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-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. A writ of execution in favor of private respondent
1

Gabriel V. Manansala had previously been issued. He was the counsel of the prevailing party, the United
2

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." In thus denying the motion to quash, petitioner contended that there was on the part of
3

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. Whatever defect could be attributed therefore to the order denying the
4

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." There was a motion for reconsideration
5

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 is squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief Justice,
6

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." The similarities between the aforesaid case and the present litigation
7
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, this Court,
8

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, Wheat, 904, 6 L.ed. 244). By engaging in a particular business thru the
9

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, was
10

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." The National Shipyard and Steel Corporation case, therefore, merely reaffirmed
11

one of the oldest and soundest doctrines in this branch of the law.

3. The invocation of Republic v. Palacio, as well as Commissioner of Public Highways v. San Diego, did not
12 13

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." Such a motion to dismiss was denied. The case
14

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 Again, 15

there was an urgent motion to lift such order, but it was denied. A certiorari and 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." There was no such waiver. Even if there were, it was
16

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)." To levy the execution of such funds, according to him, would thus "amount to a disbursement without any
17

proper appropriation as required by law " In Commissioner of Public Highways v. San Diego, the opening
18

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." The funds appertained to a governmental office,
19

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 Since then such a principle has been
20

followed with undeviating rigidity, the latest case in point being Republic v. Villasor, promulgated in 1973. It is an
21

entirely different matter if, according to Justice Sanchez in Ramos v. Court of Industrial Relations, the office or
22

entity is "possessed of a separate and distinct corporate existence." Then it can sue and be sued. Thereafter, its
23

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. In the order sought to be nullified, the then Judge Joaquin M. Salvador of respondent Court pointed
24

out that under a later Act, the Court of Industrial Relations Act was amended with the proviso that its Clerk of
25

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. L-41299 February 21, 1983

SOCIAL SECURITY SYSTEM, petitioner,

vs.
COURT OF APPEALS, DAVID B. CRUZ, SOCORRO CONCIO CRUZ, and LORNA C. CRUZ, respondents.

The Solicitor General for petitioner.

Eribert D. Ignacio for respondents David Cruz, Socorro Concio Cruz and Lorna Cruz.

MELENCIO-HERRERA, J.:

This Petition for Review on certiorari of the Decision of the Court of Appeals stems from the following facts, as
1

narrated by the Trial Court, adopted by the Court of Appeals, and quoted by both petitioner and private
2

respondents : 3

Sometime in March, 1963 the spouses David B. Cruz and Socorro Concio Cruz applied for and
were granted a real estate loan by the SSS with their residential lot located at Lozada Street, Sto.
Rosario, Pateros, Rizal covered by Transfer Certificate of Title No. 2000 of the Register of Deeds
of Rizal as collateral. Pursuant to this real estate ban said spouses executed on March 26, 1963
the corresponding real estate mortgage originally in the amount of P39,500.00 which was later
increased to P48,000.00 covering the aforementioned property as shown in their mortgage
contract, Exhibit A and 1. From the proceeds of the real estate loan the mortgagors constructed
their residential house on the mortgaged property and were furnished by the SSS with a
passbook to record the monthly payments of their amortizations (Exhibits B and B-1). The
mortgagors, plaintiffs herein, complied with their monthly payments although there were times
when delays were incurred in their monthly payments which were due every first five (5) days of
the month (Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS filed an application with the
Provincial Sheriff of Rizal for the foreclosure of the real estate mortgage executed by the plaintiffs
on the ground, among others:

That the conditions of the mortgage have been broken since October, 1967 with
the default on the part of the mortgagor to pay in full the installments then due and
payable on the principal debt and the interest thereon, and, all of the monthly
installments due and payable thereafter up to the present date; ...

That by the terms of the contract herein above referred to, the indebtedness to the
mortgagee as of June, 1968 amounts to Ten Thousand Seven Hundred Two
Pesos & 58/100 (P10,702.58), Philippine Currency, excluding interests thereon,
 plus 20% of the total amount of the indebtedness as attorney's fees, also secured
by the said mortgage. (Exhibit "C ")

Pursuant to this application for foreclosure, the notice of the Sheriff's Sale of the mortgaged
property was initially published in the Sunday Chronicle in its issue of July 14, 1968 announcing
the sale at public auction of the said mortgaged property. After this first publication of the notice,
and before the second publication of the notice, plaintiff herein thru counsel formally wrote
defendant SSS, a letter dated July 19, 1968 and received on the same date by said entity
demanding, among others, for said defendant SSS to withdraw the foreclosure and discontinue
the publication of the notice of sale of their property claiming that plaintiffs were up-to-date in the
payment of their monthly amortizations (Exhibits "E" and "E-1"). In answer to this letter defendant
SSS sent a telegram to Atty. Eriberto Ignacio requesting him to come to their office for a
conference. This telegram was received by said counsel on July 23, 1968 (Exhibit "G " and "G-1
"). To this telegraphic answer, Atty. Ignacio sent a telegraphic reply suggesting instead that a
representative of the SSS be sent to him because his clients were the aggrieved parties (Exhibit-.
"G-2"). Nothing came out of the telegraphic communications between the parties and the second
and third publications of the notice of foreclosure were published successively in the Sunday
Chronicle in its issues of July 21 and 28, 1968 (Exhibits "N-1 " and "O-1"). 4

On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz, instituted before the Court of
First Instance of Rizal an action for damages and attorney's fees against the Social Security System (SSS) and
the Provincial Sheriff of Rizal alleging, among other things, that they had fully and religiously paid their monthly
amortizations and had not defaulted in any payment.

In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage executed in its favor by
private respondents by virtue of the automatic acceleration clause provided in the mortgage contract, even after
private respondents had paid their amortization installments. In its counterclaim, the SSS prayed for actual and
other damages, as well as attorney's fees, for malicious and baseless statements made by private respondents
and published in the Manila Chronicle.

On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at public auction of private
respondent's property upon their posting of a P2,000.00 bond executed in favor of the SSS.

The Trial Court rendered judgment on March 5, 1971, the dispositive portion of which reads:

WHEREFORE, judgment is rendered against defendant SSS, directing it to pay plaintiffs the
following amounts:

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages; and
(d) P5,000.00 as attorney's fees.

Defendant SSS shall further pay the costs. 5

In respect of the moral and temperate damages awarded, the Trial Court stated:

With respect to moral and temperate damages, the Court holds that the first publication of the
notice was made in good faith but committed by defendant SSS in gross negligence considering
the personnel at its command and the ease with which verifications of the actual defaulting
mortgagors may be made. On this initial publication of the notice of foreclosure (Exhibits "M" and
"M-1"), the Court believes plaintiffs are entitled to the amount of P5,000.00. The second
publication of the notice of foreclosure is another matter. There was already notice by plaintiffs to
defendant SSS that there was no reason for the foreclosure of their mortgaged property as they
were never in default. Instead of taking any corrective measure to rectify its error, defendant SSS
adopted a position of righteousness and followed the same course of action contending that no
error has open committed. This act of defendant indeed was deliberate, calculated to cow
plaintiffs into submission, and made obviously with malice. On this score, the Court believes
defendant SSS should pay and indemnify plaintiffs jointly in the sum of P10,000.00. Lastly, on the
third publication of the notice of foreclosure, the Court finds this continued publication an outright
disregard for the reputation and standing of plaintiffs. The publication having reached a bigger
segment of society and also done with malice and callous disregard for the rights of its clients,
 defendant SSS should compensate plaintiffs jointly in the sum of P20,000.00. All in all, plaintiffs
are entitled to P35,000.00 by way of moral damages. 6

On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision promulgated on March 14,
1975, but upon SSS's Motion for Reconsideration, modified the judgment by the elimination of the P5,000.00
moral damages awarded on account of the initial publication of the foreclosure notice. To quote:

xxx xxx xxx

After a re-examination of the evidence, we find that the negligence of the appellant is not so gross
as to warrant moral and temperate damages. The amount of P5,000.00 should be deducted from
the total damages awarded to the plaintiffs.

WHEREFORE, the decision promulgated on March 14, 1975 is hereby maintained with the sole
modification that the amount of P5,000.00 awarded on account of the initial publication is
eliminated so that the said amount should be deducted from the total damages awarded to the
plaintiffs.

SO ORDERED. 7

In so far as exemplary and corrective damages are concerned, the Court of Appeals had this to say.

The Court finds no extenuating circumstances to mitigate the irresponsible action of defendant
SSS and for this reason, said defendant should pay exemplary and corrective damages in the
sum of P10,000.00 ...

Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this Petition alleging —.

I. Respondent Court of Appeals erred in not finding that under Condition No. 10 of the Mortgage
contract, which is a self-executing, automatic acceleration clause, all amortizations and
obligations of the mortgagors become ipso jure due and demandable if they at any time fail to pay
any of the amortizations or interest when due;

II. Respondent Court of Appeals erred in holding that a previous notice to the mortgagor was
necessary before the mortgage could be foreclosed;

III. Respondent Court of Appeals erred in not holding that, assuming that there was negligence
committed by subordinate employees of the SSS in staking 'Socorro C. Cruz' for 'Socorro J. Cruz'
as the defaulting borrower, the fault cannot be attributed to the SSS, much less should the SSS
be made liable for their acts done without its knowledge and authority;

IV. Respondent Court of Appeals erred in holding that there is no extenuating circumstance to
mitigate the liability of petitioner;

V. Respondent Court of Appeals erred in not holding that petitioner is not liable for damages not
being a profit-oriented governmental institution but one performing governmental functions
petitions. 8

For failure of the First Division to obtain concurrence of the five remaining members (Justices Plana and
Gutierrez, Jr. could take no part), the case was referred to the Court en banc.

The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real estate mortgage
contract with the SSS as would have warranted the publications of the notices of foreclosure; and (2) whether or
not the SSS can be held liable for damages.

The first issue revolves around the question of appreciation of the evidence by the lower Court as concurred in by
the Court of Appeals. The appraisal should be left undisturbed following the general rule that factual findings of
the Court of Appeals are not subject to review by this Court, the present case not being one of the recognized
exceptions to that rule. Accordingly, we are upholding the finding of the Court of Appeals that the SSS
9

application for foreclosure was not justified, particularly considering that the real estate loan of P48,000.00
obtained by the Cruzes in March, 1963, was payable in 15 years with a monthly amortization of P425.18, and that
as of July 14, 1968, the date of the first notice of foreclosure and sale, the outstanding obligation was still
P38,875.06 and not P10,701.58, as published.

The appellant was not justified in applying for the extrajudicial foreclosure of the mortgage
contract executed in its favor by the spouses, David B. Cruz and Socorro Concio-Cruz, Exh. 'A'.
While it is true that the payments of the monthly installments were previously not regular, it is a
fact that as of June 30, 1968 the appellee, David B. Cruz and Socorro Concio-Cruz were up-to-
date and current in the payment of their monthly installments. Having accepted the prior late
payments of the monthly installments, the appellant could no longer suddenly and without prior
notice to the mortgagors apply for the extra-judicial foreclosure of the mortgage in July 1968. 10

A similar conclusion was reached by the trial Court.

Defendant's contention that there was clerical error in the amount of the mortgage loan due as of
June, 1968 as per their application for foreclosure of real estate mortgage is a naive attempt to
justify an untenable position. As a matter of fact plaintiffs were able to establish that the mortgagor
who actually committed the violation of her mortgage loan was a certain 'Socorro J. Cruz' who
was in arrears in the amount of P10,702.58 at the time the application for foreclosure of real
estate mortgage was filed Exhibits "BB" and "EE"). Defendant mortgagee must have committed
an error in picking the record of plaintiff 'Socorro C. Cruz' instead of the record of 'Socorro J.
Cruz'. Defendant SSS, however, denied having committed any error and insists that their motion
for foreclosure covers the real estate mortgage of spouses David E. Cruz and Socorro C. Cruz.
This Court is nonetheless convinced that the foreclosure proceedings should have been on the
real estate mortgage of 'Socorro J. Cruz' who was in arrears as of June, 1968 in the amount of
P10,701.58, the exact amount mentioned in the application for foreclosure of real estate mortgage
by defendant SSS. 11

We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds,
there should be no question on this score considering that the SSS is a juridical entity with a personality of its
own. It has corporate powers separate and distinct from the Government. SSS' own organic act specifically
12 13

provides that it can sue and be sued in Court. These words "sue and be sued" embrace all civil process incident
14

to a legal action. So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity
15

performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the
Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby
concede its liability. That statutoy law has given to the private-citizen a remedy for the enforcement and protection
of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to
interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes
unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such
as, in this case, to obtain compensation in damages arising from contract and even for tort.
16

A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo vs.
Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice
Vicente Abad Santos, ruled:

It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It is
sufficient to say that the government has organized a private corporation, put money in it and has
snowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a
government owned and controlled corporation, it has a personality of its own, distinct and
separate from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-
17874, August 31, 1963, 8 SCRA 78 1). Moreover, the charter provision that the NPC can 'sue
and be sued in any court' is without qualification on the cause of action and accordingly it can
include a tort claim such as the one instituted by the petitioners.

The proposition that the SSS is not profit-oriented was rejected in the case of SSS Employees' Association vs.
Hon. Soriano. But even conceding that the SSS is not, in the main, operated for profit, it cannot be denied that,
17

in so far as contractual loan agreements with private parties are concerned, the SSS enters into them for profit
considering that the borrowers pay interest, which is money paid for the use of money, plus other charges.

In so far as it is argued that to hold the SSS liable for damages would be to deplete the benefit funds available for
its covered members, suffice it to say, that expenditures of the System are not confined to the payment of social
security benefits. For example, the System also has to pay the salaries of its personnel. Moreover, drawing a
parallel with the NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of public funds,
it has been held that those funds may even be made the object of a notice of garnishment. 18
What is of paramount importance in this controversy is that an injustice is not perpetrated and that when damage
is caused a citizen, the latter should have a right of redress particularly when it arises from a purely private and
contractual relationship between said individual and the System.

We find, however, that under the circumstances of the case, the SSS cannot be held liable for the damages as
awarded by the Trial Court and the Appellate Tribunal.

As basis for the award of actual damages, the Trial Court relied on the alleged expenses incurred by private
respondents for the wardrobe they were supposed to use during their trip abroad, which was allegedly aborted
because of the filing of the foreclosure application by the SSS. We find the foregoing too speculative. There could
have been other reasons why the trip did not materialize. Moreover, it appears that private respondents'
passports had already expired but that they made no effort to secure new passports. Nor did they secure the
19

necessary visas from the local consulates of foreign countries they intended to visit for their trip abroad. 20

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals "the
negligence of the appellant is not so gross as to warrant moral and temperate damages", except that, said
21

Court reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the
findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS
was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of
irregular payments made by private respondents, and placed reliance on the automatic acceleration clause in the
contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages in
the same way that a clearly unfounded civil action is not among the grounds for moral damages. 22

With the ruling out of compensatory, moral and temperate damages, the grant of exemplary or corrective
damages should also be set aside. Moreover, no proof has been submitted that the SSS had acted in a wanton,
23

reckless and oppressive manner. 24

However, as found by both the Trial and Appellate Courts, there was clear negligence on the part of SSS when
they mistook the loan account of Socorro J. Cruz for that of private respondent Socorro C. Cruz. Its attention was
called to the error, but it adamantly refused to acknowledge its mistake. The SSS can be held liable for nominal
damages. This type of damages is not for the purpose of indemnifying private respondents for any loss suffered
by them but to vindicate or recognize their rights which have been violated or invaded by petitioner SSS. 25

The circumstances of the case also justify the award of attorney's fees, as granted by the Trial and Appellate
Courts, particularly considering that private respondents were compelled to litigate for the prosecution of their
interests.26

WHEREFORE, the judgment sought to be reviewed is hereby modified in that petitioner SSS shall pay private
respondents: P3,000.00 as nominal damages; and P5,000.00 as attorney's fees.

Costs against petitioner Social Security System.

SO ORDERED.

Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Vasquez and Relova, JJ., concur.

Fernando, C.J., concurs in the result.

Plana, Escolin ** and Gutierrez, Jr., *** JJ., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified under arts. 2219 and 2220 of the Civil Code. I vote to award
the private respondents the additional sum of P2,000 as litigation expenses.

MAKASIAR, J., dissenting:

I dissent.

To begin with, the negligent acts committed by the officers and employees of the petitioner, Social Security
System, amounted to not simply a contractual breach but tort. For the record is clear that petitioner's officers and
employees were grossly negligent bordering on malice or bad faith in applying for the extrajudicial foreclosure of
the mortgage contract executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, and that
even after private respondents had brought to the attention of the petitioner's officers and employees their
mistake, they insisted on their course of action, instead of making the necessary rectifications, which grossly
negligent and oppressive acts caused damage to private respondents. As found by the Court of Appeals:

The appellant was not justified in applying for the extrajudicial foreclosure of the mortgage
contract executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, Exh. 'A'.
While it is true that the payments of the monthly installments were previously not regular, it is a
fact that as of June 30, 1968 the appellees, David B. Cruz and Socorro Concio-Cruz were up-to-
date and current in the payment of their monthly installments. Having accepted the prior late
payments of the monthly installments, the appellant could no longer suddenly and without prior
notice to the mortgagors apply for the extra-judicial foreclosure of the mortgage in July, 1968.

It is obvious that the appellant applied for the extra-judicial foreclosure of the mortgage in
question because of the gross negligence of its employees. This negligence was aggravated
when the appellant, after being informed of the error, insisted on proceeding with the extra-judicial
foreclosure by invoking alleged violations of the mortgage contract. But these violations are either
too minor to warrant the drastic step of foreclosure or were deemed condoned when the appellant
accepted late payments prior to June 30, 1968. Hence the trial court did not err in concluding that
'the act of defendant indeed was deliberate, calculated to cow plaintiffs into submission and made
obviously with malice (p. 54, rec.; emphasis supplied).

The circumstance that there was a pre-existing contractual relationship between the herein contending parties,
does not bar the tort liability of the officers and employees of petitioner; because tort liability may still exist despite
presence of contractual relations as the act that breaks the contract may also be a tort, as in this case (Air France
vs. Carrascoso, L-21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson & Castillo vs. Bank of the Philippine
Islands, L-24837, June 27, 1968, 23 SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the applicable provision of law is Article 2180 in relation to Article
2176 of the New Civil Code. Under Article 2180, ... The State is responsible in like manner when it acts through a
special agent; but not when the damage has been caused by the official to whom the task done properly pertains,
in which case what is provided in Article 2176 shall be applicable.

In the case at bar, the petitioner Social Security System as the instrumentality of the State to implement the social
justice guarantee enunciated in the Constitution, did not act through a special agent. Hence, the Social Security
System cannot be liable for the damages caused by the tortious acts of its officers and employees while in the
performance of their regular functions. The remedy therefore of private respondents is to proceed against the
guilty officers and employees of petitioner Social Security System as mandated by Article 2176 of the New Civil
Code.

For as held in the leading case of Merritt vs. Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article 1903 to the case wherein it acts through
a special agent, ... 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 active 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.

While Article 2180 of the New Civil Code was not invoked by the petitioner as a defense, this does not prevent
this Tribunal from taking cognizance of the same. For as stressed in Ortigas, Jr. vs. Lufthansa German
Airlines (June 30, 1975, 64 SCRA 610, 633), failure to assign a defense as an error on appeal is a pure
technicality that should not prevail over the substantial issues in a controversy as the same would not serve the
interest of justice, and "this Court is clothed with ample authority to review matters even if they are not assigned
as errors in the appeal, if it finds that our consideration is necessary in arriving at a just decision of the case"
(citing Saura & Export Co., Inc., May 31, 1963, 8 SCRA 143). Further, We have, time and again, re-stated the
rule that the Supreme Court can suspend its own rules to serve the ends of justice (Jose vs. C.A., et al., L-38581,
March 31, 1976; Phil. Blooming Mills Employees Organization, et al. vs. PBM Co., et al., L-31195, 51 SCRA 189,
215; Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313; Ordoveza vs. Raymundo, 63 Phil. 275).

The principle that a defense not expressly pleaded is deemed waived unless such failure is satisfactorily
explained, is merely a general rule which is subject to exceptions, among which is when the Court can take
judicial notice of such defense. In this case, We can take judicial notice of the law, like Article 2180 of the New
Civil Code. It must be emphasized that the courts have as much duty as the Commission on August to protect the
public treasury from being mulcted or raided illegally. And this becomes more imperative considering that a
substantial portion of the funds of the petitioner comes from the contributions of- employees and workers in
private firms and is therefore in the nature of a trust fund to be expended only for their welfare and benefit, with
the government merely giving some subsidy. Any amount of damages illegally assessed against the Social
Security System will deplete the benefit funds available to its covered members for the contingencies of sickness,
disability, retirement or death.

It cannot likewise be seriously questioned that the Social Security System is comprehended in the definition in
Section 2 of the Revised Administrative Code of the term "Government of the Republic of the Philippines ... which
refers to the corporate governmental entity through which the functions of government are exercised throughout
the Philippine Islands, including, save as the contrary appears from the context, the various arms through which
political authority is made effective in the Philippines, whether pertaining to the central Government or to the
provincial or municipal branches or other forms of local government." And the second paragraph of said Section 2
provides that the term "national government" refers to the central government as distinguished from the different
forms of local government. There is nothing therein nor in the Social Security Act, as amended, intimating that the
national government does not include the Social Security System.

It is true that the Social Security System has a corporate or juridical personality of its own. But this does not
remove it as an integral part of the national or central government. For such corporate or juridical personality
invested in it is more for facility and convenience in the attainment of the objectives for which it was created by
the legislative. Such vesting of corporate or juridical personality in the Social Security System was never intended
to destroy the shield from liability afforded it as an integral part of the State or Government by Article 2180 of the
New Civil Code. Relatedly, such corporate or juridical personality of the Social Security System and the express
provision of the law creating the same that it can sue and be sued, have the effect of merely waiving its immunity
from suit as an entity performing governmental functions. Such waiver of its immunity from suit is not an
admission of its liability. Such waiver merely allows a private citizen a remedy for the enforcement and protection
of his rights, but always subject to the lawful defenses of the Social Security System one of which is Article 2180
of the New Civil Code as aforestated. In other words, such waiver of immunity from suit is not equivalent to
instant liability. The Social Security System can only be held liable for damages arising from the tortious acts of its
officers and employees only if it acts through a special agent, which is not true in the case at bar.

II

It must be finally stressed that the Social Security System cannot be liable for damages because it is an entity of
government performing governmental functions; hence, not profit-oriented. The 1963 doctrine in SSSEA vs.
Soriano(7 SCRA 1016 [1963]) that the system is exercising proprietary functions, is no longer controlling.

For in 1969, the distinction between constituent and ministrant functions of the Government as laid down in the
case of Bacani vs. Nacoco (100 Phil. 468 [1956]) has been obliterated. In the case of Agricultural Credit and
Cooperative Financing Administration (ACCFA) vs. Confederation of Unions in Government Corporations and
Offices (CUGCO) [30 SCRA 649 (1969)], this Court in re-examining the aforesaid Bacani ruling observed that the
trend has been to abandon and reject the traditional "Constituent- Ministrant" criterion in governmental functions
in favor of the more responsive postulate that the growing complexities of modern society have rendered the
traditional classification of government functions unrealistic and obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however, have rendered this traditional classification
of the functions of government quite unrealistic, not to say obsolete. The areas which used to be
left to private enterprise and initiative and which the government was called upon to enter
optionally, and only 'because it was better equipped to administer for the public welfare than is
 any private individual or groups of individuals,' continue to lose their well-defined boundaries and
to be absorbed within activities that the government must have undertaken in its sovereign
capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere,
else, the tendency is undoubtedly towards a greater socialization of economic forces. Here of
course, this development was envisioned indeed adopted as a national policy, by the Constitution
itself in its declaration of principle concerning the promotion of social justice.

Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed that:

The decision reached by this Court so ably given expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision, represents what for me is a clear tendency not to
be necessarily bound by our previous pronouncements on what activities partake of a nature that
is governmental. Of even greater significance, there is a definite rejection of the 'constituent-
ministrant' criterion of governmental functions, followed in Bacani vs. National Coconut
Corporation. That indeed is cause for gratification. For me at least, there is again full adherence to
the basic philosophy of the Constitution as to the extensive and vast power lodged in our
government to cope with the social and economic problems that even now sorely beset us. There
is therefore full concurrence on my part to the opinion of the court, distinguished by its high quality
of juristic craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the government is freed from the compulsion exerted by
the Bacani doctrine of the 'constituent-ministrant' test as a criterion for the type of activity in which
it may engage. It constricting effect is consigned to oblivion. No doubts or misgivings need assail
us that government efforts to promote the public wealth whether through regulatory legislation of
vast scope and emplitude or through the undertaking of business activities, would have to face a
searching and rigorous scrutiny. It is clear that their legitimacy cannot be challenged on the
ground alone of their being offensive to the implications of the laissez- faire concept. Unless there
be a repugnancy then to the limitations expressly set forth in the Constitution to protect individual
rights, the government enjoys a much wider latitude of action as to the means it chooses to cope
with grave social and economic problems that urgently press for solution. For me, at least, that is
to manifest deference to the philosophy of our fundamental law. Hence my full concurrence, as
announced at the outset. (pp- 682-683, emphasis supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the well being and economic security of all the
people should be the concern of the State. (Art. II, Declaration of Principles).

The present 1973 Constitution provides under its Declaration of Principles and State Policies (Article 11), that

The State shall promote social justice to ensure the dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse property ownership and profits. (Section 6);

and

The State shall establish, maintain, and ensure adequate social services in the field of education,
health, housing, employment, welfare, and social security to guarantee the enjoyment by the
people of a decent standard of living. (Section 7).

The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No. 1161 entitled
"The Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of the Philippines to develop, establish
gradually and perfect a social security system which shall be suitable to the needs of the people
throughout the Philippines, and shall provide protection against the hazards of disability, sickness,
old age and death.

As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social Security Act of 1954:
 It is a recognized principle in free societies that the State must help its citizens to make provision
for emergencies beyond their control, such as unemployment, sickness requiring expensive
medical treatment, and similar emergencies to a greater or lesser degree by means of social
security legislation in a variety of forms.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 10 [1961]), declared that "the
Social Security Law was enacted pursuant to the 'policy of the Republic to develop, establish gradually and
perfect a social security system which shall be suitable to the needs of the people throughout the Philippines and
provide protection to employees against the hazards of disability, sickness, old age and death' (Sec. 2, Republic
Act No. 1161, as amended). Such enactment is a legitimate exercise of the police power. It affords protection to
labor, especially to working women and minors, and is in full accord with the constitutional provisions on the
'promotion of social justice to insure the well being and economic security of all the people.

It is interesting to note that aforesaid pronouncement of this Court was incorporated in the Social Security Act
(R.A. 1161) by Presidential Decree No. 24 issued on October 19, 1972. Thus, as amended by said Decree, its
section 2 now reads: "It is the policy of the Republic of the Philippines to establish, develop, promote and perfect
a sound viable 'tax exempt social security service suitable to the needs of the people throughout the Philippines,
which shall provide to covered employees and their families protection against the hazards of disability, sickness,
old age, and death, with a view to promoting their well-being in the spirit of social justice" (emphasis supplied).
And one of its whereases expressly states that "the measure is necessary to effect reforms in SSS operations
and to revitalize its structure as an important agency in the promotion of the social and economic development
programs of the Government; ... (emphasis supplied).

Considering therefore that the establishment and maintenance of an adequate social security and social services,
which the Social Security System seeks to perform and achieve are functions pursuant to the basic constitutional
mandate directing the State to promote "social justice to insure the well-being and economic security of all the
people" (1935 Constitution) or "to insure the dignity, welfare and security of all the people" as well as the police
power of the State, the inescapable conclusion is that the function of the SSS is and has always been
governmental.

It thus becomes clear that petitioner Social Security System, under the obtaining facts and applicable laws in the
case, is not liable for the damages caused to private respondents by the tortious acts of its officers and
employees to whom the task done properly pertained.

A contrary rule as that enunciated in the majority opinion invites conspiracy between officials and employees of
the Social Security System and private parties to create financial liabilities against the System. Its funds are
public funds and more importantly trust funds, which must be protected.

G.R. No. 85284 February 28, 1990

REPUBLIC OF THE PHILIPPINES, petitioner

vs.
SANDIGANBAYAN, Third Division, SIMPLICIO A. PALANCA in his own behalf as a stockholder of Bacolod
Real Estate Development Corporation (BREDCO), and other stockholders similarly situated, respondents.

Hilado, Hagad & Hilado for private respondents.

RESOLUTION

PADILLA, J.:

This is a petition for certiorari to annul and set aside the resolution of the Sandiganbayan (Third Division), dated 3
June 1988, granting the private respondents' motion to intervene in Civil Case No. 0025 and admitting their
answer in intervention, as well as its resolution, dated 25 August 1988, denying the petitioner's motion for
reconsideration; PROHIBITION to order the respondent court to cease and desist from proceeding with the
intervention filed with it; and alternatively, mandamus to compel the respondent court to dismiss the intervention
case.

The antecedents are as follows:

On 29 July 1987, the Republic of the Philippines, as Plaintiff, through its governmental instrumentality the
Presidential Commission on Good Government (PCGG) filed with the respondent Sandiganbayan a complaint
against Ferdinand E. Marcos, et al. for reconveyance, reversion, accounting, restitution and damages, docketed
therein as Civil Case No. 0025 (PCGG No. 26). 1

On or about 3 September 1987, before the said Civil Case No. 0025 could be set for hearing, private respondent
Simplicio A. Palanca in his own behalf as a stockholder of Bacolod Real Estate Development Corporation
(BREDCO) and other stockholders similarly situated, filed with the respondent Sandiganbayan a "Motion For
Leave To Intervene" attaching thereto their "Answer in Intervention ."
2 3

In their motion, private respondents alleged that they be —

... allowed to intervene in the present action and to file the Answer in intervention hereto attached
as Annex 'A', the said stockholders having a legal interest in the matter in litigation and in the
disposition of the properties listed in Annex 'A' of the Complaint as BREDCO LOTS and shares of
stock in Bacolod Real Estate Development Corporation.

In justification, it is further respectfully alleged that.

1. Close examination of the Complaint, in particular par. 12 thereto under 'V. SPECIFIC
AVERMENTS OF DEFENDANTS' ILLEGAL ACTS', makes no mention at all about BREDCO
being the subject of any anomalous transaction engaged in by any of the defendants, in
consequence of which the listed BREDCO lots could have been gotten illegally. It is to be
observed, on the other hand, that the titles mentioned in aforesaid Annex of the complaint
covering the lots in question are not registered in the names of any of the defendants but in the
name of Bacolod Real Estate Development Corporation.

2. Similarly, the shares of stock in Bacolod Real Estate Development Corporation appealing under
PERSONAL PROPERTY on page two of Annex A of the complaint t are ' carried not in the names
of any of the defendants, but in the name of Marsteel Consolidated Inc. and were acquired under
the circumstances averred more in detail in the accompanying Answer in Intervention by reason
of which detail shares should not be involved in the present action.

3. If intervention is allowed, intervenors are prepared to prove that if ever any of the defendants
through Marsteel Consolidated, Inc. and Marsteel Corporation came to have any interest in
Bacolod Real Estate Development Corporation, it was only by way of accommodation on the part
of BREDCO stockholders who transferred their shareholdings aggregating 70% of the subscribed
capital to enable Marsteel Consolidated to secure adequate financing for the reclamation and port
development project . 4

The foregoing allegations were further expanded and elaborated in the private respondents' Answer in
Intervention.

On 2 December 1987, petitioner filed its Reply to Answer In Intervention, while private respondents filed a
5

"Rejoinder to Reply With Motion To Release BREDCO Lots and also a "Motion To Calendar For Hearing" the
6

motion to release BREDCO lots. 7

On 22 January 1988, respondent court promulgated a resolution holding in abeyance action on the private
8

respondents' "Rejoinder to Reply with Motion to Release BREDCO lots", and set the Motion for Leave to
Intervene for hearing on 2 February 1988.

On 11 March 1988, respondent court issued an order giving petitioner fifteen (1 5) days from 11 March 1988
9

within which to file its opposition and/or comment on the motion to intervene and giving the private respondents in
turn ten (10) days within which to file their reply thereto.

On 23 March 1988, petitioner filed its Motion to Dismiss "Answer In Intervention," on the grounds that; (1)
respondent court lacks jurisdiction and (2) intervenors have no legal interest in the matter in litigation, which the
10

private respondents opposed. 11

On 6 June 1988, respondent court promulgated a Resolution dated 3 June 1988 12

granting the private
respondents' motion to intervene and admitting their Answer in Intervention.

Petitioner moved for reconsideration but this was denied by respondent court in its resolution of 25 August 1989. 13
Hence, the instant petition.

The petitioner, through the Solicitor General, contends that in issuing the questioned resolutions granting the
Motion to Intervene and admitting the Answer-in-Intervention, respondent Sandiganbayan acted in contravention
of a national or public policy embedded in Executive Order Nos. 1, 2, 4 and related issuances, or otherwise acted
in a way not in accord with law or with the applicable decisions of this Court, because:

(a) Petitioner, being the sovereign state, cannot be sued without its consent, and the Intervention is, in legal
effect, a suit or counter- suit against the sovereign state, the Republic of the Philippines;

(b) The cause of action of intervenors does not fall within the jurisdiction of the Sandiganbayan as expressly
spelled out in P.D. No. 1606 and Executive Order No. 14;

(c) Intervenors have no legal interest in the matter in litigation, and the subject matter is not in custodia legis of
respondent court; and

(d) Intervenors' claims, as contained in their Motion for Intervention and Answer-in-Intervention, are claims
between and/or among Ferdinand and Imelda Marcos and their cronies, i.e., "members of their immediate family
close relatives, subordinates, and/or business associates, dummies, agents and nominees" and are cognizable
not by respondent court but by the regular courts or other for a Even if there would be multiple litigations, as
among themselves, the legal effect remains, i.e., that there is only one case filed by the Republic against the
named defendants in Civil Case No. 0025, grounded on causes of action entirely distinct from any cause of
action which intervenors may have against Mr. Marcos and his cronies.

The petition is not impressed with merit.

The Rules of Court permit an aggrieved party, generally, to take a cause and apply for relief with the appellate
courts by way of either of two distinct and dissimilar modes through the broad process of appeal or the limited
special civil action of certiorari. An appeal brings up for review errors of judgment committed by a court of
competent jurisdiction over the subject of the suit or the persons of the parties or any such error committed by the
court in the exercise of its jurisdiction amounting to nothing more than an error of judgment. On the other hand,
the writ of certiorari issues for the correction of errors of jurisdiction only or grave abuse of discretion amounting
to lack or excess of jurisdiction. The writ of certiorari cannot legally be used for any other purpose. In terms of its
function, the writ of certiorari serves to keep a lower court within the bounds of its jurisdiction or to prevent it from
committing such a grave abuse of discretion amounting to excess of jurisdiction or to relieve parties from arbitrary
acts of courts — acts which courts have no power or authority in law to perform. 14

Hence, the main issue to be resolved in the present case, which is principally a petition for certiorari to annul and
set aside the questioned resolutions of respondent court is, whether or not the Sandiganbayan has jurisdiction
over the action for intervention, or if it has, whether respondent court acted with grave abuse of discretion
amounting to lack or excess of its jurisdiction in rendering the questioned resolutions.

In the present case, petitioner merely contends that the cause of action of intervenors does not fall within the
jurisdiction of the Sandiganbayan as expressly spelled out in Presidential Decree No. 1606 and Executive Order
No. 14; it does not claim that respondent court committed grave abuse of discretion amounting to lack or excess
of its jurisdiction in rendering the questioned resolutions.

The jurisdiction of the Sandiganbayan has already been settled in Presidential Commission on Good
Government vs. Hon. Emmanuel G. Penal, etc., et al. where the Court held that —
15

... Under Section 2 of the President's Executive Order No. 14 issued on May 7, 1986, all cases of
the Commission regarding 'the funds, Moneys, Assets, and Properties Illegally Acquired or I
Misappropriated by Former President Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their
Close Relatives, Subordinates, Business Associates, Dummies, Agents, or Nominees whether
civil or criminal, are lodged within the 'exclusive and original jurisdiction of the Sandiganbayan'
and all incidents arising from, incidental to, or related to, such cases necessarily fall likewise
under the Sandiganbayan's exclusive and original jurisdiction, subject to review on certiorari
exclusively by the Supreme Court. (emphasis supplied)

In reiterating the aforequoted ruling in six (6) subsequent cases 16

which were decided jointly, again, the Court
held that-
 ... the exclusive jurisdiction conferred on the Sandiganbayan would evidently extend not only to
the principal causes of action, i.e., the recovery of alleged ill-gotten wealth, but also to 'all
incidents arising from, incidental to, or related to, such cases,' such as the dispute over the sale of
the shares, the propriety of the issuance of ancillary writs or provisional remedies relative thereto,
the sequestration thereof, which may not be made the subject of separate actions or proceedings
in another forum.

Intervention is not an independent action, but is ancillary and supplemental to an existing litigation. Hence, the
17

private respondents' action for intervention in Civil Case No. 0025, not being an independent action, is merely
incidental to, or related to, the said civil case. Since the respondent Sandiganbayan has the exclusive and
original jurisdiction over Civil Case No. 0025, it has likewise original and exclusive jurisdiction over the private
respondents' action for intervention therein.

Now, considering that respondent Sandiganbayan has jurisdiction not only over Civil Case No. 0025 but also over
the private respondents' action for intervention, any error or irregularity that it may have committed in rendering
its questioned resolutions, in the exercise of its jurisdiction, amounts to an error of judgment, which is not
correctable in the present petition for certiorari but by appeal.

Accordingly, this case may be dismissed outright without the Court having to pass upon the other issues raised in
the petition. However, considering that the litigation below is of great public interest and involves a matter of
public policy, the Court has decided to review the other errors allegedly committed by respondent court in
rendering its questioned resolutions.

In this jurisdiction, the law on "intervention" is found in the Rules of Court. Thus, a person may, before or during
18

a trial, be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter in
litigation, or in the success of either of the parties or an interest against both, or when he is so situated as to be
adversely affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof. 19

The Court is not impressed with the contention of petitioner that the intervenors have no legal interest in the
matter in litigation. In this connection, it would suffice to quote what the respondent court said in holding that the
intervenors have a legal interest in the matter in litigation. Thus —

Has Palanca shown a proper case for intervention by him and his co-stockholders who are
similarly situated as he is?

A narration of the pertinent facts alleged by Palanca and the plaintiff indicates the answer.

In 1961, BREDCO was awarded by Bacolod City a contract to undertake the

reclamation and port development of the city. As of 1975, a sizeable portion of
land had already been reclaimed from the sea and corresponding torrens titles
issued in BREDCO's name.

In that year, BREDCO engaged MARSTEEL as a contractor to complete the

project with power to negotiate in its name or jointly and/or severally with
BREDCO for loans to finance the reclamation and port development, and to
mortgage all reclaimed lots and other assets of the project as security. For its
services, MARSTEEL shall receive 65% of the excess of all revenues over all
disbursements. Accordingly, BREDCO conveyed to MARSTEEL 65% of each lot
already reclaimed and that to be reclaimed.

In 1977, MARSTEEL assigned to MCI, which owned 100% of its capital stock, all
its rights, interests, obligations, and undertakings in the project. To enable MCI to
expand its base of negotiation for loans needed in the reclamation and port
development the BREDCO stockholders transferred to MCI their respective
shares of stock amounting to 70% of the capital stock of BREDCO. In return, they
'shall be entitled to a share of 35% in excess of all revenues over all
disbursements of the projects,' it being understood that payment of the
corresponding share shall be due to BREDCO stockholders as owners of existing
interests in the project, regardless of the fact that by implementation of this
AGREEMENT, they ceased to be stockholders of BREDCO.
 In September 1986, the Presidential Commission on Good Government (PCGG)
sequestered all assets, properties, records and documents' of MARSTEEL, MCI,
and BREDCO'. In July 1987, the complaint at bar was filed and expanded in
March 1988. The pleadings, original and expanded, allege that the defendants,
acting singly or collectively, amassed ill-gotten wealth listed in Annex 'A' thereof,
among which are the BREDCO lots and shares of stock, and pray that the ill-
gotten wealth be reconveyed to the plaintiff, plus damages. Significantly, however,
the bodies of the complaints do not mention anything about BREDCO, its project,
lots, and stocks, nor about MCI.

Under these alleged facts, Palanca has established a proper case for intervention. Firstly, he and
his co-stockholders have a legal interest in the matter in litigation, namely, their 70% of the capital
stock of BREDCO, which they transferred to MCI by way of alleged accommodation, or its
equivalent of 35% of the excess of all revenues over all disbursements, to which they are entitled
'as owners of existing interests in the project.' Section 2, Rule 12, Revised Rules of Court,
provides that a person may be permitted 'to intervene in an action, if he has legal interest in the
matter in litigation.'

As a general rule the right to intervene exists in favor of one who claims to be the
owner or to have some interest in the property which is the subject of litigation,
and this without particular regard to the value of the property or the right claimed
therein. A third party may intervene in a sequestration suit involving title to
personal property, and have his claims to the possession of the property
vindicated therein So, in an action for possession of real or personal property, an
intervenor may be admitted on the ground that he is an owner thereof, either to
assist in the defense, or to claim the property for himself, or to obtain some other
relief germane to the action.' (59 Am Jur 2d, Parties, Sec. 152, p. 585,

Secondly, the same Section 2, Rule 12, further provides that intervention by a person may be
permitted 'when he is so situated as to be adversely affected by a distribution or other disposition
of property in the custody of the court or of an officer thereof.' On this point, the Supreme Court
observed:

We shall now speak of the case where the stranger desires to intervene for the
purpose of asserting a property right in the res, or thing, which is the subject-
matter of the ligitation, without becoming a formal plaintiff or defendant, and
without acquiring the control over the course of a litigation, which is conceded to
the main actions (sic) therein. The mode of intervention to which reference is now
made is denominated in equity procedure the intervention pro interesse suo and is
somewhat analogous to the trial of a right of property in an action of law, its
purpose being to enable a person whose property gets into the clutches of a court,
in a controversy between others, to go into court and to procure it or its proceeds
to be surrendered to him. It often happens that a person who really owns property,
or has a superior lien or other interest in it, sees a litigation spring up between
others who assert rights in or concerning it. If the court takes possession of the
res, or otherwise gets jurisdiction over it in such a controversy, the real owner is
not compelled to stand Idly by and see the property disposed of without asserting
his rights. Though it be granted that the litigation would not be technically binding
on him, because of his not being a party, yet it might well happen that
complications would ensue whereby his rights would be materially prejudiced. For
instance, the subject-matter of the litigation might consist of a fund to he
distributed, and the conditions might be such that if it were turned over to the
particular litigant who should appear to have the better right in the original action,
the person really having a superior title might be left without redress. Accordingly
provision is made whereby persons who have not been joined as parties in the
original proceedings may intervene and assert a right antagonistic or superior to
that of one or both of the parties. (Bosworth vs. Terminal etc. Assoc. of St. Louis,
174 U.S. 182,187, 43 L. ed., 941, 943). As regards the right to intervene in this
manner, it may be stated that if the party desiring to intervene shows a legitimate
and proper interest in the fund or property in question, the motion to intervene
should be granted, especially if such interest cannot be otherwise properly
protected. (Joaquin v. Herrera, 37 Phil. 705, 722-724)
 Here, the BREDCO lots and stocks were sequestered and are now in custodia legis (Bernas, The
Constitution of the Republic of the Philippines, An Annotated Text, 1987 ed., p. 129, footnote 42).
From the facts averred by Palanca and the plaintiff, it is easy to see that in the event We decide to
order the reconveyance of those assets to the plaintiff, Palanca and his co-stockholders in
BREDCO stand to be adversely affected.

And thirdly, the legal interest of Palanca and his co-stockholders in the matter in litigation and the
possibility of a judgment ordering reconveyance in favor of the plaintiff, invest them with legal
interest in the success of the defendants, at least insofar as the BREDCO lots and shares are
concerned. Section 2, Rule 12, also permits intervention by a person who has legal interest in the
success of either of the parties. 20

The petitioner's contention that the State cannot be sued without its consent and that private respondents' action
for intervention is, in legal effect, a suit or counter-suit against the sovereign is also untenable.

The Rules of Court provide that the intervention shall be made by complaint filed and served in regular form,
21

and may be answered as if it where an original complaint; but where the intervenor unites with the defendant in
resisting the claims of the plaintiff, the intervention may be made in the form of an answer to the complaint. In
order words, a third person who makes himself a party to an existing litigation, may either join the plaintiff in
claiming what is sought in the filing a complaint in intervention, or by uniting with the defendant in resisting the
claims of the plaintiff, by filing an answer in intervention.

In Froilan v. Pan Oriental Shipping Co., the plaintiff therein Fernando A. Froilan filed a complaint against the
22

defendant, Pan Oriental Shipping Co. The Republic of the Philippines intervened by filing a complaint in
intervention. Thereafter, the defendant filed its answer to the complaint in intervention, and set up a counterclaim
against the Republic of the Philippines. The trial court dismissed the defendants counterclaim against the
Republic on the ground, among others, that the state is immune from suit. On appeal, this Court held that the
dismissal of the counterclaim was untenable, because by filing its complaint in intervention the Government in
effect waived its right to non-suability.

In another case, Lim vs. Brownell, Jr. and Kagawa, the plaintiff Benito E. Lim, as administrator of the intestate
23

estate of Arsenia Enriquez, filed a complaint in the Court of First Instance of Manila against the Alien Property
Administrator (later substituted by the Attorney General of the United States) for the recovery of four (4) parcels
of land (which were subsequently transferred to the Republic of the Philippines) with a prayer for the payment of
back rentals. The Republic of the Philippines intervened in the case. The defendant Attorney General of the
United States and the defendant- intervenor Republic of the Philippines each filed an answer, alleging by way of
affirmative defense, among others, that the lower court had no jurisdiction over the claim for rentals since the
action in that regard constituted a suit against the Republic to which it had not given its consent. The trial court
dismissed the complaint for lack of jurisdiction. On appeal, this Court affirmed, with the following reasons:

The claim for damages for the use of the property against the intervenor defendant Republic of
the Philippines to which it was transferred, likewise, cannot be maintained because of the
immunity of the state from suit. The claim obviously constitutes a charge against, or financial
liability to, the Government and consequently cannot be entertained by the courts except with the
consent of said government. (Syquia vs. Almeda Lopez, 84 Phil. 312; 47 Off. Gaz., 665;
Compania General de Tabacos vs. Govt. of the PI 45 Phil., 663). Plaintiff argues that by its
intervention, the Republic of the Philippines, in effect, waived its right of non-suability, but it will be
remembered that the Republic intervened in the case merely to unite with the defendant Attorney
General of the United States in resisting plaintiffs claims, and for that reason asked no affirmative
relief against any party in the answer in intervention. x x x. Clearly, this is not a case where the
State takes the initiative in an action against a private party by filing a complaint in intervention,
thereby surrendering its privileged position and coming down to the level of the defendants what
happened in the case of Froilan vs. Pan Oriental Shipping Co., et al.-95 Phil. 905 cited by the
plaintiff but one where the State, as one of the defendants merely resisted a claim against it
precisely on the ground, among others, of its privileged position which exempts it from
suit. (emphasis supplied).

In the present case, the private respondents intervened in Civil Case No. 0025 merely to unite with the
defendants therein in resisting the claims of petitioner, as plaintiff, and for that reason asked for no affirmative
relief against any party in their answer in intervention. In other words, this is not a case where the private
respondents take the initiative in an action against petitioner by filing a complaint in intervention or a complaint.
As observed by respondent Sandiganbayan:
 In intervening, Palanca and his co-stockholders have for their purpose to exclude the BREDCO
lots and stocks or, at least, their 35% interest in the BREDCO project from any possible judgment
directing reconveyance of the alleged ill-gotten wealth to the plaintiff. They do not pray for
damages against the latter. In effect, they occupy a defensive position as regards those shares of
stock or interest. The fact that they interjected themselves into his litigation at their own initiative
does not alter the essential nature of their intervention." 24

Private respondents' action for intervention in Civil Case No. 0025 is not, therefore, a suit or counter-suit against
petitioner Republic of the Philippines.

Having arrived at the above conclusions, the Court finds no need to further discuss the petitioner's pretense that
the private respondents' claims are claims as between and/or among Ferdinand and Imelda Marcos, et al., and
that the same is not cognizable by respondent Sandiganbayan but by the regular courts. It suffices to state that,
as already stated, in intervening in Civil Case No. 0025, private respondents merely joined the defendants therein
in resisting the claims of petitioner, as plaintiff, and that they asked no affirmative relief against any party in their
answer in intervention. They do not appear to have any controversy with the defendants, Ferdinand and Imelda
Marcos, et al.

ACCORDINGLY, the petition in the present case is hereby DISMISSED.

SO ORDERED.

G.R. No. 129406 March 6, 2006

REPUBLIC OF THE PHILIPPINES represented by the PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT (PCGG), Petitioner,
vs.
SANDIGANBAYAN (SECOND DIVISION) and ROBERTO S. BENEDICTO, Respondents.

DECISION

GARCIA, J.:

Before the Court is this petition for certiorari under Rule 65 of the Rules of Court to nullify and set aside the
March 28, 19951 and March 13, 19972 Resolutions of the Sandiganbayan, Second Division, in Civil Case No.
0034, insofar as said resolutions ordered the Presidential Commission on Good Government (PCGG) to pay
private respondent Roberto S. Benedicto or his corporations the value of 227 shares of stock of the Negros
Occidental Golf and Country Club, Inc. (NOGCCI) at P150,000.00 per share, registered in the name of said
private respondent or his corporations.

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 from P150.00 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 totaling P2,959,471.00. 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 Benedicto’s
properties, petitioner Republic acknowledging that it was within private respondent Benedicto’s 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 by petitioner 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 Resolution7 promulgated on December 6, 1994, the Sandiganbayan granted Benedicto’s
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 Court’s
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 Republic’s] cash share in the Compromise Agreement.
[Words in bracket added] (Emphasis Supplied).

Owing to PCGG’s 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 PCGG’s Manifestation with Motion for Reconsideration concerning the
subject 227 NOGCCI shares and granted Benedicto’s Motion to Enforce Judgment Levy.
Hence, the Republic’s 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 PCGG’s 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 PCGG’s 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 PCGG’s 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, PCGG’s 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 court’s 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. Petitioner’s 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
court’s resolutions of December 6, 199418 and February 23, 199619 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
the March 28, 199520 and March 13, 199721 resolutions, which merely reiterated and clarified the graft court’s
underlying resolution of December 6, 1994. And to place matters in the proper perspective, PCGG’s 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.22As 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 itself is 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 Republic’s 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 Benedicto’s prayers in the same case.

In fact, by entering into a Compromise Agreement with private respondent Benedicto, petitioner Republic thereby
stripped itself of its immunity 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-55963 December 1, 1989

SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners,

vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents.

G.R. No. L-61045 December 1, 1989

NATIONAL IRRIGATION ADMINISTRATION, appellant,

vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.

Cecilio V. Suarez, Jr. for Spouses Fontanilla.

Felicisimo C. Villaflor for NIA.

PARAS, J.:

In G.R. No. L-55963, the petition for review on certiorari seeks the affirmance of the decision dated March 20,
1980 of the then Court of First Instance of Nueva Ecija, Branch VIII, at San Jose City and its modification with
respect to the denial of petitioner's claim for moral and exemplary damages and attorneys fees.

In G.R. No. 61045, respondent National Irrigation Administration seeks the reversal of the aforesaid decision of
the lower court. The original appeal of this case before the Court of Appeals was certified to this Court and in the
resolution of July 7, 1982, it was docketed with the aforecited number. And in the resolution of April 3, this case
was consolidated with G.R. No. 55963.

It appears that on August 21, 1976 at about 6:30 P.M., a pickup owned and operated by respondent National
Irrigation Administration, a government agency bearing Plate No. IN-651, then driven officially by Hugo Garcia, an
employee of said agency as its regular driver, bumped a bicycle ridden by Francisco Fontanilla, son of herein
petitioners, and Restituto Deligo, at Maasin, San Jose City along the Maharlika Highway. As a result of the
impact, Francisco Fontanilla and Restituto Deligo were injured and brought to the San Jose City Emergency
Hospital for treatment. Fontanilla was later transferred to the Cabanatuan Provincial Hospital where he died.

Garcia was then a regular driver of respondent National Irrigation Administration who, at the time of the accident,
was a licensed professional driver and who qualified for employment as such regular driver of respondent after
having passed the written and oral examinations on traffic rules and maintenance of vehicles given by National
Irrigation Administration authorities.

The within petition is thus an off-shot of the action (Civil Case No. SJC-56) instituted by petitioners-spouses on
April 17, 1978 against respondent NIA before the then Court of First Instance of Nueva Ecija, Branch VIII at San
Jose City, for damages in connection with the death of their son resulting from the aforestated accident.

After trial, the trial court rendered judgment on March 20, 1980 which directed respondent National Irrigation
Administration to pay damages (death benefits) and actual expenses to petitioners. The dispositive portion of the
decision reads thus:

. . . . . Judgment is here rendered ordering the defendant National Irrigation Administration to pay
to the heirs of the deceased P12,000.00 for the death of Francisco Fontanilla; P3,389.00 which
the parents of the deceased had spent for the hospitalization and burial of the deceased
Francisco Fontanilla; and to pay the costs. (Brief for the petitioners spouses Fontanilla, p. 4;
Rollo, p. 132)

Respondent National Irrigation Administration filed on April 21, 1980, its motion for reconsideration of the
aforesaid decision which respondent trial court denied in its Order of June 13, 1980. Respondent National
Irrigation Administration thus appealed said decision to the Court of Appeals (C.A.-G.R. No. 67237- R) where it
filed its brief for appellant in support of its position.

Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed the instant petition with
this Court.

The sole issue for the resolution of the Court is: Whether or not the award of moral damages, exemplary
damages and attorney's fees is legally proper in a complaint for damages based on quasi-delict which resulted in
the death of the son of herein petitioners.

Petitioners allege:

1. The award of moral damages is specifically allowable. under paragraph 3 of Article 2206 of the
New Civil Code which provides that the spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish by reason of the
death of the deceased. Should moral damages be granted, the award should be made to each of
petitioners-spouses individually and in varying amounts depending upon proof of mental and
depth of intensity of the same, which should not be less than P50,000.00 for each of them.

2. The decision of the trial court had made an impression that respondent National Irrigation
Administration acted with gross negligence because of the accident and the subsequent failure of
the National Irrigation Administration personnel including the driver to stop in order to give
assistance to the, victims. Thus, by reason of the gross negligence of respondent, petitioners
become entitled to exemplary damages under Arts. 2231 and 2229 of the New Civil Code.

3. Petitioners are entitled to an award of attorney's fees, the amount of which (20%) had been
sufficiently established in the hearing of May 23, 1979.

4. This petition has been filed only for the purpose of reviewing the findings of the lower court
upon which the disallowance of moral damages, exemplary damages and attorney's fees was
based and not for the purpose of disturbing the other findings of fact and conclusions of law.
The Solicitor General, taking up the cudgels for public respondent National Irrigation Administration, contends
thus:

1. The filing of the instant petition is rot proper in view of the appeal taken by respondent National
Irrigation Administration to the Court of Appeals against the judgment sought to be reviewed. The
focal issue raised in respondent's appeal to the Court of Appeals involves the question as to
whether or not the driver of the vehicle that bumped the victims was negligent in his operation of
said vehicle. It thus becomes necessary that before petitioners' claim for moral and exemplary
damages could be resolved, there should first be a finding of negligence on the part of
respondent's employee-driver. In this regard, the Solicitor General alleges that the trial court
decision does not categorically contain such finding.

2. The filing of the "Appearance and Urgent Motion For Leave to File Plaintiff-Appellee's Brief"
dated December 28, 1981 by petitioners in the appeal (CA-G.R. No. 67237-R; and G. R.
No.61045) of the respondent National Irrigation Administration before the Court of Appeals, is an
explicit admission of said petitioners that the herein petition, is not proper. Inconsistent
procedures are manifest because while petitioners question the findings of fact in the Court of
Appeals, they present only the questions of law before this Court which posture confirms their
admission of the facts.

3. The fact that the parties failed to agree on whether or not negligence caused the vehicular
accident involves a question of fact which petitioners should have brought to the Court of Appeals
within the reglementary period. Hence, the decision of the trial court has become final as to the
petitioners and for this reason alone, the petition should be dismissed.

4. Respondent Judge acted within his jurisdiction, sound discretion and in conformity with the law.

5. Respondents do not assail petitioners' claim to moral and exemplary damages by reason of the
shock and subsequent illness they suffered because of the death of their son. Respondent
National Irrigation Administration, however, avers that it cannot be held liable for the damages
because it is an agency of the State performing governmental functions and driver Hugo Garcia
was a regular driver of the vehicle, not a special agent who was performing a job or act foreign to
his usual duties. Hence, the liability for the tortious act should. not be borne by respondent
government agency but by driver Garcia who should answer for the consequences of his act.

6. Even as the trial court touched on the failure or laxity of respondent National Irrigation
Administration in exercising due diligence in the selection and supervision of its employee, the
matter of due diligence is not an issue in this case since driver Garcia was not its special agent
but a regular driver of the vehicle.

The sole legal question on whether or not petitioners may be entitled to an award of moral and exemplary
damages and attorney's fees can very well be answered with the application of Arts. 2176 and 2180 of theNew
Civil Code.

Art. 2176 thus provides:

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

Paragraphs 5 and 6 of Art. 21 80 read as follows:

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even the though the former are not engaged in
any business or industry.

The State is responsible in like manner when it acts through a special agent.; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in Art. 2176 shall be applicable.

The liability of the State has two aspects. namely:

1. Its public or governmental aspects where it is liable for the tortious acts of special agents only.
 2. Its private or business aspects (as when it engages in private enterprises) where it becomes
liable as an ordinary employer. (p. 961, Civil Code of the Philippines; Annotated, Paras; 1986
Ed. ).

In this jurisdiction, the State assumes a limited liability for the damage caused by the tortious acts or conduct of
its special agent.

Under the aforequoted paragrah 6 of Art. 2180, the State has voluntarily assumed liability for acts done through
special agents. The State's agent, if a public official, must not only be specially commissioned to do a particular
task but that such task must be foreign to said official's usual governmental functions. If the State's agent is not a
public official, and is commissioned to perform non-governmental functions, then the State assumes the role of
an ordinary employer and will be held liable as such for its agent's tort. Where the government commissions a
private individual for a special governmental task, it is acting through a special agent within the meaning of the
provision. (Torts and Damages, Sangco, p. 347, 1984 Ed.)

Certain functions and activities, which can be performed only by the government, are more or less generally
agreed to be "governmental" in character, and so the State is immune from tort liability. On the other hand, a
service which might as well be provided by a private corporation, and particularly when it collects revenues from
it, the function is considered a "proprietary" one, as to which there may be liability for the torts of agents within the
scope of their employment.

The National Irrigation Administration is an agency of the government exercising proprietary functions, by express
provision of Rep. Act No. 3601. Section 1 of said Act provides:

Section 1. Name and domicile.-A body corporate is hereby created which shall be known as the
National Irrigation Administration, hereinafter called the NIA for short, which shall be organized
immediately after the approval of this Act. It shall have its principal seat of business in the City of
Manila and shall have representatives in all provinces for the proper conduct of its business.

Section 2 of said law spells out some of the NIA's proprietary functions. Thus-

Sec. 2. Powers and objectives.-The NIA shall have the following powers and objectives:

(a) x x x x x x x x x x x x x x x x x x

(b) x x x x x x x x x x x x x x x x x x

(c) To collect from the users of each irrigation system constructed by it such fees as may be
necessary to finance the continuous operation of the system and reimburse within a certain period
not less than twenty-five years cost of construction thereof; and

(d) To do all such other tthings and to transact all such business as are directly or indirectly
necessary, incidental or conducive to the attainment of the above objectives.

Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of the
government. Since it is a corporate body performing non-governmental functions, it now becomes liable for the
damage caused by the accident resulting from the tortious act of its driver-employee. In this particular case, the
NIA assumes the responsibility of an ordinary employer and as such, it becomes answerable for damages.

This assumption of liability, however, is predicated upon the existence of negligence on the part of respondent
NIA. The negligence referred to here is the negligence of supervision.

At this juncture, the matter of due diligence on the part of respondent NIA becomes a crucial issue in determining
its liability since it has been established that respondent is a government agency performing proprietary functions
and as such, it assumes the posture of an ordinary employer which, under Par. 5 of Art. 2180, is responsible for
the damages caused by its employees provided that it has failed to observe or exercise due diligence in the
selection and supervision of the driver.

It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco Fontanilla
was thrown to a distance 50 meters away from the point of impact while Restituto Deligo was thrown a little bit
further away. The impact took place almost at the edge of the cemented portion of the road." (Emphasis
supplied,) [page 26, Rollo]
The lower court further declared that "a speeding vehicle coming in contact with a person causes force and
impact upon the vehicle that anyone in the vehicle cannot fail to notice. As a matter of fact, the impact was so
strong as shown by the fact that the vehicle suffered dents on the right side of the radiator guard, the hood, the
fender and a crack on the radiator as shown by the investigation report (Exhibit "E"). (Emphasis supplied) [page
29, Rollo]

It should be emphasized that the accident happened along the Maharlika National Road within the city limits of
San Jose City, an urban area. Considering the fact that the victim was thrown 50 meters away from the point of
impact, there is a strong indication that driver Garcia was driving at a high speed. This is confirmed by the fact
that the pick-up suffered substantial and heavy damage as above-described and the fact that the NIA group was
then "in a hurry to reach the campsite as early as possible", as shown by their not stopping to find out what they
bumped as would have been their normal and initial reaction.

Evidently, there was negligence in the supervision of the driver for the reason that they were travelling at a high
speed within the city limits and yet the supervisor of the group, Ely Salonga, failed to caution and make the driver
observe the proper and allowed speed limit within the city. Under the situation, such negligence is further
aggravated by their desire to reach their destination without even checking whether or not the vehicle suffered
damage from the object it bumped, thus showing imprudence and reckelessness on the part of both the driver
and the supervisor in the group.

Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and
supervision (the latter aspect has not been established herein) of the employee, still if he ratifies the wrongful
acts, or take no step to avert further damage, the employer would still be liable. (Maxion vs. Manila Railroad Co.,
44 Phil. 597).

Thus, too, in the case of Vda. de Bonifacio vs. B.L.T. Bus Co. (L-26810, August 31, 1970, 34 SCRA 618), this
Court held that a driver should be especially watchful in anticipation of others who may be using the highway, and
his failure to keep a proper look out for reasons and objects in the line to be traversed constitutes negligence.

Considering the foregoing, respondent NIA is hereby directed to pay herein petitioners-spouses the amounts of
P12,000.00 for the death of Francisco Fontanilla; P3,389.00 for hospitalization and burial expenses of the
aforenamed deceased; P30,000.00 as moral damages; P8,000.00 as exemplary damages and attorney's fees of
20% of the total award.

SO ORDERED.

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch
61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the Orders
dated June 20, 1991 and September 19, 1991 of the Regional Trial Court, Branch 61, Makati, Metro Manila in
Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case No. 90-183,
while the Order dated September 19, 1991 denied the motion for reconsideration of the June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented in
the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate
business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A, Transfer
Certificate of Title No. 390440) located in the Municipality of Parañaque, Metro Manila and registered in the name
of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title Nos. 271108
and 265388 respectively and registered in the name of the Philippine Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers.
Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to who of
the parties has the responsibility of evicting and clearing the land of squatters. Complicating the relations of the
parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61, Makati,
Metro Manila for annulment of the sale of the three parcels of land, and specific performance and damages
against petitioner, represented by the Papal Nuncio, and three other defendants: namely, Msgr. Domingo A.
Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the PRC, agreed to
sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per square meters; (2) the agreement to sell
was made on the condition that earnest money of P100,000.00 be paid by Licup to the sellers, and that the
sellers clear the said lots of squatters who were then occupying the same; (3) Licup paid the earnest money to
Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the property to private respondent and
informed the sellers of the said assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that
the sellers fulfill their undertaking and clear the property of squatters; however, Msgr. Cirilos informed private
respondent of the squatters' refusal to vacate the lots, proposing instead either that private respondent undertake
the eviction or that the earnest money be returned to the latter; (6) private respondent counterproposed that if it
would undertake the eviction of the squatters, the purchase price of the lots should be reduced from P1,240.00 to
P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private
respondent giving it seven days from receipt of the letter to pay the original purchase price in cash; (8) private
respondent sent the earnest money back to the sellers, but later discovered that on March 30, 1989, petitioner
and the PRC, without notice to private respondent, sold the lots to Tropicana, as evidenced by two separate
Deeds of Sale, one over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of
title over the lots were cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced
petitioner and the PRC to sell the lots to it and thus enriched itself at the expense of private respondent; (10)
private respondent demanded the rescission of the sale to Tropicana and the reconveyance of the lots, to no
avail; and (11) private respondent is willing and able to comply with the terms of the contract to sell and has
actually made plans to develop the lots into a townhouse project, but in view of the sellers' breach, it lost profits of
not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and the PRC on
the one hand, and Tropicana on the other; (2) the reconveyance of the lots in question; (3) specific performance
of the agreement to sell between it and the owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint — petitioner for lack of
jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for being an improper party. An opposition to
the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to dismiss after
finding that petitioner "shed off [its] sovereign immunity by entering into the business contract in question" (Rollo,
pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner filed a "Motion
for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of Immunity as a Jurisdictional
Defense." So as to facilitate the determination of its defense of sovereign immunity, petitioner prayed that a
hearing be conducted to allow it to establish certain facts upon which the said defense is based. Private
respondent opposed this motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration until
after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign immunity
only on its own behalf and on behalf of its official representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign Affairs,
claiming that it has a legal interest in the outcome of the case as regards the diplomatic immunity of petitioner,
and that it "adopts by reference, the allegations contained in the petition of the Holy See insofar as they refer to
arguments relative to its claim of sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with the
resolution of this Court, both parties and the Department of Foreign Affairs submitted their respective
memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition for certiorari under Rule 65
of the Revised Rules of Court can be availed of to question the order denying petitioner's motion to dismiss. The
general rule is that an order denying a motion to dismiss is not reviewable by the appellate courts, the remedy of
the movant being to file his answer and to proceed with the hearing before the trial court. But the general rule
admits of exceptions, and one of these is when it is very clear in the records that the trial court has no alternative
but to dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service
Commission, 216 SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to require the
parties to undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal interest of the Department
of Foreign Affairs to intervene in the case in behalf of the Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic
immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that
said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or the
international organization sued in an American court requests the Secretary of State to make a determination as
to whether it is entitled to immunity. If the Secretary of State finds that the defendant is immune from suit, he, in
turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is entitled to immunity. In
England, a similar procedure is followed, only the Foreign Office issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first secure an
executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office
conveys its endorsement to the courts varies. In International Catholic Migration Commission v. Calleja, 190
SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and
Employment, informing the latter that the respondent-employer could not be sued because it enjoyed diplomatic
immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of
Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of the United States Naval
Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the
"suggestion" in a Manifestation and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with this Court
to be allowed to intervene on the side of petitioner. The Court allowed the said Department to file its
memorandum in support of petitioner's claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the respondents
through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus
Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA 644 [1990] and companion cases).
In cases where the foreign states bypass the Foreign Office, the courts can inquire into the facts and make their
own determination as to the nature of the acts and transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a foreign state
enjoying sovereign immunity. On the other hand, private respondent insists that the doctrine of non-suability is
not anymore absolute and that petitioner has divested itself of such a cloak when, of its own free will, it entered
into a commercial transaction for the sale of a parcel of land located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign state is in
order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the Holy See,
was considered a subject of International Law. With the loss of the Papal States and the limitation of the territory
under the Holy See to an area of 108.7 acres, the position of the Holy See in International Law became
controversial (Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive dominion
and sovereign jurisdiction of the Holy See over the Vatican City. It also recognized the right of the Holy See to
receive foreign diplomats, to send its own diplomats to foreign countries, and to enter into treaties according to
International Law (Garcia, Questions and Problems In International Law, Public and Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the Holy See
absolute and visible independence and of guaranteeing to it indisputable sovereignty also in the field of
international relations" (O'Connell, I International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is vested in the
Holy See or in the Vatican City. Some writers even suggested that the treaty created two international persons —
the Holy See and Vatican City (Salonga and Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution to it of "sovereignty"
must be made in a sense different from that in which it is applied to other states (Fenwick, International Law 124-
125 [1948]; Cruz, International Law 37 [1991]). In a community of national states, the Vatican City represents an
entity organized not for political but for ecclesiastical purposes and international objects. Despite its size and
object, the Vatican City has an independent government of its own, with the Pope, who is also head of the
Roman Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the demands of
its mission in the world. Indeed, the world-wide interests and activities of the Vatican City are such as to make it
in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication — that it is
possible for any entity pursuing objects essentially different from those pursued by states to be invested with
international personality (Kunz, The Status of the Holy See in International Law, 46 The American Journal of
International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See and not in
the name of the Vatican City, one can conclude that in the Pope's own view, it is the Holy See that is the
international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy See,
through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine government
since 1957 (Rollo, p. 87). This appears to be the universal practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted
principles of International Law. Even without this affirmation, such principles of International Law are deemed
incorporated as part of the law of the land as a condition and consequence of our admission in the society of
nations (United States of America v. Guinto, 182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to
the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of
another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only
with regard to public acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International
Law 194 [1984]).

Some states passed legislation to serve as guidelines for the executive or judicial determination when an act may
be considered as jure gestionis. The United States passed the Foreign Sovereign Immunities Act of 1976, which
defines a commercial activity as "either a regular course of commercial conduct or a particular commercial
transaction or act." Furthermore, the law declared that the "commercial character of the activity shall be
determined by reference to the nature of the course of conduct or particular transaction or act, rather than by
reference to its purpose." The Canadian Parliament enacted in 1982 an Act to Provide For State Immunity in
Canadian Courts. The Act defines a "commercial activity" as any particular transaction, act or conduct or any
regular course of conduct that by reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of sovereign
immunity, has created problems of its own. Legal treatises and the decisions in countries which follow the
restrictive theory have difficulty in characterizing whether a contract of a sovereign state with a private party is an
act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial activities
remotely connected with the discharge of governmental functions. This is particularly true with respect to the
Communist states which took control of nationalized business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure imperii: (1)
the lease by a foreign government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil.
312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a United States Naval Station (United
States of America v. Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v.
Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private parties as
acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three restaurants, a cafeteria, a
bakery, a store, and a coffee and pastry shop at the John Hay Air Station in Baguio City, to cater to American
servicemen and the general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the
bidding for the operation of barber shops in Clark Air Base in Angeles City (United States of America v. Guinto,
182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general public is
undoubtedly for profit as a commercial and not a governmental activity. By entering into the employment contract
with the cook in the discharge of its proprietary function, the United States government impliedly divested itself of
its sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered "commercial" and as
constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be.

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.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be deemed to
have impliedly waived its non-suability if it has entered into a contract in its proprietary or private
capacity. It is only when the contract involves its sovereign or governmental capacity that no such
waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business,
surely the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that the
acquisition and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said property for
the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said
claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not for
commercial purpose, but for the use of petitioner to construct thereon the official place of residence of the Papal
Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state, necessary for
the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on
Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force in
the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and administrative
jurisdiction of the receiving state over any real action relating to private immovable property situated in the
territory of the receiving state which the envoy holds on behalf of the sending state for the purposes of the
mission. If this immunity is provided for a diplomatic envoy, with all the more reason should immunity be
recognized as regards the sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a
governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it
almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters have occupied
and are still occupying the lot, and that they stubbornly refuse to leave the premises, has been admitted by
private respondent in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the light of the
pleadings, particularly the admission of private respondent. Besides, the privilege of sovereign immunity in this
case was sufficiently established by the Memorandum and Certification of the Department of Foreign Affairs. As
the department tasked with the conduct of the Philippines' foreign relations (Administrative Code of 1987, Book
IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case and officially certified that
the Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the Philippines exempt
from local jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy
in this country (Rollo, pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is conclusive upon the
courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of
immunity is recognized and affirmed by the executive branch, it is the duty of the courts to accept this claim so as
not to embarrass the executive arm of the government in conducting the country's foreign relations (World Health
Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration Commission and in World
Health Organization, we abide by the certification of the Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing to establish
the facts alleged by petitioner in its motion. In view of said certification, such procedure would however be
pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25,
1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances. Under both Public
International Law and Transnational Law, a person who feels aggrieved by the acts of a foreign sovereign can
ask his own government to espouse his cause through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its claims against
the Holy See. Its first task is to persuade the Philippine government to take up with the Holy See the validity of its
claims. Of course, the Foreign Office shall first make a determination of the impact of its espousal on the relations
between the Philippine government and the Holy See (Young, Remedies of Private Claimants Against Foreign
States, Selected Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]). Once the
Philippine government decides to espouse the claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the International Court of Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or international
judicial proceedings on his behalf, a State is in reality asserting its own rights — its right to
ensure, in the person of its subjects, respect for the rules of international law (The Mavrommatis
Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183 against
petitioner is DISMISSED.
SO ORDERED.

G.R. No. 74135 May 28, 1992

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

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

GUTIERREZ, JR., J.:

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

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

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

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

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

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

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

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

1. Defendants M. H. Wylie and Capt. James Williams acted in the performance of their official
functions as officers of the United States Navy and are, therefore, immune from suit;

2. The United States Naval Base is an instrumentality of the US government which cannot be
sued without its consent; and
 3. This Court has no jurisdiction over the subject matter as well as the parties in this case.
(Record on Appeal, pp. 133-134)

The motion was, however, denied.

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

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

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

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

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

3) To pay the costs of this suit.

Counterclaims are dismissed.

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

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

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

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

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

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

Hence, this petition.

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

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

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

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

Even without such affirmation, we would still be bound by the generally accepted principles of
international law under the doctrine of incorporation. Under this doctrine, as accepted by the
majority of states, such principles are deemed incorporated in the law of every civilized state as a
condition and consequence of its membership in the society of nations. Upon its admission to
such society, the state is automatically obligated to comply with these principles in its relations
with other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by
Justice Holmes that "there can be no legal right against the authority which makes the law on
which the right depends." (Kawanakoa v. Polybank, 205 U.S. 349) There are other practical
reasons for the enforcement of the doctrine. In the case of the foreign state sought to be
impleaded in the local jurisdiction, the added inhibition is expressed in the maxim par in parem,
non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary disposition would, in the language of a celebrated case, "unduly vex the peace
of nations." (Da Haber v. Queen of Portugal, 17 Q. B. 171)

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

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

The consent of the state to be sued may be manifested expressly or impliedly. Express consent
may be embodied in a general law or a special law. Consent is implied when the state enters into
a contract it itself commences litigation.

xxx xxx xxx

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

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

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

It is mutually agreed that the United States shall have the rights, power and
authority within the bases which are necessary for the establishment, use,
operation and defense thereof or appropriate for the control thereof and all the
rights, power and authority within the limits of the territorial waters and air space
adjacent to, or in the vicinity of, the bases which are necessary to provide access
to them or appropriate for their control.
The petitioners also rely heavily on Baer v. Tizon, (57 SCRA 1) along with several other decisions,
to support their position that they are not suable in the cases below, the United States not having
waived its sovereign immunity from suit. It is emphasized that in Baer, the Court held:

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

xxx xxx xxx

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

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

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

xxx xxx xxx

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

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

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

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

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

There is no question, therefore, that the two (2) petitioners actively participated in screening the features and
articles in the POD as part of their official functions. Under the rule that U.S. officials in the performance of their
official functions are immune from suit, then it should follow that the petitioners may not be held liable for the
questioned publication.

It is to be noted, however, that the petitioners were sued in their personal capacities for their alleged tortious acts
in publishing a libelous article.

The question, therefore, arises –– are American naval officers who commit a crime or tortious act while
discharging official functions still covered by the principle of state immunity from suit? Pursuing the question
further, does the grant of rights, power, and authority to the United States under the RP-US Bases Treaty cover
immunity of its officers from crimes and torts? Our answer is No.

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

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

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

xxx xxx xxx

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

In the case of Presidential Commission on Good Government v. Peña (159 SCRA 556 [1988]
then Chief Justice Claudio Teehankee, added a clarification of the immunity accorded PCGG
officials under Section 4(a) of Executive Order No. 1 as follows:

With respect to the qualifications expressed by Mr. Justice Feliciano in his

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

xxx xxx xxx

Immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a
privileged status not claimed by any other official of the Republic. (id., at page 586)

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

We apply the same ruling to this case.

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

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

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

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

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

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

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

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

G.R. No. 142396 February 11, 2003

KHOSROW MINUCHER, petitioner,

vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.

DECISION

VITUG, J.:

Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425, otherwise also known
as the "Dangerous Drugs Act of 1972," was filed against petitioner Khosrow Minucher and one Abbas Torabian
with the Regional Trial Court, Branch 151, of Pasig City. The criminal charge followed a "buy-bust operation"
conducted by the Philippine police narcotic agents in the house of Minucher, an Iranian national, where a quantity
of heroin, a prohibited drug, was said to have been seized. The narcotic agents were accompanied by private
respondent Arthur Scalzo who would, in due time, become one of the principal witnesses for the prosecution. On
08 January 1988, Presiding Judge Eutropio Migrino rendered a decision acquitting the two accused.

On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court (RTC), Branch 19, of
Manila for damages on account of what he claimed to have been trumped-up charges of drug trafficking made by
Arthur Scalzo. The Manila RTC detailed what it had found to be the facts and circumstances surrounding the
case.

"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the Philippines to study in the
University of the Philippines in 1974. In 1976, under the regime of the Shah of Iran, he was appointed Labor
Attaché for the Iranian Embassies in Tokyo, Japan and Manila, Philippines. When the Shah of Iran was deposed
by Ayatollah Khomeini, plaintiff became a refugee of the United Nations and continued to stay in the Philippines.
He headed the Iranian National Resistance Movement in the Philippines.

"He came to know the defendant on May 13, 1986, when the latter was brought to his house and introduced to
him by a certain Jose Iñigo, an informer of the Intelligence Unit of the military. Jose Iñigo, on the other hand, was
met by plaintiff at the office of Atty. Crisanto Saruca, a lawyer for several Iranians whom plaintiff assisted as head
of the anti-Khomeini movement in the Philippines.

"During his first meeting with the defendant on May 13, 1986, upon the introduction of Jose Iñigo, the defendant
expressed his interest in buying caviar. As a matter of fact, he bought two kilos of caviar from plaintiff and paid
P10,000.00 for it. Selling caviar, aside from that of Persian carpets, pistachio nuts and other Iranian products was
his business after the Khomeini government cut his pension of over $3,000.00 per month. During their
introduction in that meeting, the defendant gave the plaintiff his calling card, which showed that he is working at
the US Embassy in the Philippines, as a special agent of the Drug Enforcement Administration, Department of
Justice, of the United States, and gave his address as US Embassy, Manila. At the back of the card appears a
telephone number in defendant’s own handwriting, the number of which he can also be contacted.

"It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa for his wife and the wife
of a countryman named Abbas Torabian. The defendant told him that he [could] help plaintiff for a fee of
$2,000.00 per visa. Their conversation, however, was more concentrated on politics, carpets and caviar.
Thereafter, the defendant promised to see plaintiff again.

"On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at Mario's Restaurant at
Makati. He wanted to buy 200 grams of caviar. Plaintiff brought the merchandize but for the reason that the
defendant was not yet there, he requested the restaurant people to x x x place the same in the refrigerator.
Defendant, however, came and plaintiff gave him the caviar for which he was paid. Then their conversation was
again focused on politics and business.

"On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at Kapitolyo, Pasig. The
defendant wanted to buy a pair of carpets which plaintiff valued at $27,900.00. After some haggling, they agreed
at $24,000.00. For the reason that defendant did not yet have the money, they agreed that defendant would
come back the next day. The following day, at 1:00 p.m., he came back with his $24,000.00, which he gave to the
plaintiff, and the latter, in turn, gave him the pair of carpets.
1awphi1.nét

"At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to plaintiff's house and directly
proceeded to the latter's bedroom, where the latter and his countryman, Abbas Torabian, were playing chess.
Plaintiff opened his safe in the bedroom and obtained $2,000.00 from it, gave it to the defendant for the latter's
fee in obtaining a visa for plaintiff's wife. The defendant told him that he would be leaving the Philippines very
soon and requested him to come out of the house for a while so that he can introduce him to his cousin waiting in
a cab. Without much ado, and without putting on his shirt as he was only in his pajama pants, he followed the
defendant where he saw a parked cab opposite the street. To his complete surprise, an American jumped out of
the cab with a drawn high-powered gun. He was in the company of about 30 to 40 Filipino soldiers with 6
Americans, all armed. He was handcuffed and after about 20 minutes in the street, he was brought inside the
house by the defendant. He was made to sit down while in handcuffs while the defendant was inside his
bedroom. The defendant came out of the bedroom and out from defendant's attaché case, he took something
and placed it on the table in front of the plaintiff. They also took plaintiff's wife who was at that time at the
boutique near his house and likewise arrested Torabian, who was playing chess with him in the bedroom and
both were handcuffed together. Plaintiff was not told why he was being handcuffed and why the privacy of his
house, especially his bedroom was invaded by defendant. He was not allowed to use the telephone. In fact, his
telephone was unplugged. He asked for any warrant, but the defendant told him to `shut up.’ He was
nevertheless told that he would be able to call for his lawyer who can defend him.

"The plaintiff took note of the fact that when the defendant invited him to come out to meet his cousin, his safe
was opened where he kept the $24,000.00 the defendant paid for the carpets and another $8,000.00 which he
also placed in the safe together with a bracelet worth $15,000.00 and a pair of earrings worth $10,000.00. He
also discovered missing upon his release his 8 pieces hand-made Persian carpets, valued at $65,000.00, a
painting he bought for P30,000.00 together with his TV and betamax sets. He claimed that when he was
handcuffed, the defendant took his keys from his wallet. There was, therefore, nothing left in his house.

"That his arrest as a heroin trafficker x x x had been well publicized throughout the world, in various newspapers,
particularly in Australia, America, Central Asia and in the Philippines. He was identified in the papers as an
international drug trafficker. x x x
In fact, the arrest of defendant and Torabian was likewise on television, not only in the Philippines, but also in
America and in Germany. His friends in said places informed him that they saw him on TV with said news.

"After the arrest made on plaintiff and Torabian, they were brought to Camp Crame handcuffed together, where
they were detained for three days without food and water." 1

During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for Scalzo and moved for
extension of time to file an answer pending a supposed advice from the United States Department of State and
Department of Justice on the defenses to be raised. The trial court granted the motion. On 27 October 1988,
Scalzo filed another special appearance to quash the summons on the ground that he, not being a resident of the
Philippines and the action being one in personam, was beyond the processes of the court. The motion was
denied by the court, in its order of 13 December 1988, holding that the filing by Scalzo of a motion for extension
of time to file an answer to the complaint was a voluntary appearance equivalent to service of summons which
could likewise be construed a waiver of the requirement of formal notice. Scalzo filed a motion for reconsideration
of the court order, contending that a motion for an extension of time to file an answer was not a voluntary
appearance equivalent to service of summons since it did not seek an affirmative relief. Scalzo argued that in
cases involving the United States government, as well as its agencies and officials, a motion for extension was
peculiarly unavoidable due to the need (1) for both the Department of State and the Department of Justice to
agree on the defenses to be raised and (2) to refer the case to a Philippine lawyer who would be expected to first
review the case. The court a quo denied the motion for reconsideration in its order of 15 October 1989.

Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R. No. 17023, assailing the
denial. In a decision, dated 06 October 1989, the appellate court denied the petition and affirmed the ruling of the
trial court. Scalzo then elevated the incident in a petition for review on certiorari, docketed G.R. No. 91173, to this
Court. The petition, however, was denied for its failure to comply with SC Circular No. 1-88; in any event, the
Court added, Scalzo had failed to show that the appellate court was in error in its questioned judgment.

Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a) declaring Scalzo in default for
his failure to file a responsive pleading (answer) and (b) setting the case for the reception of evidence. On 12
March 1990, Scalzo filed a motion to set aside the order of default and to admit his answer to the complaint.
Granting the motion, the trial court set the case for pre-trial. In his answer, Scalzo denied the material allegations
of the complaint and raised the affirmative defenses (a) of Minucher’s failure to state a cause of action in his
complaint and (b) that Scalzo had acted in the discharge of his official duties as being merely an agent of the
Drug Enforcement Administration of the United States Department of Justice. Scalzo interposed a counterclaim of
P100,000.00 to answer for attorneys' fees and expenses of litigation.

Then, on 14 June 1990, after almost two years since the institution of the civil case, Scalzo filed a motion to
dismiss the complaint on the ground that, being a special agent of the United States Drug Enforcement
Administration, he was entitled to diplomatic immunity. He attached to his motion Diplomatic Note No. 414 of the
United States Embassy, dated 29 May 1990, addressed to the Department of Foreign Affairs of the Philippines
and a Certification, dated 11 June 1990, of Vice Consul Donna Woodward, certifying that the note is a true and
faithful copy of its original. In an order of 25 June 1990, the trial court denied the motion to dismiss.

On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court, docketed G.R. No. 94257 and
entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao Polo, et al.," asking that the complaint in Civil Case No. 88-
45691 be ordered dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R. SP No.
22505, per this Court’s resolution of 07 August 1990. On 31 October 1990, the Court of Appeals promulgated its
decision sustaining the diplomatic immunity of Scalzo and ordering the dismissal of the complaint against him.
Minucher filed a petition for review with this Court, docketed G.R. No. 97765 and entitled "Khosrow Minucher vs.
the Honorable Court of Appeals, et. al." (cited in 214 SCRA 242), appealing the judgment of the Court of Appeals.
In a decision, dated 24 September 1992, penned by Justice (now Chief Justice) Hilario Davide, Jr., this Court
reversed the decision of the appellate court and remanded the case to the lower court for trial. The remand was
ordered on the theses (a) that the Court of Appeals erred in granting the motion to dismiss of Scalzo for lack of
jurisdiction over his person without even considering the issue of the authenticity of Diplomatic Note No. 414 and
(b) that the complaint contained sufficient allegations to the effect that Scalzo committed the imputed acts in his
personal capacity and outside the scope of his official duties and, absent any evidence to the contrary, the issue
on Scalzo’s diplomatic immunity could not be taken up.

The Manila RTC thus continued with its hearings on the case. On 17 November 1995, the trial court reached a
decision; it adjudged:

"WHEREFORE, and in view of all the foregoing considerations, judgment is hereby rendered for the plaintiff, who
successfully established his claim by sufficient evidence, against the defendant in the manner following:
"`Adjudging defendant liable to plaintiff in actual and compensatory damages of P520,000.00; moral damages in
the sum of P10 million; exemplary damages in the sum of P100,000.00; attorney's fees in the sum of
P200,000.00 plus costs.

`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of the Court on this judgment to
answer for the unpaid docket fees considering that the plaintiff in this case instituted this action as a pauper
litigant.’"
2

While the trial court gave credence to the claim of Scalzo and the evidence presented by him that he was a
diplomatic agent entitled to immunity as such, it ruled that he, nevertheless, should be held accountable for the
acts complained of committed outside his official duties. On appeal, the Court of Appeals reversed the decision of
the trial court and sustained the defense of Scalzo that he was sufficiently clothed with diplomatic immunity
during his term of duty and thereby immune from the criminal and civil jurisdiction of the "Receiving State"
pursuant to the terms of the Vienna Convention.

Hence, this recourse by Minucher. The instant petition for review raises a two-fold issue: (1) whether or not the
doctrine of conclusiveness of judgment, following the decision rendered by this Court in G.R. No. 97765, should
have precluded the Court of Appeals from resolving the appeal to it in an entirely different manner, and (2)
whether or not Arthur Scalzo is indeed entitled to diplomatic immunity.

The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would require 1) the finality of the
prior judgment, 2) a valid jurisdiction over the subject matter and the parties on the part of the court that renders
it, 3) a judgment on the merits, and 4) an identity of the parties, subject matter and causes of action. Even while
3

one of the issues submitted in G.R. No. 97765 - "whether or not public respondent Court of Appeals erred in
ruling that private respondent Scalzo is a diplomat immune from civil suit conformably with the Vienna
Convention on Diplomatic Relations" - is also a pivotal question raised in the instant petition, the ruling in G.R.
No. 97765, however, has not resolved that point with finality. Indeed, the Court there has made this observation -

"It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief filed on 13 June 1990,
unequivocally states that he would present documentary evidence consisting of DEA records on his investigation
and surveillance of plaintiff and on his position and duties as DEA special agent in Manila. Having thus reserved
his right to present evidence in support of his position, which is the basis for the alleged diplomatic immunity, the
barren self-serving claim in the belated motion to dismiss cannot be relied upon for a reasonable, intelligent and
fair resolution of the issue of diplomatic immunity."
4

Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the Philippines is a signatory,
grants him absolute immunity from suit, describing his functions as an agent of the United States Drugs
Enforcement Agency as "conducting surveillance operations on suspected drug dealers in the Philippines
believed to be the source of prohibited drugs being shipped to the U.S., (and) having ascertained the target, (he
then) would inform the Philippine narcotic agents (to) make the actual arrest." Scalzo has submitted to the trial
court a number of documents -

1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;

2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;

3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;

4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and

5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.

6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department of Foreign Affairs,
dated 27 June 1990 forwarding Embassy Note No. 414 to the Clerk of Court of RTC Manila, Branch 19
(the trial court);

7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3'); and

8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol, Department of Foreign
Affairs, through Asst. Sec. Emmanuel Fernandez, addressed to the Chief Justice of this Court. 5

The documents, according to Scalzo, would show that: (1) the United States Embassy accordingly advised the
Executive Department of the Philippine Government that Scalzo was a member of the diplomatic staff of the
United States diplomatic mission from his arrival in the Philippines on 14 October 1985 until his departure on 10
August 1988; (2) that the United States Government was firm from the very beginning in asserting the diplomatic
immunity of Scalzo with respect to the case pursuant to the provisions of the Vienna Convention on Diplomatic
Relations; and (3) that the United States Embassy repeatedly urged the Department of Foreign Affairs to take
appropriate action to inform the trial court of Scalzo’s diplomatic immunity. The other documentary exhibits were
presented to indicate that: (1) the Philippine government itself, through its Executive Department, recognizing and
respecting the diplomatic status of Scalzo, formally advised the "Judicial Department" of his diplomatic status and
his entitlement to all diplomatic privileges and immunities under the Vienna Convention; and (2) the Department
of Foreign Affairs itself authenticated Diplomatic Note No. 414. Scalzo additionally presented Exhibits "9" to "13"
consisting of his reports of investigation on the surveillance and subsequent arrest of Minucher, the certification of
the Drug Enforcement Administration of the United States Department of Justice that Scalzo was a special agent
assigned to the Philippines at all times relevant to the complaint, and the special power of attorney executed by
him in favor of his previous counsel to show (a) that the United States Embassy, affirmed by its Vice Consul,
6

acknowledged Scalzo to be a member of the diplomatic staff of the United States diplomatic mission from his
arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988, (b) that, on May 1986, with
the cooperation of the Philippine law enforcement officials and in the exercise of his functions as member of the
mission, he investigated Minucher for alleged trafficking in a prohibited drug, and (c) that the Philippine
Department of Foreign Affairs itself recognized that Scalzo during his tour of duty in the Philippines (14 October
1985 up to 10 August 1988) was listed as being an Assistant Attaché of the United States diplomatic mission and
accredited with diplomatic status by the Government of the Philippines. In his Exhibit 12, Scalzo described the
functions of the overseas office of the United States Drugs Enforcement Agency, i.e., (1) to provide criminal
investigative expertise and assistance to foreign law enforcement agencies on narcotic and drug control
programs upon the request of the host country, 2) to establish and maintain liaison with the host country and
counterpart foreign law enforcement officials, and 3) to conduct complex criminal investigations involving
international criminal conspiracies which affect the interests of the United States.

The Vienna Convention on Diplomatic Relations was a codification of centuries-old customary law and, by the
time of its ratification on 18 April 1961, its rules of law had long become stable. Among the city states of ancient
Greece, among the peoples of the Mediterranean before the establishment of the Roman Empire, and among the
states of India, the person of the herald in time of war and the person of the diplomatic envoy in time of peace
were universally held sacrosanct. By the end of the 16th century, when the earliest treatises on diplomatic law
7

were published, the inviolability of ambassadors was firmly established as a rule of customary international
law. Traditionally, the exercise of diplomatic intercourse among states was undertaken by the head of state
8

himself, as being the preeminent embodiment of the state he represented, and the foreign secretary, the official
usually entrusted with the external affairs of the state. Where a state would wish to have a more prominent
diplomatic presence in the receiving state, it would then send to the latter a diplomatic mission. Conformably with
the Vienna Convention, the functions of the diplomatic mission involve, by and large, the representation of the
interests of the sending state and promoting friendly relations with the receiving state.9

The Convention lists the classes of heads of diplomatic missions to include (a) ambassadors or nuncios
accredited to the heads of state, (b) envoys, ministers or internuncios accredited to the heads of states; and (c)
10 11

charges d' affairs accredited to the ministers of foreign affairs. Comprising the "staff of the (diplomatic) mission"
12 13

are the diplomatic staff, the administrative staff and the technical and service staff. Only the heads of missions, as
well as members of the diplomatic staff, excluding the members of the administrative, technical and service staff
of the mission, are accorded diplomatic rank. Even while the Vienna Convention on Diplomatic Relations
provides for immunity to the members of diplomatic missions, it does so, nevertheless, with an understanding that
the same be restrictively applied. Only "diplomatic agents," under the terms of the Convention, are vested with
blanket diplomatic immunity from civil and criminal suits. The Convention defines "diplomatic agents" as the
heads of missions or members of the diplomatic staff, thus impliedly withholding the same privileges from all
others. It might bear stressing that even consuls, who represent their respective states in concerns of commerce
and navigation and perform certain administrative and notarial duties, such as the issuance of passports and
visas, authentication of documents, and administration of oaths, do not ordinarily enjoy the traditional diplomatic
immunities and privileges accorded diplomats, mainly for the reason that they are not charged with the duty of
representing their states in political matters. Indeed, the main yardstick in ascertaining whether a person is a
diplomat entitled to immunity is the determination of whether or not he performs duties of diplomatic nature.

Scalzo asserted, particularly in his Exhibits "9" to "13," that he was an Assistant Attaché of the United States
diplomatic mission and was accredited as such by the Philippine Government. An attaché belongs to a category
of officers in the diplomatic establishment who may be in charge of its cultural, press, administrative or financial
affairs. There could also be a class of attaches belonging to certain ministries or departments of the government,
other than the foreign ministry or department, who are detailed by their respective ministries or departments with
the embassies such as the military, naval, air, commercial, agricultural, labor, science, and customs attaches, or
the like. Attaches assist a chief of mission in his duties and are administratively under him, but their main function
is to observe, analyze and interpret trends and developments in their respective fields in the host country and
submit reports to their own ministries or departments in the home government. These officials are not generally
14

regarded as members of the diplomatic mission, nor are they normally designated as having diplomatic rank.

In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos. 414, 757 and 791, all
issued post litem motam, respectively, on 29 May 1990, 25 October 1991 and 17 November 1992. The
presentation did nothing much to alleviate the Court's initial reservations in G.R. No. 97765, viz:

"While the trial court denied the motion to dismiss, the public respondent gravely abused its discretion in
dismissing Civil Case No. 88-45691 on the basis of an erroneous assumption that simply because of the
diplomatic note, the private respondent is clothed with diplomatic immunity, thereby divesting the trial court of
jurisdiction over his person.

"x x x x x x x x x

"And now, to the core issue - the alleged diplomatic immunity of the private respondent. Setting aside for the
moment the issue of authenticity raised by the petitioner and the doubts that surround such claim, in view of the
fact that it took private respondent one (1) year, eight (8) months and seventeen (17) days from the time his
counsel filed on 12 September 1988 a Special Appearance and Motion asking for a first extension of time to file
the Answer because the Departments of State and Justice of the United States of America were studying the
case for the purpose of determining his defenses, before he could secure the Diplomatic Note from the US
Embassy in Manila, and even granting for the sake of argument that such note is authentic, the complaint for
damages filed by petitioner cannot be peremptorily dismissed.

"x x x x x x x x x

"There is of course the claim of private respondent that the acts imputed to him were done in his official capacity.
Nothing supports this self-serving claim other than the so-called Diplomatic Note. x x x. The public respondent
then should have sustained the trial court's denial of the motion to dismiss. Verily, it should have been the most
proper and appropriate recourse. It should not have been overwhelmed by the self-serving Diplomatic Note
whose belated issuance is even suspect and whose authenticity has not yet been proved. The undue haste with
which respondent Court yielded to the private respondent's claim is arbitrary."

A significant document would appear to be Exhibit No. 08, dated 08 November 1992, issued by the Office of
Protocol of the Department of Foreign Affairs and signed by Emmanuel C. Fernandez, Assistant Secretary,
certifying that "the records of the Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office
in the Philippines (from 14 October 1985 up to 10 August 1988) was listed as an Assistant Attaché of the United
States diplomatic mission and was, therefore, accredited diplomatic status by the Government of the Philippines."
No certified true copy of such "records," the supposed bases for the belated issuance, was presented in
evidence.

Concededly, vesting a person with diplomatic immunity is a prerogative of the executive branch of the
government. In World Health Organization vs. Aquino, the Court has recognized that, in such matters, the hands
15

of the courts are virtually tied. Amidst apprehensions of indiscriminate and incautious grant of immunity, designed
to gain exemption from the jurisdiction of courts, it should behoove the Philippine government, specifically its
Department of Foreign Affairs, to be most circumspect, that should particularly be no less than compelling, in its
post litem motam issuances. It might be recalled that the privilege is not an immunity from the observance of the
law of the territorial sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise of
territorial jurisdiction. The government of the United States itself, which Scalzo claims to be acting for, has
16

formulated its standards for recognition of a diplomatic agent. The State Department policy is to only concede
diplomatic status to a person who possesses an acknowledged diplomatic title and "performs duties of diplomatic
nature." Supplementary criteria for accreditation are the possession of a valid diplomatic passport or, from States
17

which do not issue such passports, a diplomatic note formally representing the intention to assign the person to
diplomatic duties, the holding of a non-immigrant visa, being over twenty-one years of age, and performing
diplomatic functions on an essentially full-time basis. Diplomatic missions are requested to provide the most
18

accurate and descriptive job title to that which currently applies to the duties performed. The Office of the Protocol
would then assign each individual to the appropriate functional category. 19

But while the diplomatic immunity of Scalzo might thus remain contentious, it was sufficiently established that,
indeed, he worked for the United States Drug Enforcement Agency and was tasked to conduct surveillance of
suspected drug activities within the country on the dates pertinent to this case. If it should be ascertained that
Arthur Scalzo was acting well within his assigned functions when he committed the acts alleged in the complaint,
the present controversy could then be resolved under the related doctrine of State Immunity from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary
international law then closely identified with the personal immunity of a foreign sovereign from suit and, with the
20

emergence of democratic states, made to attach not just to the person of the head of state, or his representative,
but also distinctly to the state itself in its sovereign capacity. If the acts giving rise to a suit are those of a foreign
21

government done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official
capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without its consent.
Suing a representative of a state is believed to be, in effect, suing the state itself. The proscription is not accorded
for the benefit of an individual but for the State, in whose service he is, under the maxim - par in parem, non
habet imperium - that all states are sovereign equals and cannot assert jurisdiction over one another. The 22

implication, in broad terms, is that if the judgment against an official would require the state itself to perform an
affirmative act to satisfy the award, such as the appropriation of the amount needed to pay the damages decreed
against him, the suit must be regarded as being against the state itself, although it has not been formally
impleaded. 23

In United States of America vs. Guinto, involving officers of the United States Air Force and special officers of the
24

Air Force Office of Special Investigators charged with the duty of preventing the distribution, possession and use
of prohibited drugs, this Court has ruled -

"While the doctrine (of state immunity) appears to prohibit only suits against the state without its consent, it is also
applicable to complaints filed against officials of the state for acts allegedly performed by them in the discharge of
their duties. x x x. It cannot for a moment be imagined that they were acting in their private or unofficial capacity
when they apprehended and later testified against the complainant. It follows that for discharging their duties as
agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which has not
given its consent to be sued. x x x As they have acted on behalf of the government, and within the scope of their
authority, it is that government, and not the petitioners personally, [who were] responsible for their acts." 25

This immunity principle, however, has its limitations. Thus, Shauf vs. Court of Appeals elaborates:
26

"It is a different matter where the public official is made to account in his capacity as such for acts contrary to law
and injurious to the rights of the plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al., vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the State authorizes only legal acts
by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against
the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his
rights, is not a suit against the State within the rule of immunity of the State from suit. In the same tenor, it has
been said that an action at law or suit in equity against a State officer or the director of a State department on the
ground that, while claiming to act for the State, he violates or invades the personal and property rights of the
plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a suit
against the State within the constitutional provision that the State may not be sued without its consent. The
rationale for this ruling is that the doctrine of state immunity cannot be used as an instrument for perpetrating an
injustice.

"x x x x x x x x x

"(T)he doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued
in his private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and
agents of the government is removed the moment they are sued in their individual capacity. This situation usually
arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled
principle of law that a public official may be liable in his personal private capacity for whatever damage he may
have caused by his act done with malice and in bad faith or beyond the scope of his authority and jurisdiction." 27

A foreign agent, operating within a territory, can be cloaked with immunity from suit but only as long as it can be
established that he is acting within the directives of the sending state. The consent of the host state is an
indispensable requirement of basic courtesy between the two sovereigns. Guinto and Shauf both involve officers
and personnel of the United States, stationed within Philippine territory, under the RP-US Military Bases
Agreement. While evidence is wanting to show any similar agreement between the governments of the
Philippines and of the United States (for the latter to send its agents and to conduct surveillance and related
activities of suspected drug dealers in the Philippines), the consent or imprimatur of the Philippine government to
the activities of the United States Drug Enforcement Agency, however, can be gleaned from the facts heretofore
elsewhere mentioned. The official exchanges of communication between agencies of the government of the two
countries, certifications from officials of both the Philippine Department of Foreign Affairs and the United States
Embassy, as well as the participation of members of the Philippine Narcotics Command in the "buy-bust
operation" conducted at the residence of Minucher at the behest of Scalzo, may be inadequate to support the
"diplomatic status" of the latter but they give enough indication that the Philippine government has given
its imprimatur, if not consent, to the activities within Philippine territory of agent Scalzo of the United States Drug
Enforcement Agency. The job description of Scalzo has tasked him to conduct surveillance on suspected drug
suppliers and, after having ascertained the target, to inform local law enforcers who would then be expected to
make the arrest. In conducting surveillance activities on Minucher, later acting as the poseur-buyer during the
buy-bust operation, and then becoming a principal witness in the criminal case against Minucher, Scalzo hardly
can be said to have acted beyond the scope of his official function or duties.

All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of the United States Drug
Enforcement Agency allowed by the Philippine government to conduct activities in the country to help contain the
problem on the drug traffic, is entitled to the defense of state immunity from suit.

WHEREFORE, on the foregoing premises, the petition is DENIED. No costs.

SO ORDERED.

G.R. No. 154705 June 26, 2003

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER

COUNSELLOR AZHARI KASIM, Petitioners,
vs.
JAMES VINZON, doing business under the name and style of VINZON TRADE AND
SERVICES, Respondent.

DECISION

AZCUNA, J:

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

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance
Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The
Maintenance Agreement stated that respondent shall, for a consideration, maintain specified equipment at the
Embassy Main Building, Embassy Annex Building and the Wisma Duta, the official residence of petitioner
Ambassador Soeratmin. The equipment covered by the Maintenance Agreement are air conditioning units,
generator sets, electrical facilities, water heaters, and water motor pumps. It is likewise stated therein that the
agreement shall be effective for a period of four years and will renew itself automatically unless cancelled by
either party by giving thirty days prior written notice from the date of expiry.
1

Petitioners claim that sometime prior to the date of expiration of the said agreement, or before August 1999, they
informed respondent that the renewal of the agreement shall be at the discretion of the incoming Chief of
Administration, Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000. When Minister
Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found
respondent’s work and services unsatisfactory and not in compliance with the standards set in the Maintenance
Agreement. Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31,
2000. Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision to
2

terminate the agreement.

On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful. Respondent cites
various circumstances which purportedly negated petitioners’ alleged dissatisfaction over respondent’s services:
(a) in July 2000, Minister Counsellor Kasim still requested respondent to assign to the embassy an additional full-
time worker to assist one of his other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent
to donate a prize, which the latter did, on the occasion of the Indonesian Independence Day golf tournament; and
(c) in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for sponsoring a
prize and expressed his hope that the cordial relations happily existing between them will continue to prosper and
be strengthened in the coming years.

Hence, on December 15, 2000, respondent filed a complaint against petitioners docketed as Civil Case No.
3

18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a Motion
to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from
suit and cannot be sued as a party-defendant in the Philippines. The said motion further alleged that Ambassador
Soeratmin and Minister Counsellor Kasim are diplomatic agents as defined under the Vienna Convention on
Diplomatic Relations and therefore enjoy diplomatic immunity. In turn, respondent filed on March 20, 2001, an
4

Opposition to the said motion alleging that the Republic of Indonesia has expressly waived its immunity from suit.
He based this claim upon the following provision in the Maintenance Agreement:

"Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the
Philippines and by the proper court of Makati City, Philippines."

Respondent’s Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be
sued and held liable in their private capacities for tortious acts done with malice and bad faith. 5

On May 17, 2001, the trial court denied herein petitioners’ Motion to Dismiss. It likewise denied the Motion for
Reconsideration subsequently filed.

The trial court’s denial of the Motion to Dismiss was brought up to the Court of Appeals by herein petitioners in a
petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court
gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be sued and voluntarily
submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and
Minister Counsellor Kasim waived their immunity from suit.

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit. On 6

August 16, 2002, it denied herein petitioners’ motion for reconsideration. 7

Hence, this petition.

In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in sustaining the
trial court’s decision that petitioners have waived their immunity from suit by using as its basis the
abovementioned provision in the Maintenance Agreement.

The petition is impressed with merit.

International law is founded largely upon the principles of reciprocity, comity, independence, and equality of
States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution. The 8

rule that a State may not be sued without its consent is a necessary consequence of the principles of
independence and equality of States. As enunciated in Sanders v. Veridiano II, the practical justification for the
9 10

doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law on
which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign equals
and cannot assert jurisdiction over one another. A contrary attitude would "unduly vex the peace of nations."
11 12

The rules of International Law, however, are neither unyielding nor impervious to change. The increasing need of
sovereign States to enter into purely commercial activities remotely connected with the discharge of their
governmental functions brought about a new concept of sovereign immunity. This concept, the restrictive theory,
holds that the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not
with regard to private acts or acts jure gestionis. 13

In United States v. Ruiz, for instance, we held that the conduct of public bidding for the repair of a wharf at a
14

United States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the
hiring of a cook in the recreation center catering to American servicemen and the general public at the John Hay
Air Station in Baguio City, as well as the bidding for the operation of barber shops in Clark Air Base in Angeles
15

City.
16

Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be
construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start
of the inquiry. Is the foreign State engaged in the regular conduct of a business? If the foreign State is not
engaged regularly in a business or commercial activity, and in this case it has not been shown to be so engaged,
the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or
an incident thereof, then it is an act jure imperii.
17

Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the agreement
shall be settled according to the laws of the Philippines and by a specified court of the Philippines is not
necessarily a waiver of sovereign immunity from suit. The aforesaid provision contains language not necessarily
inconsistent with sovereign immunity. On the other hand, such provision may also be meant to apply where the
sovereign party elects to sue in the local courts, or otherwise waives its immunity by any subsequent act. The
applicability of Philippine laws must be deemed to include Philippine laws in its totality, including the principle
recognizing sovereign immunity. Hence, the proper court may have no proper action, by way of settling the case,
except to dismiss it.

Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly or by
necessary implication. We find no such waiver in this case.

Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the other hand,
1âwphi1

he argues that the actual physical maintenance of the premises of the diplomatic mission, such as the upkeep of
its furnishings and equipment, is no longer a sovereign function of the State. 18

We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure imperii. A sovereign
State does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic
mission encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private
entities to maintain the premises, furnishings and equipment of the embassy and the living quarters of its agents
and officials. It is therefore clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity
when it entered into a contract with respondent for the upkeep or maintenance of the air conditioning units,
generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian Embassy and the
official residence of the Indonesian ambassador.

The Solicitor General, in his Comment, submits the view that, "the Maintenance Agreement was entered into by
the Republic of Indonesia in the discharge of its governmental functions. In such a case, it cannot be deemed to
have waived its immunity from suit." As to the paragraph in the agreement relied upon by respondent, the
Solicitor General states that it "was not a waiver of their immunity from suit but a mere stipulation that in the event
they do waive their immunity, Philippine laws shall govern the resolution of any legal action arising out of the
agreement and the proper court in Makati City shall be the agreed venue thereof. 19

On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be sued
herein in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides:

xxx

1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He shall also enjoy
immunity from its civil and administrative jurisdiction, except in the case of:

(a) a real action relating to private immovable property situated in the territory of the receiving State,
unless he holds it on behalf of the sending State for the purposes of the mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor, administrator,
heir or legatee as a private person and not on behalf of the sending State;

(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the
receiving State outside his official functions.

xxx

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance
Agreement is not covered by the exceptions provided in the abovementioned provision.

The Solicitor General believes that said act may fall under subparagraph (c) thereof, but said provision clearly
20

applies only to a situation where the diplomatic agent engages in any professional or commercial activity outside
official functions, which is not the case herein.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA G.R.
SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against petitioners is
DISMISSED.

No costs.

SO ORDERED.
G.R. No. 125865 January 28, 2000

JEFFREY LIANG (HUEFENG), petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

YNARES-SANTIAGO, J.:

Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in 1994, for allegedly
uttering defamatory words against fellow ADB worker Joyce Cabal, he was charged before the Metropolitan Trial
Court (MeTC) of Mandaluyong City with two counts of grave oral defamation docketed as Criminal Cases Nos.
53170 and 53171. Petitioner was arrested by virtue of a warrant issued by the MeTC. After fixing petitioner's bail
at P2,400.00 per criminal charge, the MeTC released him to the custody of the Security Officer of ADB. The next
day, the MeTC judge received an "office of protocol" from the Department of Foreign Affairs (DFA) stating that
petitioner is covered by immunity from legal process under Section 45 of the Agreement between the ADB and
the Philippine Government regarding the Headquarters of the ADB (hereinafter Agreement) in the country. Based
on the said protocol communication that petitioner is immune from suit, the MeTC judge without notice to the
prosecution dismissed the two criminal cases. The latter filed a motion for reconsideration which was opposed by
the DFA. When its motion was denied, the prosecution filed a petition for certiorari and mandamus with the
Regional Trial Court (RTC) of Pasig City which set aside the MeTC rulings and ordered the latter court to enforce
the warrant of arrest it earlier issued. After the motion for reconsideration was denied, petitioner elevated the
case to this Court viaa petition for review arguing that he is covered by immunity under the Agreement and that
no preliminary investigation was held before the criminal cases were filed in court. 1âwphi1.nêt

The petition is not impressed with merit.

First, courts cannot blindly adhere and take on its face the communication from the DFA that petitioner is covered
by any immunity. The DFA's determination that a certain person is covered by immunity is only preliminary which
has no binding effect in courts. In receiving ex-parte the DFA's advice and in motu propio dismissing the two
criminal cases without notice to the prosecution, the latter's right to due process was violated. It should be noted
that due process is a right of the accused as much as it is of the prosecution. The needed inquiry in what capacity
petitioner was acting at the time of the alleged utterances requires for its resolution evidentiary basis that has yet
to be presented at the proper time. At any rate, it has been ruled that the mere invocation of the immunity clause
1

does not ipso facto result in the dropping of the charges. 2

Second, under Section 45 of the Agreement which provides:

Officers and staff of the Bank including for the purpose of this Article experts and consultants performing
missions for the Bank shall enjoy the following privileges and immunities:

a.) immunity from legal process with respect to acts performed by them in their official capacity
except when the Bank waives the immunity.

the immunity mentioned therein is not absolute, but subject to the exception that the acts was done in "official
capacity." It is therefore necessary to determine if petitioner's case falls within the ambit of Section 45(a). Thus,
the prosecution should have been given the chance to rebut the DFA protocol and it must be accorded the
opportunity to present its controverting evidence, should it so desire.

Third, slandering a person could not possibly be covered by the immunity agreement because our laws do not
allow the commission of a crime, such as defamation, in the name of official duty. The imputation of theft is ultra
3

vires and cannot be part of official functions. It is well-settled principle of law that a public official may be liable in
his personal private capacity for whatever damage he may have caused by his act done with malice or in bad
faith or beyond the scope of his authority or jurisdiction. It appears that even the government's chief legal
4

counsel, the Solicitor General, does not support the stand taken by petitioner and that of the DFA.

Fourth, under the Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming petitioner is such,
enjoys immunity from criminal jurisdiction of the receiving state except in the case of an action relating to any
professional or commercial activity exercised by the diplomatic agent in the receiving state outside his official
functions. As already mentioned above, the commission of a crime is not part of official duty.
5

Finally, on the contention that there was no preliminary investigation conducted, suffice it to say that preliminary
investigation is not a matter of right in cases cognizable by the MeTC such as the one at bar. Being purely a
6

statutory right, preliminary investigation may be invoked only when specifically granted by law. The rule on the
7
criminal procedure is clear that no preliminary investigation is required in cases falling within the jurisdiction of the
MeTC. Besides the absence of preliminary investigation does not affect the court's jurisdiction nor does it impair
8

the validity of the information or otherwise render it defective.9

WHEREFORE, the petition is DENIED.

SO ORDERED. 1âwphi1.nêt

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDEC-

AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS
REYES (FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

NOCON, J.:

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations
Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development
Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable
to pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May
16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the
resolution denying the petitioners' motion for reconsideration of said decision dated January 9, 1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development

Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the
governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the
sponsoring country (Article 1, Agreement Establishing the SEAFDEC).

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary
basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a
monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the
position of Professional III and designated as Head of External Affairs Office with the same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to
private respondent informing him that due to the financial constraints being experienced by the department, his
services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation
benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p.
153).

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March
18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and
attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari).

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as
the SEAFDEC-AQD is an international organization and that private respondent must first secure clearances
from the proper departments for property or money accountability before any claim for separation pay will be
paid, and which clearances had not yet been obtained by the private respondent.

A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by
the petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private
respondent has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of
P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to
P44,000.00 due to his failure to avail of the same during his employment with the SEAFDEC-AQD (Annex
"D", Id.).

On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:

1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until
full payment thereof is made, as separation pay and other post-employment benefits;

2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.

All other claims are hereby dismissed.

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of
P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.)

On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on
January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no
jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing
to its international character and the complaint is in effect a suit against the State which cannot be maintained
without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an

international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom
of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of
Vietnam (Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January
16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries development in
Southeast Asia by mutual co-operation among the member governments of the Center,
hereinafter called the "Members", and through collaboration with international organizations and
governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H"
Petition) (p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala
Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for
the promotion of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC
mandates:

1. The Council shall be the supreme organ of the Center and all powers of the Center shall be
vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional
independence and freedom from control of the state in whose territory its office is located.

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

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

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

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

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

jurisdiction, i.e.,that it is immune from the legal writs and processes issued by the tribunals of the
country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the
subjection of such an organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in there 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. In the case at bar, for instance, the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases would amount to interference by the
Philippine Government in the management decisions of the SEARCA governing board; even
worse, it could compromise the desired impartiality of the organization since it will have to suit its
actuations to the requirements of Philippine law, which may not necessarily coincide with the
interests of the other member-states. It is precisely to forestall these possibilities that in cases
where the extent of the immunity is specified in the enabling instruments of international
organizations, jurisdictional immunity from the host country is invariably among the first accorded.
(SeeJenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because
estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is
conferred by law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the
decision of a tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this
Court held:

A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous
to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and
may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court
may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified
by recent pronouncements which it stemmed principally from the ruling in the cited case
of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to
situations which were obviously not contemplated therein. The exceptional circumstances
involved in Sibonghanoy which justified the departure from the accepted concept of non-
waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but
rather the general rule, virtually overthrowing altogether the time-honored principle that the issue
of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118
SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify
its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why
it took cognizance of the case. Said the Court:

We would note, finally, that the present petition relates to a controversy between two claimants to
the same position; this is not a controversy between the SEAFDEC on the one hand, and an
officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the
other hand. There is before us no question involving immunity from the jurisdiction of the Court,
there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of
SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local
agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988
and January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without
jurisdiction. No costs.

SO ORDERED.

G.R. No. 106483 May 22, 1995

ERNESTO L. CALLADO, petitioner,

vs.
INTERNATIONAL RICE RESEARCH INSTITUTE, respondent.

ROMERO, J.:

Did the International Rice Research Institute (IRRI) waive its immunity from suit in this dispute which arose from
an employer-employee relationship?

We rule in the negative and vote to dismiss the petition.

Ernesto Callado, petitioner, was employed as a driver at the IRRI from April 11, 1983 to December 14, 1990. On
February 11, 1990, while driving an IRRI vehicle on an official trip to the Ninoy Aquino International Airport and
back to the IRRI, petitioner figured in an accident.

Petitioner was informed of the findings of a preliminary investigation conducted by the IRRI's Human Resource
Development Department Manager in a Memorandum dated March 5, 1990. In view of the aforesaid findings, he
1

was charged with:

(1) Driving an institute vehicle while on official duty under the influence of liquor;

(2) Serious misconduct consisting of your failure to report to your supervisors the failure of your
vehicle to start because of a problem with the car battery which, you alleged, required you to
overstay in Manila for more than six (6) hours, whereas, had you reported the matter to IRRI, Los
Baños by telephone, your problem could have been solved within one or two hours;

(3) Gross and habitual neglect of your duties. 2

In a Memorandum dated March 9, 1990, petitioner submitted his answer and defenses to the charges against
him. After evaluating petitioner's answer, explanations and other evidence, IRRI issued a Notice of Termination to
3

petitioner on December 7, 1990. 4

Thereafter, petitioner filed a complaint on December 19, 1990 before the Labor Arbiter for illegal dismissal, illegal
suspension and indemnity pay with moral and exemplary damages and attorney's fees.

On January 2, 1991, private respondent IRRI, through counsel, wrote the Labor Arbiter to inform him that the
Institute enjoys immunity from legal process by virtue of Article 3 of Presidential Decree No. 1620, and that it
5

invokes such diplomatic immunity and privileges as an international organization in the instant case filed by
petitioner, not having waived the same. 6

IRRI likewise wrote in the same tenor to the Regional Director of the Department of Labor and Employment. 7

While admitting IRRI's defense of immunity, the Labor Arbiter, nonetheless, cited an Order issued by the Institute
on August 13, 1991 to the effect that "in all cases of termination, respondent IRRI waives its immunity," and,
8

accordingly, considered the defense of immunity no longer a legal obstacle in resolving the case. The dispositive
portion of the Labor arbiter's decision dated October 31, 1991, reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent to

reinstate complainant to his former position without loss or (sic) seniority rights and privileges
within five (5) days from receipt hereof and to pay his full backwages from March 7, 1990 to
October 31, 1991, in the total amount of P83,048.75 computed on the basis of his last monthly
salary.9
The NLRC found merit in private respondent' s appeal and, finding that IRRI did not waive its immunity, ordered
the aforesaid decision of the Labor Arbiter set aside and the complaint dismissed. 10

Hence, this petition where it is contended that the immunity of the IRRI as an international organization granted
by Article 3 of Presidential Decree No. 1620 may not be invoked in the case at bench inasmuch as it waived the
same by virtue of its Memorandum on "Guidelines on the handling of dismissed employees in relation to P.D.
1620." 11

It is also petitioner's position that a dismissal of his complaint before the Labor Arbiter leaves him no other
remedy through which he can seek redress. He further states that since the investigation of his case was not
referred to the Council of IRRI Employees and Management (CIEM), he was denied his constitutional right to due
process.

We find no merit in petitioner's arguments.

IRRI's immunity from suit is undisputed.

Presidential Decree No. 1620, Article 3 provides:

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

In the case of International Catholic Migration Commission v. Hon. Calleja, et al. and Kapisanan ng Manggagawa
at TAC sa IRRI v. Secretary of Labor and Employment and IRRI, the Court upheld the constitutionality of the
12

aforequoted law. After the Court noted the letter of the Acting Secretary of Foreign Affairs to the Secretary of
Labor dated June 17, 1987, where the immunity of IRRI from the jurisdiction of the Department of Labor and
Employment was sustained, the Court stated that this opinion constituted "a categorical recognition by the
Executive Branch of the Government that . . . IRRI enjoy(s) immunities accorded to international organizations,
which determination has been held to be a political question conclusive upon the Courts in order not to embarass
a political department of Government. We cited the Court's earlier pronouncement in WHO v. Hon. Benjamin
13

Aquino, et al., to wit:

14

It is a recognized principle of international law and under our system of separation of powers that
diplomatic immunity is essentially a political question and courts should refuse to look beyond a
determination by the executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the government as in the case at
bar, it is then the duty of the courts to accept the claim of immunity upon appropriate suggestion
by the principal law officer of the government . . . or other officer acting under his direction.
Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction . . .
as to embarass the executive arm of the government in conducting foreign relations, it is accepted
doctrine that in such cases the judicial department of (this) government follows the action of the
political branch and will not embarrass the latter by assuming an antagonistic jurisdiction. 15

Further, we held that "(t)he raison d'etre for these immunities is the assurance of unimpeded performance of their
functions by the agencies concerned.

The grant of immunity from local jurisdiction to . . . and IRRI is clearly necessitated by their
international character and respective purposes. The objective is to avoid the danger of partiality
and interference by the host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in accordance with international practice, from
political pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered the performance of their functions. 16

The grant of immunity to IRRI is clear and unequivocal and an express waiver by its Director-General is the only
way by which it may relinquish or abandon this immunity.

On the matter of waiving its immunity from suit, IRRI had, early on, made its position clear. Through counsel, the
Institute wrote the Labor Arbiter categorically informing him that the Institute will not waive its diplomatic immunity.
In the second place, petitioner's reliance on the Memorandum with "Guidelines in handling cases of dismissal of
employees in relation to P.D. 1620" dated July 26, 1983, is misplaced. The Memorandum reads, in part:
 Time and again the Institute has reiterated that it will not use its immunity under P.D. 1620 for the
purpose of terminating the services of any of its employees. Despite continuing efforts on the part
of IRRI to live up to this undertaking, there appears to be apprehension in the minds of some IRRI
employees. To help allay these fears the following guidelines will be followed hereafter by the
Personnel/Legal Office while handling cases of dismissed employees.

xxx xxx xxx

2. Notification/manifestation to MOLE or labor arbiter

If and when a dismissed employee files a complaint against the Institute contesting the legality of dismissal,
IRRI's answer to the complaint will:

1. Indicate in the identification of IRRI that it is an international organization operating under the laws
of the Philippines including P.D. 1620. and

2. Base the defense on the merits and facts of the case as well as the legality of the cause or
causes for termination.

3) Waiving immunity under P.D. 1620

If the plaintiff's attorney or the arbiter, asks if IRRI will waive its immunity we may reply that the
Institute will be happy to do so, as it has in the past in the formal manner required thereby
reaffirming our commitment to abide by the laws of the Philippines and our full faith in the integrity
and impartially of the legal system. (Emphasis in this paragraphs ours)
17

From the last paragraph of the foregoing quotation, it is clear that in cases involving dismissed employees, the
Institute may waive its immunity, signifying that such waiver is discretionary on its part.

We agree with private respondent IRRI that this memorandum cannot, by any stretch of the imagination, be
considered the express waiver by the Director-General. Respondent Commission has quoted IRRI's reply thus:

The 1983 . . . is an internal memo addressed to Personnel and Legal Office and was issued for its
guidance in handling those cases where IRRI opts to waive its immunity. It is not a declaration of
waiver for all cases. This is apparent from the use of the permissive term "may" rather than the
mandatory term "shall" in the last paragraph of the memo. Certainly the memo cannot be
considered as the express waiver by the Director General as contemplated by P.D. 1620,
especially since the memo was issued by a former Director-General. At the very least, the
express declaration of the incumbent Director-general supersedes the 1983 memo and should be
accorded greater respect. It would be equally important to point out that the Personnel and Legal
Office has been non-existent since 1988 as a result of major reorganization of the IRRI. Cases of
IRRI before DOLE are handled by an external Legal Counsel as in this particular
case. (Emphasis supplied)
18

The memorandum, issued by the former Director-General to a now-defunct division of the IRRI, was meant for
internal circulation and not as a pledge of waiver in all cases arising from dismissal of employees. Moreover, the
IRRI's letter to the Labor Arbiter in the case at bench made in 1991 declaring that it has no intention of waiving its
immunity, at the very least, supplants any pronouncement of alleged waiver issued in previous cases.

Petitioner's allegation that he was denied due process is unfounded and has no basis.

It is not denied that he was informed of the findings and charges resulting from an investigation conducted of his
case in accordance with IRRI policies and procedures. He had a chance to comment thereon in a Memorandum
he submitted to the Manager of the Human Resource and Development Department. Therefore, he was given
proper notice and adequate opportunity to refute the charges and findings, hereby fulfilling the basic
requirements of due process.

Finally, on the issue of referral to the Council of IRRI Employees and Management (CIEM), petitioner similarly
fails to persuade the Court.

The Court, in the Kapisanan ng mga Manggagawa at TAC sa IRRI case, held: 19
 Neither are the employees of IRRI without remedy in case of dispute with management as, in fact,
there had been organized a forum for better management-employee relationship as evidenced by
the formation of the Council of IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented for purposes of maintaining mutual
and beneficial cooperation between IRRI and its employees." The existence of this Union factually
and tellingly belies the argument that Pres. Decree No. Decree No. 1620, which grants to IRRI the
status, privileges and immunities of an international organization, deprives its employees of the
right to self-organization.

We have earlier concluded that petitioner was not denied due process, and this, notwithstanding the non-referral
to the Council of IRRI Employees and Management. Private respondent correctly pointed out that petitioner,
having opted not to seek the help of the CIEM Grievance Committee, prepared his answer by his own self. He 20

cannot now fault the Institute for not referring his case to the CIEM.

IN VIEW OF THE FOREGOING, the petition for certiorari is DISMISSED. No costs.

SO ORDERED.

G.R. No. 102667 February 23, 2000

AMADO J. LANSANG, petitioner,

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

QUISUMBING, J.:

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

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

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

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

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

On the day of the supposed eviction, GABI filed an action for damages and injunction in the Regional Trial Court
against petitioner, Villanueva, and "all persons acting on their behalf".5 The trial court issued a temporary
restraining order on the same day.6

The TRO expired on March 28, 1988. The following day, GABI was finally evicted by NPDC.
GABI's action for damages and injunction was subsequently dismissed by the RTC, ruling that the complaint was
actually directed against the State which could not be sued without its consent. Moreover, the trial court ruled that
GABI could not claim damages under the alleged oral lease agreement since GABI was a mere accommodation
concessionaire. As such, it could only recover damages upon proof of the profits it could realize from the
conclusion. The trial court noted that no such proof was presented. 1âwphi1.nêt

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

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

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

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

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

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

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

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

II. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT HOLDING THAT PETITIONER'S ACT
OF TERMINATING RESPONDENT GABI'S CONCESSION IS VALID AND DONE IN THE LAWFUL
PERFORMANCE OF OFFICIAL DUTY.13

Petitioner insists that the complaint filed against him is in reality a complaint against the State, which could not
prosper without the latter's consent. He anchors his argument on the fact that NPDC is a government agency,
and that when he ordered the eviction of GABI, he was acting in his capacity as chairman of NPDC. Petitioner
avers that the mere allegation that he was being sued in his personal capacity did not remove the case from the
coverage of the law of public officers and the doctrine of state immunity.

Petitioner points out that Iglesias signed the notice of eviction to indicate his conformity thereto. He contends that
as evidence of private respondents' bad faith, they sued petitioner instead of complying with their undertaking to
vacate their library and kiosk at Rizal Park.

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

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

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

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

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

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

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

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

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

4. Defendant AMADO J. LANSANG, JR., the Chairman of the National Parks Development
Committee, acting under the spirit of revenge, ill-will, evil motive and personal resentment against
plaintiff JOSE IGLESIAS, served on the plaintiff corporation a letter, dated February 23, 1988 terminating
plaintiffs lease agreement with a demand for the plaintiff corporation to vacate its office premises. . .
20
(Emphasis supplied.)

The parties do not dispute that it was petitioner who ordered the ejectment of GABI from their office and kiosk at
Rizal Park. There is also no dispute that petitioner, as chairman of the NPDC which was the agency tasked to
administer Rizal Park, had the authority to terminate the agreement with GABI 21 and order the organization's
ejectment. The question now is whether or not petitioner abused his authority in ordering the ejectment of private
respondents.

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

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

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

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

SO ORDERED. 1âwphi1.nêt

G.R. No. 84607 March 19, 1993

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

G.R. No. 84645 March 19, 1993

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

The Solicitor General for the Republic of the Philippines.

Structural Alternative Legal Assistance for Grassroots for petitioners in 84645 & private respondents in
84607.
CAMPOS, JR., J.:

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

Hence, the heirs of the deceased, together with those injured (Caylao group), instituted this petition,
docketed as G.R. No. 84645, under Section 1 of Rule 65 of the Rules of Court, seeking the reversal and
setting aside of the Orders of respondent Judge Sandoval, dated May 31 and August 8, 1988, dismissing
1

the complaint for damages of herein petitioners against the Republic of the Philippines in Civil Case No. 88-
43351.

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

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

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

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

On the other hand, the Order , dated August 8, 1988, denied the motions filed by both parties, for a
3

reconsideration of the abovecited Order, respondent Judge finding no cogent reason to disturb the said order.

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

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

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

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

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

On January 22, 1987, Tadeo's group instead decided to march to Malacañang to air their demands. Before the
march started, Tadeo talked to the press and TV media. He uttered fiery words, the most telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kinakailangan alisin din niya ang
barikada sa Mendiola sapagkat bubutasin din namin iyon at dadanak ang dugo . . . ." 4

The farmers then proceeded to march to Malacañang, from Quezon Memorial Circle, at 10:00 a.m. They were
later joined by members of other sectoral organizations such as the Kilusang Mayo Uno (KMU), Bagong
Alyansang Makabayan (BAYAN), League of Filipino Students (LFS) and Kongreso ng Pagkakaisa ng Maralitang
Lungsod (KPML).

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

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

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

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

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

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

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

(3) Forming the third line was the Marine Civil Disturbance Control Battalion composed of the first
and second companies of the Philippine Marines stationed at Fort Bonifacio. The marines were all
equipped with shields, truncheons and M-16 rifles (armalites) slung at their backs, under the
command of Major Felimon B. Gasmin. The Marine CDC Battalion was positioned in line
formation ten (10) yards farther behind the INP Field Force.

At the back of the marines were four (4) 6 x 6 army trucks, occupying the entire width of Mendiola
street, followed immediately by two water cannons, one on each side of the street and eight fire
trucks, four trucks on each side of the street. The eight fire trucks from Fire District I of
Manila under Fire Superintendent Mario C. Tanchanco, were to supply water to the two water
cannons.

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

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

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

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

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

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

Of the police and military personnel, three (3) sustained gunshot wounds and twenty (20) suffered minor physical
injuries such as abrasions, contusions and the like.

In the aftermath of the confrontation, then President Corazon C. Aquino issued Administrative Order No.
11, (A.O. 11, for brevity) dated January 22, 1987, which created the Citizens' Mendiola Commission. The body
7

was composed of retired Supreme Court Justice Vicente Abad Santos as Chairman, retired Supreme Court
Justice Jose Y. Feria and Mr. Antonio U. Miranda, both as members. A.O. 11 stated that the Commission was
created precisely for the "purpose of conducting an investigation of the disorder, deaths, and casualties that took
place in the vicinity of Mendiola Bridge and Mendiola Street and Claro M. Recto Avenue, Manila, in the afternoon
of January 22, 1987". The Commission was expected to have submitted its findings not later than February 6,
1987. But it failed to do so. Consequently, the deadline was moved to February 16, 1987 by Administrative Order
No. 13. Again, the Commission was unable to meet this deadline. Finally, on February 27, 1987, it submitted its
report, in accordance with Administrative Order No. 17, issued on February 11, 1987.

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

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

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

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

(4) There was unnecessary firing by the police and military crowd dispersal control units in
dispersing the marchers, a prohibited act under paragraph (e), Section 13, and punishable under
paragraph (b), Section 14, Batas Pambansa Blg. 880.
 (5) The carrying and use of steel bars, pillboxes, darts, lead pipe, wooden clubs with spikes, and
guns by the marchers as offensive weapons are prohibited acts punishable under paragraph (g),
Section 13, and punishable under paragraph (e), Section 14 of Batas Pambansa Blg. 880.

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

(7) There was no dialogue between the rallyists and the government forces. Upon approaching
the intersections of Legarda and Mendiola, the marchers began pushing the police lines and
penetrated and broke through the first line of the CDC contingent.

(8) The police fought back with their truncheons and shields. They stood their ground but the CDC
line was breached. There ensued gunfire from both sides. It is not clear who started the firing.

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

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

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

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

From the results of the probe, the Commission recommended the criminal prosecution of four unidentified,
9

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

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

Notwithstanding such recommendation, no concrete form of compensation was received by the victims. Thus, on
July 27, 1987, herein petitioners, (Caylao group) filed a formal letter of demand for compensation from the
Government. This formal demand was indorsed by the office of the Executive Secretary to the Department of
10

Budget and Management (DBM) on August 13, 1987. The House Committee on Human Rights, on February 10,
1988, recommended the expeditious payment of compensation to the Mendiola victims. 11

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

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

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

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

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

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

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

Under our Constitution the principle of immunity of the government from suit is expressly provided in Article XVI,
Section 3. The principle is based on the very essence of sovereignty, and on the practical ground that there can
be no legal right as against the authority that makes the law on which the right depends. It also rests on
12

reasons of public policy — that public service would be hindered, and the public endangered, if the sovereign
authority could be subjected to law suits at the instance of every citizen and consequently controlled in the uses
and dispositions of the means required for the proper administration of the government. 13

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

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

exercise of its functions, A.O. 11 provides guidelines, and what is relevant to Our discussion reads:

1 Its conclusions regarding the existence of probable cause for the commission of any offense
and of the persons probably guilty of the same shall be sufficient compliance with the rules on
preliminary investigation and the charges arising therefrom may be filed directly with the proper
court. 15

In effect, whatever may be the findings of the Commission, the same shall only serve as the cause of action in
the event that any party decides to litigate his/her claim. Therefore, the Commission is merely a preliminary
venue. The Commission is not the end in itself. Whatever recommendation it makes cannot in any way bind the
State immediately, such recommendation not having become final and, executory. This is precisely the essence
of it being a fact-finding body.

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

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

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

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

(1) When the Republic is sued by name;

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

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

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

under B.P. Blg. 880 as there was unnecessary firing by them in dispersing the marchers.
18 19

As early as 1954, this Court has pronounced that an officer cannot shelter himself by the plea that he is a public
agent acting under the color of his office when his acts are wholly without authority. Until recently in 1991, this
20 21

doctrine still found application, this Court saying that immunity from suit cannot institutionalize irresponsibility and
non-accountability nor grant a privileged status not claimed by any other official of the Republic. The military and
police forces were deployed to ensure that the rally would be peaceful and orderly as well as to guarantee the
safety of the very people that they are duty-bound to protect. However, the facts as found by the trial court
showed that they fired at the unruly crowd to disperse the latter.

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

has made it quite clear that even a "high position in the government does not confer a license to persecute or
recklessly injure another." 23

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

authority, may be held liable for damages.

WHEREFORE, finding no reversible error and no grave abuse of discretion committed by respondent Judge in
issuing the questioned orders, the instant petitions are hereby DISMISSED.

SO ORDERED.

G.R. No. 159402 February 23, 2011

AIR TRANSPORTATION OFFICE, Petitioner,

vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.

RESOLUTION

BERSAMIN, J.:

The State’s immunity from suit does not extend to the petitioner because it is an agency of the State engaged in
an enterprise that is far from being the State’s exclusive prerogative.

Under challenge is the decision promulgated on May 14, 2003,1 by which the Court of Appeals (CA) affirmed with
modification the decision rendered on February 21, 2001 by the Regional Trial Court, Branch 61 (RTC), in Baguio
City in favor of the respondents.2

Antecedents
Spouses David and Elisea Ramos (respondents) discovered that a portion of their land registered under Transfer
Certificate of Title No. T-58894 of the Baguio City land records with an area of 985 square meters, more or less,
was being used as part of the runway and running shoulder of the Loakan Airport being operated by petitioner Air
Transportation Office (ATO). On August 11, 1995, the respondents agreed after negotiations to convey the
affected portion by deed of sale to the ATO in consideration of the amount of ₱778,150.00. However, the ATO
failed to pay despite repeated verbal and written demands.

Thus, on April 29, 1998, the respondents filed an action for collection against the ATO and some of its officials in
the RTC (docketed as Civil Case No. 4017-R and entitled Spouses David and Elisea Ramos v. Air Transportation
Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega, and Mr. Cesar de Jesus).

In their answer, the ATO and its co-defendants invoked as an affirmative defense the issuance of Proclamation
No. 1358, whereby President Marcos had reserved certain parcels of land that included the respondents’ affected
portion for use of the Loakan Airport. They asserted that the RTC had no jurisdiction to entertain the action
without the State’s consent considering that the deed of sale had been entered into in the performance of
governmental functions.

On November 10, 1998, the RTC denied the ATO’s motion for a preliminary hearing of the affirmative defense.

After the RTC likewise denied the ATO’s motion for reconsideration on December 10, 1998, the ATO commenced
a special civil action for certiorari in the CA to assail the RTC’s orders. The CA dismissed the petition for
certiorari, however, upon its finding that the assailed orders were not tainted with grave abuse of discretion. 3

Subsequently, February 21, 2001, the RTC rendered its decision on the merits, 4 disposing:

WHEREFORE, the judgment is rendered ORDERING the defendant Air Transportation Office to pay the plaintiffs
DAVID and ELISEA RAMOS the following: (1) The amount of ₱778,150.00 being the value of the parcel of land
appropriated by the defendant ATO as embodied in the Deed of Sale, plus an annual interest of 12% from August
11, 1995, the date of the Deed of Sale until fully paid; (2) The amount of ₱150,000.00 by way of moral damages
and ₱150,000.00 as exemplary damages; (3) the amount of ₱50,000.00 by way of attorney’s fees plus
₱15,000.00 representing the 10, more or less, court appearances of plaintiff’s counsel; (4) The costs of this suit.

SO ORDERED.

In due course, the ATO appealed to the CA, which affirmed the RTC’s decision on May 14, 2003, 5 viz:

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED, with MODIFICATION that the
awarded cost therein is deleted, while that of moral and exemplary damages is reduced to ₱30,000.00 each, and
attorney’s fees is lowered to ₱10,000.00.

No cost.

SO ORDERED.

Hence, this appeal by petition for review on certiorari.

Issue

The only issue presented for resolution is whether the ATO could be sued without the State’s consent.

Ruling

The petition for review has no merit.

The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the
State, is expressly provided in Article XVI of the 1987 Constitution, viz:

Section 3. The State may not be sued without its consent.

The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong. Moreover,
as the eminent Justice Holmes said in Kawananakoa v. Polyblank:6
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US 436, 44 L ed 1140, 20
Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases cited if it could have done so. xxx But
in the case at bar it did object, and the question raised is whether the plaintiffs were bound to yield. Some doubts
have been expressed as to the source of the immunity of a sovereign power from suit without its own permission,
but the answer has been public property since before the days of Hobbes. Leviathan, chap. 26, 2. A sovereign is
exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical
ground that there can be no legal right as against the authority that makes the law on which the right depends.
"Car on peut bien recevoir loy d'autruy, mais il est impossible par nature de se donner loy." Bodin, Republique, 1,
chap. 8, ed. 1629, p. 132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur necessitative.
Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61. 7

Practical considerations dictate the establishment of an immunity from suit in favor of the State. Otherwise, and
the State is suable at the instance of every other individual, government service may be severely obstructed and
public safety endangered because of the number of suits that the State has to defend against. 8 Several
justifications have been offered to support the adoption of the doctrine in the Philippines, but that offered in
Providence Washington Insurance Co. v. Republic of the Philippines 9 is "the most acceptable explanation,"
according to Father Bernas, a recognized commentator on Constitutional Law, 10 to wit:

[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience
that may be caused private parties, the loss of governmental efficiency and the obstacle to the performance of its
multifarious functions are far greater if such a fundamental principle were abandoned and the availability of
judicial remedy were not thus restricted. With the well-known propensity on the part of our people to go to court,
at the least provocation, the loss of time and energy required to defend against law suits, in the absence of such
a basic principle that constitutes such an effective obstacle, could very well be imagined.

An unincorporated government agency without any separate juridical personality of its own enjoys immunity from
suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the
agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. 11 However, the need to
distinguish between an unincorporated government agency performing governmental function and one
performing proprietary functions has arisen. The immunity has been upheld in favor of the former because its
function is governmental or incidental to such function; 12 it has not been upheld in favor of the latter whose
function was not in pursuit of a necessary function of government but was essentially a business. 13

Should the doctrine of sovereignty immunity or non-suability of the State be extended to the ATO?

In its challenged decision,14 the CA answered in the negative, holding:

On the first assignment of error, appellants seek to impress upon Us that the subject contract of sale partook of a
governmental character. Apropos, the lower court erred in applying the High Court’s ruling in National Airports
Corporation vs. Teodoro (91 Phil. 203 [1952]), arguing that in Teodoro, the matter involved the collection of
landing and parking fees which is a proprietary function, while the case at bar involves the maintenance and
operation of aircraft and air navigational facilities and services which are governmental functions.

We are not persuaded.

Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees which was
declared as proprietary in nature by the High Court in Teodoro, but management and maintenance of airport
operations as a whole, as well. Thus, in the much later case of Civil Aeronautics Administration vs. Court of
Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the pronouncements laid down in Teodoro,
declared that the CAA (predecessor of ATO) is an agency not immune from suit, it being engaged in functions
pertaining to a private entity. It went on to explain in this wise:

xxx

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

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

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

xxx

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

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

xxx

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

xxx

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

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

This doctrine has been reaffirmed in the recent case of Malong v. Philippine National Railways [G.R. No. L-
49930, August 7, 1985, 138 SCRA 63], where it was held that the Philippine National Railways, although owned
and operated by the government, was not immune from suit as it does not exercise sovereign but purely
proprietary and business functions. Accordingly, as the CAA was created to undertake the management of airport
operations which primarily involve proprietary functions, it cannot avail of the immunity from suit accorded to
government agencies performing strictly governmental functions.15

In our view, the CA thereby correctly appreciated the juridical character of the ATO as an agency of the
Government not performing a purely governmental or sovereign function, but was instead involved in the
management and maintenance of the Loakan Airport, an activity that was not the exclusive prerogative of the
State in its sovereign capacity. Hence, the ATO had no claim to the State’s immunity from suit. We uphold the
CA’s aforequoted holding.

We further observe the doctrine of sovereign immunity cannot be successfully invoked to defeat a valid claim for
compensation arising from the taking without just compensation and without the proper expropriation proceedings
being first resorted to of the plaintiffs’ property.16 Thus, in De los Santos v. Intermediate Appellate Court,17 the trial
court’s dismissal based on the doctrine of non-suability of the State of two cases (one of which was for damages)
filed by owners of property where a road 9 meters wide and 128.70 meters long occupying a total area of 1,165
square meters and an artificial creek 23.20 meters wide and 128.69 meters long occupying an area of 2,906
square meters had been constructed by the provincial engineer of Rizal and a private contractor without the
owners’ knowledge and consent was reversed and the cases remanded for trial on the merits. The Supreme
Court ruled that the doctrine of sovereign immunity was not an instrument for perpetrating any injustice on a
citizen. In exercising the right of eminent domain, the Court explained, the State exercised its jus imperii, as
distinguished from its proprietary rights, or jus gestionis; yet, even in that area, where private property had been
taken in expropriation without just compensation being paid, the defense of immunity from suit could not be set
up by the State against an action for payment by the owners.

Lastly, the issue of whether or not the ATO could be sued without the State’s consent has been rendered moot by
the passage of Republic Act No. 9497, otherwise known as the Civil Aviation Authority Act of 2008.

R.A. No. 9497 abolished the ATO, to wit:

Section 4. Creation of the Authority. – There is hereby created an independent regulatory body with quasi-judicial
and quasi-legislative powers and possessing corporate attributes to be known as the Civil Aviation Authority of
the Philippines (CAAP), herein after referred to as the "Authority" attached to the Department of Transportation
and Communications (DOTC) for the purpose of policy coordination. For this purpose, the existing Air
transportation Office created under the provisions of Republic Act No. 776, as amended is hereby
abolished.

xxx

Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the Civil Aviation Authority of the
Philippines (CAAP), which thereby assumed all of the ATO’s powers, duties and rights, assets, real and personal
properties, funds, and revenues, viz:

CHAPTER XII
TRANSITORTY PROVISIONS

Section 85. Abolition of the Air Transportation Office. – The Air Transportation Office (ATO) created under
Republic Act No. 776, a sectoral office of the Department of Transportation and Communications (DOTC), is
hereby abolished. 1avvphi1

All powers, duties and rights vested by law and exercised by the ATO is hereby transferred to the Authority.

All assets, real and personal properties, funds and revenues owned by or vested in the different offices of
the ATO are transferred to the Authority. All contracts, records and documents relating to the operations
of the abolished agency and its offices and branches are likewise transferred to the Authority. Any real
property owned by the national government or government-owned corporation or authority which is being
used and utilized as office or facility by the ATO shall be transferred and titled in favor of the Authority.

Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP, including the power to sue
and be sued, to enter into contracts of every class, kind and description, to construct, acquire, own, hold, operate,
maintain, administer and lease personal and real properties, and to settle, under such terms and conditions most
advantageous to it, any claim by or against it.18

With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the obligations that the ATO had
incurred by virtue of the deed of sale with the Ramos spouses might now be enforced against the CAAP.

WHEREFORE, the Court denies the petition for review on certiorari, and affirms the decision promulgated by the
Court of Appeals.

No pronouncement on costs of suit.

SO ORDERED.

G.R. No. 107271 September 10, 2003

CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners,

vs.
HON. MAURO T. ALLARDE, Presiding Judge of Branch 123, RTC of Caloocan City, ALBERTO A.
CASTILLO, Deputy Sheriff of Branch 123, RTC of Caloocan City, and DELFINA HERNANDEZ SANTIAGO
and PHILIPPINE NATIONAL BANK (PNB), respondents.
CORONA, J.:

Assailed in this petition for certiorari is the decision1 dated August 31, 1992, of the Court of Appeals in CA G.R.
SP No. 27423, ordering the Regional Trial Court of Caloocan City, Branch 123, to implement an alias writ of
execution dated January 16, 1992. The dispositive portion read as follows:

WHEREFORE the petition is hereby granted ordering the Regional Trial Court of Kaloocan City, Branch
123, to immediately effect the alias writ of execution dated January 16, 1992 without further delay.

Counsel for the respondents are warned that a repetition of their contemptuous act to delay the execution
of a final and executory judgment will be dealt with more severely.

SO ORDERED.2

It is important to state at the outset that the dispute between petitioner and private respondent has been litigated
thrice before this Court: first, in G.R. No. L-39288-89, entitled Heirs of Abelardo Palomique, et al. vs. Marcial
Samson, et al., decided on January 31, 1985; second, in G.R. No. 98366, entitled City Government of Caloocan
vs. Court of Appeals, et al., resolved on May 16, 1991, and third, in G.R. No. 102625, entitled Santiago vs. Sto.
Tomas, et al., decided on August 1, 1995. This is not to mention the numerous concurrent efforts by the City
Government of Caloocan to seek relief from other judicial and quasi-judicial bodies. The present petition for
certiorari is the fourthtime we are called upon to resolve the dispute.

The factual and procedural antecedents follow.

Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through Ordinance No. 1749, abolished the
position of Assistant City Administrator and 17 other positions from the plantilla of the local government of
Caloocan. Then Assistant City Administrator Delfina Hernandez Santiago and the 17 affected employees of the
City Government assailed the legality of the abolition before the then Court of First Instance (CFI) of Caloocan
City, Branch 33.

In 1973, the CFI declared the abolition illegal and ordered the reinstatement of all the dismissed employees and
the payment of their back salaries and other emoluments. The City Government of Caloocan appealed to the
Court of Appeals. Respondent Santiago and her co-parties moved for the dismissal of the appeal for being
dilatory and frivolous but the appellate court denied their motion. Thus, they elevated the case on certiorari before
this Court, docketed as G.R. No. L-39288-89, Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al. In
our Resolution dated January 31, 1985, we held that the appellate court "erred in not dismissing the appeal," and
"that the appeal of the City Government of Caloocan was frivolous and dilatory." In due time, the
resolution lapsed into finality and entry of judgment was made on February 27, 1985.

In 1986, the City Government of Caloocan paid respondent Santiago P75,083.37 in partial payment of her
backwages, thereby leaving a balance of P530,761.91. Her co-parties were paid in full.3 In 1987, the City of
Caloocan appropriated funds for her unpaid back salaries. This was included in Supplemental Budget No. 3 for
the fiscal year 1987. Surprisingly, however, the City later refused to release the money to respondent Santiago.

Respondent Santiago exerted effort for the execution of the remainder of the money judgment but she met stiff
opposition from the City Government of Caloocan. On February 12, 1991, Judge Mauro T. Allarde, RTC of
Caloocan City, Branch 123, issued a writ of execution for the payment of the remainder of respondent Santiago’s
back salaries and other emoluments.4

For the second time, the City Government of Caloocan went up to the Court of Appeals and filed a petition for
certiorari, prohibition and injunction to stop the trial court from enforcing the writ of execution. The CA dismissed
the petition and affirmed the order of issuance of the writ of execution. 5 One of the issues raised and resolved
therein was the extent to which back salaries and emoluments were due to respondent Santiago. The appellate
court held that she was entitled to her salaries from October, 1983 to December, 1986.

And for the second time, the City Government of Caloocan appealed to this Court in G.R. No. 98366, City
Government of Caloocan vs. Court of Appeals, et al. The petition was dismissed, through our Resolution of May
16, 1991, for having been filed late and for failure to show any reversible error on the part of the Court of Appeals.
The resolution subsequently attained finality and the corresponding entry of judgment was made on July 29,
1991.

On motion of private respondent Santiago, Judge Mauro T. Allarde ordered the issuance of an alias writ of
execution on March 3, 1992. The City Government of Caloocan moved to reconsider the order, insisting in the
main that respondent Santiago was not entitled to backwages from 1983 to 1986. The court a quo denied the
motion and forthwith issued the alias writ of execution. Unfazed, the City Government of Caloocan filed a motion
to quash the writ, maintaining that the money judgment sought to be enforced should not have included salaries
and allowances for the years 1983-1986. The trial court likewise denied the motion.

On July 27, 1992, Sheriff Alberto A. Castillo levied and sold at public auction one of the motor vehicles of the City
Government of Caloocan, with plate no. SBH-165, for P100,000. The proceeds of the sale were turned over to
respondent Santiago in partial satisfaction of her claim, thereby leaving a balance of P439,377.14, inclusive of
interest. Petitioners filed a motion questioning the validity of the auction sale of the vehicle with plate no. SBH-
165, and a supplemental motion maintaining that the properties of the municipality were exempt from execution.
In his Order dated October 1, 1992, Judge Allarde denied both motions and directed the sheriff to levy and
schedule at public auction three more vehicles of the City of Caloocan - 6</p>

ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor No. C-240-199629; Chassis No. MBB-
910369C;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB1-174328, Chassis No. MBB-
910345C; Plate No. SDL-653;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB-165196; Chassis No. MBB
910349C.

All the vehicles, including that previously sold in the auction sale, were owned by the City and assigned for the
use of herein petitioner Norma Abracia, Division Superintendent of Caloocan City, and other officials of the
Division of City Schools.

Meanwhile, the City Government of Caloocan sought clarification from the Civil Service Commission (CSC) on
whether respondent Santiago was considered to have rendered services from 1983-1986 as to be entitled to
backwages for that period. In its Resolution No. 91-1124, the CSC ruled in the negative.

On November 22, 1991, private respondent Santiago challenged the CSC resolution before this Court in G.R. No.
102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we initially dismissed the petition for lack of merit;
however, we reconsidered the dismissal of the petition in our Resolution dated August 1, 1995, this time ruling in
favor of respondent Santiago:

The issue of petitioner Santiago’s right to back salaries for the period from October 1983 to December
1986 having been resolved in G.R. No. 98366 on 16 May 1991, CSC Resolution No. 91-1124
promulgated later on 24 September 1991 – in particular, its ruling on the extent of backwages due
petitioner Santiago – was in fact moot and academic at the time of its promulgation. CSC Resolution No.
91-1124 could not, of course, set aside what had been judicially decided with finality x x x x the court
considers that resort by the City Government of Caloocan to respondent CSC was but another attempt to
deprive petitioner Santiago of her claim to back salaries x x x and a continuation of the City’s abuse and
misuse of the rules of judicial procedure. The City’s acts have resulted in wasting the precious time and
resources of the courts and respondent CSC. (Underscoring supplied).

On October 5, 1992, the City Council of Caloocan passed Ordinance No. 0134, Series of 1992, which included
the amount of P439,377.14 claimed by respondent Santiago as back salaries, plus interest. 7 Pursuant to the
subject ordinance, Judge Allarde issued an order dated November 10, 1992, decreeing that:

WHEREFORE, the City Treasurer (of Caloocan), Norberto Azarcon is hereby ordered to deliver to this
Court within five (5) days from receipt hereof, (a) manager’s check covering the amount of P439,378.00
representing the back salaries of petitioner Delfina H. Santiago in accordance with Ordinance No. 0134
S. 1992 and pursuant to the final and executory decision in these cases.

Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as payment for
respondent Santiago’s claims. This, despite the fact that he was one of the signatories of the ordinance
authorizing such payment. On April 29, 1993, Judge Allarde issued another order directing the Acting City
Mayor of Caloocan, Reynaldo O. Malonzo, to sign the check which had been pending before the Office of
the Mayor since December 11, 1992. Acting City Mayor Malonzo informed the trial court that "he could not
comply with the order since the subject check was not formally turned over to him by the City Mayor" who
went on official leave of absence on April 15, 1993, and that "he doubted whether he had authority to sign
the same."8
Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A. Castillo to immediately garnish the
funds of the City Government of Caloocan corresponding to the claim of respondent Santiago. 9 On the same day,
Sheriff Alberto A. Castillo served a copy of the Notice of Garnishment on the Philippine National Bank (PNB),
Sangandaan Branch, Caloocan City. When PNB immediately notified the City of Caloocan of the Notice of
Garnishment, the City Treasurer sent a letter-advice informing PNB that the order of garnishment was "illegal,"
with a warning that it would hold PNB liable for any damages which may be caused by the withholding of the
funds of the city. PNB opted to comply with the order of Judge Allarde and released to the Sheriff a manager’s
check amounting to P439,378. After 21 long years, the claim of private respondent Santiago was finally settled in
full.

On June 4, 1993, however, while the instant petition was pending, the City Government of Caloocan filed yet
another motion with this Court, a Motion to Declare in Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint against Judge Allarde, respondent Santiago and PNB. Subsequently, the City
Government of Caloocan filed a Supplemental Petition formally impleading PNB as a party-respondent in this
case.

The instant petition for certiorari is directed this time against the validity of the garnishment of the funds of the
City of Caloocan, as well as the validity of the levy and sale of the motor vehicles belonging to the City of
Caloocan. More specifically, petitioners insist that Judge Allarde gravely abused his discretion in:

(a) ordering the garnishment of the funds of the City of Caloocan deposited with the PNB, since it is
settled that public funds are beyond the reach of garnishment and even with the appropriation passed by
the City Council, the authority of the Mayor is still needed for the release of the appropriation;

(b) ordering the levy and sale at public auction of three (3) motor vehicles owned by the City of Caloocan,
which vehicles are necessary for public use and cannot be attached nor sold in an execution sale to
satisfy a money judgment against the City of Caloocan;

(c) peremptorily denying petitioner City of Caloocan’s urgent motions to vacate and set aside the auction
sale of the motor vehicle with PLATE NO. SBH-165, notwithstanding that the auction sale by the Sheriff
was tainted with serious irregularities, more particularly:

i. non-compliance with the mandatory posting of the notice of sale;

ii. non-observance of the procedure that a sale through public auction has to be made and
consummated at the time of the auction, at the designated place and upon actual payment of the
purchase price by the winning bidder;

iii. violation of Sec. 21, Rule 39 of the Rules of Court to the effect that sale of personal property
capable of manual delivery ‘must be sold within the view of those attending the sale;’ and,

iv. the Sheriff’s Certificate of Sale contained false narration of facts respecting the actual time of
the public auction;

(d) the enforcement of the levy made by the Sheriff covering the three (3) motor vehicles based on an
alias writ that has long expired.

The petition has absolutely no merit. The trial court committed no grave abuse of discretion in
implementing the alias writ of execution to settle the claim of respondent Santiago, the satisfaction of
which petitioner had been maliciously evading for 21 years.

Petitioner argues that the garnishment of its funds in PNB was invalid inasmuch as these were public
funds and thus exempt from execution. Garnishment is considered a specie of attachment by means of
which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person, or
money owed by such third person or garnishee to the defendant. 10

The rule is and has always been that all government funds deposited in the PNB or any other official depositary
of the Philippine Government by any of its agencies or instrumentalities, whether by general or special deposit,
remain government funds and may not be subject to garnishment or levy, in the absence of a corresponding
appropriation as required by law:11

Even though the rule as to immunity of a state from suit is relaxed, the power of the courts ends when the
judgment is rendered. Although the liability of the state has been judicially ascertained, the state is at
 liberty to determine for itself whether to pay the judgment or not, and execution cannot issue on a
judgment against the state. Such statutes do not authorize a seizure of state property to satisfy
judgments recovered, and only convey an implication that the legislature will recognize such judgment as
final and make provision for the satisfaction thereof.12

The rule is based on obvious considerations of public policy. The functions and public services rendered by the
State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.13

However, the rule is not absolute and admits of a well-defined exception, that is, when there is a corresponding
appropriation as required by law. Otherwise stated, the rule on the immunity of public funds from seizure or
garnishment does not apply where the funds sought to be levied under execution are already allocated by law
specifically for the satisfaction of the money judgment against the government. In such a case, the monetary
judgment may be legally enforced by judicial processes.

Thus, in the similar case of Pasay City Government, et al. vs. CFI of Manila, Br. X, et al.,14 where petitioners
challenged the trial court’s order garnishing its funds in payment of the contract price for the construction of the
City Hall, we ruled that, while government funds deposited in the PNB are exempt from execution or garnishment,
this rule does not apply if an ordinance has already been enacted for the payment of the City’s obligations –

Upon the issuance of the writ of execution, the petitioner-appellants moved for its quashal alleging among
other things the exemption of the government from execution. This move on the part of petitioner-
appellants is at first glance laudable for ‘all government funds deposited with the Philippine National Bank
by any agency or instrumentality of the government, whether by way of general or special deposit, remain
government funds and may not be subject to garnishment or levy.’ But inasmuch as an ordinance has
already been enacted expressly appropriating the amount of P613,096.00 as payment to the respondent-
appellee, then the herein case is covered by the exception to the general rule x x x x

In the instant case, the City Council of Caloocan already approved and passed Ordinance No. 0134, Series of
1992, allocating the amount of P439,377.14 for respondent Santiago’s back salaries plus interest. Thus this case
fell squarely within the exception. For all intents and purposes, Ordinance No. 0134, Series of 1992, was the
"corresponding appropriation as required by law." The sum indicated in the ordinance for Santiago were deemed
automatically segregated from the other budgetary allocations of the City of Caloocan and earmarked solely for
the City’s monetary obligation to her. The judgment of the trial court could then be validly enforced against such
funds.

Indeed, this conclusion is further buttressed by the Certification issued on December 23, 1992 by Norberto C.
Azarcon, City Treasurer of Caloocan:

CERTIFICATION

This is to certify that according to the records available in this Office the claim for backwages of the HON.
JUDGE DELFINA H. SANTIAGO has been properly obligated and can be collected in accordance with
existing accounting and auditing rules and regulations.

This is to certify further that in case the claim is not collected within the present fiscal year, such claim
shall be entered in the books of Accounts Payable and can still be collected in the next fiscal year x x x x
(Underscoring supplied)

Petitioners’ reliance on Municipality of Makati vs. Court of Appeals, et al.,15 and Commissioner of Public Highways
vs. San Diego,16 does not help their cause.17 Both cases implicitly affirmed that public funds may be garnished if
there is a statute which appropriated the amount so garnished. Thus, in Municipality of Makati, citing San Diego,
we unequivocally held that:

In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless
otherwise provided by statute x x x x

Similarly, we cannot agree with petitioner’s argument that the appropriation ordinance of the City Council
did not authorize PNB to release the funds because only the City Mayor could authorize the release
thereof. A valid appropriation of public funds lifts its exemption from execution. Here, the appropriation
passed by the City Council of Caloocan providing for the payment of backwages to respondent was duly
approved and signed by both the council and then Mayor Macario Asistio, Jr. The mayor’s signature
approving the budget ordinance was his assent to the appropriation of funds for respondent Santiago’s
 backwages. If he did not agree with such allocation, he could have vetoed the item pursuant to Section
55 of the Local Government Code.18 There was no such veto.

In view of the foregoing discourse, we dismiss petitioners’ unfounded assertion, probably made more out of sheer
ignorance of prevailing jurisprudence than a deliberate attempt to mislead us, that the rule that "public funds (are)
beyond the reach of levy and garnishment is not qualified by any condition."19

We now come to the issue of the legality of the levy on the three motor vehicles belonging to the City of Caloocan
which petitioners claimed to be exempt from execution, and which levy was based on an alias writ that had
purportedly expired. Suffice it to say that Judge Allarde, in his Order dated November 10, 1992, 20 already lifted
the levy on the three vehicles, thereby formally discharging them from the jurisdiction of the court and turning
them over to the City Government of Caloocan:

x x x x the levy of the three (3) vehicles made by Sheriff Alberto Castillo pursuant to the Orders of this
Court dated October 1 and 8, 1992 is hereby lifted and the said Sheriff is hereby ordered to return the
same to the City Government in view of the satisfaction of the decision in these cases x x x x

It is thus unnecessary for us to discuss a moot issue.

We turn to the third issue raised by petitioners that the auction sale by Sheriff Alberto A. Castillo of the
motor vehicle with plate no. SBH-165 was tainted with serious irregularities. We need not emphasize that
the sheriff enjoys the presumption of regularity in the performance of the functions of his office. This
presumption prevails in the absence of substantial evidence to the contrary and cannot be overcome by
bare and self-serving allegations. The petitioners failed to convince us that the auction sale conducted by
the sheriff indeed suffered from fatal flaws. No evidence was adduced to prove that the sheriff had been
remiss in the performance of his duties during the public auction sale. Indeed it would be injudicious for
us to assume, as petitioners want us to do, that the sheriff failed to follow the established procedures
governing public auctions.

On the contrary, a review of the records shows that the sheriff complied with the rules on public auction.
The sale of the City’s vehicle was made publicly in front of the Caloocan City Hall on the date fixed in the
notice – July 27, 1992. In fact, petitioners in their Motion to Declare in Contempt of Court; to Set Aside the
Garnishment and Administrative Complaint admitted as much:

On July 27, 1992, by virtue of an alias writ of execution issued by the respondent court, a vehicle owned
by the petitioner xxx was levied and sold at public auction for the amount of P100,000.00 and which
amount was immediately delivered to the private respondent x x x x 21

Hence, petitioners cannot now be heard to impugn the validity of the auction sale.

Petitioners, in desperation, likewise make much of the proceedings before the trial court on October 8, 1992,
wherein petitioner Norma Abracia, Superintendent of the Division of City Schools of Caloocan, was commanded
to appear and show cause why she should not be cited in contempt for delaying the execution of judgment. This
was in connection with her failure (or refusal) to surrender the three motor vehicles assigned to the Division of
City Schools to the custody of the sheriff. Petitioner Abracia, assisted by Mr. Ricardo Nagpacan of the Division of
City Schools, appeared during the hearing but requested a ten-day period within which to refer the matter of
contempt to a counsel of her choice. The request was denied by Judge Allarde in his assailed order dated
October 8, 1992. Thus petitioner Abracia claimed, inter alia, that: (a) she was denied due process; (b) the silence
of the order of Judge Allarde on her request for time violated an orderly and faithful recording of the proceedings,
and (c) she was coerced into agreeing to surrender the vehicles.

We do not think so. What violates due process is the absolute lack of opportunity to be heard. That opportunity,
the Court is convinced, was sufficiently accorded to petitioner Abracia. She was notified of the contempt charge
against her; she was effectively assisted by counsel when she appeared during the hearing on October 8, 1992;
and she was afforded ample opportunity to answer and refute the charge against her. The circumstance that she
opted not to avail of her chance to be heard on that occasion by asking for an extension of time within which to
hire a counsel of her choice, a request denied by the trial court, did not transgress nor deprive her of her right to
due process.

Significantly, during the hearing on October 8, 1992, Mr. Nagpacan manifested in open court that, after conferring
with petitioner Abracia, the latter was "willing to surrender these vehicles into the custody of the sheriff on the
condition that the standing motion (for contempt) be withdrawn." 22 Her decision was made freely and voluntarily,
and after conferring with her counsel. Moreover, it was petitioner Abracia herself who imposed the condition that
respondent Santiago should withdraw her motion for contempt in exchange for her promise to surrender the
subject vehicles. Thus, petitioner Abracia’s claim that she was coerced into surrendering the vehicles had no
basis.

Even assuming ex gratia argumenti that there indeed existed certain legal infirmities in connection with the
assailed orders of Judge Allarde, still, considering the totality of circumstances of this case, the nullification of the
contested orders would be way out of line. For 21 long years, starting 1972 when this controversy started up to
1993 when her claim was fully paid out of the garnished funds of the City of Caloocan, respondent Santiago was
cruelly and unjustly deprived of what was due her. It would be, at the very least, merciless and unchristian to
make private respondent refund the City of Caloocan the amount already paid to her, only to force her to go
through the same nightmare all over again.

At any rate, of paramount importance to us is that justice has been served. No right of the public was violated and
public interest was preserved.

Finally, we cannot simply pass over in silence the deplorable act of the former Mayor of Caloocan City in refusing
to sign the check in payment of the City’s obligation to private respondent. It was an open defiance of judicial
processes, smacking of political arrogance, and a direct violation of the very ordinance he himself approved. Our
Resolution in G.R. No. 98366, City Government of Caloocan vs. Court of Appeals, et al., dated May 16, 1991,
dismissing the petition of the City of Caloocan assailing the issuance of a writ of execution by the trial court,
already resolved with finality all impediments to the execution of judgment in this case. Yet, the City Government
of Caloocan, in a blatant display of malice and bad faith, refused to comply with the decision. Now, it has the
temerity to come to this Court once more and continue inflicting injustice on a hapless citizen, as if all the harm
and prejudice it has already heaped upon respondent Santiago are still not enough.

This Court will not condone the repudiation of just obligations contracted by municipal corporations. On the
contrary, we will extend our aid and every judicial facility to any citizen in the enforcement of just and valid claims
against abusive local government units.

WHEREFORE, the petition is hereby DISMISSED for utter lack of merit. The assailed orders of the trial court
dated October 1, 1992, October 8, 1992 and May 7, 1993, respectively, are AFFIRMED.

Petitioners and their counsels are hereby warned against filing any more pleadings in connection with the issues
already resolved with finality herein and in related cases.

Costs against petitioners.

SO ORDERED.

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

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE
PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF
MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO
UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION, respondents.

Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner.

Andres T. Velarde and Marcelo B. Fernan for respondents.

FERNANDO, J.:

The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an order
issued by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I, declaring
1

a decision final and executory and of an alias writ of execution directed against the funds of the Armed Forces of
the Philippines subsequently issued in pursuance thereof, the alleged ground being excess of jurisdiction, or at
the very least, grave abuse of discretion. As thus simply and tersely put, with the facts being undisputed and the
principle of law that calls for application indisputable, the outcome is predictable. The Republic of the Philippines
is entitled to the writs prayed for. Respondent Judge ought not to have acted thus. The order thus impugned and
the alias writ of execution must be nullified.

In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus: "7.
On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J. Kiener
Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against the petitioner herein,
confirming the arbitration award in the amount of P1,712,396.40, subject of Special Proceedings. 8. On June 24,
1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring the aforestated decision of July 3,
1961 final and executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to execute the
said decision. 9. Pursuant to the said Order dated June 24, 1969, the corresponding Alias Writ of Execution [was
issued] dated June 26, 1969, .... 10. On the strength of the afore-mentioned Alias Writ of Execution dated June
26, 1969, the Provincial Sheriff of Rizal (respondent herein) served notices of garnishment dated June 28, 1969
with several Banks, specially on the "monies due the Armed Forces of the Philippines in the form of deposits
sufficient to cover the amount mentioned in the said Writ of Execution"; the Philippine Veterans Bank received the
same notice of garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the Philippines on deposit
with the Banks, particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their
branches are public funds duly appropriated and allocated for the payment of pensions of retirees, pay and
allowances of military and civilian personnel and for maintenance and operations of the Armed Forces of the
Philippines, as per Certification dated July 3, 1969 by the AFP Controller,..." . The paragraph immediately
2

succeeding in such petition then alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in
excess of jurisdiction [or] with grave abuse of discretion amounting to lack of jurisdiction in granting the issuance
of an alias writ of execution against the properties of the Armed Forces of the Philippines, hence, the Alias Writ of
Execution and notices of garnishment issued pursuant thereto are null and void." In the answer filed by
3

respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted with
the only qualification being that the total award was in the amount of P2,372,331.40. 4

The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition
proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. .

It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as
well as its government is immune from suit unless it gives its consent. It is readily understandable why it must be
so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception
or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority
that makes the law on which the right depends." Sociological jurisprudence supplies an answer not dissimilar. So
5

it was indicated in a recent decision, Providence Washington Insurance Co. v. Republic of the Philippines, with
6

its affirmation that "a continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to
go to court, at the least provocation, the loss of time and energy required to defend against law suits, in the
absence of such a basic principle that constitutes such an effective obstacle, could very well be imagined." 7

This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is
therein expressly provided: "The State may not be sued without its consent." A corollary, both dictated by logic
8

and sound sense from a basic concept is that public funds cannot be the object of a garnishment proceeding
even if the consent to be sued had been previously granted and the state liability adjudged. Thus in the recent
case of Commissioner of Public Highways v. San Diego, such a well-settled doctrine was restated in the opinion
9

of Justice Teehankee: "The universal rule that where the State gives its consent to be sued by private parties
either by general or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to
the stage of execution' and that the power of the Courts ends when the judgment is rendered, since government
funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is
based on obvious considerations of public policy. Disbursements of public funds must be covered by the
corresponding appropriation as required by law. The functions and public services rendered by the State cannot
be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects,
as appropriated by law." Such a principle applies even to an attempted garnishment of a salary that had
10

accrued in favor of an employee. Director of Commerce and Industry v. Concepcion, speaks to that effect.
11

Justice Malcolm as ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned,
is that money in the hands of public officers, although it may be due government employees, is not liable to the
creditors of these employees in the process of garnishment. One reason is, that the State, by virtue of its
sovereignty, may not be sued in its own courts except by express authorization by the Legislature, and to subject
its officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that moneys
sought to be garnished, as long as they remain in the hands of the disbursing officer of the Government, belong
to the latter, although the defendant in garnishment may be entitled to a specific portion thereof. And still another
reason which covers both of the foregoing is that every consideration of public policy forbids it." 12
In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a
legitimate grievance.

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of
June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued
thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent.

G.R. No. L-61744 June 25, 1984

MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,

vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV, Baliuag,
Bulacan, The PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO, ADORACION
IMPERIO, RODOLFO IMPERIO, CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS
IMPERIO, JR., JUAN IMPERIO and SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents.

Pascual C. Liatchko for petitioner.

The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:

In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel,
Bulacan, et al.", the then Court of First Instance of Bulacan, on April 28, 1978, rendered judgment holding herein
petitioner municipality liable to private respondents, as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendant Municipal Government of San Miguel Bulacan, represented by Mayor Mar
Marcelo G. Aure and its Municipal Treasurer:

1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio
in favor of the Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1,
2, 3, 4 and 5, Block 11 of Subdivision Plan Psd-20831 are concerned, with an aggregate total
area of 4,646 square meters, which lots are among those covered and described under TCT No.
T-1831 of the Register of Deeds of Bulacan in the name of the Municipal Government of San
Miguel Bulacan,

2. ordering the defendant to execute the corresponding Deed of Reconveyance over the
aforementioned five lots in favor of the plaintiffs in the proportion of the undivided one-half (½)
share in the name of plaintiffs Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado,
Ernesto, Alfredo, Carlos, Jr. and Juan, all surnamed Imperio, and the remaining undivided one-
half (½) share in favor of plaintiffs uses Marcelo E. Pineda and Lucila Pongco;

3. ordering the defendant municipality to pay to the plaintiffs in the proportion mentioned in the
immediately preceding paragraph the sum of P64,440.00 corresponding to the rentals it has
collected from the occupants for their use and occupation of the premises from 1970 up to and
including 1975, plus interest thereon at the legal rate from January 1970 until fully paid;

4. ordering the restoration of ownership and possession over the five lots in question in favor of
the plaintiffs in the same proportion aforementioned;

5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay
the cost of suit.

The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to
substantiate the same.

SO ORDERED. (pp. 11-12, Rollo)

The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the
record on appeal on time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and
by this Court in G.R. No. 59938. Thereafter, herein private respondents moved for issuance of a writ of execution
for the satisfaction of the judgment. Respondent judge, on July 27, 1982, issued an order, to wit:

Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-
59938 and;

Considering further that there is no opposition to plaintiffs' motion for execution dated July 23,
1983;

Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)

Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's
property or funds are all public funds exempt from execution. The said motion to quash was, however, denied by
the respondent judge in an order dated August 23, 1982 and the alias writ of execution stands in full force and
effect.

On September 13, 1982, respondent judge issued an order which in part, states:

It is clear and evident from the foregoing that defendant has more than enough funds to meet its
judgment obligation. Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial
Treasurer of Bulacan Agustin O. Talavera are therefor hereby ordered to comply with the money
judgment rendered by Judge Agustin C. Bagasao against said municipality. In like manner, the
municipal authorities of San Miguel, Bulacan are likewise ordered to desist from plaintiffs' legal
possession of the property already returned to plaintiffs by virtue of the alias writ of execution.

Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy
of this order by the Office of the Provincial Fiscal of Bulacan within which to submit their written
compliance, (p. 24, Rollo)

When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982,
respondent judge issued an order for their arrest and that they will be release only upon compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the
hands of the provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which
are exempt from execution for the satisfaction of the money judgment in Civil Case No. 604-B.

Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained
in the case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended
and used for the accomplishment of the purposes for which municipal corporations are created, and that to
subject said properties and public funds to execution would materially impede, even defeat and in some
instances destroy said purpose." And, in Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is
the settled doctrine of the law that not only the public property but also the taxes and public revenues of such
corporations Cannot be seized under execution against them, either in the treasury or when in transit to it.
Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not
subject to execution unless so declared by statute." Thus, it is clear that all the funds of petitioner municipality in
the possession of the Municipal Treasurer of San Miguel, as well as those in the possession of the Provincial
Treasurer of Bulacan, are also public funds and as such they are exempt from execution.

Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a),
provides:

SEC. 2. Fundamental Principles. — Local government financial affairs, transactions, and

operations shall be governed by the fundamental principles set forth hereunder:

(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or
other specific statutory authority.

xxx xxx xxx

Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the
Sangguniang Bayan before any money of the municipality may be paid out. In the case at bar, it has not been
shown that the Sangguniang Bayan has passed an ordinance to this effect.

Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of
money judgment:

(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt
from execution, or only on such part of the property as is sufficient to satisfy the judgment and
accruing cost, if he has more than sufficient property for the purpose;

(b) By selling the property levied upon;

(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and
accruing costs; and

(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by
judgment or order of the court.

The foregoing has not been followed in the case at bar.

ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting
issuance of a writ of execution; the alias writ of execution, dated July 27, 1982; and the order of respondent
judge, dated September 13, 1982, directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of
San Miguel, Bulacan to comply with the money judgments, are SET ASIDE; and respondents are hereby
enjoined from implementing the writ of execution.

SO ORDERED.

G.R. Nos. 89898-99 October 1, 1990

MUNICIPALITY OF MAKATI, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati,
Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R.
PASTRANA, respondents.

Defante & Elegado for petitioner.

Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

RESOLUTION

CORTÉS, J.:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral
Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements thereon
located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No. 13699.
Attached to petitioner's complaint was a certification that a bank account (Account No. S/A 265-537154-3) had
been opened with the PNB Buendia Branch under petitioner's name containing the sum of P417,510.00, made
pursuant to the provisions of Pres. Decree No. 42. After due hearing where the parties presented their respective
appraisal reports regarding the value of the property, respondent RTC judge rendered a decision on June 4,
1987, fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this amount
minus the advanced payment of P338,160.00 which was earlier released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of a writ of execution.
This motion was granted by respondent RTC judge. After issuance of the writ of execution, a Notice of
Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of
the PNB Buendia Branch. However, respondent sheriff was informed that a "hold code" was placed on the
account of petitioner. As a result of this, private respondent filed a motion dated January 27, 1988 praying that an
order be issued directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance
due under the RTC decision dated June 4, 1987.

Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation
amount should be done in installments which the respondent RTC judge failed to state in his decision. Private
respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing the court
that private respondent was no longer the true and lawful owner of the subject property because a new title over
the property had been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge
issued an order requiring PSB to make available the documents pertaining to its transactions over the subject
property, and the PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by
respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court that it had
consolidated its ownership over the property as mortgagee/purchaser at an extrajudicial foreclosure sale held on
April 20, 1987. After several conferences, PSB and private respondent entered into a compromise agreement
whereby they agreed to divide between themselves the compensation due from the expropriation proceedings.

Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the
compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum of
P4,953,506.45 which corresponds to the balance of the appraised value of the subject property under the RTC
decision dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and private
respondent to execute the necessary deed of conveyance over the subject property in favor of petitioner.
Petitioner's motion to lift the garnishment was denied.

Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand,
for failure of the manager of the PNB Buendia Branch to comply with the order dated September 8, 1988, private
respondent filed two succeeding motions to require the bank manager to show cause why he should not be held
in contempt of court. During the hearings conducted for the above motions, the general manager of the PNB
Buendia Branch, a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization from
the PNB head office enabling him to make a disbursement for the amount so ordered. For its part, petitioner
contended that its funds at the PNB Buendia Branch could neither be garnished nor levied upon execution, for to
do so would result in the disbursement of public funds without the proper appropriation required under the law,
citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899].

Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for reconsideration
on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner's
PNB Account No. S/A 265-537154-3 was an account specifically opened for the expropriation proceedings of the
subject property pursuant to Pres. Decree No. 42. Respondent RTC judge likewise declared Mr. Antonio Bautista
guilty of contempt of court for his inexcusable refusal to obey the order dated September 8, 1988, and thus
ordered his arrest and detention until his compliance with the said order.

Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions for certiorari with the Court
of Appeals, which were eventually consolidated. In a decision promulgated on June 28, 1989, the Court of
Appeals dismissed both petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the
funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present
petition for review with prayer for preliminary injunction.

On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining respondent RTC
judge, respondent sheriff, and their representatives, from enforcing and/or carrying out the RTC order dated
December 21, 1988 and the writ of garnishment issued pursuant thereto. Private respondent then filed its
comment to the petition, while petitioner filed its reply.

Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but also alleges
for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:

xxx xxx xxx

(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject property, with
an outstanding balance of P99,743.94.
 (2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of the municipal
government, with a balance of P170,098,421.72, as of July 12, 1989.

xxx xxx xxx

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it may fairly
be asked whether the second account was opened only for the purpose of undermining the legal basis of the
assailed orders of respondent RTC judge and the decision of the Court of Appeals, and strengthening its reliance
on the doctrine that public funds are exempted from garnishment or execution as enunciated in Republic v.
Palacio [supra.] At any rate, the Court will give petitioner the benefit of the doubt, and proceed to resolve the
principal issues presented based on the factual circumstances thus alleged by petitioner.

Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation proceedings it
had initiated over the subject property, petitioner poses no objection to the garnishment or the levy under
execution of the funds deposited therein amounting to P99,743.94. However, it is petitioner's main contention that
inasmuch as the assailed orders of respondent RTC judge involved the net amount of P4,965,506.45, the funds
garnished by respondent sheriff in excess of P99,743.94, which are public funds earmarked for the municipal
government's other statutory obligations, are exempted from execution without the proper appropriation required
under the law.

There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are
public funds of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not
subject to levy and execution, unless otherwise provided for by statute [Republic v. Palacio, supra.; The
Commissioner of Public Highways v. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616]. More
particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot
be attached and sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues
derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of
financing the governmental activities and functions of the municipality, are exempt from execution [See Viuda De
Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos Norte v. Manaois,
86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130
SCRA 56]. The foregoing rule finds application in the case at bar. Absent a showing that the municipal council of
Makati has passed an ordinance appropriating from its public funds an amount corresponding to the balance due
under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-
537154-3, no levy under execution may be validly effected on the public funds of petitioner deposited in Account
No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a
municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered
against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval of
the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor
[See Viuda De Tan Toco v. The Municipal Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960);
Yuviengco v. Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal
was taken therefrom. For three years now, petitioner has enjoyed possession and use of the subject property
notwithstanding its inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has
benefited from its possession of the property since the same has been the site of Makati West High School since
the school year 1986-1987. This Court will not condone petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact initiated. It cannot be over-emphasized that, within the
context of the State's inherent power of eminent domain,

. . . [j]ust compensation means not only the correct determination of the amount to be paid to the
owner of the land but also the payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered "just" for the property owner is
made to suffer the consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to cope with his loss
[Cosculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA
393, 400. See also Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037,
August 27, 1987, 153 SCRA 291].

The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case
at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality
is in full possession and utilizing the property for public purpose, for three (3) years, the Court finds that the
municipality has had more than reasonable time to pay full compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine
Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is hereby required to submit
to this Court a report of its compliance with the foregoing order within a non-extendible period of SIXTY (60)
DAYS from the date of receipt of this resolution.

The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case No. 13699, is
SET ASIDE and the temporary restraining order issued by the Court on November 20, 1989 is MADE
PERMANENT.

SO ORDERED.

G.R. No. L-31635 August 31, 1971

ANGEL MINISTERIO and ASUNCION SADAYA, petitioners,

vs.
THE COURT OF FIRST INSTANCE OF CEBU, Fourth Branch, Presided by the Honorable, Judge JOSE C.
BORROMEO, THE PUBLIC HIGHWAY COMMISSIONER, and THE AUDITOR GENERAL, respondents.

Eriberto Seno for petitioners.

Office of the Solicitor General Felix Q. Antonio, Acting First Assistant Solicitor General Antonio A. Torres and
Solicitor Norberto P. Eduardo for respondents.

FERNANDO, J.:

What is before this Court for determination in this appeal by certiorari to review a decision of the Court of First
Instance of Cebu is the question of whether or not plaintiffs, now petitioners, seeking the just compensation to
which they are entitled under the Constitution for the expropriation of their property necessary for the widening of
a street, no condemnation proceeding having been filed, could sue defendants Public Highway Commissioner
and the Auditor General, in their capacity as public officials without thereby violating the principle of government
immunity from suit without its consent. The lower court, relying on what it considered to be authoritative
precedents, held that they could not and dismissed the suit. The matter was then elevated to us. After a careful
consideration and with a view to avoiding the grave inconvenience, not to say possible injustice contrary to the
constitutional mandate, that would be the result if no such suit were permitted, this Court arrives at a different
conclusion, and sustains the right of the plaintiff to file a suit of this character. Accordingly, we reverse.

Petitioners as plaintiffs in a complaint filed with the Court of First Instance of Cebu, dated April 13, 1966, sought
the payment of just compensation for a registered lot, containing an area of 1045 square meters, alleging that in
1927 the National Government through its authorized representatives took physical and material possession of it
and used it for the widening of the Gorordo Avenue, a national road, Cebu City, without paying just compensation
and without any agreement, either written or verbal. There was an allegation of repeated demands for the
payment of its price or return of its possession, but defendants Public Highway Commissioner and the Auditor
General refused to restore its possession. It was further alleged that on August 25, 1965, the appraisal committee
of the City of Cebu approved Resolution No. 90, appraising the reasonable and just price of Lot No. 647-B at
P50.00 per square meter or a total price of P52,250.00. Thereafter, the complaint was amended on June 30,
1966 in the sense that the remedy prayed for was in the alternative, either the restoration of possession or the
payment of the just compensation.

In the answer filed by defendants, now respondents, through the then Solicitor General, now Associate Justice,
Antonio P. Barredo, the principal defense relied upon was that the suit in reality was one against the government
and therefore should be dismissed, no consent having been shown. Then on July 11, 1969, the parties submitted
a stipulation of facts to this effect: "That the plaintiffs are the registered owners of Lot 647-B of the Banilad estate
described in the Survey plan RS-600 GLRO Record No. 5988 and more particularly described in Transfer
Certificate of Title No. RT-5963 containing an area of 1,045 square meters; That the National Government in
1927 took possession of Lot 647-B Banilad estate, and used the same for the widening of Gorordo Avenue; That
the Appraisal Committee of Cebu City approved Resolution No. 90, Series of 1965 fixing the price of Lot No. 647-
B at P50.00 per square meter; That Lot No. 647-B is still in the possession of the National Government the same
being utilized as part of the Gorordo Avenue, Cebu City, and that the National Government has not as yet paid
the value of the land which is being utilized for public use."1

The lower court decision now under review was promulgated on January 30, 1969. As is evident from the excerpt
to be cited, the plea that the suit was against the government without its consent having been manifested met
with a favorable response. Thus: "It is uncontroverted that the land in question is used by the National
Government for road purposes. No evidence was presented whether or not there was an agreement or contract
between the government and the original owner and whether payment was paid or not to the original owner of the
land. It may be presumed that when the land was taken by the government the payment of its value was made
thereafter and no satisfactory explanation was given why this case was filed only in 1966. But granting that no
compensation was given to the owner of the land, the case is undoubtedly against the National Government and
there is no showing that the government has consented to be sued in this case. It may be contended that the
present case is brought against the Public Highway Commissioner and the Auditor General and not against the
National Government. Considering that the herein defendants are sued in their official capacity the action is one
against the National Government who should have been made a party in this case, but, as stated before, with its
consent." 2

Then came this petition for certiorari to review the above decision. The principal error assigned would impugn the
holding that the case being against the national government which was sued without its consent should be
dismissed, as it was in fact dismissed. As was indicated in the opening paragraph of this opinion, this assignment
of error is justified. The decision of the lower court cannot stand. We shall proceed to explain why.

1. The government is immune from suit without its consent. Nor is it indispensable that it be the party proceeded
3

against. If it appears that the action, would in fact hold it liable, the doctrine calls for application. It follows then
that even if the defendants named were public officials, such a principle could still be an effective bar. This is
clearly so where a litigation would result in a financial responsibility for the government, whether in the
disbursements of funds or loss of property. Under such circumstances, the liability of the official sued is not
personal. The party that could be adversely affected is government. Hence the defense of non-suability may be
interposed. 4

So it has been categorically set forth in Syquia v. Almeda Lopez: "However, and this is important, where the
5

judgment in such a case would result not only in the recovery of possession of the property in favor of said citizen
but also in a charge against or financial liability to the Government, then the suit should be regarded as one
against the government itself, and, consequently, it cannot prosper or be validly entertained by the courts except
with the consent of said Government." 6

2. It is a different matter where the public official is made to account in his capacity as such for acts contrary to
law and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications v. Aligean: "Inasmuch as the State authorizes only legal acts by its officers, unauthorized
7

acts of government officials or officers are not acts of the State, and an action against the officials or officers by
one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against
the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at
law or suit in equity against a State officer or the director of a State department on the ground that, while claiming
to act for the State, he violates or invades the personal and property rights of the plaintiff, under an
unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State
within the constitutional provision that the State may not be sued without its consent." 8

3. It would follow then that the prayer in the amended complaint of petitioners being in the alternative, the lower
court, instead of dismissing the same, could have passed upon the claim of plaintiffs there, now petitioners, for
the recovery of the possession of the disputed lot, since no proceeding for eminent domain, as required by the
then Code of Civil Procedure, was instituted. However, as noted in Alfonso v. Pasay City, this Court speaking
9 10

through Justice Montemayor, restoration would be "neither convenient nor feasible because it is now and has
been used for road purposes." The only relief, in the opinion of this Court, would be for the government "to
11

make due compensation, ..." It was made clear in such decision that compensation should have been made "as
12

far back as the date of the taking." Does it result, therefore, that petitioners would be absolutely remediless since
recovery of possession is in effect barred by the above decision? If the constitutional mandate that the owner be
compensated for property taken for public use were to be respected, as it should, then a suit of this character
13

should not be summarily dismissed. The doctrine of governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the
governing law at the time, a complaint would have been filed by it, and only upon payment of the compensation
fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed, may it "have the
right to enter in and upon the land so condemned" to appropriate the same to the public use defined in the
judgment." If there were an observance of procedural regularity, petitioners would not be in the sad plaint they
14

are now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the
government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on
the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the government
takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially
ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the
doctrine of immunity from suit could still be appropriately invoked.
15

Accordingly, the lower court decision is reversed so that the court may proceed with the complaint and determine
the compensation to which petitioners are entitled, taking into account the ruling in the above Alfonso case: "As to
the value of the property, although the plaintiff claims the present market value thereof, the rule is that to
determine due compensation for lands appropriated by the Government, the basis should be the price or value at
the time that it was taken from the owner and appropriated by the Government." 16

WHEREFORE, the lower court decision of January 30, 1969 dismissing the complaint is reversed and the case
remanded to the lower court for proceedings in accordance with law.

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 DEV'T. 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.

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
contractscovering the additional constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined
that payment of petitioners' money claims should be based on quantum meruit and should be forwarded to the
Commission on Audit (COA) for its due consideration and approval. The money claims were then referred to COA
which returned the same to the DPWH Auditor for auditorial action. On the basis of the Inspection Report of the
Auditor's 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 attorney's 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 466 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 official's contracting authority, the same is not binding on the government and impose no liability therefor." 10

Although this Court agrees with respondent's 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 petitioner's 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 Audit14 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 claims — on 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.

Respondent's 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 State's 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 Cebu20 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 State's immunity from suit vis a
visthe 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 State's 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 State's cloak of invincibility against suit be shred in this particular instance, and that
petitioners-contractors 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.