1989" does not refer to incumbents but qualifies what additional
compensation can be continued together with the qualifying words "not integrated
into the standardized rates shall continue to be authorized." The correct
interpretation therefore is that, additional compensation being received by employees
not integrated into the standardized rates as of July 1, 1989 shall continue to be
authorized and received/enjoyed by said employees, whether or not said employee was
appointed prior to or after July 1, 1989.
A different interpretation will result in the creation of two classes of employees, i.e.,
one class receiving less pay than another class for substantially equal work. Said
interpretation will violate Section 2 of the SSL which provides, thus:
xxxx
Additionally, this interpretation will also violate the constitutional precept that no
person shall be denied the equal protection of law (Section 1, Article III of the 1987
Constitution). Applying this precept the Supreme Court declared that "equal
protection of the law is against unde favor on an individual or class (Tiu vs. Court of
Appeals, GR No. 127410, January 20, 1999).19
The Office of the Government Corporate Counsel (OGCC), in response to the request
of then NEA Administrator Manuel Luis S. Sanchez, issued on August 14, 2001 its
Opinion No. 157, s. 200120 declaring that the RTC decision, not having been appealed,
had become the law of the case which must now be applied. The pertinent portion of
such opinion reads:
HON. MANUEL LUIS S. SANCHEZ
Administrator
National Electrification Administration
NEA Road, Diliman, Quezon City
Re: Request for legal opinion on the propriety and applicability to NEA employees
hired after July 1, 1989 of OGCC Opinion NO. 086, s. 2001
xxxx
Pursuant to law, subject Decision became final and executory fifteen (15) days after
its rendition, there being no appeal or motion for reconsideration filed in the interim,
as certified to by Atty. Lily D. Labarda, Branch 88, Quezon City, on January 24, 2000.
The foregoing considered, this Office therefore cannot opine otherwise save to uphold
the supremacy and finality of the aforequoted Decision of the Court on the matter. Its
judgment is now res judicata, hence, the controlling legal rule, as far as Petitioners
NEA employees are concerned, is that they must be extended the benefits and
allowances "to which they are entitled but which until now they have been deprived of
as enumerated under Section 5 of DBM CCC No. 101 x x x, retroactive from the date
of their appointments up to the present or until their separation from the service."
This is the law of the case which must now be applied. At any rate, we have stated in
OGCC Opinion No. 086, S. 2001 that even employees hired after July 1, 1989 may
receive the subject benefits provided there is determination by the DBM that the
same have not been actually integrated into their basic salaries.
Hence, your query is therefore answered in the affirmative.21
Pursuant to the above opinion in its favor, the NEA Board of Administrators issued
Resolution No. 29 on August 9, 200122 approving the entitlement to rice, medical,
children, meal, and other related allowances to NEA employees hired after October
31, 1989,23 and the payment of these benefits, chargeable to its Personnel Services
Savings. This resolution was the outcome of the meeting of the NEA Board of
Administrators on the same date, and reads:
RESOLUTION NO. 29
xxxx
RESOLVED THEREFORE TO APPROVE, as it hereby approves, the entitlement to
rice, medical, children, meal and other related allowances of NEA employees hired
after October 31, 1989 and payment of these benefits;
RESOLVED FURTHER TO CONFIRM, as it hereby confirms, the initial
appropriation and payment of One Million Six Hundred Forty Six Thousand One
Hundred Twenty Seven Pesos and Thirty Centavos (P1,646,127.30) for this purpose
chargeable against the Personnel Services Savings.24
Thus, NEA granted the questioned allowances to its employees who were not
receiving these benefits/allowances, including rice allowance amounting to
₱1,865,811.84 covering the period January to August 2001.25
However, the resident auditor of COA, Carmelita M. Agullana (Agullana), did not
allow the payment of rice allowance for the period January to August 2001 to NEA
employees who were not incumbents as of June 30, 1989, under Notice of
Disallowance26 No. 2001-004-101 dated September 6, 2001. Agullana indicated the
"Facts and/or Reasons for Disallowance" as follows:
Payment of Rice Allowance for the period January, 2001 to August, 2001 to employees
who were not incumbents as of June 30, 1989 not allowed pursuant to RA #6758 as
implemented by Corporate Compensation Circular No. 10 prescribing the Rules and
Regulations for the Implementation of the Revised Compensation and Position
Classification System for Government-Owned and/or Controlled Corporations
(GOCCs) and Financial Institutions (GFIs) specifically Sections 5.4 and 5.5 thereof. x
x x.27
NEA, through then Acting Administrator Francisco G. Silva, and assisted by counsel,
appealed Agullana’s disallowance to the COA on September 27, 2001, 28 arguing that
the disallowance had no basis in law and in fact, and that the subject disbursement
was anchored on a court decision that had become final and executory.
The COA denied the appeal from the disallowance in a Decision 29 dated October 9,
2003 (Decision No. 2003-134). The COA stated that:
The Director of x x x Corporate Audit Office II recommended the affirmance of the
subject disallowance contending that Section 12 of Republic Act (RA) No. 6758 (Salary
Standardization Law) x x x remains applicable on the matter since Department of
Budget and Management-Corporate Compensation Circular No. 10, s. 1989 (DBM-
CCC No. 10) was declared ineffective by the Supreme Court in the case of De Jesus, et
al. vs. COA, et al. (G.R. No. 109023, August 13, 1998) due to its non-publication in the
Official Gazette or in a newspaper of general circulation. She pointed out that the
alleged discriminatory effect and violation of the policy to provide equal pay for
substantially equal work in the above-quoted provision have been sufficiently
considered in Philippine Ports Authority vs. COA, 214 SCRA 653 and later confirmed
in Philippine International Trading Corporation vs. COA, G.R. No. 132593, June 25,
1999, wherein the Supreme Court ruled that:
"x x x we must mention that this Court has confirmed in Philippine Ports Authority
vs. Commission on Audit the legislative intent to protect incumbents who are
receiving salaries and allowances over and above those authorized by RA 6758 to
continue to receive the same even after RA 6758 took effect. In reserving the benefit to
incumbents, the legislature has manifested its intent to gradually phase out this
privilege without upsetting the policy of non-diminution of pay and consistent with
the rule that laws should only be applied prospectively in the spirit of fair play."
She also conformed to the OGCC Opinion No. 52, s. 1999 dated March 22, 1999,
edifying the implication of the De Jesus Case which enunciated thusly:
"Notwithstanding the ruling in the De Jesus Case, the applicable law is still Section
12 of R.A. No. 6758 which allows additional compensation being received by
incumbents as of July 1, 1989 not integrated into the standard rates to continue. The
recent nullification of DBM-CCC No. 10 applies favorably only to those incumbent
employees (hired prior to July 1, 1989) and does not in any way change the position or
situation of those employees hired after the cut-off date. With the issuance of R.A.
6758, employees hired after July 1, 1989 must follow the revised and unified
compensation and position classification system in the government, for which the
DBM was directed to establish and administer and which shall be applied for all
government entities.
xxxx
The new hirees having accepted their employment, aware of such a condition that
they are not entitled to additional benefits and allowances, they would be estopped
from complaining."
Moreover, the Director noted that when the rice allowance to the claimants was
granted in the year 2001, the DBM had already published CCC No. 10.
Anent the contention that the subject decision of the RTC has become the law of the
case which must be applied, she stressed that the said doctrine is one of the policies
only and will be disregarded when compelling circumstances call for a
redetermination of the point of law. As cited in Black’s Law Dictionary, 6th Edition,
1990, "the doctrine is merely a rule of procedure and does not go to the power of the
court, and will not be adhered to where its application will result in unjust decision."
xxxx
PREMISES CONSIDERED, the instant appeal is hereby DENIED and the
disallowance in the total amount of ₱1,865,811.84 is accordingly affirmed.30
NEA filed a Motion for Reconsideration of the said Decision, but this was denied in
COA Decision No. 2005-01031dated February 24, 2005, the pertinent portions of which
read:
After a careful re-evaluation, this Commission finds herein motion devoid of merit, the
issues raised therein being a mere reiteration of the previous arguments of the
movant in his appeal and which were already considered and passed upon by this
Commission in the assailed decision.
WHEREFORE, there being no new and material evidence adduced as would warrant
a reversal or modification of the decision herein sought to be reconsidered, the instant
motion for reconsideration has to be, as it is hereby, denied with finality. 32
Thus, petitioners came to this Court questioning the COA’s decision and resolution on
the disallowance of their rice subsidy.
Petitioners claim that the COA’s reliance on DBM-CCC No. 10 is totally misplaced,
alleging that this interpretation had been "squarely debunked" by the Supreme Court
in a number of cases, including Cruz v. Commission on Audit.33 Furthermore,
petitioners claim that in a similar case involving Opinion No. 086, s. 2001 of the
OGCC, it wrote: "[It] is our considered opinion that employees of COA, whether
appointed before or after July 1, 1989, are entitled to the benefits enumerated under
Section 5.5 of DBM-CCC No. 10 x x x."34
We quote portions of Opinion No. 086, s. 2001 of the OGCC below:
Please be informed that our Office had previously rendered legal opinions involving
the same issue upon the request of some of our client corporations similarly situated.
In our Opinion No. 55, Series of 2000, we stated:
"At the outset we would like to clarify that the amount of the standardized salary vis-
à-vis the pre-SSL salary (plus allowance) is not conclusively determinant of whether
or not a certain allowance is deemed integrated into the former. Section 12 of R.A.
6758 expressly provides:
xxxx
The law is thus clear. The general rule is that all allowances are deemed included in
the standardized rates set forth in R.A. 6758. This is consistent with the primary
intent of the Act to eliminate wage inequities. The law, however, admits of certain
exceptions and as stated in the second sentence of the aforecited provision, such other
additional compensation in cash or in kind not integrated into the standardized rates
being received by incumbents as of July 1, 1989 shall continue to be authorized. It is
our view, however, that a government agency, in this case NDC, does not have
discretion to determine what allowances received by incumbent employees prior to
SSL are deemed included or integrated in the standardized rates. It is the DBM which
has the mandate and authority under the SSL to determine what additional
compensation shall be integrated and it is precisely why it issued NCC No. 10."
The foregoing opinion is consistent with our Opinion No. 52, Series of 1999, wherein
we opined:
"x x x Nonetheless, as Section 12 of RA 6758 expressly provides that such additional
compensation, whether in cash or in kind, being received by incumbent employees as
of July 1, 1989 not integrated to the standardized salary rates as may be determined
by the DBM shall continue to be authorized, the question becomes a matter of fact, on
whether or not the aforementioned allowances have been integrated into the salaries
of employees."35 (Emphases in the quoted text.)
Petitioners claim that "the Civil Service Commission, the Office of the Government
Corporate Counsel and the highest court of the land, the Supreme Court, chose not to
distinguish the entitlement of benefits to those hired before and after October 31,
1989 (or in this case, July [1], 1989)," while "the COA sweepingly does so by just a
wave of the hand."36 To support this claim, petitioners erroneously cite Javier v.
Philippine Ports Authority, CA-G.R. No. 67937, March 12, 2002, as a decision by this
Court, but said decision was rendered by the Court of Appeals.
Petitioners argue that assuming that they are not entitled to the rice allowance in
question, they should not be required to refund the amounts received, on grounds of
fairness and equity. In connection with this, petitioners allege as follows:
Prior to December 31, 2003, NEA consists of 720 employees more or less who received
the rice allowance. Upon [the] restructuring of NEA in December 2003, all NEA
employees were legally terminated. Out of 720 employees, only 320 employees are now
left with to operate NEA. Most of the (sic) them are rehired while minority of them are
newly hired. Thus, the refund of P1,865,811.84, shall be shouldered by those who
remained as NEA employees. Secondly, those who received the said rice allowance
accepted it in good faith believing that they are entitled to it as a matter of law. 37
In its Comment38 dated September 21, 2005, COA’s lone argument is that "[t]he
assailed COA decision is not tainted with grave abuse of discretion. The disallowance
of payment for the rice [subsidy] by the COA is in accord with the law and the rules."
COA maintains that the law on the matter, Section 12 of Republic Act No. 6758, is
clear, as its last sentence provides reservation of certain allowances to incumbents.
COA argues in this wise:
The Supreme Court in Philippine Ports Authority vs. Commission on Audit confirmed
the legislative intent to protect incumbents who are receiving salaries and/or
allowances over and above those authorized by R.A. 6758 to continue to receive the
same even after the law took effect. In reserving the benefit to incumbents, the
legislature has manifested its intent to gradually phase out this privilege without
upsetting the policy of non-diminution of pay and consistent with the rule that laws
should only be applied prospectively in the spirit of fairness and justice.
Thus, pursuant to its authority under Section 23 of R.A. No. 6758, the DBM x x x
issued on October 2, 1989, DBM-CCC No. 10. Section 5.5 of DBM-CCC No. 10
enumerated the various allowances/fringe benefits authorized to GOCCs/GFIs which
are not to be integrated into the basic salary and allowed to be continued only for
incumbents of positions as of June 30, 1989 who are authorized and actually receiving
said allowances/benefits as of said date. Among these was the rice subsidy/allowance.
Hence, in light of the effectivity of DBM-CCC No. 10 on March 16, 1999 following its
reissuance (in its entirety on February 15, 1999) and publication in the Official
Gazette on March 1, 1999, the disallowance by the COA of the rice allowance for the
period beginning January 2001 up to August 2001 is not tainted with grave abuse of
discretion but in accord with the law and the rules.39
Petitioners, in their Reply,40 anchor their petition on their allegation that the RTC
Decision had already become final and executory, could no longer be disturbed, and
must be respected by the parties. To support their claim, they cite Arcenas v. Court of
Appeals41 wherein this Court held:
For, it is a fundamental rule that when a final judgment becomes executory, it
thereby becomes immutable and unalterable. The judgment 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. The only recognized exceptions are the correction of clerical errors or the
making of so-called nunc pro tunc entries which cause no prejudice to any party, and,
of course, where the judgment is void. Any amendment or alteration which
substantially affects a final and executory judgment is null and void for lack of
jurisdiction, including the entire proceedings held for that purpose.42 (Emphasis ours.)
Petitioners likewise cite Panado v. Court of Appeals43 wherein the Court held that "[i]t
is axiomatic that final and executory judgments can no longer be attacked by any of
the parties or be modified, directly or indirectly, even by the highest court of the
land."44 From the foregoing jurisprudence, petitioners conclude that the acts of COA
in disallowing the claims and ordering refund of benefits already received clearly
constitute grave abuse of discretion amounting to lack of jurisdiction inasmuch as said
acts frustrated the final and executory decision of the trial court.
The pivotal issues as determined by the COA are:
1. Whether or not the immutability of final decision doctrine must prevail
over the exclusive jurisdiction of [the COA] to audit and settle disbursements
of funds; and
2. Whether or not the NEA employees hired after June 30, 1989 are entitled
to rice allowance.45
The COA resolved these issues in this manner:
As to the first issue, the immutability rule applies only when the decision is
promulgated by a court possessed of jurisdiction to hear and decide the case.
Undoubtedly, the petition in the guise of a case for mandamus is a money claim
falling within the original and exclusive jurisdiction of this Commission. Noting the
propensity of the lower courts in taking cognizance of cases filed by claimants in
violation of such primary jurisdiction, the Supreme Court issued Administrative
Circular 10-2000 dated October 23, 2000 enjoining judges of lower courts to exercise
caution in order to prevent "possible circumvention of the rules and procedures of the
Commission on Audit" and reiterating the basic rule that: "All money claims against
the Government must be filed with the Commission on Audit which shall 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."
Under the doctrine of primary jurisdiction, when an administrative body is clothed
with original and exclusive jurisdiction, courts are utterly without power and
authority to exercise concurrently such jurisdiction. Accordingly, all the proceedings of
the court in violation of that doctrine and all orders and decisions reached thereby are
null and void. It will be noted in the cited Supreme Court Circular that money claims
are cognizable by the COA and its decision is appealable only to the Supreme Court.
The lower courts have nothing to do with such genus of transactions.
Anent the issue of entitlement to rice allowance by employees hired after June 30,
1989, this Commission is left with no option but to affirm the disallowance in the face
of the explicit provisions of DBM-CCC No. 10. After its publication on March 9, 1999
in the Official Gazette, rice allowance was allowed only for incumbents as of July 1,
1989. Obviously, there is no violation of the equal protection clause as cited in the
PITC case, supra, because whatever increments the incumbents are enjoying over
those of non-incumbents are transitory, for the same law provides that such difference
shall be deducted from the salary increase the former should receive under Section 17.
Thus, the equalization or standardization of what the two categories of employees will
be receiving in terms of benefits is ensured.
PREMISES CONSIDERED, the instant appeal is hereby DENIED and the
disallowance in the total amount of ₱1,865,811.84 is accordingly affirmed.46
We agree with the findings of the COA.
In National Electrification Administration v. Morales, the order of garnishment
against the NEA funds to implement the RTC Decision was in issue, and we said that
the COA had exclusive jurisdiction to decide on the allowance or disallowance of
money claims arising from the implementation of Republic Act No. 6758. We observed
therein that "the RTC acted prudently in halting implementation of the writ of
execution to allow the parties recourse to the processes of the COA." 47 In fact, we even
stated there that "it is not for this Court to preempt the action of the COA on the post-
audit to be conducted by it per its Indorsement dated March 23, 2000." 48
We find that the COA had ruled in accordance with law and jurisprudence, and we see
no reason to reverse its decision.
Section 5.5 of DBM-CCC No. 10 is clear that rice subsidy is one of the benefits that
will be granted to employees of GOCCs49 or GFIs50 only if they are "incumbents" as of
July 1, 1989. We reproduce the first paragraph of Section 5.5 below:
5.5 The following allowances/fringe benefits authorized to GOCCs/GFIs pursuant to
the aforementioned issuances are not likewise to be integrated into the basic salary
and allowed to be continued only for incumbents of positions as of June 30, 1989 who
are authorized and actually receiving said allowances/benefits as of said date, at the
same terms and conditions prescribed in said issuances[:]
5.5.1 Rice Subsidy; x x x.51
We have defined an incumbent as "a person who is in present possession of an office;
one who is legally authorized to discharge the duties of an office."52 There is no
question that petitioners were not incumbents as of June 30, 1989. We have likewise
characterized NEA as a GOCC in National Electrification Administration v. Morales.
Thus, Section 5.5 quoted above, issued pursuant to the authority given to the DBM
under Section 12 of Republic Act No. 6758, was correctly applied by the COA.
We find our pronouncements in Philippine National Bank v. Palma53 to be applicable
and conclusive on this issue now before us:
During these tough economic times, this Court understands, and in fact sympathizes
with, the plight of ordinary government employees. Whenever legally possible, it has
bent over backwards to protect labor and favor it with additional economic
advantages. In the present case, however, the Salary Standardization Law clearly
provides that the claimed benefits shall continue to be granted only to employees who
were "incumbents" as of July 1, 1989. Hence, much to its regret, the Court has no
authority to reinvent or modify the law to extend those benefits even to employees
hired after that date.1awphil
xxxx
Stare Decisis
The doctrine "stare decisis et non quieta movere (Stand by the decisions and disturb
not what is settled)" is firmly entrenched in our jurisprudence. Once this Court has
laid down a principle of law as applicable to a certain state of facts, it would adhere to
that principle and apply it to all future cases in which the facts are substantially the
same as in the earlier controversy.
The precise interpretation and application of the assailed provisions of RA 6758,
namely those in Section 12, have long been established in Philippine Ports Authority
v. COA. The essential pronouncements in that case have further been fortified
by Manila International Airport Authority v. COA, Philippine International Trading
Corporation v. COA, and Social Security System v. COA.
This Court has consistently held in those cases that allowances or fringe benefits,
whether or not integrated into the standardized salaries prescribed by RA 6758,
should continue to be enjoyed by employees who (1) were incumbents and (2) were
receiving those benefits as of July 1, 1989.
In Philippine Ports Authority v. COA, the x x x Court said that the intention of the
framers of that law was to phase out certain allowances and privileges gradually,
without upsetting the principle of non-diminution of pay. The intention of Section 12
to protect incumbents who were already receiving those allowances on July 1, 1989,
when RA 6758 took effect was emphasized thus:
"An incumbent is a person who is in present possession of an office.
"The consequential outcome, under sections 12 and 17, is that if the incumbent
resigns or is promoted to a higher position, his successor is no longer entitled to his
predecessor’s RATA privilege x x x or to the transition allowance."
Finally, to explain what July 1, 1989 pertained to, we held in the same case as follows:
"x x x. The date July 1, 1989 becomes crucial only to determine that as of said date,
the officer was an incumbentand was receiving the RATA, for purposes of entitling
him to its continued grant. x x x."
In Philippine International Trading Corporation v. COA, this Court confirmed the
legislative intention in this wise:
"x x x [T]here was no intention on the part of the legislature to revoke existing
benefits being enjoyed by incumbentsof government positions at the time of the
passage of RA 6758 by virtue of Sections 12 and 17 thereof. x x x."
The Court stressed that in reserving the benefits to incumbents alone, the
legislature’s intention was not only to adhere to the policy of non-diminution of pay,
but also to be consistent with the prospective application of laws and the spirit of
fairness and justice.
xxxx
In consonance with stare decisis, there should be no more misgivings about the proper
application of Section 12. In the present case, the payment of benefits to employees
hired after July 1, 1989, was properly withheld, because the law clearly mandated
that those benefits should be reserved only to incumbents who were already enjoying
them before its enactment. Withholding them from the others ensured that the
compensation of the incumbents would not be diminished in the course of the latter’s
continued employment with the government agency.54 (Emphasis ours, citations
omitted.)1avvphi1
As petitioners were hired after June 30, 1989, the COA was correct in disallowing the
grant of the benefit to them, as they were clearly not entitled to it. As quoted above,
we have repeatedly held that under Section 12 of Republic Act No. 6758, the only
requirements for the continuous grant of allowances and fringe benefits on top of the
standardized salary rates for employees of GOCCs and GFIs are as follows: (1) the
employee must be an incumbent as of July 1, 1989; and (2) the allowance or benefit
was not consolidated in the standardized salary rate as prescribed by Republic Act No.
6758.55
We hereby reiterate our ruling in Philippine National Bank v. Palma as regards
Section 12 of Republic Act No. 6758, as follows:
In sum, we rule thus:
1. Under Section 12 of RA 6758, additional compensation already being
received by the employees of petitioner, but not integrated into the
standardized salary rates -- enumerated in Section 5.5 of DBM-CC[C] No. 10,
like "rice subsidy, sugar subsidy, death benefits other than those granted by
the GSIS," and so on -- shall continue to be given.
 2. However, the continuation of the grant shall be available only to those
"incumbents" already receiving it on July 1, 1989.
3. Thus, in PPA v. COA, this Court held that PPA employees already
receiving the RATA granted by LOI No. 97 should continue to receive them,
provided they were already "incumbents" on or before July 1, 1989.
4. PITC v. COA held that in enacting RA 6758, Congress was adhering to the
policy of non-diminution of existing pay. Hence, if a benefit was not yet
existing when the law took effect on July 1, 1989, there was nothing to
continue and no basis for applying the policy.
5. Neither would Cruz v. COA be applicable. In those cases, the COA
arbitrarily set a specific date, October 31, 1989; RA 6758 had not made a
distinction between those hired before and those after that date. In the
present case, the law itself set July 1, 1989, as the date when employees
should be "incumbents," because that was when RA 6758 took effect. It was
not an arbitrarily chosen date; there was sufficient reason for setting it as the
cutoff point.56
Notwithstanding our ruling above, however, we take up as another matter the refund
ordered by the COA on the rice subsidy that petitioners had already received. As
regards the refund, we rule in favor of petitioners and will not require them to return
the amounts anymore.
This is because, to begin with, the officials and administrators of NEA themselves had
believed that their employees were entitled to the allowances, and this was covered by
Resolution No. 29 of the NEA Board of Administrators. The petitioners thus received
in good faith the rice subsidy together with other allowances provided in said
Resolution. For reasons of equity and fairness, therefore, and considering their long
wait for this matter to be resolved with finality, we will no longer require a refund
from these public servants.
Our pronouncements on refund in De Jesus v. Commission on Audit, 57 wherein we
cited Blaquera v. Hon. Alcala,58are applicable:
Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which amounts
the petitioners have already received. Indeed, no indicia of bad faith can be detected
under the attendant facts and circumstances. The officials and chiefs of offices
concerned disbursed such incentive benefits in the honest belief that the amounts
given were due to the recipients and the latter accepted the same with gratitude,
confident that they richly deserve such benefits.
This ruling in Blaquera applies to the instant case. Petitioners here received the
additional allowances and bonuses in good faith under the honest belief that LWUA
Board Resolution No. 313 authorized such payment. At the time petitioners received
the additional allowances and bonuses, the Court had not yet decided Baybay Water
District. Petitioners had no knowledge that such payment was without legal basis.
Thus, being in good faith, petitioners need not refund the allowances and bonuses
they received but disallowed by the COA.59 (Emphasis supplied.)
As in the cases above quoted, we cannot countenance the refund of the rice subsidies
given to petitioners by NEA for the period January to August 2001 at this late time,
especially since they were given by the government agency to its employees in good
faith.
WHEREFORE, premises considered, the petition is hereby PARTIALLY GRANTED.
COA Decision No. 2003-134 dated October 9, 2003 and COA Resolution No. 2005-010
dated February 24, 2005 are hereby AFFIRMED with the CLARIFICATION that the
petitioners shall no longer be required to refund the rice subsidies for the period
January to August 2001, which they had received from NEA but were later disallowed
by the COA.
SO ORDERED.
SECOND DIVISION
G.R. No. 179918 September 8, 2010
SHELL PHILIPPINES EXPLORATION B.V., represented by its Managing
Director, Jeremy Cliff, Petitioner,
vs.
EFREN JALOS, JOVEN CAMPANG, ARNALDO MIJARES, CARLITO
TRIVINO, LUCIANO ASERON, CHARLITO ALDOVINO, ROBERTO FADERA,
RENATO MANTALA, GERTRUDES MENESES, NORBERTO HERNANDEZ,
JOSE CABASE, DANILO VITTO, EDWIN MARIN, SAMUEL MARIN,
ARMANDO MADERA, EDGARDO MARINO, HERMINO RELOX, ROLANDO
TARROBACO, ERNESTO RELOX, ROSALITO RUGAS, ELDIE DIMALIBOT,
PLARIDEL MUJE, REYMUNDO CARMONA, RONILO RIOFLORIDO,
LEONIDES MANCIA, JONAR GERANCE, RODEL CASAPAO, CARMENCITA
MENDOZA, SEVERINO MEDRANO, EDWIN MENDOZA, DOMINEZ
SANTIAGO, ROGER MUJE, REYNALDO MORALES, WILLIAM MENDOZA,
NELSON SOLIS, ALBERTO MATRE, MARGARITO GADO, BONIFACIO
LEOTERIO, NEMESIO PEREZ, JR., ARIEL MENDOZA, PEPITO MENDOZA,
SALVADOR FALCULAN, JR., CEASAR ROBLEDO, SUZIMO CERNA,
VIRGILIO VATAL, JIMMY ALBAO, CRISANTO SABIDA, LAUDRINO
MIRANDA, LEOPOLDO MISANA, JIMMY DELACION, FREJEDO MAGPILI,
ROLANDO DIMALIBOT, PEDRO MAPALAD, FAUSTINO BALITOSTOS,
LEONARDO DIMALIBOT, MARIANO MAGYAYA, RAUL MIRANO, ERNESTO
MATRE, ROMEO ROBLEDO, GILBERT SADICON, ROMEO SIENA, NESTOR
SADICON, NOEL SIENA, REDENTER CAMPANG, ARNEL HERNENDEZ,
RESTITUTO BAUTISTA, JOSE MUJE, DANILO BILARMINO, ADRIAN
MAGANGO, VALERIANO SIGUE, BERNIE MORALES, JOSEPH SALAZAR,
PABLITO MENDOZA, JR., ERWIN BAUTISTA, RUBEN BAUTISTA,
ALEXANDER ROVERO, EDUARDO QUARTO, RUBEN RIOFLORIDO,
NESTOR DELACION, SEVERINO MEDRANO, JOEY FAJECULAY, NICOLAS
MEDRANO, FELIX MEDRANO, RODELIO CASAPAO, FELIPE LOLONG,
MARCELINO LOLONG, ELDY DIMALIBOT, ROBERTO CASAPAO, SIMEON
CASAPAO, HENRY DIMALIBOT, RONALDO MORALES, PEPING CASAPAO,
JOEL GERANCE, JAYREE DIMALIBOT, MARIO DIMALIBOT, SANTO
DIMALIBOT, ZERAPIN DIMALIBOT, FLORENCIO ROVERO, Respondents.
DECISION
ABAD, J.:
This case is about a question of jurisdiction over an action against a petroleum
contractor, whose pipeline operation has allegedly driven the fish away from coastal
areas, inflicting loss of earnings among fishermen.
The Facts and the Case
On December 11, 1990 petitioner Shell Philippines Exploration B.V. (Shell) and the
Republic of the Philippines entered into Service Contract 38 for the exploration and
extraction of petroleum in northwestern Palawan. Two years later, Shell discovered
natural gas in the Camago-Malampaya area and pursued its development of the well
under the Malampaya Natural Gas Project. This entailed the construction and
installation of a pipeline from Shell’s production platform to its gas processing plant
in Batangas. The pipeline spanned 504 kilometers and crossed the Oriental Mindoro
Sea.
On May 19, 2003, respondents Efren Jalos, Joven Campang, Arnaldo Mijares, and 75
other individuals (Jalos, et al) filed a complaint for damages 1 against Shell before the
Regional Trial Court (RTC), Branch 41, Pinamalayan, Oriental Mindoro. Jalos, et al
claimed that they were all subsistence fishermen from the coastal barangay of
Bansud, Oriental Mindoro whose livelihood was adversely affected by the construction
and operation of Shell’s natural gas pipeline.
Jalos, et al claimed that their fish catch became few after the construction of the
pipeline. As a result, their average net income per month fell from a high of ₱4,848.00
to only ₱573.00. They said that "the pipeline greatly affected biogenically hard-
structured communities such as coral reefs and led [to] stress to the marine life in the
Mindoro Sea." They now have to stay longer and farther out at sea to catch fish, as the
pipeline’s operation has driven the fish population out of coastal waters. 2
Instead of filing an answer, Shell moved for dismissal of the complaint. It alleged that
the trial court had no jurisdiction over the action, as it is a "pollution case" under
Republic Act (R.A.) 3931, as amended by Presidential Decree (P.D.) 984 or the
Pollution Control Law. Under these statutes, the Pollution Adjudication Board (PAB)
has primary jurisdiction over pollution cases and actions for related damages. 3
Shell also claimed that it could not be sued pursuant to the doctrine of state immunity
without the State’s consent. Shell said that under Service Contract 38, it served
merely as an agent of the Philippine government in the development of the
Malampaya gas reserves.
Moreover, said Shell, the complaint failed to state a cause of action since it did not
specify any actionable wrong or particular act or omission on Shell’s part that could
have caused the alleged injury to Jalos, et al. The complaint likewise failed to comply
with requirements of a valid class suit, verification and certification against forum
shopping, and the requisites for a suit brought by pauper litigants.4
On March 24, 2004 the RTC dismissed the complaint. It ruled that the action was
actually pollution-related, although denominated as one for damages. The complaint
should thus be brought first before the PAB, the government agency vested with
jurisdiction over pollution-related cases.5
Jalos, et al assailed the RTC’s order through a petition for certiorari6 before the Court
of Appeals (CA). In due course, the latter court reversed such order and upheld the
jurisdiction of the RTC over the action. It said that Shell was not being sued for
committing pollution, but for constructing and operating a natural gas pipeline that
caused fish decline and considerable reduction in the fishermen’s income. The claim
for damages was thus based on a quasi-delict over which the regular courts have
jurisdiction.
The CA also rejected Shell’s assertion that the suit was actually against the State. It
observed that the government was not even impleaded as party defendant. It gave
short shrift to Shell’s insistence that, under the service contract, the government was
solidarily liable with Shell for damages caused to third persons. Besides, the State
should be deemed to have given its consent to be sued when it entered into the
contract with Shell.
The CA also held that the complaint sufficiently alleged an actionable wrong. Jalos, et
al invoked their right to fish the sea and earn a living, which Shell had the correlative
obligation to respect. Failure to observe such obligation resulted in a violation of the
fishermen’s rights and thus gave rise to a cause of action for damages.7
Finally, the CA held that Jalos, et al substantially complied with the technical
requirements for filing the action. But since they failed to prove the requisites of a
class suit, only those who have verified the complaint should be deemed party
plaintiffs.8
Shell moved for reconsideration of the CA’s decision but the same was denied. 9 Hence,
it filed this petition for review under Rule 45.
The Issues Presented
The case presents the following issues:
1. Whether or not the complaint is a pollution case that falls within the
primary jurisdiction of the PAB;
2. Whether or not the complaint sufficiently alleges a cause of action against
Shell; and
3. Whether or not the suit is actually against the State and is barred under
the doctrine of state immunity.
The Court’s Rulings
First. Although the complaint of Jalos, et al does not use the word "pollution" in
describing the cause of the alleged fish decline in the Mindoro Sea, it is unmistakable
based on their allegations that Shell’s pipeline produced some kind of poison or
emission that drove the fish away from the coastal areas. While the complaint did not
specifically attribute to Shell any specific act of "pollution," it alleged that "the
pipeline greatly affected biogenically hard-structured communities such as coral reefs
and led [to] stress to the marine life in the Mindoro Sea." 10 This constitutes "pollution"
as defined by law.
Section 2(a) of P.D. 984 defines "pollution" as "any alteration of the physical, chemical
and biological properties of any water x x x as will or is likely to create or render such
water x x x harmful, detrimental or injurious to public health, safety or welfare or
which will adversely affect their utilization for domestic, commercial, industrial,
agricultural, recreational or other legitimate purposes."
It is clear from this definition that the stress to marine life claimed by Jalos, et al is
caused by some kind of pollution emanating from Shell’s natural gas pipeline. The
pipeline, they said, "greatly affected" or altered the natural habitat of fish and
affected the coastal waters’ natural function as fishing grounds. Inevitably, in
resolving Jalos, et al’s claim for damages, the proper tribunal must determine
whether or not the operation of the pipeline adversely altered the coastal waters’
properties and negatively affected its life sustaining function. The power and
expertise needed to determine such issue lies with the PAB.
Executive Order 192 (1987) transferred to the PAB the powers and functions of the
National Pollution and Control Commission provided in R.A. 3931, as amended by
P.D. 984.11 These empowered the PAB to "[d]etermine the location, magnitude, extent,
severity, causes and effects" of water pollution.12 Among its functions is to "[s]erve as
arbitrator for the determination of reparation, or restitution of the damages and
losses resulting from pollution." In this regard, the PAB has the power to conduct
hearings,13 impose penalties for violation of P.D. 984,14 and issue writs of execution to
enforce its orders and decisions.15 The PAB’s final decisions may be reviewed by the
CA under Rule 43 of the Rules of Court.16
Jalos, et al had, therefore, an administrative recourse before filing their complaint
with the regular courts.17 The laws creating the PAB and vesting it with powers are
wise. The definition of the term "pollution" itself connotes the need for specialized
knowledge and skills, technical and scientific, in determining the presence, the cause,
and the effects of pollution. These knowledge and skills are not within the competence
of ordinary courts.18 Consequently, resort must first be made to the PAB, which is the
agency possessed of expertise in determining pollution-related matters.1avvphil
To this extent, the failure of Jalos, et al to allege in their complaint that they had first
taken resort to PAB before going to court means that they failed to state a cause of
action that the RTC could act on. This warranted the dismissal of their action. 19
Second. Still, Shell points out that the complaint also states no cause of action because
it failed to specify any actionable wrong or particular act or omission on Shell’s part.
The Court cannot agree.
As mentioned above, the complaint said that the natural gas pipeline’s construction
and operation "greatly affected" the marine environment, drove away the fish, and
resulted in reduced income for Jalos, et al. True, the complaint did not contain some
scientific explanation regarding how the construction and operation of the pipeline
disturbed the waters and drove away the fish from their usual habitat as the
fishermen claimed. But lack of particulars is not a ground for dismissing the
complaint.
A cause of action is the wrongful act or omission committed by the defendant in
violation of the primary rights of the plaintiff. 20 Its elements consist of: (1) a right
existing in favor of the plaintiff, (2) a duty on the part of the defendant to respect the
plaintiff’s right, and (3) an act or omission of the defendant in violation of such
right.21 To sustain a motion to dismiss for lack of cause of action, however, the
complaint must show that the claim for relief does not exist and not only that the
claim was defectively stated or is ambiguous, indefinite or uncertain. 22
Here, all the elements of a cause of action are present. First, Jalos, et al undoubtedly
had the right to the preferential use of marine and fishing resources which is
guaranteed by no less than the Constitution.23 Second, Shell had the correlative duty
to refrain from acts or omissions that could impair Jalos, et al’s use and enjoyment of
the bounties of the seas. Lastly, Shell’s construction and operation of the pipeline,
which is an act of physical intrusion into the marine environment, is said to have
disrupted and impaired the natural habitat of fish and resulted in considerable
reduction of fish catch and income for Jalos, et al.
Thus, the construction and operation of the pipeline may, in itself, be a wrongful act
that could be the basis of Jalos, et al’s cause of action. The rules do not require that
the complaint establish in detail the causal link between the construction and
operation of the pipeline, on the one hand, and the fish decline and loss of income, on
the other hand, it being sufficient that the complaint states the ultimate facts on
which it bases its claim for relief. The test for determining the sufficiency of a cause of
action rests on whether the complaint alleges facts which, if true, would justify the
relief demanded.24 In this case, a valid judgment for damages can be made in favor of
Jalos, et al, if the construction and operation of the pipeline indeed caused fish decline
and eventually led to the fishermen’s loss of income, as alleged in the complaint.
Third. Shell claims that it cannot be sued without the State’s consent under the
doctrine of state immunity from suit. But, to begin with, Shell is not an agent of the
Republic of the Philippines. It is but a service contractor for the exploration and
development of one of the country’s natural gas reserves. While the Republic
appointed Shell as the exclusive party to conduct petroleum operations in the
Camago-Malampayo area under the State’s full control and supervision, 25 it does not
follow that Shell has become the State’s "agent" within the meaning of the law.
An agent is a person who binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the
latter.26 The essence of an agency is the agent’s ability to represent his principal and
bring about business relations between the latter and third persons.27 An agent’s
ultimate undertaking is to execute juridical acts that would create, modify or
extinguish relations between his principal and third persons.28 It is this power to
affect the principal’s contractual relations with third persons that differentiates the
agent from a service contractor.
Shell’s main undertaking under Service Contract 38 is to "[p]erform all petroleum
operations and provide all necessary technology and finance" as well as other
connected services29 to the Philippine government. As defined under the contract,
petroleum operation means the "searching for and obtaining Petroleum within the
Philippines", including the "transportation, storage, handling and sale" of petroleum
whether for export or domestic consumption.30 Shell’s primary obligation under the
contract is not to represent the Philippine government for the purpose of transacting
business with third persons. Rather, its contractual commitment is to develop and
manage petroleum operations on behalf of the State.
Consequently, Shell is not an agent of the Philippine government, but a provider of
services, technology and financing31 for the Malampaya Natural Gas Project. It is not
immune from suit and may be sued for claims even without the State’s consent.
Notably, the Philippine government itself recognized that Shell could be sued in
relation to the project. This is evident in the stipulations agreed upon by the parties
under Service Contract 38.
Article II, paragraph 8, Annex "B" of Service Contract 38 32 states that legal expenses,
including "judgments obtained against the Parties or any of them on account of the
Petroleum Operations", can be recovered by Shell as part of operating expenses to be
deducted from gross proceeds. Article II, paragraph 9B of the same document allows a
similar recovery for "[a]ll actual expenditures incurred and paid by CONTRACTOR
[Shell] in settlement of any and all losses, claims, damages, judgments, and any other
expenses not covered by insurance, including legal services." This signifies that the
State itself acknowledged the suability of Shell. Since payment of claims and damages
pursuant to a judgment against Shell can be deducted from gross proceeds, the State
will not be required to perform any additional affirmative act to satisfy such a
judgment.
In sum, while the complaint in this case sufficiently alleges a cause of action, the
same must be filed with the PAB, which is the government agency tasked to
adjudicate pollution-related cases. Shell is not an agent of the State and may thus be
sued before that body for any damages caused by its operations. The parties may
appeal the PAB’s decision to the CA. But pending prior determination by the PAB,
courts cannot take cognizance of the complaint.
WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the
Court of Appeals in CA-G.R. CV 82404 dated November 20, 2006. Respondent Efren
Jalos, et al’s complaint for damages against Shell Philippines Exploration B.V. in
Civil Case P-1818-03 of the Regional Trial Court, Branch 41, Pinamalayan, Oriental
Mindoro is ordered DISMISSED without prejudice to its refiling with the Pollution
Adjudication Board or PAB.
SO ORDERED.
A.M. No. 08-2-01-0 February 11, 2010
RE: PETITION FOR RECOGNITION OF THE EXEMPTION OF THE
GOVERNMENT SERVICE INSURANCE SYSTEM FROM PAYMENT OF
LEGAL FEES. GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner.
RESOLUTION
CORONA, J.:
May the legislature exempt the Government Service Insurance System (GSIS) from
legal fees imposed by the Court on government-owned and controlled corporations and
local government units? This is the central issue in this administrative matter.
The GSIS seeks exemption from the payment of legal fees imposed on government-
owned or controlled corporations under Section 22,1 Rule 141 (Legal Fees) of the Rules
of Court. The said provision states:
SEC. 22. Government exempt. – The Republic of the Philippines, its agencies and
instrumentalities are exempt from paying the legal fees provided in this Rule. Local
government corporations and government-owned or controlled corporations
with or without independent charter are not exempt from paying such fees.
However, all court actions, criminal or civil, instituted at the instance of the
provincial, city or municipal treasurer or assessor under Sec. 280 of the Local
Government Code of 1991 shall be exempt from the payment of court and sheriff’s
fees. (emphasis supplied)
The GSIS anchors its petition on Section 39 of its charter, RA2 8291 (The GSIS Act of
1997):
SEC. 39. Exemption from Tax, Legal Process and Lien. – It is hereby declared to be the
policy of the State that the actuarial solvency of the funds of the GSIS shall be
preserved and maintained at all times and that contribution rates necessary to
sustain the benefits under this Act shall be kept as low as possible in order not to
burden the members of the GSIS and their employers. Taxes imposed on the GSIS
tend to impair the actuarial solvency of its funds and increase the
contribution rate necessary to sustain the benefits of this Act. Accordingly,
notwithstanding any laws to the contrary, the GSIS, its assets, revenues
including accruals thereto, and benefits paid, shall be exempt from all taxes,
assessments, fees, charges or duties of all kinds. These exemptions shall
continue unless expressly and specifically revoked and any assessment against the
GSIS as of the approval of this Act are hereby considered
paid.Consequently, all laws, ordinances, regulations, issuances, opinions or
jurisprudence contrary to or in derogation of this provision are hereby
deemed repealed, superseded and rendered ineffective and without legal
force and effect.
Moreover, these exemptions shall not be affected by subsequent laws to the contrary
unless this section is expressly, specifically and categorically revoked or repealed by
law and a provision is enacted to substitute or replace the exemption referred to
herein as an essential factor to maintain and protect the solvency of the fund,
notwithstanding and independently of the guaranty of the national government to
secure such solvency or liability.
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from attachment,
garnishment, execution, levy or other processes issued by the courts, quasi-judicial
agencies or administrative bodies including Commission on Audit (COA)
disallowances and from all financial obligations of the members, including his
pecuniary accountability arising from or caused or occasioned by his exercise or
performance of his official functions or duties, or incurred relative to or in connection
with his position or work except when his monetary liability, contractual or otherwise,
is in favour of the GSIS. (emphasis supplied)
The GSIS then avers that courts still assess and collect legal fees in actions and
proceedings instituted by the GSIS notwithstanding its exemption from taxes,
assessments, fees, charges, or duties of all kinds under Section 39. For this reason, the
GSIS urges this Court to recognize its exemption from payment of legal fees.
According to the GSIS, the purpose of its exemption is to preserve and maintain the
actuarial solvency of its funds and to keep the contribution rates necessary to sustain
the benefits provided by RA 8291 as low as possible. Like the terms "taxes,"
"assessments," "charges," and "duties," the term "fees" is used in the law in its generic
and ordinary sense as any form of government imposition. The word "fees," defined as
"charge[s] fixed by law for services of public officers or for the use of a privilege under
control of government," is qualified by the phrase "of all kinds." 3 Hence, it includes the
legal fees prescribed by this Court under Rule 141. Moreover, no distinction should be
made based on the kind of fees imposed on the GSIS or the GSIS’ ability to pay
because the law itself does not distinguish based on those matters.
The GSIS argues that its exemption from the payment of legal fees would not mean
that RA 8291 is superior to the Rules of Court. It would merely show "deference" by
the Court to the legislature as a co-equal branch.4 This deference will recognize the
"compelling and overriding" State interest in the preservation of the actuarial
solvency of the GSIS for the benefit of its members.5
The GSIS further contends that the right of government workers to social security is
an aspect of social justice. The right to social security is also guaranteed under Article
22 of the Universal Declaration of Human Rights and Article 9 of the International
Covenant on Economic, Social and Cultural Rights. The Court has the power to
promulgate rules concerning the protection and enforcement of constitutional rights,
including the right to social security, but the GSIS is not compelling the Court to
promulgate such rules. The GSIS is merely asking the Court to recognize and allow
the exercise of the right of the GSIS "to seek relief from the courts of justice sans
payment of legal fees."6
Required to comment on the GSIS’ petition,7 the Office of the Solicitor General (OSG)
maintains that the petition should be denied.8 According to the OSG, the issue of the
GSIS’ exemption from legal fees has been resolved by the issuance by then Court
Administrator Presbitero J. Velasco, Jr.9 of OCA10 Circular No. 93-2004:
TO : ALL JUDGES, CLERKS OF COURT AND COURT PERSONNEL OF THE
METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL COURTS IN CITIES,
MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT TRIAL COURTS, SHARI’A
CIRCUIT COURTS
SUBJECT : REMINDER ON THE STRICT OBSERVANCE OF ADMINISTRATIVE
CIRCULAR NO. 3-98 (Re: Payment of Docket and Filing Fees in Extra-Judicial
Foreclosure); SECTION 21, RULE 141 OF THE RULES OF COURT; SECTION 3 OF
PRESIDENTIAL DECREE NO. 385; and ADMINISTRATIVE CIRCULAR NO. 07-99
(Re: Exercise of Utmost Caution, Prudence, and Judiciousness in Issuance of
Temporary Restraining Orders and Writs of Preliminary Injunctions)
Pursuant to the Resolution of the Third Division of the Supreme Court dated 05 April
2004 and to give notice to the concern raised by the [GSIS] to expedite extrajudicial
foreclosure cases filed in court, we wish to remind all concerned [of] the pertinent
provisions of Administrative Circular No. 3-98, to wit:
2. No written request/petition for extrajudicial foreclosure of mortgages, real
or chattel, shall be acted upon by the Clerk of Court, as Ex-Officio Sheriff,
without the corresponding filing fee having been paid and the receipt thereof
attached to the request/petition as provided for in Sec. 7(c), of Rule 141 of the
Rules of Court.
3. No certificate of sale shall be issued in favor of the highest bidder until all
fees provided for in the aforementioned sections and paragraph 3 of Section 9
(I) of Rule 141 of the Rules of Court shall have been paid.The sheriff shall
attach to the records of the case a certified copy of the Official Receipt [O.R.]
of the payment of the fees and shall note the O.R. number in the duplicate of
the Certificate of Sale attached to the records of the case.
Moreover, to settle any queries as to the status of exemption from payment of docket
and legal fees of government entities, Section 21, Rule 141 of the Rules of Court
explicitly provides:
SEC. 21. Government exempt. – The Republic of the Philippines, its agencies and
instrumentalities are exempt from paying the legal fees provided in this Rule. Local
governments and government-owned or controlled corporations with or
without independent charters are not exempt from paying such fees.11
xxx xxx xxx
The OSG contends that there is nothing in Section 39 of RA 8291 that exempts the
GSIS from fees imposed by the Court in connection with judicial proceedings. The
exemption of the GSIS from "taxes, assessments, fees, charges or duties of all kinds" is
necessarily confined to those that do not involve pleading, practice and procedure.
Rule 141 has been promulgated by the Court pursuant to its exclusive rule-making
power under Section 5(5), Article VIII of the Constitution. Thus, it may not be
amended or repealed by Congress.
On this Court’s order,12 the Office of the Chief Attorney (OCAT) submitted a report
and recommendation13 on the petition of the GSIS and the comment of the OSG
thereon. According to the OCAT, the claim of the GSIS for exemption from the
payment of legal fees has no legal basis. Read in its proper and full context, Section 39
intends to preserve the actuarial solvency of GSIS funds by exempting the GSIS from
government impositions through taxes. Legal fees imposed under Rule 141 are not
taxes.
The OCAT further posits that the GSIS could not have been exempted by Congress
from the payment of legal fees. Otherwise, Congress would have encroached on the
rule-making power of this Court.
According to the OCAT, this is the second time that the GSIS is seeking exemption
from paying legal fees.14 The OCAT also points out that there are other government-
owned or controlled corporations and local government units which asked for
exemption from paying legal fees citing provisions in their respective charters that are
similar to Section 39 of RA 8291.15 Thus, the OCAT recommends that the petition of
GSIS be denied and the issue be settled once and for all for the guidance of the
concerned parties.
Faced with the differing opinions of the GSIS, the OSG and the OCAT, we now
proceed to probe into the heart of this matter: may Congress exempt the GSIS from
the payment of legal fees? No.
The GSIS urges the Court to show deference to Congress by recognizing the
exemption of the GSIS under Section 39 of RA 8291 from legal fees imposed under
Rule 141. Effectively, the GSIS wants this Court to recognize a power of Congress to
repeal, amend or modify a rule of procedure promulgated by the Court. However, the
Constitution and jurisprudence do not sanction such view.
Rule 141 (on Legal Fees) of the Rules of Court was promulgated by this Court in the
exercise of its rule-making powers under Section 5(5), Article VIII of the Constitution:
Sec. 5. The Supreme Court shall have the following powers:
xxx xxx xxx
(5) Promulgate rules concerning the protection and enforcement of constitutional
rights, pleading, practice, and procedure in all courts, the admission to the
practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such
rules shall provide a simplified and inexpensive procedure for the speedy disposition
of cases, shall be uniform for all courts of the same grade, and shall not diminish,
increase, or modify substantive rights. Rules of procedure of special courts and quasi-
judicial bodies shall remain effective unless disapproved by the Supreme Court.
xxx xxx x x x (emphasis supplied)
The power to promulgate rules concerning pleading, practice and procedure in all
courts is a traditional power of this Court.16 It necessarily includes the power to
address all questions arising from or connected to the implementation of the said
rules.
The Rules of Court was promulgated in the exercise of the Court’s rule-making power.
It is essentially procedural in nature as it does not create, diminish, increase or
modify substantive rights. Corollarily, Rule 141 is basically procedural. It does not
create or take away a right but simply operates as a means to implement an existing
right. In particular, it functions to regulate the procedure of exercising a right of
action and enforcing a cause of action.17 In particular, it pertains to the procedural
requirement of paying the prescribed legal fees in the filing of a pleading or any
application that initiates an action or proceeding.18
Clearly, therefore, the payment of legal fees under Rule 141 of the Rules of Court is an
integral part of the rules promulgated by this Court pursuant to its rule-making
power under Section 5(5), Article VIII of the Constitution. In particular, it is part of
the rules concerning pleading, practice and procedure in courts. Indeed, payment of
legal (or docket) fees is a jurisdictional requirement.19 It is not simply the filing of the
complaint or appropriate initiatory pleading but the payment of the prescribed docket
fee that vests a trial court with jurisdiction over the subject-matter or nature of the
action.20 Appellate docket and other lawful fees are required to be paid within the
same period for taking an appeal.21 Payment of docket fees in full within the
prescribed period is mandatory for the perfection of an appeal. 22 Without such
payment, the appellate court does not acquire jurisdiction over the subject matter of
the action and the decision sought to be appealed from becomes final and executory. 23
An interesting aspect of legal fees is that which relates to indigent or pauper litigants.
In proper cases, courts may waive the collection of legal fees. This, the Court has
allowed in Section 21, Rule 3 and Section 19, Rule 141 of the Rules of Court in
recognition of the right of access to justice by the poor under Section 11, Article III of
the Constitution.24 Mindful that the rule with respect to indigent litigants should not
be ironclad as it touches on the right of access to justice by the poor, 25 the Court
acknowledged the exemption from legal fees of indigent clients of the Public
Attorney’s Office under Section 16-D of the Administrative Code of 1987, as amended
by RA 9406.26 This was not an abdication by the Court of its rule-making power but
simply a recognition of the limits of that power. In particular, it reflected a keen
awareness that, in the exercise of its rule-making power, the Court may not dilute or
defeat the right of access to justice of indigent litigants.
The GSIS cannot successfully invoke the right to social security of government
employees in support of its petition. It is a corporate entity whose personality is
separate and distinct from that of its individual members. The rights of its members
are not its rights; its rights, powers and functions pertain to it solely and are not
shared by its members. Its capacity to sue and bring actions under Section 41(g) of RA
8291, the specific power which involves the exemption that it claims in this case,
pertains to it and not to its members. Indeed, even the GSIS acknowledges that, in
claiming exemption from the payment of legal fees, it is not asking that rules be made
to enforce the right to social security of its members but that the Court recognize the
alleged right of the GSIS "to seek relief from the courts of justice sans payment of
legal fees."27
However, the alleged right of the GSIS does not exist. The payment of legal fees does
not take away the capacity of the GSIS to sue. It simply operates as a means by which
that capacity may be implemented.
Since the payment of legal fees is a vital component of the rules promulgated by this
Court concerning pleading, practice and procedure, it cannot be validly annulled,
changed or modified by Congress. As one of the safeguards of this Court’s institutional
independence, the power to promulgate rules of pleading, practice and procedure is
now the Court’s exclusive domain. That power is no longer shared by this Court with
Congress, much less with the Executive.28
Speaking for the Court, then Associate Justice (now Chief Justice) Reynato S. Puno
traced the history of the rule-making power of this Court and highlighted its evolution
and development in Echegaray v. Secretary of Justice:291avvphi1
Under the 1935 Constitution, the power of this Court to promulgate rules concerning
pleading, practice and procedure was granted but it appeared to be co-existent with
legislative power for it was subject to the power of Congress to repeal, alter or
supplement. Thus, its Section 13, Article VIII provides:
Sec. 13. The Supreme Court shall have the power to promulgate rules concerning
pleading, practice and procedure in all courts, and the admission to the practice of
law. Said rules shall be uniform for all courts of the same grade and shall not
diminish, increase, or modify substantive rights. The existing laws on pleading,
practice and procedure are hereby repealed as statutes, and are declared Rules of
Court, subject to the power of the Supreme Court to alter and modify the same. The
Congress shall have the power to repeal, alter or supplement the rules concerning
pleading, practice and procedure, and the admission to the practice of law in the
Philippines.
The said power of Congress, however, is not as absolute as it may appear on its
surface. In In re Cunanan, Congress in the exercise of its power to amend rules of the
Supreme Court regarding admission to the practice of law, enacted the Bar Flunkers
Act of 1953 which considered as a passing grade, the average of 70% in the bar
examinations after July 4, 1946 up to August 1951 and 71% in the 1952 bar
examinations. This Court struck down the law as unconstitutional. In his
ponencia, Mr. Justice Diokno held that "x x x the disputed law is not a legislation; it is
a judgment - a judgment promulgated by this Court during the aforecited years
affecting the bar candidates concerned; and although this Court certainly can revoke
these judgments even now, for justifiable reasons, it is no less certain that only this
Court, and not the legislative nor executive department, that may do so. Any attempt
on the part of these departments would be a clear usurpation of its function, as is the
case with the law in question." The venerable jurist further ruled: "It is obvious,
therefore, that the ultimate power to grant license for the practice of law
belongs exclusively to this Court, and the law passed by Congress on the matter is of
permissive character, or as other authorities say, merely to fix the minimum
conditions for the license." By its ruling, this Court qualified the absolutist tone
of the power of Congress to "repeal, alter or supplement the rules concerning
pleading, practice and procedure, and the admission to the practice of law in the
Philippines.
The ruling of this Court in In re Cunanan was not changed by the 1973
Constitution. For the 1973 Constitution reiterated the power of this Court "to
promulgate rules concerning pleading, practice and procedure in all courts, x x x
which, however, may be repealed, altered or supplemented by the Batasang
Pambansa x x x." More completely, Section 5(2)5 of its Article X provided:
xxx xxx xxx
Sec. 5. The Supreme Court shall have the following powers.
xxx xxx xxx
(5) Promulgate rules concerning pleading, practice, and procedure in all courts, the
admission to the practice of law, and the integration of the Bar, which, however, may
be repealed, altered, or supplemented by the Batasang Pambansa. Such rules shall
provide a simplified and inexpensive procedure for the speedy disposition of cases,
shall be uniform for all courts of the same grade, and shall not diminish, increase, or
modify substantive rights.
Well worth noting is that the 1973 Constitution further strengthened the
independence of the judiciary by giving to it the additional power to promulgate rules
governing the integration of the Bar.
The 1987 Constitution molded an even stronger and more independent
judiciary. Among others, it enhanced the rule making power of this Court. Its
Section 5(5), Article VIII provides:
xxx xxx xxx
Section 5. The Supreme Court shall have the following powers:
xxx xxx xxx
(5) Promulgate rules concerning the protection and enforcement of
constitutional rights, pleading, practice and procedure in all courts, the admission
to the practice of law, the Integrated Bar, and legal assistance to the underprivileged.
Such rules shall provide a simplified and inexpensive procedure for the speedy
disposition of cases, shall be uniform for all courts of the same grade, and shall not
diminish, increase, or modify substantive rights. Rules of procedure of special
courts and quasi-judicial bodies shall remain effective unless disapproved
by the Supreme Court.
The rule making power of this Court was expanded. This Court for the first
time was given the power to promulgate rules concerning the protection and
enforcement of constitutional rights. The Court was also granted for the first
time the power to disapprove rules of procedure of special courts and quasi-judicial
bodies. But most importantly, the 1987 Constitution took away the power of
Congress to repeal, alter, or supplement rules concerning pleading, practice
and procedure. In fine, the power to promulgate rules of pleading, practice and
procedure is no longer shared by this Court with Congress, more so with the
Executive.
The separation of powers among the three co-equal branches of our government has
erected an impregnable wall that keeps the power to promulgate rules of pleading,
practice and procedure within the sole province of this Court. The other branches
trespass upon this prerogative if they enact laws or issue orders that effectively
repeal, alter or modify any of the procedural rules promulgated by this Court. Viewed
from this perspective, the claim of a legislative grant of exemption from the payment
of legal fees under Section 39 of RA 8291 necessarily fails.
Congress could not have carved out an exemption for the GSIS from the payment of
legal fees without transgressing another equally important institutional safeguard of
the Court’s independence — fiscal autonomy.30Fiscal autonomy recognizes the power
and authority of the Court to levy, assess and collect fees,31 including legal fees.
Moreover, legal fees under Rule 141 have two basic components, the Judiciary
Development Fund (JDF) and the Special Allowance for the Judiciary Fund
(SAJF).32 The laws which established the JDF and the SAJF33expressly declare the
identical purpose of these funds to "guarantee the independence of the Judiciary as
mandated by the Constitution and public policy."34 Legal fees therefore do not only
constitute a vital source of the Court’s financial resources but also comprise an
essential element of the Court’s fiscal independence. Any exemption from the payment
of legal fees granted by Congress to government-owned or controlled corporations and
local government units will necessarily reduce the JDF and the SAJF. Undoubtedly,
such situation is constitutionally infirm for it impairs the Court’s guaranteed fiscal
autonomy and erodes its independence.
WHEREFORE, the petition of the Government Service Insurance System for
recognition of its exemption from the payment of legal fees imposed under Section 22
of Rule 141 of the Rules of Court on government-owned or controlled corporations and
local government units is hereby DENIED.
The Office of the Court Administrator is hereby directed to promptly issue a circular
to inform all courts in the Philippines of the import of this resolution.
SO ORDERED.
RENATO C. CORONA
Associate Justice

SPECIAL FIRST DIVISION
G.R. No. 182431 February 27, 2013
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
ESTHER ANSON RIVERA, ANTONIO G. ANSON AND CESAR G.
ANSON, Respondents.
RESOLUTION
PEREZ, J.:
The Case
Before the Court is a Motion for Reconsideration1 filed by the Land Bank of the
Philippines (LBP) alleging error on the part of this Court in affirming the award of
12% interest on just compensation due to the landowner.
The Facts
We reiterate the facts from the assailed 17 November 2010 Decision:
The respondents are the co-owners of a parcel of agricultural land embraced by
Original Certificate of Title No. P-082, and later transferred in their names under
Transfer Certificate of Title No. T-95690 that was placed under the Operation Land
Transfer pursuant to Presidential Decree No. 27 in 1972. Only 18.8704 hectares of the
total area of 20.5254 hectares were subject of the coverage.
After the Department of Agrarian Reform (DAR) directed payment, LBP approved the
payment of ₱265,494.20, exclusive of the advance payments made in the form of lease
rental amounting to ₱75,415.88 but inclusive of 6% increment of ₱191,876.99
pursuant to DAR Administrative Order No. 13, series of 1994.
On 1 December 1994, the respondents instituted Civil Case No. 94-03 for
determination and payment of just compensation before the Regional Trial Court
(RTC), Branch 3 of Legaspi City, claiming that the landholding involved was irrigated
with two cropping seasons a year with an average gross production per season of
100 cavans of 50 kilos/hectare, equivalent of 200 cavans/year/hectare; and that the
fair market value of the property was not less than ₱130,000.00/hectare, or
₱2,668,302.00 for the entire landholding of 20.5254 hectares.
LBP filed its Answer, stating that rice and corn lands placed under the coverage of
Presidential Decree No. 27 [PD 27]2 were governed and valued in accordance with the
provisions of Executive Order No. 228 [EO 228]3 as implemented by DAR
Administrative Order No. 2, Series of 1987 and other statutes and administrative
issuances; that the administrative valuation of lands covered by [PD 27] and [EO 228]
rested solely in DAR and LBP was the only financing arm; that the funds that LBP
would use to pay compensation were public funds to be disbursed only in accordance
with existing laws and regulations; that the supporting documents were not yet
received by LBP; and that the constitutionality of [PD 27] and [EO 228] was already
settled.4
The Trial Court’s Ruling
On 6 October 2004, the trial court rendered its decision which reads:
ACCORDINGLY, the just compensation of the land partly covered by TCT No. T-
95690 is fixed at Php1,297,710. 63. Land Bank of the Philippines is hereby ordered to
pay Esther Anson, Cesar Anson and Antonio Anson the aforesaid value of the land,
plus interest of 12% per annum or Php194.36 per day effective October 7, 2004, until
the value is fully paid, in cash or in bond or in any other mode of payment at the
option of the landowners in accordance with Sec. 18, R.A. 6657.5
Discontented, LBP filed an appeal before the Court of Appeals (CA). It argued that the
trial court erred in disregarding the lease rentals already paid by the farmer
beneficiaries as part of the just compensation as well as the imposition of 12% interest
despite the increment of 6% interest allowed under the EO 228 and DAR
Administrative Order (A.O.) No. 13 Series of 1994 (A.O. 13-94).
The Court of Appeals’ Ruling
The appellate court partly granted the petition of the LBP, the fallo of the decision
reading:
WHEREFORE, the DECISION DATED OCTOBER 6, 2004 is
MODIFIED, ordering petitioner LAND BANK OF THE PHILIPPINES to pay to
the respondents just compensation (inclusive of interests as of October 6, 2004) in the
amount of ₱823, 957.23, plus interest of 12% per annum in the amount of ₱515, 777.57
or ₱61, 893.30 per annum, beginning October 7, 2004 until just compensation is fully
paid in accordance with this decision.
Costs of suit to be paid by the petitioner.6
In its petition7 before this Court, LBP alleged error in the imposition of 12% interest
per annum beginning from 7 October 2004 until full payment of just compensation for
subject property and the liability of the bank for costs of suit.
17 November 2010 Decision
In its argument, LBP cited the applicability of the DAR A.O. No. 2, Series of 2004
(A.O. 02-04) which provides for the 6% interest imposition to the just compensation
until actual payment. Further, it added that the 12% interest finds application in
cases of undue delay, which is not present in the case. As to the payment of costs, the
bank argued that it was performing a governmental function when it disbursed the
Agrarian Reform Fund (ARF) as the financial intermediary of the agrarian program of
the government.
In our 17 November 2010 Decision, this Court partly granted the prayers of LBP and
deleted the costs adjudged. We agreed that the bank was indeed performing a
governmental function in agrarian reform proceeding pursuant to Section 1, Rule
1428 of the Rules of Court.9 However, we upheld the imposition of 12% interest on the
just compensation beginning 7 October 2004 until full payment. We anchored our
decision following the ruling in Republic of the Philippines v. Court of Appeals.10
As a conclusion, the Court rendered the assailed decision which reads:
WHEREFORE, premises considered, the petition is GRANTED. The decision of the
Court of Appeals in C.A. G.R. SP No. 87463 dated 9 October 2007 is AFFIRMED with
the MODIFICATION that LBP is hereby held exempted from the payment of costs of
suit. In all other respects, the Decision of the Court of Appeals is AFFIRMED. No
costs.11
Aggrieved, LBP filed this present Motion for Reconsideration and argued once again
the erroneous imposition of 12% interest. The bank reiterated its previous argument
that the imposition is justifiable only in case of undue delay in the payment of just
compensation.12 It argued13 against the application of the A.O. No. 6, Series of 2008
(A.O. 06-08)14 to the instant case because it claims that the 6% interest does not apply
to agricultural lands valued under R.A. 6657, such as the subject properties, following
the Court’s ruling in Land Bank of the Philippines v. Chico.15
We deny the prayers of LBP.
In many cases16 decided by this Court, it has been repeated time and again that the
award of 12% interest is imposed in the nature of damages for delay in payment
which in effect makes the obligation on the part of the government one of forbearance.
This is to ensure prompt payment of the value of the land and limit the opportunity
loss of the owner that can drag from days to decades.
In this case, LBP is adamant in contending that the landowners were promptly paid
of their just compensation. It argues that, "there is no factual finding whatsoever
indicating undue delay on the part of LBP."17
We disagree.
It is true that LBP approved the amount of ₱265,494.20 in favor of the landowners on
23 August 2004.18 However, that amount is way below the amount that should have
been received by the landowners based on the valuations adjudged by the agrarian
court, CA and this Court. To be considered as just compensation, it must be fair and
equitable and the landowners must have received it without any delay.19
The contention that there can be no delay when there is a deposit of the amount of the
government valuation in favor of the landowners was also the same argument raised
in the second Motion for Reconsideration addressing the 12 October 2010 and 23
November 2010 Resolutions in Apo Fruits20 case. LBP contended then that
landowners APO Fruits and Hijo Plantation did not suffer from any delay in payment
since the LBP made partial payments prior to the taking of the parcels of land. The
Court there ruled that twelve years passed after the Government took the properties,
before full payment was settled. The Court took into account that the partial payment
made by LBP only amounted to 5% of the actual value of property.21
Similar to Apo Fruits, the delay in this case is traceable to the undervaluation of the
property of the government. Had the landholdings been properly valued, the
landowners would have accepted the payment and there would have been no need for
a judicial determination of just compensation.22 The landowners could not possibly
accept ₱265,494.20 as full payment for their entire 18 hectare-property. It must be
noted that the landowners, since the deprivation of their property, have been waiting
for four decades to get the just compensation due to them.
As in several other just compensation cases, respondents faced the difficult problem
whether to accept a low valuation or file a case for determination of just compensation
before the court. Before the choice is made, and for a longer period if the judicial
course is taken, the landowners already are deprived of the income that could have
been yielded by their lands.
The Imperial case23 is an applicable precedent.
Juan H. Imperial (Imperial) was the owner of five parcels of land with a total land
area of 151.7168 hectares. Upon the effectivity of P.D. No. 27 and EO 228, the parcels
of land were placed under the Land Reform Program and distributed to the farmer-
beneficiaries on 21 October 1972. On 20 July 1994, Imperial filed a complaint for
determination and payment of just compensation before the Agrarian Court of
Legazpi City, Albay. As the amount fixed by the agrarian court was found to be
inacceptable by the parties, the case went up all the way to the Supreme Court.
Before this Court, LBP claimed that a 6% annual interest in the concept of damages
should not be imposed because (1) the delay in the payment of the just compensation
was not its fault, and (2) DAR A.O. No. 13 already provides for the payment of a 6%
annual interest, compounded annually, provided that the just compensation is
computed in accordance with its prescribed formula.24 The Court partly granted the
claim of LBP and directed the trial court to re-compute the just compensation by using
the formula prescribed by DAR A.O. No. 13, as amended, which imposed a 6% interest
compounded annually from the date of the compensable taking on 21 October 1972
until 31 December 2006; and thereafter, at the rate of 12% per annum, until full
payment is made.25 This is to mean that from 1 January 2007 onwards, there shall be
an imposition of 12% interest per annum until full payment in the nature of damages
for the delay. The reason given was that it would be inequitable to determine the just
compensation based solely on the formula provided by DAR A.O. No. 13, as amended.
Just compensation does not only pertain to the amount to be paid to the owners of the
land, but also its payment within a reasonable time from the taking of the land; hence
the imposition of interest in the nature of damages for the delay.26
In this case, LBP pointed out the error made by this Court in Imperial in determining
the extent of the period of applicability of the 6% compounded interest.27 It asserts
that:
"Based on the foregoing, this Court deemed the day after the expiration of DAR A.O.
No. 13, meaning 1 January 2007, as the date of finality, constraining it to impose the
12% interest per annum.
However, beyond the knowledge of the Supreme Court, a subsequent DAR A.O.
extended the applicability of the imposition of 6% interest compounded annually from
1 January 2007 until 31 December 2009.
Following the new DAR A.O., only 6% interest compounded annually would have been
the correct interest to be imposed. This was not imposed, however, simply because the
day after 31 December 2006 or 01 January 2007 was deemed by the Supreme Court as
the date of finality, leading to the imposition of 12% interest."28
Following A.O. 13-94, the 6% yearly interest compounded annually shall be reckoned
from 21 October 1972 up to the effectivity date of this Order which was on 21 October
1994. However, A.O. 02-0431 extended the period of application of 6% interest from 21
October 1972 up to the time of actual payment but not later than December 2006.
Then, under A.O. 06-08,32 the application of 6% interest was further until 31
December 2009. It must be noted that the term "actual payment" in the
administrative orders is to be interpreted as "full payment" pursuant to the ruling
in Land Bank of the Philippines v. Obias33 and Land Bank of the Philippines v.
Soriano.34
The amount of land value of ₱164,059.26 was already settled before the lower
courts.35 There is no need for a new computation.
Applying the rules under A.O. 13-94, A.O. 02-04 and A.O. 06-08 the formula to
determine the increment of 6% interest per annum compounded annually beginning
21 October 1972 up to 31 December 2009 is:
CI = P (1+R) n
(CI as compounded interest; P as the Principal; R is the Rate of 6% and
n = number of years from date of tenancy starting from.)
Where:

Contrary to the position of LBP, this Court did not commit a mistake in not applying
the extension thru A.O. 06-08 of the 6% interest until 31 December 2009. It must be P = ₱164,059. 26
understood that at the time of the promulgation of the Imperial Decision on 12
February 2007, A.O. 06-08 was not yet effective, as it was signed only on 30 July 2008. R = 6%

Likewise, it is erroneous for LBP to anchor its motion on the contention that the 6% n = 37 years
interest compounded annually does not apply to agricultural lands valued under R.A.
6657 such as the subject properties.29 The fact is that the valuation in the instant case COMPUTATION:
was under P.D. 27 and E.O. 228, as adjudged by the trial court, because even if at the
time of valuation R.A. 6657 was already effective, the respondents failed to present
any evidence on the valuation factors under Section 17 of R.A. 6657. CI = P (1+R) n
= ₱164,059.26 (1+ 6%) 37 years
The Computation = ₱164,059. 26 (1.06) 37 years
= ₱1,252,770.80
The purpose of A.O. No. 13 is to compensate the landowners for unearned
interests.1âwphi1 Had they been paid in 1972 when the Government Support Price
(GSP) for rice and corn was valued at ₱35.00 and ₱31.00, respectively, and such
amounts were deposited in a bank, they would have earned a compounded interest of Then we add the compounded interest to the land value ₱164,059.26:
6% per annum. Thus, if the [Provincial Agrarian Reform Adjudicator] [(]PARAD[)]
used the 1972 GSP, then the product of (2.5 x Average Gross Production (AGP) x
Compounded Amount = Land Value + Compounded Interest
₱35.00 or ₱31.00) could be multiplied by (1.06) to determine the value of the land plus
the additional 6% compounded interest it would have earned from 1972.30 = ₱164,059.26 + ₱1,252,770.80
 = ₱1,416,830.06 (Compounded Amount) (12% interest)

= x No. of Days

To compute the compounded amount to be paid, we subtract the amount of lease 365 days
rental of ₱75,415.88 as adjudged by the appellate court to the compounded amount:36

(Compounded Amount) (.12)

Compounded Amount = ₱1,416,830.06 less ₱75,415.88
= ₱1,341,414.18 = x 50 days

365 days
We add a simple interest of 12% to the compounded amount from 31 December 2009
until the promulgation of this decision due to the delay incurred by LBP in not paying (₱1,341,414.18) (.12)
the full just compensation to the Spouses:
= x 50 days
I=PxRxT
365 days
(I = Interest, R = Rate, T = Time)

₱160,969.69
Where:
= x 50 days
P = Compounded Amount
365
R = 12%

T = 31 December 2009 to 31 December 2012 = ₱441.01 x 50 days

1. COMPUTATION: 31 December 2009 to 31 December 2012 = ₱22,050.50

I=PxRxT

I = (Compounded Amount) (.12) (3 years)

Final Just Compensation = Compounded Amount + Interest
I = ₱1,341,414.18 (.12) (3years) = ₱1,341,414.18 + ₱482,909.1048+ ₱22,050.50
= ₱1,846,373.70
I = ₱482,909.1048

2. COMPUTATION: 31 December 2012 to 20 February 2013 WHEREFORE, premises considered, we PARTIALLY GRANT the petitioner's Motion
for Reconsideration. The Decision dated 17 November 2010 of the Court's First
Division is hereby MODIFIED.
I = PxRxT

The petitioner Land Bank of the Philippines is hereby ORDERED to pay Esther
Anson Rivera, Antonio G. Anson and Cesar G. Anson ₱1,846,373.70 as final just
compensation plus interest at the rate of 12% per annum from the finality of this At bar are two consolidated Petitions for Review on Certiorari concerning 78 parcels of
decision until full payment. land located in Barrio Marigondon, Lapu-Lapu City. The parties in both cases have
been in litigation over these lots for the last two decades in what seems to be an
SO ORDERED. endless exercise of filing repetitious suits before the Court of Appeals and even this
Court, questioning the various decisions and resolutions issued by the two separate
trial courts involved. With this decision, it is intended that all legal disputes among
the parties concerned, particularly over all the issues involved in these cases, will
finally come to an end

In the Petition in G.R. No. 167000, the Government Service Insurance System (GSIS)
seeks to reverse and set aside the November 25, 2004 Decision1 and January 20, 2005
Resolution2 of the Twentieth Division of the Court of Appeals in CA-G.R. SP No.
85096 and to annul and set aside the March 11, 20043 and May 7, 20044 Orders of the
Regional Trial Court (RTC) of Lapu-Lapu City (Lapu-Lapu RTC) in Civil Case No.
2203-L.

In the Petition in G.R. No. 169971, Group Management Corporation (GMC) seeks to
reverse and set aside the September 23, 2005 Decision5 in CA-G.R. SP No. 84382
wherein the Special Nineteenth Division of the Court of Appeals annulled and set
aside the March 11, 2004 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L.

Both these cases stem from the same undisputed factual antecedents as follows:

FIRST DIVISION Lapu-Lapu Development & Housing Corporation6 (LLDHC) was the registered owner
of seventy-eight (78) lots (subject lots), situated in Barrio Marigondon, Lapu-Lapu
G.R. No. 167000 June 8, 2011 City.

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,
vs.
GROUP MANAGEMENT CORPORATION (GMC) AND LAPU-LAPU
DEVELOPMENT & HOUSING Corporation (LLDHc), Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 169971
GROUP MANAGEMENT CORPORATION (GMC), Petitioner,
vs.
LAPU-LAPU DEVELOPMENT & HOUSING Corporation (LLDHc) and
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
On February 4, 1974, LLDHC and the GSIS entered into a Project and Loan
Agreement for the development of the subject lots. GSIS agreed to extend a Twenty-
Five Million Peso-loan (₱25,000,000.00) to LLDHC, and in return, LLDHC will
develop, subdivide, and sell its lots to GSIS members. To secure the payment of the
loan, LLDHC executed a real estate mortgage over the subject lots in favor of GSIS.
For LLDHC’s failure to fulfill its obligations, GSIS foreclosed the mortgage. As the
lone bidder in the public auction sale, GSIS acquired the subject lots, and eventually
was able to consolidate its ownership over the subject lots with the corresponding
transfer certificates of title (TCTs) issued in its name.
On November 19, 1979, GMC offered to purchase on installments the subject lots from
GSIS for a total price of One Million One Hundred Thousand Pesos (₱1,100,000.00),
with the aggregate area specified as 423,177 square meters. GSIS accepted the offer
and on February 26, 1980, executed a Deed of Conditional Sale over the subject lots.
However, when GMC discovered that the total area of the subject lots was only
298,504 square meters, it wrote GSIS and proposed to proportionately reduce the
purchase price to conform to the actual total area of the subject lots. GSIS approved
this proposal and an Amendment to the Deed of Conditional Sale was executed to
reflect the final sales agreement between GSIS and GMC.
On April 23, 1980, LLDHC filed a complaint for Annulment of Foreclosure with Writ
of Mandatory Injunction against GSIS before the RTC of Manila (Manila RTC). This
became Civil Case No. R-82-34297 and was assigned to Branch 38.
On November 3, 1989, GMC filed its own complaint against GSIS for Specific
Performance with Damages before the Lapu-Lapu RTC. The complaint was docketed
as Civil Case No. 2203-L and it sought to compel GSIS to execute a Final Deed of Sale
over the subject lots since the purchase price had already been fully paid by GMC.
GSIS, in defense, submitted to the court a Commission on Audit (COA) Memorandum
dated April 3, 1989, purportedly disallowing in audit the sale of the subject lots for
"apparent inherent irregularities," the sale price to GMC being lower than GSIS’s
purchase price at the public auction. LLDHC, having been allowed to intervene, filed
a Motion to Dismiss GMC’s complaint. When this motion was denied, LLDHC filed its
Answer-in-Intervention and participated in the ensuing proceedings as an intervenor.
GMC, on February 1, 1992, filed its own Motion to Intervene with a Complaint-in-
Intervention in Civil Case No. R-82-3429. This was dismissed on February 17, 1992
and finally denied on March 23, 1992 by the Manila RTC on the ground that GMC can
protect its interest in another proceeding.8
On February 24, 1992, after a full-blown trial, the Lapu-Lapu RTC rendered its
Decision9 in Civil Case No. 2203-L, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to:
1. Execute the final deed of absolute sale and deliver the seventy-eight (78)
certificates of title covering said seventy-eight (78) parcels of land to the
[Group Management Corporation (GMC)];
2. Pay [GMC] actual damages, plus attorney’s fees and expenses of litigation,
in the amount of ₱285,638.88 and ₱100,000.00 exemplary damages;
3. [D]ismissing in toto intervenor’s complaint-in-intervention for lack of
evidence of legal standing and legal interest in the suit, as well as failure to
substantiate any cause of action against either [GMC] or [GSIS].10
In deciding in favor of GMC, the Lapu-Lapu RTC held that there existed a valid and
binding sales contract between GSIS and GMC, which GSIS could not continue to
ignore without any justifiable reason especially since GMC had already fully complied
with its obligations. 11
The Lapu-Lapu RTC found GSIS’s invocation of COA’s alleged disapproval of the sale
belated and self-serving. The Lapu-Lapu RTC said that COA, in disapproving GSIS’s
sale of the subject lots to GMC, violated its own circular which excludes the disposal
by a government owned and/or controlled corporation of its "acquired assets" (e.g.,
foreclosed assets or collaterals acquired in the regular course of business).12 The Lapu-
Lapu RTC also held that COA may not intrude into GSIS’s charter-granted power to
dispose of its acquired assets within five years from acquisition by
"preventing/aborting the sale in question by refusing to pass it in audit." 13 Moreover,
the Lapu-Lapu RTC held that the GSIS-proferred COA Memorandum was
inadmissible in evidence not only because as a mere photocopy it failed to measure up
to the "best evidence" rule under the Revised Rules of Court, but also because no one
from COA, not even the auditor who supposedly prepared it, was ever presented to
testify to the veracity of its contents or its due execution.14
In dismissing LLDHC’s complaint-in-intervention, the Lapu-Lapu RTC held that
LLDHC failed to prove its legal personality as a party-intervenor and all it was able to
establish was a "suggestion of right for [GSIS] to renege [on] the sale for reasons
peculiar to [GSIS] but not transmissible nor subject to invocation by [LLDHC]."15
LLDHC and GSIS filed their separate Notices of Appeal but these were dismissed by
the Lapu-Lapu RTC on December 6, 1993.16
On May 10, 1994, the Manila RTC rendered a Decision17 in Civil Case No. R-82-3429.
The Manila RTC held that GSIS was unable to prove the alleged violations committed
by LLDHC to warrant the foreclosure of the mortgage over the subject lots. Thus, the
Manila RTC annulled the foreclosure made by GSIS and ordered LLDHC to pay GSIS
the balance of its loan with interest, to wit:
WHEREFORE, judgment is hereby rendered:
1. ANNULLING the foreclosure by the defendant GSIS of the mortgage over
the seventy-eight (78) parcels of land here involved:
2. CANCELLING the consolidated certificates of [title] issued in the name of
GSIS and directing the Register of Deeds of Lapu-Lapu City to issue new
certificates of [title] over those seventy-eight (78) parcels of land in the name
of the plaintiff, in exactly the same condition as they were before the
foreclosure;
3. ORDERING the plaintiff to pay the GSIS the amount of ₱9,200,000.00
with interest thereon at the rate of twelve (12%) percent per annum
commencing from October 12, 1989 until fully paid; and
4. ORDERING defendant GSIS to execute a properly registrable release of
discharge of mortgage over the parcels of land here involved after full
payment of such amount by the plaintiff.
All claims and counterclaims by the parties as against each other are hereby
dismissed.
No pronouncement as to costs.18
Armed with the Manila RTC decision, LLDHC, on July 27, 1994, filed before the
Court of Appeals a Petition for Annulment of Judgment of the Lapu-Lapu RTC
Decision in Civil Case No. 2203-L.19 LLDHC alleged that the Manila RTC decision
nullified the sale of the subject lots to GMC and consequently, the Lapu-Lapu RTC
decision was also nullified.
This petition, docketed as CA-G.R. SP No. 34696, was dismissed by the Court of
Appeals on December 29, 1994.20The Court of Appeals, in finding that the grounds
LLDHC relied on were without merit, said:
In fine, there being no showing from the allegations of the petition that the
respondent court is without jurisdiction over the subject matter and of the parties in
Civil Case No. 2309 [2203-L], petitioner has no cause of action for the annulment of
judgment. The complaint must allege ultimate facts for the annulment of the decision
(Avendana v. Bautista, 142 SCRA 41). We find none in this case.21
No appeal having been taken by LLDHC, the decision of the Court of Appeals in CA-
G.R. SP No. 34696 became final and executory on January 28, 1995, as stated in the
Entry of Final Judgment dated August 18, 1995.22
On February 2, 1995, LLDHC filed before this Court a Petition for
Certiorari23 docketed as G.R. No. 118633. LLDHC, in seeking to annul the February
24, 1992 Decision of the Lapu-Lapu RTC, again alleged that the Manila RTC Decision
nullified the Lapu-Lapu RTC Decision.
Finding the petition a mere reproduction of the Petition for Annulment filed before
the Court of Appeals in CA-G.R. SP No. 34696, this Court, in a Resolution24 dated
September 6, 1996, dismissed the petition in this wise:
In a last ditch attempt to annul the February 24, 1992 Decision of the respondent
court, this petition was brought before us on February 2, 1995.
Dismissal of this petition is inevitable.
The instant petition which is captioned, For: Certiorari With Preliminary Injunction,
is actually another Petition for Annulment of Judgment of the February 24, 1992
Decision of the respondent Regional Trial Court of Lapu-lapu City, Branch 27 in Civil
Case No. 2203-L. A close perusal of this petition as well as the Petition for Annulment
of Judgment brought by the petitioner before the Court of Appeals in CA-G.R. SP No.
34696 reveals that the instant petition is a mere reproduction of the
petition/complaint filed before the appellate tribunal for annulment of judgment.
Paragraphs two (2) to eighteen (18) of this petition were copied verbatim from the
Petition for Annulment of Judgment earlier filed in the court a quo, except for the
designation of the parties thereto, i.e., plaintiff was changed to petitioner, defendant
to respondent. In fact, even the prayer in this petition is the same prayer in the
Petition for Annulment of Judgment dismissed by the Court of Appeals, x x x.
xxxx
Under Section 9(2) of Batas Pambansa Blg. 129, otherwise known as "The Judiciary
Reorganization Act of 1980," it is the Court of Appeals (then the Intermediate
Appellate Court), and not this Court, which has jurisdiction to annul judgments of
Regional Trial Courts, viz:
SEC. 9. Jurisdiction -- The Intermediate Appellate Court shall exercise:
xxxx
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional
Trial Courts; and
xxxx
Thus, this Court apparently has no jurisdiction to entertain a petition which is
evidently another petition to annul the February 24, 1992 Decision of the respondent
Branch 27, Regional Trial Court of Lapu-lapu City, it appearing that jurisdiction
thereto properly pertains to the Court of Appeals. Such a petition was brought before
the appellate court, but due to petitioner’s failure to nullify Judge Risos’ Decision in
said forum, LLDHC, apparently at a loss as to what legal remedy to take, brought the
instant petition under the guise of a petition for certiorari under Rule 65 seeking once
again to annul the judgment of Branch 27.
Instead of filing this petition for certiorari under Rule 65, which is essentially another
Petition to Annul Judgment, petitioner LLDHC should have filed a timely Petition for
Review under Rule 45 of the Revised Rules of Court of the decision of the Court of
Appeals, dated December 29, 1994, dismissing the Petition for Annulment of
Judgment filed by the petitioner LLDHC before the court a quo. But, this is all
academic now. The appellate court’s decision had become final and executory on
January 28, 1995.25
Despite such pronouncements, this Court, nevertheless, passed upon the merits of
LLDHC’s Petition for Certiorari in G.R. No. 118633. This Court said that the petition,
"which was truly for annulment of judgment,"26 cannot prosper because the two
grounds on which a judgment may be annulled were not present in the case. 27 Going
further, this Court held that even if the petition were to be given due course as a
petition for certiorari under Rule 65 of the Revised Rules of Court, it would still be
dismissible for not being brought within a reasonable period of time as it took LLDHC
almost three years from the time it received the February 24, 1992 decision until the
time it brought this action.28
LLDHC’s motion for reconsideration was denied with finality29 on November 18, 1996,
and on February 18, 1997, an Entry of Judgment30 was made certifying that the
September 6, 1996 Resolution of this Court in G.R. No. 118633 had become final and
executory on December 23, 1996.
Consequently, on November 28, 1996, the Lapu-Lapu RTC issued an Order31 directing
the execution of the judgment in Civil Case No. 2203-L. A corresponding Writ of
Execution32 was issued on December 17, 1996. The Motions to Stay Execution filed by
LLDHC and GSIS were denied by the Lapu-Lapu RTC on February 19, 1997.33
Meanwhile, on December 27, 1996, the Court of Appeals rendered a Decision 34 in the
separate appeals taken by GSIS and LLDHC from the May 10, 1994 Manila RTC
Decision in Civil Case No. R-82-3429. This case, docketed as CA-G.R. CV No. 49117,
affirmed the Manila RTC decision with modification insofar as awarding LLDHC
attorney’s fees and litigation expenses.
On March 3, 1997, GSIS came to this Court on a Petition for Review of the Court of
Appeals’ decision in CA-G.R. CV No. 49117. This was docketed as G.R. No. 127732
and was dismissed on April 14, 199735 due to late filing, the due date being January
31, 1997. This dismissal became final and executory on May 30, 1997.36
On March 8, 1997, LLDHC filed a Petition for Certiorari with preliminary injunction
before the Court of Appeals, praying that GMC and the Lapu-Lapu RTC be ordered to
cease and desist from proceeding with the execution of its Decision in Civil Case No.
2203-L, on the theory that the Manila RTC decision was a supervening event which
made it mandatory for the Lapu-Lapu RTC to stop the execution of its decision. This
case was docketed as CA-G.R. SP No. 44052. On July 16, 1997, the Court of Appeals
issued an Order temporarily restraining the Lapu-Lapu RTC and GMC from
executing the February 24, 1992 decision in Civil Case No. 2203-L so as not to render
the resolution of the case moot and academic.37
On July 21, 1997, because of GSIS’s continued refusal to implement the December 17,
1996 Writ of Execution, the Lapu-Lapu RTC, upon GMC’s motion, issued an
Order38 redirecting its instructions to the Register of Deeds of Lapu-Lapu City, to wit:
WHEREFORE, the defendant GSIS having refused to implement the Order of this
Court dated December 17, 1996 the Court in accordance with Rule 39, Sec. 10-a of the
1997 Rules of Procedure, hereby directs the Register of Deeds of Lapu-lapu City to
cancel the Transfer Certificate of Titles of the properties involved in this case and to
issue new ones in the name of the plaintiff and to deliver the same to the latter within
ten (10) days after this Order shall have become final. 39
While the TRO issued by the Court of Appeals in CA-G.R. SP No. 44052 was in effect,
the Manila RTC, on August 1, 1997, issued a Writ of Execution 40 of its judgment in
Civil Case No. R-82-3429. On August 7, 1997, the Sheriff implemented the Writ and
ordered the Register of Deeds of Lapu-Lapu City to cancel the consolidated certificates
of title issued in the name of GSIS and to issue new ones in favor of LLDHC. In
conformity with the TRO, the Lapu-Lapu RTC on August 19, 1997, ordered41 the
suspension of its July 21, 1997 Order. With no similar restraining order against the
execution of the Manila RTC Decision, a Writ of Possession was issued on August 21,
1997 to cause GSIS and all persons claiming rights under it to vacate the properties in
question and to place LLDHC in peaceful possession thereof.42
On October 23, 1997, the Lapu-Lapu RTC, being aware of the events that have taken
place while the TRO was in effect, issued an Order43 reiterating its previous Orders of
November 28, 1996, December 17, 1996, and July 21, 1997. The Lapu-Lapu RTC held
that since the restraining order issued by the Court of Appeals in CA-G.R. SP No.
44052 had already lapsed by operation of law, and the February 24, 1992 Decision in
Civil Case No. 2203-L had not only become final and executory but had been affirmed
and upheld by both the Court of Appeals and this Court, the inescapable mandate was
to give due course to the efficacy of its decision. The Lapu-Lapu RTC thus directed the
Register of Deeds of Lapu-Lapu City to effect the transfer of the titles to the subject
lots in favor of GMC and declared "any and all acts done by the Register of Deeds of
Lapu-Lapu City null and void starting with the surreptitious issuance of the new
certificates of title in the name of [LLDHC], contrary" to its decision and orders. 44
On November 13, 1997, LLDHC filed before the Court of Appeals another Petition
for Certiorari with preliminary injunction and motion to consolidate with CA-G.R. SP
No. 44052. This case was docketed as CA-G.R. SP No. 45946, but was dismissed45 on
November 20, 1997 for LLDHC’s failure to comply with Section 1, Rule 65 of the 1997
Rules of Civil Procedure which requires the petition to be accompanied by, among
others, "copies of all pleadings and documents relevant and pertinent thereto."46
The petition in CA-G.R. SP No. 44052 would likewise be dismissed47 by the Court of
Appeals on January 9, 1998, but this time, on the merits, to wit:
The validity of the decision of the respondent judge in Civil Case No. 2303-L has thus
been brought both before this Court and to the Supreme Court by the petitioner. In
both instances the respondent judge has been upheld. The instant petition is
petitioner’s latest attempt to resist the implementation or execution of that decision
using as a shield a decision of a Regional Trial Court in the National Capital Region.
We are not prepared to allow it. The applicable rule and jurisprudence are clear. The
prevailing party is entitled as a matter of right to a writ of execution, and the issuance
thereof is a ministerial duty compellable by mandamus. We do not believe that there
exists in this instance a supervening event which would justify a deviation from this
rule.48
Prior to this, however, on November 28, 1997, the Lapu-Lapu RTC, acting on GMC’s
Omnibus Motion, made the following orders: for LLDHC to show cause why it should
not be declared in contempt; for a writ of preliminary prohibitory injunction to be
issued to restrain all persons acting on LLDHC’s orders from carrying out such orders
in defiance of its final and executory judgment; and for a writ of preliminary
mandatory injunction to be issued to direct the ouster of LLDHC. The Lapu-Lapu
RTC also declared the Register of Deeds of Lapu-Lapu City in contempt and directed
the Office of the City Sheriff to implement the above orders and to immediately detain
and confine the Register of Deeds of Lapu-Lapu City at the City Jail if he continues to
refuse to transfer the titles of the subject lots after ten days from receipt of this
order.49
On December 22, 1997, the Lapu-Lapu RTC denied50 the motion for reconsideration
filed by the Register of Deeds of Lapu-Lapu City. In separate motions, LLDHC, and
again the Register of Deeds of Lapu-Lapu City, sought the reconsideration of the
November 28, 1997 and December 22, 1997 Orders. On May 27, 1998, the Lapu-Lapu
RTC, acting under a new judge,51 granted both motions and accordingly set aside the
November 28, 1997 and December 22, 1997 Orders.52
With the denial53 of its motion for reconsideration on August 4, 1998, GMC came to
this Court on a Petition for Certiorari, Prohibition and Mandamus, seeking to set
aside the May 27, 1998 Order of the Lapu-Lapu RTC in Civil Case No. 2203-L. The
Petition was referred to the Court of Appeals, which under Batas Pambansa Blg. 129,
exercises original jurisdiction to issue such writs.54 This was docketed as CA-G.R. SP
No. 50650.
On April 30, 1999, the Court of Appeals rendered its Decision 55 in CA-G.R. SP No.
50650, the dispositive portion of which reads:
WHEREFORE, the petition being partly meritorious, the Court hereby resolves as
follows:
(1) To AFFIRM the Orders of May 28, 1998 and August 4, 1998 in Civil Case
No. 2203-L insofar as they set aside the order holding respondent Register of
Deeds guilty of indirect contempt of court and to NULLIFY said orders in so
far as they set aside the directives contained in paragraphs (a) and (b) and (c)
of the order dated November 28, 1997.
(2) To DECLARE without FORCE and EFFECT insofar as petitioner Group
Management Corporation is concerned the decision in Civil Case No. R-82-
3429 as well as the orders and writs issued for its execution and enforcement:
and
(3) To ENJOIN respondent Lapu-Lapu Development and Housing
Corporation, along with its agents and representatives and/or persons/public
officials/employees acting in its interest, specifically respondent Regional
Trial Court of Manila Branch 38, and respondent Register of Deeds of Lapu-
Lapu City, from obstructing, interfering with or in any manner delaying the
implementation/execution/ enforcement by the Lapu-Lapu City RTC of its
order and writ of execution in Civil Case No. 2203-L.
For lack of sufficient basis the charge of contempt of court against respondent Lapu-
Lapu Development and Housing Corporation and the public respondents is hereby
DISMISSED.56
With the denial of LLDHC’s motion for reconsideration on December 29,
1999,57 LLDHC, on January 26, 2000, filed before this Court a Petition for Review
on Certiorari assailing the April 30, 1999 decision of the Court of Appeals in CA-G.R.
SP No. 50650. This petition was docketed as G.R. No. 141407.
This Court dismissed LLDHC’s petition and upheld the decision of the Court of
Appeals in CA-G.R. SP No. 50650 in its decision dated September 9, 2002.58 LLDHC’s
Motion for Reconsideration and Second Motion for Reconsideration were also denied
on November 13, 200259 and February 3, 2003,60 respectively.
The September 9, 2002 decision of this Court in G.R. No. 141407 became final on
March 10, 2003.61
On March 11, 2004, the Lapu-Lapu RTC, acting on GMC’s Motion for Execution,
issued an Order62 the dispositive portion of which reads:
WHEREFORE, in light of the foregoing considerations, plaintiff Group Management
Corporation’s motion is GRANTED, while defendant GSIS’ motion to stay the
issuance of a writ of execution is denied for lack of merit. Consequently, the Sheriff of
this Court is directed to proceed with the immediate implementation of this Court’s
decision dated February 24, 1992, by enforcing completely this Court’s Order of
Execution dated November 28, 1996, the writ of execution dated December 17, 1996,
the Order dated July 21, 1997, the Order dated October 23 1997, the Order dated
November 28, 1997 and the Order dated December 22, 1997.63
On May 7, 2004, the Lapu-Lapu RTC denied64 the motions for reconsideration filed by
LLDHC and GSIS.
On May 27, 2004, LLDHC filed before the Court of Appeals a Petition for Certiorari,
Prohibition and Mandamus65against the Lapu-Lapu RTC for having issued the
Orders of March 11, 2004 and May 7, 2004 (assailed Orders). This petition docketed
as CA-G.R. SP No. 84382, sought the annulment of the assailed Orders and for the
Court of Appeals to command the Lapu-Lapu RTC to desist from further proceeding in
Civil Case No. 2203-L, to dismiss GMC’s Motion for Execution, and for the issuance of
a Temporary Restraining Order (TRO)/Writ of Preliminary Injunction against the
Lapu-Lapu RTC and GMC.
On July 6, 2004, GSIS filed its own Petition for Certiorari and Prohibition with
Preliminary Injunction and Temporary Restraining Order66 before the Court of
Appeals to annul the assailed Orders of the Lapu-Lapu RTC, to prohibit the judge
therein and the Register of Deeds of Lapu-Lapu City from implementing such assailed
Orders, and for the issuance of a TRO and writ of preliminary injunction to maintain
the status quo while the case is under litigation. This petition was docketed as CA-
G.R. SP No. 85096.
The Court of Appeals initially dismissed outright LLDHC’s petition for failure to
attach the Required Secretary’s Certificate/Board Resolution authorizing petitioner to
initiate the petition,67 but in a Resolution68 dated August 2, 2004, after having found
the explanation for the mistake satisfactory, the Court of Appeals, "on equitable
consideration and for the purpose of preserving the status quo during the pendency of
the appeal,"69 issued a TRO against the Lapu-Lapu RTC from enforcing its
jurisdiction and judgment/order in Civil Case No. 2203-L until further orders. In its
August 30, 2004 Resolution,70 the Court of Appeals, without resolving the case on its
merits, also issued a Writ of Preliminary Injunction, commanding the Lapu-Lapu RTC
to cease and desist from implementing the assailed Orders in Civil Case No. 2203-L,
until further orders.
On November 25, 2004, the Twentieth Division of the Court of Appeals promulgated
its decision in CA-G.R. SP No. 85096. It dismissed GSIS’s petition and affirmed the
assailed Orders of March 11, 2004 and May 7, 2004. The Court of Appeals found no
merit in GSIS’s petition since the judgment in Civil Case No. 2203-L, which was
decided way back on February 24, 1992, had long become final and executory, which
meant that the Lapu-Lapu RTC had no legal obstacle to cause said judgment to be
executed and enforced. The Court of Appeals quoted in full, portions of this Court’s
Decision in G.R. No. 141407 to underscore the fact that no less than the Supreme
Court had declared that the decision in Civil Case No. 2203-L was valid and binding
and had become final and executory a long time ago and had not been in any way
nullified by the decision rendered by the Manila RTC on May 10, 1994 in Civil Case
No. R-82-3429. On January 20, 2005, the Court of Appeals upheld its decision and
denied GSIS’s Motion for Reconsideration.71
However, on September 23, 2005, the Special Nineteenth Division of the Court of
Appeals came out with its own decision in CA-G.R. SP No. 84382. It granted LLDHC’s
petition, contrary to the Court of Appeals’ decision in CA-G.R. SP No. 85096, and
annulled and set aside the March 11, 2004 Order of the Lapu-Lapu RTC in this wise:
WHEREFORE, finding merit in the instant Petition for Certiorari, Prohibition and
Mandamus, the same is hereby GRANTED, and the assailed Order, dated March 11,
2004, of the Regional Trial Court, 7th Judicial Region, Branch 27, Lapulapu City, in
Civil Case No. 2203-L is ANNULLED AND SET ASIDE.
Accordingly, respondent Judge Benedicto Cobarde is hereby ORDERED:
a) to DESIST from further proceeding in Civil Case No. 2203-L; and
b) to DISMISS GMC’s Motion for Execution in the abovementioned case;
Meanwhile, the Writ of Preliminary Injunction earlier issued is hereby declared
PERMANENT. No pronouncement as to costs.72
GSIS73 and GMC74 are now before this Court, with their separate Petitions for Review
on Certiorari, assailing the decisions of the Court of Appeals in CA-G.R. SP No. 85096
and CA-G.R. SP No. 84382, respectively.
G.R. No. 167000
In G.R. No. 167000, GSIS is assailing the Orders issued by the Lapu-Lapu RTC on
March 11, 2004 and May 7, 2004 for being legally unenforceable on GSIS because the
titles of the 78 lots in Marigondon, Lapu-Lapu City were already in LLDHC’s name,
due to the final and executory judgment rendered by the Manila RTC in Civil Case
No. R-82-3429. GSIS contends that it is legally and physically impossible for it to
comply with the assailed Orders as the "subject matter to be delivered or performed
have already been taken away from" 75 GSIS. GSIS asserts that the circumstances
which have arisen, from the judgment of the Manila RTC to the cancellation of GSIS’s
titles, are "supervening events" which should be considered as an exception to the
doctrine of finality of judgments because they render the execution of the final and
executory judgment of the Lapu-Lapu RTC in Civil Case No. 2203-L unjust and
inequitable. GSIS further claims that it should not be made to pay damages of any
kind because its funds and properties are exempt from execution, garnishment, and
other legal processes under Section 39 of Republic Act No. 8291.
LLDHC, in its Compliance,76 believes that it was impleaded in this case as a mere
nominal party since it filed its own Petition for Certiorari before the Court of Appeals,
which was granted in CA-G.R. SP No. 84382. LLDHC essentially agrees with GSIS
that the implementation of the assailed Orders have become legally impossible due to
the fully implemented Writ of Execution issued by the Manila RTC in Civil Case No.
R-82-3429. LLDHC alleges that because of this "supervening event," GSIS cannot be
compelled to execute a final deed of sale in GMC’s favor, and "LLDHC cannot be
divested of its titles, ownership and possession" of the subject properties.77
GMC in its comment78 argues that GSIS has no legal standing to institute this
petition because it has no more interest in the subject lots, since it is no longer in
possession and the titles thereto have already been registered in LLDHC’s name.
GMC claims that the decision of the Special Nineteenth Division of the Court of
Appeals is barred by res judicata, and that LLDHC is guilty of forum shopping for
filing several petitions before the Court of Appeals and this Court with the same
issues and arguments. GMC also asserts that the judgment in Civil Case No. R-82-
3429 is enforceable only between GSIS and LLDHC as GMC was not a party to the
case, and that the Manila RTC cannot overrule the Lapu-Lapu RTC, they being co-
equal courts.
G.R. No. 169971
In G.R. No. 169971, GMC is praying that the decision of the Special Nineteenth
Division of the Court of Appeals in CA-G.R. SP No. 84382 be reversed and set aside.
GMC is claiming that the Court of Appeals, in rendering the said decision, committed
a palpable legal error by overruling several final decisions rendered by the Lapu-Lapu
RTC, the Court of Appeals, and this Court.79 GMC claims that the Lapu-Lapu RTC’s
duty to continue with the implementation of its orders is purely ministerial as the
judgment has not only become final and executory, but has been affirmed by both the
Court of Appeals and the Supreme Court in several equally final and executory
decisions.80 GMC, repeating its arguments in G.R. No. 167000, maintains that the
petition is barred by res judicata, that there is forum shopping, and that the Manila
RTC decision is not binding on GMC.
LLDHC in its comment81 insists that there is a supervening event which rendered it
necessary to stay the execution of the judgment of the Lapu-Lapu RTC. LLDHC also
asserts that, as correctly found by the Court of Appeals in CA-G.R. SP No. 84382, the
Lapu-Lapu RTC decision in Civil Case No. 2203-L was not affirmed with finality by
the Court of Appeals and the Supreme Court as the decision was not reviewed on the
merits.
SUMMARY OF THE ISSUES
The present case is peculiar in the sense that it involves two conflicting final and
executory decisions of two different trial courts. Moreover, one of the RTC decisions
had been fully executed and implemented. To complicate things further, the parties
have previously filed several petitions, which have reached not only the Court of
Appeals but also this Court. Upon consolidation of the two petitions, this Court has
narrowed down the issues to the following:
1. Whether or not the decision of the Manila RTC in Civil Case No. R-82-3429
constitutes a supervening event, which should be admitted as an exception to
the doctrine of finality of judgments.
2. Whether or not the September 23, 2005 Decision of the Special Nineteenth
Division of the Court of Appeals in CA-G.R. SP No. 84382 and GSIS’s Petition
in G.R. No. 167000 are barred by res judicata.
3. Whether or not there is a legal and physical impossibility for GSIS to
comply with the March 11, 2004 and May 7, 2004 Orders of the Lapu-Lapu
RTC in Civil Case No. 2203-L.
4. Whether or not LLDHC and GSIS are guilty of forum shopping.
DISCUSSION
First Issue:
Supervening Event
It is well-settled that once a judgment attains finality, it becomes immutable and
unalterable. It may not be changed, altered or modified in any way even if the
modification were for the purpose of correcting an erroneous conclusion of fact or law.
This is referred to as the "doctrine of finality of judgments," and this doctrine applies
even to the highest court of the land.82 This Court explained its rationale in this wise:
The doctrine of finality of judgment is grounded on fundamental considerations of
public policy and sound practice, and that, at the risk of occasional errors, the
judgments or orders of courts must become final at some definite time fixed by law;
otherwise, there would be no end to litigations, thus setting to naught the main role of
courts of justice which is to assist in the enforcement of the rule of law and the
maintenance of peace and order by settling justiciable controversies with finality. 83
This Court has, on several occasions, ruled that the doctrine of finality of judgments
admits of certain exceptions, namely: "the correction of clerical errors, the so-
called nunc pro tunc entries which cause no prejudice to any party, void judgments,
and whenever circumstances transpire after the finality of the decision which render
its execution unjust and inequitable."84
Both GSIS and LLDHC claim that the execution of the decision and orders in Civil
Case No. 2203-L should be stayed because of the occurrence of "supervening events"
which render the execution of the judgment "impossible, unfair, unjust and
inequitable."85 However, in order for an event to be considered a supervening event to
justify the alteration or modification of a final judgment, the event must have
transpired after the judgment has become final and executory, to wit:
Supervening events refer to facts which transpire after judgment has become final
and executory or to new circumstances which developed after the judgment has
acquired finality, including matters which the parties were not aware of prior to or
during the trial as they were not yet in existence at that time.86
The Lapu-Lapu RTC Decision in Civil Case No. 2203-L was promulgated on February
24, 1992, while the Manila RTC Decision in Civil Case No. R-82-3429 was
promulgated on May 10, 1994. As early as December 6, 1993, both GSIS’s and
LLDHC’s appeals of the Lapu-Lapu RTC Decision were dismissed by the said
RTC.87 Only GSIS moved to reconsider this dismissal, which was denied on July 6,
1994.88 Strictly speaking, the Lapu Lapu RTC Decision should have attained finality
at that stage; however, LLDHC filed with the Court of Appeals its Petition for
Annulment of Judgment (CA-G.R. SP No. 34696) on July 27, 1994 and it used therein
the Manila RTC Decision as its main ground for annulment of the Lapu-Lapu RTC
decision.
The Court of Appeals nonetheless dismissed LLDHC’s Petition for Annulment of
Judgment, in CA-G.R. SP No. 34696,89 and that became final and executory on
January 28, 1995,90 after LLDHC interposed no appeal. The entry of judgment in this
case was issued on August 18, 1995.91 Moreover, the similar petition of LLDHC before
this Court in G.R. No. 118633 was decided on September 6, 1996 and became final
and executory on December 23, 1996. Therefore, the ruling by the Manila RTC is
evidently not a supervening event. It was already in existence even before the decision
in Civil Case No. 2203-L attained finality.
Just as LLDHC and GSIS, as the losing parties, had the right to file their respective
appeals within the prescribed period, GMC, as the winning party in Civil Case No.
2203-L, equally had the correlative right to benefit from the finality of the resolution
of its case,92 to wit:
A final judgment vests in the prevailing party a right recognized and protected by law
under the due process clause of the Constitution. A final judgment is "a vested
interest which it is right and equitable that the government should recognize and
protect, and of which the individual could not be deprived arbitrarily without
injustice."93 (Citations omitted.)
Since the Manila RTC decision does not constitute a supervening event, there is
therefore neither reason nor justification to alter, modify or annul the Lapu-Lapu
RTC Decision and Orders, which have long become final and executory. Thus, in the
present case, GMC must not be deprived of its right to enjoy the fruits of a final
verdict.
It is settled in jurisprudence that to stay execution of a final judgment, a supervening
event "must create a substantial change in the rights or relations of the parties which
would render execution of a final judgment unjust, impossible or inequitable making
it imperative to stay immediate execution in the interest of justice."94
However, what would be unjust and inequitable is for the Court to accord preference
to the Manila RTC Decision on this occasion when in the past, the Court of Appeals
and this Court have repeatedly, consistently, and with finality rejected LLDHC’s
moves to use the Manila RTC Decision as a ground to annul, and/or to bar the
execution of, the Lapu Lapu RTC Decision. To be sure, in the Decision dated
September 9, 2002 in G.R. No. 141407, penned by former Chief Justice Artemio V.
Panganiban, the Court already passed upon the lack of effect of the Manila RTC
Decision on the finality of the Lapu Lapu RTC decision in this wise:
The records of the case clearly show that the Lapulapu Decision has become final and
executory and is thus valid and binding upon the parties. Obviously, petitioner
[LLDHC] is again trying another backdoor attempt to annul the final and executory
Decision of the Lapulapu RTC.
First, it was petitioner that filed on March 11, 1992 a Notice of Appeal contesting the
Lapulapu RTC Judgment in Civil Case No. 2203-L rendered on February 24, 1992.
The Notice was however rejected by the said RTC for being frivolous and dilatory.
Since petitioner had done nothing thereafter, the Decision clearly became final and
executory.
However, upon receipt of the Manila RTC Decision, petitioner found a new tool to
evade the already final Lapulapu Decision by seeking the annulment of the latter in a
Petition with the CA. However, the appellate court dismissed the action, because
petitioner had been unable to prove any of the grounds for annulment; namely lack of
jurisdiction or extrinsic fraud. Because no appeal had been taken by petitioner, the
ruling of the CA also became final and executory.
Second, the Supreme Court likewise recognized the finality of the CA Decision when it
threw out LLDHC’s Petition for Certiorari in GR No. 118633. This Court ruled thus:
"Instead of filing this petition for certiorari under Rule 65, which is essentially
another Petition to Annul Judgment, petitioner LLDHC should have filed a timely
Petition for Review under Rule 45 of the Revised Rules of Court of the decision of the
Court of Appeals, dated December 29, 1994, dismissing the Petition for Annulment of
Judgment filed by the petitioner LLDHC before the court a quo. But this is all
academic now. The appellate court’s decision had become final and executory on
January 28, 1995."
Jurisprudence mandates that when a decision becomes final and executory, it becomes
valid and binding upon the parties and their successors in interest. Such decision or
order can no longer be disturbed or reopened no matter how erroneous it may have
been. Petitioner’s failure to file an appeal within the reglementary period renders the
judgment final and executory. The perfection of an appeal in the manner and within
the period prescribed by law is mandatory. Failure to conform to the rules regarding
appeal will render the judgment final and executory and, hence, unappealable.
Therefore, since the Lapulapu Decision has become final and executory, its execution
has become mandatory and ministerial on the part of the judge.
The CA correctly ruled that the Lapulapu Judgment is binding upon petitioner
[LLDHC] which, by its own motion, participated as an intervenor. In fact, the latter
filed an Answer in Intervention and thereafter actively took part in the trial. Thus,
having had an opportunity to be heard and to seek a reconsideration of the action or
ruling it complained of, it cannot claim that it was denied due process of law. What
the law prohibits is the absolute absence of the opportunity to be heard.
Jurisprudence teaches that a party cannot feign denial of due process if it has been
afforded the opportunity to present its side.
Petitioner likewise claims that Private Respondent GMC cannot escape the adverse
effects of the final and executory judgment of the Manila RTC.
Again, we do not agree. A trial court has no power to stop an act that has been
authorized by another trial court of equal rank. As correctly stated by the CA, the
Decision rendered by the Manila RTC -- while final and executory -- cannot bind
herein private respondent [GMC], which was not a party to the case before the said
RTC. A personal judgment is binding only upon the parties, their agents,
representatives and successors in interest.1avvphi1
Third, petitioner grievously errs in insisting that the judgment of the Manila RTC
nullified that of the Lapulapu RTC. As already adverted to earlier, courts of coequal
and coordinate jurisdiction may not interfere with or pass upon each other’s orders or
processes, since they have the same power and jurisdiction. Except in extreme
situations authorized by law, they are proscribed from doing so.95(Emphases
supplied.)
It likewise does not escape the attention of this Court that the only reason the Manila
RTC Decision was implemented ahead of the Lapu Lapu RTC Decision was that
LLDHC successfully secured a TRO from the Court of Appeals through its petition for
certiorari docketed as CA-G.R. SP No. 44052, which was eventually dismissed by the
appellate court. The Court of Appeals ruled that the Manila RTC Decision did not
constitute a supervening event that would forestall the execution of the Lapu Lapu
RTC Decision. This decision of the Court of Appeals likewise became final and
executory in 1998.
It bears repeating that the issue of whether or not the Manila RTC Decision could
nullify or render unenforceable the Lapu Lapu RTC Decision has been litigated many
times over in different fora. It would be the height of inequity if the Court were to now
reverse the Court of Appeals’ and its own final and executory rulings and allow GSIS
to prevent the execution of the Lapu Lapu RTC Decision on the same legal grounds
previously discredited by the courts.
Second Issue:
Res Judicata
GMC asserts that the September 23, 2005 Decision of the Special Nineteenth Division
of the Court of Appeals in CA-G.R. SP No. 84382 and the petition herein by GSIS in
G.R. No. 167000 are barred by res judicata as the issues involved had been fully
resolved not only by the lower courts but by this Court as well. GSIS and LLDHC both
insist that res judicata does not apply as this Court "has not yet rendered a decision
involving the same or any similar petition."96 The petitions by LLDHC before the
Court of Appeals and GSIS before this Court both prayed for the annulment of the
March 11, 2004 and May 7, 2004 Orders of the Lapu-Lapu RTC in Civil Case No.
2203-L. These assailed Orders were both issued to resolve the parties’ motions and to
have the February 24, 1992 judgment implemented and executed.
In Republic of the Philippines (Civil Aeronautics Administration) v. Yu, 97 this Court
expounded on the concept of res judicata and explained it in this wise:
Res judicata literally means "a matter adjudged; a thing judicially acted upon or
decided; a thing or matter settled by judgment." Res judicata lays the rule that an
existing final judgment or decree rendered on the merits, and without fraud or
collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction,
is conclusive of the rights of the parties or their privies, in all other actions or suits in
the same or any other judicial tribunal of concurrent jurisdiction on the points and
matters in issue in the first suit.98
In Villanueva v. Court of Appeals,99 we enumerated the elements of res judicata as
follows:
a) The former judgment or order must be final;
b) It must be a judgment or order on the merits, that is, it was rendered after
a consideration of the evidence or stipulations submitted by the parties at the
trial of the case;
c) It must have been rendered by a court having jurisdiction over the subject
matter and the parties; and
d) There must be, between the first and second actions, identity of parties, of
subject matter and of cause of action. This requisite is satisfied if the two (2)
actions are substantially between the same parties.100
All three parties herein are in agreement with the facts that led to the petitions in
this case. However, not all of them agree that the matters involved in this case have
already been judicially settled. While GMC contends that GSIS’s petition is barred by
res judicata, both GSIS and LLDHC assert that this Court has not yet decided any
similar petition, thus disputing the claim of res judicata.
Res judicata has two concepts: (1) "bar by prior judgment" as enunciated in Rule 39,
Section 47(b) of the 1997 Rules of Civil Procedure; and (2) "conclusiveness of
judgment" in Rule 39, Section 47(c), which reads as follows:
(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity; and
(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or
final order which appears upon its face to have been so adjudged, or which
was actually and necessarily included therein or necessary thereto.
In explaining the two concepts of res judicata, this Court held that:
There is "bar by prior judgment" when, as between the first case where the judgment
was rendered, and the second case that is sought to be barred, there is identity of
parties, subject matter, and causes of action. But where there is identity of parties
and subject matter in the first and second cases, but no identity of causes of action,
the first judgment is conclusive only as to those matters actually and directly
controverted and determined and not as to matters merely involved therein. This is
"conclusiveness of judgment." Under the doctrine of conclusiveness of judgment, facts
and issues actually and directly resolved in a former suit cannot again be raised in
any future case between the same parties, even if the latter suit may involve a
different claim or cause of action. The identity of causes of action is not required but
merely identity of issues.101
In Peñalosa v. Tuason,102 we laid down the test in determining whether or not the
causes of action in the first and second cases are identical:
Would the same evidence support and establish both the present and former cause of
action? If so, the former recovery is a bar; if otherwise, it does not stand in the way of
the former action.103
Res judicata clearly exists in G.R. No. 167000 and in CA-G.R. SP No. 84382 because
both GSIS’s and LLDHC’s actions put in issue the validity of the Lapu-Lapu RTC
Decision and were based on the assumption that it has either been modified, altered
or nullified by the Manila RTC Decision.
In CA-G.R. SP No. 84382, LLDHC sought to annul the assailed Orders of the Lapu-
Lapu RTC and to order the judge therein to desist from further proceeding in Civil
Case No. 2203-L. LLDHC sought for the same reliefs in its Petition for Annulment of
Judgment in CA-G.R. SP No. 34696 and G.R. No. 118633, in its Petition
for Certiorari in CA-G.R. SP No. 44052, and in its Petition for Review on Certiorari in
G.R. No. 141407, all of which have been decided with finality.
In G.R. No. 167000, GSIS is praying for the reversal of the November 25, 2004
Decision and January 20, 2005 Resolution in CA-G.R. SP No. 85096, wherein the
Court of Appeals affirmed the assailed Orders. The validity of these assailed Orders
hinges on the validity of the Lapu-Lapu RTC Decision, which issue had already been
decided with finality by both the Court of Appeals and this Court.
Notwithstanding the difference in the forms of actions GSIS and LLDHC filed, the
doctrine of res judicata still applies considering that the parties were litigating the
same thing, i.e., the 78 lots in Marigondon, Lapu-Lapu City, and more importantly,
the same contentions and evidence were used in all causes of action. As this Court
held in Mendiola v. Court of Appeals104:
The test of identity of causes of action lies not in the form of an action but on whether
the same evidence would support and establish the former and the present causes of
action. The difference of actions in the aforesaid cases is of no moment. x x x.105
The doctrine of res judicata makes a final judgment on the merits rendered by a court
of competent jurisdiction conclusive as to the rights of the parties and their privies
and amounts to an absolute bar to subsequent actions involving the same claim,
demand, or cause of action.106 Even a finding of conclusiveness of judgment operates
as estoppel with respect to matters in issue or points controverted, on the
determination of which the finding or judgment was anchored.107
Evidently, this Court could dispose of this case simply upon the application of the
principle of res judicata. It is clear that GSIS’s petition in G.R. No. 167000 and
LLDHC’s petition in CA-G.R. SP No. 84382 should have never reached those stages
for having been barred by a final and executory judgment on their claims. However,
considering the nature of the case before us, this Court is compelled to make a final
determination of the issues in the interest of substantial justice and to end the
wasteful use of our courts’ time and resources.
Third Issue:
GSIS’s Compliance with the
Lapu-Lapu RTC Judgment and Orders
GSIS asserts that the assailed Orders cannot be enforced upon it given the physical
and legal impossibility for it to comply as the titles over the subject properties were
transferred to LLDHC under the Manila RTC writ of execution.
A closer perusal of the March 11, 2004 and May 7, 2004 Orders shows that GSIS’s
argument holds no water. The May 7, 2004 Order denied GSIS’s and LLDHC’s
motions for reconsideration of the March 11, 2004 Order. The March 11, 2004 Order
resolved GMC’s urgent manifestation and motion to proceed with the implementation
of the February 24, 1992 final and executory decision and GSIS’s and LLDHC’s
opposition thereto, as well as GSIS’s motion to stay the issuance of a writ of execution
against it. The dispositive portion of the Order reads:
WHEREFORE, in the light of the foregoing considerations, plaintiff Group
Management Corporation’s motion is GRANTED, while defendant GSIS’ motion to
stay the issuance of a writ of execution is denied for lack of merit. Consequently, the
Sheriff of this Court is directed to proceed with the immediate
implementation of this Court’s decision dated February 24, 1992, by enforcing
completely this Court’s Order of Execution dated November 28, 1996, the writ of
execution dated December 17, 1996, the Order dated July 21, 1997, the Order dated
October 23, 1997, the Order dated November 28, 1997 and the Order dated December
22, 1997.108 (Emphasis ours.)
While the previous orders and writs of execution issued by the Lapu-Lapu RTC
required the GSIS to execute the final deed of sale and to deliver the subject
properties, the Lapu-Lapu RTC, in its subsequent Orders, modified this by directing
its order to the Register of Deeds of Lapu-Lapu City. In its July 21, 1997 Order,109 the
Lapu-Lapu RTC, seeing GSIS’s obstinate refusal to implement the court’s previous
orders, directed the Register of Deeds of Lapu-Lapu City to cancel the Transfer
Certificates of Title of the subject properties and to issue new ones in the name of
GMC, and to deliver the same to GMC. Moreover, in its October 23, 1997 Order, the
Lapu-Lapu RTC, noting the implemented judgment of the Manila RTC, declared the
issuance of new titles to LLDHC null and void for being contrary to the court’s
February 24, 1992 decision and directed the Register of Deeds to effect the transfer of
the titles to GMC.
Considering that the assailed Orders merely directed the Lapu-Lapu RTC’s Sheriff to
proceed with the implementation of the court’s previous orders, that is, to make sure
that the Register of Deeds of Lapu-Lapu City complied with the orders, GSIS had
nothing to comply with insofar as the titles to, and possession of, the subject
properties were concerned, the Orders being clearly directed towards the Sheriff of the
Lapu-Lapu RTC and the Register of Deeds of Lapu-Lapu City. Hence, GSIS’s
argument of legal and physical impossibility of compliance with the assailed Orders is
baseless.
GSIS also argues that it cannot be the "subject [of any] execution including [the]
payment of any damage and other monetary judgments because all GSIS funds and
properties are absolutely and expressly exempt from execution and other legal
processes under Section 39 of Republic Act No. 8291."110
Section 39 of Republic Act No. 8291 provides:
SECTION 39. Exemption from Tax, Legal Process and Lien. —It is hereby declared to
be the policy of the State that the actuarial solvency of the funds of the GSIS shall be
preserved and maintained at all times and that contribution rates necessary to
sustain the benefits under this Act shall be kept as low as possible in order not to
burden the members of the GSIS and their employers. Taxes imposed on the GSIS
tend to impair the actuarial solvency of its funds and increase the contribution rate
necessary to sustain the benefits of this Act. Accordingly, notwithstanding any laws to
the contrary, the GSIS, its assets, revenues including all accruals thereto, and
benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of
all kinds. These exemptions shall continue unless expressly and specifically revoked
and any assessment against the GSIS as of the approval of this Act are hereby
considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions
or jurisprudence contrary to or in derogation of this provision are hereby deemed
repealed, superseded and rendered ineffective and without legal force and effect.
xxxx
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from attachment,
garnishment, execution, levy or other processes issued by the courts, quasi judicial
agencies or administrative bodies including Commission on Audit (COA)
disallowances and from all financial obligations of the members, including his
pecuniary accountability arising from or caused or occasioned by his exercise or
performance of his official functions or duties, or incurred relative to or in connection
with his position or work except when his monetary liability, contractual or otherwise,
is in favor of the GSIS.
This Court, in Rubia v. Government Service Insurance System,111 held that the
exemption of GSIS is not absolute and does not encompass all of its funds, to wit:
In so far as Section 39 of the GSIS charter exempts the GSIS from execution, suffice it
to say that such exemption is not absolute and does not encompass all the GSIS funds.
By way of illustration and as may be gleaned from the Implementing Rules and
Regulation of the GSIS Act of 1997, one exemption refers to social security benefits
and other benefits of GSIS members under Republic Act No. 8291 in connection with
financial obligations of the members to other parties. The pertinent GSIS Rule
provides:
Rule XV. Funds of the GSIS
Section 15.7 Exemption of Benefits of Members from Tax, Attachment,
Execution, Levy or other Legal Processes. – The social security benefits and other
benefits of GSIS members under R.A. 8291 shall be exempt from tax, attachment,
garnishment, execution, levy or other processes issued by the courts, quasi-judicial
agencies or administrative bodies in connection with all financial obligations of
the member, including his pecuniary accountability arising from or caused or
occasioned by his exercise or performance of his official functions or duties or incurred
in connection with his position or work, as well as COA disallowances. Monetary
liability in favor of the GSIS, however, may be deducted from the benefits of the
member. [Emphasis supplied]
The processual exemption of the GSIS funds and properties under Section 39 of the
GSIS Charter, in our view, should be read consistently with its avowed principal
purpose: to maintain actuarial solvency of the GSIS in the protection of assets which
are to be used to finance the retirement, disability and life insurance benefits of its
members. Clearly, the exemption should be limited to the purposes and objects
covered. Any interpretation that would give it an expansive construction to exempt all
GSIS assets from legal processes absolutely would be unwarranted.
Furthermore, the declared policy of the State in Section 39 of the GSIS Charter
granting GSIS an exemption from tax, lien, attachment, levy, execution, and other
legal processes should be read together with the grant of power to the GSIS to invest
its "excess funds" under Section 36 of the same Act. Under Section 36, the GSIS is
granted the ancillary power to invest in business and other ventures for the benefit of
the employees, by using its excess funds for investment purposes. In the exercise of
such function and power, the GSIS is allowed to assume a character similar to a
private corporation. Thus, it may sue and be sued, as also, explicitly granted by its
charter. Needless to say, where proper, under Section 36, the GSIS may be held liable
for the contracts it has entered into in the course of its business investments. For
GSIS cannot claim a special immunity from liability in regard to its business ventures
under said Section. Nor can it deny contracting parties, in our view, the right of
redress and the enforcement of a claim, particularly as it arises from a purely
contractual relationship, of a private character between an individual and the
GSIS.112
This ruling has been reiterated in the more recent case of Government Service
Insurance System v. Regional Trial Court of Pasig City, Branch 71,113 wherein GSIS,
which was also the petitioner in that case, asked to reverse this Court’s findings in
Rubia and grant GSIS absolute immunity. This Court rejected that plea and held that
GSIS should not be allowed to hide behind such immunity especially since its
obligation arose from its own wrongful action in a business transaction.
In this case, the monetary judgments against GSIS arose from its failure to comply
with its private and contractual obligation to GMC. As such, GSIS cannot claim
immunity from the enforcement of the final and executory judgment against it.114
Fourth Issue:
 Forum Shopping
On the issue of forum shopping, this Court already found LLDHC guilty of forum
shopping and was adjudged to pay treble costs way back in 2002 in G.R. No.
141407115:
There is forum shopping whenever, as a result of an adverse opinion in one forum, a
party seeks a favorable opinion (other than by appeal or certiorari) from another. In
Gatmaytan v. CA, the petitioner therein repeatedly availed itself of several judicial
remedies in different courts, simultaneously or successively. All those remedies were
substantially founded on the same transactions and the same essential facts and
circumstances; and all raised substantially the same issues either pending in, or
already resolved adversely by, some other court. This Court held that therein
petitioner was trying to increase his chances of obtaining a favorable decision by filing
multiple suits in several courts. Hence, he was found guilty of forum shopping.
In the present case, after the Lapulapu RTC had rendered its Decision in favor of
private respondent, petitioner filed several petitions before this Court and the CA
essentially seeking the annulment thereof. True, petitioner had filed its Complaint in
the Manila RTC before private respondent filed its own suit in the Lapulapu RTC.
Records, however, show that private respondent learned of the Manila case only when
petitioner filed its Motion for Intervention in the Lapulapu RTC. When GMC filed its
own Motion to Intervene in the Manila RTC, it was promptly rebuffed by the judge
therein. On the other hand, petitioner was able to present its side and to participate
fully in the proceedings before the Lapulapu RTC.
On July 27, 1994, almost two years after the dismissal of its appeal by the Lapulapu
RTC, petitioner filed in the CA a suit for the annulment of that RTC judgment. On
December 29, 1994, this suit was rejected by the CA in a Decision which became final
and executory on January 28, 1995, after no appeal was taken by petitioner. However,
this action did not stop petitioner. On February 2, 1995, it filed with this Court
another Petition deceptively cloaked as certiorari, but which in reality sought the
annulment of the Lapulapu Decision. This Court dismissed the Petition on September
6, 1996. Petitioner’s Motion for Reconsideration was denied with finality on November
18, 1996.
On November 28, 1996, Judge Risos of the Lapulapu RTC directed the execution of
the judgment in the case filed before it. The Motion to Stay Execution filed by
petitioner was denied on February 19, 1997. Undaunted, it filed in this Court another
Petition for Certiorari, Prohibition and Mandamus. On September 21, 1998, we
referred the Petition to the CA for appropriate action. This new Petition again
essentially sought to annul the final and executory Decision rendered by the Lapulapu
RTC. Needless to say, the new suit was unsuccessful. Still, this rejection did not stop
petitioner. It brought before this Court the present Petition for Review
on Certiorari alleging the same facts and circumstances and raising the same issues
already decided by this Court in G.R. No. 118633.
First Philippine International Bank v. CA stresses that what is truly important to
consider in determining whether forum shopping exists is the vexation caused the
courts and the parties-litigants by one who asks different courts and/or administrative
agencies to rule on the same or related facts and causes and/or to grant the same or
substantially the same relief, in the process creating the possibility of conflicting
rulings and decisions.
Petitioner in the present case sued twice before the CA and thrice before this Court,
alleging substantially the same facts and circumstances, raising essentially the same
issues, and praying for almost identical reliefs for the annulment of the Decision
rendered by the Lapulapu RTC. This insidious practice of repeatedly bringing
essentially the same action -- albeit disguised in various nomenclatures -- before
different courts at different times is forum shopping no less. Because of petitioner’s
actions, the execution of the Lapulapu Decision has been needlessly delayed and
several courts vexed.116
There is forum shopping when two or more actions or proceedings, other than appeal
or certiorari, involving the same parties for the same cause of action, are instituted
either simultaneously or successively to obtain a more favorable decision. 117 This
Court, in Spouses De la Cruz v. Joaquin,118 explained why forum shopping is
disapproved of:
Forum shopping trifles with the courts, abuses their processes, degrades the
administration of justice, and congests court dockets. Willful and deliberate violation
of the rule against it is a ground for the summary dismissal of the case; it may also
constitute direct contempt of court.119
It is undeniable that both LLDHC and GSIS are guilty of forum shopping, for having
gone through several actions and proceedings from the lowest court to this Court in
the hopes that they will obtain a decision favorable to them. In all those actions, only
one issue was in contention: the ownership of the subject lots. In the process, the
parties degraded the administration of justice, congested our court dockets, and
abused our judicial system. Moreover, the simultaneous and successive actions filed
below have resulted in conflicting decisions rendered by not only the trial courts but
also by different divisions of the Court of Appeals.
The very purpose of the rule against forum shopping was to stamp out the abominable
practice of trifling with the administration of justice. 120 It is evident from the history
of this case that not only were the parties and the courts vexed, but more importantly,
justice was delayed. As this Court held in the earlier case of LLDHC against GMC:
"[The] insidious practice of repeatedly bringing essentially the same action – albeit
disguised in various nomenclatures – before different courts at different times is
forum shopping no less."121
Conclusion
Nonetheless, like we said, substantial justice requires the resolution of this
controversy on its merits. It is the duty of this Court to put an end to this long-delayed
litigation and render a decision, which will bind all parties with finality.
Although it is settled that the Lapu-Lapu RTC Decision was not in any way nullified
by the Manila RTC Decision, it is this Court’s duty to resolve the legal implications of
having two conflicting, final, and executory decisions in existence. In Collantes v.
Court of Appeals,122 this Court, faced with the similar issue of having two conflicting,
final and executory decisions before it, offered three options to solve the dilemma: "the
first is for the parties to assert their claims anew, the second is to determine which
judgment came first, and the third is to determine which of the judgments had been
rendered by a court of last resort."123
In Collantes, this Court applied the first option and resolved the conflicting issues
anew. However, resorting to the first solution in the case at bar would entail
disregarding not only the final and executory decisions of the Lapu-Lapu RTC and the
Manila RTC, but also the final and executory decisions of the Court of Appeals and
this Court. Moreover, it would negate two decades’ worth of litigating. Thus, we find it
more equitable and practicable to apply the second and third options consequently
maintaining the finality of one of the conflicting judgments. The primary criterion
under the second option is the time when the decision was rendered and became final
and executory, such that earlier decisions should prevail over the current ones since
final and executory decisions vest rights in the winning party. In the third solution,
the main criterion is the determination of which court or tribunal rendered the
decision. Decisions of this Court should be accorded more respect than those made by
the lower courts.124
Applying these criteria to the case at bar, the February 24, 1992 Decision of the Lapu-
Lapu RTC in Civil Case No. 2203-L was not only promulgated first; it also attained
finality on January 28, 1995, before the Manila RTC’s May 10, 1994 Decision in Civil
Case No. R-82-3429 became final on May 30, 1997. It is especially noteworthy that
months after the Lapu-Lapu RTC issued its writ of execution on December 17, 1996,
the Manila RTC issued its own writ of execution on August 1, 1997. To recall, the
Manila RTC writ was only satisfied first because the Court of Appeals in CA-G.R. SP
No. 44052 deemed it appropriate to issue a temporary restraining order against the
execution of the Lapu-Lapu RTC Decision, pending the case before it. Hence, the fact
that the Manila RTC Decision was implemented and executed first does not negate
the fact that the Lapu-Lapu RTC Decision was not only rendered earlier, but had also
attained finality earlier. Furthermore, while both judgments reached the Court of
Appeals, only Civil Case No. 2203-L was passed upon on the merits by this Court. In
G.R. No. 141407, this Court resolved LLDHC’s petition for review
on certiorari seeking to annul the Court of Appeals’ Decision in CA-G.R. SP No. 50650.
This Court, in dismissing the petition, upheld the validity of the Lapu-Lapu RTC
Decision and declared that the Manila RTC Decision cannot bind GMC. That decision
became final and executory way back on March 10, 2003.
While this Court cannot blame the parties for exhausting all available remedies to
obtain a favorable judgment, the issues involved in this case should have been
resolved upon the finality of this Court’s decision in G.R. No. 141407. As pronounced
by this Court in Villanueva v. Court of Appeals125:
The interest of the judicial system in preventing relitigation of the same dispute
recognizes that judicial resources are finite and the number of cases that can be heard
by the court is limited. Every dispute that is reheard means that another will be
delayed. In modern times when court dockets are filled to overflowing, this concern is
of critical importance. x x x.126
In summary, this Court finds the execution of the Lapu-Lapu RTC Decision in Civil
Case No. 2203-L to be in order. We affirm the assailed Orders of March 11, 2004 and
May 7, 2004, which reiterate, among others, the October 23, 1997 Order issued by the
Lapu-Lapu RTC, directing the Register of Deeds of Lapu-Lapu City to cancel the
certificates of title of LLDHC and to issue new ones in GMC’s name. Whatever rights
are due LLDHC from GSIS as a result of the final judgment of the Manila RTC in
Civil Case No. R-82-3429, which we have previously held to be binding between GSIS
and LLDHC, may be threshed out in an appropriate proceeding. Such proceeding
shall not further delay the execution of the Lapu-Lapu RTC Decision.
WHEREFORE, in view of the foregoing, the petition in G.R. No. 167000 is DENIED
and the Decision dated November 25, 2004 and Resolution dated January 20, 2005 of
the Twentieth Division of the Court of Appeals are AFFIRMED. The petition in G.R.
No. 169971 is GRANTED and the Decision dated September 23, 2005 of the Special
Nineteenth Division of the Court of Appeals is hereby REVERSED AND SET ASIDE.
SO ORDERED.
SECOND DIVISION
G.R. No. 169304 March 13, 2007
THE DEPARTMENT OF HEALTH, SECRETARY MANUEL M. DAYRIT, USEC.
MA. MARGARITA GALON and USEC. ANTONIO M. LOPEZ, Petitioners,
vs.
PHIL. PHARMAWEALTH, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. SP
No. 84457, to wit: a) Decision1dated May 12, 2005 which affirmed the order issued by
Judge Leoncio M. Janolo, Jr. of the Regional Trial Court of Pasig City, Branch 264
denying petitioners’ motion to dismiss Civil Case No. 68208; and b) Resolution 2 dated
August 9, 2005 which denied petitioners’ motion for reconsideration.
Phil. Pharmawealth, Inc. (respondent) is a domestic corporation engaged in the
business of manufacturing and supplying pharmaceutical products to government
hospitals in the Philippines.
On December 22, 1998, then Secretary of Health Alberto G. Romualdez, Jr. issued
Administrative Order (A.O.) No. 27,3 Series of 1998, outlining the guidelines and
procedures on the accreditation of government suppliers for pharmaceutical products.
A.O. No. 27 was later amended by A.O. No. 10,4 Series of 2000, providing for
additional guidelines for accreditation of drug suppliers aimed at ensuring that only
qualified bidders can transact business with petitioner Department of Health (DOH).
Part V of A.O. No. 10 reads, in part:
1. Drug Manufacturer, Drug Trader and Drug Importer shall be allowed to
apply for accreditation.
2. Accreditation shall be done by the Central Office-Department of Health.
3. A separate accreditation is required for the drug suppliers and for their
specific products.
xxxx
12. Only products accredited by the Committee shall be allowed to be
procured by the DOH and all otherentities under its
jurisdiction.5 (Underscoring supplied)
On May 9, 20006 and May 29, 2000,7 respondent submitted to petitioner DOH a
request for the inclusion of additional items in its list of accredited drug products,
including the antibiotic "Penicillin G Benzathine." Based on the schedule provided by
petitioner DOH, it appears that processing of and release of the result of respondent’s
request were due on September 2000, the last month of the quarter following the date
of its filing.8
Sometime in September 2000, petitioner DOH, through petitioner Antonio M. Lopez,
chairperson of the pre-qualifications, bids and awards committee, issued an Invitation
for Bids9 for the procurement of 1.2 million units vials of Penicillin G Benzathine
(Penicillin G Benzathine contract).
Despite the lack of response from petitioner DOH regarding respondent’s request for
inclusion of additional items in its list of accredited products, respondent submitted
its bid for the Penicillin G Benzathine contract. When the bids were opened on
October 11, 2000, only two companies participated, with respondent submitting the
lower bid at ₱82.24 per unit, compared to Cathay/YSS Laboratories’ (YSS) bid of
₱95.00 per unit. In view, however, of the non-accreditation of respondent’s Penicillin G
Benzathine product, the contract was awarded to YSS.
Respondent thus filed a complaint10 for injunction, mandamus and damages with
prayer for the issuance of a writ of preliminary injunction and/or temporary
restraining order with the Regional Trial Court of Pasig City praying, inter alia, that
the trial court "nullify the award of the Penicillin G Benzathine contract (IFB No.
2000-10-11 [14]) to YSS Laboratories, Inc. and direct defendant DOH, defendant
Romualdez, defendant Galon and defendant Lopez to declare plaintiff Pharmawealth
as
the lowest complying responsible bidder for the Benzathine contract, and that they
accordingly award the same to plaintiff company" and "adjudge defendants
Romualdez, Galon and Lopez liable, jointly and severally to plaintiff, for [the therein
specified damages]."11
In their Comment,12 petitioner DOH, Secretary Alberto Romualdez, Jr. who was later
succeeded by petitioner Secretary Manuel M. Dayrit, and individual petitioners
Undersecretaries Margarita Galon and Antonio Lopez argued for the dismissal of the
complaint for lack of merit in view of the express reservation made by petitioner DOH
to accept or reject any or all bids without incurring liability to the bidders, they
positing that government agencies have such full discretion.
Petitioners subsequently filed a Manifestation and Motion13 (motion to dismiss)
praying for the outright dismissal of the complaint based on the doctrine of state
immunity. Additionally, they alleged that respondent’s representative was not duly
authorized by its board of directors to file the complaint.
To petitioners’ motion to dismiss, respondent filed its
comment/opposition14 contending, in the main, that the doctrine of state immunity is
not applicable considering that individual petitioners are being sued both in their
official and personal capacities, hence, they, not the state, would be liable for
damages.
By Order of December 8, 2003, the trial court15 denied petitioners’ motion to dismiss.
Their motion for reconsideration having been denied,16 petitioners filed a petition for
certiorari17 with the Court of Appeals, before which they maintained that the suit is
against the state.
By the assailed Decision18 of May 12, 2005, the Court of Appeals affirmed the trial
court’s Order. And by Resolution of August 9, 2005, it denied petitioners’ motion for
reconsideration.
Hence, the instant petition for review which raises the sole issue of whether the Court
of Appeals erred in upholding the denial of petitioners’ motion to dismiss.
The petition fails.
The suability of a government official depends on whether the official concerned was
acting within his official or jurisdictional capacity, and whether the acts done in the
performance of official functions will result in a charge or financial liability against
the government. In the first case, the Constitution itself assures the availability of
judicial review,19 and it is the official concerned who should be impleaded as the
proper party.20
In its complaint, respondent sufficiently imputes grave abuse of discretion against
petitioners in their official capacity. Since judicial review of acts alleged to have been
tainted with grave abuse of discretion is guaranteed by the Constitution, it
necessarily follows that it is the official concerned who should be impleaded as
defendant or respondent in an appropriate suit.21
Moreover, part of the reliefs prayed for by respondent is the enjoinment of the
implementation, as well as the nullification of the award to YSS, the grant of which
may not be enforced against individual petitioners and their successors except in their
official capacities as officials of the DOH.22
As regards petitioner DOH, the defense of immunity from suit will not avail despite
its being an unincorporated agency of the government, for the only causes of action
directed against it are preliminary injunction and mandamus. Under Section 1, Rule
5823 of the Rules of Court, preliminary injunction may be directed against a party or a
court, agency or a person. Moreover, the defense of state immunity from suit does not
apply in causes of action which do not seek to impose a charge or financial liability
against the State.24
As regards individual petitioners’ suability for damages, the following discussion on
the applicability of the defense of state immunity from suit is relevant.
The rule that a state may not be sued without its consent, now embodied in Section 3,
Article XVI of the 1987 Constitution, is one of the generally accepted principles of
international law, which we have now adopted as part of the law of the land.25
While the doctrine of state immunity appears to prohibit only suits against the state
without its consent, it is also applicable to complaints filed against officials of the
state for acts allegedly performed by them in the discharge of their duties.26 The suit
is regarded as one against the state where satisfaction of the judgment against the
officials will require the state itself to perform a positive act, such as the
appropriation of the amount necessary to pay the damages awarded against them. 27
The rule, however, is not so all-encompassing as to be applicable under all
circumstances. Shauf v. Court of Appeals28 elucidates:
It is a different matter where the public official is made to account in his capacity as
such for acts contrary to law and injurious to the rights of plaintiff. As was clearly set
forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al. vs.
Aligaen, etc., et al.,29 ‘ Inasmuch as the State authorizes only legal acts by its
officers, unauthorized acts of government officials or officers are not acts of the State,
and an action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates or
invades the personal and property rights of the plaintiff, under an unconstitutional
act or under an assumption of authority which he does not have, is not a suit against
the State within the constitutional provision that the State may not be sued without
its consent.’ The rationale for this ruling is that the doctrine of state immunity cannot
be used as an instrument for perpetrating an injustice. (Emphasis and underscoring
supplied)1avvphi1
Hence, the rule does not apply where the public official is charged in his official
capacity for acts that are unauthorized or unlawful and injurious to the rights of
others. Neither does it apply where the public official is clearly being sued not in his
official capacity but in his personal capacity, although the acts complained of may
have been committed while he occupied a public position.30
In the present case, suing individual petitioners in their personal capacities for
damages in connection with their alleged act of "illegal[ly] abus[ing] their official
positions to make sure that plaintiff Pharmawealth would not be awarded the
Benzathine contract [which act was] done in bad faith and with full knowledge of the
limits and breadth of their powers given by law" 31 is permissible, in consonance with
the foregoing principles. For an officer who exceeds the power conferred on him by law
cannot hide behind the plea of sovereign immunity and must bear the liability
personally.32
It bears stressing, however, that the statements in the immediately foregoing
paragraph in no way reflect a ruling on the actual liability of petitioners to
respondent. The mere allegation that a government official is being sued in his
personal capacity does not automatically remove the same from the protection of the
doctrine of state immunity. Neither, upon the other hand, does the mere invocation of
official character suffice to insulate such official from suability and liability for an act
committed without or in excess of his or her authority.33 These are matters of evidence
which should be presented and proven at the trial.
WHEREFORE, the petition is DENIED. The assailed Decision dated May 12, 2005
and Resolution dated August 9, 2005 issued by the Court of Appeals are AFFIRMED.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
WE CONCUR:
HIRD DIVISION
G.R. No. 168289 March 22, 2010
THE MUNICIPALITY OF HAGONOY, BULACAN, represented by the HON.
FELIX V. OPLE, Municipal Mayor, and FELIX V. OPLE, in his personal
capacity, Petitioners,
vs.
HON. SIMEON P. DUMDUM, JR., in his capacity as the Presiding Judge of
the REGIONAL TRIAL COURT, BRANCH 7, CEBU CITY; HON. CLERK OF
COURT & EX-OFFICIO SHERIFF of the REGIONAL TRIAL COURT of CEBU
CITY; HON. CLERK OF COURT & EX-OFFICIO SHERIFF of the REGIONAL
TRIAL COURT of BULACAN and his DEPUTIES; and EMILY ROSE GO KO
LIM CHAO, doing business under the name and style KD
SURPLUS, Respondents.
DECISION
PERALTA, J.:
This is a Joint Petition1 under Rule 45 of the Rules of Court brought by the
Municipality of Hagonoy, Bulacan and its former chief executive, Mayor Felix V. Ople
in his official and personal capacity, from the January 31, 2005 Decision 2 and the May
23, 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No. 81888. The assailed
decision affirmed the October 20, 2003 Order4 issued by the Regional Trial Court of
Cebu City, Branch 7 in Civil Case No. CEB-28587 denying petitioners’ motion to
dismiss and motion to discharge/dissolve the writ of preliminary attachment
previously issued in the case. The assailed resolution denied reconsideration.
The case stems from a Complaint5 filed by herein private respondent Emily Rose Go
Ko Lim Chao against herein petitioners, the Municipality of Hagonoy, Bulacan and its
chief executive, Felix V. Ople (Ople) for collection of a sum of money and damages. It
was alleged that sometime in the middle of the year 2000, respondent, doing business
as KD Surplus and as such engaged in buying and selling surplus trucks, heavy
equipment, machinery, spare parts and related supplies, was contacted by petitioner
Ople. Respondent had entered into an agreement with petitioner municipality
through Ople for the delivery of motor vehicles, which supposedly were needed to
carry out certain developmental undertakings in the municipality. Respondent
claimed that because of Ople’s earnest representation that funds had already been
allocated for the project, she agreed to deliver from her principal place of business in
Cebu City twenty-one motor vehicles whose value totaled ₱5,820,000.00. To prove
this, she attached to the complaint copies of the bills of lading showing that the items
were consigned, delivered to and received by petitioner municipality on different
dates.6 However, despite having made several deliveries, Ople allegedly did not heed
respondent’s claim for payment. As of the filing of the complaint, the total obligation
of petitioner had already totaled ₱10,026,060.13 exclusive of penalties and damages.
Thus, respondent prayed for full payment of the said amount, with interest at not less
than 2% per month, plus ₱500,000.00 as damages for business losses, ₱500,000.00 as
exemplary damages, attorney’s fees of ₱100,000.00 and the costs of the suit.
On February 13, 2003, the trial court issued an Order7 granting respondent’s prayer
for a writ of preliminary attachment conditioned upon the posting of a bond
equivalent to the amount of the claim. On March 20, 2003, the trial court issued the
Writ of Preliminary Attachment8 directing the sheriff "to attach the estate, real and
personal properties" of petitioners.
Instead of addressing private respondent’s allegations, petitioners filed a Motion to
Dismiss9 on the ground that the claim on which the action had been brought was
unenforceable under the statute of frauds, pointing out that there was no written
contract or document that would evince the supposed agreement they entered into
with respondent. They averred that contracts of this nature, before being undertaken
by the municipality, would ordinarily be subject to several preconditions such as a
public bidding and prior approval of the municipal council which, in this case, did not
obtain. From this, petitioners impress upon us the notion that no contract was ever
entered into by the local government with respondent.10 To address the claim that
respondent had made the deliveries under the agreement, they advanced that the bills
of lading attached to the complaint were hardly probative, inasmuch as these
documents had been accomplished and handled exclusively by respondent herself as
well as by her employees and agents.11
Petitioners also filed a Motion to Dissolve and/or Discharge the Writ of Preliminary
Attachment Already Issued,12invoking immunity of the state from suit,
unenforceability of the contract, and failure to substantiate the allegation of fraud.13
On October 20, 2003, the trial court issued an Order14 denying the two motions.
Petitioners moved for reconsideration, but they were denied in an Order 15 dated
December 29, 2003.
Believing that the trial court had committed grave abuse of discretion in issuing the
two orders, petitioners elevated the matter to the Court of Appeals via a petition
for certiorari under Rule 65. In it, they faulted the trial court for not dismissing the
complaint despite the fact that the alleged contract was unenforceable under the
statute of frauds, as well as for ordering the filing of an answer and in effect allowing
private respondent to prove that she did make several deliveries of the subject motor
vehicles. Additionally, it was likewise asserted that the trial court committed grave
abuse of discretion in not discharging/dissolving the writ of preliminary attachment,
as prayed for in the motion, and in effect disregarding the rule that the local
government is immune from suit.
On January 31, 2005, following assessment of the parties’ arguments, the Court of
Appeals, finding no merit in the petition, upheld private respondent’s claim and
affirmed the trial court’s order.16 Petitioners moved for reconsideration, but the same
was likewise denied for lack of merit and for being a mere scrap of paper for having
been filed by an unauthorized counsel.17 Hence, this petition.
In their present recourse, which raises no matter different from those passed upon by
the Court of Appeals, petitioners ascribe error to the Court of Appeals for dismissing
their challenge against the trial court’s October 20 and December 29, 2003 Orders.
Again, they reason that the complaint should have been dismissed at the first
instance based on unenforceability and that the motion to dissolve/discharge the
preliminary attachment should have been granted.18
Commenting on the petition, private respondent notes that with respect to the Court
of Appeals’ denial of the certiorari petition, the same was rightly done, as the fact of
delivery may be properly and adequately addressed at the trial of the case on the
merits; and that the dissolution of the writ of preliminary attachment was not proper
under the premises inasmuch as the application for the writ sufficiently alleged fraud
on the part of petitioners. In the same breath, respondent laments that the denial of
petitioners’ motion for reconsideration was rightly done by the Court of Appeals,
because it raised no new matter that had not yet been addressed.19
After the filing of the parties’ respective memoranda, the case was deemed submitted
for decision.
We now rule on the petition.
To begin with, the Statute of Frauds found in paragraph (2), Article 1403 of the Civil
Code,20 requires for enforceability certain contracts enumerated therein to be
evidenced by some note or memorandum. The term "Statute of Frauds" is descriptive
of statutes that require certain classes of contracts to be in writing; and that do not
deprive the parties of the right to contract with respect to the matters therein
involved, but merely regulate the formalities of the contract necessary to render it
enforceable.21
In other words, the Statute of Frauds only lays down the method by which the
enumerated contracts may be proved. But it does not declare them invalid because
they are not reduced to writing inasmuch as, by law, contracts are obligatory in
whatever form they may have been entered into, provided all the essential requisites
for their validity are present.22 The object is to prevent fraud and perjury in the
enforcement of obligations depending, for evidence thereof, on the unassisted memory
of witnesses by requiring certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged.23 The effect of
noncompliance with this requirement is simply that no action can be enforced under
the given contracts.24 If an action is nevertheless filed in court, it shall warrant a
dismissal under Section 1(i),25 Rule 16 of the Rules of Court, unless there has been,
among others, total or partial performance of the obligation on the part of either
party.26
It has been private respondent’s consistent stand, since the inception of the instant
case that she has entered into a contract with petitioners. As far as she is concerned,
she has already performed her part of the obligation under the agreement by
undertaking the delivery of the 21 motor vehicles contracted for by Ople in the name
of petitioner municipality. This claim is well substantiated — at least for the initial
purpose of setting out a valid cause of action against petitioners — by copies of the
bills of lading attached to the complaint, naming petitioner municipality as consignee
of the shipment. Petitioners have not at any time expressly denied this allegation and,
hence, the same is binding on the trial court for the purpose of ruling on the motion to
dismiss. In other words, since there exists an indication by way of allegation that
there has been performance of the obligation on the part of respondent, the case is
excluded from the coverage of the rule on dismissals based on unenforceability under
the statute of frauds, and either party may then enforce its claims against the other.
No other principle in remedial law is more settled than that when a motion to dismiss
is filed, the material allegations of the complaint are deemed to be hypothetically
admitted.27 This hypothetical admission, according to Viewmaster Construction
Corporation v. Roxas28 and Navoa v. Court of Appeals,29 extends not only to the
relevant and material facts well pleaded in the complaint, but also to inferences that
may be fairly deduced from them. Thus, where it appears that the allegations in the
complaint furnish sufficient basis on which the complaint can be maintained, the
same should not be dismissed regardless of the defenses that may be raised by the
defendants.30 Stated differently, where the motion to dismiss is predicated on grounds
that are not indubitable, the better policy is to deny the motion without prejudice to
taking such measures as may be proper to assure that the ends of justice may be
served.31
It is interesting to note at this point that in their bid to have the case dismissed,
petitioners theorize that there could not have been a contract by which the
municipality agreed to be bound, because it was not shown that there had been
compliance with the required bidding or that the municipal council had approved the
contract. The argument is flawed. By invoking unenforceability under the Statute of
Frauds, petitioners are in effect acknowledging the existence of a contract between
them and private respondent — only, the said contract cannot be enforced by action
for being non-compliant with the legal requisite that it be reduced into writing. Suffice
it to say that while this assertion might be a viable defense against respondent’s
claim, it is principally a matter of evidence that may be properly ventilated at the
trial of the case on the merits.
Verily, no grave abuse of discretion has been committed by the trial court in denying
petitioners’ motion to dismiss this case. The Court of Appeals is thus correct in
affirming the same.
We now address the question of whether there is a valid reason to deny petitioners’
motion to discharge the writ of preliminary attachment.
Petitioners, advocating a negative stance on this issue, posit that as a municipal
corporation, the Municipality of Hagonoy is immune from suit, and that its properties
are by law exempt from execution and garnishment. Hence, they submit that not only
was there an error committed by the trial court in denying their motion to dissolve the
writ of preliminary attachment; they also advance that it should not have been issued
in the first place. Nevertheless, they believe that respondent has not been able to
substantiate her allegations of fraud necessary for the issuance of the writ. 32
Private respondent, for her part, counters that, contrary to petitioners’ claim, she has
amply discussed the basis for the issuance of the writ of preliminary attachment in
her affidavit; and that petitioners’ claim of immunity from suit is negated by Section
22 of the Local Government Code, which vests municipal corporations with the power
to sue and be sued. Further, she contends that the arguments offered by petitioners
against the writ of preliminary attachment clearly touch on matters that when ruled
upon in the hearing for the motion to discharge, would amount to a trial of the case on
the merits.33
The general rule spelled out in Section 3, Article XVI of the Constitution is that the
state and its political subdivisions may not be sued without their consent. Otherwise
put, they are open to suit but only when they consent to it. Consent is implied when
the government enters into a business contract, as it then descends to the level of the
other contracting party; or it may be embodied in a general or special law 34 such as
that found in Book I, Title I, Chapter 2, Section 22 of the Local Government Code of
1991, which vests local government units with certain corporate powers —one of them
is the power to sue and be sued.
Be that as it may, a difference lies between suability and liability. As held in City of
Caloocan v. Allarde,35 where the suability of the state is conceded and by which
liability is ascertained judicially, the state is at liberty to determine for itself whether
to satisfy the judgment or not. Execution may not issue upon such judgment, because
statutes waiving non-suability do not authorize the seizure of property to satisfy
judgments recovered from the action. These statutes only convey an implication that
the legislature will recognize such judgment as final and make provisions for its full
satisfaction. Thus, where consent to be sued is given by general or special law, the
implication thereof is limited only to the resultant verdict on the action before
execution of the judgment.36
Traders Royal Bank v. Intermediate Appellate Court, 37 citing Commissioner of Public
Highways v. San Diego,38 is instructive on this point. In that case which involved a
suit on a contract entered into by an entity supervised by the Office of the President,
the Court held that while the said entity opened itself to suit by entering into the
subject contract with a private entity; still, the trial court was in error in ordering the
garnishment of its funds, which were public in nature and, hence, beyond the reach of
garnishment and attachment proceedings. Accordingly, the Court ordered that the
writ of preliminary attachment issued in that case be lifted, and that the parties be
allowed to prove their respective claims at the trial on the merits. There, the Court
highlighted the reason for the rule, to wit:
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 appropriations 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.
x x x39
With this in mind, the Court holds that the writ of preliminary attachment must be
dissolved and, indeed, it must not have been issued in the very first place. While there
is merit in private respondent’s position that she, by affidavit, was able to
substantiate the allegation of fraud in the same way that the fraud attributable to
petitioners was sufficiently alleged in the complaint and, hence, the issuance of the
writ would have been justified. Still, the writ of attachment in this case would only
prove to be useless and unnecessary under the premises, since the property of the
municipality may not, in the event that respondent’s claim is validated, be subjected
to writs of execution and garnishment — unless, of course, there has been a
corresponding appropriation provided by law.401avvphi1
Anent the other issues raised by petitioners relative to the denial of their motion to
dissolve the writ of attachment, i.e., unenforceability of the contract and the veracity
of private respondent’s allegation of fraud, suffice it to say that these pertain to the
merits of the main action. Hence, these issues are not to be taken up in resolving the
motion to discharge, lest we run the risk of deciding or prejudging the main case and
force a trial on the merits at this stage of the proceedings.41
There is one final concern raised by petitioners relative to the denial of their motion
for reconsideration. They complain that it was an error for the Court of Appeals to
have denied the motion on the ground that the same was filed by an unauthorized
counsel and, hence, must be treated as a mere scrap of paper.42
It can be derived from the records that petitioner Ople, in his personal capacity, filed
his Rule 65 petition with the Court of Appeals through the representation of the law
firm Chan Robles & Associates. Later on, municipal legal officer Joselito Reyes,
counsel for petitioner Ople, in his official capacity and for petitioner municipality,
filed with the Court of Appeals a Manifestation with Entry of Appearance 43 to the
effect that he, as counsel, was "adopting all the pleadings filed for and in behalf of
[Ople’s personal representation] relative to this case."44
It appears, however, that after the issuance of the Court of Appeals’ decision, only
Ople’s personal representation signed the motion for reconsideration. There is no
showing that the municipal legal officer made the same manifestation, as he
previously did upon the filing of the petition.45 From this, the Court of Appeals
concluded that it was as if petitioner municipality and petitioner Ople, in his official
capacity, had never moved for reconsideration of the assailed decision, and adverts to
the ruling in Ramos v. Court of Appeals46 and Municipality of Pililla, Rizal v. Court of
Appeals47 that only under well-defined exceptions may a private counsel be engaged
in lawsuits involving a municipality, none of which exceptions obtains in this case.48
The Court of Appeals is mistaken. As can be seen from the manner in which the
Manifestation with Entry of Appearance is worded, it is clear that petitioner
municipality’s legal officer was intent on adopting, for both the municipality and
Mayor Ople, not only the certiorari petition filed with the Court of Appeals, but also
all other pleadings that may be filed thereafter by Ople’s personal representation,
including the motion for reconsideration subject of this case. In any event, however,
the said motion for reconsideration would warrant a denial, because there seems to be
no matter raised therein that has not yet been previously addressed in the assailed
decision of the Court of Appeals as well as in the proceedings below, and that would
have otherwise warranted a different treatment of the issues involved.
WHEREFORE, the Petition is GRANTED IN PART. The January 31, 2005 Decision
of the Court of Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar as it affirmed
the October 20, 2003 Decision of the Regional Trial Court of Cebu City, Branch 7
denying petitioners’ motion to dismiss in Civil Case No. CEB-28587. The assailed
decision is REVERSED insofar as it affirmed the said trial court’s denial of
petitioners’ motion to discharge the writ of preliminary attachment issued in that
case. Accordingly, the August 4, 2003 Writ of Preliminary Attachment issued in Civil
Case No. CEB-28587 is ordered lifted.
SO ORDERED.
SECOND DIVISION
G.R. No. 203834 July 9, 2014
HEIRS OF DIOSDADO M. MENDOZA, namely: LICINIA V. MENDOZA,
PETER VAL V. MENDOZA, CONSTANCIA V. MENDOZA YOUNG, CRISTINA
V. MENDOZA FIGUEROA, DIOSDADO V. MENDOZA, JR., JOSEPHINE V.
MENDOZA JASA, and RIZALINA V. MENDOZA PUSO, Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and the DPWH
SECRETARY, Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review on certiorari 1 assailing the 20 June 2012
Decision2 and the 15 October 2012 Resolution3 of the Court of Appeals in CA-G.R. CV
No. 86433. The Court of Appeals set aside the 29 October 2001 Decision4 of the
Regional.Trial Court of Manila, Branch 36, in Civil Case No. 90-53649.
The Antecedent Facts
The case stemmed from an action for specific performance and damages, with prayer
for preliminary injunction, filed by Diosdado M. Mendoza (Mendoza), doing
businessunder the name and style of D’ Superior Builders (Superior Builders) against
the defendants Department of Public Works and Highways (DPWH), then DPWH
Secretary Fiorello R. Estuar (Estuar), Undersecretary Edmundo V. Mir (Mir), Nestor
Abarca (Abarca), United Technologies, Inc. (UTI), UTI’s President Pedro Templo
(Templo) and UTI’s Project Manager Rodante Samonte (Samonte). The case was
docketed as Civil Case No. 90-53649.
Mendoza was the winning bidder for the construction of the 15-kilometer Madaymen
Masala Amsuling Road in Benguet and the engineers’ quarters and laboratory,
designatedas Package VI, of the Highland Agriculture Development Project (HADP).
His total bid for materials and labor was ₱16,176,878.58. He was also the winning
bidder for the construction of the 15-kilometer barangay roads (Sinipsip-Akiki,
SinipsipMaalad, and Madaymen) in Benguet, designated as Package IX of the HADP,
with a bid of ₱10,527,192.14. The DPWH hired UTI as consultant for Packages VI and
IX, under the direct charge of Templo and Samonte.
On 2 March 1989, Mendoza received the Notice to Proceed for Package VI of the
HADP. During the pre-construction survey, Mendoza alleged that he discovered that
the whole stretch of the 15-kilometer project had no right-of-way, in violation of
Ministry Order No. 65. He brought the matter to the attention of the DPWH and UTI
but according to him, it was only resolved on 29 November 1989 when the affected
landowners and farmers allowed passage at Mendoza’s risk. Mendoza alleged that the
defendants, except for Estuar, conspired to make it appear that Superior Builders
incurred negative slippage of29% and recommended the forfeiture of the contract.
Mendoza further alleged that as regards Package IX, the DPWH did not execute any
contract despite the Superior Builders’ compliance with all the post-evaluation
requirements. The DPWH also recommended the rebidding of Package IX. Package IX
was, in effect, canceled together with the forfeiture of the contract for Package VI. The
DPWH blacklisted the Superior Builders from participating inany bidding or entering
into any contract with it for a period of one year.
On 2 August 1990, the Regional Trial Court of Manila, Branch 36 (trial court) issued a
Temporary Restraining Order enjoining the defendants from rebidding Package VI
and fromawarding Package IX to another contractor, and to cease and desistfrom
withholding the equipment of Superior Builders.
On 20 August 1990, the DPWH, Estuar, Mir and Abarca filed an opposition to the
prayer for the issuance of a preliminary injunction, citing Section 1 of Presidential
Decree No. 1818 that the trial court has no jurisdiction to issue a writ of preliminary
injunction. They likewise alleged that Superior Builders failed to exhaust its
administrative remedies. They further alleged that the owner of the road,
GregorioAbalos (Abalos) issued a certification that he never disallowed passage to
Superior Builders’ vehicles and equipment and road right-of-way was never a
problem. They also alleged that Superior Builders started mobilization from 12 to 15
July 1989 and resumed its operationsfor one week in December 1989. They also
alleged that on 20 November 1989, the Office of the Sangguniang Panlalawiganof
Benguet passed Resolution No. 1176 recommending the termination of the contract
between the DPWH and Superior Builders. They reiterated the allegations in their
Opposition in their Answer.
For their part, UTI, Templo and Samonte alleged that Superior Builders had 10
calendar days to commence with the project from the time it received the Notice to
Proceed on 2 March 1989 or until 12 March 1989 but it failed to do so. They alleged
that Superior Builders only mobilized one bulldozer and one loader out of the 47 units
required in the contract. They alleged that at the time of the filing of the case,
Superior Builders had only mobilized eight units, a majority of which were not
working. They alleged that Superior Builders failed to mobilize sufficient number of
materials, equipment and personnel and that by 25 October 1989, it already incurred
negative slippage of 27.97% that they were compelled to recommend the termination
of the contract for Package VI and rebidding of Package IX.
The Decision of the Trial Court
In its 29 October 2001 Decision, the trial court ruled that the termination of the
contract over Package VI and the non-award of Package IX to Superior Builders were
arbitrary and unjustified. The trial court ruled that under the original plan, Package
VI was inaccessible from the starting point which is a privately-owned road. The trial
court ruled that there was no showing of any attempt by the government to secure
right-of-way by expropriation or other legal means. The trial court held that Superior
Builders could not be faulted for its failure to perform the obligation within the
stipulated period because the DPWH made it impossible by its failure to acquire the
necessary right-of-way and as such, nonegative slippage could be attributed to
Superior Builders. The trial court further ruled that inentering into a contract, the
DPWH divested itself of immunity from suit and assumed the character of an
ordinary litigant.
The dispositive portion of the trial court’s decision reads:
WHEREFORE, judgment is hereby rendered ordering defendants Department of
Public Works and Highway thru its Secretary, United Technologies, Inc. and Rodante
Samonte to pay plaintiff Diosdado M. Mendoza, jointly and severally, ₱1,565,317.70 as
reimbursement for materials and labor on the accomplishment and ₱1,617,187.86
performance bond forfeited, ₱8,817,926.00 as rental value for eight (8) units of
equipment for twenty-six (26) months from December 21, 1989 to January 24, 1992 at
₱339,151.00 per month, with interest at the legal rate until fully paid; ₱300,000.00 for
moral damages, ₱150,000.00 for attorney’s fees, and costs.
The writ of preliminary injunction earlier issued is declared moot and academic but
defendant Department of Public Works and Highways thru its Secretary is ordered to
turn over to plaintiff, and the latter is authorized to take delivery of the construction
equipment still under the control of the DPWH.
The counterclaim of the private defendants not being substantiated is dismissed.
SO ORDERED.5
The DPWH and the DPWH Secretary (respondents before us) appealed from the trial
court’s decision.
The Decision of the Court of Appeals
In its 20 June 2012 Decision, the Court of Appeals set aside the trial court’s decision
and dismissed Mendoza’s complaint for specific performance and damages for lack of
merit.
The Court of Appeals ruled that the DPWH’s forfeiture order of Package VI of the
HADP as well asthe non-award of Package IX to Superior Builders was justified. The
Court of Appeals found that Superior Builders incurred a negative slippage
of31.852%, which is double the limit set by the government under DPWH Circular No.
102, series of 1988. Tracing the slippages incurred by Superior Builders,the Court of
Appeals declared:
As early as May 25, 1989, or about two (2) months after the notice to proceed was
issued, defendant UTI,the consultant for the government’s HADP, issued a "first
warning"to plaintiff-appellee D’ Superior Builders for having already incurred a
slippage of 7.648% due to late implementation, with time elapseof 13.80%. Defendant
UTI instructed plaintiff-appellee D’ Superior Builders to submit a "catch-up" program
to address the slippage.
Subsequently, on June 25, 1989, plaintiff-appellee D’ Superior Builders incurred a
slippage of 11.743% with corresponding time elapse of 19.63% (106 days from
effectivityof contract) and was given a "second warning."
On July 25, 1989, the negative slippage reached 16.32%, with corresponding time
elapse of 25.18% (136 days from effectivity of the contract). As a consequence,
plaintiff-appellee D’ Superior Builders was issued a "final warning."
In its August 11, 1989 letter, defendant UTI reminded plaintiffappellee D’ Superior
Builders of itsprevious instructions to bring the construction materials for the
engineers’ quarters, office, and laboratory. Defendant UTI noted:
"We could not find reasons why you cannot immediately bring your construction
materials at site, 50 kms. from Baguio City, whenin fact, there [were] [continuous]
deliveries of some construction materials under Contract Package XI, whose site is
located 102 kms. from Baguio City." Thereafter, on September 25, 1989, the negative
slippage of plaintiff-appellee D’ Superior Builders reached 21.109% with elapsed time
of 36.66% (equivalent to 198 calendar days), or already at "terminal stage" pursuant
to DPWH Circular No. 102. Defendant UTI, thus, urged plaintiff-appellee D’ Superior
Builders to show positive actions and speed up its operations, otherwise the former
would be compelled to recommend the termination of its contract.
The following month, on October 25, 1989, plaintiff-appellee D’ Superior Builders’
negative slippage reached 27.970%, still at "terminal stage."The consultant mentioned
several reasons for the slippage, such as: (1) late implementation of construction of the
engineers’ building, (2) non-implementation of work itemsdue to lack or non-
operational equipment as site, and (3) continued absence of plaintiff-appellee’s Project
Manager.
In November 1989, the negative slippage of plaintiff-appellee D’ Superior Builders
was already 31.852%, or more than double the limit of what is considered as being at
"terminal stage", which is 15%.6
Superior Builders’ performance prompted the Sangguniang Panlalawigan of the
Province of Benguet to pass a Resolution on 20 November 1989 recommending the
termination of the contract for Package VI that also eventually led to the forfeiture of
the contract for Package VI. The Court of Appeals noted that there were letters and
monthly conferences where UTI, through Samonte and UTI’s Resident Engineer
Federico Vinson, Jr. (Vinson), consistently reminded Superior Builders of its
obligations and deficiencies. The Court of Appeals concluded that the delay in the
execution of Package VI was due to Superior Builders’ delay, particularly its failure to
mobilize itspersonnel and equipment to the project site.
The Court of Appeals ruled that the area where there was a right-ofway problem was
only the first 3.2 kilometers of the 15.5-kilometer project. Hence, Superior Builders
could have worked on the other areas and the right-of-way issue could not justify the
31.852% negative slippage it incurred. The Court of Appeals faulted the trial court for
skirting the issue on state immunity from suit. The Court of Appeals ruled that there
should be a distinction whether the DPWH entered the contracts for Package VI and
Package XI in its governmental or proprietary capacity. In this case, the Court of
Appeals ruled that the DPWH’s contractual obligation was made in the exercise of its
governmental functions and was imbued with public interest.
The dispositive portion of the Court of Appeals’ decision reads:
WHEREFORE, premises considered, the appeal is GRANTED. The assailed Decision
dated October 29, 2001 of the Regional Trial Court (RTC), National Capital Judicial
Region, Branch 36, Manila in Civil Case No. 90-53649 is hereby REVERSED and SET
ASIDE. Plaintiff-appellee’s complaint for specific performanceand damages with
prayer for preliminary injunction is hereby DISMISSED for lack of merit. No costs.
SO ORDERED.7
The heirs of Mendoza, namely, Licinia V. Mendoza, Peter Val V. Mendoza, Constancia
V. Mendoza Young, Cristina V. Mendoza Figueroa, Diosdado V. Mendoza, Jr.,
Josephine V. Mendoza Jasa, and Rizalina V. Mendoza Puso (petitioners in this
case)filed a motion for reconsideration, at the same time seeking to substitute
Mendoza as the plaintiff-appellee in view of Mendoza’s death on 25 April 2005 during
the pendency of the case before the Court of Appeals.
In its 15 October 2012 Resolution, the Court of Appeals granted the motion for
substitution. In the same resolution, the Court of Appeals denied the motion for
reconsideration for lack of merit.
The Court of Appeals ruled that first, petitioners were not denied due process when
they were not informed that the case was re-raffled when the original
ponenteinhibited himself from the case. The Court of Appeals ruled that there was no
requirement of notification under Section 2(b), Rule III of the Internal Rules of the
Court of Appeals (IRCA). Further, the action on the inhibition was attached to the
rolloand duly paged in compliance with Section 4, Rule V of the IRCA. Second, the
Court of Appeals ruled that contrary to petitioners’ claim, the issue on the absence of
road right-of-way was considered in its 20 June 2012 decision. The Court of Appeals
emphasized that under DPWH CircularNo. 102, series of 1988, the allowable rate of
slippage is only 15%. In this case, Superior Builders reached 31.852% negative
slippage and thus, the termination of the contract was justified. The Court of Appeals
noted that Abalos issued a certification that he never disallowed the passage of
Superior Builders’ vehicles and equipment. The Court of Appeals alsonoted that as
early as May 1989, Superior Builders was instructed to carry out road works where
there were no right-of-way problems. Third, the Court of Appeals ruled that mere
entering into a contract by the government does not automatically amount to a waiver
of immunity from suit. The Court of Appeals ruled that in this case, the road
construction was in the exercise of the DPWH’s governmental functions. The Court of
Appeals also ruled that it was established that Superior Builders was at fault and
thatit exceeded the allowable limit of slippage set by law. Petitioners came to
thisCourt assailing the 20 June 2012 Decision and 15 October 2012 Resolution ofthe
Court of Appeals.
The Issues
Petitioners raise two issues before us:
 (1) Whether the Court of Appeals committed a reversible error in ruling that
the forfeiture of the contract in Package VI of HADP and the non-payment of
the cost of materials, labor on the accomplishment and the rental value of the
heavy equipment were justified; and
(2) Whether the Court of Appeals committed a reversible error in ruling that
the DPWH has no juridical personality of its own and that Mendoza’s action
was a suit against the State.
The Ruling of this Court
We deny the petition.
On Negative Slippages
The first issue raised by petitionersrequires a review of the negative slippages
incurred by Superior Builders and the reasons for the slippages.
The records of the case showed thatSuperior Builders incurred the following negative
slippages:
1. As of 25 May 1989 – 7.648%
2. As of 25 June 1989 - 11.743%
3. As of 25 July 1989 – 16.32%
4. As of 25 September 1989 - 21.109%
5. As of 25 October 1989 – 27.970%
6. As of November 1989 - 31.852%
Presidential Decree No. 1870,series of 1983 (PD 1870),8 states:
1. Whenever a contractor is behind schedule in its contract work and incur 15% or
more negative slippage based on its approved PERT/CPM, the implementing agency,
at the discretion of the Minister concerned, may undertake by administration the
whole ora portion of the unfinished work, or have the whole or a portion of such
unfinished work done by another qualified contractor through negotiated contract at
the current valuation price.
Undeniably, the negative slippage incurred by Superior Builders, which reached
31.852%, far exceeded the allowable slippage under PD 1870.
Under Department Order No. 102,series of 1988 (DO 102),9 the following calibrated
actions are required to be done for infrastructure projects that reached certain levels
of negative slippage:
1. Negative slippage of 5% ("Early Warning" Stage): The contractor shall be
given a warning and required to submit a "catch-up" program to eliminate
the slippage. The PM/RD/DE10 shall provide thorough supervision and
monitoring of the work.
2. Negative slippage of 10% ("ICU" Stage): The contractor shall be given a
second warning and required to submit a detailed action program on a
fortnightly (two weeks) basis which commits him to accelerate the work and
accomplish specific physical targets which will reduce the slippage over a
defined time period. Furthermore, the contractor shall be instructed to
specify the additional input resources – money, manpower, materials,
machines, and management – which he should mobilize for this action
program. The PM/RD/DE shall exercise closer supervision and meet the
contractor every other week toevaluate the progress of work and resolve any
problems and bottlenecks.
3. Negative slippage of 15% ("Make-or-Break" Stage): The contractor shall be
issued a final warning and required to come up with a more detailed program
of activities with weekly physical targets, together with the required
additional input resources. On-site supervision shall be done at least once a
week. At the sametime, the PM/RD/DE shall prepare contingency plans for
the termination/rescission of the contract and/or take-over of the work by
administration or contract.
4. Negative slippage beyond 15% ("Terminal" Stage): The PM/RD/DE shall
initiate termination/rescission of the contract and/or take-over of the
remaining work byadministration orassignment to another
contractor/appropriate agency. Proper transitory measures shall be taken to
minimize work disruptions, e.g., take-over by administration while rebidding
is going on. The discretion of the DPWH to terminate or rescind the contract
comes into play when the contractor shall have incurreda negative slippage of
15% or more.11
In this case, Superior Builders was warned of its considerable delay in the
implementation of the project as early as 29 April 1989 12 when the progress slippage
reached 4.534% due to the late implementation of the project. Thereafter, Superior
Builders received the first,13 second14 and final15 warnings when the negative
slippages reached 7.648%, 11.743% and 16.32%, respectively. By the time the contract
was terminated, the negative slippage already reached 31.852% or more than twice
the terminal stage under DO 102.
Petitioners claimed that the negative slippages were attributable to the government.
Petitioners cited the right-of-way problem because the construction site was privately
owned.The construction of the building for the field office laboratory and engineers’
quarters was also delayed because it took months for the DPWH to approve the
revision of the building layout.
We note that Superior Builders received the Notice to Proceed dated 22 February
1989 on 2 March 1989.16 The Notice to Proceed stated that "the number of days
allowable under [the] contract will be counted from the date [the contractor]
commence[s] work or not later than the 8th of March 1989." 17 On 17 April 1989, more
thana month after the project was supposed to start, Mendoza wrote Templo that
Superior Builders would start the construction of Package VI and that their "Survey
Team [would] immediately start the preconstruction survey of the project x x x." 18In
two separate letters dated 27April 1989, both addressed to Samonte, Mendoza
informed UTI that: (1) there was an existing building on the site where the bunkhouse
was supposed to be constructed, which had to be cleared and demolished first; and (2)
the first fivekilometers of Package VI allegedly belonged to private residents who
were asking for compensation before they could proceed with the road construction. 19
The right-of-way problem was confirmed in a letter dated 2 May 1989 sent by Vinson
to DPWH Director Heraldo B. Daway of the Cordillera Administrative Region.20 In a
letter dated 9 May 1989 addressed to "The Project Manager," Mendoza requested for
the temporary suspension of work effective 22 April 1989 due to the right-of-way
problem regarding the first five kilometers of the project.21 Samonte denied the
request in a letter dated 24 May 1989 on the ground that Superior Builders can carry
out work in sections without right-of-way conflict. Samonte likewise reminded
Superior Builders to mobilize all the required construction resources in order not to
prejudice its performance on the project.22
Apparently, despite the denial of its request for temporary suspension of work,
Superior Builders did not mobilize all the required resources as directed by Samonte.
In a letter dated 15 June 1989 to Mir, Mendoza stated that Superior Builders had
started the "mobilization of equipment and personnel since last week," 23 meaning, the
mobilization of the construction resources started on the first week ofJune. However,
in a letter dated 24 June 1989, Vinson called the Superior Builders’ attention that as
of 21 June 1989, it only mobilized one dozer and one loader at the jobsite. 24
The Minutes of the Meeting dated 7 July 198925 showed that Gloria Areniego
(Areniego), the Superior Builders’ representative, assured the delivery of additional
equipment on site"next week" or the second week of July. The minutes also showed
that Superior Builders was again advised to start working on the sections not affected
by the right-of-way problem.26 In addition, Samonte asked Areniego for the time when
Superior Builders would start the demolition of the building where the engineers’
office and quarters would be built. Areniego promised that it would start on July
14.27 However, Superior Builders still failed to comply, prompting Vinson to send
another letter dated 22 July 1989 to Superior Builders, noting that "since the arrival
of your One (1) unit Dozer and One (1) unit Loader last 21 June 1989, no other
construction equipment had been mobilized on site to date."28
The right-of-way problem turned out to affect only the first 3.2 kilometers of the
project. However, as the Court of Appeals pointed out, Superior Builders was not able
to go beyond the 3.2 kilometers because of the limited equipment it mobilized on the
project site. Further, the Court of Appeals noted that Superior Builders’ bulldozer
broke down after three days of work, proving that Superior Builders had been remiss
in its responsibilities as a contractor. In addition, Abalos denied in a certification that
he disallowed the passage of Superior Builders’ vehicles and equipment on the road
within his property from the time of the commencement of the contract in March
1989.29
In short, Superior Builders could have proceeded with the project, as it was constantly
reminded to do so, but it capitalized on the right-of-way problem to justify its delays.
In a letter30 dated 2 October 1989 by Bial A. Palaez (Palaez), Provincial Planning and
Development Coordinator, addressed to Benguet Provincial Governor Andres R.
Bugnosen (Bugnosen), Palaez informed Bugnosen that when he visited the project
with Kibungan Mayor Albert Mayamnes on 14 July 1989, they observed the following:
(1) Superior Builders only constructed 100linear meters of road at Masala; (2) there
was no sign of work activity; and (3) there were only one bulldozer, one payloader and
a fiera on the project site, which were all under repair and not functional. When they
visited the project on 31 August 1989, there were no activities and they were not able
to meet the project engineer or the workers on the project site. In addition, the
construction of the building for engineering purposes had not started as of 27
September 1989. Thus, the Provincial Government of Benguet passed Resolution No.
117631 on 20 November 1989 recommending to the DPWH the "Termination of
Contract or Disqualification of Contractor Pertinent to HADP Project."
Given the foregoing, the DPWH was justified in forfeiting Package VI for Superior
Builders’ failure to comply with its contractual obligations. We also note that Package
IX of the HADP was tied to the completion of Package VI because the Asian
Development Bank could not approve the award of Package IX to Superior Builders
unless its work on Package VI was satisfactory to the DPWH. 32 This explains why
Package IX had to be rebid despite the initial award of the project to Superior
Builders.
The Court of Appeals likewise correctly ruled that the DPWH should not be made to
pay for the rental of the unserviceable equipment of Superior Builders. The Court of
Appeals noted that (1) Superior Builders failed to mobilize its equipment despite
having the first 7.5% advance payment under the contract, and (2) even when the trial
court issueda temporary restraining order on 2 August 1990 in favor of Superior
Builders, it failed to remove the equipment from the project site. As regards the
delivery and value of the materials, the Court of Appeals found that the supposed
delivery was only signed by Areniego without verification from UTI’s Quantity
Engineer and Resident Engineer. Thus, we agree with the Court of Appeals that
Superior Builders should be made tobear its own losses.
On Governmental v. Proprietary Functions
Petitioners assail the Court of Appeals’ ruling that the contract entered into by the
DPWH was made in the exercise of its governmental, not proprietary, function and
was imbued with public interest. Petitioners likewise assail the Court of Appeals’
ruling that the DPWH has no juridical personality of its own and thus, the suit was
against the agency’s principal, the State. Petitioners further argue that the DPWH
entered into a contract with Mendoza and by its act of entering into a contract, it
already waived its immunity from suit.
The doctrine of immunity from suit is anchored on Section 3, Article XVI of the 1987
Constitution which provides:
Section 3. The State may not besued without its consent.
The general rule is that a state may not be sued, but it may be the subject of a suit if
it consents to be sued, either expressly or impliedly.33 There is express consent when a
law so provides, while there is implied consent when the State enters into a contract
or it itself commences litigation.34 This Court explained that in order to determine
implied waiver when the State or its agency entered into a contract, there is a need to
distinguish whether the contract was entered into in its governmental or proprietary
capacity, thus:
x x x. However, it must be clarified that when a state enters into a contract, it does
not automatically mean that it has waived its nonsuability. The State "will be
deemedto have impliedly waived its nonsuability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves
its sovereign or governmental capacity[,] x x x no suchwaiver may be implied."
Statutory provisions waiving [s]tate immunity are construed in strictissimi juris. For,
waiver of immunity is in derogation of sovereignty.35
In Air Transportation Office v. Ramos,36 the Court expounded:
An unincorporated agency without any separate juridical personality of its own enjoys
immunityfrom suit because it is invested with an inherent power of sovereignty. x x x.
However, the need to distinguish between an unincorporated government agency
performing governmental function and one performing proprietary functions has
arisen. The immunity has been upheld in favor of the former because its function is
governmental or incidentalto such function; it has not been upheld in favor of the
latter whose function was not in pursuit of a necessary function of government but
was essentially a business.37
Having made this distinction, wereiterate that the DPWH is an unincorporated
government agency without any separate juridical personality of its own and it enjoys
immunity from suit.38 The then Ministry of Public Works and Highways, now DPWH,
was created under Executive Order No. 710, series of 1981 (EO 710). EO 710
abolished the old Ministry of PublicWorks and the Ministry of Public Highways and
transferred their functions to the newly-created Ministry of Public Works of
Highways. Section 4 of EO 710 provides:
SECTION 4. The Ministry shall exercise supervision and control over the following
staff bureaus which are created in the Ministry:
(1) Bureau of Construction, which shall provide technical services on the
construction, rehabilitation, betterment, and improvement of infrastructure
facilities;
(2) Bureau of Design, which shall undertake project development,
engineering surveys, and designs of infrastructure facilities;
(3) Bureau of Equipment, which shall provide technical services on the
management of construction and maintenance equipment and ancillary
facilities;
(4) Bureau of Maintenance, which shall provide technical services on the
maintenance and repair of infrastructure facilities; and
(5) Bureau of Materials and Quality Control, which shall provide research
and technical services on quality control and on the management of materials
plants and ancillary facilities for the production and processing of
construction materials.
The Ministry of Public Works and Highways was later reorganized under Executive
Order No. 124, series of 1987 (EO 124). Under Section 5 of EO 124, the Ministry shall
have the following powersand functions:
Sec. 5. Powers and Functions. — The Ministry, in order to carry out its mandate, shall
have the following powers and functions:
(a) Provide technical services for the planning, design, construction,
maintenance, and/or operation of infrastructure facilities;
(b) Develop and implement effective codes, standards, and reasonable
guidelines to ensure the safety of all public and private structures in the
country and assure efficiency and proper quality in the construction of public
works;
(c) Ascertain that all public works plans and project implementation designs
are consistent with current standards and guidelines;
(d) Identify, plan, secure funding for, program, design, construct or undertake
prequalification, bidding, and award of contracts of public works projects
with the exception only of specialized projects undertaken by Government
corporate entities withestablished technical capability and as directed by the
President of the Philippines or as provided by law;
 (e) Provide the works supervision function for all public works construction
and ensure that actual construction is done in accordance with approved
government plans and specifications;
(f) Assist other agencies, including the local governments, in determining the
most suitable entity to undertake the actual construction of public works and
projects;
(g) Maintain or cause to be maintained all highways, flood control, and other
public works throughout the country except those that are the responsibility
of other agencies as directed by the President of the Philippines as provided
by law;
(h) Provide an integrated planning for highways, flood control and water
resource development systems, and other public works;
(i) Classify roads and highways intonational, regional, provincial, city,
municipal, and barangay roads and highways, based on objective criteria it
shall adopt; provide or authorize the conversion of roads and highways from
one category to another;
(j) Delegate, to any agency it determines to have the adequate technical
capability, any of the foregoing powers and functions.
It is clear from the enumeration of its functions that the DPWH performs
governmental functions. Section 5(d) states that it has the power to "[i]dentify, plan,
secure funding for, program, design, construct or undertake prequalification, bidding,
and award of contracts of public works projects x x x" while Section 5(e) states that
itshall "[p]rovide the works supervision function for all public works constructionand
ensure that actual construction is done in accordance with approved government
plans and specifications."
The contracts that the DPWH entered into with Mendoza for the construction of
Packages VI and IX of the HADP were done in the exercise of its governmental
functions. Hence, petitioners cannot claim that there was an implied waiver by the
DPWH simply by entering into a contract.1âwphi1 Thus, the Court of Appeals
correctly ruled that the DPWH enjoys immunity from suit and may not be sued
without its consent.
WHEREFORE, we DENY the petition. We AFFIRM the 20 June 2012 Decision and
the 15 October 2012 Resolution of the Court of Appeals in CA-G.R. CV. No. 86433.
SO ORDERED.
FIRST DIVISION
G.R. No. 161657 October 4, 2007
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
HON. VICENTE A. HIDALGO, in his capacity as Presiding Judge of the
Regional Trial Court of Manila, Branch 37, CARMELO V. CACHERO, in his
capacity as Sheriff IV, Regional Trial Court of Manila, and TARCILA
LAPERAL MENDOZA, Respondents.
DECISION
GARCIA, J.:
Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of
Court, the Republic of the Philippines ("Republic," for short), thru the Office of the
Solicitor General (OSG), comes to this Court to nullify and set aside the decision dated
August 27, 2003 and other related issuances of the Regional Trial Court (RTC) of
Manila, Branch 37, in its Civil Case No. 99-94075. In directly invoking the Court’s
original jurisdiction to issue the extraordinary writs of certiorari and prohibition,
without challenge from any of the respondents, the Republic gave as justification
therefor the fact that the case involves an over TWO BILLION PESO judgment
against the State, allegedly rendered in blatant violation of the Constitution, law and
jurisprudence.
By any standard, the case indeed involves a colossal sum of money which, on the face
of the assailed decision, shall be the liability of the national government or, in fine,
the taxpayers. This consideration, juxtaposed with the constitutional and legal
questions surrounding the controversy, presents special and compelling reasons of
public interests why direct recourse to the Court should be allowed, as an exception to
the policy on hierarchy of courts.
At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer
Certificate of Title (TCT) No. 118527 of the Registry of Deeds of Manila in the name of
the herein private respondent Tarcila Laperal Mendoza (Mendoza), married to
Perfecto Mendoza. The lot is situated at No. 1440 Arlegui St., San Miguel, Manila,
near the Malacañang Palace complex. On this lot, hereinafter referred to as
the Arlegui property, now stands the Presidential Guest House which was home to
two (2) former Presidents of the Republic and now appears to be used as office
building of the Office of the President.1
The facts:
Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for
reconveyance and the corresponding declaration of nullity of a deed of sale and title
against the Republic, the Register of Deeds of Manila and one Atty. Fidel Vivar. In
her complaint, as later amended, docketed as Civil Case No. 99-94075 and eventually
raffled to Branch 35 of the court, Mendoza essentially alleged being the owner of the
disputed Arlegui property which the Republic forcibly dispossessed her of and over
which the Register of Deeds of Manila issued TCT No. 118911 in the name of the
Republic.
Answering, the Republic set up, among other affirmative defenses, the State’s
immunity from suit.
The intervening legal tussles are not essential to this narration. What is material is
that in an Order of March 17, 2000, the RTC of Manila, Branch 35, dismissed
Mendoza’s complaint. The court would also deny, in another order dated May 12,
2000, Mendoza’s omnibus motion for reconsideration. On a petition for certiorari,
however, the Court of Appeals (CA), in CA-G.R. SP No. 60749, reversed the trial
court’s assailed orders and remanded the case to the court a quo for further
proceedings.2 On appeal, this Court, in G.R. No. 155231, sustained the CA’s reversal
action.3
From Branch 35 of the trial court whose then presiding judge inhibited himself from
hearing the remanded Civil Case No. 99-94075, the case was re-raffled to Branch 37
thereof, presided by the respondent judge.
On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended
Complaint with a copy of the intended third amended complaint thereto attached. In
the May 16, 2003 setting to hear the motion, the RTC, in open court and in the
presence of the Republic’s counsel, admitted the third amended complaint, ordered the
Republic to file its answer thereto within five (5) days from May 16, 2003 and set a
date for pre-trial.
In her adverted third amended complaint for recovery and reconveyance of
the Arlegui property, Mendoza sought the declaration of nullity of a supposed deed
of sale dated July 15, 1975 which provided the instrumentation toward the issuance of
TCT No. 118911 in the name of the Republic. And aside from the cancellation of TCT
No. 118911, Mendoza also asked for the reinstatement of her TCT No. 118527. 4 In the
same third amended complaint, Mendoza averred that, since time immemorial, she
and her predecessors-in-interest had been in peaceful and adverse possession of the
property as well as of the owner’s duplicate copy of TCT No. 118527. Such possession,
she added, continued "until the first week of July 1975 when a group of armed men
representing themselves to be members of the Presidential Security Group [PSG] of the
then President Ferdinand E. Marcos, had forcibly entered [her] residence and ordered
[her] to turn over to them her … Copy of TCT No. 118525 … and compelled her and the
members of her household to vacate the same …; thus, out of fear for their lives, [she]
handed her Owner’s Duplicate Certificate Copy of TCT No. 118527 and had left
and/or vacated the subject property." Mendoza further alleged the following:
1. Per verification, TCT No. 118527 had already been cancelled by virtue of a
deed of sale in favor of the Republic allegedly executed by her and her
deceased husband on July 15, 1975 and acknowledged before Fidel Vivar
which deed was annotated at the back of TCT No. 118527 under PE: 2035/T-
118911 dated July 28, 1975; and
2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her
husband have not executed any deed of conveyance covering the disputed
property in favor of the Republic, let alone appearing before Fidel Vivar.
Inter alia, she prayed for the following:
4. Ordering the … Republic to pay plaintiff [Mendoza] a reasonable
compensation or rental for the use or occupancy of the subject property in the
sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS a month with a
five (5%) per cent yearly increase, plus interest thereon at the legal rate,
beginning July 1975 until it finally vacates the same;
5. Ordering the … Republic to pay plaintiff’s counsel a sum equivalent to
TWENTY FIVE (25%) PER CENT of the current value of the subject property
and/or whatever amount is recovered under the premises; Further, plaintiff
prays for such other relief, just and equitable under the premises.
On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension
(With Motion for Cancellation of scheduled pre-trial). In it, the Republic manifested its
inability to simply adopt its previous answer and, accordingly, asked that it be given a
period of thirty (30) days from May 21, 2003 or until June 20, 2003 within which to
submit an Answer.5 June 20, 2003 came and went, but no answer was filed. On July
18, 2003 and again on August 19, 2003, the OSG moved for a 30-day extension at
each instance. The filing of the last two motions for extension proved to be an idle
gesture, however, since the trial court had meanwhile issued an order6 dated July 7,
2003 declaring the petitioner Republic as in default and allowing the private
respondent to present her evidence ex-parte.
The evidence for the private respondent, as plaintiff a quo, consisted of her testimony
denying having executed the alleged deed of sale dated July 15, 1975 which paved the
way for the issuance of TCT No. 118911. According to her, said deed is fictitious or
inexistent, as evidenced by separate certifications, the first (Exh. "E"), issued by the
Register of Deeds for Manila and the second (Exh. "F"), by the Office of Clerk of
Court, RTC Manila. Exhibit "E"7states that a copy of the supposed conveying deed
cannot, despite diligent efforts of records personnel, be located, while
Exhibit "F"8 states that Fidel Vivar was not a commissioned notary public for and in
the City of Manila for the year 1975. Three other witnesses 9 testified, albeit their
testimonies revolved around the appraisal and rental values of the Arlegui
property.
Eventually, the trial court rendered a judgment by default10 for Mendoza and against
the Republic. To the trial court, the Republic had veritably confiscated Mendoza’s
property, and deprived her not only of the use thereof but also denied her of the
income she could have had otherwise realized during all the years she was illegally
dispossessed of the same.
Dated August 27, 2003, the trial court’s decision dispositively reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring the deed of sale dated July 15, 1975, annotated at the back of
[TCT] No. 118527 as PE:2035/T-118911, as non-existent and/or fictitious,
and, therefore, null and void from the beginning;
2. Declaring that [TCT] No. 118911 of the defendant Republic of the
Philippines has no basis, thereby making it null and void from the beginning;
3. Ordering the defendant Register of Deeds for the City of Manila to
reinstate plaintiff [Mendoza’s TCT] No. 118527;
4. Ordering the defendant Republic … to pay just compensation in the sum of
ONE HUNDRED FORTY THREE MILLION SIX HUNDRED THOUSAND
(P143,600,000.00) PESOS, plus interest at the legal rate, until the whole
amount is paid in full for the acquisition of the subject property;
5. Ordering the plaintiff, upon payment of the just compensation for the
acquisition of her property, to execute the necessary deed of conveyance in
favor of the defendant Republic …; and, on the other hand, directing the
defendant Register of Deeds, upon presentation of the said deed of
conveyance, to cancel plaintiff’s TCT No. 118527 and to issue, in lieu thereof,
a new Transfer Certificate of Title in favor of the defendant Republic;
6. Ordering the defendant Republic … to pay the plaintiff the sum of ONE
BILLION FOUR HUNDRED EIGHTY MILLION SIX HUNDRED TWENTY
SEVEN THOUSAND SIX HUNDRED EIGHTY
EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental for
the use of the subject property, the interest thereon at the legal rate, and the
opportunity cost at the rate of three (3%) per cent per annum, commencing
July 1975 continuously up to July 30, 2003, plus an additional interest at the
legal rate, commencing from this date until the whole amount is paid in full;
7. Ordering the defendant Republic … to pay the plaintiff attorney’s fee, in an
amount equivalent to FIFTEEN (15%) PER CENT of the amount due to the
plaintiff.
With pronouncement as to the costs of suit.
SO ORDERED. (Words in bracket and emphasis added.)
Subsequently, the Republic moved for, but was denied, a new trial per order of the
trial court of October 7, 2003.11Denied also was its subsequent plea for
reconsideration.12 These twin denial orders were followed by several orders and
processes issued by the trial court on separate dates as hereunder indicated:
1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003
decision final and executory.13
2. December 17, 2003 - - Order denying the Notice of Appeal filed on
November 27, 2003, the same having been filed beyond the reglementary
period.14
3. December 19, 2003 - - Order15 granting the private respondent’s motion for
execution.
4. December 22, 2003 - - Writ of Execution.16
Hence, this petition for certiorari.
By Resolution17 of November 20, 2006, the case was set for oral arguments. On
January 22, 2007, when this case was called for the purpose, both parties manifested
their willingness to settle the case amicably, for which reason the Court gave them up
to February 28, 2007 to submit the compromise agreement for approval. Following
several approved extensions of the February 28, 2007 deadline, the OSG, on August 6,
2007, manifested that it is submitting the case for resolution on the merits owing to
the inability of the parties to agree on an acceptable compromise.
In this recourse, the petitioner urges the Court to strike down as a nullity the trial
court’s order declaring it in default and the judgment by default that followed. Sought
to be nullified, too, also on the ground that they were issued in grave abuse of
discretion amounting to lack or in excess of jurisdiction, are the orders and processes
enumerated immediately above issued after the rendition of the default judgment.
Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by
impugning the order of default and the judgment by default. To the petitioner, the
respondent judge committed serious jurisdictional error when he proceeded to hear
the case and eventually awarded the private respondent a staggering amount without
so much as giving the petitioner the opportunity to present its defense.
Petitioner’s posture is simply without merit.
Deprivation of procedural due process is obviously the petitioner’s threshold theme.
Due process, in its procedural aspect, guarantees in the minimum the opportunity to
be heard.18 Grave abuse of discretion, however, cannot plausibly be laid at the
doorstep of the respondent judge on account of his having issued the default order
against the petitioner, then proceeding with the hearing and eventually rendering a
default judgment. For, what the respondent judge did hew with what Section 3, Rule 9
of the Rules of Court prescribes and allows in the event the defending party fails to
seasonably file a responsive pleading. The provision reads:
SEC. 3. Default; declaration of.- If the defending party fails to answer within the time
allowed therefor, the court shall, upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the defending party in default.
Thereupon, the court shall proceed to render judgment granting the claimant such
relief as his pleading may warrant, unless the court in its discretion requires the
claimant to submit evidence ….19
While the ideal lies in avoiding orders of default,20 the policy of the law being to have
every litigated case tried on its full merits,21 the act of the respondent judge in
rendering the default judgment after an order of default was properly issued cannot
be struck down as a case of grave abuse of discretion.
The term "grave abuse of discretion," in its juridical sense, connotes capricious,
despotic, oppressive or whimsical exercise of judgment as is equivalent to lack of
jurisdiction.22 The abuse must be of such degree as to amount to an evasion of a
positive duty or a virtual refusal to perform a duty enjoined by law, as where the
power is exercised in a capricious manner. The word "capricious," usually used in
tandem with "arbitrary," conveys the notion of willful and unreasoning action.23
Under the premises, the mere issuance by the trial court of the order of default
followed by a judgment by default can easily be sustained as correct and doubtless
within its jurisdiction. Surely, a disposition directing the Republic to pay an enormous
sum without the trial court hearing its side does not, without more, vitiate, on due
procedural ground, the validity of the default judgment. The petitioner may have
indeed been deprived of such hearing, but this does not mean that its right to due
process had been violated. For, consequent to being declared in default, the defaulting
defendant is deemed to have waived his right to be heard or to take part in the trial.
The handling solicitors simply squandered the Republic’s opportunity to be heard. But
more importantly, the law itself imposes such deprivation of the right to participate as
a form of penalty against one unwilling without justification to join issue upon the
allegations tendered by the plaintiff.
And going to another point, the petitioner would ascribe jurisdictional error on the
respondent judge for denying its motion for new trial based on any or a mix of the
following factors, viz., (1) the failure to file an answer is attributable to the negligence
of the former handling solicitor; (2) the meritorious nature of the petitioner’s defense;
and (3) the value of the property involved.
The Court is not convinced. Even as the Court particularly notes what the trial court
had said on the matter of negligence: that all of the petitioner’s pleadings below bear
at least three signatures, that of the handling solicitor, the assistant solicitor and the
Solicitor General himself, and hence accountability should go up all the way to the top
of the totem pole of authority, the cited reasons advanced by the petitioner for a new
trial are not recognized under Section 1, Rule 37 of the Rules of Court for such
recourse.24 Withal, there is no cogent reason to disturb the denial by the trial court of
the motion for new trial and the denial of the reiterative motion for reconsideration.
Then, too, the issuance by the trial court of the Order dated December 17,
200325 denying the petitioner’s notice of appeal after the court caused the issuance on
November 27, 2003 of a certificate of finality of its August 27, 2003 decision can
hardly be described as arbitrary, as the petitioner would have this Court believe. In
this regard, the Court takes stock of the following key events and material dates set
forth in the assailed December 17, 2003 order, supra: (a) The petitioner, thru the
OSG, received on August 29, 2003 a copy of the RTC decision in this case, hence had
up to September 13, 2003, a Saturday, within which to perfect an appeal; (b)
On September 15, 2003, a Monday, the OSG filed its motion for new trial, which the
RTC denied, the OSG receiving a copy of the order of denial on October 9, 2003; and
(c) On October 24, 2003, the OSG sought reconsideration of the order denying the
motion for new trial. The motion for reconsideration was denied per Order dated
November 25, 2003, a copy of which the OSG received on the same date.
Given the foregoing time perspective, what the trial court wrote in its aforementioned
impugned order of December 17, 2003 merits approval:
In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th)
day after the decision was received on August 29, 2003 was denied and the moving
party has only the remaining period from notice of notice of denial within which to file
a notice of appeal. xxx
Accordingly, when defendants [Republic et al.] filed their motion for new trial on the
last day of the fifteen day (15) prescribed for taking an appeal, which motion was
subsequently denied, they had one (1) day from receipt of a copy of the order denying
… new trial within which to perfect [an] appeal …. Since defendants had received a
copy of the order denying their motion for new trial on 09 October 2003, reckoned
from that date, they only have one (1) day left within which to file the notice of appeal.
But instead of doing so, the defendants filed a motion for reconsideration which was
later declared by the Court as pro forma motion in the Order dated 25 November
2003. The running of the prescriptive period, therefore, can not be interrupted by
a pro forma motion. Hence the filing of the notice of appeal on 27 November 2007
came much too late for by then the judgment had already become final and
executory.26 (Words in bracket added; Emphasis in the original.)
It cannot be over-emphasized at this stage that the special civil action of certiorari is
limited to resolving only errors of jurisdiction; it is not a remedy to correct errors of
judgment. Hence, the petitioner’s lament, partly covered by and discussed under the
first ground for allowing its petition, about the trial court taking cognizance of the
case notwithstanding private respondent’s claim or action being barred by
prescription and/or laches cannot be considered favorably. For, let alone the fact that
an action for the declaration of the inexistence of a contract, as here, does not
prescribe;27 that a void transfer of property can be recovered by accion
reivindicatoria;28 and that the legal fiction of indefeasibility of a Torrens title cannot
be used as a shield to perpetuate fraud,29 the trial court’s disinclination not to
appreciate in favor of the Republic the general principles of prescription or laches
constitutes, at best, errors of judgment not correctable by certiorari.
The evidence adduced below indeed adequately supports a conclusion that the Office
of the President, during the administration of then President Marcos, wrested
possession of the property in question and somehow secured a certificate of title over
it without a conveying deed having been executed to legally justify the cancellation of
the old title (TCT No. 118527) in the name of the private respondent and the issuance
of a new one (TCT No. 118911) in the name of petitioner Republic. Accordingly,
granting private respondent’s basic plea for recovery of the Arlegui property, which
was legally hers all along, and the reinstatement of her cancelled certificate of title
are legally correct as they are morally right. While not exactly convenient because the
Office of the President presently uses it for mix residence and office purposes,
restoring private respondent to her possession of the Arlegui property is still legally
and physically feasible. For what is before us, after all, is a registered owner of a piece
of land who, during the early days of the martial law regime, lost possession thereof to
the Government which appropriated the same for some public use, but without going
through the legal process of expropriation, let alone paying such owner just
compensation.
The Court cannot, however, stop with just restoring the private respondent to her
possession and ownership of her property. The restoration ought to be complemented
by some form of monetary compensation for having been unjustly deprived of the
beneficial use thereof, but not, however, in the varying amounts and level fixed in the
assailed decision of the trial court and set to be executed by the equally assailed writ
of execution. The Court finds the monetary award set forth therein to be erroneous.
And the error relates to basic fundamentals of law as to constitute grave abuse of
discretion.
As may be noted, private respondent fixed the assessed value of her Arlegui
property at ₱2,388,990.00. And in the prayer portion of her third amended complaint
for recovery, she asked to be restored to the possession of her property and that the
petitioner be ordered to pay her, as reasonable compensation or rental use or
occupancy thereof, the sum of ₱500,000.00 a month, or ₱6 Million a year, with a five
percent (5%) yearly increase plus interest at the legal rate beginning July 1975. From
July 1975 when the PSG allegedly took over the subject property to July 2003, a
month before the trial court rendered judgment, or a period of 28 years, private
respondent’s total rental claim would, per the OSG’s computation, only amount
to ₱371,440,426.00. In its assailed decision, however, the trial court ordered the
petitioner to pay private respondent the total amount of over ₱1.48 Billion or the
mind-boggling amount of ₱1,480,627,688.00, to be exact, representing the reasonable
rental for the property, the interest rate thereon at the legal rate and the opportunity
cost. This figure is on top of the ₱143,600,000.00 which represents the acquisition cost
of the disputed property. All told, the trial court would have the Republic pay the total
amount of about ₱1.624 Billion, exclusive of interest, for the taking of a property
with a declared assessed value of ₱2,388,900.00. This is not to mention the award of
attorney’s fees in an amount equivalent to 15% of the amount due the private
respondent.
In doing so, the respondent judge brazenly went around the explicit command of Rule
9, Section 3(d) of the Rules of Court30 which defines the extent of the relief that may
be awarded in a judgment by default, i.e., only so much as has been
alleged and proved. The court acts in excess of jurisdiction if it awards an amount
beyond the claim made in the complaint or beyond that proved by the
evidence.31 While a defaulted defendant may be said to be at the mercy of the trial
court, the Rules of Court and certainly the imperatives of fair play see to it that any
decision against him must be in accordance with law. 32 In the abstract, this means
that the judgment must not be characterized by outrageous one-sidedness, but by
what is fair, just and equitable that always underlie the enactment of a law.
Given the above perspective, the obvious question that comes to mind is the level of
compensation which – for the use and occupancy of the Arlegui property - would be
fair to both the petitioner and the private respondent and, at the same time, be within
acceptable legal bounds. The process of balancing the interests of both parties is not
an easy one. But surely, the Arlegui property cannot possibly be assigned, even
perhaps at the present real estate business standards, a monthly rental value of at
least ₱500,000.00 or ₱6,000,000.00 a year, the amount private respondent particularly
sought and attempted to prove. This asking figure is clearly unconscionable, if not
downright ridiculous, attendant circumstances considered. To the Court, an award of
₱20,000.00 a month for the use and occupancy of the Arlegui property, while perhaps
a little bit arbitrary, is reasonable and may be granted pro hac viceconsidering the
following hard realities which the Court takes stock of:
1. The property is relatively small in terms of actual area and had an
assessed value of only P2,388,900.00;
2. What the martial law regime took over was not exactly an area with a new
and imposing structure, if there was any; and
3. The Arlegui property had minimal rental value during the relatively long
martial law years, given the very restrictive entry and egress conditions
prevailing at the vicinity at that time and even after.
To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay
City,33 a case where a registered owner also lost possession of a piece of lot to a
municipality which took it for a public purposes without instituting expropriation
proceedings or paying any compensation for the lot, the Court, citing Herrera v.
Auditor General,34ordered payment of just compensation but in the form of interest
when a return of the property was no longer feasible.
The award of attorney’s fees equivalent to 15% of the amount due the private
respondent, as reduced herein, is affirmed.
The assessment of costs of suit against the petitioner is, however, nullified, costs not
being allowed against the Republic, unless otherwise provided by law. 35
The assailed trial court’s issuance of the writ of execution36 against government funds
to satisfy its money judgment is also nullified. It is basic that government funds and
properties may not be seized under writs of execution or garnishment to satisfy such
judgments.37 Republic v. Palacio38 teaches that a judgment against the State
generally operates merely to liquidate and establish the plaintiff’s claim in the
absence of express provision; otherwise, they can not be enforced by processes of law.
2. The Order of the respondent court dated December 19, 2003 for the
issuance of a writ of execution and the Writ of Execution dated December 22,
2003 against government funds are hereby declared null and void.
Accordingly, the presiding judge of the respondent court, the private
respondent, their agents and persons acting for and in their behalves are
permanently enjoined from enforcing said writ of execution.

Albeit title to the Arlegui property remains in the name of the petitioner Republic,
it is actually the Office of the President which has beneficial possession of and use
over it since the 1975 takeover. Accordingly, and in accord with the elementary sense
of justice, it behooves that office to make the appropriate budgetary arrangements
towards paying private respondent what is due her under the premises. This, to us, is
the right thing to do. The imperatives of fair dealing demand no less. And the Court
would be remiss in the discharge of its duties as dispenser of justice if it does not
exhort the Office of the President to comply with what, in law and equity, is its
obligation. If the same office will undertake to pay its obligation with reasonable
dispatch or in a manner acceptable to the private respondent, then simple justice,
while perhaps delayed, will have its day. Private respondent is in the twilight of her
life, being now over 90 years of age.39 Any delay in the implementation of this
disposition would be a bitter cut.1âwphi1
However, consistent with the basic tenets of justice, fairness and equity, petitioner
Republic, thru the Office of the President, is hereby strongly enjoined to take the
necessary steps, and, with reasonable dispatch, make the appropriate budgetary
arrangements to pay private respondent Tarcila L. Mendoza or her assigns the
amount adjudged due her under this disposition.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
WE CONCUR:

WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27,
2003 insofar as it nullified TCT No. 118911 of petitioner Republic of the Philippines
and ordered the Register of Deeds of Manila to reinstate private respondent Tarcila L.
Mendoza’s TCT No. 118527, or to issue her a new certificate of title is AFFIRMED.
Should it be necessary, the Register of Deeds of Manila shall execute the necessary
conveying deed to effect the reinstatement of title or the issuance of a new title to her.

It is MODIFIED in the sense that for the use and occupancy of the Arlegui property,
petitioner Republic is ordered to pay private respondent the reasonable amount of
₱20,000.00 a month beginning July 1975 until it vacates the same and the possession
thereof restored to the private respondent, plus an additional interest of 6% per
annum on the total amount due upon the finality of this Decision until the same is
fully paid. Petitioner is further ordered to pay private respondent attorney's fees
equivalent to 15% of the amount due her under the premises.

Accordingly, a writ of certiorari is hereby ISSUED in the sense that: EN BANC

1. The respondent court’s assailed decision of August 27, 2003 insofar as it
ordered the petitioner Republic of the Philippines to pay private respondent
Tarcila L. Mendoza the sum of One Billion Four Hundred Eighty Million Six
Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos
(₱1,480,627,688.00) representing the purported rental use of the property in
question, the interest thereon and the opportunity cost at the rate of 3% per
annum plus the interest at the legal rate added thereon is nullified. The
portion assessing the petitioner Republic for costs of suit is also declared null
and void.
G.R. No. 206510 September 16, 2014
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.;
MOST REV. DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus of Caloocan,
FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE,
MARIA CAROLINA P. ARAULLO, RENATO M. REYES, JR., Bagong
Alyansang Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna
Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A Movement, TERESITA
R. PEREZ, PH.D., HON. RAYMOND V. PALATINO, Kabataan Party-list,
PETER SJ. GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D., Agham,
ELMER C. LABOG, Kilusang Mayo Uno, JOAN MAY E. SALVADOR, Gabriela,
JOSE ENRIQUE A. AFRICA, THERESA A. CONCEPCION, MARY JOAN A.
GUAN, NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK
A. RICE in his capacity as Commanding Officer of the USS Guardian,
PRESIDENT BENIGNO S. AQUINO III in his capacity as Commander-in-
Chief of the Armed Forces of the Philippines, HON. ALBERT F. DEL
ROSARIO, Secretary, pepartment of Foreign Affair.s, HON. PAQUITO
OCHOA, JR., Executiv~.:Secretary, Office of the President, . HON.
VOLTAIRE T. GAZMIN, Secretary, Department of National Defense, HON.
RAMON JESUS P. P AJE, Secretary, Department of Environment and
Natural Resoz!rces, VICE ADMIRAL JOSE LUIS M. ALANO, Philippine Navy
Flag Officer in Command, Armed Forces of the Philippines, ADMIRAL
RODOLFO D. ISO RENA, Commandant, Philippine Coast Guard,
COMMODORE ENRICO EFREN EVANGELISTA, Philippine Coast Guard
Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of Armed
Forces of the Philippines Command and LT. GEN. TERRY G. ROBLING, US
Marine Corps Forces. Pacific and Balikatan 2013 Exercise Co-
Director, Respondents.
DECISION
VILLARAMA, JR, J.:
Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7 of
A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental
Cases (Rules), involving violations of environmental laws and regulations in relation
to the grounding of the US military ship USS Guardian over the Tubbataha Reefs.
Factual Background
The name "Tubbataha" came from the Samal (seafaring people of southern
Philippines) language which means "long reef exposed at low tide." Tubbataha is
composed of two huge coral atolls - the north atoll and the south atoll - and the Jessie
Beazley Reef, a smaller coral structure about 20 kilometers north of the atolls. The
reefs of Tubbataha and Jessie Beazley are considered part of Cagayancillo, a remote
island municipality of Palawan.1
In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation
No. 306 issued by President Corazon C. Aquino on August 11, 1988. Located in the
middle of Central Sulu Sea, 150 kilometers southeast of Puerto Princesa City,
Tubbataha lies at the heart of the Coral Triangle, the global center of marine
biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and
Cultural Organization (UNESCO) as a World Heritage Site. It was recognized as one
of the Philippines' oldest ecosystems, containing excellent examples of pristine reefs
and a high diversity of marine life. The 97,030-hectare protected marine park is also
an important habitat for internationally threatened and endangered marine species.
UNESCO cited Tubbataha's outstanding universal value as an important and
significant natural habitat for in situ conservation of biological diversity; an example
representing significant on-going ecological and biological processes; and an area of
exceptional natural beauty and aesthetic importance.2
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067, 3 otherwise known as
the "Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure the protection and
conservation of the globally significant economic, biological, sociocultural, educational
and scientific values of the Tubbataha Reefs into perpetuity for the enjoyment of
present and future generations." Under the "no-take" policy, entry into the waters of
TRNP is strictly regulated and many human activities are prohibited and penalized or
fined, including fishing, gathering, destroying and disturbing the resources within the
TRNP. The law likewise created the Tubbataha Protected Area Management Board
(TPAMB) which shall be the sole policy-making and permit-granting body of the
TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In
December 2012, the US Embassy in the Philippines requested diplomatic clearance
for the said vessel "to enter and exit the territorial waters of the Philippines and to
arrive at the port of Subic Bay for the purpose of routine ship replenishment,
maintenance, and crew liberty."4 On January 6, 2013, the ship left Sasebo, Japan for
Subic Bay, arriving on January 13, 2013 after a brief stop for fuel in Okinawa,
Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in
Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea,
the ship ran aground on the northwest side of South Shoal of the Tubbataha Reefs,
about 80 miles east-southeast of Palawan. No cine was injured in the incident, and
there have been no reports of leaking fuel or oil.
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed
regret for the incident in a press statement.5 Likewise, US Ambassador to the
Philippines Harry K. Thomas, Jr., in a meeting at the Department of Foreign Affairs
(DFA) on February 4, "reiterated his regrets over the grounding incident and assured
Foreign Affairs Secretazy Albert F. del Rosario that the United States will provide
appropriate compensation for damage to the reef caused by the ship." 6 By March 30,
2013, the US Navy-led salvage team had finished removing the last piece of the
grounded ship from the coral reef.
On April 1 7, 2013, the above-named petitioners on their behalf and in representation
of their respective sector/organization and others, including minors or generations yet
unborn, filed the present petition agairtst Scott H. Swift in his capacity as
Commander of the US 7th Fleet, Mark A. Rice in his capacity as Commanding Officer
of the USS Guardian and Lt. Gen. Terry G. Robling, US Marine Corps Forces, Pacific
and Balikatan 2013 Exercises Co-Director ("US respondents"); President Benigno S.
Aquino III in his capacity as Commander-in-Chief of the Armed Forces of the
Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive Secretary Paquito
Ochoa, Jr., Secretary Voltaire T. Gazmin (Department of National Defense), Secretary
Jesus P. Paje (Department of Environment and Natural Resources), Vice-Admiral
Jose Luis M. Alano (Philippine Navy Flag Officer in Command, AFP), Admiral
Rodolfo D. Isorena (Philippine Coast Guard Commandant), Commodore Enrico Efren
Evangelista (Philippine Coast Guard-Palawan), and Major General Virgilio 0.
Domingo (AFP Commandant), collectively the "Philippine respondents."
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations of the
USS Guardian cause and continue to cause environmental damage of such magnitude
as to affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo, Negros
Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-Tawi,
which events violate their constitutional rights to a balanced and healthful ecology.
They also seek a directive from this Court for the institution of civil, administrative
and criminal suits for acts committed in violation of environmental laws and
regulations in connection with the grounding incident.
Specifically, petitioners cite the following violations committed by US respondents
under R.A. No. 10067: unauthorized entry (Section 19); non-payment of conservation
fees (Section 21 ); obstruction of law enforcement officer (Section 30); damages to the
reef (Section 20); and destroying and disturbing resources (Section 26[g]).
Furthermore, petitioners assail certain provisions of the Visiting Forces Agreement
(VFA) which they want this Court to nullify for being unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the
petition, to wit: WHEREFORE, in view of the foregoing, Petitioners respectfully pray
that the Honorable Court: 1. Immediately issue upon the filing of this petition a
Temporary Environmental Protection Order (TEPO) and/or a Writ of Kalikasan,
which shall, in particular,
a. Order Respondents and any person acting on their behalf, to cease and
desist all operations over the Guardian grounding incident;
b. Initially demarcating the metes and bounds of the damaged area as well as
an additional buffer zone;
c. Order Respondents to stop all port calls and war games under 'Balikatan'
because of the absence of clear guidelines, duties, and liability schemes for
breaches of those duties, and require Respondents to assume responsibility
for prior and future environmental damage in general, and environmental
damage under the Visiting Forces Agreement in particular.
d. Temporarily define and describe allowable activities of ecotourism, diving,
recreation, and limited commercial activities by fisherfolk and indigenous
communities near or around the TRNP but away from the damaged site and
an additional buffer zone;
2. After summary hearing, issue a Resolution extending the TEPO until
further orders of the Court;
3. After due proceedings, render a Decision which shall include, without
limitation:
a. Order Respondents Secretary of Foreign Affairs, following the dispositive
portion of Nicolas v. Romulo, "to forthwith negotiate with the United States
representatives for the appropriate agreement on [environmental guidelines
and environmental accountability] under Philippine authorities as provided
in Art. V[] of the VFA ... "
b. Direct Respondents and appropriate agencies to commence administrative,
civil, and criminal proceedings against erring officers and individuals to the
full extent of the law, and to make such proceedings public;
c. Declare that Philippine authorities may exercise primary and exclusive
criminal jurisdiction over erring U.S. personnel under the circumstances of
this case;
d. Require Respondents to pay just and reasonable compensation in the
settlement of all meritorious claims for damages caused to the Tubbataha
Reef on terms and conditions no less severe than those applicable to other
States, and damages for personal injury or death, if such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of
witnesses and in the collection and production of evidence, including seizure
and delivery of objects connected with the offenses related to the grounding of
the Guardian;
f. Require the authorities of the Philippines and the United States to notify
each other of the disposition of all cases, wherever heard, related to the
grounding of the Guardian;
g. Restrain Respondents from proceeding with any purported restoration,
repair, salvage or post salvage plan or plans, including cleanup plans
covering the damaged area of the Tubbataha Reef absent a just settlement
approved by the Honorable Court;
h. Require Respondents to engage in stakeholder and LOU consultations in
accordance with the Local Government Code and R.A. 10067;
 i. Require Respondent US officials and their representatives to place a
deposit to the TRNP Trust Fund defined under Section 17 of RA 10067 as a
bona .fide gesture towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas
affected by the grounding of the Guardian in light of Respondents' experience
in the Port Royale grounding in 2009, among other similar grounding
incidents;
k. Require Respondents to regularly publish on a quarterly basis and in the
name of transparency and accountability such environmental damage
assessment, valuation, and valuation methods, in all stages of negotiation;
l. Convene a multisectoral technical working group to provide scientific and
technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National
Defense, and the Department of Environment and Natural Resources to
review the Visiting Forces Agreement and the Mutual Defense Treaty to
consider whether their provisions allow for the exercise of erga omnes rights
to a balanced and healthful ecology and for damages which follow from any
violation of those rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for
purposes of protecting the damaged areas of TRNP;
o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction")
and Article VI of the Visiting Forces Agreement unconstitutional for violating
equal protection and/or for violating the preemptory norm of
nondiscrimination incorporated as part of the law of the land under Section 2,
Article II, of the Philippine Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all
other respects; and
4. Provide just and equitable environmental rehabilitation measures and
such other reliefs as are just and equitable under the
premises.7 (Underscoring supplied.)
Since only the Philippine respondents filed their comment8 to the petition, petitioners
also filed a motion for early resolution and motion to proceed ex parte against the US
respondents.9
Respondents' Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO and
ocular inspection and production orders, respondents assert that: ( 1) the grounds
relied upon for the issuance of a TEPO or writ of Kalikasan have become fait accompli
as the salvage operations on the USS Guardian were already completed; (2) the
petition is defective in form and substance; (3) the petition improperly raises issues
involving the VFA between the Republic of the Philippines and the United States of
America; and ( 4) the determination of the extent of responsibility of the US
Government as regards the damage to the Tubbataha Reefs rests exdusively with the
executive branch.
The Court's Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners to file
the present petition.
Locus standi is "a right of appearance in a court of justice on a given
question."10 Specifically, it is "a party's personal and substantial interest in a case
where he has sustained or will sustain direct injury as a result" of the act being
challenged, and "calls for more than just a generalized grievance."11 However, the rule
on standing is a procedural matter which this Court has relaxed for non-traditional
plaintiffs like ordinary citizens, taxpayers and legislators when the public interest so
requires, such as when the subject matter of the controversy is of transcendental
importance, of overreaching significance to society, or of paramount public interest. 12
In the landmark case of Oposa v. Factoran, Jr., 13 we recognized the "public right" of
citizens to "a balanced and healthful ecology which, for the first time in our
constitutional history, is solemnly incorporated in the fundamental law." We declared
that the right to a balanced and healthful ecology need not be written in the
Constitution for it is assumed, like other civil and polittcal rights guaranteed in the
Bill of Rights, to exist from the inception of mankind and it is an issue of
transcendental importance with intergenerational implications.1âwphi1 Such right
carries with it the correlative duty to refrain from impairing the environment.14
On the novel element in the class suit filed by the petitioners minors in Oposa, this
Court ruled that not only do ordinary citizens have legal standing to sue for the
enforcement of environmental rights, they can do so in representation of their own
and future generations. Thus:
Petitioners minors assert that they represent their generation as well as generations
yet unborn. We find no difficulty in ruling that they can, for themselves, for others of
their generation and for the succeeding generations, file a class suit. Their personality
to sue in behalf of the succeeding generations can only be based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful
ecology is concerned. Such a right, as hereinafter expounded, considers the "rhythm
and harmony of nature." Nature means the created world in its entirety. Such rhythm
and harmony indispensably include, inter alia, the judicious disposition, utilization,
management, renewal and conservation of the country's forest, mineral, land, waters,
fisheries, wildlife, off-shore areas and other natural resources to the end that their
exploration, development and utilization be equitably accessible to the present a:: well
as future generations. Needless to say, every generation has a responsibility to the
next to preserve that rhythm and harmony for the full 1:njoyment of a balanced and
healthful ecology. Put a little differently, the minors' assertion of their right to a
sound environment constitutes, at the same time, the performance of their obligation
to ensure the protection of that right for the generations to come. 15 (Emphasis
supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to minors
and generations yet unborn, is now enshrined in the Rules which allows the filing of a
citizen suit in environmental cases. The provision on citizen suits in the Rules
"collapses the traditional rule on personal and direct interest, on the principle that
humans are stewards of nature."16
Having settled the issue of locus standi, we shall address the more fundamental
question of whether this Court has jurisdiction over the US respondents who did not
submit any pleading or manifestation in this case.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State,17is expressly provided in Article XVI of the
1987 Constitution which states:
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto,18 we discussed the principle of state
immunity from suit, as follows:
The rule that a state may not be sued without its consent, now · expressed in Article
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles of
international law that we have adopted as part of the law of our land under Article II,
Section 2. x x x.
Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this
doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its
membership in the society of nations. Upon its admission to such society, the state is
automatically obligated to comply with these principles in its relations with other
states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that ''there can be no legal right against the
authority which makes the law on which the right depends." [Kawanakoa v. Polybank,
205 U.S. 349] There are other practical reasons for the enforcement of the doctrine. In
the case of the foreign state sought to be impleaded in the local jurisdiction, the added
inhibition is expressed in the maxim par in parem, non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary
disposition would, in the language of a celebrated case, "unduly vex the peace of
nations." [De Haber v. Queen of Portugal, 17 Q. B. 171]
While the doctrine appears to prohibit only suits against the state without its consent,
it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to
satisfy the same,. such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although
it has not been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a
situation, the state may move to dismiss the comp.taint on the ground that it has been
filed without its consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh
Amendment which reads:
The Judicial power of the United States shall not be construed to extend to any suit in
law or equity, commenced or prosecuted against one of the United States by Citizens
of another State, or by Citizens or Subjects of any Foreign State.
In the case of Minucher v. Court of Appeals,20 we further expounded on the immunity
of foreign states from the jurisdiction of local courts, as follows:
The precept that a State cannot be sued in the courts of a foreign state is a long-
standing rule of customary international law then closely identified with the personal
immunity of a foreign sovereign from suit and, with the emergence of democratic
states, made to attach not just to the person of the head of state, or his representative,
but also distinctly to the state itself in its sovereign capacity. If the acts giving rise to
a suit arc those of a foreign government done by its foreign agent, although not
necessarily a diplomatic personage, but acting in his official capacity, the complaint
could be barred by the immunity of the foreign sovereign from suit without its
consent. Suing a representative of a state is believed to be, in effect, suing the state
itself. The proscription is not accorded for the benefit of an individual but for the
State, in whose service he is, under the maxim -par in parem, non habet imperium -
that all states are soverr~ign equals and cannot assert jurisdiction over one another.
The implication, in broad terms, is that if the judgment against an official would rec
1uire the state itself to perform an affirmative act to satisfy the award, such as the
appropriation of the amount needed to pay the damages decreed against him, the suit
must be regarded as being against the state itself, although it has not been formally
impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity, the
privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise
of territorial jurisdiction.22
In United States of America v. Judge Guinto,23 one of the consolidated cases therein
involved a Filipino employed at Clark Air Base who was arrested following a buy-bust
operation conducted by two officers of the US Air Force, and was eventually dismissed
from his employment when he was charged in court for violation of R.A. No. 6425. In a
complaint for damages filed by the said employee against the military officers, the
latter moved to dismiss the case on the ground that the suit was against the US
Government which had not given its consent. The RTC denied the motion but on a
petition for certiorari and prohibition filed before this Court, we reversed the RTC and
dismissed the complaint. We held that petitioners US military officers 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. 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.
This traditional rule of State immunity which exempts a State from being sued in the
courts of another State without the former's consent or waiver has evolved into a
restrictive doctrine which distinguishes sovereign and governmental acts (Jure
imperil") from private, commercial and proprietary acts (Jure gestionis). Under the
restrictive rule of State immunity, State immunity extends only to acts Jure imperii.
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.24
In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity
principle, thus:
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 JustiGe Zaldivar in Director of the Bureau of Telecommunications, et al. vs.
Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an
action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates or
invades the personal and property rights of the plaintiff, under an unconstitutional
act or under an assumption of authority which he does not have, is not a suit against
the State within the constitutional provision that the State may not be sued without
its consent." The rationale for this ruling is that the doctrine of state immunity cannot
be used as an instrument for perpetrating an injustice.
xxxx
The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public official is
being sued in his private and personal capacity as an ordinary citizen. The cloak of
protection afforded the officers and agents of the government is removed the moment
they are sued in their individual capacity. This situation usually arises where the
public official acts without authority or in excess of the powers vested in him. It is a
well-settled principle of law that a public official may be liable in his personal private
capacity for whatever damage he may have caused by his act done with malice and in
bad faith, or beyond the scope of his authority or jurisdiction. 26 (Emphasis supplied.)
In this case, the US respondents were sued in their official capacity as commanding
officers of the US Navy who had control and supervision over the USS Guardian and
its crew. The alleged act or omission resulting in the unfortunate grounding of the
USS Guardian on the TRNP was committed while they we:re performing official
military duties. Considering that the satisfaction of a judgment against said officials
will require remedial actions and appropriation of funds by the US government, the
suit is deemed to be one against the US itself. The principle of State immunity
therefore bars the exercise of jurisdiction by this Court over the persons of
respondents Swift, Rice and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the position
that the conduct of the US in this case, when its warship entered a restricted area in
violation of R.A. No. 10067 and caused damage to the TRNP reef system, brings the
matter within the ambit of Article 31 of the United Nations Convention on the Law of
the Sea (UNCLOS). He explained that while historically, warships enjoy sovereign
immunity from suit as extensions of their flag State, Art. 31 of the UNCLOS creates
an exception to this rule in cases where they fail to comply with the rules and
regulations of the coastal State regarding passage through the latter's internal waters
and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the UNCLOS, as
a matter of long-standing policy the US considers itself bound by customary
international rules on the "traditional uses of the oceans" as codified in UNCLOS, as
can be gleaned from previous declarations by former Presidents Reagan and Clinton,
and the US judiciary in the case of United States v. Royal Caribbean Cruise Lines,
Ltd.27
The international law of the sea is generally defined as "a body of treaty rules arid
customary norms governing the uses of the sea, the exploitation of its resources, and
the exercise of jurisdiction over maritime regimes. It is a branch of public
international law, regulating the relations of states with respect to the uses of the
oceans."28 The UNCLOS is a multilateral treaty which was opened for signature on
December 10, 1982 at Montego Bay, Jamaica. It was ratified by the Philippines in
1984 but came into force on November 16, 1994 upon the submission of the 60th
ratification.
The UNCLOS is a product of international negotiation that seeks to balance State
sovereignty (mare clausum) and the principle of freedom of the high seas (mare
liberum).29 The freedom to use the world's marine waters is one of the oldest
customary principles of international law.30 The UNCLOS gives to the coastal State
sovereign rights in varying degrees over the different zones of the sea which are: 1)
internal waters, 2) territorial sea, 3) contiguous zone, 4) exclusive economic zone, and
5) the high seas. It also gives coastal States more or less jurisdiction over foreign
vessels depending on where the vessel is located.31
Insofar as the internal waters and territorial sea is concerned, the Coastal State
exercises sovereignty, subject to the UNCLOS and other rules of international law.
Such sovereignty extends to the air space over the territorial sea as well as to its bed
and subsoil.32
In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy
sovereign immunity subject to the following exceptions:
Article 30
Non-compliance by warships with the laws and regulations of the coastal State
If any warship does not comply with the laws and regulations of the coastal State
concerning passage through the territorial sea and disregards any request for
compliance therewith which is made to it, the coastal State may require it to leave the
territorial sea immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
The flag State shall bear international responsibility for any loss or damage to the
coastal State resulting from the non-compliance by a warship or other government
ship operated for non-commercial purposes with the laws and regulations of the
coastal State concerning passage through the territorial sea or with the provisions of
this Convention or other rules of international law.
Article 32
Immunities of warships and other government ships operated for non-commercial
purposes
With such exceptions as are contained in subsection A and in articles 30 and 31,
nothing in this Convention affects the immunities of warships and other government
ships operated for non-commercial purposes. (Emphasis supplied.) A foreign warship's
unauthorized entry into our internal waters with resulting damage to marine
resources is one situation in which the above provisions may apply. But what if the
offending warship is a non-party to the UNCLOS, as in this case, the US?
An overwhelming majority - over 80% -- of nation states are now members of
UNCLOS, but despite this the US, the world's leading maritime power, has not
ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from signing it
due to concerns over deep seabed mining technology transfer provisions contained in
Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk of
UNCLOS member states cooperated over the succeeding decade to revise the
objection.able provisions. The revisions satisfied the Clinton administration, which
signed the revised Part XI implementing agreement in 1994. In the fall of 1994,
President Clinton transmitted UNCLOS and the Part XI implementing agreement to
the Senate requesting its advice and consent. Despite consistent support from
President Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the President to
internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the
108th and 110th Congresses, its progress continues to be hamstrung by significant
pockets of political ambivalence over U.S. participation in international institutions.
Most recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting
out" UNCLOS for full Senate consideration among his highest priorities. This did not
occur, and no Senate action has been taken on UNCLOS by the 112th Congress.34
Justice Carpio invited our attention to the policy statement given by President
Reagan on March 10, 1983 that the US will "recognize the rights of the other , states
in the waters off their coasts, as reflected in the convention [UNCLOS], so long as the
rights and freedom of the United States and others under international law are
recognized by such coastal states", and President Clinton's reiteration of the US policy
"to act in a manner consistent with its [UNCLOS] provisions relating to traditional
uses of the oceans and to encourage other countries to do likewise." Since Article 31
relates to the "traditional uses of the oceans," and "if under its policy, the US
'recognize[s] the rights of the other states in the waters off their coasts,"' Justice
Carpio postulates that "there is more reason to expect it to recognize the rights of
other states in their internal waters, such as the Sulu Sea in this case."
As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal
to join the UN CLOS was centered on its disagreement with UN CLOS' regime of deep
seabed mining (Part XI) which considers the oceans and deep seabed commonly owned
by mankind," pointing out that such "has nothing to do with its [the US'] acceptance of
customary international rules on navigation."
It may be mentioned that even the US Navy Judge Advocate General's Corps publicly
endorses the ratification of the UNCLOS, as shown by the following statement posted
on its official website:
The Convention is in the national interest of the United States because it establishes
stable maritime zones, including a maximum outer limit for territorial seas; codifies
innocent passage, transit passage, and archipelagic sea lanes passage rights; works
against "jurisdictiomtl creep" by preventing coastal nations from expanding their own
maritime zones; and reaffirms sovereign immunity of warships, auxiliaries anJ
government aircraft.
xxxx
Economically, accession to the Convention would support our national interests by
enhancing the ability of the US to assert its sovereign rights over the resources of one
of the largest continental shelves in the world. Further, it is the Law of the Sea
Convention that first established the concept of a maritime Exclusive Economic Zone
out to 200 nautical miles, and recognized the rights of coastal states to conserve and
manage the natural resources in this Zone.35
We fully concur with Justice Carpio's view that non-membership in the UNCLOS does
not mean that the US will disregard the rights of the Philippines as a Coastal State
over its internal waters and territorial sea. We thus expect the US to bear
"international responsibility" under Art. 31 in connection with the USS Guardian
grounding which adversely affected the Tubbataha reefs. Indeed, it is difficult to
imagine that our long-time ally and trading partner, which has been actively
supporting the country's efforts to preserve our vital marine resources, would shirk
from its obligation to compensate the damage caused by its warship while transiting
our internal waters. Much less can we comprehend a Government exercising
leadership in international affairs, unwilling to comply with the UNCLOS directive
for all nations to cooperate in the global task to protect and preserve the marine
environment as provided in Article 197, viz:
Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional basis,
directly or through competent international organizations, in formulating and
elaborating international rules, standards and recommended practices and procedures
consistent with this Convention, for the protection and preservation of the marine
environment, taking into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is beyond
dispute. Although the said treaty upholds the immunity of warships from the
jurisdiction of Coastal States while navigating the.latter's territorial sea, the flag
States shall be required to leave the territorial '::;ea immediately if they flout the laws
and regulations of the Coastal State, and they will be liable for damages caused by
their warships or any other government vessel operated for non-commercial purposes
under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the US have
statutorily waived their immunity to any action. Even under the common law tort
claims, petitioners asseverate that the US respondents are liable for negligence,
trespass and nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops and
personnel visiting the Philippines to promote "common security interests" between the
US and the Philippines in the region. It provides for the guidelines to govern such
visits of military personnel, and further defines the rights of the United States and
the Philippine government in the matter of criminal jurisdiction, movement of vessel
and aircraft, importation and exportation of equipment, materials and supplies. 36 The
invocation of US federal tort laws and even common law is thus improper considering
that it is the VF A which governs disputes involving US military ships and crew
navigating Philippine waters in pursuance of the objectives of the agreement.
As it is, the waiver of State immunity under the VF A pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for issuance of
a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of the Rules that
a criminal case against a person charged with a violation of an environmental law is
to be filed separately:
SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the
writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.
In any case, it is our considered view that a ruling on the application or non-
application of criminal jurisdiction provisions of the VF A to US personnel who may be
found responsible for the grounding of the USS Guardian, would be premature and
beyond the province of a petition for a writ of Kalikasan. We also find it unnecessary
at this point to determine whether such waiver of State immunity is indeed absolute.
In the same vein, we cannot grant damages which have resulted from the violation of
environmental laws. The Rules allows the recovery of damages, including the
collection of administrative fines under R.A. No. 10067, in a separate civil suit or that
deemed instituted with the criminal action charging the same violation of an
environmental law.37
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for
issuance of a writ of Kalikasan, to wit:
SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for
decision, the court shall render judgment granting or denying the privilege of the writ
of kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing
acts or neglecting the performance of a duty in violation of environmental
laws resulting in environmental destruction or damage;
(b) Directing the respondent public official, govemment agency, private
person or entity to protect, preserve, rehabilitate or restore the environment;
 (c) Directing the respondent public official, government agency, private
person or entity to monitor strict compliance with the decision and orders of
the court;
(d) Directing the respondent public official, government agency, or private
person or entity to make periodic reports on the execution of the final
judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection, preservation, rehabilitation or
restoration of the environment, except the award of damages to individual
petitioners. (Emphasis supplied.)
We agree with respondents (Philippine officials) in asserting that this petition has
become moot in the sense that the salvage operation sought to be enjoined or
restrained had already been accomplished when petitioners sought recourse from this
Court. But insofar as the directives to Philippine respondents to protect and
rehabilitate the coral reef stn icture and marine habitat adversely affected by the
grounding incident are concerned, petitioners are entitled to these reliefs
notwithstanding the completion of the removal of the USS Guardian from the coral
reef. However, we are mindful of the fact that the US and Philippine governments
both expressed readiness to negotiate and discuss the matter of compensation for the
damage caused by the USS Guardian. The US Embassy has also declared it is closely
coordinating with local scientists and experts in assessing the extent of the damage
and appropriate methods of rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by the
Rules. As can be gleaned from the following provisions, mediation and settlement are
available for the consideration of the parties, and which dispute resolution methods
are encouraged by the court, to wit:
RULE3
xxxx
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall
inquire from the parties if they have settled the dispute; otherwise, the court shall
immediately refer the parties or their counsel, if authorized by their clients, to the
Philippine Mediation Center (PMC) unit for purposes of mediation. If not available,
the court shall refer the case to the clerk of court or legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days from
receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the expiration of
the 30-day period.
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the court may
refer the case to the branch clerk of court for a preliminary conference for the
following purposes:
(a) To assist the parties in reaching a settlement;
xxxx
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their
counsels under oath, and they shall remain under oath in all pre-trial conferences.
The judge shall exert best efforts to persuade the parties to arrive at a settlement of
the dispute. The judge may issue a consent decree approving the agreement between
the parties in accordance with law, morals, public order and public policy to protect
the right of the people to a balanced and healthful ecology.
xxxx
SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to
compromise or settle in accordance with law at any stage of the proceedings before
rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guided-missile
cruiser, the USS Port Royal, ran aground about half a mile off the Honolulu Airport
Reef Runway and remained stuck for four days. After spending $6.5 million restoring
the coral reef, the US government was reported to have paid the State of Hawaii $8.5
million in settlement over coral reef damage caused by the grounding.38
To underscore that the US government is prepared to pay appropriate compensation
for the damage caused by the USS Guardian grounding, the US Embassy in the
Philippines has announced the formation of a US interdisciplinary scientific team
which will "initiate discussions with the Government of the Philippines to review coral
reef rehabilitation options in Tubbataha, based on assessments by Philippine-based
marine scientists." The US team intends to "help assess damage and remediation
options, in coordination with the Tubbataha Management Office, appropriate
Philippine government entities, non-governmental organizations, and scientific
experts from Philippine universities."39
A rehabilitation or restoration program to be implemented at the cost of the violator is
also a major relief that may be obtained under a judgment rendered in a citizens' suit
under the Rules, viz:
RULES
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of the
environment and the payment of attorney's fees, costs of suit and other litigation
expenses. It may also require the violator to submit a program of rehabilitation or
restoration of the environment, the costs of which shall be borne by the violator, or to
contribute to a special trust fund for that purpose subject to the control of the
court.1âwphi1

In the light of the foregoing, the Court defers to the Executive Branch on the matter of
compensation and rehabilitation measures through diplomatic channels. Resolution of
these issues impinges on our relations with another State in the context of common
security interests under the VFA. It is settled that "[t]he conduct of the foreign
relations of our government is committed by the Constitution to the executive and
legislative-"the political" --departments of the government, and the propriety of what
may be done in the exercise of this political power is not subject to judicial inquiry or
decision."40

On the other hand, we cannot grant the additional reliefs prayed for in the petition to
order a review of the VFA and to nullify certain immunity provisions thereof.

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora, 41 the VFA
was duly concurred in by the Philippine Senate and has been recognized as a treaty
by the United States as attested and certified by the duly authorized representative of
the United States government. The VF A being a valid and binding agreement, the
parties are required as a matter of international law to abide by its terms and
provisions.42 The present petition under the Rules is not the proper remedy to assail
the constitutionality of its provisions. WHEREFORE, the petition for the issuance of
the privilege of the Writ of Kalikasan is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.