[G.R. No. 91359. September 25, 1992.] different rule.
different rule. "It is obvious that public service would be hindered, and public
VETERANS MANPOWER AND PROTECTIVE SERVICES, INC., Petitioner, v. THE
COURT OF APPEALS, THE CHIEF OF PHILIPPINE CONSTABULARY and
PHILIPPINE CONSTABULARY SUPERVISORY UNIT FOR SECURITY AND
INVESTIGATION AGENCIES (PC-SUSIA),Respondents.
Franciso A. Lava, Jr. and Andresito X. Fornier for Petitioner.
SYLLABUS
1. POLITICAL LAW; IMMUNITY FROM SUIT; THE PHILIPPINE CONSTABULARY
CHIEF AND THE PC-SUSIA MAY NOT BE SUED WITHOUT THE CONSENT OF THE
STATE. — The State may not be sued without its consent (Article XVI, Section 3,
of the 1987 Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend
that, being instrumentalities of the national government exercising a primarily
governmental function of regulating the organization and operation of private
detective, watchmen, or security guard agencies, said official (the PC Chief) and
agency (PC-SUSIA) may not be sued without the Government’s consent,
especially in this case because VMPSI’s complaint seeks not only to compel the
public respondents to act in a certain way, but worse, because VMPSI seeks
actual and compensatory damages in the sum of P1,000,000.00, exemplary
damages in the same amount, and P200,000.00 as attorney’s fees from said
public respondents. Even if its action prospers, the payment of its monetary
claims may not be enforced because the State did not consent to appropriate
the necessary funds for that purpose.
2. ID.; ID.; PUBLIC OFFICIAL MAY BE SUED IN HIS PERSONAL CAPACITY IF HE
ACTS, AMONG OTHERS BEYOND THE SCOPE OF HIS AUTHORITY; CASE AT BAR.
— A public official may sometimes be held liable in his personal or private
capacity if he acts in bad faith, or beyond the scope of his authority or
jurisdiction (Shauf v. Court of Appeals, supra), however, since the acts for which
the PC Chief and PC-SUSIA are being called to account in this case, were
performed by them as part of their official duties, without malice, gross
negligence, or bad faith, no recovery may be had against them in their private
capacities.
3. ID.; ID.; CONSENT TO BE SUED MUST EMANATE FROM A LEGISLATIVE ACT. —
Waiver of the State’s immunity from suit, being a derogation of sovereignty, will
not be lightly inferred, but must be construed strictissimi juris (Republic v.
Feliciano, 148 SCRA 424). The consent of the State to be sued must emanate
from statutory authority, hence, from a legislative act, not from a mere
memorandum. Without such consent, the trial court did not acquire jurisdiction
over the public respondents.
4. ID.; ID.; REASONS BEHIND. — The state immunity doctrine rests upon reasons
of public policy and the inconvenience and danger which would flow from a
The constitutionality of the following provisions of R.A. 5487 (otherwise known
safety endangered, if the supreme authority could be subjected to suits at the as the "Private Security Agency Law"), as amended, is questioned by VMPSI in
instance of every citizen, and, consequently, controlled in the use and its complaint:
disposition of the means required for the proper administration of the
government" (Siren v. U.S. Wall, 152, 19 L. ed. 129, as cited in 78 SCRA 477).
"SECTION 4. Who may Organize a Security or Watchman Agency. — Any Filipino
citizen or a corporation, partnership, or association, with a minimum capital of
five thousand pesos, one hundred per cent of which is owned and controlled by
DECISION Filipino citizens may organize a security or watchman agency: Provided, That no
person shall organize or have an interest in, more than one such agency except
GRIÑO-AQUINO, J.:
those which are already existing at the promulgation of this Decree: . . ." (As
This is a petition for review on certiorari of the decision dated August 11, 1989, amended by P.D. Nos. 11 and 100.)
of the Court of Appeals in CA-G.R. SP No. 15990, entitled "The Chief of
Philippine Constabulary (PC) and Philippine Constabulary Supervisor Unit for "SECTION 17. Rules and Regulations by Chief, Philippine Constabulary. — The
Security and Investigation Agencies (PC-SUSIA) v. Hon. Omar U. Amin and Chief of the Philippine Constabulary, in consultation with the Philippine
Veterans Manpower and Protective Services, Inc. (VMPSI)," lifting the writ of Association of Detective and Protective Agency Operators, Inc. and subject to
preliminary injunction which the Regional Trial Court had issued to the PC-SUSIA the provision of existing laws, is hereby authorized to issue the rules and
enjoining them from committing acts that would result in the cancellation or regulations necessary to carry out the purpose of this Act."
non-renewal of the license of VMPSI to operate as a security agency.
VMPSI alleges that the above provisions of R.A. No. 5487 violate the provisions
of the 1987 Constitution against monopolies, unfair competition and
On March 28, 1988, VMPSI filed a complaint in the Regional Trial Court at
combinations in restraint of trade, and tend to favor and institutionalize the
Makati, Metro Manila, praying the court to:
Philippine Association of Detective and Protective Agency Operators, Inc.
(PADPAO) which is monopolistic because it has an interest in more than one
"A. Forthwith issue a temporary restraining order to preserve the status quo,
security agency.
enjoining the defendants, or any one acting in their place or stead, to refrain
from committing acts that would result in the cancellation or non-renewal of
Respondent VMPSI likewise questions the validity of paragraph 3, subparagraph
VMPSI’s license;
(g) of the Modifying Regulations on the Issuance of License to Operate and
Private Security Licenses and Specifying Regulations for the Operation of
"B. In due time, issue a writ of preliminary injunction to the same effect;
PADPAO issued by then PC Chief Lt. Gen. Fidel V. Ramos, through Col. Sabas V.
Edades, requiring that "all private security agencies/company security forces
"C. Render decision and judgment declaring null and void the amendment of
must register as members of any PADPAO Chapter organized within the Region
Section 4 of R.A. No. 5487, by PD No. 11 exempting organizations like PADPAO
where their main offices are located . . ." (pp. 5-6, Complaint in Civil Case No.
from the prohibition that no person shall organize or have an interest in more
88-471). As such membership requirement in PADPAO is compulsory in nature,
than one agency, declaring PADPAO as an illegal organization existing in
it allegedly violates legal and constitutional provisions against monopolies,
violation of said prohibition, without the illegal exemption provided in PD No.
unfair competition and combinations in restraint of trade.
11; declaring null and void Section 17 of R.A. No. 5487 which provides for the
issuance of rules and regulations in consultation with PADPAO, declaring null
On May 12, 1986, a Memorandum of Agreement was executed by PADPAO and
and void the February 1, 1982 directive of Col. Sabas V. Edadas, in the name of
the PC Chief, which fixed the minimum monthly contract rate per guard for
the then PC Chief, requiring all private security agencies/security forces such as
VMPSI to join PADPAO as a prerequisite to secure/renew their licenses, eight (8) hours of security service per day at P2,255.00 within Metro Manila and
P2,215.00 outside of Metro Manila (Annex B, Petition).
declaring that VMPSI did not engage in ‘cut-throat competition’ in its contract
with MWSS, ordering defendants PC Chief and PC-SUSIA to renew the license of
On June 29, 1987, Odin Security Agency (Odin) filed a complaint with PADPAO
VMPSI; ordering the defendants to refrain from further harassing VMPSI and
accusing VMPSI of cut-throat competition by undercutting its contract rate for
from threatening VMPSI with cancellations or non-renewal of license, without
security services rendered to the Metropolitan Waterworks and Sewerage
legal and justifiable cause; ordering the defendants to pay to VMPSI the sum of
System (MWSS), charging said customer lower than the standard minimum
P1,000,000.00 as actual and compensatory damages, P1,000,000.00 as
rates provided in the Memorandum of Agreement dated May 12, 1986.
exemplary damages, and P200,000.00 as attorney’s fees and expenses of
litigation; and granting such further or other reliefs to VMPSI as may be deemed
PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO
lawful, equitable and just." (pp. 55-56, Rollo.)
Committee on Discipline recommended the expulsion of VMPSI from PADPAO
and the cancellation of its license to operate a security agency (Annex D,
Petition).
The PC-SUSIA made similar findings and likewise recommended the cancellation
of VMPSI’s license (Annex E, Petition).
As a result, PADPAO refused to issue a clearance/certificate of membership to
VMPSI when it requested one.
VMPSI wrote the PC Chief on March 10, 1988, requesting him to set aside or
disregard the findings of PADPAO and consider VMPSI’s application for renewal
of its license, even without a certificate of membership from PADPAO (Annex F,
Petition).
As the PC Chief did not reply, and VMPSI’s license was expiring on March 31,
1988, VMPSI filed Civil Case No. 88-471 in the RTC-Makati, Branch 135, on
March 28, 1988 against the PC Chief and PC-SUSIA. On the same date, the court
issued a restraining order enjoining the PC Chief and PC-SUSIA "from
committing acts that would result in the cancellation or non-renewal of VMPSI’s
license" (Annex G, Petition).
The PC chief and PC-SUSIA filed a "Motion to Dismiss, Opposition to the
Issuance of Writ of Preliminary Injunction, and Motion to Quash the Temporary
Restraining Order," on the grounds that the case is against the State which had
not given consent thereto and that VMPSI’s license already expired on March
31, 1988, hence, the restraining order or preliminary injunction would not serve
any purpose because there was no more license to be cancelled (Annex H,
Petition). Respondent VMPSI opposed the motion.
On April 18, 1988, the lower court denied VMPSI’s application for a writ of
preliminary injunction for being premature because it "has up to May 31, 1988
within which to file its application for renewal pursuant to Section 2 (e) of
Presidential Decree No. 199, . . ." (p. 140, Rollo.).
On May 23, 1988, VMPSI reiterated its application for the issuance of a writ of
preliminary injunction because PC-SUSIA had rejected payment of the penalty
for its failure to submit its application for renewal of its license and the
requirements therefor within the prescribed period in Section 2(e) of the
Revised Rules and Regulations Implementing R.A. 5487, as amended by P.D.
1919 (Annex M, Petition).
On June 10, 1998, the RTC-Makati issued a writ of preliminary injunction upon a
bond of P100,000.00, restraining the defendants, or any one acting in their
behalf, from cancelling or denying renewal of VMPSI’s license, until further
orders from the court.
The PC Chief and PC-SUSIA filed a Motion for Reconsideration of the above
order, but it was denied by the court in its Order of August 10, 1988 (Annex R,
Petition).
On November 3, 1988, the PC Chief and PC-SUSIA sought relief by a petition
for certiorari in the Court of Appeals.
On August 11, 1989, the Court of Appeals granted the petition. The dispositive
portion of its decision reads:
"WHEREFORE, the petition for certiorari filed by petitioners PC Chief and PC-
SUSIA is hereby GRANTED, and the RTC-Makati, Branch 135, is ordered to
dismiss the complaint filed by respondent VMPSI in Civil Case No. 88-471,
insofar as petitioners PC Chief and PC-SUSIA are concerned, for lack of
jurisdiction. The writ of preliminary injunction issued on June 10, 1988, is
dissolved." (pp. 295-296, Rollo.)
VMPSI came to us with this petition for review.
The primary issue in this case is whether or not VMPSI’s complaint against the
PC Chief and PC-SUSIA is a suit against the State without its consent.
The answer is yes.
The State may not be sued without its consent (Article XVI, Section 3, of the
1987 Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend that,
being instrumentalities of the national government exercising a primarily
governmental function of regulating the organization and operation of private
detective, watchmen, or security guard agencies, said official (the PC Chief) and
agency (PC-SUSIA) may not be sued without the Government’s consent,
especially in this case because VMPSI’s complaint seeks not only to compel the
public respondents to act in a certain way, but worse, because VMPSI seeks
actual and compensatory damages in the sum of P1,000,000.00, exemplary
damages in the same amount, and P200,000.00 as attorney’s fees from said
public respondents. Even if its action prospers, the payment of its monetary
claims may not be enforced because the State did not consent to appropriate
the necessary funds for that purpose.
Thus did we hold in Shauf v. Court of Appeals, 191 SCRA
713:jgc:chanrobles.com.ph
"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."
(Emphasis supplied.)
A public official may sometimes be held liable in his personal or private capacity
if he acts in bad faith, or beyond the scope of his authority or jurisdiction (Shauf
v. Court of Appeals, supra), however, since the acts for which the PC Chief and
PC-SUSIA are being called to account in this case, were performed by them as
part of their official duties, without malice, gross negligence, or bad faith, no
recovery may be had against them in their private capacities.
We agree with the observation of the Court of Appeals that the Memorandum
of Agreement dated May 12, 1986 does not constitute an implied consent by
the State to be sued:
"The Memorandum of Agreement dated May 12, 1986 was entered into by the
PC Chief in relation to the exercise of a function sovereign in nature. The correct
test for the application of state immunity is not the conclusion of a contract by
the State but the legal nature of the act. This was clearly enunciated in the case
of United States of America v. Ruiz where the Hon. Supreme Court held:
"‘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 a business contract.
It does not apply where the contract relates to the exercise of its functions.’
(136 SCRA 487, 492.)
"In the instant case, the Memorandum of Agreement entered into by the PC
Chief and PADPAO was intended to professionalize the industry and to
standardize the salaries of security guards as well as the current rates of
security services, clearly, a governmental function. The execution of the said
agreement is incidental to the purpose of R.A. 5487, as amended, which is to
regulate the organization and operation of private detective, watchmen or
security guard agencies. (Emphasis ours.)" (pp. 258-259, Rollo.)
Waiver of the State’s immunity from suit, being a derogation of sovereignty, will
not be lightly inferred, but must be construed strictissimi juris (Republic v.
Feliciano, 148 SCRA 424). The consent of the State to be sued must emanate
from statutory authority, hence, from a legislative act, not from a mere
memorandum. Without such consent, the trial court did not acquire jurisdiction
over the public respondents.
The state immunity doctrine rests upon reasons of public policy and the
inconvenience and danger which would flow from a different rule. "It is obvious
that public service would be hindered, and public safety endangered, if the
supreme authority could be subjected to suits at the instance of every citizen,
and, consequently, controlled in the use and disposition of the means required
for the proper administration of the government" (Siren v. U.S. Wall, 152, 19 L.
ed. 129, as cited in 78 SCRA 477). In the same vein, this Court in Republic v.
Purisima (78 SCRA 470, 473) rationalized:
"Nonetheless, a continued adherence to the doctrine of nonsuability is not to
be deplored for as against the inconvenience that may be cause [by] 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
obstacles, could very well be imagined." (citing Providence Washington
Insurance Co. v. Republic, 29 SCRA 598.)
WHEREFORE, the petition for review is DENIED and the judgment appealed
from is AFFIRMED in toto. No costs.
SO ORDERED.
G.R. No. 104269 November 11, 1993
DEPARTMENT OF AGRICULTURE, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Roy Lago Salcedo for private respondents.
VITUG, J.:
For consideration are the incidents that flow from the familiar doctrine of non-
suability of the state.
In this petition for certiorari, the Department of Agriculture seeks to nullify the
Resolution, 1 dated 27 November 1991, of the National Labor Relations
Commission (NLRC), Fifth Division, Cagayan de Oro City, denying the petition for
injunction, prohibition and mandamus that prays to enjoin permanently the
NLRC's Regional Arbitration Branch X and Cagayan de Oro City Sheriff from
enforcing the decision 2 of 31 May 1991 of the Executive Labor Arbiter and from
attaching and executing on petitioner's property.
The Department of Agriculture (herein petitioner) and Sultan Security Agency
entered into a contract 3 on 01 April 1989 for security services to be provided by
the latter to the said governmental entity. Save for the increase in the monthly
rate of the guards, the same terms and conditions were also made to apply to
another contract, dated 01 May 1990, between the same parties. Pursuant to
their arrangements, guards were deployed by Sultan Agency in the various
premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security Agency filed a
complaint for underpayment of wages, non-payment of 13th month pay,
uniform allowances, night shift differential pay, holiday pay and overtime pay,
as well as for damages, 4 before the Regional Arbitration Branch X of Cagayan de
Oro City, docketed as NLRC Case No. 10-09-00455-90 (or 10-10-00519-90, its
original docket number), against the Department of Agriculture and Sultan
Security Agency.
The Executive Labor Arbiter rendered a decision on 31 May finding herein
petitioner and jointly and severallyliable with Sultan Security Agency for the
payment of money claims, aggregating P266,483.91, of the complainant
security guards. The petitioner and Sultan Security Agency did not appeal the
decision of the Labor Arbiter. Thus, the decision became final and executory.
On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the
City Sheriff to enforce and execute the judgment against the property of the
two respondents. Forthwith, or on 19 July 1991, the City Sheriff levied on
execution the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace,
one (1) unit Toyota Mini Cruiser, and one (1) unit Toyota Crown. 6 These units
were put under the custody of Zacharias Roa, the property custodian of the
petitioner, pending their sale at public auction or the final settlement of the
case, whichever would come first.
A petition for injunction, prohibition and mandamus, with prayer for
preliminary writ of injunction was filed by the petitioner with the National Labor
Relations Commission (NLRC), Cagayan de Oro, alleging, inter alia, that the writ
issued was effected without the Labor Arbiter having duly acquired jurisdiction
over the petitioner, and that, therefore, the decision of the Labor Arbiter was
null and void and all actions pursuant thereto should be deemed equally invalid
and of no legal, effect. The petitioner also pointed out that the attachment or
seizure of its property would hamper and jeopardize petitioner's governmental
functions to the prejudice of the public good.
On 27 November 1991, the NLRC promulgated its assailed resolution; viz:
WHEREFORE, premises considered, the following orders are issued:
1. The enforcement and execution of the judgments against petitioner in NLRC
RABX Cases Nos. 10-10-00455-90; 10-10-0481-90 and 10-10-00519-90 are
temporarily suspended for a period of two (2) months, more or less, but not
extending beyond the last quarter of calendar year 1991 to enable petitioner to
source and raise funds to satisfy the judgment awards against it;
2. Meantime, petitioner is ordered and directed to source for funds within the
period above-stated and to deposit the sums of money equivalent to the
aggregate amount. it has been adjudged to pay jointly and severally with
respondent Sultan Security Agency with the Regional Arbitration Branch X,
Cagayan de Oro City within the same period for proper dispositions;
3. In order to ensure compliance with this order, petitioner is likewise directed
to put up and post sufficient surety and supersedeas bond equivalent to at least
to fifty (50%) percent of the total monetary award issued by a reputable
bonding company duly accredited by the Supreme Court or by the Regional Trial
Court of Misamis Oriental to answer for the satisfaction of the money claims in
case of failure or default on the part of petitioner to satisfy the money claims;
4. The City Sheriff is ordered to immediately release the properties of petitioner
levied on execution within ten (10) days from notice of the posting of sufficient
surety or supersedeas bond as specified above. In the meanwhile, petitioner is
assessed to pay the costs and/or expenses incurred by the City Sheriff, if any, in
connection with the execution of the judgments in the above-stated cases upon
presentation of the appropriate claims or vouchers and receipts by the city
Sheriff, subject to the conditions specified in the NLRC Sheriff, subject to the
conditions specified in the NLRC Manual of Instructions for Sheriffs;
5. The right of any of the judgment debtors to claim reimbursement against
each other for any payments made in connection with the satisfaction of the
judgments herein is hereby recognized pursuant to the ruling in the Eagle
Security case, (supra). In case of dispute between the judgment debtors, the
Executive Labor Arbiter of the Branch of origin may upon proper petition by any
of the parties conduct arbitration proceedings for the purpose and thereby
render his decision after due notice and hearings;
7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of
preliminary injunction previously issued is Lifted and Set Aside and in lieu
thereof, a Temporary Stay of Execution is issued for a period of two (2) months
but not extending beyond the last quarter of calendar year 1991, conditioned
upon the posting of a surety or supersedeas bond by petitioner within ten (10)
days from notice pursuant to paragraph 3 of this disposition. The motion to
admit the complaint in intervention isDenied for lack of merit while the motion
to dismiss the petition filed by Duty Sheriff is Noted
SO ORDERED.
In this petition for certiorari, the petitioner charges the NLRC with grave abuse
of discretion for refusing to quash the writ of execution. The petitioner faults
the NLRC for assuming jurisdiction over a money claim against the Department,
which, it claims, falls under the exclusive jurisdiction of the Commission on
Audit. More importantly, the petitioner asserts, the NLRC has disregarded the
cardinal rule on the non-suability of the State.
The private respondents, on the other hand, argue that the petitioner has
impliedly waived its immunity from suit by concluding a service contract with
Sultan Security Agency.
The basic postulate enshrined in the constitution that "(t)he State may not be
sued without its consent," 7 reflects nothing less than a recognition of the
sovereign character of the State and an express affirmation of the unwritten
rule effectively insulating it from the jurisdiction of courts. 8 It is based on the
very essence of sovereignty. As has been aptly observed, by Justice Holmes, a
sovereign is exempt from suit, not because of any formal conception or
obsolete theory, but on the logical and practical ground that there can be no
legal right as against the authority that makes the law on which the right
depends. 9 True, the doctrine, not too infrequently, is derisively called "the royal
prerogative of dishonesty" because it grants the state the prerogative to defeat
any legitimate claim against it by simply invoking its non-suability. 10 We have
had occasion, to explain in its defense, however, that a continued adherence to
the doctrine of non-suability cannot be deplored, for the loss of governmental
efficiency and the obstacle to the performance of its multifarious functions
would be far greater in severity than the inconvenience that may be caused
private parties, if such fundamental principle is to be abandoned and the
availability of judicial remedy is not to be accordingly restricted. 11
The rule, in any case, is not really absolute for it does not say that the state may
not be sued under any circumstances. On the contrary, as correctly phrased, the
doctrine only conveys, "the state may not be sued without its consent;" its clear
import then is that the State may at times be sued. 12 The States' consent may
be given expressly or impliedly. Express consent may be made through a
general law 13 or a special law. 14 In this jurisdiction, the general law waiving the
immunity of the state from suit is found in Act No. 3083, where the Philippine
government "consents and submits to be sued upon any money claims involving
liability arising from contract, express or implied, which could serve as a basis of
civil action between private parties." 15 Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a
counterclaim 16 or when it enters into a contract. 17 In this situation, the
government is deemed to have descended to the level of the other contracting
party and to have divested itself of its sovereign immunity. This rule, relied
upon by the NLRC and the private respondents, is not, however, without
qualification. Not all contracts entered into by the government operate as a
waiver of its non-suability; distinction must still be made between one which is
executed in the exercise of its sovereign function and another which is done in
its proprietary capacity. 18
In the Unites States of America vs. Ruiz, 19 where the questioned transaction
dealt with improvements on the wharves in the naval installation at Subic Bay,
we held:
The traditional rule of immunity exempts a State from being sued in the courts
of another State without its consent or waiver. This rule is a necessary
consequence of the principles of independence and equality of States.
However, the rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states have multiplied, it
has been necessary to distinguish them — between sovereign and
governmental acts ( jure imperii) and private, commercial and proprietary act
( jure gestionisis). The result is that State immunity now extends only to
acts jure imperii. The restrictive application of State immunity is now the rule in
the United States, the United Kingdom and other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its
commercial activities or economic affairs. Stated differently, a state may be said
to have descended to the level of an individual and can this be deemed to have
actually given its consent to be sued only when it enters into business contracts.
It does not apply where the contracts relates to the exercise of its sovereign
functions. In this case the projects are an integral part of the naval base which is
devoted to the defense of both the United States and the Philippines,
indisputably a function of the government of the highest order; they are not
utilized for not dedicated to commercial or business purposes.
In the instant case, the Department of Agriculture has not pretended to have
assumed a capacity apart from its being a governmental entity when it entered
into the questioned contract; nor that it could have, in fact, performed any act
proprietary in character.
But, be that as it may, the claims of private respondents, i.e. for underpayment
of wages, holiday pay, overtime pay and similar other items, arising from the
Contract for Service, clearly constitute money claims. Act No. 3083, aforecited,
gives the consent of the State to be "sued upon any moneyed claim involving
liability arising from contract, express or implied, . . . Pursuant, however, to
Commonwealth Act ("C.A.") No. 327, as amended by Presidential Decree
("P.D.") No. 1145, the money claim first be brought to the Commission on Audit.
Thus, inCarabao, Inc., vs. Agricultural Productivity Commission, 20 we ruled:
(C)laimants have to prosecute their money claims against the Government
under Commonwealth Act 327, stating that Act 3083 stands now merely as the
general law waiving the State's immunity from suit, subject to the general
limitation expressed in Section 7 thereof that "no execution shall issue upon any
judgment rendered by any Court against the Government of the (Philippines),
and that the conditions provided in Commonwealth Act 327 for filing money
claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions
of C.A. No. 327 and the Labor Code with respect to money claims against the
State. The Labor code, in relation to Act No. 3083, provides the legal basis for
the State liability but the prosecution, enforcement or satisfaction thereof must
still be pursued in accordance with the rules and procedures laid down in C.A.
No. 327, as amended by P.D. 1445.
When the state gives its consent to be sued, it does thereby necessarily consent
to unrestrained execution against it. tersely put, when the State waives its
immunity, all it does, in effect, is to give the other party an opportunity to
prove, if it can, that the State has a liability. 21 In Republic vs. Villasor 22 this
Court, in nullifying the issuance of an alias writ of execution directed against the
funds of the Armed Forces of the Philippines to satisfy a final and executory
judgment, has explained, thus —
The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit the claimant's action "only
up to the completion of proceedings anterior to the stage of execution"
and that the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs or execution or
garnishment to satisfy such judgments, is based on obvious considerations of
public policy. Disbursements of public funds must be covered by the
correspondent appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to be paralyzed or disrupted
by the diversion of public funds from their legitimate and specific objects, as
appropriated by law. 23
WHEREFORE, the petition is GRANTED. The resolution, dated 27 November
1991, is hereby REVERSED and SET ASIDE. The writ of execution directed against
the property of the Department of Agriculture is nullified, and the public
respondents are hereby enjoined permanently from doing, issuing and
implementing any and all writs of execution issued pursuant to the decision
rendered by the Labor Arbiter against said petitioner.
SO ORDERED.
G.R. No. L-30044 December 19, 1973
LORENZO SAYSON, as Highway Auditor, Bureau of Public Highways, Cebu First
Engineering District; CORNELIO FORNIER, as Regional Supervising Auditor,
Eastern Visayas Region; ASTERIO, BUQUERON, ADVENTOR FERNANDEZ,
MANUEL S. LEPATAN, RAMON QUIRANTE, and TEODULFO REGIS, petitioners,
vs.
FELIPE SINGSON, as sole owner and proprietor of Singkier Motor
Service, respondent.
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo
for petitioners.
Teodoro Almase and Casiano U. Laput for respondent.
FERNANDO, J.:
The real party in interest before this Court in this certiorari proceeding to
review a decision of the Court of First Instance of Cebu is the Republic of the
Philippines, although the petitioners are the public officials who were named as
respondents 1 in a mandamus suit below. Such is the contention of the then
Solicitor General, now Associate Justice, Felix V. Makasiar, 2 for as he did point
out, what is involved is a money claim against the government, predicated on a
contract. The basic doctrine of non-suability of the government without its
consent is thus decisive of the controversy. There is a governing statute that is
controlling. 3 Respondent Felipe Singson, the claimant, for reasons known to
him, did not choose to abide by its terms. That was a fatal misstep. The lower
court, however, did not see it that way. We cannot affirm its decision.
As found by the lower court, the facts are the following: "In January, 1967, the
Office of the District Engineer requisitioned various items of spare parts for the
repair of a D-8 bulldozer, ... . The requisition (RIV No. 67/0331) was signed by
the District Engineer, Adventor Fernandez, and the Requisitioning Officer (civil
engineer), Manuel S. Lepatan. ... It was approved by the Secretary of Public
Works and Communications, Antonio V. Raquiza. It is noted in the approval of
the said requisition that "This is an exception to the telegram dated Feb. 21,
1967 of the Secretary of Public Works and Communications." ... So, a canvass or
public bidding was conducted on May 5, 1967 ... . The committee on award
accepted the bid of the Singkier Motor Service [owned by respondent Felipe
Singson] for the sum of P43,530.00. ... Subsequently, it was approved by the
Secretary of Public Works and Communications; and on May 16, 1967 the
Secretary sent a letter-order to the Singkier Motor Service, Mandaue, Cebu
requesting it to immediately deliver the items listed therein for the lot price of
P43,530.00. ... It would appear that a purchase order signed by the District
Engineer, the Requisitioning Officer and the Procurement Officer, was
addressed to the Singkier Motor Service. ... In due course the Voucher No.
07806 reached the hands of Highway Auditor Sayson for pre-audit. He then
made inquiries about the reasonableness of the price. ... Thus, after finding
from the indorsements of the Division Engineer and the Commissioner of Public
Highways that the prices of the various spare parts are just and reasonable and
that the requisition was also approved by no less than the Secretary of Public
Works and Communications with the verification of V.M. Secarro a
representative of the Bureau of Supply Coordination, Manila, he approved it for
payment in the sum of P34,824.00, with the retention of 20% equivalent to
P8,706.00. ... His reason for withholding the 20% equivalent to P8,706.00 was to
submit the voucher with the supporting papers to the Supervising Auditor,
which he did. ... The voucher ... was paid on June 9, 1967 in the amount of
P34,824.00 to the petitioner [respondent Singson]. On June 10,1967, Highway
Auditor Sayson received a telegram from Supervising Auditor Fornier quoting a
telegraphic message of the General Auditing Office which states: "In view of
excessive prices charge for purchase of spare parts and equipment shown by
vouchers already submitted this Office direct all highway auditors refer General
Office payment similar nature for appropriate action." ... In the interim it would
appear that when the voucher and the supporting papers reached the GAO, a
canvass was made of the spare parts among the suppliers in Manila,
particularly, the USI (Phil.), which is the exclusive dealer of the spare parts of
the caterpillar tractors in the Philippines. Said firm thus submitted its quotations
at P2,529.64 only which is P40,000.00 less than the price of the Singkier. ... In
view of the overpricing the GAO took up the matter with the Secretary of Public
Works in a third indorsement of July 18, 1967. ... The Secretary then circularized
a telegram holding the district engineer responsible for overpricing." 4 What is
more, charges for malversation were filed against the district engineer and the
civil engineer involved. It was the failure of the Highways Auditor, one of the
petitioners before us, that led to the filing of the mandamus suit below, with
now respondent Singson as sole proprietor of Singkier Motor Service, being
adjudged as entitled to collect the balance of P8,706.00, the contract in
question having been upheld. Hence this appeal by certiorari.
1. To state the facts is to make clear the solidity of the stand taken by the
Republic. The lower court was unmindful of the fundamental doctrine of non-
suability. So it was stressed in the petition of the then Solicitor General
Makasiar. Thus: "It is apparent that respondent Singson's cause of action is a
money claim against the government, for the payment of the alleged balance of
the cost of spare parts supplied by him to the Bureau of Public Highways.
Assuming momentarily the validity of such claim, although as will be shown
hereunder, the claim is void for the cause or consideration is contrary to law,
morals or public policy, mandamus is not the remedy to enforce the collection
of such claim against the State but a ordinary action for specific performance ...
. Actually, the suit disguised as one for mandamus to compel the Auditors to
approve the vouchers for payment, is a suit against the State, which cannot
prosper or be entertained by the Court except with the consent of the State ... .
In other words, the respondent should have filed his claim with the General
Auditing Office, under the provisions of Com. Act 327 ... which prescribe the
conditions under which money claim against the government may be
filed ...." 5 Commonwealth Act No. 327 is quite explicit. It is therein provided: "In
all cases involving the settlement of accounts or claims, other than those of
accountable officers, the Auditor General shall act and decide the same within
sixty days, exclusive of Sundays and holidays, after their presentation. If said
accounts or claims need reference to other persons, office or offices, or to a
party interested, the period aforesaid shall be counted from the time the last
comment necessary to a proper decision is received by
him." 6 Thereafter, the procedure for appeal is indicated: "The party aggrieved
by the final decision of the Auditor General in the settlement of an account or
claim may, within thirty days from receipt of the decision, take an appeal in
writing: (a) To the President of the United States, pending the final and
complete withdrawal of her sovereignty over the Philippines, or (b) To the
President of the Philippines, or (c) To the Supreme Court of the Philippines if the
appellant is a private person or entity." 7
2. With the facts undisputed and the statute far from indefinite or ambiguous,
the appealed decision defies explanation. It would be to disregard a basic
corollary of the cardinal postulate of non-suability. It is true that once consent is
secured, an action may be filed. There is nothing to prevent the State, however,
in such statutory grant, to require that certain administrative proceedings be
had and be exhausted. Also, the proper forum in the judicial hierarchy can be
specified if thereafter an appeal would be taken by the party aggrieved. Here,
there was no ruling of the Auditor General. Even had there been such, the court
to which the matter should have been elevated is this Tribunal; the lower court
could not legally act on the matter. What transpired was anything but that. It is
quite obvious then that it does not have the imprint of validity.
WHEREFORE, the decision of the Court of First Instance of Cebu of September 4,
1968 is reversed and set aside, and the suit for mandamus filed against
petitioners, respondents below, is dismissed. With costs against respondent
Felipe Singson.
[G.R. No. 154411. June 19, 2003]
NATIONAL HOUSING AUTHORITY, petitioner, vs. HEIRS OF ISIDRO
GUIVELONDO, COURT OF APPEALS, HON. ISAIAS DICDICAN, Presiding Judge,
Regional Trial Court, Branch 11, Cebu City, and PASCUAL Y. ABORDO, Sheriff,
Regional Trial Court, Branch 11, Cebu City, respondents.
DECISION
YNARES-SANTIAGO, J.:
On February 23, 1999, petitioner National Housing Authority filed with the
Regional Trial Court of Cebu City, Branch 11, an Amended Complaint for
eminent domain against Associacion Benevola de Cebu, Engracia Urot and the
Heirs of Isidro Guivelondo, docketed as Civil Case No. CEB-23386. Petitioner
alleged that defendant Associacion Benevola de Cebu was the claimant/owner
of Lot 108-C located in the Banilad Estate, Cebu City; that defendant Engracia
Urot was the claimant/owner of Lots Nos. 108-F, 108-I, 108-G, 6019-A and
6013-A, all of the Banilad Estate; that defendant Heirs of Isidro Guivelondo were
the claimants/owners of Cadastral Lot No. 1613-D located at Carreta, Mabolo,
Cebu City; and that the lands are within a blighted urban center which
petitioner intends to develop as a socialized housing project.[1]
On November 12, 1999, the Heirs of Isidro Guivelondo, respondents herein,
filed a Manifestation stating that they were waiving their objections to
petitioners power to expropriate their properties. Hence, the trial court issued
an Order as follows:
WHEREFORE, the Court hereby declares that the plaintiff has a lawful right to
expropriate the properties of the defendants who are heirs of Isidro
Guivelondo.
The appointment of commissioners who would ascertain and report to the
Court the just compensation for said properties will be done as soon as the
parties shall have submitted to the Court the names of persons desired by them
to be appointed as such commissioners.
SO ORDERED.[2]
Thereafter, the trial court appointed three Commissioners to ascertain the
correct and just compensation of the properties of respondents. On April 17,
2000, the Commissioners submitted their report wherein they recommended
that the just compensation of the subject properties be fixed at P11,200.00 per
square meter.[3] On August 7, 2000, the trial court rendered Partial Judgment
adopting the recommendation of the Commissioners and fixing the just
compensation of the lands of respondent Heirs of Isidro Guivelondo at
P11,200.00 per square meter, to wit:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered
by the Court in this case fixing the just compensation for the lands of the
defendants who are the heirs of Isidro Guivelondo, more particularly Lots Nos.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 19, 20, 6016-F, 6016-H, 6016-E and
6016-D of Csd-10219, which were sought to be expropriated by the plaintiff at
P11,200.00 per square meter and ordering the plaintiff to pay to the said
defendants the just compensation for the said lands computed at P11,200.00
per square meter.
IT IS SO ORDERED.[4]
Petitioner NHA filed two motions for reconsideration dated August 30, 2000
and August 31, 2000, assailing the inclusion of Lots 12, 13 and 19 as well as the
amount of just compensation, respectively. Respondent Heirs also filed a
motion for reconsideration of the Partial Judgment. On October 11, 2000, the
trial court issued an Omnibus Order denying the motion for reconsideration of
respondent Heirs and the August 31, 2000 motion of petitioner, on the ground
that the fixing of the just compensation had adequate basis and support. On the
other hand, the trial court granted petitioners August 30, 2000 motion for
reconsideration on the ground that the Commissioners Report did not include
Lots 12, 13 and 19 within its coverage. Thus:
WHEREFORE, in view of the foregoing premises, the Court hereby denies the
motion of the heirs of Isidro Guivelondo (with the exception of Carlota Mercado
and Juanita Suemith) for reconsideration of the partial judgment rendered in
this case on August 7, 2000 and plaintiffs motion for reconsideration of said
judgment, dated August 31, 2000.
However, the Court hereby grants the plaintiffs motion for reconsideration of
said judgment, dated August 30, 2000. Accordingly, the judgment rendered in
this case on August 7, 2000 is hereby set aside insofar as it has fixed just
compensations for Lots Nos. 12, 13 and 19 of Csd-10219 because the fixing of
said just compensations appears to lack adequate basis.
SO ORDERED.[5]
Petitioner filed with the Court of Appeals a petition for certiorari, which was
docketed as CA-G.R. SP No. 61746.[6] Meanwhile, on October 31, 2000, the trial
court issued an Entry of Judgment over the Partial Judgment dated August 7,
2000 as modified by the Omnibus Order dated October 11,
2000.[7] Subsequently, respondent Heirs filed a Motion for Execution, which was
granted on November 22, 2000.
On January 31, 2001, the Court of Appeals dismissed the petition for certiorari
on the ground that the Partial Judgment and Omnibus Order became final and
executory when petitioner failed to appeal the same.[8]
Petitioners Motion for Reconsideration and Urgent Ex-Parte Motion for a
Clarificatory Ruling were denied in a Resolution dated March 18, 2001.[9] A
petition for review was filed by petitioner with this Court, which was docketed
as G.R. No. 147527. However, the same was denied in a Minute Resolution
dated May 9, 2001 for failure to show that the Court of Appeals committed a
reversible error.[10]
Petitioner filed a Motion for Reconsideration which was however denied with
finality on August 20, 2001.[11]
Prior to the aforesaid denial of the Motion for Reconsideration, petitioner, on
July 16, 2001, filed with the trial court a Motion to Dismiss Civil Case No. CEB-
23386, complaint for eminent domain, alleging that the implementation of its
socialized housing project was rendered impossible by the unconscionable value
of the land sought to be expropriated, which the intended beneficiaries can not
afford.[12] The Motion was denied on September 17, 2001, on the ground that
the Partial Judgment had already become final and executory and there was no
just and equitable reason to warrant the dismissal of the case.[13] Petitioner filed
a Motion for Reconsideration, which was denied in an Order dated November
20, 2001.[14]
Petitioner thus filed a petition for certiorari with the Court of Appeals, which
was docketed as CA-G.R. SP No. 68670, praying for the annulment of the Order
of the trial court denying its Motion to Dismiss and its Motion for
Reconsideration.[15]
On February 5, 2002, the Court of Appeals summarily dismissed the
petition. Immediately thereafter, respondent Sheriff Pascual Y. Abordo of the
Regional Trial Court of Cebu City, Branch 11, served on petitioner a Notice of
Levy pursuant to the Writ of Execution issued by the trial court to enforce the
Partial Judgment of August 7, 2000 and the Omnibus Order of October 11,
2000.[16]
On February 18, 2002, the Court of Appeals set aside the dismissal of the
petition and reinstated the same.[17] Thereafter, a temporary restraining order
was issued enjoining respondent sheriff to preserve the status quo.[18]
On May 27, 2002, respondent sheriff served on the Landbank of the Philippines
a Notice of Third Garnishment against the deposits, moneys and interests of
petitioner therein.[19] Subsequently, respondent sheriff levied on funds and
personal properties of petitioner.[20]
On July 16, 2002, the Court of Appeals rendered the assailed decision dismissing
the petition for certiorari.[21]
Hence, petitioner filed this petition for review, raising the following issues:
1) WHETHER OR NOT THE STATE CAN BE COMPELLED AND COERCED BY THE
COURTS TO EXERCISE OR CONTINUE WITH THE EXERCISE OF ITS INHERENT
POWER OF EMINENT DOMAIN;
2) WHETHER OR NOT JUDGMENT HAS BECOME FINAL AND EXECUTORY AND IF
ESTOPPEL OR LACHES APPLIES TO GOVERNMENT;
3) WHETHER OR NOT WRITS OF EXECUTION AND GARNISHMENT MAY BE
ISSUED AGAINST THE STATE IN AN EXPROPRIATION WHEREIN THE EXERCISE OF
THE POWER OF EMINENT DOMAIN WILL NOT SERVE PUBLIC USE OR PURPOSE
{APPLICATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 10-
2000}.[22]
Respondent Heirs of Isidro Guivelondo filed their Comment, arguing as follows:
I made to appear to the satisfaction of the appellate court that the expropriation
AS EARLIER UPHELD BY THE HONORABLE COURT, THE JUDGMENT OF THE TRIAL
COURT IS ALREADY FINAL AND EXECUTORY, HENCE, COULD NO LONGER BE
DISTURBED NOR SET ASIDE
II
THE FUNDS AND ASSETS OF THE PETITIONER ARE NOT EXEMPT FROM LEVY AND
GARNISHMENT
III
THE ISSUES RAISED IN THIS SECOND PETITION FOR REVIEW WERE ALREADY
RESOLVED BY THE HONORABLE COURT[23]
In the early case of City of Manila v. Ruymann,[24] the Court was confronted with
the question: May the petitioner, in an action for expropriation, after he has
been placed in possession of the property and before the termination of the
action, dismiss the petition? It resolved the issue in the affirmative and held:
The right of the plaintiff to dismiss an action with the consent of the court is
universally recognized with certain well-defined exceptions. If the plaintiff
discovers that the action which he commenced was brought for the purpose of
enforcing a right or a benefit, the advisability or necessity of which he later
discovers no longer exists, or that the result of the action would be different
from what he had intended, then he should be permitted to withdraw his
action, subject to the approval of the court. The plaintiff should not be required
to continue the action, subject to some well-defined exceptions, when it is not
to his advantage to do so. Litigation should be discouraged and not
encouraged. Courts should not require parties to litigate when they no longer
desire to do so. Courts, in granting permission to dismiss an action, of course,
should always take into consideration the effect which said dismissal would
have upon the rights of the defendant.[25]
Subsequently, in Metropolitan Water District v. De Los Angeles,[26] the Court had
occasion to apply the above-quoted ruling when the petitioner, during the
pendency of the expropriation case, resolved that the land sought to be
condemned was no longer necessary in the maintenance and operation of its
system of waterworks. It was held:
It is not denied that the purpose of the plaintiff was to acquire the land in
question for a public use. The fundamental basis then of all actions brought for
the expropriation of lands, under the power of eminent domain, is public
use. That being true, the very moment that it appears at any stage of the
proceedings that the expropriation is not for a public use, the action must
necessarily fail and should be dismissed, for the reason that the action cannot
be maintained at all except when the expropriation is for some public use. That
must be true even during the pendency of the appeal of at any other stage of
the proceedings. If, for example, during the trial in the lower court, it should be
made to appear to the satisfaction of the court that the expropriation is not for
some public use, it would be the duty and the obligation of the trial court to
dismiss the action. And even during the pendency of the appeal, if it should be
is not for public use, then it would become the duty and the obligation of the
appellate court to dismiss it.[27]
Notably, the foregoing cases refer to the dismissal of an action for eminent
domain at the instance of the plaintiff during the pendency of the case. The rule
is different where the case had been decided and the judgment had already
become final and executory.
Expropriation proceedings consists of two stages: first, condemnation of the
property after it is determined that its acquisition will be for a public purpose or
public use and, second, the determination of just compensation to be paid for
the taking of private property to be made by the court with the assistance of
not more than three commissioners.[28] Thus:
There are two (2) stages in every action for expropriation. The first is concerned
with the determination of the authority of the plaintiff to exercise the power of
eminent domain and the propriety of its exercise in the context of the facts
involved in the suit. It ends with an order, if not of dismissal of the action, of
condemnation declaring that the plaintiff has a lawful right to take the property
sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the
date of the filing of the complaint. An order of dismissal, if this be ordained,
would be a final one, of course, since it finally disposes of the action and leaves
nothing more to be done by the Court on the merits. So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the
proceedings before the Trial Court, no objection to the exercise of the right of
condemnation (or the propriety thereof) shall be filed or heard.
The second phase of the eminent domain action is concerned with the
determination by the Court of the just compensation for the property sought to
be taken. This is done by the Court with the assistance of not more than three
(3) commissioners. The order fixing the just compensation on the basis of the
evidence before, and findings of, the commissioners would be final, too. It
would finally dispose of the second stage of the suit, and leave nothing more to
be done by the Court regarding the issue. Obviously, one or another of the
parties may believe the order to be erroneous in its appreciation of the
evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied
party may seek a reversal of the order by taking an appeal therefrom.[29]
The outcome of the first phase of expropriation proceedings, which is either an
order of expropriation or an order of dismissal, is final since it finally disposes of
the case. On the other hand, the second phase ends with an order fixing the
amount of just compensation. Both orders, being final, are appealable.[30] An
order of condemnation or dismissal is final, resolving the question of whether or
not the plaintiff has properly and legally exercised its power of eminent
domain.[31] Once the first order becomes final and no appeal thereto is taken,
the authority to expropriate and its public use can no longer be questioned.[32]
The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil
Procedure, which provides:
Order of expropriation. If the objections to and the defenses against the right of
the plaintiff to expropriate the property are overruled, or when no party
appears to defend as required by this Rule, the court may issue an order of
expropriation declaring that the plaintiff has a lawful right to take the property
sought to be expropriated, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the
date of the taking of the property or the filing of the complaint, whichever came
first.
A final order sustaining the right to expropriate the property may be appealed
by any party aggrieved thereby. Such appeal, however, shall not prevent the
court from determining the just compensation to be paid.
After the rendition of such an order, the plaintiff shall not be permitted to
dismiss or discontinue the proceeding except on such terms as the court deems
just and equitable. (underscoring ours)
In the case at bar, petitioner did not appeal the Order of the trial court dated
December 10, 1999, which declared that it has a lawful right to expropriate the
properties of respondent Heirs of Isidro Guivelondo. Hence, the Order became
final and may no longer be subject to review or reversal in any court.[33] A final
and executory decision or order can no longer be disturbed or reopened no
matter how erroneous it may be. Although judicial determinations are not
infallible, judicial error should be corrected through appeals, not through
repeated suits on the same claim.[34]
Petitioner anchors its arguments on the last paragraph of the above-quoted
Rule 67, Section 4. In essence, it contends that there are just and equitable
grounds to allow dismissal or discontinuance of the expropriation
proceedings. More specifically, petitioner alleges that the intended public use
was rendered nugatory by the unreasonable just compensation fixed by the
court, which is beyond the means of the intended beneficiaries of the socialized
housing project. The argument is tenuous.
Socialized housing has been recognized as public use for purposes of exercising
the power of eminent domain.
Housing is a basic human need. Shortage in housing is a matter of state concern
since it directly and significantly affects public health, safety, the environment
and in sum, the general welfare. The public character of housing measures does
not change because units in housing projects cannot be occupied by all but only
by those who satisfy prescribed qualifications. A beginning has to be made, for
it is not possible to provide housing for all who need it, all at once.
xxx xxx xxx.
In the light of the foregoing, this Court is satisfied that socialized housing falls
with the confines of public use. xxx xxx xxx. Provisions on economic
opportunities inextricably linked with low-cost housing, or slum clearance,
relocation and resettlement, or slum improvement emphasize the public
purpose of the project.[35]
The public purpose of the socialized housing project is not in any way
diminished by the amount of just compensation that the court has fixed. The
need to provide decent housing to the urban poor dwellers in the locality was
not lost by the mere fact that the land cost more than petitioner had
expected. It is worthy to note that petitioner pursued its petition for certiorari
with the Court of Appeals assailing the amount of just compensation and its
petition for review with this Court which eloquently indicates that there still
exists a public use for the housing project. It was only after its appeal and
petitions for review were dismissed that petitioner made a complete turn-
around and decided it did not want the property anymore.
Respondent landowners had already been prejudiced by the expropriation
case. Petitioner cannot be permitted to institute condemnation proceedings
against respondents only to abandon it later when it finds the amount of just
compensation unacceptable. Indeed, our reprobation in the case of Cosculluela
v. Court of Appeals[36]is apropos:
It is arbitrary and capricious for a government agency to initiate expropriation
proceedings, seize a persons property, allow the judgment of the court to
become final and executory and then refuse to pay on the ground that there are
no appropriations for the property earlier taken and profitably used. We
condemn in the strongest possible terms the cavalier attitude of government
officials who adopt such a despotic and irresponsible stance.
In order to resolve the issue of the propriety of the garnishment against
petitioners funds and personal properties, there is a need to first determine its
true character as a government entity. Generally, funds and properties of the
government cannot be the object of garnishment proceedings even if the
consent to be sued had been previously granted and the state liability
adjudged.[37]
The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit claimants action only up to
the completion of proceedings anterior to the stage of execution and that the
power of the Courts ends when the judgment is rendered, since government
funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of
public policy. Disbursements of public funds must be covered by the
corresponding appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to be paralyzed or disrupted
by the diversion of public funds from their legitimate and specific objects, as
appropriated by law.[38]
However, if the funds belong to a public corporation or a government-owned or
controlled corporation which is clothed with a personality of its own, separate
and distinct from that of the government, then its funds are not exempt from
garnishment.[39] This is so because when the government enters into
commercial business, it abandons its sovereign capacity and is to be treated like
any other corporation.[40]
In the case of petitioner NHA, the matter of whether its funds and properties
are exempt from garnishment has already been resolved squarely against its
predecessor, the Peoples Homesite and Housing Corporation (PHHC), to wit:
The plea for setting aside the notice of garnishment was premised on the funds
of the Peoples Homesite and Housing Corporation deposited with petitioner
being public in character. There was not even a categorical assertion to that
effect. It is only the possibility of its being public in character. The tone was thus
irresolute, the approach diffident. The premise that the funds cold be spoken of
as public in character may be accepted in the sense that the Peoples Homesite
and Housing Corporation was a government-owned entity. It does not follow
though that they were exempt from garnishment.[41]
This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v.
Board of Liquidators:[42]
Having a juridical personality separate and distinct from the government, the
funds of such government-owned and controlled corporations and non-
corporate agency, although considered public in character, are not exempt
from garnishment. This doctrine was applied to suits filed against the Philippine
Virginia Tobacco Administration (PNB vs. Pabalan, et al., 83 SCRA 695); the
National Shipyard & Steel Corporation (NASSCO vs. CIR, 118 Phil. 782); the
Manila Hotel Company (Manila Hotel Employees Asso. vs. Manila Hotel Co., 73
Phil. 374); and the People's Homesite and Housing Corporation (PNB vs. CIR, 81
SCRA 314). [emphasis ours]
Hence, it is clear that the funds of petitioner NHA are not exempt from
garnishment or execution. Petitioners prayer for injunctive relief to restrain
respondent Sheriff Pascual Abordo from enforcing the Notice of Levy and
Garnishment against its funds and properties must, therefore, be denied.
WHEREFORE, in view of the foregoing, the instant petition for review
is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 68670,
affirming the trial courts Order denying petitioners Motion to Dismiss the
expropriation proceedings in Civil Case No. CEB-23386, is AFFIRMED. Petitioners
prayer for injunctive relief against the levy and garnishment of its funds and
personal properties is DENIED. The Temporary Restraining Order dated January
22, 2003 is LIFTED.
SO ORDERED.
G.R. No. 176628
PHILIPPINE TOURISM AUTHORITY,
- versus -
PHILIPPINE GOLF DEVELOPMENT
& EQUIPMENT, INC.
March 19, 2012
x------------------------------------------------------------------------------------x
RESOLUTION
BRION, J.:
Before this Court is a petition for certiorari, under Rule 65 of the 1997 Rules of
Civil Procedure, to annul the decision[1] dated December 13, 2006 of the Court
of Appeals (CA) in CA G.R. SP No. 90402. This CA decision dismissed the petition
for annulment of judgment which sought to set aside the decision[2] of the
Regional Trial Court (RTC) of Muntinlupa City, Branch 203, in Civil Case No. 03-
212. The RTC held the Philippine Tourism Authority (PTA) liable for its unpaid
obligation to Philippine Golf Development & Equipment, Inc. (PHILGOLF).
FACTUAL BACKGROUND 3. The amount of One Hundred Twenty Eight Thousand, Five Hundred
Twenty Nine Pesos and Fourteen Centavos (P128,529.14), as filing fees and
On April 3, 1996, PTA, an agency of the Department of Tourism, whose main other costs of litigation.
function is to bolster and promote tourism, entered into a contract with Atlantic
Erectors, Inc. (AEI) for the construction of the Intramuros Golf Course Expansion 4. The amount of Three Hundred Thousand Pesos (P300,000.00), as
Projects (PAR 60-66) for a contract price of Fifty-Seven Million Nine Hundred moral damages.
Fifty-Four Thousand Six Hundred Forty-Seven and 94/100 Pesos
(P57,954,647.94). 5. The amount of One Hundred Fifty Thousand (Pesos (P150,000.00),
as nominal damages, and
6. The amount of Two Hundred Fifty Thousand Pesos (P250,000.00),
The civil works of the project commenced. Since AEI was incapable of as exemplary damages.
constructing the golf course aspect of the project, it entered into a sub-contract
agreement with PHILGOLF, a duly organized domestic corporation, to build the
golf course amounting to Twenty-Seven Million Pesos (P27,000,000.00). The
SO ORDERED.[4]
sub-contract agreement also provides that PHILGOLF shall submit its progress
billings directly to PTA and, in turn, PTA shall directly pay PHILGOLF.[3]
On July 11, 2005, PTA seasonably appealed the case to the CA. But before the
appeal of PTA could be perfected, PHILGOLF already filed a motion for
On October 2, 2003, PHILGOLF filed a collection suit against PTA amounting to
execution pending appeal with the RTC. The RTC, in an Order dated June 2,
Eleven Million Eight Hundred Twenty Thousand Five Hundred Fifty and 53/100
2004, granted the motion and a writ of execution pending appeal was issued
Pesos (P11,820,550.53), plus interest, for the construction of the golf
against PTA. On June 3, 2004, a notice of garnishment was issued against PTAs
course. Within the period to file a responsive pleading, PTA filed a motion for
bank account at the Land Bank of the Philippines, NAIA-BOC Branch to fully
extension of time to file an answer.
satisfy the judgment.
On October 30, 2003, the RTC granted the motion for extension of time. PTA
PTA filed a petition for certiorari with the CA, imputing grave abuse of discretion
filed another motion for extension of time to file an answer. The RTC again
on the part of the RTC for granting the motion for execution pending appeal.
granted the motion.
The CA ruled in favor of PTA and set aside the order granting the motion for
execution pending appeal.
Despite the RTCs liberality of granting two successive motions for extension of
time, PTA failed to answer the complaint. Hence, on April 6, 2004, the RTC
On July 11, 2005, PTA withdrew its appeal of the RTC decision and, instead, filed
rendered a judgment of default, ruling as follows:
a petition[5] for annulment of judgment under Rule 47 of the Rules of Court. The
petition for annulment of judgment was premised on the argument that the
gross negligence of PTAs counsel prevented the presentation of evidence before
WHEREFORE, judgment is hereby rendered, ordering the defendant to pay the RTC.
plaintiff:
1. The amount of Eleven Million, Eight Hundred Twenty Thousand,
Five Hundred Fifty Pesos and Fifty Three Centavos (P11,820,550.53), On December 13, 2006, the CA dismissed the petition for annulment of
judgment for lack of merit. PTA questions this CA action in the present petition
representing defendants outstanding obligation, plus interest thereon of twelve
percent (12%) per annum from the time the unpaid billings of plaintiff were due for certiorari.
for payment by the defendant, until they are fully paid.
2. The amount of Two Hundred Thousand Pesos (P200,000.00), as
THE PETITION
attorneys fees.
The petition cites three arguments: first, that the negligence of PTAs counsel
amounted to an extrinsic fraud warranting an annulment of judgment; second,
that since PTA is a government entity, it should not be bound by the inactions or
negligence of its counsel; and third, that there were no other available remedies
left for PTA but a petition for annulment of judgment.
OUR RULING
We find the petition unmeritorious.
The Rules of Court specifically provides for deadlines in actions before the court
to ensure an orderly disposition of cases. PTA cannot escape these legal
technicalities by simply invoking the negligence of its counsel. This practice, if
allowed, would defeat the purpose of the Rules on periods since every party
would merely lay the blame on its counsel to avoid any liability. The rule is that
a client is bound by the acts, even mistakes, of his counsel in the realm of
procedural technique[,]and unless such acts involve gross negligence that the
claiming party can prove, the acts of a counsel bind the client as if it had been
the latters acts.[6]
In LBC Express - Metro Manila, Inc. v. Mateo,[7] the Court held that [g]ross
negligence is characterized by want of even slight care, acting or omitting to act
in a situation where there is a duty to act, not inadvertently but willfully and
intentionally with a conscious indifference to consequences insofar as other
persons may be affected. This cannot be invoked in cases where the counsel is
merely negligent in submitting his required pleadings within the period that the
rules mandate.
It is not disputed that the summons together with a copy of the complaint was
personally served upon, and received by PTA through its Corporate Legal
Services Department, on October 10, 2003.[8] Thus, in failing to submit a
responsive pleading within the required time despite sufficient notice, the RTC
was correct in declaring PTA in default.
There was no extrinsic fraud
Extrinsic fraud refers to any fraudulent act of the prevailing party in the
litigation which is committed outside of the trial of the case, whereby the
unsuccessful party has been prevented from exhibiting fully his case, by fraud or
deception practiced on him by his opponent.[9] Under the doctrine of this cited
case, we do not see the acts of PTAs counsel to be constitutive of extrinsic
fraud.
The records reveal that the judgment of default[10] was sent via registered mail
to PTAs counsel. However, PTA never availed of the remedy of a motion to lift
the order of default.[11] Since the failure of PTA to present its evidence was not a
product of any fraudulent acts committed outside trial, the RTC did not err in
declaring PTA in default.
Annulment of judgment is not the proper remedy
PTAs appropriate remedy was only to appeal the RTC decision. Annulment of
Judgment under Rule 47 of the Rules of Court is a recourse equitable in
character and allowed only in exceptional cases where the ordinary remedies of
new trial, appeal, petition for relief or other appropriate remedies are no longer
available through no fault of petitioner.[12]
In this case, appeal was an available remedy. There was also no extraordinary
reason for a petition for annulment of judgment, nor was there any adequate
explanation on why the remedy for new trial or petition for relief could not be
used. The Court is actually at a loss why PTA had withdrawn a properly filed
appeal and substituted it with another petition, when PTA could have merely
raised the same issues through an ordinary appeal.
PTA was acting in a proprietary character
PTA also erred in invoking state immunity simply because it is a government
entity. The application of state immunity is proper only when the proceedings
arise out of sovereign transactions and not in cases of commercial activities or
economic affairs. The State, in entering into a business contract, descends to
the level of an individual and is deemed to have tacitly given its consent to be
sued.[13]
Since the Intramuros Golf Course Expansion Projects partakes of a proprietary
character entered into between PTA and PHILGOLF, PTA cannot avoid its
financial liability by merely invoking immunity from suit.
A special civil action for certiorari under Rule 65 is proper only when there is
no other plain, speedy, and adequate remedy
Lastly, a special civil action under Rule 65 of the Rules of Court is only available
in cases when a tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of
law. It is not a mode of appeal, and cannot also be made as a substitute for
appeal. It will not lie in cases where other remedies are available under the law.
In Land Bank of the Philippines v. Court of Appeals,[14] the Court had the
occasion to state:
The general rule is that a [certiorari] will not issue where the remedy of appeal
is available to the aggrieved party. The remedies of appeal in the ordinary
course of law and that of certiorari under Rule 65 of the Revised Rules of Court
are mutually exclusive and not alternative or cumulative. Hence, the special civil
action for certiorariunder Rule 65 is not and cannot be a substitute for an
appeal, where the latter remedy is available. xxx
xxxx
The proper recourse of the aggrieved party from a decision of the CA is a
petition for review on certiorari under Rule 45 of the Revised Rules of Court. On
the other hand, if the error subject of the recourse is one of jurisdiction, or the
act complained of was perpetrated by a quasi-judicial officer or agency with
grave abuse of discretion amounting to lack or excess of jurisdiction, the proper
remedy available to the aggrieved party is a petition for certiorari under Rule 65
of the said Rules. [emphases supplied; citations omitted]
In sum, PTA had the remedy of appealing the RTC decision to the CA and,
thereafter, to us. Under the circumstances, we find no adequate reason to
justify the elevation of this case to the CA and then to us, under Rule 65 of the
Rules of Court.
WHEREFORE, premises considered, we hereby DISMISS the petition
for certiorari. No costs.
SO ORDERED.
G.R. No. 131544. March 16, 2001]
EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING, SEPTA
CONSTRUCTION CO., PHIL. PLUMBING CO., HOME CONSTRUCTION INC.,
WORLD BUILDERS CO., GLASS WORLD INC., PERFORMANCE BUILDERS DEVT.
CO., DE LEON-ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All
represented by their Atty. IN FACT, MARCELO D, FORONDA, petitioners, vs.
HON. GREGORIO R. VIGILAR, In His Capacity as Secretary of Public Works and
Highways, respondent.
DECISION
BUENA, J.:
Sought to be reversed in the instant Petition for Certiorari is the Decision, dated
07 November 1997, of the Regional Trial Court of Quezon City, Branch 226, in
Civil Case No. Q-96-29243,[1] dismissing the Petition for Mandamus filed by
herein petitioners against herein respondent Hon. Gregorio Vigilar, in his
capacity as Secretary of the Department of Public Works and Highways (DPWH).
The tapestry of facts unfurls.
In 1983, the Ministry of Human Settlement, through the BLISS Development
Corporation, initiated a housing project on a government property along the
east bank of the Manggahan Floodway in Pasig City. For this purpose, the
Ministry of Human Settlement entered into a Memorandum of Agreement
(MOA) with the Ministry of Public Works and Highways,[2] where the latter
undertook to develop the housing site and construct thereon 145 housing units.
By virtue of the MOA, the Ministry of Public Works and Highways forged
individual contracts with herein petitioners EPG Construction Co., Ciper
Electrical and Engineering, Septa Construction Co., Phil. Plumbing Co., Home
Construction Inc., World Builders Inc., Glass World Inc., Performance Builders
Development Co. and De Leon Araneta Construction Co., for the construction of
the housing units. Under the contracts, the scope of construction and funding
therefor covered only around 2/3 of each housing unit.[3] After complying with
the terms of said contracts, and by reason of the verbal request and assurance
of then DPWH Undersecretary Aber Canlas that additional funds would be
available and forthcoming, petitioners agreed to undertake and perform
additional constructions[4] for the completion of the housing units, despite the
absence of appropriations and written contracts to cover subsequent expenses
for the additional constructions.
Petitioners then received payment for the construction work duly covered by
the individual written contracts, thereby leaving an unpaid balance of
P5,918,315.63,[5] which amount represents the expenses for the additional
constructions for the completion of the existing housing units. On 14 November
1988, petitioners sent a demand letter to the DPWH Secretary and submitted
that their claim for payment was favorably recommended by DPWH Assistant
Secretary for Legal Services Dominador Madamba, who recognized the
existence of implied contracts covering the additional
constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined
that payment of petitioners money claims should be based on quantum
meruitand should be forwarded to the Commission on Audit (COA) for its due
consideration and approval. The money claims were then referred to COA which
returned the same to the DPWH Auditor for auditorial action. On the basis of
the Inspection Report of the Auditors Technical Staff, the DPWH Auditor
interposed no objection to the payment of the money claims subject to
whatever action the COA may adopt.
In a Second Indorsement dated 27 July 1992, the COA returned the documents
to the DPWH, stating that funds should first be made available before COA
could pass upon and act on the money claims. In a Memorandum dated 30 July
1992, then DPWH Secretary Jose De Jesus requested the Secretary of Budget
and Management to release public funds for the payment of petitioners money
claims, stating that the amount is urgently needed in order to settle once and
for all this (sic) outstanding obligations of the government. In a Letter of the
Undersecretary of Budget and Management dated 20 December 1994, the
amount of P5,819,316.00 was then released for the payment of petitioners
money claims, under Advise of Allotment No. A4-1303-04-41-303.
In an Indorsement dated 27 December 1995, the COA referred anew the money
claims to the DPWH pursuant to COA Circular 95-006, thus:
Respectfully returned thru the Auditor to the Honorable Secretary, Department
of Public Works and Highways, Port Area, Manila, the above-captioned subject
(Re: Claim of Ten (10) contractors for payment of Work accomplishments on the
construction of the COGEO II Housing Project, Pasig, Metro Manila) and
reiterating the policy of this office as embodied in COA Circular No. 95-006
dated May 18, 1995 totally lifting its pre-audit activities on all financial
transactions of the agencies of the government involving
implementation/prosecution of projects and/or payment of claims without
exception so as to vest on agency heads the prerogative to exercise fiscal
responsibility thereon.
The audit of the transaction shall be done after payment.
In a letter dated 26 August 1996, respondent DPWH Secretary Gregorio Vigilar
denied the subject money claims prompting herein petitioners to file before the
Regional Trial Court of Quezon City, Branch 226, a Petition for Mandamus
praying that herein respondent be ordered:
1) To pay petitioners the total of P5,819,316.00;
2) To pay petitioners moral and exemplary damages in the amount to be fixed
by the Court and sum of P500,000.00 as attorneys fees.
On 18 February 1997, the lower court conducted a pre-trial conference where
the parties appeared and filed their respective pre-trial briefs. Further,
respondent submitted a Memorandum to which petitioners filed a Rejoinder.
On 07 November 1997, the lower court denied the Petition for Mandamus, in a
Decision which disposed as follows:
WHEREFORE, in view of all the foregoing, the instant Petition for Mandamus is
dismissed. The order of September 24, 1997, submitting the Manifestation and
Motion for Resolution, is hereby withdrawn.
SO ORDERED.
Hence, this petition where the core issue for resolution focuses on the right of
petitioners-contractors to compensation for a public works housing project.
In the case before us, respondent, citing among others Sections 46[6] and
47,[7] Chapter 7, Sub-Title B, Title I, Book V of the Administrative Code of 1987
(E.O 292), posits that the existence of appropriations and availability of funds as
certified to and verified by the proper accounting officials are conditions sine
qua non for the execution of government contracts.[8]Respondent harps on the
fact that the additional work was pursued through the verbal request of then
DPWH Undersecretary Aber P. Canlas, despite the absence of the corresponding
supplemental contracts and appropriate funding.[9] According to
respondent, sans showing of certificate of availability of funds, the implied
contracts are considered fatally defective and considered inexistent and void ab
initio. Respondent concludes that inasmuch as the additional work done was
pursued in violation of the mandatory provisions of the laws concerning
contracts involving expenditure of public funds and in excess of the public
officials contracting authority, the same is not binding on the government and
impose no liability therefor.[10]
Although this Court agrees with respondents postulation that the implied
contracts, which covered the additional constructions, are void, in view of
violation of applicable laws, auditing rules and lack of legal requirements, [11] we
nonetheless find the instant petition laden with merit and uphold, in the
interest of substantial justice, petitioners-contractors right to be compensated
for the "additional constructions" on the public works housing project, applying
the principle of quantum meruit.
Interestingly, this case is not of first impression. In Eslao vs. Commission on
Audit,[12] this Court likewise allowed recovery by the contractor on the basis
of quantum meruit, following our pronouncement in Royal Trust Construction
vs. Commission on Audit,[13] thus:
In Royal Trust Construction vs. COA, a case involving the widening and
deepening of the Betis River in Pampanga at the urgent request of the local
officials and with the knowledge and consent of the Ministry of Public Works,
even without a written contract and the covering appropriation, the project
was undertaken to prevent the overflowing of the neighboring areas and to
irrigate the adjacent farmlands. The contractor sought compensation for the
completed portion in the sum of over P1 million. While the payment was
favorably recommended by the Ministry of Public Works, it was denied by the
respondent COA on the ground of violation of mandatory legal provisions as the
existence of corresponding appropriations covering the contract cost. Under
COA Res. No. 36-58 dated November 15, 1986, its existing policy is to allow
recovery from covering contracts on the basis of quantum meruit if there is
delay in the accomplishment of the required certificate of availability of funds
to support a contract. (Emphasis ours)
In the Royal Construction case, this Court, applying the principle of quantum
meruit in allowing recovery by the contractor, elucidated:
The work done by it (the contractor) was impliedly authorized and later
expressly acknowledged by the Ministry of Public Works, which has twice
recommended favorable action on the petitioners request for payment. Despite
the admitted absence of a specific covering appropriation as required under
COA Resolution No. 36-58, the petitioner may nevertheless be compensated
for the services rendered by it, concededly for the public benefit, from the
general fund allotted by law to the Betis River project. Substantial compliance
with the said resolution, in view of the circumstances of this case, should
suffice. The Court also feels that the remedy suggested by the respondent, to
wit, the filing of a complaint in court for recovery of the compensation
claimed, would entail additional expense, inconvenience and delay which in
fairness should be imposed on the petitioner.
Accordingly, in the interest of substantial justice and equity, the respondent
Commission on Audit is DIRECTED to determine on a quantum meruit basis the
total compensation due to the petitioner for the services rendered by it in the
channel improvement of the Betis River in Pampanga and to allow the payment
thereof immediately upon completion of the said determination. (Emphasis
ours)
Similarly, this Court applied the doctrine of quantum meruit in Melchor vs.
Commission on Audit[14] and explained that where payment is based
on quantum meruit, the amount of recovery would only be the reasonable
value of the thing or services rendered regardless of any agreement as to
value.[15]
Notably, the peculiar circumstances present in the instant case buttress
petitioners claim for compensation for the additional constructions, despite the
illegality and void nature of the implied contracts forged between the DPWH
and petitioners-contractors. On this matter, it bears stressing that the illegality
of the subject contracts proceeds from an express declaration or prohibition by
law,[16] and not from any intrinsic illegality. Stated differently, the subject
contracts are not illegal per se.
Of equal significance are circumstances attendant and peculiar in this case
which necessitate allowance of petitioners money claimson the basis
of quantum meruit for work accomplished on the government housing project.
To begin with, petitioners-contractors assented and agreed to undertake
additional constructions for the completion of the housing units, believing in
good faith and in the interest of the government and, in effect, the public in
general, that appropriations to cover the additional constructions and
completion of the public works housing project would be available and
forthcoming. On this particular score, the records reveal that the verbal request
and assurance of then DPWH Undersecretary Canlas led petitioners-contractors
to undertake the completion of the government housing project, despite the
absence of covering appropriations, written contracts, and certification of
availability of funds, as mandated by law and pertinent auditing rules and
issuances. To put it differently, the implied contracts, declared void in this case,
covered only the completion and final phase of construction of the housing
units, which structures, concededly, were already existing, albeit not yet
finished in their entirety at the time the implied contracts were entered into
between the government and the contractors.
Further, petitioners-contractors sent to the DPWH Secretary a demand letter
pressing for their money claims, on the strength of a favorable
recommendation from the DPWH Assistant Secretary for Legal Affairs to the
effect that implied contracts existed and that the money claims had ample basis
applying the principle of quantum meruit. Moreover, as can be gleaned from
the records, even the DPWH Auditor interposed no objection to the payment of
the money claims, subject to whatever action the COA may adopt.
Beyond this, the sum of P5,819,316.00 representing the amount of petitioners
money claims, had already been released by the Department of Budget and
Management (DBM), under Advise of Allotment No. A4-1303-04-41-303. Equally
important is the glaring fact that the construction of the housing units had
already been completed by petitioners-contractors and the subject housing
units had been, since their completion, under the control and disposition of the
government pursuant to its public works housing project.
To our mind, it would be the apex of injustice and highly inequitable for us to
defeat petitioners-contractors right to be duly compensated for actual work
performed and services rendered, where both the government and the public
have, for years, received and accepted benefits from said housing project and
reaped the fruits of petitioners-contractors honest toil and labor.
Incidentally, respondent likewise argues that the State may not be sued in the
instant case, invoking the constitutional doctrine of Non-suability of the
State,[17] otherwise known as the Royal Prerogative of Dishonesty.
Respondents argument is misplaced inasmuch as the Principle of State
Immunity finds no application in the case before us.
Under these circumstances, respondent may not validly invoke the Royal
Prerogative of Dishonesty and conveniently hide under the States cloak of
invincibility against suit,considering that this principle yields to certain settled
exceptions. True enough, the rule, in any case, is not absolute for it does not say
that the state may not be sued under any circumstance.[18]
Thus, in Amigable vs. Cuenca,[19] this Court, in effect, shred the protective
shroud which shields the State from suit, reiterating our decree in the landmark
case of Ministerio vs. CFI of Cebu[20] that the doctrine of governmental immunity
from suit cannot serve as an instrument for perpetrating an injustice on a
citizen. It is just as important, if not more so, that there be fidelity to legal
norms on the part of officialdom if the rule of law were to be maintained.[21]
Although the Amigable and Ministerio cases generously tackled the issue of the
States immunity from suit vis a vis the payment of just compensation for
expropriated property, this Court nonetheless finds the doctrine enunciated in
the aforementioned cases applicable to the instant controversy, considering
that the ends of justice would be subverted if we were to uphold, in this
particular instance, the States immunity from suit.
To be sure, this Court as the staunch guardian of the citizens rights and welfare
cannot sanction an injustice so patent on its face, and allow itself to be an
instrument in the perpetration thereof. Justice and equity sternly demand that
the States cloak of invincibility against suit be shred in this particular instance,
and that petitionerscontractors be duly compensated on the basis of quantum
meruit for construction done on the public works housing project.
IN VIEW WHEREOF, the instant petition is GRANTED. The assailed decision of
the Regional Trial Court dated 07 November 1997 is REVERSED AND SET ASIDE.
ACCORDINGLY, the Commission on Audit is hereby directed to determine and
ascertain with dispatch, on a quantum meruit basis, the total compensation due
to petitioners-contractors for the additional constructions on the housing
project and to allow payment thereof upon the completion of said
determination. No costs.
SO ORDERED.
G.R. Nos. 166309-10 March 9, 2007
REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF
CUSTOMS, Petitioner,
vs.
UNIMEX MICRO-ELECTRONICS GmBH, Respondent.
DECISION
CORONA, J.:
This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to
nullify and set aside the decision of the Court of Appeals (CA) dated August 30,
20041 and its amended decision of November 30, 20042 in CA-G.R. SP No. 75359
and CA-G.R. SP No. 75366.
The antecedent facts follow.
Sometime in April 1985, respondent Unimex Micro-Electronics GmBH (Unimex)
shipped a 40-foot container and 171 cartons of Atari game computer cartridges,
duplicators, expanders, remote controllers, parts and accessories to Handyware
Phils., Inc. (Handyware). Don Tim Shipping Corporation transported the goods
with Evergreen Marine Corporation as shipping agent.
After the shipment arrived in the Port of Manila on July 9, 1985, the Bureau of
Customs (BOC) agents discovered that it did not tally with the description
appearing on the cargo manifest. As a result, BOC instituted seizure proceedings
against Handyware and later issued a warrant of seizure and detention against
the shipment.
On June 5, 1987, the Collector of Customs issued a default order against
Handyware for failing to appear in the seizure proceedings. After an ex
parte hearing, the Collector of Customs forfeited the goods in favor of the
government.
Subsequently, on June 15, 1987, respondent Unimex (as shipper and owner of
the goods) filed a motion to intervene in the seizure proceedings. The Collector
of Customs granted the motion but later on declared the June 5, 1987 default
order against Handyware as final and executory, thus affirming the goods’
forfeiture in favor of the government.
Respondent filed a petition for review against petitioner Commissioner of
Customs (BOC Commissioner) in the Court of Tax Appeals (CTA). This case was
docketed as CTA Case No. 4317.3
In a decision4 dated June 15, 1992, the CTA reversed the forfeiture decree and
ordered the release of the subject shipment to respondent subject to the
payment of customs duties. The CTA decision became final and executory on
July 20, 1992. The decision read:
WHEREFORE, the decree of forfeiture of [petitioner] Commissioner of Customs
is hereby reversed and the subject shipment is hereby ordered released to
[respondent] subject to the condition that the correct duties, taxes, fees and
other charges thereon be paid to the Bureau of Customs based on the actual
quality and condition of the shipments at the time of the filing of the
corresponding import entry in compliance with this decision and further subject
to the presentation of Central Bank Release Certificate.5
Unfortunately, however, respondent’s counsel failed to secure a writ of
execution to enforce the CTA decision. Instead, it filed separate claims for
damages against Don Tim Shipping Corporation and Evergreen Marine
Corporation6 but both cases were dismissed.
On September 5, 2001, respondent filed in the CTA a petition for the revival of
its June 15, 1992 decision. It prayed for the immediate release by BOC of its
shipment or, in the alternative, payment of the shipment’s value plus damages.
The BOC Commissioner failed to file his answer, hence, he was declared in
default.
During the ex parte presentation of respondent’s evidence, BOC informed the
court that the subject shipment could no longer be found at its warehouses.
In its decision of September 19, 2002,7 the CTA declared that its June 15, 1992
decision could no longer be executed due to the loss of respondent’s shipment
so it ordered the BOC Commissioner to pay respondent the commercial value of
the goods based on the prevailing exchange rate at the time of their
importation. The dispositive portion of the decision read:
WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED.
Accordingly, [petitioner] is ORDERED to PAY [respondent] the amount
of P8,675,200.22 representing the commercial value of the shipment at the
time of importation subject, however, to the payment of the proper taxes,
duties, fees and other charges thereon. The payment shall be taken from the
sale or sales of the goods or properties seized or forfeited by the Bureau of
Customs.8
The BOC Commissioner and respondent filed their respective motions for
reconsideration (MRs) of the above decision.
In his MR, the BOC Commissioner argued that the CTA altered its June 15, 1992
decision by converting it from an action for specific performance into a money
judgment.9 On the other hand, respondent contended that the exchange rate
prevailing at the time of actual payment should apply. It also argued that the
CTA erred in not imposing legal interest on BOC’s obligation.
The CTA denied both MRs. The BOC Commissioner and the respondent then
filed separate petitions in the CA. The BOC Commissioner’s appeal was
docketed as CA-G.R. SP No. 75359 and respondent’s as CA-G.R. SP No. 75366.
The CA consolidated the two cases.
On August 30, 2004, the CA dismissed the BOC Commissioner’s appeal and
granted respondent’s.
In CA-G.R. SP No. 75359, the CA held that the BOC Commissioner was liable for
the value of the subject shipment as the same was lost while in its custody. On
the other hand, in CA-G.R. SP No. 75366, it ruled that the CTA erred in using as
basis the prevailing peso-dollar exchange rate at the time of the importation
instead of the prevailing rate at the time of actual payment pursuant to RA
4100.10 It added that respondent was also entitled to legal interest. According to
the CA:
…Considering that the BOC was grossly negligent in handling the subject
shipment, this Court finds Unimex entitled to legal interests. Accordingly, the
actual damages thus awarded shall be subject to 6% interest per annum.
Be that as it may, such interest shall accrue only from the date of the CTA
Decision on 19 September 2002 since it is from that the quantification of
Unimex’s damages have been reasonably ascertained…
xxx xxx xxx
Finally, Unimex is likewise entitled to 12% interest per annum in lieu of 6% per
annum from the time this Decision becomes final and executory until fully paid,
in as much as the interim period is equivalent to a forbearance of credit.
xxx xxx xxx
WHEREFORE, the appealed Decision, dated 19 September 2002, is
hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is
adjudged liable to Unimex for the value of the subject shipment in the amount
of $466,885.54. The Bureau of Customs’ liability may be paid in Philippine
currency, computed at the exchange rate prevailing at the time of actual
payment with legal interest thereon at the rate of 6% per annum from 19
September 2002 up to its finality. Upon finality of this Decision, the rate of legal
interest shall be 12% per annum until the value of the subject shipment is fully
paid.11
The BOC Commissioner and respondent again filed their respective MRs of the
above decision. The Commissioner insisted that the BOC was not liable to
respondent. On the other hand, respondent’s MR sought payment of the goods’
value in euros, not in US dollars.12 It also demanded that the 6% legal interest
be reckoned from the date of its judicial demand on June 15, 1987.
On November 30, 2004, the CA denied the BOC Commissioner’s MR and
granted respondent’s. Accordingly, the decretal portion of its amended decision
read:
WHEREFORE, the appealed Decision, dated 19 September 2002, is
hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is
adjudged liable to Unimex for the value of the subject shipment in the amount
of Euro 669,982.565. The Bureau of Custom’s liability [may be] paid in the
Philippine currency, computed at the exchange rate prevailing at the time of
actual payment with legal interests thereon at the rate of 6% per annum from
15 June 1987 up to the finality of this Decision. In lieu of the 6% interest, the
rate of legal interest shall be 12% per annum upon finality of this Decision until
the value of the subject shipment is fully paid.13
The Republic of the Philippines, represented by the BOC Commissioner, now
comes to us via this petition assailing the CTA decision on the following
grounds: (1) the June 15, 1992 CTA judgment could not be altered after it
became final and executory; (2) laches has already set in, hence, respondent’s
case (reviving the June 15, 1992 CTA judgment) should have been dismissed
outright; (3) the legal interest imposed was erroneous and (4) the government
funds cannot be charged with respondent’s claim without a corresponding
appropriation.
Modification of a Final And Executory Judgment
In support of its first argument, petitioner contends that once a judgment
becomes final and executory, it becomes immutable and unalterable, thus the
CTA erred in changing the tenor of its June 15, 1992 decision by ordering it to
instead pay the value of the goods.14
We disagree.
Indeed, the general rule is that once a decision becomes final and executory, it
cannot be altered or modified. However, this rule is not absolute. In some
cases,15 we held that where facts or events transpire after a decision has
become executory, which facts constitute a supervening cause rendering the
final judgment unenforceable, said judgment may be modified. Also, a final
judgment may be altered when its execution becomes impossible or unjust.
In the case at bar, parties do not dispute the fact that after the June 15, 1992
CTA decision became final and executory, respondent’s goods were inexplicably
lost while under the BOC’s custody. Certainly, this fact presented a supervening
event warranting the modification of the CTA decision. Even if the CTA had
maintained its original decision, still petitioner would have been unable to
comply with it for the obvious reason that there was nothing more to deliver to
respondent.
Laches Did Not Set in to Frustrate Respondent’s Petition to Revive The June
15, 1992 CTA Decision
Regarding petitioner’s second argument, we hold that it cannot impugn
respondent’s claim on the basis of laches. Laches is the failure or negligence to
assert a right within a reasonable time, giving rise to a presumption that a party
has abandoned it or declined to assert it.16 It is not a mere question of lapse or
passage of time but is principally a question of the inequity or unfairness of
permitting a right or claim to be asserted.17
It is clear from the records that respondent was not guilty of negligence or
omission. Neither did it abandon its claim against petitioner. We agree with the
CTA (as later affirmed by the CA) that:
There was never negligence or omission to assert its right within a reasonable
period of time on the part of [respondent]. In fact, from the moment it
intervened in the proceedings before the Bureau of Customs up to the present
time, [respondent] is diligently trying to fight for what it believes is right.
[Respondent] may have failed to secure a writ of execution with this court when
the [CTA decision] became final and executory due to wrong legal advice, yet it
does not mean that it was sleeping on its right for it filed a case against the
shipping agent and/or the sub-agent. Therefore, there [was never] an occasion
wherein petitioner had abandoned or declined to assert its right. 18
The rule is that the findings of fact by the lower court,19 if affirmed by the CA,
are conclusive on us.20 Absent any reason that compels us to deviate from the
rule, as in this case, we shall not disturb such findings.
Moreover, the doctrine of laches is based upon grounds of public policy and
equity. It is invoked to discourage stale claims but is entirely addressed to the
sound discretion of the court.21 Since it is an equitable doctrine, its application is
likewise controlled by reasonable considerations. Thus, the better rule is that
courts, under the principle of equity, should not be bound by the doctrine of
laches if wrong or injustice will result.22
Given the attendant circumstances, laches cannot stall respondent’s right to
recover what is due to it especially where BOC’s negligence in the safekeeping
of the goods appears indubitable. There is no denying that BOC exhibited gross
carelessness and ineptitude in the performance of its duty as it could not even
explain why or how the goods vanished while in its custody. With this, it is
difficult to exonerate petitioner from liability; otherwise, we would
countenance a wrong and exacerbate respondent’s loss which to this day has
remained unrecompensed.
More importantly, laches never set in because respondent filed its petition for
revival of judgment within the period set by the Rules. In particular, Rule 39,
Section 6 states:
SEC. 6. Execution by motion or by independent action. – A final and executory
judgment or order may be executed on motion within five (5) years from the
date of its entry. After the lapse of such time, and before it is barred by the
statute of limitations, a judgment may be enforced by action. The revived
judgment may also be enforced by motion within five (5) years from the date of
its entry and thereafter by action before it is barred by the statute of
limitations.
Furthermore, Article 1144 of the Civil Code, an action "upon a judgment" may
be brought within ten (10) years from the time the right of action accrues.
The CTA judgment sought to be revived became final and executory on July 20,
199223 and was accordingly entered into the book of judgments on the same
date. On the other hand, the petition to revive said judgment was filed on
September 5, 2001. Clearly, the filing of the petition for the revival of judgment
was well within the reglementary period provided by law.
Legal Interest May Be Imposed for Use of Money or as Compensatory
Damages
Petitioner likewise argues that the CA erred in imposing the 6% p.a. legal
interest. According to petitioner, the obligation to pay legal interest only arises
by virtue of a contract or on account of damages due to delay or failure to pay
the principal on which the interest is exacted. It added that since the June 15,
1992 CTA decision did not involve a monetary award but merely the release of
the goods to respondent, there was no basis for the computation and/or
imposition of the 6% p.a. legal interest.
We agree with petitioner.
Interest may be paid only either as compensation for the use of money
(monetary interest)24 or as damages (compensatory interest).25 We quote in
agreement the CTA’s disquisition in its decision dated September 19, 2002:
Interest may be paid either as compensation for the use of money (monetary
interest) referred to in Article 1956 of the New Civil Code or as damages
(compensatory interest) under Article 2209 above cited. As clearly provided in
[Article 2209], interest is demandable if: a) there is monetary obligation and b)
debtor incurs delay.
This case does not involve a monetary obligation to be covered by Article 2209.
There is no dispute that this case was originally filed questioning the seizure of
the shipment by the Bureau of Customs. Our decision subject of this action for
revival [of judgment] did not refer to any monetary obligation by [petitioner]
towards the [respondent]. In fact, if there was any monetary obligation
mentioned, it referred to the obligation of [respondent] to pay the correct
taxes, duties, fees and other charges before the release of the goods can be
had. In one case, the Supreme Court held:
"In a comprehensive sense, the term "debt" embraces not merely money due
by contract, but whatever one is bound to render to another, either for contract
or the requirement of the law, such as tax where the law imposes personal
liability therefor."
Therefore, the government was never a debtor to the petitioner in order that
[Article] 2209 could apply. Nor was it in default for there was no monetary
obligation to pay in the first place. There is default when after demand is made
either judicially or extrajudicially. In other words, for interest to be demandable
under Article 2209, there should be a monetary obligation and the debtor was
in default…
In the instant case, [petitioner] was never under monetary obligation to
[respondent], no demand can be made either judicially or extrajudicially.
Parallel thereto, there could be no default… 26
No doubt, the present case does not fall within the first situation. Neither can it
be considered as one involving interest based on damages under the second
situation.
More importantly, interest is not chargeable against petitioner except when it
has expressly stipulated to pay it or when interest is allowed by the legislature
or in eminent domain cases where damages sustained by the owner take the
form of interest at the legal rate.27 Consequently, the CA’s imposition of the
12% p.a. legal interest upon the finality of the decision of this case until the
value of the goods is fully paid (as forbearance of credit) is likewise bereft of any
legal anchor.
Government Liability For Actual Damages
Finally, petitioner argues that a money judgment or any charge against the
government requires a corresponding appropriation and cannot be decreed by
mere judicial order.
Although it may be gainsaid that the satisfaction of respondent’s demand will
ultimately fall on the government, and that, under the political doctrine of
"state immunity," it cannot be held liable for governmental acts (jus
imperii),28 we still hold that petitioner cannot escape its liability. The
circumstances of this case warrant its exclusion from the purview of the state
immunity doctrine.
As previously discussed, the Court cannot turn a blind eye to BOC’s ineptitude
and gross negligence in the safekeeping of respondent’s goods. We are not
likewise unaware of its lackadaisical attitude in failing to provide a cogent
explanation on the goods’ disappearance, considering that they were in its
custody and that they were in fact the subject of litigation. The situation does
not allow us to reject respondent’s claim on the mere invocation of the doctrine
of state immunity. Succinctly, the doctrine must be fairly observed and the
State should not avail itself of this prerogative to take undue advantage of
parties that may have legitimate claims against it.29
In Department of Health v. C.V. Canchela & Associates,30 we enunciated that
this Court, as the staunch guardian of the people’s rights and welfare, cannot
sanction an injustice so patent in its face, and allow itself to be an instrument in
the perpetration thereof. Over time, courts have recognized with almost
pedantic adherence that what is inconvenient and contrary to reason is not
allowed in law.31 Justice and equity now demand that the State’s cloak of
invincibility against suit and liability be shredded.
Accordingly, we agree with the lower courts’ directive that, upon payment of
the necessary customs duties by respondent, petitioner’s "payment shall be
taken from the sale or sales of goods or properties seized or forfeited by the
Bureau of Customs."32
WHEREFORE, the assailed decisions of the Court of Appeals in CA-G.R. SP Nos.
75359 and 75366 are herebyAFFIRMED with MODIFICATION. Petitioner
Republic of the Philippines, represented by the Commissioner of the Bureau of
Customs, upon payment of the necessary customs duties by respondent Unimex
Micro-Electronics GmBH, is hereby ordered to pay respondent the value of the
subject shipment in the amount of Euro 669,982.565. Petitioner’s liability may
be paid in Philippine currency, computed at the exchange rate prevailing at the
time of actual payment.
SO ORDERED.
G.R. No. L-6060 September 30, 1954
FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.
Quisumbing, Sycip, Quisumbing and Salazar, for appellant.
Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.
PARAS, C.J.:
The factual antecedents of this case are sufficiently recited in the brief filed by
the intervenor-appellee as follows:
1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint
against the defendant-appellant, Pan Oriental Shipping Co., alleging that he
purchased from the Shipping Commission the vessel FS-197 for P200,000,
paying P50,000 down and agreeing to pay the balance in installments; that to
secure the payment of the balance of the purchase price, he executed a chattel
mortgage of said vessel in favor of the Shipping Commission; that for various
reason, among them the non-payment of the installments, the Shipping
Commission took possession of said vessel and considered the contract of sale
cancelled; that the Shipping Commission chartered and delivered said vessel to
the defendant-appellant Pan Oriental Shipping Co. subject to the approval of
the President of the Philippines; that he appealed the action of the Shipping
Commission to the President of the Philippines and, in its meeting on August 25,
1950, the Cabinet restored him to all his rights under his original contract with
the Shipping Commission; that he had repeatedly demanded from the Pan
Oriental Shipping Co. the possession of the vessel in question but the latter
refused to do so. He, therefore, prayed that, upon the approval of the bond
accompanying his complaint, a writ of replevin be issued for the seizure of said
vessel with all its equipment and appurtenances, and that after hearing, he be
adjudged to have the rightful possession thereof (Rec. on App. pp. 2-8).
2. On February 3, 1951, the lower court issued the writ of replevin prayed for by
Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested of its
possession of said vessel (Rec. on App. p. 47).
3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right
of Froilan to the possession of the said vessel; it alleged that the action of the
Cabinet on August 25, 1950, restoring Froilan to his rights under his original
contract with the Shipping Commission was null and void; that, in any event,
Froilan had not complied with the conditions precedent imposed by the Cabinet
for the restoration of his rights to the vessel under the original contract; that it
suffered damages in the amount of P22,764.59 for wrongful replevin in the
month of February, 1951, and the sum of P17,651.84 a month as damages
suffered for wrongful replevin from March 1, 1951; it alleged that it had
incurred necessary and useful expenses on the vessel amounting to
P127,057.31 and claimed the right to retain said vessel until its useful and
necessary expenses had been reimbursed (Rec. on App. pp. 8-53).
4. On November 10, 1951, after the leave of the lower court had been obtained,
the intervenor-appellee, Government of the Republic of the Philippines, filed a
complaint in intervention alleging that Froilan had failed to pay to the Shipping
Commission (which name was later changed to Shipping Administration) the
balance due on the purchase price of the vessel in question, the interest
thereon, and its advances on insurance premium totalling P162,142.95,
excluding the dry-docking expenses incurred on said vessel by the Pan Oriental
Shipping Co.; that intervenor was entitled to the possession of the said vessel
either under the terms of the original contract as supplemented by Froilan's
letter dated January 28, 1949, or in order that it may cause the extrajudicial sale
thereof under the Chattel Mortgage Law. It, therefore, prayed that Froilan be
ordered to deliver the vessel in question to its authorized representative, the
Board of Liquidators; that Froilan be declared to be without any rights on said
vessel and the amounts he paid thereon forfeited or alternately, that the said
vessel be delivered to the Board of Liquidators in order that the intervenor may
have its chattel mortgage extrajudicially foreclosed in accordance with the
provisions of the Chattel Mortgage Law; and that pending the hearing on the
merits, the said vessel be delivered to it (Rec. on App. pp. 54-66).
5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the
complaint in intervention alleging that the Government of the Republic of the
Philippines was obligated to deliver the vessel in question to it by virtue of a
contract of bare-boat charter with option to purchase executed on June 16,
1949, by the latter in favor of the former; it also alleged that it had made
necessary and useful expenses on the vessel and claimed the right of retention
of the vessel. It, therefore, prayed that, if the Republic of the Philippines
succeeded in obtaining possession of the said vessel, to comply with its
obligations of delivering to it (Pan Oriental Shipping co.) or causing its delivery
by recovering it from Froilan (Rec. on App. pp. 69-81).
6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which
was liquidating the affairs of the Shipping Administration, a check in the amount
of P162,576.96 in payment of his obligation to the Shipping Administration for
the said vessel as claimed in the complaint in intervention of the Government of
the Republic of the Philippines. The Board of Liquidators issued an official report
therefor stating that it was a 'deposit pending the issuance of an order of the
Court of First Instance of Manila' (Rec. on App. pp. 92-93).
7. On December 7, 1951, the Government of the Republic of the Philippines
brought the matter of said payment and the circumstance surrounding it to the
attention of the lower court "in order that they may be taken into account by
this Honorable Court in connection with the questions that are not pending
before it for determination" (Rec. on App. pp. 82-86).
8. On February 3, 1952, the lower court held that the payment by Froilan of the
amount of P162,576.96 on November 29, 1951, to the Board of Liquidators
constituted a payment and a discharge of Froilan's obligation to the
Government of the Republic of the Philippines and ordered the dismissal of the
latter's complaint in intervention. In the same order, the lower court made it
very clear that said order did not pre-judge the question involved between
Froilan and the Oriental Shipping Co. which was also pending determination in
said court (Rec. on App. pp. 92-93). This order dismissing the complaint in
intervention, but reserving for future adjudication the controversy between
Froilan and the Pan Oriental Shipping Co. has already become final since neither
the Government of the Republic of the Philippines nor the Pan Oriental Shipping
Co. had appealed therefrom.
9. On May 10, 1952, the Government of the Republic of the Philippines filed a
motion to dismiss the counterclaim of the Pan Oriental Shipping Co. against it
on the ground that the purpose of said counterclaim was to compel the
Government of the Republic of the Philippines to deliver the vessel to it (Pan
Oriental Shipping Co.) in the event that the Government of the Republic of the
Philippines recovers the vessel in question from Froilan. In view, however, of
the order of the lower court dated February 3, holding that the payment made
by Froilan to the Board of Liquidators constituted full payment of Froilan's
obligation to the Shipping Administration, which order had already become
final, the claim of the Pan Oriental Shipping Co. against the Republic of the
Philippines was no longer feasible, said counterclaim was barred by prior
judgment and stated no cause of action. It was also alleged that movant was not
subject to the jurisdiction of the court in connection with the counterclaim.
(Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental Shipping
Co. in its written opposition dated June 4, 1952 (Rec. on app. pp. 19-104).
10. In an order dated July 1, 1952, the lower court dismissed the counterclaim
of the Pan Oriental Shipping Co. as prayed for by the Republic of the Philippines
(Rec. on App. pp. 104-106).
11. It if from this order of the lower court dismissing its counterclaim against
the Government of the Republic of the Philippines that Pan Oriental Shipping
Co. has perfected the present appeal (Rec. on App. p. 107).
The order of the Court of First Instance of Manila, dismissing the counterclaim
of the defendant Pan Oriental Shipping Co., from which the latter has appealed,
reads as follows:
This is a motion to dismiss the counterclaim interposed by the defendant in its
answer to the complaint in intervention.
"The counterclaim states as follows:
"COUNTERCLAIM
"As counterclaim against the intervenor Republic of the Philippines, the
defendant alleges:
"1. That the defendant reproduces herein all the pertinent allegations of the
foregoing answer to the complaint in intervention
"2. That, as shown by the allegations of the foregoing answer to the complaint
in intervention, the defendant Pan Oriental Shipping Company is entitled to the
possession of the vessel and the intervenor Republic of the Philippines is bound
under the contract of charter with option to purchase it entered into with the
defendant to deliver that possession to the defendant — whether it actually has
the said possession or it does not have that possession from the plaintiff
Fernando A. Froilan and deliver the same to the defendant;
"3. That, notwithstanding demand, the intervenor Republic of the Philippines
has not to date complied with its obligation of delivering or causing the delivery
of the vessel to the defendant Pan Oriental Shipping Company.1âwphïl.nêt
"RELIEF
"WHEREFORE, the defendant respectfully prays that judgment be rendered
ordering the intervenor Republic of the Philippines alternatively to deliver to
the defendants the possession of the said vessel, or to comply with its
obligation to the defendant or causing the delivery to the latter of the said
vessel by recovering the same from plaintiff, with costs.
"The defendant prays for such other remedy as the Court may deem just and
equitable in the premises."
The ground of the motion to dismiss are (a) That the cause of action is barred by
prior judgment; (b) That the counterclaim states no cause of action; and (c) That
this Honorable Court has no jurisdiction over the intervenor government of the
Republic of the Philippines in connection with the counterclaim of the
defendant Pan Oriental Shipping Co.
The intervenor contends that the complaint in intervention having been
dismissed and no appeal having been taken, the dismissal of said complaint is
tantamount to a judgment.
The complaint in intervention did not contain any claim whatsoever against the
defendant Pan Oriental Shipping Co.; hence, the counterclaim has no
foundation.
The question as to whether the Court has jurisdiction over the intervenor with
regard to the counterclaim, the Court is of the opinion that it has no jurisdiction
over said intervenor.
It appearing, therefore, that the grounds of the motion to dismiss are well
taken, the counterclaim of the defendant is dismissed, without pronouncement
as to costs.
The defendant's appeal is predicated upon the following assignments of error:
I. The lower court erred in dismissing the counterclaim on the ground of prior
judgment.
II. The lower court erred in dismissing the counterclaim on the ground that the
counterclaim had no foundation because made to a complaint in intervention
that contained no claim against the defendant.
III. The lower court erred in dismissing the counterclaim on the ground of
alleged lack of jurisdiction over the intervenor Republic of the Philippines.
We agree with appellant's contention that its counterclaim is not barred by
prior judgment (order of February 8, 1952, dismissing the complaint in
intervention), first, because said counterclaim was filed on November 29, 1951, position and comes down to the level of the defendant. The latter automatically
before the issuance of the order invoked; and, secondly, because in said order acquires, within certain limits, the right to set up whatever claims and other
of February 8, the court dismissed the complaint in intervention, "without, of defenses he might have against the state. The United States Supreme Court
course, precluding the determination of the right of the defendant in the instant thus explains:
case," and subject to the condition that the "release and cancellation of the
chattel mortgage does not, however, prejudge the question involved between "No direct suit can be maintained against the United States. But when an action
the plaintiff and the defendant which is still the subject of determination in this is brought by the United States to recover money in the hands of a party who
has a legal claim against them, it would be a very rigid principle to deny to him
case." It is to be noted that the first condition referred to the right of the
defendant, as distinguished from the second condition that expressly specified the right of setting up such claim in a court of justice, and turn him around to an
the controversy between the plaintiff and the defendant. That the first application to Congress." (Sinco, Philippine Political Law, Tenth Ed., pp. 36-37,
condition reserved the right of the defendant as against the intervenor, is citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.)
clearly to be deduced from the fact that the order of February 8 mentioned the
It is however, contended for the intervenor that, if there was at all any waiver, it
circumstance that "the question of the expenses of drydocking incurred by the
was in favor of the plaintiff against whom the complaint in intervention was
defendant has been included in its counterclaim against the plaintiff,"
directed. This contention is untenable. As already stated, the complaint in
apparently as one of the grounds for granting the motion to dismiss the
intervention was in a sense in derogation of the defendant's claim over the
complaint in intervention.
possession of the vessel in question.
The defendant's failure to appeal from the order of February 8 cannot,
Wherefore, the appealed order is hereby reversed and set aside and the case
therefore, be held as barring the defendant from proceeding with its
remanded to the lower court for further proceedings. So ordered, without
counterclaim, since, as already stated, said order preserved its right as against
costs.
the intervenor. Indeed, the maintenance of said right is in consonance with Rule
30, section 2, of the Rules of Court providing that "if a counterclaim has been
pleaded by a defendant prior to the service upon him of the plaintiff's motion to
dismiss, the action shall not be dismissed against the defendant's objection
unless the counterclaim can remain pending for independent adjudication by
REPUBLIC OF THE PHILIPPINES G.R. No. 129406
the court."
represented by the PRESIDENTIAL
COMMISSION ON GOOD
The lower court also erred in holding that, as the intervenor had not made any
GOVERNMENT (PCGG),
claim against the defendant, the latter's counterclaim had no foundation. The
complaint in intervention sought to recover possession of the vessel in question
- versus -
from the plaintiff, and this claim is logically adverse to the position assumed by
the defendant that it has a better right to said possession than the plaintiff who SANDIGANBAYAN (SECOND
alleges in his complaint that he is entitled to recover the vessel from the Promulgated:
DIVISION) and ROBERTO S.
defendant. At any rate a counterclaim should be judged by its own allegations, BENEDICTO March 6, 2006
and not by the averments of the adverse party. It should be recalled that the
defendant's theory is that the plaintiff had already lost his rights under the
contract with the Shipping Administration and that, on the other hand, the
defendant is relying on the charter contract executed in its favor by the x----------------------------------------x
intervenor which is bound to protect the defendant in its possession of the
DECISION
vessel. In other words, the counterclaim calls for specific performance on the
part of the intervenor. As to whether this counterclaim is meritorious is another GARCIA, J.:
question which is not now before us.
Before the Court is this petition for certiorari under Rule 65 of the Rules of
The other ground for dismissing the defendant's counterclaim is that the State Court to nullify and set aside the March 28, 1995[1] and March 13,
is immune from suit. This is untenable, because by filing its complaint in 1997[2] Resolutions of the Sandiganbayan, Second Division, in Civil Case No.
intervention the Government in effect waived its right of nonsuability. 0034, insofar as said resolutions ordered the Presidential Commission on Good
Government (PCGG) to pay private respondent Roberto S. Benedicto or his
The immunity of the state from suits does not deprive it of the right to sue
corporations the value of 227 shares of stock of the Negros Occidental Golf and
private parties in its own courts. The state as plaintiff may avail itself of the
Country Club, Inc. (NOGCCI) at P150,000.00 per share, registered in the name of
different forms of actions open to private litigants. In short, by taking the
said private respondent or his corporations.
initiative in an action against a private party, the state surrenders its privileged
The facts:
Civil Case No. 0034 entitled Republic of the Philippines, plaintiff, v. Roberto S.
Benedicto, et al., defendants, is a complaint for reconveyance, reversion,
accounting, reconstitution and damages. The case is one of several suits
involving ill-gotten or unexplained wealth that petitioner Republic, through the
PCGG, filed with the Sandiganbayan against private respondent Roberto S.
Benedicto and others pursuant to Executive Order (EO) No. 14,[3] series of 1986.
Pursuant to its mandate under EO No. 1,[4] series of 1986, the PCGG issued writs
placing under sequestration all business enterprises, entities and other
properties, real and personal, owned or registered in the name of private
respondent Benedicto, or of corporations in which he appeared to have
controlling or majority interest. Among the properties thus sequestered and
taken over by PCGG fiscal agents were the 227 shares in NOGCCI owned by
private respondent Benedicto and registered in his name or under the names of
corporations he owned or controlled.
Following the sequestration process, PCGG representatives sat as members of
the Board of Directors of NOGCCI, which passed, sometime in October 1986, a
resolution effecting a corporate policy change. The change consisted of
assessing a monthly membership due of P150.00 for each NOGCCI share. Prior
to this resolution, an investor purchasing more than one NOGCCI share was
exempt from paying monthly membership due for the second and subsequent
shares that he/she owned.
Subsequently, on March 29, 1987, the NOGCCI Board passed another
resolution, this time increasing the monthly membership due fromP150.00
to P250.00 for each share.
As sequestrator of the 227 shares of stock in question, PCGG did not pay the
corresponding monthly membership due thereon totalingP2,959,471.00. On
account thereof, the 227 sequestered shares were declared delinquent to be
disposed of in an auction sale.
Apprised of the above development and evidently to prevent the projected
auction sale of the same shares, PCGG filed a complaint for injunction with the
Regional Trial Court (RTC) of Bacolod City, thereat docketed as Civil Case No.
5348. The complaint, however, was dismissed, paving the way for the auction
sale for the delinquent 227 shares of stock. On August 5, 1989, an auction sale
was conducted.
On November 3, 1990, petitioner Republic and private
respondent Benedicto entered into a Compromise Agreement in Civil Case No.
0034. The agreement contained a general release
clause[5] whereunder petitioner Republic agreed and bound itself to lift the
sequestration on the 227 NOGCCI shares, among other Benedictos
properties, petitioner Republic acknowledging that it was within private
respondent Benedictos capacity to acquire the same shares out of his income
from business and the exercise of his profession.[6] Implied in this undertaking is
the recognition bypetitioner Republic that the subject shares of stock could not
have been ill-gotten.
In a decision dated October 2, 1992, the Sandiganbayan approved the
Compromise Agreement and accordingly rendered judgment in accordance with
its terms.
In the process of implementing the Compromise Agreement, either of the
parties would, from time to time, move for a ruling by the Sandiganbayan on
the proper manner of implementing or interpreting a specific provision therein.
On February 22, 1994, Benedicto filed in Civil Case No. 0034 a Motion for
Release from Sequestration and Return of Sequestered
Shares/Dividends praying, inter alia, that his NOGCCI shares of stock
be specifically released from sequestration and returned, delivered or paid to
him as part of the parties Compromise Agreement in that case. In a
Resolution[7] promulgated on December 6, 1994, the Sandiganbayan granted
Benedictos aforementioned motion but placed the subject shares under the
custody of its Clerk of Court, thus:
WHEREFORE, in the light of the foregoing, the said Motion for Release From
Sequestration and Return of Sequestered Shares/Dividends is hereby GRANTED
and it is directed that said shares/dividends be delivered/placed under the
custody of the Clerk of Court, Sandiganbayan, Manila subject to this Courts
disposition.
On March 28, 1995, the Sandiganbayan came out with the herein first assailed
Resolution,[8] which clarified its aforementioned December 6, 1994 Resolution
and directed the immediate implementation thereof by requiring PCGG, among
other things:
(b) To deliver to the Clerk of Court the 227 sequestered shares of [NOGCCI]
registered in the name of nominees of ROBERTO S. BENEDICTO free from all
liens and encumbrances, or in default thereof, to pay their value at
P150,000.00 per share which can be deducted from [the Republics] cash share
in the Compromise Agreement. [Words in bracket added] (Emphasis Supplied).
Owing to PCGGs failure to comply with the above directive, Benedicto filed
in Civil Case No. 0034 a Motion for Compliance dated July 25, 1995, followed by
an Ex-Parte Motion for Early Resolution dated February 12, 1996. Acting
thereon, the Sandiganbayan promulgated yet another Resolution[9] on February
23, 1996, dispositively reading:
WHEREFORE, finding merit in the instant motion for early resolution and
considering that, indeed, the PCGG has not shown any justifiable ground as to
why it has not complied with its obligation as set forth in the Order of
December 6, 1994 up to this date and which Order was issued pursuant to the
Compromise Agreement and has already become final and executory,
accordingly, the Presidential Commission on Good Government is hereby given
a final extension of fifteen (15) days from receipt hereof within which to comply
with the Order of December 6, 1994 as stated hereinabove.
On April 1, 1996, PCGG filed a Manifestation with Motion for
Reconsideration,[10] praying for the setting aside of the Resolution of February
23, 1996. On April 11, 1996, private respondent Benedicto filed a Motion to
Enforce Judgment Levy. Resolving these two motions, the Sandiganbayan, in
its second assailed Resolution[11] dated March 13, 1997, denied that portion of
the PCGGs Manifestation with Motion for Reconsiderationconcerning the
subject 227 NOGCCI shares and granted Benedictos Motion to Enforce
Judgment Levy.
Hence, the Republics present recourse on the sole issue of whether or not the
public respondent Sandiganbayan, Second Division, gravely abused its discretion
in holding that the PCGG is at fault for not paying the membership dues on the
227 sequestered NOGCCI shares of stock, a failing which eventually led to the
foreclosure sale thereof.
The petition lacks merit.
To begin with, PCGG itself does not dispute its being considered as a receiver
insofar as the sequestered 227 NOGCCI shares of stock are concerned.[12] PCGG
also acknowledges that as such receiver, one of its functions is to pay
outstanding debts pertaining to the sequestered entity or property, [13] in this
case the 227 NOGCCI shares in question. It contends, however, that
membership dues owing to a golf club cannot be considered as an outstanding
debt for which PCGG, as receiver, must pay. It also claims to have exercised due
diligence to prevent the loss through delinquency sale of the subject NOGCCI
shares, specifically inviting attention to the injunctive suit, i.e., Civil Case No.
5348, it filed before the RTC of Bacolod City to enjoin the foreclosure sale of the
shares.
The filing of the injunction complaint adverted to, without more, cannot
plausibly tilt the balance in favor of PCGG. To the mind of the Court, such filing
is a case of acting too little and too late. It cannot be over-emphasized that it
behooved the PCGGs fiscal agents to preserve, like a responsible father of the
family, the value of the shares of stock under their administration. But far from
acting as such father, what the fiscal agents did under the premises was to allow
the element of delinquency to set in before acting by embarking on a tedious
process of going to court after the auction sale had been announced and
scheduled.
The PCGGs posture that to the owner of the sequestered shares rests the
burden of paying the membership dues is untenable. For one, it lost sight of the
reality that such dues are basically obligations attached to the shares, which, in
the final analysis, shall be made liable, thru delinquency sale in case of
default in payment of the dues. For another, the PCGG as sequestrator-receiver
of such shares is, as stressed earlier, duty bound to preserve the value of such
shares. Needless to state, adopting timely measures to obviate the loss of those
shares forms part of such duty and due diligence.
The Sandiganbayan, to be sure, cannot plausibly be faulted for finding the PCGG
liable for the loss of the 227 NOGCCI shares. There can be no quibbling, as
indeed the graft court so declared in its assailed and related resolutions
respecting the NOGCCI shares of stock, that PCGGs fiscal agents, while sitting in
the NOGCCI Board of Directors agreed to the amendment of the rule pertaining
to membership dues. Hence, it is not amiss to state, as did the Sandiganbayan,
that the PCGG-designated fiscal agents, no less, had a direct hand in the loss of
the sequestered shares through delinquency and their eventual sale through
public auction. While perhaps anti-climactic to so mention it at this stage, the
unfortunate loss of the shares ought not to have come to pass had those fiscal
agents prudently not agreed to the passage of the NOGCCI board resolutions
charging membership dues on shares without playing representatives.
Given the circumstances leading to the auction sale of the subject NOGCCI
shares, PCGGs lament about public respondent Sandiganbayan having erred or,
worse still, having gravely abused its discretion in its determination as to who is
at fault for the loss of the shares in question can hardly be given cogency.
For sure, even if the Sandiganbayan were wrong in its findings, which does not
seem to be in this case, it is a well-settled rule of jurisprudence
that certiorari will issue only to correct errors of jurisdiction, not errors of
judgment. Corollarily, errors of procedure or mistakes in the courts findings and
conclusions are beyond the corrective hand of certiorari.[14] The extraordinary
writ of certiorari may be availed only upon a showing, in the minimum, that the
respondent tribunal or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion.[15]
The term grave abuse of discretion connotes capricious and whimsical exercise
of judgment as is equivalent to excess, or a lack of jurisdiction.[16]The abuse
must be so patent and gross as to amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law as where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility.[17] Sadly, this is completely
absent in the present case. For, at bottom, the assailed resolutions of the
Sandiganbayan did no more than to direct PCGG to comply with its part of the
bargain under the compromise agreement it freely entered into with private
respondent Benedicto. Simply put, the assailed resolutions of the
Sandiganbayan have firm basis in fact and in law.
Lest it be overlooked, the issue of liability for the shares in
question had, as both public and private respondents asserted,
long become final and executory. Petitioners narration of facts in its present
petition is even misleading as it conveniently fails to make reference to two (2)
resolutions issued by the Sandiganbayan. We refer to that courts resolutions
of December 6, 1994[18] and February 23, 1996[19] as well as several intervening
pleadings which served as basis for the decisions reached therein. As it were,
the present petition questions only and focuses on theMarch 28,
1995[20] and March 13, 1997[21] resolutions, which merely reiterated and
clarified the graft courts underlying resolution of December 6, 1994. And to
place matters in the proper perspective, PCGGs failure to comply with
the December 6, 1994 resolution prompted the issuance of the clarificatory
and/or reiteratory resolutions aforementioned.
In a last-ditch attempt to escape liability, petitioner Republic, through the
PCGG, invokes state immunity from suit.[22] As argued, the order for it to pay the
value of the delinquent shares would fix monetary liability on a government
agency, thus necessitating the appropriation of public funds to satisfy the
judgment claim.[23] But, as private respondent Benedicto correctly countered,
the PCGG fails to take stock of one of the exceptions to the state immunity
principle, i.e., when the government itself is the suitor, as in Civil Case No. 0034.
Where, as here, the State itselfis no less the plaintiff in the
main case, immunity from suit cannot be effectively invoked.[24] For,
as jurisprudence teaches, when the State, through its duly
authorized officers, takes the initiative in a suit against a private party, it
thereby descends to the level of a private individual and thus opens itself to
whatever counterclaims or defenses the latter may have against
it.[25] Petitioner Republics act of filing its complaint in Civil Case No.
0034 constitutes a waiver of its immunity from suit. Being itself the plaintiff in
that case, petitioner Republic cannot set up its immunity against private
respondent Benedictos prayers in the same case.
In fact, by entering into a Compromise Agreement with private
respondent Benedicto, petitioner Republic thereby stripped itself
of itsimmunity from suit and placed itself in the same level of its adversary.
When the State enters into contract, through its officers or agents, in
furtherance of a legitimate aim and purpose and pursuant to constitutional
legislative authority, whereby mutual or reciprocal benefits accrue and rights
and obligations arise therefrom, the State may be sued even without its express
consent, precisely because by entering into a contract the sovereign descends
to the level of the citizen. Its consent to be sued is implied from the very act of
entering into such contract,[26] breach of which on its part gives the
corresponding right to the other party to the agreement.
Finally, it is apropos to stress that the Compromise Agreement in Civil Case No.
0034 envisaged the immediate recovery of alleged ill-gotten wealth without
further litigation by the government, and buying peace on the part of the aging
Benedicto.[27] Sadly, that stated objective has come to naught as not only had
the litigation continued to ensue, but, worse, private
respondent Benedicto passed away on May 15, 2000,[28]with the trial of Civil
Case No. 0034 still in swing, so much so that the late Benedicto had to be
substituted by the administratrix of his estate.[29]
WHEREFORE, the instant petition is hereby DISMISSED.
SO ORDERED.
G.R. No. L-30098 February 18, 1970
THE COMMISSIONER OF PUBLIC HIGHWAYS and the AUDITOR
GENERAL, petitioners,
vs.
HON. LOURDES P. SAN DIEGO as Presiding Judge of the Court of First Instance
of Rizal, Branch IX, sitting in Quezon City, TESTATE ESTATE OF N. T. HASHIM
(Special Proceedings No. 71131 of the Court of First Instance of Manila)
represented by its Judicial Administrator, Tomas N. Hashim, TOMAS N.
HASHIM, personally, and as Judicial Administrator of the Estate of Hashim,
Special Proceedings No. 71131 of the Court of ]First instance of Manila, ALL
THE LEGAL OR TESTAMENTARY HEIRS of the Estate of Hashim, MANUELA C.
FLORENDO, personally as Deputy Clerk, Court of First Instance of Rizal,
Quezon City, Branch IX, BENJAMIN GARCIA as "Special Sheriff" appointed by
respondent Judge Lourdes P. San Diego, BENJAMIN V. CORUÑA, personally
and as Chief Documentation Staff, Legal Department, Philippine National
Bank, and the PHILIPPINE NATIONAL BANK, respondents.
TEEHANKEE, J.:
In this special civil action for certiorari and prohibition, the Court declares null
and void the two questioned orders of respondent Court levying upon funds of
petitioner Bureau of Public Highways on deposit with the Philippine National
Bank, by virtue of the fundamental precept that government funds are not
subject to execution or garnishment.
The background facts follow:
On or about November 20, 1940, the Government of the Philippines filed a
complaint for eminent domain in the Court of First Instance of Rizal1 for the
expropriation of a parcel of land belonging to N. T. Hashim, with an area of
14,934 square meters, needed to construct a public road, now known as
Epifanio de los Santos Avenue. On November 25, 1940, the Government took
possession of the property upon deposit with the City Treasurer of the sum of
P23,413.64 fixed by the Court therein as the provisional value of all the lots
needed to construct the road, including Hashim's property. The records of the
expropriation case were destroyed and lost during the second world war, and
neither party took any step thereafter to reconstitute the proceedings.
In 1958, however, the estate of N.T. Hashim, deceased, through its Judicial
Administrator, Tomas N. Hashim, filed a money claim with the Quezon City
Engineer's Office in the sum of P522,620.00, alleging said amount to be the fair
market value of the property in question, now already converted and used as a
public highway. Nothing having come out of its claim, respondent estate filed
on August 6, 1963, with the Court of First Instance of Rizal, Quezon City Branch,
assigned to Branch IX, presided by respondent judge,2 a complaint for the
recovery of the fair market price of the said property in the sum of P672,030.00
against the Bureau of Public Highways, which complaint was amended on
August 26, 1963, to include as additional defendants, the Auditor General and
the City Engineer of Quezon City.3
The issues were joined in the case with the filing by then Solicitor General
Arturo A. Alafriz of the State's answer, stating that the Hashim estate was
entitled only to the sum of P3,203.00 as the fair market value of the property at
the time that the State took possession thereof on November 25, 1940, with
legal interest thereon at 6% per annum, and that said amount had been
available and tendered by petitioner Bureau since 1958. The parties thereafter
worked out a compromise agreement, respondent estate having proposed on
April 28, 1966, a payment of P14.00 per sq. m. for its 14,934 sq.m.-parcel of
land or the total amount of P209,076.00, equivalent to the land's total assessed
value,4 which was confirmed, ratified and approved in November, 1966 by the
Commissioner of Public Highways and the Secretary of Public Works and
Communications. On November 7, 1966, the Compromise Agreement
subscribed by counsel for respondent estate and by then Solicitor General
Antonio P. Barredo, now a member of this Court, was submitted to the lower
Court and under date of November 8, 1966, respondent judge, as prayed for,
rendered judgment approving the Compromise Agreement and ordering
petitioners, as defendants therein, to pay respondent estate as plaintiff therein,
the total sum of P209,076.00 for the expropriated lot.
On October 10, 1968, respondent estate filed with the lower Court a motion for
the issuance of a writ of execution, alleging that petitioners had failed to satisfy
the judgment in its favor. It further filed on October 12, 1968, an ex-
parte motion for the appointment of respondent Benjamin Garcia as special
sheriff to serve the writ of execution. No opposition having been filed by the
Solicitor General's office to the motion for execution at the hearing thereof on
October 12, 1968, respondent judge, in an order dated October 14, 1968,
granted both motions.
On the same date, October 14, 1968, respondent Garcia, as special sheriff,
forthwith served a Notice of Garnishment, together with the writ of execution
dated October 14, 1968, issued by respondent Manuela C. Florendo as Deputy
Clerk of Court, on respondent Philippine National Bank, notifying said bank that
levy was thereby made upon funds of petitioners Bureau of Public Highways
and the Auditor General on deposit, with the bank to cover the judgment of
P209,076.00 in favor of respondent estate, and requesting the bank to reply to
the garnishment within five days. On October 16, 1968, three days before the
expiration of the five-day deadline, respondent Benjamin V. Coruña in his
capacity as Chief, Documentation Staff, of respondent bank's Legal Department,
allegedly acting in excess of his authority and without the knowledge and
consent of the Board of Directors and other ranking officials of respondent
bank, replied to the notice of garnishment that in compliance therewith, the
bank was holding the amount of P209,076.00 from the account of petitioner
Bureau of Public Highways. Respondent bank alleged that when it was served
with Notice to Deliver Money signed by respondent Garcia, as special sheriff, on
October 17, 1968, it sent a letter to the officials of the Bureau of Public
Highways notifying them of the notice of garnishment.
Under date of October 16, 1968, respondent estate further filed with the lower
Court an ex-parte motion for the issuance of an order ordering respondent bank
to release and deliver to the special sheriff, respondent Garcia, the garnished
amount of P209,076.00 deposited under the account of petitioner Bureau,
which motion was granted by respondent judge in an order of October 18,
1968. On the same day, October 18, 1968, respondent Coruña allegedly taking
advantage of his position, authorized the issuance of a cashier's check of the
bank in the amount of P209,076.00, taken out of the funds of petitioner Bureau
deposited in current account with the bank and paid the same to respondent
estate, without notice to said petitioner.
Later on December 20, 1968, petitioners, through then Solicitor General Felix V.
Makasiar, wrote respondent bank complaining that the bank acted precipitately
in having delivered such a substantial amount to the special sheriff without
affording petitioner Bureau a reasonable time to contest the validity of the
garnishment, notwithstanding the bank's being charged with legal knowledge
that government funds are exempt from execution or garnishment, and
demanding that the bank credit the said petitioner's account in the amount of
P209,076.00, which the bank had allowed to be illegally garnished. Respondent
bank replied on January 6, 1969 that it was not liable for the said garnishment
of government funds, alleging that it was not for the bank to decide the
question of legality of the garnishment order and that much as it wanted to
wait until it heard from the Bureau of Public Highways, it was "helpless to
refuse delivery under the teeth" of the special order of October 18, 1968,
directing immediate delivery of the garnished amount.
Petitioners therefore filed on January 28, 1969 the present action against
respondents, in their capacities as above stated in the title of this case, praying
for judgment declaring void the question orders of respondent Court.
Petitioners also sought the issuance of a writ of preliminary mandatory
injunction for the immediate reimbursement of the garnished sum of
P209,076.00, constituting funds of petitioner Bureau on deposit with the
Philippine National Bank as official depository of Philippine Government funds,
to the said petitioner's account with the bank, so as to forestall the dissipation
of said funds, which the government had allocated to its public highways and
infrastructure projects. The Court ordered on January 31, 1969 the issuance of
the writ against the principal respondents solidarily, including respondent judge
therein so that she would take forthwith all the necessary measures and
processes to compel the immediate return of the said government funds to
petitioner Bureau's account with respondent bank. 5
In compliance with the writ, respondent bank restored the garnished sum of
P209,076.00 to petitioner Bureau's account with it.6 The primary responsibility
for the reimbursement of said amount to petitioner Bureau's account with the
respondent bank, however, rested solely on respondent estate, since it is the
judgment creditor that received the amount upon the questioned execution.
Strangely enough, as appears now from respondent bank's memorandum in lieu
of oral argument,7 what respondent bank did, acting through respondent
Coruña as its counsel, was not to ask respondent estate to reimburse it in turn
in the same amount, but to file with the probate court with jurisdiction over
respondent estate,8 a motion for the estate to deposit the said amount with it,
purportedly in compliance with the writ. Respondent estate
thereupon deposited with respondent bank as a savings account the sum of
P125,446.00, on which the bank presumably would pay the usual interest,
besides. As to the balance of P83,630.00, this sum had been in the interval paid
as attorney's fees to Atty. Jesus B. Santos, counsel for the estate, by the
administrator, allegedly without authority of the probate court.9 Accordingly,
respondent estate has not reimbursed the respondent bank either as to this last
amount, and the bank has complacently not taken any steps in the lower court
to require such reimbursement.
The ancillary questions now belatedly raised by the State may readily be
disposed of. Petitioners may not invoke the State's immunity from suit, since
the case below was but a continuation in effect of the pre-war expropriation
proceedings instituted by the State itself. The expropriation of the property,
which now forms part of Epifanio, de los Santos Avenue, is a fait accompli and is
not questioned by the respondent state. The only question at issue was the
amount of the just compensation due to respondent estate in payment of the
expropriated property, which properly pertained to the jurisdiction of the lower
court. 10 It is elementary that in expropriation proceedings, the State precisely
submits to the Court's jurisdiction and asks the Court to affirm its lawful right to
take the property sought to be expropriated for the public use or purpose
described in its complaint and to determine the amount of just compensation to
be paid therefor.
Neither may the State impugn the validity of the compromise agreement
executed by the Solicitor General on behalf of the State with the approval of the
proper government officials, on the ground that it was executed only by the
lawyer of respondent estate, without any showing of having been specially
authorized to bind the estate thereby, because such alleged lack of authority
may be questioned only by the principal or client, and respondent estate as
such principal has on the contrary confirmed and ratified the compromise
agreement. 11 As a matter of fact, the Solicitor General, in representation of the
State, makes in the petition no prayer for the annulment of the compromise
agreement or of the respondent court's decision approving the same.
On the principal issue, the Court holds that respondent Court's two questioned
orders (1) for execution of the judgment, in pursuance whereof respondent
deputy clerk issued the corresponding writ of execution and respondent special
sheriff issued the notice of garnishment, and (2) for delivery of the garnished
amount of P209,076.00 to respondent estate as judgment creditor through
respondent special sheriff, are null and void on the fundamental ground that
government funds are not subject to execution or garnishment.
1. As early as 1919, the Court has pointed out that although the Government, as
plaintiff in expropriation proceedings, submits itself to the jurisdiction of the
Court and thereby waives its immunity from suit, the judgment that is thus
rendered requiring its payment of the award determined as just compensation
for the condemned property as a condition precedent to the transfer to the title
thereto in its favor, cannot be realized upon execution. 12 The Court there added
that it is incumbent upon the legislature to appropriate any additional amount,
over and above the provisional deposit, that may be necessary to pay the award
determined in the judgment, since the Government cannot keep the land and
dishonor the judgment.
In another early case, where the government by an act of the Philippine
Legislature, expressly consented to be sued by the plaintiff in an action for
damages and waived its immunity from suit, the Court adjudged the
Government as not being legally liable on the complaint, since the State under
our laws would be liable only for torts caused by its special agents, specially
commissioned to carry out the acts complained of outside of such agents'
regular duties. We held that the plaintiff would have to look to the legislature
for another legislative enactment and appropriation of sufficient funds, if the
Government intended itself to be legally liable only for the damages sustained
by plaintiff as a result of the negligent act of one of its employees. 13
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.
Thus, as pointed out by the Court in Belleng vs. Republic, 14 while the State has
given its consent to be sued in compensation cases, the pauper-claimant
therein must look specifically to the Compensation Guarantee Fund provided by
the Workmen's Compensation Act for the corresponding disbursement in
satisfaction of his claim, since the State in Act 3083, the general law waiving its
immunity from suit "upon any money claim involving liability arising from
contract express or implied," imposed the limitation in Sec. 7 thereof that "no
execution shall issue upon any judgment rendered by any Court against the
Government of the (Philippines) under the provisions of this Act;" and that
otherwise, the claimant would have to prosecute his money claim against the
State under Commonwealth Act 327.
This doctrine was again stressed by. the Court in Republic vs. Palacio, 15 setting
aside as null and void the order of garnishment issued by the sheriff pursuant to
the lower Court's writ of execution on funds of the Pump Irrigation Trust Fund
in the account of the Government's Irrigation Service Unit with the Philippine
National Bank. The Court emphasized then and re-emphasizes now that
judgments against the State or its agencies and instrumentalities in cases where
the State has consented to be sued, operate merely to liquidate and establish
the plaintiff's claim; such judgments may not be enforced by writs of execution
or garnishment and it is for the legislature to provide for their payment through
the corresponding appropriation, as indicated in Act 3083.
2. Respondent bank and its Chief, Documentation Staff, respondent Coruña
have advanced two specious arguments to justify their wrongful delivery of the
garnished public funds to respondent estate. Their first contention that the said
government funds by reason of their being deposited by petitioner Bureau
under a current account subject to withdrawal by check, instead of being
deposited as special trust funds, "lost their kind and character as government
funds," 16 is untenable. As the official depositary of the Philippine Government,
respondent bank and its officials should be the first ones to know that all
government funds deposited with it by any agency or instrumentality of the
government, whether by way of general or special deposit, remain government
funds, since such government agencies or instrumentalities do not have any
non-public or private funds of their own.
Their second contention that said government funds lost their character as such
"the moment they were deposited with the respondent bank", 17 since the
relation between a depositor and a depository bank is that of creditor and
debtor, is just as untenable, absolutely. Said respondents shockingly ignore the
fact that said government funds were deposited with respondent bank as the
official depositary of the Philippine Government. Assuming for the nonce the
creation of such relationship of creditor and debtor, petitioner Bureau thereby
held a credit against respondent bank whose obligation as debtor was to pay
upon demand of said petitioner-creditor the public funds thus deposited with it;
even though title to the deposited funds passes to the bank under this theory
since the funds become mingled with other funds which the bank may employ
in its ordinary business, what was garnished was not the bank's own funds but
the credit of petitioner bureau against the bank to receive payment of its funds,
as a consequence of which respondent bank delivered to respondent estate the
garnished amount of P209,076.00 belonging to said petitioner. Petitioner
bureau's credit against respondent bank thereby never lost its character as a
credit representing government funds thus deposited. The moment the
payment is made by respondent bank on such deposit, what it pays out
represents the public funds thus deposited which are not garnishable and may
be expended only for their legitimate objects as authorized by the
corresponding legislative appropriation. Neither respondent bank nor
respondent Coruña are the duly authorized disbursing officers and auditors of
the Government to authorize and cause payment of the public funds of
petitioner Bureau for the benefit or private persons, as they wrongfully did in
this case.
3. Respondents bank and Coruña next pretend that refusal on their part to obey
respondent judge's order to deliver the garnished amount, "which is valid and
binding unless annulled, would have exposed them for contempt of
court." 18 They make no excuse for not having asked the lower court for time
and opportunity to consult petitioner Bureau or the Solicitor General with
regard to the garnishment and execution of said deposited public funds which
were allocated to specific government projects, or for not having simply replied
to the sheriff that what they held on deposit for petitioner Bureau were non-
garnishable government funds. They have not given any cogent reason or
explanation, — charged as they were with knowledge of the nullity of the writ
of execution and notice of garnishment against government funds, for in the
earlier case of Republic vs. Palacio, supra, they had then prudently and timely
notified the proper government officials of the attempted levy on the funds of
the Irrigation Service Unit deposited with it, thus enabling the Solicitor General
to take the corresponding action to annul the garnishment — for their failure to
follow the same prudent course in this case. Indeed, the Court is appalled at the
improper haste and lack of circumspection with which respondent Coruña and
other responsible officials of respondent bank precipitately allowed the
garnishment and delivery of the large amount involved, all within the period of
just four days, even before the expiration of the five-day reglementary period to
reply to the sheriff's notice of garnishment. Failure on the State's part to oppose
the issuance of the writ of execution, which was patently null and void as an
execution against government funds, could not relieve them of their own
responsibility.
4. Respondents bank and Coruña further made common cause with respondent
estate beyond the legal issues that should solely concern them, by reason of
their having wrongfully allowed the garnishment and delivery of government
funds, instead assailing petitioners for not having come to court with "clean
hands" and asserting that in fairness, justice and equity, petitioners should not
impede, obstruct or in any way delay the payment of just compensation to the
land owners for their property that was occupied way back in 1940. This matter
of payment of respondent estate's judgment credit is of no concern to them as
custodian and depositary of the public funds deposited with them, whereby
they are charged with the obligation of assuring that the funds are not illegally
or wrongfully paid out.
Since they have gone into the records of the expropriation case, then it should
be noted that they should have considered the vital fact that at the time that
the compromise agreement therein was executed in November, 1966,
respondent estate was well aware of the fact that the funds for the payment of
the property in the amount of P209,076.00 still had to be released by the
Budget Commissioner and that at the time of the garnishment, respondent
estate was still making the necessary representations for the corresponding
release of such amount, pursuant to the Budget Commissioner's favorable
recommendation.19 And with regard to the merits of the case, they should have
likewise considered that respondent estate could have no complaint against the
fair attitude of the authorities in not having insisted on their original stand in
their answer that respondent estate was entitled only to the sum of P3,203.00
as the fair market value of the property at the time the State took possession
thereof on November 25, 1940, with legal interests thereon, but rather agreed
to pay therefor the greatly revised and increased amount of P209,076.00 at
P14.00 per square meter, not to mention the consequential benefits derived by
said respondent from the construction of the public highway with the resultant
enhanced value of its remaining properties in the area.
5. The manner in which respondent bank's counsel and officials proceeded to
comply with the writ of preliminary mandatory injunction issued by the Court
commanding respondent estate, its judicial administrator and respondents bank
and Coruña, in solidum, to reimburse forthwith the account of petitioner
Bureau in the garnished amount of P209,076.00, does not speak well of their
fidelity to the bank's interests. For while respondent bank had restored with its
own funds the said amount of P209,076.00 to petitioner Bureau's account, it
has not required respondent estate as the party primarily liable therefor as the
recipient of the garnished amount to reimburse it in turn in this same amount.
Rather, said bank officials have allowed respondent estate to keep all this time
the whole amount of P209,076.00 wrongfully garnished by it. For as stated
above, respondent bank allowed respondent estate merely to deposit with it as
a savings account, of respondent estate, the lesser sum of P125,446.00 on
which the bank presumably has paid and continues paying respondent estate,
besides the usual interest rates on such savings accounts, and neither has it
taken any steps to require reimbursement to it from respondent estate of the
remainder of P83,630.00 which respondent estate of its own doing and
responsibility paid by way of attorney's fees.
It thus appears that all this time, respondent bank has not been reimbursed by
respondent estate as the party primarily liable for the whole amount of
P209,076.00 wrongfully and illegally garnished and received by respondent
estate. This grave breach of trust and dereliction of duty on the part of
respondent bank's officials should be brought to the attention of respondent
bank's Board of Directors and management for the appropriate administrative
action and other remedial action for the bank to recover the damages it has
been made to incur thereby.
6. The Solicitor General has likewise questioned the legality of respondent
Court's Order of October 14, 1968, appointing respondent Garcia as "special
sheriff" for the purpose of effecting service of the writ of execution, simply on
respondent estate's representation that it was desirable "for a speedy
enforcement of the writ."
The Court finds this general practice of the lower courts of appointing "special
sheriffs" for the service of writs of execution to be unauthorized by law. The
duty of executing all processes" of the courts in civil cases, particularly, writs of
execution, devolves upon the sheriff or his deputies, under Section 183 of the
Revised Administrative Code and Rule 39, section 8 of the Rules of Court. Unlike
the service of summons which may be made, aside from the sheriff or other
proper court officers, "for special reasons by any person especially authorized
by the judge of the court issuing the summons" under Rule 14, section 5 of the
Rules of Court, the law requires that the responsibility of serving writs of
execution, which involve the taking delivery of money or property in trust for
the judgment creditor, should be carried out by regularly bonded sheriffs or
other proper court officers. (Sections 183 and 330, Revised Administrative
Code). The bond required by law of the sheriff is conditioned inter alia, "for the
delivery or payment to the Government, or the persons entitled thereto, of all
the property or sums of money that shall officially come into his or their (his
deputies') hands" (Section 330, idem), and thus avoids the risk of embezzlement
of such properties and moneys.
Section 185 of the Revised Administrative Code restrictively authorizes the
judge of the Court issuing the process or writ to deputize some suitable person
only "when the sheriff is party to any action or proceeding or is otherwise
incompetent to serve process therein." The only other contingency provided by
law is when the office of sheriff is vacant, and the judge is then authorized, "in
case of emergency, (to) make a temporary appointment to the office of sheriff
... pending the appointment and qualification of the sheriff in due course; and
he may appoint the deputy clerk of the court or other officer in the government
service to act in said capacity." (Section 189, idem).
None of the above contingencies having been shown to be present, respondent
Court's order appointing respondent Garcia as "special sheriff" to serve the writ
of execution was devoid of authority.
7. No civil liability attaches, however, to respondents special sheriff and deputy
clerk, since they acted strictly pursuant to orders issued by respondent judge in
the discharge of her judicial functions as presiding judge of the lower court, and
respondent judge's immunity from civil responsibility covers them, although the
said orders are herein declared null and void. 20
ACCORDINGLY, the writs of certiorari and prohibition are granted. The
respondent court's questioned Orders of October 14, and 18, 1968, are declared
null and void, and all further proceedings in Civil Case No. Q-7441 of the Court
of First Instance of Rizal, Quezon City, Branch IX are abated. The writ of
preliminary mandatory injunction heretofore issued is made permanent, except
as to respondent judge who is excluded therefrom, without prejudice to any
cause of action that private respondents may have, inter se. Respondent estate
and respondent Tomas N. Hashim as prayed for by respondent Philippine
National Bank in its Answer, are ordered jointly and severally to reimburse said
respondent bank in the amount of P209,076.00 with legal interest until the date
of actual reimbursement. Respondents Estate of N. T. Hashim, Philippine
National Bank and Benjamin Coruña are ordered jointly to pay treble costs.
The Clerk of Court is directed to furnish copies of this decision to the Board of
Directors and to the president of respondent Philippine National Bank for their
information and appropriate action. So ordered.
G.R. No. L-32667 January 31, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, GABRIEL V. MANANSALA and GILBERT P.
LORENZO, in his official capacity as authorized Deputy sheriff, respondents.
Conrado E. Medina for petitioner.
Gabriel V. Manansala in his own behalf.
Jose K. Manguiat, Jr. for respondent Court.
FERNANDO, J.:
The issue raised in this certiorari proceeding is whether or not an order of the
now defunct respondent Court of Industrial Relations denying for lack of merit
petitioner's motion to quash a notice of garnishment can be stigmatized as a
grave abuse of discretion. What was sought to be garnished was the money of
the People's Homesite and Housing Corporation deposited at petitioner's
branch in Quezon City, to satisfy a decision of respondent Court which had
become final and executory. 1 A writ of execution in favor of private respondent
Gabriel V. Manansala had previously been issued. 2 He was the counsel of the
prevailing party, the United Homesite Employees and Laborers Association, in
the aforementioned case. The validity of the order assailed is challenged on two
grounds: (1) that the appointment of respondent Gilbert P. Lorenzo as
authorized deputy sheriff to serve the writ of execution was contrary to law and
(2) that the funds subject of the garnishment "may be public in character." 3 In
thus denying the motion to quash, petitioner contended that there was on the
part of respondent Court a failure to abide by authoritative doctrines
amounting to a grave abuse of discretion. After a careful consideration of the
matter, it is the conclusion of this Tribunal that while the authorization of
respondent Lorenzo to act as special deputy sheriff to serve the notice of
garnishment may be open to objection, the more basic ground that could have
been relied upon — not even categorically raised, petitioner limiting itself to the
assertion that the funds "could be public" in character, thus giving rise to the
applicability of the fundamental concept of non-suability — is hardly persuasive.
The People's Homesite and Housing Corporation had a juridical existence
enabling it sue and be sued. 4 Whatever defect could be attributed therefore to
the order denying the motion to quash could not be characterized as a grave
abuse of discretion. Moreover, with the lapse of time during which private
respondent had been unable to execute a judgment in his favor, the equities are
on his side. Accordingly, this petition must be dismissed.
The order of August 26, 1970 of respondent Court denying the motion to quash,
subject of this certiorari proceeding, reads as follows: "The Philippine National
Bank moves to quash the notice of garnishment served upon its branch in
Quezon City by the authorized deputy sheriff of this Court. It contends that the
service of the notice by the authorized deputy sheriff of the court contravenes
Section 11 of Commonwealth Act No. 105, as amended which reads:" 'All writs
and processes issued by the Court shall be served and executed free of charge
by provincial or city sheriffs, or by any person authorized by this Court, in the
same manner as writs and processes of Courts of First Instance.' Following the
law, the Bank argues that it is the Sheriff of Quezon City, and not the Clerk of
this Court who is its Ex-Officio Sheriff, that has the authority to serve the notice
of garnishment, and that the actual service by the latter officer of said notice is
therefore not in order. The Court finds no merit in this argument. Republic Act
No. 4201 has, since June 19, 1965, already repealed Commonwealth Act No.
103, and under this law, it is now the Clerk of this Court that is at the same time
the Ex-Officio Sheriff. As such Ex-Officio Sheriff, the Clerk of this Court has
therefore the authority to issue writs of execution and notices of garnishment in
an area encompassing the whole of the country, including Quezon City, since his
area of authority is coterminous with that of the Court itself, which is national in
nature. ... At this stage, the Court notes from the record that the appeal to the
Supreme Court by individual employees of PHHC which questions the award of
attorney's fees to Atty. Gabriel V.
Manansala, has already been dismissed and that the same became final and
executory on August 9, 1970. There is no longer any reason, therefore, for
withholding action in this case. [Wherefore], the motion to quash filed by the
Philippine National Bank is denied for lack of merit. The said Bank is therefore
ordered to comply within five days from receipt with the 'notice of
Garnishment' dated May 6, 1970." 5 There was a motion for reconsideration
filed by petitioner, but in a resolution dated September 22, 1970, it was denied.
Hence, this certiorari petition.
As noted at the outset, the petition lacks merit.
1. The plea for setting aside the notice of garnishment was promised on the
funds of the People's homesite and Housing Corporation deposited with
petitioner being "public in character." There was not even a categorical
assertion to that effect. It is only the possibility of its being "public in character."
The tone was thus irresolute,the approach difficult The premise that the funds
could be spoken of as public in character may be accepted in the sense that the
People's Homesite and Housing Corporation was a government-owned entity It
does not follow though that they were exempt from garnishment. National
Shipyard and Steel Corporation v. court of Industrial Relations 6 is squarely in
point. As was explicitly stated in the opinion of the then Justice, later Chief
Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO
are public funds of the government, and that, as such, the same may not be
garnished, attached or levied upon, is untenable for, as a government owned
and controlled corporation. the NASSCO has a personality of its own, distinct
and separate from that of the Government. It has pursuant to Section 2 of
Executive Order No. 356, dated October 23, 1950 ..., pursuant to which the
NASSCO has been established — 'all the powers of a corporation under the
Corporation Law ...' Accordingly, it may sue and be sued and may be subjected
to court processes just like any other corporation (Section 13, Act No. 1459), as
amended." 7 The similarities between the aforesaid case and the present
litigation are patent. Petitioner was similarly a government-owned corporation.
The principal respondent was the Court of Industrial Relations. The prevailing
parties were the employees of petitioner. There was likewise a writ of execution
and thereafter notices of garnishment served on several banks. There was an
objection to such a move and the ruling was adverse to the National Shipyard
and Steel Corporation. Hence the filing of a petition for certiorari. To repeat, the
ruling was quite categorical Garnishment was the appropriate remedy for the
prevailing party which could proceed against the funds of a corporate entity
even if owned or controlled by the government. In a 1941 decision, Manila
Hotel Employees Association v. Manila Hotel Company, 8 this Court, through
Justice Ozaeta, held: "On the other hand, it is well settled that when the
government enters into commercial business, it abandons its sovereign capacity
and is to be treated like any other corporation. (Bank of the United States v.
Planters' Bank, 9 Wheat, 904, 6 L.ed. 244). By engaging in a particular business
thru the instrumentality of a corporation, the governmnent divests itself pro
hac vice of its sovereign character, so as to render the corporation subject to
the rules of law governing private corporations."
2. It is worth noting that the decision referred to, the Bank of the United States
v. Planters' Bank, 10 was promulgated by the American Supreme Court as early
as 1824, the opinion being penned by the great Chief Justice Marshall. As was
pointed out by him: "It is, we think, a sound principle, that when a government
becomes a partner in any trading company, it divests itself, so far as concerns
the transactions of that company, of its sovereign character, and takes that of a
private citizen. Instead of communicating to the company its privileges and its
prerogatives, it descends to a level with those with whom it associates itself,
and takes the character which belongs to its associates, and to the business
which is to be transacted. Thus, many states of this Union who have an interest
in banks, are not suable even in their own courts; yet they never exempt the
corporation from being sued. The state of Georgia, by giving to the bank the
capacity to sue and be sued, voluntarily strips itself of its sovereign character, so
far as respects the transactions of the bank, and waives an the privileges of that
character. As a member of a corporation, a government never exercises its
sovereignty. It acts merely as a corporator, and exercises no other power in the
management of the affairs of the corporation, that are expressly given by the
incorporating act." 11 The National Shipyard and Steel Corporation case,
therefore, merely reaffirmed one of the oldest and soundest doctrines in this
branch of the law.
3. The invocation of Republic v. Palacio, 12 as well as Commissioner of Public
Highways v. San Diego, 13 did not help the cause of petitioner at all The
decisions are not applicable. If properly understood they can easily be
distinguished. As is clear in the opinion of Justice J.B.L. Reyes in Republic v.
Palacio, the Irrigation Service Unit which was sued was an office and agency
under the Department of Public Works and Communications. The Republic of
the Philippines, through the then Solicitor General, moved for the dismissal of
such complaint, alleging that it "has no juridical personality to sue and be
sued." 14 Such a motion to dismiss was denied. The case was tried and plaintiff
Ildefonso Ortiz, included as private respondent in the Supreme Court
proceeding, obtained a favorable money judgment. It became final and
executory. Thereafter, it appeared that the Solicitor General was served with a
copy of the writ of execution issued by the lower court followed by an order of
garnishment 15 Again, there was an urgent motion to lift such order, but it was
denied. A certiorariand prohibition proceeding was then filed with the Court of
Appeals. The legality of the issuance of such execution and punishment was
upheld, and the matter was elevated to this Tribunal The Republic was
sustained. The infirmity of the decision reached by the Court of Appeals,
according to the opinion, could be traced to the belief that there was a waiver
of "governmental immunity and, by implication, consent to the suit." 16 There
was no such waiver. Even if there were, it was stressed by justice J.B.L. Reyes:
"It is apparent that this decision of the Court of Appeals suffers from the
erroneous assumption that because the State has waived its immunity, its
property and funds become liable to seizure under the legal process. This
emphatically is not the law. (Merritt v. Insular Government, 34 Phil 311)." 17 To
levy the execution of such funds, according to him, would thus "amount to a
disbursement without any proper appropriation as required by law
" 18 InCommissioner of Public Highways v. San Diego, the opening paragraph of
Justice Teehankee was quite specific as to why there could be neither execution
nor garnishment of the money of petitioner Bureau of Public Highways: "In this
special civil action for certiorari and prohibition, the Court declares null and void
the two questioned orders of respondent Court levying upon funds of petitioner
Bureau of Public Highways on deposit with the Philippine National Bank, by
virtue of the fundamental precept that government funds are not subject to
execution or garnishment." 19 The funds appertained to a governmental office,
not to a government-owned or controlled corporation with a separate juridical
personality. In neither case therefore was there an entity with the capacity to
sue and be sued, the funds of which could thereafter be held liable to execution
and garnishment in the event of an adverse judgment.
4. Both the Palacio and the Commissioner of Public Highways decisions, insofar
as they reiterate the doctrine that one of the coronaries of the fundamental
concept of non-suability is that governmental funds are immune from
garnishment, refer to Merritt v. Insular Government, a 1916 decision 20 Since
then such a principle has been followed with undeviating rigidity, the latest case
in point being Republic v. Villasor, 21 promulgated in 1973. It is an entirely
different matter if, according to Justice Sanchez in Ramos v. Court of Industrial
Relations, 22 the office or entity is "possessed of a separate and distinct
corporate existence." 23 Then it can sue and be sued. Thereafter, its funds may
be levied upon or garnished. That is what happened in this case.
5. With the crucial issue thus resolved in favor of the correctness of the order
assailed, the other objection raised, namely that respondent Court acted
erroneously in having a special sheriff serve to the writ of execution, hardly
needs any extensive decision. It is true that in the aforesaid Commissioner of
Public Highways opinion, this Court held that there is no authorization in law for
the appointment of special sheriffs for the service of writs of execution. 24 In the
order sought to be nullified, the then Judge Joaquin M. Salvador of respondent
Court pointed out that under a later Act, 25 the Court of Industrial Relations Act
was amended with the proviso that its Clerk of Court was the ex-oficio sheriff.
The point raised in the petition that it should be the sheriff of Quezon City that
ought to have served the writ of execution would thus clearly appear to be
inconclusive. There is to be sure no thought of deviating from the principle
announced in the Commissioner of Public Highways case. That is as it ought to
be. Even if, however, there is sufficient justification for the infirmity attributed
to respondent Court by virtue of such a ruling, still considering all the
circumstances of this case, it clearly does not call for the nullification of the
order in question. What cannot be denied is that the writ of execution was
issued as far back as May 5, 1970 by the then Clerk of Court of respondent
Tribunal as the authorized sheriff. It would be, to say the least, unfair and
unequitable if, on the assumption that such Clerk of Court lacked such
competence, a new writ of execution had to be issued by the proper official At
any rate, what is important is that the judgment be executed. That is to achieve
justice according to law. It would be to carry technicality, therefore, to an
absurd length if just because of such a mistake, assuming that it is, but
undoubtedly one committed in good faith, further delay would get be imposed
on private respondent by characterizing the order sought to be nullified
amounting to a grave abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed. No costs.
[G.R. No. 113191. September 18, 1996]
DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES V. DE CASTRO and
JOSE C. MAGNAYI, respondents.
DECISION
VITUG, J.:
The questions raised in the petition for certiorari are a few coincidental matters
relative to the diplomatic immunity extended to the Asian Development Bank
("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-
0690-93 for his alleged illegal dismissal by ADB and the latter's violation of the
"labor-only" contracting law. Two summonses were served, one sent directly to
the ADB and the other through the Department of Foreign Affairs ("DFA"), both
with a copy of the complaint. Forthwith, the ADB and the DFA notified
respondent Labor Arbiter that the ADB, as well as its President and Officers,
were covered by an immunity from legal process except for borrowings,
guaranties or the sale of securities pursuant to Article 50(1) and Article 55 of
the Agreement Establishing the Asian Development Bank (the "Charter") in
relation to Section 5 and Section 44 of the Agreement Between The Bank And
The Government Of The Philippines Regarding The Bank's Headquarters (the
"Headquarters Agreement").
The Labor Arbiter took cognizance of the complaint on the impression that the
ADB had waived its diplomatic immunity from suit. In time, the Labor Arbiter
rendered his decision, dated 31 August 1993, that concluded:
"WHEREFORE, above premises considered, judgment is hereby rendered
declaring the complainant as a regular employee of respondent ADB, and the
termination of his services as illegal. Accordingly, respondent Bank is hereby
ordered:
"1. To immediately reinstate the complainant to his former position
effective September 16, 1993;
"2. To pay complainant full backwages from December 1, 1992 to September
15, 1993 in the amount of P42,750.00 (P4,500.00 x 9 months);
"3. And to pay complainants other benefits and without loss of seniority rights
and other privileges and benefits due a regular employee of Asian Development
Bank from the time he was terminated on December 31, 1992;
"4. To pay 10% attorney's fees of the total entitlements."[1]
The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA
referred the matter to the National Labor Relations Commission ("NLRC"); in its
referral, the DFA sought a "formal vacation of the void judgment." Replying to
the letter, the NLRC Chairman, wrote:
"The undersigned submits that the request for the 'investigation' of Labor
Arbiter Nieves de Castro, by the National Labor Relations Commission, has been
erroneously premised on Art. 218(c) of the Labor Code, as cited in the letter of
Secretary Padilla, considering that the provision deals with 'a question, matter
or controversy within its (the Commission) jurisdiction' obviously referring to a
labor dispute within the ambit of Art. 217 (on jurisdiction of Labor Arbiters and
the Commission over labor cases).
"The procedure, in the adjudication of labor cases, including raising of defenses,
is prescribed by law. The defense of immunity could have been raised before
the Labor Arbiter by a special appearance which, naturally, may not be
considered as a waiver of the very defense being raised. Any decision thereafter
is subject to legal remedies, including appeals to the appropriate division of the
Commission and/or a petition for certiorari with the Supreme Court, under Rule
65 of the Rules of Court. Except where an appeal is seasonably and properly
made, neither the Commission nor the undersigned may review, or even
question, the propriety of any decision by a Labor Arbiter. Incidentally, the
Commission sits en banc (all fifteen Commissioners)only to promulgate rules of
procedure or to formulate policies (Art. 213, Labor Code).
"On the other hand, while the undersigned exercises 'administrative supervision
over the Commission and its regional branches and all its personnel, including
the Executive Labor Arbiters and Labor Arbiters' (penultimate paragraph, Art.
213, Labor Code), he does not have the competence to investigate or review
any decision of a Labor Arbiter. However, on the purely administrative aspect of
the decision-making process, he may cause that an investigation be made of any
misconduct, malfeasance or misfeasance, upon complaint properly made.
"If the Department of Foreign Affairs feels that the action of Labor Arbiter
Nieves de Castro constitutes misconduct, malfeasance or misfeasance, it is
suggested that an appropriate complaint be lodged with the Office of the
Ombudsman.
"Thank you for your kind attention."[2]
Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's
resolution of 31 January 1994, respondents were required to
comment. Petitioner was later constrained to make an application for a
restraining order and/or writ of preliminary injunction following the issuance,
on 16 March 1994, by the Labor Arbiter of a writ of execution. In a resolution,
dated 07 April 1994, the Court issued the temporary restraining order prayed
for.
The Office of the Solicitor General (OSG), in its comment of 26 May 1994,
initially assailed the claim of immunity by the ADB. Subsequently, however, it
submitted a Manifestation (dated 20 June 1994) stating, among other things,
that "after a thorough review of the case and the records," it became convinced
that ADB, indeed, was correct in invoking its immunity from suit under the
Charter and the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal process, except in cases
arising out of or in connection with the exercise of its powers to borrow money,
to guarantee obligations, or to buy and sell or underwrite the sale of
securities.[3]
Under Article 55 thereof -
All Governors, Directors, alternates, officers and employees of the Bank,
including experts performing missions for the Bank:
(1) shall be immune from legal process with respect of acts performed by them
in their official capacity, except when the Bank waives the immunity.[4]
Like provisions are found in the Headquarters Agreement. Thus, its Section 5
reads:
"The Bank shall enjoy immunity from every form of legal process, except in
cases arising out of, or in connection with, the exercise of its powers to borrow
money, to guarantee obligations, or to buy and sell or underwrite the sale of
securities.[5]
And, with respect to certain officials of the bank, Section 44 of the agreement
states:
Governors, other representatives of Members, Directors, the President, Vice-
President and executive officers as may be agreed upon between the
Government and the Bank shall enjoy, during their stay in the Republic of the
Philippines in connection with their official duties with the Bank:
xxxxxxxxx
(b) Immunity from legal process of every kind in respect of words spoken or
written and all acts done by them in their official capacity.[6]
The above stipulations of both the Charter and Headquarters Agreement should
be able, nay well enough, to establish that, except in the specified cases of
borrowing and guarantee operations, as well as the purchase, sale and
underwriting of securities, the ADB enjoys immunity from legal process of every
form. The Banks officers, on their part, enjoy immunity in respect of all acts
performed by them in their official capacity. The Charter and the Headquarters
Agreement granting these immunities and privileges are treaty covenants and
commitments voluntarily assumed by the Philippine government which must be
respected.
In World Health Organization vs. Aquino,[7] we have declared:
It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political question
and courts should refuse to look beyond a determination by the executive
branch of the government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the government x x x it is
then the duty of the courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, x x x or other officer
acting under his direction.Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction x x x as to embarrass the executive
arm of the government in conducting foreign relations, it is accepted doctrine
that `in such cases the judicial department of government follows the action of
the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction.'"[8]
To the same effect is the decision in International Catholic Migration
Commission vs. Calleja,[9] which has similarly deemed the Memoranda of the
Legal Adviser of the Department of Foreign Affairs to be "a categorical
recognition by the Executive Branch of Government that ICMC x x x enjoy(s)
immunities accorded to international organizations" and which determination
must be held "conclusive upon the Courts in order not to embarrass a political
department of Government. In the instant case, the filing of the petition by the
DFA, in behalf of ADB, is itself an affirmance of the government's own
recognition of ADB's immunity.
Being an international organization that has been extended a diplomatic status,
the ADB is independent of the municipal law.[10] In Southeast Asian Fisheries
Development Center vs. Acosta,[11] the Court has cited with approval the
opinion[12] of the then Minister of Justice; thus -
"One of the basic immunities of an international organization is immunity from
local jurisdiction, i.e., that it is immune from the legal writs and processes
issued by the tribunals of the country where it is found. (See Jenks, Id., pp. 37-
44). The obvious reason for this is that the subjection of such an organization to
the authority of the local courts would afford a convenient medium thru which
the host government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such subjection to
local jurisdiction would impair the capacity of such body to discharge its
responsibilities impartially on behalf of its member-states."[13]
Contrary to private respondent's assertion, the claim of immunity is not here
being raised for the first time; it has been invoked before the forum of origin
through communications sent by petitioner and the ADB to the Labor Arbiter, as
well as before the NLRC following the rendition of the questioned judgment by
the Labor Arbiter, but evidently to no avail.
In its communication of 27 May 1993, the DFA, through the Office of Legal
Affairs, has advised the NLRC:
"Respectfully returned to the Honorable Domingo B. Mabazza, Labor Arbitration
Associate, National Labor Relations Commission, National Capital Judicial
Region, Arbitration Branch, Associated bank Bldg., T.M. Kalaw St., Ermita,
Manila, the attached Notice of Hearing addressed to the Asian Development
Bank, in connection with the aforestated case, for the reason stated in the
Department's 1st Indorsement dated 23 March 1993, copy attached, which is
self-explanatory.
"In view of the fact that the Asian Development Bank (ADB) invokes its
immunity which is sustained by the Department of Foreign Affairs, a continuous
hearing of this case erodes the credibility of the Philippine government before
the international community, let alone the negative implication of such a suit on
the official relationship of the Philippine government with the ADB.
"For the Secretary of Foreign Affairs
(Sgd.)
"SIME D. HIDALGO
Assistant Secretary"[14]
The Office of the President, likewise, has issued on 18 May 1993 a letter to the
Secretary of Labor, viz:
"Dear Secretary Confesor,
"I am writing to draw your attention to a case filed by a certain Jose C. Magnayi
against the Asian Development Bank and its President, Kimimasa Tarumizu,
before the National Labor Relations Commission, National Capital Region
Arbitration Board (NLRC NCR Case No. 00-01690-93).
"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de Castro,
addressed a Notice of Resolution/Order to the Bank which brought it to the
attention of the Department of Foreign Affairs on the ground that the service of
such notice was in violation of the RP-ADB Headquarters Agreement which
provided, inter-alia, for the immunity of the Bank, its President and officers
from every form of legal process, except only, in cases of borrowings,
guarantees or the sale of securities.
"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V. de
Castro of this fact by letter dated March 22, copied to you.
"Despite this, the labor arbiter in question persisted to send summons, the
latest dated May 4, herewith attached, regarding the Magnayi case.
"The Supreme Court has long settled the matter of diplomatic immunities. In
WHO vs. Aquino, SCRA 48, it ruled that courts should respect diplomatic
immunities of foreign officials recognized by the Philippine government. Such
decision by the Supreme Court forms part of the law of the land.
"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that
ignorance of the law is a ground for dismissal.
"Very truly yours,
(Sgd.)
JOSE B. ALEJANDRINO
Chairman, PCC-ADB"[15]
Private respondent argues that, by entering into service contracts with different
private companies, ADB has descended to the level of an ordinary party to a
commercial transaction giving rise to a waiver of its immunity from suit. In the
case of Holy See vs. Hon. Rosario, Jr.,[16] the Court has held:
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 act or acts jure gestionis.
xxxxxxxxx
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.[17]
The service contracts referred to by private respondent have not been intended
by the ADB for profit or gain but are official acts over which a waiver of
immunity would not attach.
With regard to the issue of whether or not the DFA has the legal standing to file
the present petition, and whether or not petitioner has regarded the basic rule
thatcertiorari can be availed of only when there is no appeal nor plain, speedy
and adequate remedy in the ordinary course of law, we hold both in the
affirmative.
The DFA's function includes, among its other mandates, the determination of
persons and institutions covered by diplomatic immunities, a determination
which, when challenged, 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 on
the DFA as being the highest executive department with the competence and
authority to so act in this aspect of the international arena.[18] In Holy See vs.
Hon. Rosario, Jr.,[19] this Court has explained the matter in good detail; viz:
"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 vs. 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 vs. Aquino, 48 SCRA
242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to
that effect. In Baer vs. 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 vs.
Bradford, 75 Phil. 50 [1945]; Miquiabas vs. Philippine-Ryukyus Command, 80
Phil. 262 [1948]; United States of America vs. 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."[20]
Relative to the propriety of the extraordinary remedy of certiorari, the Court
has, under special circumstances, so allowed and entertained such a petition
when (a) the questioned order or decision is issued in excess of or without
jurisdiction,[21] or (b) where the order or decision is a patent nullity,[22] which,
verily, are the circumstances that can be said to obtain in the present
case. When an adjudicator is devoid of jurisdiction on a matter before him, his
action that assumes otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the decision of the
Labor Arbiter, dated 31 August 1993 is VACATED for being NULL AND VOID. The
temporary restraining order issued by this Court on 07 April 1994 is hereby
made permanent. No costs.
SO ORDERED.
[G.R. No. 120385. October 17, 1996]
REPUBLIC OF THE PHILIPPINES, represented by ASSET PRIVATIZATION
TRUST, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON.
EDUARDO J. CARPIO, and PANTRANCO ASSOCIATION OF CONCERNED
EMPLOYEES UNION, respondents.
RESOLUTION
VITUG, J.:
Once a judgment becomes final, it is a matter of right for the prevailing party to
be entitled to a writ of execution,[1] so described as the fruit and end of the
suit.[2] The decisions of the Labor Arbiters and the National Labor Relations
Commission (NLRC) having gained finality, writs of execution and notices of
garnishment have been issued in (a) NLRC NCR Case No. 00-08-05380-
93,[3] PANTRANCO EMPLOYEES ASSOCIATION PTGWO vs. PANTRANCO NORTH
EXPRESS INC. AND ASSET PRIVATIZATION TRUST; (b) NLRC-NCR Case No. 00-05-
03587-93,[4] PANTRANCO ASSOCIATION OF CONCERNED EMPLOYEES UNION vs.
PANTRANCO NORTH EXPRESS, INC., ASSET PRIVATIZATION TRUST AND
DEPARTMENT OF TRANSPORTATION AND COMMUNICATION; and, (c) NLRC
CASE NO. SUB-RAB-01-12-7-02255-93,[5] DR. ANTONIO P. CABUGAO vs.
PANTRANCO NORTH EXPRESS, INC., ASSET PRIVATIZATION TRUST.
The writs of execution and notices of garnishment are now sought to be set
aside by the Republic, represented by the Asset Privatization Trust (APT), in the
instant special civil action of prohibition with prayer for the issuance of
preliminary injunction or temporary restraining order.
Prefatorily, it would be helpful to mention how APT became involved in these
various cases of monetary claims filed by the employees of the Pantranco North
Express, Inc. (PNEI).
In December of 1978, the full ownership of PNEI was transferred to its creditor,
the National Investment Development Corporation (NIDC), a subsidiary of the
Philippine National Bank (PNB),[6] following the latters foreclosure of PNEI
assets. PNEI was one among several companies placed under sequestration by
the Presidential Commission on Good Government (PCGG) shortly after the
historic 1986 events in EDSA. Some time in January, 1988, the sequestration
order was lifted to give way to the sale of PNEI by the APT which, in the
meanwhile, had taken over the management of the company.[7] The continuing
deterioration of its financial condition prompted PNEI to lodge, on 07 May
1992, a Petition for Suspension of Payments with the Securities and Exchange
Commission (SEC), a move calculated to prevent further dissipation of PNEIs
assets and to make PNEI a viable source of income for the government.[8] The
management committee, which was created to handle the business operations
of PNEI, presented a report to the SEC that recommended, in a move to best
serve the interest of all parties concerned (creditors, employees of PNEI and the
government), the sale of the company through privatization in accordance with
the rules of the APT. As a cost saving measure, the management committee also
recommended to the SEC the retrenchment of some 500 employees of
PNEI. The retrenchment was carried out during the months of November and
December of 1992 and January of 1993.
The filing of various labor complaints against PNEI was the immediate result.
(A) NLRC NCR Case No. 00-08-05380-93 was started by PEA-PTGWO on 27
August 1993 in the Arbitration Branch of the NLRC-NCR against PNEI and APT
for unfair labor practice, for non-payment of 13th month pay, and various other
claims. Summonses were served and received by the respective Legal
Departments of PNEI and APT. When the case was called for hearing, only PNEI
made an appearance through the Office of the Government Corporate Counsel
(OGCC). In the subsequent hearings, while APT did not formally enter its
appearance, it, however, submitted a position paper with a motion to dismiss
the case.[9] On 14 February 1994, Labor Arbiter Eduardo Carpio rendered a
decision holding PNEI and APT jointly and solidarily liable, viz:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondents to jointly and severally pay all the covered employees the
following:
1. 13th month pay and P1,000.00 cash gift for the year 1992;
2. medicine allowance from 1991 to September 1993 when the company ceased
its operations;
3. uniform allowance pursuant to Art. XIII of the CBA;
4. separation pay equivalent to one (1) month for every year of service, a
fraction of six (6) months to be considered as one (1) whole year; and
5. 10% of the total award as attorneys fees.[10]
No appeal was interposed by either the PNEI or the APT from the Carpio
decision. PEA-PTGWO in due time filed an urgent motion for the issuance of a
writ of execution. Acting on the motion, Labor Arbiter Carpio directed the
Research and Information Unit of the NLRC to submit an official computation of
PEA-PTGWOs monetary entitlements. PEA-PTGWO, PNEI and APT were all
served with copies of the computation directing them to submit their respective
comments thereon. Only PEA-PTGWO submitted its manifestation stating that it
was agreeable to the computation.
A writ of execution, dated 26 May 1994, was eventually issued by Labor Arbiter
Carpio. The writ was sought to be implemented by Sheriff Juanito Atienza but
only a partial satisfaction of judgment could be realized (through the sale of
levied properties of PNEI in the sum of P22,300.00).[11] PEA-PTGWO filed an
urgent motion for the issuance of an alias writ of execution which was favorably
acted upon. In carrying out the alias writ, Sheriff Atienza served a notice of
garnishment, dated 16 November 1994, on the Land Bank of the Philippines
upon all x x x credits, interest, bank deposits x x x belonging to respondent
Pantranco North Express, Inc. or the respondent Asset Privatization
Trust[12] sufficient to cover the remaining balance of the judgment award in the
sum of P68,947,756.10. The Land Bank, in turn, responded in one of its letters
to Sheriff Atienza that since the funds of APT, a government owned and
controlled agency, were considered public in nature, they could not be the
subject of garnishment.[13]
(B) NLRC-NCR-00-05-03587-93, the second labor case, involved a claim for
separation pay, 13th month pay and other benefits lodged by PACEU against
PNEI, APT and DOTC. The proceedings that transpired in NLRC-NCR-00-05-
03587-93 were summarized by Labor Arbiter Raul Aquino in his 21 July
1993 decision; viz:
It appears on record that this case was initially set for mandatory conference
on June 9, 1993. On June 9, 1993, record of the case shows that only the
complainant appeared. Respondents appeared on June 18, 1993 but efforts to
settle the case failed.
Complainants on June 29, 1993, filed their position paper together with their
individual computation of claims. On June 30, 1993, parties appeared wherein
respondents committed to file its position paper on July 8, 1993 with
understanding that with or without the said position paper the case should be
deemed submitted for decision. On July 8, 1993, complainants
appeared.Respondents on its part did not appear neither did it file the required
position paper, it did not even explain the reason of its non-appearance.
Citing the agreement on June 30, 1993 hearing this Office issued an Order
on July 13, 1993, the same states:
When this case was called for hearing on June 30, 1993, respondent requested
that it be given until July 8, 1993 within which to submit its position paper with
the understanding that with or without the said position paper, the same shall
be deemed submitted for decision.
This case was set again for hearing on July 8, 1993 at 2:00 p.m. During the
hearing, complainants together with counsel appeared while respondent failed
to appear and likewise failed to submit the required position paper. Thus,
complainants move for the submission of the above-entitled case for decision.
ACCORDINGLY, respondent Pantranco North Express, Inc. is hereby ordered to
submit its position paper together with supporting documents within five (5)
days from receipt of this Order. Failure to comply with this Order shall be
deemed waiver of rights to present evidence hence, the above-entitled case
shall be deemed submitted for resolution. No motion for extension shall be
entertained.
SO ORDERED.
It appeared on record that respondent did not file the required position paper
despite receipt of the mentioned Order.
In consonance therefore with the Order of July 13, 1993 and pursuant to par. c,
Section 11, Rule V New Rules of Procedure of this Office, this case is now
considered submitted for decision.[14]
On 21 July 1993, Labor Arbiter Aquino rendered a decision, the decretal portion
of which read:
WHEREFORE, premises considered judgment is hereby rendered ordering
respondent Pantranco North Express, Inc. to pay individual complainants the
following amount as computed.
In addition, respondent company is further directed to pay individual
complainants the uniformed amount of P1,000.00 representing unpaid gift
check and uniform allowance in the amount of P5,868.00 for male complainants
and the amount of P5,058.00 for female complainants for the year 1991, 1992
and 1993, with the exemption of complainant Marciano Cleofas who is not
entitled to uniform allowance. In the case of complainants Rogelio Murillo,
Oronico Ponciano, Pereya Francisco, Bernardo Santos and Felizardo Lambino
respondent is directed to pay each of them the amount of P6,660.00 for the
period of 1991, 1992 and 1993.
Respondent is likewise directed to pay the attorneys fees equivalent to 10% of
the total monetary award of THIRTY NINE MILLION SEVEN HUNDRED THIRTY SIX
THOUSAND FOUR HUNDRED FIFTY NINE PESOS AND THIRTEEN CENTAVOS
(P39,736,459.13)
SO ORDERED.[15]
Since none of the parties appealed, the aforequoted decision eventually
became final and executory. Upon motion, Labor Arbiter Aquino issued a writ of
execution commanding the sheriff, as follows:
NOW THEREFORE, you are hereby commanded to proceed to the premises of
the respondent Pantranco North Express, Inc. located at 325 Quezon Blvd.
Extension, Quezon City to collect the amount of P39,736,459.13 and attorneys
fees in the amount of P3,973,645.91 plus the execution fee of P40,000.00 as per
Manual Instruction for Sheriff in cash and to turn over the same to this Office
for proper disposition.[16]
By virtue of the writ, various pieces of property of PNEI were levied upon and
sold at public auction. Meanwhile, APT filed an Urgent Ex-Parte Motion to
Quash Execution.By then, the proceeds of the sale of some property had
amounted to P1,200,000.00. The amount was deposited with the NLRC pending
resolution of APTs motion.
PEA-PTGWO filed a Motion for Intervention before Labor Arbiter Aquino
claiming interest over the same property of PNEI because of the unions own
monetary claim against the latter.
The case was re-raffled to Labor Arbiter Ricardo Nora, following the inhibition of
Labor Arbiter Aquino, who issued an order on 19 November 1993 denying both
APTs Urgent Ex-Parte Motion to Quash and PEA-PTGWOs Motion for
Intervention. Only PEA-PTGWO appealed to the NLRC for the reversal of the
order of the Labor Arbiter.
On 29 November 1994, an order[17] was issued by the NLRC affirming the
appealed order of respondent Arbiter. The subsequent motion for
reconsideration was denied by the NLRC in its 21 June 1995 order[18] which
became final and executory on 14 July 1995, and thereafter recorded in the
Book of Entries of Judgment.[19]
(C) The complaint in NLRC CASE NO. SUB-RAB-01-12-7-0225-93 was initiated by
respondent Antonio Cabugao before the Sub-Regional Arbitration Branch of
NLRC in Dagupan City against PNEI and APT similarly involving claims for
separation pay, 13th month pay and other benefits. Despite receipt of the
summonses, PNEI and APT failed to file their answers. On 29 August 1994,[20] a
decision was promulgated ordering respondent PNEI to pay the complainant the
total amount of P208,954.60.
The decision became final and executory; hence, upon motion, a writ of
execution[21] was issued by Labor Arbiter Gambito.
Mention might also be made of the fact that in addition to the writs issued by
the labor arbiters, PNEI had likewise been sued and adjudged to pay certain
amounts to different judgment creditors.[22] Losses incurred by PNEI continued
to mount due to cash-flow problems and the depletion of the aging fleet of
buses which were not replaced. The demands for payment of maturing and
overdue obligations made matters worse.
In NLRC Case No. 00-08-05380-93, Sheriff Atienza attempted to satisfy the
judgment against APT funds. Foreseeing that other respondent Sheriffs would
take similar steps unless seasonably enjoined, the Republic, represented by
APT, filed the instant petition. The Court, on 05 July 1995, issued the temporary
restraining order prayed for.[23]
The pivotal issue, in the manner the Court sees it, is whether or not, given these
case settings, APT itself can be held liable for the obligations of PNEI.
The Solicitor-General initially points out that APT, being an agency or
instrumentality of the Republic of the Philippines, is immune from suit. The
Court is not persuaded even as it is cognizant of the doctrine that (t)he State
may not be sued without its consent,[24] for as the Court has so stressed in
Department of Agriculture vs. NLRC,[25] the rule
x x x is not really absolute for it does not say that the state may not be sued
under any circumstance. On the contrary, as correctly phrased, the doctrine
only conveys, the state may not be sued without its consent; its clear import
then is that the State may at times be sued. The States consent may be given
either expressly or impliedly. Express consent may be made through a general
law or a special law. In this jurisdiction, the general law waiving the immunity of
the state from suit is found in Act No. 3083, where the Philippine government
consents and submits to be sued upon any money claim involving liability
arising from contract, express or implied, which could serve as a basis of civil
action between private parties. Implied consent, on the other hand, is conceded
when the State itself commences litigation, thus opening itself to a counter-
claim, or when it enters into a contract. (Footnotes omitted)
Proclamation No. 50,[26] creating APT which has been mandated to take title to
and possession of, conserve, provisionally manage and dispose of assets that
have been identified for privatization or disposition,[27] clearly provides that said
instrumentality, among other things, can sue and be sued.[28] This provision
indubitably shows that APT can be haled to court.
Nonetheless, we have likewise since explained[29] that suability does not
necessarily mean liability on the part of the particular instrumentality or agency
of the government; hence
When the State gives its consent to be sued, it does not thereby necessarily
consent to an unrestrained execution against it. Tersely put, when the State
waives its immunity, all it does, in effect, is to give the other party an
opportunity to prove, if it can, that the State has a liability. In Republic vs.
Villasor this Court, in nullifying the issuance of an alias writ of execution
directed against the funds of the Armed Forces of the Philippines to satisfy a
final and executory judgment, has explained, thus-
The universal rule that where the State gives its consent to be sued by private
parties either by general law or special law, it may limit claimants 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
correspondent appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to be paralyzed or disrupted
by the diversion of public funds from their legitimate and specific objects, as
appropriated by law.[30] (Footnotes omitted)
Delving into the other crucial question, it would be, in our view, a clear and
patent error to construe the decreed joint and solidary liability of APT (in NLRC
NCR Case No. 00-08-05380-93) as extending beyond what APT has held in or
acquired from PNEI. A matter that mus not be overlooked is the fact that the
inclusion of APT as a respondent in the monetary claims against PNEI is merely
the consequence of its being a conservator of assets, a role that APT normally
plays in, or the relationship that ordinarily it maintains with, corporations
identified for and while under privatization. The liability of APT under this
particular arrangement, nothing else having been shown, should be co-
extensive with the amount of assets taken over form the privatized firm. PNEIs
assets obviously remain to be subject to execution by judgment creditors of
PNEI. Accordingly, the levy and auction sale of the property of PNEI to satisfy
the monetary judgment rendered in favor of PNEI employees can be sustained
since such assets are to be deemed subject to all valid claims against PNEI.[31]
WHEREFORE, the petition is GRANTED. The notice of garnishment directed
against the funds of APT is NULLIFIED and the temporary restraining order
issued by this Court is made PERMANENT. No costs.
SO ORDERED.
REPUBLIC OF THE PHILIPPINES, A.M. No. RTJ-05-1959
- versus - (Formerly OCA I.P.I. No. 04-
1941-RTJ)
JUDGE VICENTE A. HIDALGO,
Presiding Judge of the Regional Promulgated:
Trial Court of Manila, Branch 37
December 9, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
The instant administrative case arose from the affidavit-complaint[1] dated 19
January 2004 filed by the Republic of the Philippines, represented by Solicitor
General Alfredo L. Benipayo, with the Office of the Court Administrator (OCA),
charging Judge Vicente A. Hidalgo with Gross Ignorance of the Law, Manifest
Partiality and Conduct Prejudicial to the Interest of the Service relative to Civil
Case No. 94075 entitled Tarcila Laperal Mendoza v. The Republic of the
Philippines, et al.
Facts of the case:
On 02 June 1999, Tarcila Laperal Mendoza filed an action for the annulment or
declaration of nullity of the title and deed of sale, reconveyance and/or
recovery of ownership and possession of a four thousand nine hundred twenty-
four-square meter (4,924.60 sq. m. to be exact) property against the Republic of
the Philippines (in whose name the title to the property was transferred and
registered) in the Regional Trial Court (RTC) of Manila, and was docketed as Civil
Case No. 94075. The property in question is located at 1440 Arlegui Street, San
Miguel, Manila. It is also known as the Arlegui Residence which housed two (2)
Philippine presidents and which now holds the Office of the Press Secretary and
the News Information Bureau.
The case was initially dismissed by the presiding Judge of the Manila RTC
(Branch 35) on the ground of state immunity. A petition for certiorari was filed
with the Court of Appeals which reversed the trial courts ruling and remanded
the case to the trial court for further proceedings. The Supreme Court sustained
the Court of Appeals decision.
Upon the inhibition of the presiding Judge of the Manila RTC (Branch 35), the
case was re-raffled to the Manila RTC (Branch 37), with respondent Vicente A.
Hidalgo as presiding Judge.

In an Order dated 07 July 2003, Judge Hidalgo declared the Republic in default
for failure of Solicitor Gabriel Francisco Ramirez, the handling solicitor, to file
the required Answer within the period prayed for in his motion for extension
dated 21 May 2003. The plaintiff was allowed to present her evidence ex parte.
On 27 August 2003, Judge Hidalgo rendered a decision[2] in favor of plaintiff
Mendoza, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the deed of sale dated July 15, 1975, annotated at the back of
Transfer Certificate of Title No. 118527 as PE:2035/T-118911, as non-existent
and/or fictitious, and, therefore, null and void from the beginning;
2. Declaring that Transfer Certificate of Title No. 118911 of the defendant
Republic of the Philippines has no basis, thereby, making it null and void from
beginning;
3. Ordering the defendant Register of Deeds for the City of Manila to reinstate
plaintiffs Transfer Certificate of Title No. 118527;
4. Ordering the defendant Republic of the Philippines to pay a just
compensation in the sum of ONE HUNDRED FORTY THREE MILLION SIX
HUNDRED THOUSAN (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
favour of the defendant Republic of the Philippines and, on the other hand,
directing the defendant Register of Deeds, upon presentation of the said deed
of conveyance, to cancel plaintiffs Transfer Certificate of Title in favour of the
defendant Republic of the Philippines;
6. Ordering the defendant Republic of the Philippines 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 of the Philippines to pay the plaintiff
attorneys fee, in an amount equivalent to FIFTEEN (15%) PER CENT of the
amount due to the plaintiff.
With pronouncement as to the costs of the suit.[3]
Upon receipt by the Office of the Solicitor General of the judgment by default,
the Republic moved for new trial on the ground that the gross and inexcusable
negligence of Solicitor Ramirez in handling the case does not bind the Republic
of the Philippines. It argued that it is entitled to due process of law considering
the enormous amount of the alleged obligations involved. It maintained that
plaintiffs cause of action has long prescribed and is legally barred by laches, and
that the title registered in the name of the Republic has become indefeasible.
The respondent Judge denied the motion for new trial[4]
and the subsequent
motion for reconsideration[5] filed by the Republic. A notice of appeal[6] dated 27
November 2003 was filed, but the same was denied[7] on 17 December 2003 on
the ground that it was filed beyond the reglementary period. A certificate of
finality[8] of judgment was issued by the Branch Clerk of Court, Atty. Michael B.
Robles, on 27 November 2003.
On 10 December 2003, respondent issued an order[9] directing the issuance of a
writ of execution. On 22 December 2003, a writ of execution[10] was issued,
which reads, thus:
TO: THE BRANCH SHERIFF
OF BRANCH 37, RTC, MANILA
WE COMMAND you to demand that of the goods and chattels of THE REPUBLIC
OF THE PHILIPPINES you cause to be made the sum of ONE HUNDRED FORTY
THREE MILLION SIX HUNDRED THOUSAND PESOS (P143,600,000.00) Philippine
Currency, as payment for just compensation plus interest at the legal rate, until
the whole amount is paid in full for the acquisition of the subject property; and
the further sum of ONE BILLION FOUR HUNDRED EIGHTY MILLION SIX HUNDRED
TWENTY SEVEN THOUSAN 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, the plaintiff attorneys fee, in an
amount equivalent to FIFTEEN (15%) PER CENT of the amount due to the
plaintiff plus the cost of suit, together with your lawful fees for service of this
execution all in money of the Philippines, which the plaintiff recovered in our
Court, Regional Trial Court of Manila on the 27th day of August 2003 against the
Republic of the Philippines, Inc. with interest and costs, and that you render the
same to said Tarcila Laperal aside from your own fees on this execution, and to
likewise return this Writ into this Court within sixty (60) days from the date of
receipt hereof with your proceedings endorsed thereon.
On 30 December 2003, Sheriff IV Carmelo V. Cachero directed Eduardo Sergio
G. Edeza of the National Treasurer of the Bureau of Treasury to effect the
payment of the sum stated in the decision, thus:
TO: Honorable EDUARDO SERGIO G. EDEZA
National Treasurer of the Philippines, Bureau of Treasury
Palacio del Gobernador, Intramuros
Manila
G R E E TI N G S:
Attached herewith you will find a copy of the WRIT OF EXECUTION issued by the
HON. VICENTE A. HIDALGO, Judge of the Regional Trial Court, Branch 37,
Manila, in the above-entitled case for your ready reference.
By virtue of the said Writ you are hereby directed to cause and or effect the
payment of the sum of ONE HUNDRED FORTY THREE MILLION SIX HUNDRED
THOUSAND PESOS (P143,600,000.00), Philippine Currency, as payment for just
compensation, plus interest at the legal rate, until the whole amount is paid in
full and the further sum of ONE BILLION FOUR HUNDRED EIGHTY MILLION SIX
HUNDRED TWENTY SEVEN THOUSAND SIX HUNDRED EIGHTY EIGHT PESOS
(P1,480,627,688.00) 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 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, the plaintifs attorneys fee, in an
amount equivalent to FIFTEEN (15%) PERCENT of the amount due to the
plaintiff plus costs of suit together with all the lawful fees and expenses for the
service of the Writ of Execution in favor of the above-named plaintiff.[11]
On 07 January 2004, Sheriff Cachero further directed the National Treasurer to
cause payment of P1,942,576,312.45, thus:
TO: Honorable EDUARDO SERGIO G. EDEZA
National Treasurer of the Philippines, Bureau of Treasury
Palacio del Gobernador, Intramuros, M a n i l a
S i r:
Pursuant to the WRIT OF EXECUTION issued by the Hon. VICENTE A. HIDALGO,
Judge of the Regional Trial Court, Branch 37, Manila, in the above-entitled case,
which was served upon your good office on December 30, 2003, kindly effect
and/or cause the payment of the total amount of ONE BILLION NINE HUNDRED
FORTY TWO MILLION FIVE HUNDRED SEVENTY SIX THOUSAND THREE HUNDRED
TWELVE PESOS AND FORTY FIVE CENTAVOS (P1,942,576,312.45), Philippine
Currency, made payable to:
1. TARCILA I. MENDOZA and/or FORTUNATO I. MENDOZA P828,356,119.86 to
be deposited with the Land Bank of the Philippines, Main Office, M.H. del Pilar
St., Ermita, Manila under CURRENT ACCOUNT NO. 003402-0014-95;
2. TARCILA I. MENDOZA and/or APOLONIA C. SOGUILON P1,065,555,684.78 to
be deposited with the Land Bank of the Philippines, Main Office, M.H. del Pilar
St., Ermita, Manila under CURRENT ACCOUNT NO. 003402-0015-17;
3. CLERK OF COURT, RTC MANILA P38,851,606.25 to be deposited with the Land
Bank of the Philippines, YMCA Branch, Arroceros St., Ermita, Manila under
ACCOUNT NO. 0591-0116-34;
4. CLERK OF COURT, RTC MANILA P9,712,901.56 to be deposited with the Land
Bank of the Philippines, YMCA Branch, Arroceros St., Ermita, Manila under
ACCOUNT NO. 0591-1744-28.[12]
The foregoing antecedents begot the instant administrative complaint[13] raising
the following allegations against respondent Judge:
a. The respondent judge assumed jurisdiction and took cognizance of the
plaintiffs complaint despite a clear showing that the action had long prescribed
and is already barred by laches. The Republic contends that since the complaint
showed on its face that the action had prescribed and that the plaintiffs inaction
for a period of almost twenty-four years undoubtedly amounts to laches, the
respondent judge was duty bound to dismiss it motu proprio;
b. The money judgment by default rendered by the respondent judge in the
colossal amount of almost two billion pesos (P2,000,000,000.00) is grossly in
excess of the claim alleged in the complaint in patent violation of Section 3(d),
Rule 9 of the 1997 Rules of Civil Procedure and grossly disproportionate to the
total amount of docket fees paid;
c. The respondent judge violated the Constitution and the fundamental rule
that government funds are exempt from execution or garnishment;
d. The respondent judge ordered the Republic to pay the plaintiffs attorneys
fees with pronouncement as to the costs of the suit in violation of the clear
provision of Section 1, Rule 142 which provides that no costs shall be allowed
against the Republic of the Philippines unless otherwise provided by law;
e. The respondent judge condemned the Republic to suffer the obligation of
almost two billion (P2,000,000,000.00) in violation of its right to due process;
f. Awarding the amount of two billion pesos (P2,000,000,000.00) when the
property involved is only valued at more than two million pesos (P2,000,000.00)
and the amount of claim alleged in the complaint is more or less three hundred
seventy-one million (P371,000,000.00) shows that the respondent judge had
been partial in favor of the plaintiff;
g. The certificate of finality of the judgment by default was hastily issued on
27 November 2003, the very same day the Republic filed a notice of appeal;
h. The Republic had until 20 December 2003 to submit its opposition to the
motion for the issuance of the writ of execution, yet the respondent judge
denied the Republics notice of appeal on 17 December 2003 for being allegedly
filed out of time;
i. The Republic filed its opposition to the motion for the issuance of a writ of
execution on 19 December 2003 and on the same day, the respondent judge
with astonishing speed granted the plaintiffs motion to issue a writ of
execution.
The Republic avers that the respondent Judge is liable for these unjustified and
irregular acts which constitute gross ignorance of the law, manifest partiality
and conduct prejudicial to the best interest of the service.
On 12 February 2004, OCA required[14] respondent Judge to submit his
comment within ten (10) days from receipt.
In his COMMENT[15] dated 15 March 2004, respondent Judge Vicente A. Hidalgo
claims that the instant administrative complaint was instituted against him in
order to hide from view a monstrous fiasco. The respondent Judge maintains
that the Office of the Solicitor General, having failed to fulfil its duty as counsel
for the defendant, is trying to escape criticism and responsibility for bungling
the case by the simple expedient smokescreen of making the respondent a
convenient scapegoat for its ineptitude and inefficiency.
The Office of the Solicitor General faults Judge Hidalgo in failing to dismiss the
civil case on the grounds of prescription and laches. The respondent Judge
counters that such grounds do not apply since the deed of sale upon which the
Republics title to the property is based is inexistent and absolutely simulated or
fictitious.
With respect to the money judgment granted, the respondent Judge maintains
that the amount awarded to the plaintiff was based on testimonies of experts.
The amount of damages given, the respondent explains, is within the four
corners of the prayer made in the complaint, i.e., such other relief, just and
equitable, under the premises.
The Office of the Solicitor General insists that the motion for new trial should be
granted because the gross and inexcusable negligence of Solicitor Ramirez has
impaired the rights of the Republic, depriving it of its property without due
process of law. The respondent Judge contends that the Office of the Solicitor
General is no ordinary advocate which, due to various constraints and
limitations, can be conceded to commit acts constitutive of negligence, mistake
or lack of competence. He notes that all pleadings bear at least three (3)
signatures - that of the handling solicitor, the assistant solicitor general and the
solicitor general, showing that pleadings go through the rung of the ladder of
authority ensuring their conformity to existing jurisprudence and compliance
with procedural rules.
It is also contended by the Republic that the certificate of finality of the
judgment by default was hastily issued, showing the manifest partiality of the
respondent Judge for the plaintiff. The respondent Judge avers that upon the
denial of the motion for new trial which the Office of the Solicitor General
received on 09 October 2003, the Republic had only one (1) day left or until 10
October 2003 to file its appeal. Instead of filing its appeal, it filed a motion for
reconsideration on 24 October 2003 which the respondent denied in an order
dated 25 November 2003. This is contrary to the provision in the Rules of Court
that (a)n order denying a motion for new trial or reconsideration is not
appealable, the remedy being an appeal from the judgment or final order (Sec.
9, Rule 37, 1997 Rules of Civil Procedure). The respondent Judge argues that the
filing of the notice of appeal on 27 November 2003, forty-eight (48) days from
the last day to perfect appeal, was made too late because the decision had
already become final and executory.
In its REPLY[16] dated 03 March 2004, the Republic reiterates its charges of gross
ignorance of the law, manifest partiality, violation of due process and conduct
prejudicial to the best interest of the service against Judge Hidalgo. The
Republic insists that the respondent Judge deserves to be dismissed from the
service for being guilty of the foregoing offenses.
The Republic asserts that the motion for new trial was filed to rectify the grossly
negligent act of the handling solicitor which gravely prejudiced its interest. It
maintains that the Judge violated its right to due process when he proceeded to
hold it liable for the omissions and negligence of a lawyer who had ceased to be
the authorized agent of the government.
It is also contended that the respondent Judge violated the Constitution and the
fundamental rule that government funds are exempt from execution or
garnishment when he caused the issuance of the writ of execution against the
Republic. It is likewise asserted that in ordering the Republic to pay the
attorneys fees of plaintiff and the cost of the suit, the respondent violated the
clear provision of Section 1, Rule 142 of the Rules of Court heretofore cited. In
these two issues, the Republic observes that the respondent is conspicuously
silent because he cannot offer any defense, as his actions are glaringly illegal.
Anent the accusation of the respondent that he is being used by the Office of
the Solicitor General as a scapegoat for allegedly bungling the case, the Republic
counters that the respondent himself cannot justify his actions by hiding under
the cloak of speedy disposition of the case as prescribed by the Court.
On 14 April 2005, the OCA issued its recommendation,[17] thus:
In view of the foregoing, we respectfully submit for the consideration of the
Honorable Court the following recommendation:
1. That the instant administrative complaint be RE DOCKETED as a regular
administrative matter;
2. That Judge Vicente A. Hidalgo, Presiding Judge, Regional Trial Court (Branch
37), Manila be found administratively liable for GROSS IGNORANCE OF THE LAW
OR PROCEDURE under Sec. 8 (9), Rule 140 of the Rules of Court; and
3. That Judge Hidalgo be FINED in the amount of forty thousand pesos
(P40,000.00) and be WARNED that a repetition of the same or similar acts will
be dealt with more severely.
The recommendation of the OCA is well-taken.
In the present case, respondent Judge patently committed two inexcusable
procedural errors the pronouncement of costs against the government and the
subsequent issuance of the writ of execution, in violation of settled rules and
jurisprudence.
In the decision dated 27 August 2003, respondent Judge declared the Republic
liable for payment of attorneys fees and cost of suit, pertinent portion of which
reads:
7. Ordering the defendant Republic of the Philippines to pay the plaintiff
attorneys fee, in an amount equivalent to FIFTEEN (15%) PER CENT of the
amount due to the plaintiff.
With pronouncement as to the costs of the suit.[18]
In declaring the government answerable to the attorneys fees of the plaintiff
and other costs of the suit, the respondent utterly disregarded the well-
established rule that costs of suit are not recoverable against the government
(Section 1, Rule 142, Rules of Court). As early as 15 November 1918, we ruled in
the case ofHong Kong and Shanghai Banking Corporation v. Rafferty[19] that no
costs shall be allowed against the government of the Philippine Islands where
the government is the unsuccessful party. This was reiterated in the case
of Philippines Veterans Affairs Office v. Anover[20] and The Philippine Veterans
Affairs Office v. Tamayo,[21] when we ruled that court costs are not recoverable
from a government agency.
Upon finality of the decision dated 27 August 2003, respondent Judge directed
the issuance of the writ of execution and subsequently issued the writ of
execution on 22 December 2003.
It is settled that when the State gives its consent to be sued, it does not thereby
necessarily consent to an unrestrained execution against it. Tersely put, when
the State waives its immunity, all it does, in effect, is to give the other party an
opportunity to prove, if it can, that the state has a liability. In Republic v.
Villasor[22]this Court, in nullifying the issuance of an alias writ of execution
directed against the funds of the Armed Forces of the Philippines to satisfy a
final and executory judgment, has explained, thus
. . . The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimants 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
correspondent appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to paralyzed or disrupted by
the diversion of public funds from their legitimate and specific objects, as
appropriated by law.[23]
In Administrative Circular No. 10-2000 dated 25 October 2000, all judges of
lower courts were advised to exercise utmost caution, prudence and
judiciousness in the issuance of writs of execution to satisfy money judgments
against government agencies and local government units. Judges, thus, cannot
indiscriminately issue writs of execution against the government to enforce
money judgments.
It is clear that respondent Judge ought to be sanctioned for his failure to
properly apply the court procedure. As can be seen, the law involved is simple
and elementary. When the law is sufficiently basic, a judge owes it to his office
to simply apply it, and anything less than that would be constitutive of gross
ignorance of the law. In short, when the law is so elementary, not to be aware
of it constitutes gross ignorance of the law.[24] When the inefficiency springs
from a failure to consider so basic and elementary a rule, a law or principle in
the discharge of his duties, a judge is either too incompetent and undeserving
of the position and title he holds or is too vicious that the oversight or omission
was deliberately done in bad faith and in grave abuse of judicial authority.[25]
Canon 4 of the Canon of Judicial Ethics requires that a judge should be studious
of the principles of law; while Canon 18 mandates that he should administer his
office with due regard to the integrity of the system of the law itself,
remembering that he is not a depositary of arbitrary power, but a judge under
the sanction of law.[26] The maxim ignorance of the law excuses no one has
special application to judges, who, under Rule 1.01 of the Code of Judicial
Conduct, should be the embodiment of competence, integrity, and
independence. Competence is a mark of a good judge. When a judge displays an
utter lack of familiarity with the rules, he erodes the publics confidence in the
competence of our courts.[27] It is highly imperative that judges be conversant
with the law and basic legal principles.[28] Basic legal procedures must be at the
palm of a judges hands.[29]
In the case at bar, respondent Judge not only failed to perform his duties in
accordance with the Rules, but he also acted wilfully and in gross disregard of
the law and controlling jurisprudence. He was ignorant of the basic and simple
procedural rules by issuing the writ of execution and pronouncing the costs of
suit against the government. Verily, respondent Judges actions visibly indicate
his lack of sufficient grasp of the law.
For issuing the writ of execution and pronouncing the costs of the suit against
the government, we deem that the respondent Judge is liable for gross
ignorance of the law or procedure under Rule 140 of the Rules of Court.
Under Rule 140, Section 8, of the Rules of Court, as amended by A.M. No. 01-8-
10 SC, gross ignorance of the law or procedure is classified as a serious charge.
As to the penalty imposed, Section 11 of the same Rule provides:
SEC. 11. Sanctions. - A. If the respondent is guilty of a serious charge, any of the
following sanctions may be imposed:
1. Dismissal from the service, forfeiture of all or part of the
benefits as the Court may determine, and disqualification from reinstatement
or appointment to any public office, including government-owned or controlled
corporations: Provided, however, that the forfeiture of benefits shall in no case
include accrued leave credits;
2. Suspension from office without salary and other benefits for
more than three (3) but not exceeding six (6) months; or
3. A fine of more than P20,000.00 but not exceeding P40,000.00.
Taking into consideration the length of service[30] rendered by respondent Judge
and following our rulings in Gamas v. Oco,[31] and Sule v. Biteng,[32] a fine
of P20,000.00 is justified.
The other charges against Judge Hidalgo and the issues arising therefrom are
judicial matters not subject to administrative scrutiny. The Republic has, in fact,
filed a petition for certiorari on 30 January 2004 against the respondent,
docketed as G.R. No. 161657, and remains pending before the Third Division.
The present administrative case is without prejudice to any other action which
may be taken on said petition.
All told, this Court once again seizes the moment to remind judges to keep
abreast of the rules and recent pronouncements of this Court, so they may
evolve into more effective dispensers of justice -- magistrates of the law in the
truest sense of the word.[33]
WHEREFORE, the Court finds respondent Judge Vicente A. Hidalgo
administratively liable for gross ignorance of the law and is accordingly fined the
amount of TWENTY THOUSAND (P20,000.00) PESOS with a stern warning that a
repetition of the same or similar act will be dealt with more severely.
SO ORDERED.
G.R. No. L-11154 March 21, 1916
E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
Crossfield and O'Brien for plaintiff.
Attorney-General Avanceña for defendant..
TRENT, J.:
This is an appeal by both parties from a judgment of the Court of First Instance
of the city of Manila in favor of the plaintiff for the sum of P14,741, together
with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the
general damages which the plaintiff suffered to P5,000, instead of P25,000 as
claimed in the complaint," and (2) "in limiting the time when plaintiff was
entirely disabled to two months and twenty-one days and fixing the damage
accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in his
complaint."
The Attorney-General on behalf of the defendant urges that the trial court
erred: (a) in finding that the collision between the plaintiff's motorcycle and the
ambulance of the General Hospital was due to the negligence of the chauffeur;
(b) in holding that the Government of the Philippine Islands is liable for the
damages sustained by the plaintiff as a result of the collision, even if it be true
that the collision was due to the negligence of the chauffeur; and (c) in
rendering judgment against the defendant for the sum of P14,741.
The trial court's findings of fact, which are fully supported by the record, are as
follows:
It is a fact not disputed by counsel for the defendant that when the plaintiff,
riding on a motorcycle, was going toward the western part of Calle Padre Faura,
passing along the west side thereof at a speed of ten to twelve miles an hour,
upon crossing Taft Avenue and when he was ten feet from the southwestern
intersection of said streets, the General Hospital ambulance, upon reaching said
avenue, instead of turning toward the south, after passing the center thereof,
so that it would be on the left side of said avenue, as is prescribed by the
ordinance and the Motor Vehicle Act, turned suddenly and unexpectedly and
long before reaching the center of the street, into the right side of Taft Avenue,
without having sounded any whistle or horn, by which movement it struck the
plaintiff, who was already six feet from the southwestern point or from the post
place there.
By reason of the resulting collision, the plaintiff was so severely injured that,
according to Dr. Saleeby, who examined him on the very same day that he was
taken to the General Hospital, he was suffering from a depression in the left
parietal region, a would in the same place and in the back part of his head,
while blood issued from his nose and he was entirely unconscious.
The marks revealed that he had one or more fractures of the skull and that the
grey matter and brain was had suffered material injury. At ten o'clock of the
night in question, which was the time set for performing the operation, his
pulse was so weak and so irregular that, in his opinion, there was little hope
that he would live. His right leg was broken in such a way that the fracture
extended to the outer skin in such manner that it might be regarded as double
and the would be exposed to infection, for which reason it was of the most
serious nature.
At another examination six days before the day of the trial, Dr. Saleeby noticed
that the plaintiff's leg showed a contraction of an inch and a half and a
curvature that made his leg very weak and painful at the point of the fracture.
Examination of his head revealed a notable readjustment of the functions of the
brain and nerves. The patient apparently was slightly deaf, had a light weakness
in his eyes and in his mental condition. This latter weakness was always noticed
when the plaintiff had to do any difficult mental labor, especially when he
attempted to use his money for mathematical calculations.
According to the various merchants who testified as witnesses, the plaintiff's
mental and physical condition prior to the accident was excellent, and that after
having received the injuries that have been discussed, his physical condition had
undergone a noticeable depreciation, for he had lost the agility, energy, and
ability that he had constantly displayed before the accident as one of the best
constructors of wooden buildings and he could not now earn even a half of the
income that he had secured for his work because he had lost 50 per cent of his
efficiency. As a contractor, he could no longer, as he had before done, climb up
ladders and scaffoldings to reach the highest parts of the building.
As a consequence of the loss the plaintiff suffered in the efficiency of his work
as a contractor, he had to dissolved the partnership he had formed with the
engineer. Wilson, because he was incapacitated from making mathematical
calculations on account of the condition of his leg and of his mental faculties,
and he had to give up a contract he had for the construction of the Uy Chaco
building."
We may say at the outset that we are in full accord with the trial court to the
effect that the collision between the plaintiff's motorcycle and the ambulance
of the General Hospital was due solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in
question by the plaintiff are (a) P5,000, the award awarded for permanent
injuries, and (b) the P2,666, the amount allowed for the loss of wages during
the time the plaintiff was incapacitated from pursuing his occupation. We find
nothing in the record which would justify us in increasing the amount of the
first. As to the second, the record shows, and the trial court so found, that the
plaintiff's services as a contractor were worth P1,000 per month. The court,
however, limited the time to two months and twenty-one days, which the
plaintiff was actually confined in the hospital. In this we think there was error,
because it was clearly established that the plaintiff was wholly incapacitated for
a period of six months. The mere fact that he remained in the hospital only two
months and twenty-one days while the remainder of the six months was spent
in his home, would not prevent recovery for the whole time. We, therefore, find
that the amount of damages sustained by the plaintiff, without any fault on his
part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent or
employee of the Government, the inquiry at once arises whether the
Government is legally-liable for the damages resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:
An Act authorizing E. Merritt to bring suit against the Government of the
Philippine Islands and authorizing the Attorney-General of said Islands to
appear in said suit.
Whereas a claim has been filed against the Government of the Philippine Islands
by Mr. E. Merritt, of Manila, for damages resulting from a collision between his
motorcycle and the ambulance of the General Hospital on March twenty-fifth,
nineteen hundred and thirteen;
Whereas it is not known who is responsible for the accident nor is it possible to
determine the amount of damages, if any, to which the claimant is entitled; and
Whereas the Director of Public Works and the Attorney-General recommended
that an Act be passed by the Legislature authorizing Mr. E. Merritt to bring suit
in the courts against the Government, in order that said questions may be
decided: Now, therefore,
By authority of the United States, be it enacted by the Philippine Legislature,
that:
SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First
Instance of the city of Manila against the Government of the Philippine Islands
in order to fix the responsibility for the collision between his motorcycle and the
ambulance of the General Hospital, and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said collision,
and the Attorney-General of the Philippine Islands is hereby authorized and
directed to appear at the trial on the behalf of the Government of said Islands,
to defendant said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive its immunity
from suit or did it also concede its liability to the plaintiff? If only the former,
then it cannot be held that the Act created any new cause of action in favor of
the plaintiff or extended the defendant's liability to any case not previously
recognized.
All admit that the Insular Government (the defendant) cannot be sued by an
individual without its consent. It is also admitted that the instant case is one
against the Government. As the consent of the Government to be sued by the
plaintiff was entirely voluntary on its part, it is our duty to look carefully into the
terms of the consent, and render judgment accordingly.
The plaintiff was authorized to bring this action against the Government "in
order to fix the responsibility for the collision between his motorcycle and the
ambulance of the General Hospital and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said collision, .
. . ." These were the two questions submitted to the court for determination.
The Act was passed "in order that said questions may be decided." We have
"decided" that the accident was due solely to the negligence of the chauffeur,
who was at the time an employee of the defendant, and we have also fixed the
amount of damages sustained by the plaintiff as a result of the collision. Does
the Act authorize us to hold that the Government is legally liable for that
amount? If not, we must look elsewhere for such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the
Federal and State Governments in the United States," we may look to the
decisions of the high courts of that country for aid in determining the purpose
and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts committed
by its officers or agents whom it employs, except when expressly made so by
legislative enactment, is well settled. "The Government," says Justice Story,
"does not undertake to guarantee to any person the fidelity of the officers or
agents whom it employs, since that would involve it in all its operations in
endless embarrassments, difficulties and losses, which would be subversive of
the public interest." (Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs.
Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L.
Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover
damages from the state for personal injuries received on account of the
negligence of the state officers at the state fair, a state institution created by
the legislature for the purpose of improving agricultural and kindred industries;
to disseminate information calculated to educate and benefit the industrial
classes; and to advance by such means the material interests of the state, being
objects similar to those sought by the public school system. In passing upon the
question of the state's liability for the negligent acts of its officers or agents, the
court said:
No claim arises against any government is favor of an individual, by reason of
the misfeasance, laches, or unauthorized exercise of powers by its officers or
agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51,
53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158;
Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203;
Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the state
where the cause of action arises out of either fort or contract, the rule is stated
in 36 Cyc., 915, thus:
By consenting to be sued a state simply waives its immunity from suit. It does
not thereby concede its liability to plaintiff, or create any cause of action in his
favor, or extend its liability to any cause not previously recognized. It merely
gives a remedy to enforce a preexisting liability and submits itself to the
jurisdiction of the court, subject to its right to interpose any lawful defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16,
1915, the Act of 1913, which authorized the bringing of this suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher, of the town of
Summit, Waukesha County, Wisconsin, to bring suit in such court or courts and
in such form or forms as he may be advised for the purpose of settling and
determining all controversies which he may now have with the State of
Wisconsin, or its duly authorized officers and agents, relative to the mill
property of said George Apfelbacher, the fish hatchery of the State of Wisconsin
on the Bark River, and the mill property of Evan Humphrey at the lower end of
Nagawicka Lake, and relative to the use of the waters of said Bark River and
Nagawicka Lake, all in the county of Waukesha, Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the legislature admitted
liability on the part of the state for the acts of its officers, and that the suit now
stands just as it would stand between private parties. It is difficult to see how
the act does, or was intended to do, more than remove the state's immunity
from suit. It simply gives authority to commence suit for the purpose of settling
plaintiff's controversies with the estate. Nowhere in the act is there a whisper
or suggestion that the court or courts in the disposition of the suit shall depart
from well established principles of law, or that the amount of damages is the
only question to be settled. The act opened the door of the court to the
plaintiff. It did not pass upon the question of liability, but left the suit just where
it would be in the absence of the state's immunity from suit. If the Legislature
had intended to change the rule that obtained in this state so long and to
declare liability on the part of the state, it would not have left so important a
matter to mere inference, but would have done so in express terms. (Murdock
Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied
upon and considered, are as follows:
All persons who have, or shall hereafter have, claims on contract or for
negligence against the state not allowed by the state board of examiners, are
hereby authorized, on the terms and conditions herein contained, to bring suit
thereon against the state in any of the courts of this state of competent
jurisdiction, and prosecute the same to final judgment. The rules of practice in
civil cases shall apply to such suits, except as herein otherwise provided.
And the court said:
This statute has been considered by this court in at least two cases, arising
under different facts, and in both it was held that said statute did not create any
liability or cause of action against the state where none existed before, but
merely gave an additional remedy to enforce such liability as would have
existed if the statute had not been enacted. (Chapman vs. State, 104 Cal., 690;
43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior court
"jurisdiction of all claims against the commonwealth, whether at law or in
equity," with an exception not necessary to be here mentioned. In construing
this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28),
said:
The statute we are discussing disclose no intention to create against the state a
new and heretofore unrecognized class of liabilities, but only an intention to
provide a judicial tribunal where well recognized existing liabilities can be
adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by
the terms of the statute of New York, jurisdiction of claims for damages for
injuries in the management of the canals such as the plaintiff had sustained,
Chief Justice Ruger remarks: "It must be conceded that the state can be made
liable for injuries arising from the negligence of its agents or servants, only by
force of some positive statute assuming such liability."
It being quite clear that Act No. 2457 does not operate to extend the
Government's liability to any cause not previously recognized, we will now
examine the substantive law touching the defendant's liability for the negligent
acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the
Civil Code reads:
The state is liable in this sense when it acts through a special agent, but not
when the damage should have been caused by the official to whom properly it
pertained to do the act performed, in which case the provisions of the
preceding article shall be applicable.
The supreme court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law 3,
Title 15, Partida 7, on that the person obligated, by his own fault or negligence,
takes part in the act or omission of the third party who caused the damage. It
follows therefrom that the state, by virtue of such provisions of law, is not
responsible for the damages suffered by private individuals in consequence of
acts performed by its employees in the discharge of the functions pertaining to
their office, because neither fault nor even negligence can be presumed on the
part of the state in the organization of branches of public service and in the
appointment of its agents; on the contrary, we must presuppose all foresight
humanly possible on its part in order that each branch of service serves the
general weal an that of private persons interested in its operation. Between
these latter and the state, therefore, no relations of a private nature governed
by the civil law can arise except in a case where the state acts as a judicial
person capable of acquiring rights and contracting obligations. (Supreme Court
of Spain, January 7, 1898; 83 Jur. Civ., 24.)
That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which
arise out of fault or negligence; and whereas in the first article thereof. No.
1902, where the general principle is laid down that where a person who by an
act or omission causes damage to another through fault or negligence, shall be
obliged to repair the damage so done, reference is made to acts or omissions of
the persons who directly or indirectly cause the damage, the following articles
refers to this persons and imposes an identical obligation upon those who
maintain fixed relations of authority and superiority over the authors of the
damage, because the law presumes that in consequence of such relations the
evil caused by their own fault or negligence is imputable to them. This legal
presumption gives way to proof, however, because, as held in the last
paragraph of article 1903, responsibility for acts of third persons ceases when
the persons mentioned in said article prove that they employed all the diligence
of a good father of a family to avoid the damage, and among these persons,
called upon to answer in a direct and not a subsidiary manner, are found, in
addition to the mother or the father in a proper case, guardians and owners or
directors of an establishment or enterprise, the state, but not always, except
when it acts through the agency of a special agent, doubtless because and only
in this case, the fault or negligence, which is the original basis of this kind of
objections, must be presumed to lie with the state.
That although in some cases the state might by virtue of the general principle
set forth in article 1902 respond for all the damage that is occasioned to private
parties by orders or resolutions which by fault or negligence are made by
branches of the central administration acting in the name and representation of
the state itself and as an external expression of its sovereignty in the exercise of
its executive powers, yet said article is not applicable in the case of damages
said to have been occasioned to the petitioners by an executive official, acting in
the exercise of his powers, in proceedings to enforce the collections of certain
property taxes owing by the owner of the property which they hold in sublease.
That the responsibility of the state is limited by article 1903 to the case wherein
it acts through a special agent (and a special agent, in the sense in which these
words are employed, is one who receives a definite and fixed order or
commission, foreign to the exercise of the duties of his office if he is a special
official) so that in representation of the state and being bound to act as an
agent thereof, he executes the trust confided to him. This concept does not
apply to any executive agent who is an employee of the acting administration
and who on his own responsibility performs the functions which are inherent in
and naturally pertain to his office and which are regulated by law and the
regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)
That according to paragraph 5 of article 1903 of the Civil Code and the principle
laid down in a decision, among others, of the 18th of May, 1904, in a damage
case, the responsibility of the state is limited to that which it contracts through
a special agent, duly empowered by a definite order or commission to perform
some act or charged with some definite purpose which gives rise to the claim,
and not where the claim is based on acts or omissions imputable to a public
official charged with some administrative or technical office who can be held to
the proper responsibility in the manner laid down by the law of civil
responsibility. Consequently, the trial court in not so deciding and in sentencing
the said entity to the payment of damages, caused by an official of the second
class referred to, has by erroneous interpretation infringed the provisions of
articles 1902 and 1903 of the Civil Code. (Supreme Court of Spain, July 30, 1911;
122 Jur. Civ., 146.)
It is, therefore, evidence that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the Supreme
Court of Spain, for the acts of its agents, officers and employees when they act
as special agents within the meaning of paragraph 5 of article 1903, supra, and
that the chauffeur of the ambulance of the General Hospital was not such an
agent.
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make itself
legally liable for the amount of damages above set forth, which the plaintiff has
sustained by reason of the negligent acts of one of its employees, by legislative
enactment and by appropriating sufficient funds therefor, we are not called
upon to determine. This matter rests solely with the Legislature and not with
the courts.
G.R. No. L-52179 April 8, 1991
MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner
vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO
BANIÑA, JR., SOR MARIETA BANIÑA, MONTANO BANIÑA, ORJA BANIÑA, AND
LYDIA R. BANIÑA, respondents.
Mauro C. Cabading, Jr. for petitioner.
Simeon G. Hipol for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari with prayer for the issuance of a writ of
preliminary mandatory injunction seeking the nullification or modification of
the proceedings and the orders issued by the respondent Judge Romeo N.
Firme, in his capacity as the presiding judge of the Court of First Instance of La
Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No.
107-BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al."
dated November 4, 1975; July 13, 1976; August 23,1976; February 23, 1977;
March 16, 1977; July 26, 1979; September 7, 1979; November 7, 1979 and
December 3, 1979 and the decision dated October 10, 1979 ordering
defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay,
jointly and severally, the plaintiffs for funeral expenses, actual damages
consisting of the loss of earning capacity of the deceased, attorney's fees and
costs of suit and dismissing the complaint against the Estate of Macario
Nieveras and Bernardo Balagot.
The antecedent facts are as follows:
Petitioner Municipality of San Fernando, La Union is a municipal corporation
existing under and in accordance with the laws of the Republic of the
Philippines. Respondent Honorable Judge Romeo N. Firme is impleaded in his
official capacity as the presiding judge of the Court of First Instance of La Union,
Branch IV, Bauang, La Union. While private respondents Juana Rimando-Baniña,
Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and
Lydia R. Baniña are heirs of the deceased Laureano Baniña Sr. and plaintiffs in
Civil Case No. 107-Bg before the aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a collision occurred
involving a passenger jeepney driven by Bernardo Balagot and owned by the
Estate of Macario Nieveras, a gravel and sand truck driven by Jose Manandeg
and owned by Tanquilino Velasquez and a dump truck of the Municipality of San
Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Baniña Sr. died as a result of the
injuries they sustained and four (4) others suffered varying degrees of physical
injuries.
On December 11, 1966, the private respondents instituted a compliant for
damages against the Estate of Macario Nieveras and Bernardo Balagot, owner
and driver, respectively, of the passenger jeepney, which was docketed Civil
Case No. 2183 in the Court of First Instance of La Union, Branch I, San Fernando,
La Union. However, the aforesaid defendants filed a Third Party Complaint
against the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over
by respondent judge and was subsequently docketed as Civil Case No. 107-Bg.
By virtue of a court order dated May 7, 1975, the private respondents amended
the complaint wherein the petitioner and its regular employee, Alfredo Bislig
were impleaded for the first time as defendants. Petitioner filed its answer and
raised affirmative defenses such as lack of cause of action, non-suability of the
State, prescription of cause of action and the negligence of the owner and
driver of the passenger jeepney as the proximate cause of the collision.
In the course of the proceedings, the respondent judge issued the following
questioned orders, to wit:
(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo
Balagot;
(2) Order dated July 13, 1976 admitting the Amended Answer of the
Municipality of San Fernando, La Union and Bislig and setting the hearing on the
affirmative defenses only with respect to the supposed lack of jurisdiction;
(3) Order dated August 23, 1976 deferring there resolution of the grounds for
the Motion to Dismiss until the trial;
(4) Order dated February 23, 1977 denying the motion for reconsideration of
the order of July 13, 1976 filed by the Municipality and Bislig for having been
filed out of time;
(5) Order dated March 16, 1977 reiterating the denial of the motion for
reconsideration of the order of July 13, 1976;
(6) Order dated July 26, 1979 declaring the case deemed submitted for decision
it appearing that parties have not yet submitted their respective memoranda
despite the court's direction; and
(7) Order dated September 7, 1979 denying the petitioner's motion for
reconsideration and/or order to recall prosecution witnesses for cross
examination.
On October 10, 1979 the trial court rendered a decision, the dispositive portion
is hereunder quoted as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the
plaintiffs, and defendants Municipality of San Fernando, La Union and Alfredo
Bislig are ordered to pay jointly and severally, plaintiffs Juana Rimando-Baniña,
Mrs. Priscilla B. Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B.
Soriano, Montano Baniña, Orja Baniña and Lydia B. Baniña the sums of
P1,500.00 as funeral expenses and P24,744.24 as the lost expected earnings of
the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.
The Complaint is dismissed as to defendants Estate of Macario Nieveras and
Bernardo Balagot.
SO ORDERED. (Rollo, p. 30)
Petitioner filed a motion for reconsideration and for a new trial without
prejudice to another motion which was then pending. However, respondent
judge issued another order dated November 7, 1979 denying the motion for
reconsideration of the order of September 7, 1979 for having been filed out of
time.
Finally, the respondent judge issued an order dated December 3, 1979
providing that if defendants municipality and Bislig further wish to pursue the
matter disposed of in the order of July 26, 1979, such should be elevated to a
higher court in accordance with the Rules of Court. Hence, this petition.
Petitioner maintains that the respondent judge committed grave abuse of
discretion amounting to excess of jurisdiction in issuing the aforesaid orders and
in rendering a decision. Furthermore, petitioner asserts that while appeal of the
decision maybe available, the same is not the speedy and adequate remedy in
the ordinary course of law.
On the other hand, private respondents controvert the position of the
petitioner and allege that the petition is devoid of merit, utterly lacking the
good faith which is indispensable in a petition for certiorari and prohibition.
(Rollo, p. 42.) In addition, the private respondents stress that petitioner has not
considered that every court, including respondent court, has the inherent
power to amend and control its process and orders so as to make them
conformable to law and justice. (Rollo, p. 43.)
The controversy boils down to the main issue of whether or not the respondent
court committed grave abuse of discretion when it deferred and failed to
resolve the defense of non-suability of the State amounting to lack of
jurisdiction in a motion to dismiss.
In the case at bar, the respondent judge deferred the resolution of the defense
of non-suability of the State amounting to lack of jurisdiction until trial.
However, said respondent judge failed to resolve such defense, proceeded with
the trial and thereafter rendered a decision against the municipality and its
driver.
The respondent judge did not commit grave abuse of discretion when in the
exercise of its judgment it arbitrarily failed to resolve the vital issue of non-
suability of the State in the guise of the municipality. However, said judge acted
in excess of his jurisdiction when in his decision dated October 10, 1979 he held
the municipality liable for the quasi-delict committed by its regular employee.
The doctrine of non-suability of the State is expressly provided for in Article XVI,
Section 3 of the Constitution, to wit: "the State may not be sued without its
consent."
Stated in simple parlance, the general rule is that the State may not be sued
except when it gives consent to be sued. Consent takes the form of express or
implied consent.
Express consent may be embodied in a general law or a special law. The
standing consent of the State to be sued in case of money claims involving
liability arising from contracts is found in Act No. 3083. A special law may be
passed to enable a person to sue the government for an alleged quasi-delict, as
in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United
States of America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644,
654.)
Consent is implied when the government enters into business contracts,
thereby descending to the level of the other contracting party, and also when
the State files a complaint, thus opening itself to a counterclaim. (Ibid)
Municipal corporations, for example, like provinces and cities, are agencies of
the State when they are engaged in governmental functions and therefore
should enjoy the sovereign immunity from suit. Nevertheless, they are subject
to suit even in the performance of such functions because their charter
provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987
Edition, p. 39)
A distinction should first be made between suability and liability. "Suability
depends on the consent of the state to be sued, liability on the applicable law
and the established facts. The circumstance that a state is suable does not
necessarily mean that it is liable; on the other hand, it can never be held liable if
it does not first consent to be sued. Liability is not conceded by the mere fact
that the state has allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to prove, if it can,
that the defendant is liable." (United States of America vs. Guinto, supra, p. 659-
660)
Anent the issue of whether or not the municipality is liable for the torts
committed by its employee, the test of liability of the municipality depends on
whether or not the driver, acting in behalf of the municipality, is performing
governmental or proprietary functions. As emphasized in the case of Torio vs.
Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the
distinction of powers becomes important for purposes of determining the
liability of the municipality for the acts of its agents which result in an injury to
third persons.
Another statement of the test is given in City of Kokomo vs. Loy, decided by the ACCORDINGLY, the petition is GRANTED and the decision of the respondent
Supreme Court of Indiana in 1916, thus: court is hereby modified, absolving the petitioner municipality of any liability in
favor of private respondents.
Municipal corporations exist in a dual capacity, and their functions are twofold.
In one they exercise the right springing from sovereignty, and while in the SO ORDERED.
performance of the duties pertaining thereto, their acts are political and
governmental. Their officers and agents in such capacity, though elected or
appointed by them, are nevertheless public functionaries performing a public
service, and as such they are officers, agents, and servants of the state. In the
other capacity the municipalities exercise a private, proprietary or corporate THE MUNICIPALITY OF HAGONOY, G.R. No. 168289
right, arising from their existence as legal persons and not as public agencies. BULACAN, represented by the HON.
Their officers and agents in the performance of such functions act in behalf of FELIX V. OPLE, Municipal Mayor, and
the municipalities in their corporate or individual capacity, and not for the state FELIX V. OPLE, in his personal capacity,
or sovereign power." (112 N.E., 994-995) (Ibid, pp. 605-606.)
- versus -
It has already been remarked that municipal corporations are suable because
their charters grant them the competence to sue and be sued. Nevertheless, HON. SIMEON P. DUMDUM, JR., in his
Promulgated:
they are generally not liable for torts committed by them in the discharge of capacity as the Presiding Judge of the
governmental functions and can be held answerable only if it can be shown that REGIONAL TRIAL COURT, BRANCH 7, March 22, 2010
they were acting in a proprietary capacity. In permitting such entities to be CEBU CITY; HON. CLERK OF COURT &
sued, the State merely gives the claimant the right to show that the defendant EX-OFFICIO SHERIFF of the REGIONAL
was not acting in its governmental capacity when the injury was committed or TRIAL COURT of CEBU CITY; HON. CLERK
that the case comes under the exceptions recognized by law. Failing this, the OF COURT & EX-OFFICIO SHERIFF of the
claimant cannot recover. (Cruz, supra, p. 44.) REGIONAL TRIAL COURT of BULACAN
and his DEPUTIES; and EMILY ROSE GO
In the case at bar, the driver of the dump truck of the municipality insists that KO LIM CHAO, doing business under the
"he was on his way to the Naguilian river to get a load of sand and gravel for the name and style KD SURPLUS,
repair of San Fernando's municipal streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the
performance of official duty is presumed pursuant to Section 3(m) of Rule 131 x-----------------------------------------------------------------------------------------x
of the Revised Rules of Court. Hence, We rule that the driver of the dump truck
was performing duties or tasks pertaining to his office.
DECISION
We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte,
the District Engineer, and the Provincial Treasurer (102 Phil 1186) that "the PERALTA, J.:
construction or maintenance of roads in which the truck and the driver worked
at the time of the accident are admittedly governmental activities." This is a Joint Petition[1] under Rule 45 of the Rules of Court brought by the
Municipality of Hagonoy, Bulacan and its former chief executive, Mayor Felix V.
After a careful examination of existing laws and jurisprudence, We arrive at the Ople in his official and personal capacity, from the January 31, 2005
conclusion that the municipality cannot be held liable for the torts committed by Decision[2] and the May 23, 2005 Resolution[3] of the Court of Appeals in CA-G.R.
its regular employee, who was then engaged in the discharge of governmental SP No. 81888. The assailed decision affirmed the October 20,
functions. Hence, the death of the passenger –– tragic and deplorable though it 2003 Order[4] issued by the Regional Trial Court of Cebu City, Branch 7 in Civil
may be –– imposed on the municipality no duty to pay monetary compensation. Case No. CEB-28587denying petitioners motion to dismiss and motion to
discharge/dissolve the writ of preliminary attachment previously issued in the
All premises considered, the Court is convinced that the respondent judge's
case. The assailed resolution denied reconsideration.
dereliction in failing to resolve the issue of non-suability did not amount to
grave abuse of discretion. But said judge exceeded his jurisdiction when it ruled
on the issue of liability.
The case stems from a Complaint[5] 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 Oples
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 P5,820,000.00. 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 respondents claim for payment. As of the filing of the
complaint, the total obligation of petitioner had already
totaled P10,026,060.13 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 P500,000.00 as damages for business losses, P500,000.00 as
exemplary damages, attorneys fees of P100,000.00 and the costs of the suit.
On February 13, 2003, the trial court issued an Order[7] granting respondents
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 Attachment[8] directing the sheriff to attach the
estate, real and personal properties of petitioners.
Instead of addressing private respondents allegations, petitioners filed a Motion
to Dismiss[9] 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,[12] invoking 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 Order[14] 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 respondents claim
and affirmed the trial courts 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 courts 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 respondents 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. Roxas[28] 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 respondents
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 claimants 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
x[39]
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 respondents 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
respondents claim is validated, be subjected to writs of execution and
garnishment unless, of course, there has been a corresponding appropriation
provided by law.[40]
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 respondents 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 [Oples personal representation] relative to
this case.[44]
It appears, however, that after the issuance of the Court of Appeals decision,
only Oples 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
Appeals[46] and Municipality of Pililla, Rizal v. Court of Appeals [47] 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
municipalitys 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 Oples 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 AFFIRMEDinsofar 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 courts 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.