C. STATE IMMUNITY 1. E. MERRITT, plaintiff-appellant, vs. GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

Crossfield and O'Brien for plaintiff. Attorney-General Avancea 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. Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.

2.

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and ROBERT GOHIER, petitioners, vs. HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal and ELIGIO DE GUZMAN & CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners. Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.

ABAD SANTOS, J.: This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil Case No. 779M of the defunct Court of First Instance of Rizal. The factual background is as follows: At times material to this case, the United States of America had a naval base in Subic, Zambales. The base was one of those provided in the Military Bases Agreement between the Philippines and the United States. Sometime in May, 1972, the United States invited the submission of bids for the following projects 1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines. 2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment, NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines. Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the company received from the United States two telegrams requesting it to confirm its price proposals and for the name of its bonding company. The company complied with the requests. [In its complaint, the company alleges that the United States had accepted its bids because "A request to confirm a price proposal confirms the acceptance of a bid pursuant to defendant United States' bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the case has not reached the trial stage.] In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director, Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the Navy of the United States, who is one of the petitioners herein. The letter said that the company did not qualify to receive an award for the projects because of its previous unsatisfactory performance rating on a repair contract for the sea wall at the boat landings of the U.S. Naval Station in Subic Bay. The letter further said that the projects had been awarded to third parties. In the abovementioned Civil Case No. 779-M, the company sued the United States of America and Messrs. James E. Galloway, William I. Collins and Robert Gohier all members of the Engineering Command of the U.S. Navy. The complaint is to order the defendants to allow the plaintiff to perform the work on the projects and, in the event that specific performance was no longer possible, to order the defendants to pay damages. The company also asked for the issuance of a writ of preliminary injunction to restrain the defendants from entering into contracts with third parties for work on the projects.

The defendants entered their special appearance for the purpose only of questioning the jurisdiction of this court over the subject matter of the complaint and the persons of defendants, the subject matter of the complaint being acts and omissions of the individual defendants as agents of defendant United States of America, a foreign sovereign which has not given her consent to this suit or any other suit for the causes of action asserted in the complaint." (Rollo, p. 50.) Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to the issuance of the writ of preliminary injunction. The company opposed the motion. The trial court denied the motion and issued the writ. The defendants moved twice to reconsider but to no avail. Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-M for lack of jurisdiction on the part of the trial court. The petition is highly impressed with merit. The traditional rule of State immunity exempts a State from being sued in the courts of another State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of States. However, the rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them-between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts jure imperil The restrictive application of State immunity is now the rule in the United States, the United Kingdom and other states in western Europe. (See Coquia and Defensor Santiago, Public International Law, pp. 207-209 [1984].) The respondent judge recognized the restrictive doctrine of State immunity when he said in his Order denying the defendants' (now petitioners) motion: " A distinction should be made between a strictly governmental function of the sovereign state from its private, proprietary or non- governmental acts (Rollo, p. 20.) However, the respondent judge also said: "It is the Court's considered opinion that entering into a contract for the repair of wharves or shoreline is certainly not a governmental function altho it may partake of a public nature or character. As aptly pointed out by plaintiff's counsel in his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes with approval, viz.: It is however contended that when a sovereign state enters into a contract with a private person, the state can be sued upon the theory that it has descended to the level of an individual from which it can be implied that it has given its consent to be sued under the contract. ... xxx xxx xxx We agree to the above contention, and considering that the United States government, through its agency at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay Area, a U.S. Naval Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political entity may assume under the contract. The trial court, therefore, has jurisdiction to entertain this case ... (Rollo, pp. 20-21.) The reliance placed on Lyons by the respondent judge is misplaced for the following reasons: In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of First Instance of Manila to collect several sums of money on account of a contract between plaintiff and defendant. The defendant filed a motion to dismiss on the ground that the court had no jurisdiction over defendant and over the subject matter of the action. The court granted the motion on the grounds that: (a) it had no jurisdiction over the defendant who did not give its consent to the suit; and (b) plaintiff failed to exhaust the administrative remedies provided in the contract. The order of dismissal was elevated to this Court for review. In sustaining the action of the lower court, this Court said: It appearing in the complaint that appellant has not complied with the procedure laid down in Article XXI of the contract regarding the prosecution of its claim against the United States Government, or, stated differently, it has failed to first exhaust its administrative remedies against said Government, the lower court acted properly in dismissing this case.(At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely gratuitous and, therefore, obiter so that it has no value as an imperative authority. 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. That the correct test for the application of State immunity is not the conclusion of a contract by a State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the plaintiffs leased three apartment buildings to the United States of America for the use of its military officials. The plaintiffs sued to recover possession of the premises on the ground that the term of the leases had expired. They also asked for increased rentals until the apartments shall have been vacated. The defendants who were armed forces officers of the United States moved to dismiss the suit for lack of jurisdiction in the part of the court. The Municipal Court of Manila granted the motion to dismiss; sustained by the Court of First Instance, the plaintiffs went to this Court for review on certiorari. In denying the petition, this Court said: On the basis of the foregoing considerations we are of the belief and we hold that the real party defendant in interest is the Government of the United States of America; that any judgment for back or Increased rentals or damages will have to be paid not by defendants Moore and Tillman and their 64 co-defendants but by the said U.S. Government. On the basis of the ruling in the case of Land vs. Dollar already cited, and on what we have already stated, the present action must be considered as one against the U.S. Government. It is clear hat 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. (At p. 323.) In Syquia,the United States concluded contracts with private individuals but the contracts notwithstanding the States was not deemed to have given or waived its consent to be sued for the reason that the contracts were forjure imperii and not for jure gestionis. WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside and Civil Case No. is dismissed. Costs against the private respondent. Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, Relova, Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ., concur. Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC) of Rizal be allowed to continue therein. In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and labor services within the Subic Bay area, this Court further stated that inasmuch as ". . . the United States Government. through its agency at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political entity may assume under the contract." When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a contract and thus waived the mantle of sovereign immunity from suit and descended to the level of the ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering into a contract (Santos vs. Santos, 92 Phil. 281, 284). Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in the case at bar by the unilateral cancellation of the award for the project by the United States government, through its agency at Subic Bay should not be allowed to take undue advantage of a party who may have legitimate claims against it by seeking refuge behind the shield of non-suability. A contrary view would render a Filipino citizen, as in the instant case, helpless and without redress in his own country for violation of his rights committed by the agents of the foreign government professing to act in its name. Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil. 312, 325: Although, generally, foreign governments are beyond the jurisdiction of domestic courts of justice, such rule is inapplicable to cases in which the foreign government enters into private contracts with the citizens of the court's jurisdiction. A contrary view would simply run against all principles of decency and violative of all tenets of morals. Moral principles and principles of justice are as valid and applicable as well with regard to private individuals as with regard to governments either domestic or foreign. Once a foreign government enters into a private contract with the private citizens of another country, such foreign government cannot shield its non-performance or contravention of the terms of the contract under the cloak of non-jurisdiction. To place such foreign government beyond the jurisdiction of the domestic courts is to give approval to the execution of unilateral contracts, graphically described in Spanish as 'contratos leoninos', because one party gets the lion's share to the detriment of the other. To give validity to such contract is to sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including governments and the most powerful of them, are amenable to law, and that such contracts are enforceable through the help of the courts of justice with jurisdiction to take cognizance of any violation of such contracts if the same had been entered into only by private individuals. Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or domestic contractors from transacting business and entering into contracts with United States authorities or facilities in the Philippines whether naval, air or ground forces-because the difficulty, if not impossibility, of enforcing a validly executed contract and of seeking judicial remedy in our own courts for breaches of contractual obligation committed by agents of the United States government, always, looms large, thereby hampering the growth of Filipino enterprises and creating a virtual monopoly in our own country by United States contractors of contracts for services or supplies with the various U.S. offices and agencies operating in the Philippines. The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether the parties are nations or private individuals, it is to be reasonably assumed and expected that the undertakings in the contract will be complied with in good faith. One glaring fact of modern day civilization is that a big and powerful nation, like the United States of America, can always overwhelm small and weak nations. The declaration in the United Nations Charter that its member states are equal and sovereign, becomes hollow and meaningless because big nations wielding economic and military superiority impose upon and dictate to small nations, subverting their sovereignty and dignity as nations. Thus, more

often than not, when U.S. interest clashes with the interest of small nations, the American governmental agencies or its citizens invoke principles of international law for their own benefit. In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand, and herein private respondent on the other, was honored more in the breach than in the compliance The opinion of the majority will certainly open the floodgates of more violations of contractual obligations. American authorities or any foreign government in the Philippines for that matter, dealing with the citizens of this country, can conveniently seek protective cover under the majority opinion. The result is disastrous to the Philippines. This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign political ascendancy in our Republic. The doctrine of government immunity from suit cannot and should not serve as an instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464). Under the doctrine of implied waiver of its non-suability, the United States government, through its naval authorities at Subic Bay, should be held amenable to lawsuits in our country like any other juristic person. The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the above-mentioned rights, powers and authority, the United States agrees that the powers granted to it will not be used unreasonably. . ." (Emphasis supplied). Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and maintain sound employment practices which will assure equality of treatment of all employees ... and continuing favorable employer-employee relations ..." and "(B)elieving that an agreement will be mutually beneficial and will strengthen the democratic institutions cherished by both Governments, ... the United States Government agrees to accord preferential employment of Filipino citizens in the Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968). Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires performing work for the U.S. Armed Forces shall be required by their contract or concession agreements to comply with all applicable Philippine labor laws and regulations, " even though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by either of the two Governments of such immunity under international law." Reliance by petitioners on the non-suability of the United States Government before the local courts, actually clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7, 1979, also amending RP-US Military Bases Agreement, which stresses that "it is the duty of members of the United States Forces, the civilian component and their dependents, to respect the laws of the Republic of the Philippines and to abstain from any activity inconsistent with the spirit of the Military Bases Agreement and, in particular, from any political activity in the Philippines. The United States shag take all measures within its authority to insure that they adhere to them (Emphasis supplied). The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the economic and social improvement of areas surrounding the bases, which directs that "moreover, the United States Forces shall procure goods and services in the Philippines to the maximum extent feasible" (Emphasis supplied). Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be conducted on the basis of the principles of equality of treatment, the right to organize, and bargain collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis supplied) The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos and VicePresident Mondale of the United States dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty extends over the bases and that Its base shall be under the command of a Philippine Base

Commander, " which is supposed to underscore the joint Communique of President Marcos and U.S. President Ford of December 7, 1975, under which "they affirm that sovereign equality, territorial integrity and political independence of all States are fundamental principles which both countries scrupulously respect; and that "they confirm that mutual respect for the dignity of each nation shall characterize their friendship as well as the alliance between their two countries. " The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of both the Philippine and American Base Commanders that "in the performance of their duties, the Philippine Base Commander and the American Base Commander shall be guided by full respect for Philippine sovereignty on the one hand and the assurance of unhampered U.S. military operations on the other hand and that "they shall promote cooperation understanding and harmonious relations within the Base and with the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis supplied).

Separate Opinions MAKASIAR, J., dissenting: The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC) of Rizal be allowed to continue therein. In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and labor services within the Subic Bay area, this Court further stated that inasmuch as ". . . the United States Government. through its agency at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political entity may assume under the contract." When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a contract and thus waived the mantle of sovereign immunity from suit and descended to the level of the ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering into a contract (Santos vs. Santos, 92 Phil. 281, 284). Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in the case at bar by the unilateral cancellation of the award for the project by the United States government, through its agency at Subic Bay should not be allowed to take undue advantage of a party who may have legitimate claims against it by seeking refuge behind the shield of non-suability. A contrary view would render a Filipino citizen, as in the instant case, helpless and without redress in his own country for violation of his rights committed by the agents of the foreign government professing to act in its name. Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil. 312, 325: Although, generally, foreign governments are beyond the jurisdiction of domestic courts of justice, such rule is inapplicable to cases in which the foreign government enters into private contracts with the citizens of the court's jurisdiction. A contrary view would simply run against all principles of decency and violative of all tenets of morals. Moral principles and principles of justice are as valid and applicable as well with regard to private individuals as with regard to governments either domestic or foreign. Once a foreign government enters into a private contract with the private citizens of another country, such foreign government cannot shield its non-performance or contravention of the terms of the contract under the cloak of non-jurisdiction. To place such foreign government beyond the jurisdiction of the domestic courts is to give approval to the execution of unilateral contracts, graphically described in Spanish as 'contratos leoninos', because one party gets the lion's share to the detriment of the other. To give

validity to such contract is to sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including governments and the most powerful of them, are amenable to law, and that such contracts are enforceable through the help of the courts of justice with jurisdiction to take cognizance of any violation of such contracts if the same had been entered into only by private individuals. Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or domestic contractors from transacting business and entering into contracts with United States authorities or facilities in the Philippines whether naval, air or ground forces-because the difficulty, if not impossibility, of enforcing a validly executed contract and of seeking judicial remedy in our own courts for breaches of contractual obligation committed by agents of the United States government, always, looms large, thereby hampering the growth of Filipino enterprises and creating a virtual monopoly in our own country by United States contractors of contracts for services or supplies with the various U.S. offices and agencies operating in the Philippines. The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether the parties are nations or private individuals, it is to be reasonably assumed and expected that the undertakings in the contract will be complied with in good faith. One glaring fact of modern day civilization is that a big and powerful nation, like the United States of America, can always overwhelm small and weak nations. The declaration in the United Nations Charter that its member states are equal and sovereign, becomes hollow and meaningless because big nations wielding economic and military superiority impose upon and dictate to small nations, subverting their sovereignty and dignity as nations. Thus, more often than not, when U.S. interest clashes with the interest of small nations, the American governmental agencies or its citizens invoke principles of international law for their own benefit. In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand, and herein private respondent on the other, was honored more in the breach than in the compliance The opinion of the majority will certainly open the floodgates of more violations of contractual obligations. American authorities or any foreign government in the Philippines for that matter, dealing with the citizens of this country, can conveniently seek protective cover under the majority opinion. The result is disastrous to the Philippines. This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign political ascendancy in our Republic. The doctrine of government immunity from suit cannot and should not serve as an instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464). Under the doctrine of implied waiver of its non-suability, the United States government, through its naval authorities at Subic Bay, should be held amenable to lawsuits in our country like any other juristic person. The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the above-mentioned rights, powers and authority, the United States agrees that the powers granted to it will not be used unreasonably. . ." (Emphasis supplied). Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and maintain sound employment practices which will assure equality of treatment of all employees ... and continuing favorable employer-employee relations ..." and "(B)elieving that an agreement will be mutually beneficial and will strengthen the democratic institutions cherished by both Governments, ... the United States Government agrees to accord preferential employment of Filipino citizens in the Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968). Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires performing work for the U.S. Armed Forces shall be required by their contract or concession agreements to comply with all applicable

Philippine labor laws and regulations, " even though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by either of the two Governments of such immunity under international law." Reliance by petitioners on the non-suability of the United States Government before the local courts, actually clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7, 1979, also amending RP-US Military Bases Agreement, which stresses that "it is the duty of members of the United States Forces, the civilian component and their dependents, to respect the laws of the Republic of the Philippines and to abstain from any activity inconsistent with the spirit of the Military Bases Agreement and, in particular, from any political activity in the Philippines. The United States shag take all measures within its authority to insure that they adhere to them (Emphasis supplied). The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the economic and social improvement of areas surrounding the bases, which directs that "moreover, the United States Forces shall procure goods and services in the Philippines to the maximum extent feasible" (Emphasis supplied). Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be conducted on the basis of the principles of equality of treatment, the right to organize, and bargain collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis supplied) The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos and VicePresident Mondale of the United States dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty extends over the bases and that Its base shall be under the command of a Philippine Base Commander, " which is supposed to underscore the joint Communique of President Marcos and U.S. President Ford of December 7, 1975, under which "they affirm that sovereign equality, territorial integrity and political independence of all States are fundamental principles which both countries scrupulously respect; and that "they confirm that mutual respect for the dignity of each nation shall characterize their friendship as well as the alliance between their two countries. " The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of both the Philippine and American Base Commanders that "in the performance of their duties, the Philippine Base Commander and the American Base Commander shall be guided by full respect for Philippine sovereignty on the one hand and the assurance of unhampered U.S. military operations on the other hand and that "they shall promote cooperation understanding and harmonious relations within the Base and with the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis supplied). Footnotes * He signed before he left.

3.

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 clause5 whereunder petitioner Republic agreed and bound itself to lift the sequestration on the 227 NOGCCI shares, among other Benedictos properties, petitioner Republic acknowledging that it was within private respondent Benedictos capacity to acquire the same shares out of his income from business and the exercise of his profession.6 Implied in this undertaking is the recognition 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 Benedictos aforementioned motion but placed the subject shares under the custody of its Clerk of Court, thus: WHEREFORE, in the light of the foregoing, the said "Motion for Release From Sequestration and Return of Sequestered Shares/Dividends" is hereby GRANTED and it is directed that said shares/dividends be delivered/placed under the custody of the Clerk of Court, Sandiganbayan, Manila subject to this Courts disposition. On March 28, 1995, the Sandiganbayan came out with the herein first assailed Resolution,8 which clarified its aforementioned December 6, 1994 Resolution and directed the immediate implementation thereof by requiring PCGG, among other things:

(b) To deliver to the Clerk of Court the 227 sequestered shares of [NOGCCI] registered in the name of nominees of ROBERTO S. BENEDICTO free from all liens and encumbrances, or in default thereof, to pay their value at P150,000.00 per share which can be deducted from [the Republics] cash share in the Compromise Agreement. [Words in bracket added] (Emphasis Supplied). Owing to PCGGs failure to comply with the above directive, Benedicto filed in Civil Case No. 0034 a Motion for Compliance dated July 25, 1995, followed by an Ex-Parte Motion for Early Resolution dated February 12, 1996. Acting thereon, the Sandiganbayan promulgated yet another Resolution9 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 Resolution11 dated March 13, 1997, denied that portion of the PCGGs Manifestation with Motion for Reconsideration concerning the subject 227 NOGCCI shares and granted Benedictos Motion to Enforce Judgment Levy. Hence, the Republics present recourse on the sole issue of whether or not the public respondent Sandiganbayan, Second Division, gravely abused its discretion in holding that the PCGG is at fault for not paying the membership dues on the 227 sequestered NOGCCI shares of stock, a failing which eventually led to the foreclosure sale thereof. The petition lacks merit. To begin with, PCGG itself does not dispute its being considered as a receiver insofar as the sequestered 227 NOGCCI shares of stock are concerned.12 PCGG also acknowledges that as such receiver, one of its functions is to pay outstanding debts pertaining to the sequestered entity or property,13 in this case the 227 NOGCCI shares in question. It contends, however, that membership dues owing to a golf club cannot be considered as an outstanding debt for which PCGG, as receiver, must pay. It also claims to have exercised due diligence to prevent the loss through delinquency sale of the subject NOGCCI shares, specifically inviting attention to the injunctive suit, i.e., Civil Case No. 5348, it filed before the RTC of Bacolod City to enjoin the foreclosure sale of the shares. The filing of the injunction complaint adverted to, without more, cannot plausibly tilt the balance in favor of PCGG. To the mind of the Court, such filing is a case of acting too little and too late. It cannot be over-emphasized that it behooved the PCGGs fiscal agents to preserve, like a responsible father of the family, the value of the shares of stock under their administration. But far from acting as such father, what the fiscal agents did under the premises was to allow the element of delinquency to set in before acting by embarking on a tedious process of going to court after the auction sale had been announced and scheduled. The PCGGs posture that to the owner of the sequestered shares rests the burden of paying the membership dues is untenable. For one, it lost sight of the reality that such dues are basically obligations attached to the shares, which, in the final analysis, shall be made liable, thru delinquency sale in case of default in payment of the dues. For another, the PCGG as sequestrator-receiver of such shares is, as stressed earlier, duty bound to preserve the value of such shares. Needless to state, adopting timely measures to obviate the loss of those shares forms part of such duty and due diligence. The Sandiganbayan, to be sure, cannot plausibly be faulted for finding the PCGG liable for the loss of the 227 NOGCCI shares. There can be no quibbling, as indeed the graft court so declared in its assailed and related resolutions respecting the NOGCCI shares of stock, that PCGGs fiscal agents, while sitting in the NOGCCI Board of Directors agreed to the amendment of the rule pertaining to membership dues. Hence, it is not amiss to state, as did the Sandiganbayan, that the PCGG-designated fiscal agents, no less, had a direct hand in the loss of the sequestered shares through delinquency and their eventual sale through public auction. While perhaps anti-climactic to so mention it at this stage, the unfortunate loss of the shares ought not to have come to pass had those fiscal agents prudently not agreed to the passage of the NOGCCI board resolutions charging membership dues on shares without playing representatives.

Given the circumstances leading to the auction sale of the subject NOGCCI shares, PCGGs lament about public respondent Sandiganbayan having erred or, worse still, having gravely abused its discretion in its determination as to who is at fault for the loss of the shares in question can hardly be given cogency. For sure, even if the Sandiganbayan were wrong in its findings, which does not seem to be in this case, it is a wellsettled rule of jurisprudence that certiorari will issue only to correct errors of jurisdiction, not errors of judgment. Corollarily, errors of procedure or mistakes in the courts findings and conclusions are beyond the corrective hand of certiorari.14 The extraordinary writ of certiorari may be availed only upon a showing, in the minimum, that the respondent tribunal or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion.15 The term "grave abuse of discretion" connotes capricious and whimsical exercise of judgment as is equivalent to excess, or a lack of jurisdiction.16 The abuse must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.17 Sadly, this is completely absent in the present case. For, at bottom, the assailed resolutions of the Sandiganbayan did no more than to direct PCGG to comply with its part of the bargain under the compromise agreement it freely entered into with private respondent Benedicto. Simply put, the assailed resolutions of the Sandiganbayan have firm basis in fact and in law. Lest it be overlooked, the issue of liability for the shares in question had, as both public and private respondents asserted, long become final and executory. Petitioners narration of facts in its present petition is even misleading as it conveniently fails to make reference to two (2) resolutions issued by the Sandiganbayan. We refer to that courts resolutions of December 6, 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 courts underlying resolution of December 6, 1994. And to place matters in the proper perspective, PCGGs failure to comply with the December 6, 1994 resolution prompted the issuance of the clarificatory and/or reiteratory resolutions aforementioned. In a last-ditch attempt to escape liability, petitioner Republic, through the PCGG, invokes state immunity from suit.22 As argued, the order for it to pay the value of the delinquent shares would fix monetary liability on a government agency, thus necessitating the appropriation of public funds to satisfy the judgment claim.23 But, as private respondent Benedicto correctly countered, the PCGG fails to take stock of one of the exceptions to the state immunity principle, i.e., when the government itself is the suitor, as in Civil Case No. 0034. Where, as here, the State 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 Republics act of filing its complaint in Civil Case No. 0034 constitutes a waiver of its immunity from suit. Being itself the plaintiff in that case, petitioner Republic cannot set up its immunity against private respondent Benedictos prayers in the same case. In fact, by entering into a Compromise Agreement with private respondent Benedicto, petitioner Republic thereby stripped itself of 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.

CANCIO C. GARCIA Associate Justice WE CONCUR: REYNATO S. PUNO Associate Justice Chairperson ANGELINA SANDOVAL-GUTIERREZ Associate Justice ADOLFO S. AZCUNA Associate Justice ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S .PUNO Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ARTEMIO V. PANGANIBAN Chief Justice RENATO C. CORONA Asscociate Justice

Footnotes
1

Penned by Associate Justice Romeo M. Escareal, with Associate Justices Minita Chico-Nazario (now a member of this Court) and Roberto M. Lagman, concurring; Rollo, pp. 14-27.
2

Rollo, pp. 28-43.

Issued by then Pres. Corazon C. Aquino investing the Sandiganbayan exclusive and original jurisdiction over cases involving the ill-gotten wealth of former President Ferdinand E. Marcos, members of his immediate family, close relatives, subordinates, close and/or business associates, dummies, agents and nominees.
4

Creating the PCGG to assist the President in the recovery of vast government resources allegedly amassed by then former President Marcos, his immediate family, relatives and close associates and defining its powers.
5

Par. II (a). Petition, Rollo, p. 6.

Rollo, pp. 127-132, Annex 6 of Comment. Rollo, pp. 14-27, Annex "A" of the Petition. Rollo, pp. 138-139, Annex 9 of Comment. Rollo, pp. 44-46, Annex "C" of the Petition. Rollo, pp. 28-43, Annex "B" of the Petition. Petition, Rollo, p. 7. Id. at pp. 7-8, Petition, citing Bataan Shipyard & Engineering Co. v. PCGG, 150 SCRA 181 (1987). Lee v. People, 393 SCRA 397 (2002). Camacho v. Coresis, Jr., 387 SCRA 628 (2002). Litton Mills, Inc. v. Galleon Trader, Inc., 163 SCRA 489 (1988). Duero v. Court of Appeals, 373 SCRA 11 (2002). See Note #7, supra. See Note #9, supra. See Note # 1, supra. See Note #2, supra. Reply, Rollo, p. 160; and Memorandum, Rollo, pp. 260-261. Id., citing Garcia v. Chief of Staff, 16 SCRA 120 (1966). Rejoinder, Rollo, pp. 169-170. Froilan v. Pan Oriental Shipping Co., 95 Phil. 905, 912 (1954). Santos v. Santos, 92 Phil. 281, 284 (1952). March 28, 1995 Resolution of the Sandiganbayan; Rollo, p. 20. Notice of death, Rollo, pp. 210-212. Rollo, p. 228.

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29

4. MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant, vs. CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

Alejandro Basin, Jr. and Associates for plaintiff-appellant. Felipe T. Cuison for defendants-appellees. BENGZON, J.P., J.: Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November of 1962, consigned to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of Customs then handling arrastre operations therein. The Customs Arrastre Service later delivered to the broker of the consignee three cases only of the shipment. On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against the Customs Arrastre Service and the Bureau of Customs to recover the value of the undelivered case in the amount of P18,493.37 plus other damages. On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being persons under the law, defendants cannot be sued. After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that neither the Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the order of dismissal. Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts stated. Appellant contends that not all government entities are immune from suit; that defendant Bureau of Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary functions and as such, can be sued by private individuals. The Rules of Court, in Section 1, Rule 3, provide:
SECTION 1. Who may be parties.Only natural or juridical persons or entities authorized by law may be parties in a civil action.

Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs Arrastre Service, is a person. They are merely parts of the machinery of Government. The Bureau of Customs is a bureau under the Department of Finance (Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau of Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants herein cannot he sued under the first two abovementioned categories of natural or juridical persons. Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law therebyimpliedly authorizes it to be sued as arrastre operator, for the reason that the nature of this function (arrastre service) is proprietary, not governmental. Thus, insofar as arrastre operation is concerned, appellant would put defendants under the third category of "entities authorized by law" to be sued. Stated differently, it is argued that while there is no law expressly authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is implied from its very power to render arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of a private business. The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and Customs Code, effective June 1, 1957), and it states:

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.The Bureau of Customs shall have exclusive supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the convenience and comfort of passengers and the handling of baggage; as well as to acquire fire protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to the approval of the department head, contract with any private party for the service of receiving, handling, custody and delivery of articles, and in such event, the contract may include the sale or lease of government-owned equipment and facilities used in such service.

In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6, 1963, this Court indeed held "that the foregoing statutory provisions authorizing the grant by contract to any private party of the right to render said arrastre services necessarily imply that the same is deemed by Congress to be proprietary or non-governmental function." The issue in said case, however, was whether laborers engaged in arrastre service fall under the concept of employees in the Government employed in governmental functions for purposes of the prohibition in Section 11, Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may belong to any labor organization which does not impose the obligation to strike or to join in strike," which prohibition "shall apply only to employees employed in governmental functions of the Government . . . . Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter of the case, but not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the resolution stating only that "the issue on the personality or lack of personality of the Bureau of Customs to be sued does not affect the jurisdiction of the lower court over the subject matter of the case, aside from the fact that amendment may be made in the pleadings by the inclusion as respondents of the public officers deemed responsible, for the unfair labor practice acts charged by petitioning Unions". Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily result in its being suable. If said non-governmental function is undertaken as an incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit extended to such government entity. This is the doctrine recognized in Bureau of Printing, et al. vs. Bureau of Printing Employees Association, et al., L-15751, January 28, 1961:
The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657). As such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary, Office of the President, and is "charged with the execution of all printing and binding, including work incidental to those processes, required by the National Government and such other work of the same character as said Bureau may, by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . . ." (Sec. 1644, Rev. Adm. Code.) It has no corporate existence, and its appropriations are provided for in the General Appropriations Act. Designed to meet the printing needs of the Government, it is primarily a service bureau and, obviously, not engaged in business or occupation for pecuniary profit. xxx xxx xxx

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

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it were to produce any effect, would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.)

The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of the national government. Its primary function is governmental, that of assessing and collecting lawful revenues from imported articles and all other tariff and customs duties, fees, charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident. For practical reasons said revenues and customs duties can not be assessed and collected by simply receiving the importer's or ship agent's or consignee's declaration of merchandise being imported and imposing the duty provided in the Tariff law. Customs authorities and officers must see to it that the declaration tallies with the merchandise actually landed. And this checking up requires that the landed merchandise be hauled from the ship's side to a suitable place in the customs premises to enable said customs officers to make it, that is, it requires arrastre operations.1 Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of the primary and governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said Bureau liable to suit. For otherwise, it could not perform its governmental function without necessarily exposing itself to suit. Sovereign immunity, granted as to the end, should not be denied as to the necessary means to that end. And herein lies the distinction between the present case and that of National Airports Corporation vs. Teodoro, 91 Phil. 203, on which appellant would rely. For there, the Civil Aeronautics Administration was found have for its prime reason for existence not a governmental but a proprietary function, so that to it the latter was not a mere incidental function:
Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concessions rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management. These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. . . . xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the travelling public. . . .

Regardless of the merits of the claim against it, the State, for obvious reasons of public policy, cannot be sued without its consent. Plaintiff should have filed its present claim to the General Auditing Office, it being for money under the provisions of Commonwealth Act 327, which state the conditions under which money claims against the Government may be filed. It must be remembered that statutory provisions waiving State immunity from suit are strictly construed and that waiver of immunity, being in derogation of sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785). From the provision authorizing the Bureau of Customs to lease arrastre operations to private parties, We see no authority to sue the said Bureau in the instances where

it undertakes to conduct said operation itself. The Bureau of Customs, acting as part of the machinery of the national government in the operation of the arrastre service, pursuant to express legislative mandate and as a necessary incident of its prime governmental function, is immune from suit, there being no statute to the contrary. WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So ordered. Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Zaldivar and Sanchez, JJ., concur. Makalintal, J., concurs in the result. Castro, J., reserves his vote.

Footnotes
1

Associated Workers Union Case, supra.

5.

PHILIPPINE NATIONAL BANK, petitioner, vs. HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III, La Union, AGOO TOBACCO PLANTERS ASSOCIATION, INC., PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, and PANFILO P. JIMENEZ, Deputy Sheriff, La Union, respondents.

Conrado E. Medina, Edgardo M. Magtalas & Walfrido Climaco for petitioner. Felimon A. Aspirin fit respondent Agoo 'Tobacco Planters Association, Inc. Virgilio C. Abejo for respondent Phil. Virginia Tobacco Administration.

FERNANDO, Acting C.J.:

The reliance of petitioner Philippine National Bank in this certiorari and prohibition proceeding against respondent Judge Javier Pabalan who issued a writ of execution, 1 followed thereafter by a notice of garnishment of the funds of respondent Philippine Virginia Tobacco Administration, 2 deposited with it, is on the fundamental constitutional law doctrine of non-suability of a state, it being alleged that such funds are public in character. This is not the first time petitioner raised that issue. It did so before in Philippine National Bank v. Court of industrial Relations, 3 decided only last January. It did not meet with success, this Court ruling in accordance with the two previous cases of National Shipyard and Steel Corporation 4 and Manila Hotel Employees Association v. Manila Hotel Company, 5 that funds of public corporations which can sue and be sued were not exempt from garnishment. As respondent Philippine Virginia Tobacco Administration is likewise a public corporation possessed of the same attributes, 6 a similar outcome is indicated. This petition must be dismissed.

It is undisputed that the judgment against respondent Philippine Virginia Tobacco Administration had reached the stage of finality. A writ of execution was, therefore, in order. It was accordingly issued on December 17, 1970. 7There was a notice of garnishment for the full amount mentioned in such writ of execution in the sum of P12,724,66. 8 In view of the objection, however, by petitioner Philippine National Bank on the above ground, coupled with an inquiry as to whether or not respondent Philippine Virginia Tobacco Administration had funds deposited with petitioner's La Union branch, it was not until January 25, 1971 that the order sought to be set aside in this certiorari proceeding was issued by respondent Judge. 9 Its dispositive portion reads as follows: Conformably with the foregoing, it is now ordered, in accordance with law, that sufficient funds of the Philippine Virginia Tobacco Administration now deposited with the Philippine National Bank, La Union Branch, shall be garnished and delivered to the plaintiff immediately to satisfy the Writ of Execution for one-half of the amount awarded in the decision of November 16, 1970." 10 Hence this certiorari and prohibition proceeding. As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of non-suability. It is to be admitted that under the present Constitution, what was formerly implicit as a fundamental doctrine in constitutional law has been set forth in express terms: "The State may not be sued without its consent." 11 If the funds appertained to one of the regular departments or offices in the government, then, certainly, such a provision would be a bar to garnishment. Such is not the case here. Garnishment would lie. Only last January, as noted in the opening paragraph of this decision, this Court, in a case brought by the same petitioner precisely invoking such a doctrine, left no doubt that the funds of public corporations could properly be made the object of a notice of garnishment. Accordingly, this petition must fail. 1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was sought to be justified on the failure of respondent Judge to set aside the notice of garnishment of funds belonging to respondent Philippine Virginia Tobacco Administration. This excerpt from the aforecited decision of Philippine National Bank v. Court of Industrial Relations makes manifest why such an argument is far from persuasive. "The premise that the funds could be spoken as public character may be accepted in the sense that the People Homesite and Housing Corporation was a government-owned entity. It does not follow though that they were exempt. from garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO are public funds of the government, and that, as such, the same may not be garnished, attached or levied upon, is untenable for, as a government owned and controlled corporation, the NASSCO has a personality of its own. distinct and separate from that of the Government. It has pursuant to Section 2 of Executive Order No. 356, dated October 23, 1950 ... , pursuant to which The NASSCO has been established all the powers of a corporation under the Corporation Law ... ." Accordingly, it may be sue and be sued and may be subjected to court processes just like any other corporation (Section 13, Act No. 1459, as amended.)" ... To repeat, the ruling was the appropriate remedy for the prevailing party which could proceed against the funds of a corporate entity even if owned or controlled by the government." 12 2. The National Shipyard and Steel Corporation decision was not the first of its kind. The ruling therein could be inferred from the judgment announced in Manila Hotel Employees Association v. Manila Hotel Company, decided as far back as 1941. 13 In the language of its ponente Justice Ozaeta "On the other hand, it is well-settled that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. (Bank of the United States v. Planters' Bank, 9 Wheat. 904, 6 L.ed. 244). By engaging in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations." 14It is worth mentioning that Justice Ozaeta could find support for such a pronouncement from the leading American Supreme Court case of united States v. Planters' Bank, 15 with the opinion coming from the illustrious Chief Justice Marshall. It was handed down more than one hundred fifty years ago, 1824 to be exact. It is apparent, therefore, that petitioner Bank could it legally set forth as a bar or impediment to a notice of garnishment the doctrine of non-suability.
WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.

Barredo, Antonio, Aquino, and Santos, JJ., concur. Concepcion, Jr., J., is on leave.

Footnotes
1 Petition, Statement of Facts, par. 6, Annex A. 2 Ibid, par. 12, Annex S. 3 L-32667, January 31, 1978. 4 118 Phil. 782 (1963). 5 73 Phil. 374 (1941). 6 Cf. Philippine Virginia Tobacco Administration v. Court of Industrial Relations, L-32052, July 25, 1975, 65 SCRA 416. 7 Annex B to Petition. 8 Annex C to Petition. 9 Annex to Petition. 10 Ibid, 11. 11 Article XV, Section 16, Constitution of the Philippines. 12 L-32667, January 31, 1978. The National Shipyard decision, as previously mentioned, was promulgated in 1963 and reported in 118 Phil. 782. 13 73 Phil. 374. 14 Ibid, 388-389. 15 9 Wheat, 904. 6 L. ed. 244.

6.

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. 3 Nor is it indispensable that it be the party proceeded against. If it appears that the action, would in fact hold it liable, the doctrine calls for application. It follows then that even if the defendants named were public officials, such a principle could still be an effective bar. This is clearly so where a litigation would result in a financial responsibility for the government, whether in the disbursements of funds or loss of property. Under such circumstances, the liability of the official sued is not personal. The party that could be adversely affected is government. Hence the defense of non-suability may be interposed. 4 So it has been categorically set forth in Syquia v. Almeda Lopez: 5 "However, and this is important, where the judgment in such a case would result not only in the recovery of possession of the property in favor of said citizen but also in a charge against or financial liability to the Government, then the suit should be regarded as one against the government itself, and, consequently, it cannot prosper or be validly entertained by the courts except with the consent of said Government." 6 2. It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of Telecommunications v. Aligean: 7 "Inasmuch as the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State within the constitutional provision that the State may not be sued without its consent." 8 3. It would follow then that the prayer in the amended complaint of petitioners being in the alternative, the lower court, instead of dismissing the same, could have passed upon the claim of plaintiffs there, now petitioners, for the recovery of the possession of the disputed lot, since no proceeding for eminent domain, as required by the then Code of Civil Procedure, was instituted. 9 However, as noted in Alfonso v. Pasay City, 10 this Court speaking through Justice Montemayor, restoration would be "neither convenient nor feasible because it is now and has been used for road purposes." 11 The only relief, in the opinion of this Court, would be for the government "to make due compensation, ..." 12 It was made clear in such decision that compensation should have been made "as far back as the date of the taking." Does it result, therefore, that petitioners would be absolutely remediless since recovery of possession is in effect barred by the above decision? If the constitutional mandate that the owner be compensated for property taken for public use 13 were to be respected, as it should, then a suit of this character should not be summarily dismissed. The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed, may it "have the right to enter in and upon the land so condemned" to appropriate the same to the public use defined in the judgment." 14 If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could still be appropriately invoked. 15

Accordingly, the lower court decision is reversed so that the court may proceed with the complaint and determine the compensation to which petitioners are entitled, taking into account the ruling in the above Alfonso case: "As to the value of the property, although the plaintiff claims the present market value thereof, the rule is that to determine due compensation for lands appropriated by the Government, the basis should be the price or value at the time that it was taken from the owner and appropriated by the Government." 16
WHEREFORE, the lower court decision of January 30, 1969 dismissing the complaint is reversed and the case remanded to the lower court for proceedings in accordance with law. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Villamor and Makasiar, JJ., concur. Concepcion, C.J., and Barredo, J., took no part.

Footnotes
1 Petition, Annex H, pp. 1 and 2. 2 Ibid, Annex I, p.4. 3 Cf. Providence Washington Insurance Co. v. Republic, L-26386, Sept. 30, 1969, 29 SCRA 598; Fireman's Fund Insurance Co. v. United States Lines Co., L-26533, Jan. 30, 1970, 31 SCRA 309; Switzerland General Insurance Company, Ltd. v. Republic, L-27389, March 30, 1970; 32 SCRA 227. 4 Cf. Begosa v. Chairman Philippine Veterans Administration, L-25916, April 30, 1970, 32 SCRA 466, citing Ruiz v. Cabahug, 102 Phil. 110 (1957) and Syquia v. Almeda Lopez, 84 Phil. 312 (1949). 5 84 Phil. 312 (1949) affirmed in Marvel Building Corp. v. Phil. War Damage Commission, 85 Phil. 27 (1949) and Johnson v. Turner, 94 Phil. 807 (1954). Such a doctrine goes back to Tan Te v. Bell, 27 Phil. 354 (1914). Cf. L. S. Moon v. Harrison, 43 Phil 27 (1922). 6 Ibid., p. 319. 7 L-31135, May 29, 1970, 33 SCRA 368. 8 Ibid., pp. 377-378. 9 Act No. 190 (1901). According to Section 241 of such Code: "The Government of the Philippine Islands, or of any province or department thereof, or of any municipality, and any person, or public or private corporation having by law the right to condemn private property for public use shall exercise that right in the manner hereinafter prescribed." The next section reads: "The complaint in condemnation proceedings shall state with certainty the right of condemnation, and describe the property sought to be condemned, showing the interest of each defendant separately." Sec. 242. 10 106 Phil. 1017 (1960). 11 Ibid., p. 1022. 12 Ibid.

13 "According to Article III, Section 1, paragraph 2 of the Constitution: "Private property shall not be taken for public use without just compensation." 14 Section 247 of Act No. 190 reads in full: "Upon payment by the plaintiff to the defendant of compensation as fixed by the judgment, or after tender to him of the amount so fixed and payment of the costs, the plaintiff shall have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in the judgment. In case the defendant and his attorney absent themselves from the court or decline to receive the same, payment may be made to the clerk of the court for him, and such officer shall be responsible on his bond therefor and shall be compelled to receive it." 15 Cf. Merrit v. Government of the Philippine Islands, 34 Phil. 311 (1916); Compania General de Tabacos v. Government, 45 Phil. 663 (1924); Salgado v. Ramos, 64 Phil. 724 (1937); Bull v. Yatco, 67 Phil. 728 (1939); Santos vs. Santos, 92 Phil. 281 (1952) ; Froilan v. Pan Oriental Shipping Co., 95 Phil. 905 (1954); Angat River Irrigation v. Angat River Workers' Union, 102 Phil. 789 (1957); Concepcion, J., diss.; Lyons, Inc. v. United States of America, 104 Phil. 593 (1958); Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, L-23139, December 17, 1966, 18 SCRA 1120; Hartford Insurance Co. v. P. D. Marchessini & Co., L-24544, November 15, 1967, 21 SCRA 860; Firemen's Fund Insurance Co. v. Maersk Line Far East Service, L-27189, March 28, 1969, 27 SCRA 519; Insurance Co. of North America v. Osaka Shosen Kaisha, L-22784, March 28, 1969, 27 SCRA 780; Providence Washington Insurance Co. v. Republic of the Philippines, L-26386, Sept. 30, 1969, 29 SCRA 598. 16 Alfonso v. Pasay City, 106 Phil. 1017, 1022-1023 (1960).

7. DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. MARGARITA M. GALON, Petitioners, vs. PHIL PHARMA WEALTH, INC., Respondent. DECISION DEL CASTILLO, J.: The state may not be sued without its consent. Likewise, public officials may not be sued for acts done in the perfom1ance of their official functions or within the scope of their authority. This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution3 denying petitioners' Motion for Reconsideration.4 Factual Antecedents On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued by then Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the guidelines and procedure for accreditation of government suppliers of pharmaceutical products for sale or distribution to the public, such accreditation to be valid for three years but subject to annual review. On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which amended AO 27. Under Section VII7 of AO 10, the accreditation period for government suppliers of pharmaceutical products was reduced to two years. Moreover, such accreditation may be recalled, suspended or revoked after due deliberation and proper notice by the DOH Accreditation Committee, through its Chairman.

Section VII of AO 10 was later amended by AO 66 series of 2000,8 which provided that the two-year accreditation period may be recalled, suspended or revoked only after due deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman. On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and category of sanctions to be imposed on accredited government suppliers of pharmaceutical products in case of adverse findings regarding their products (e.g. substandard, fake, or misbranded) or violations committed by them during their accreditation. In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24 accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited drug companies products. Specifically, the BFAD found that PPIs products which were being sold to the public were unfit for human consumption. During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10 days, or until November 6, 2000, their respective explanations on the adverse findings covering their respective products contained in the Report on Violative Products. Instead of submitting its written explanation within the 10-day period as required, PPI belatedly sent a letter13dated November 13, 2000 addressed to Undersecretary Galon, informing her that PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the corresponding reply. However, PPI did not indicate when its reply would be submitted; nor did it seek an extension of the 10day period, which had previously expired on November 6, 2000, much less offer any explanation for its failure to timely submit its reply. PPIs November 13, 2000 letter states:
Madam, This refers to your directive on 27 October 2000, on the occasion of the meeting with selected accredited suppliers, during which you made known to the attendees of your requirement for them to submit their individual comments on the Report on Violative Products (the "Report") compiled by your office and disseminated on that date. In this connection, we inform you that we have already instructed our lawyers to prepare on our behalf the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to you and furnish you the said reply. Please be guided accordingly. Very truly yours, (signed) ATTY. ALAN A.B. ALAMBRA

Vice-President for Legal and Administrative Affairs14 In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPIs November 13, 2000 letter and therein informed PPI that, effective immediately, its accreditation has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C. In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel questioned the suspension of its accreditation, saying that the same was made pursuant to Section VII of

AO 10 which it claimed was patently illegal and null and void because it arrogated unto the DOH Accreditation Committee powers and functions which were granted to the BFAD under Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its accreditation was suspended without the benefit of notice and hearing, in violation of its right to substantive and administrative due process. It thus demanded that the DOH desist from implementing the suspension of its accreditation, under pain of legal redress. On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a Complaint19 seeking to declare null and void certain DOH administrative issuances, with prayer for damages and injunction against the DOH, former Secretary Romualdez and DOH Undersecretary Galon. Docketed as Civil Case No. 68200, the case was raffled to Branch 160. On February 8, 2002, PPI filed an Amended and Supplemental Complaint,20 this time impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November 23, 2000 letter, and AO 14 series of 200121 are null and void for being in contravention of Section 26(d) of RA 3720 as amended by EO 175, which states as follows: SEC. 26. x x x (d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article of food or any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is adulterated, misbranded, or not registered, he shall cause notice thereof to be given to the person or persons concerned and such person or persons shall be given an opportunity to be heard before the Bureau and to submit evidence impeaching the correctness of the finding or charge in question. For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10, Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November 23, 2000 letter, and AO 14 be declared null and void, and that it be awarded moral damages of P5 million, exemplary damages of P1 million, attorneys fees of P1 million, and costs of suit. PPI likewise prayed for the issuance of temporary and permanent injunctive relief. In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and Undersecretary Galon sought the dismissal of the Complaint, stressing that PPIs accreditation was suspended because most of the drugs it was importing and distributing/selling to the public were found by the BFAD to be substandard for human consumption. They added that the DOH is primarily responsible for the formulation, planning, implementation, and coordination of policies and programs in the field of health; it is vested with the comprehensive power to make essential health services and goods available to the people, including accreditation of drug suppliers and regulation of importation and distribution of basic medicines for the public. Petitioners added that, contrary to PPIs claim, it was given the opportunity to present its side within the 10-day period or until November 6, 2000, but it failed to submit the required comment/reply. Instead, it belatedly submitted a November 13, 2000 letter which did not even constitute a reply, as it merely informed petitioners that the matter had been referred by PPI to its lawyer. Petitioners argued that due process was afforded PPI, but because it did not timely avail of the opportunity to explain its side, the DOH had to act immediately by suspending PPIs accreditation to stop the distribution and sale of substandard drug products which posed a serious health risk to the public. By exercising DOHs mandate to promote health, it cannot be said that petitioners committed grave abuse of discretion. In a January 8, 2001 Order,23 the trial court partially granted PPIs prayer for a temporary restraining order, but only covering PPIs products which were not included in the list of violative products or drugs as found by the BFAD. In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil Case No. 68200, claiming that the case was one against the State; that the Complaint was improperly verified; and

lack of authority of the corporate officer to commence the suit, as the requisite resolution of PPIs board of directors granting to the commencing officer PPIs Vice President for Legal and Administrative Affairs, Alan Alambra, the authority to file Civil Case No. 68200 was lacking. To this, PPI filed its Comment/Opposition.25 Ruling of the Regional Trial Court In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring the case to be one instituted against the State, in which case the principle of state immunity from suit is applicable. PPI moved for reconsideration,27 but the trial court remained steadfast.28 PPI appealed to the CA. Ruling of the Court of Appeals Docketed as CA-G.R. CV No. 85670, PPIs appeal centered on the issue of whether it was proper for the trial court to dismiss Civil Case No. 68200. The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand of the case for the conduct of further proceedings. The CA concluded that it was premature for the trial court to have dismissed the Complaint. Examining the Complaint, the CA found that a cause of action was sufficiently alleged that due to defendants (petitioners) acts which were beyond the scope of their authority, PPIs accreditation as a government supplier of pharmaceutical products was suspended without the required notice and hearing as required by Section 26(d) of RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion to dismiss, petitioners were deemed to have hypothetically admitted the allegations in the Complaint which state that petitioners were being sued in their individual and personal capacities thus negating their claim that Civil Case No. 68200 is an unauthorized suit against the State. The CA further held that instead of dismissing the case, the trial court should have deferred the hearing and resolution of the motion to dismiss and proceeded to trial. It added that it was apparent from the Complaint that petitioners were being sued in their private and personal capacities for acts done beyond the scope of their official functions. Thus, the issue of whether the suit is against the State could best be threshed out during trial on the merits, rather than in proceedings covering a motion to dismiss. The dispositive portion of the CA Decision reads: WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further proceedings. SO ORDERED.30 Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the present Petition. Issue Petitioners now raise the following lone issue for the Courts resolution: Should Civil Case No. 68200 be dismissed for being a suit against the State?31

Petitioners Arguments Petitioners submit that because PPIs Complaint prays for the award of damages against the DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require the appropriation of the needed amount to satisfy PPIs claim, should it win the case. Since the State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add that in issuing and implementing the questioned issuances, individual petitioners acted officially and within their authority, for which reason they should not be held to account individually. Respondents Arguments Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200 is a suit against the petitioners in their personal capacity for acts committed outside the scope of their authority. Our Ruling The Petition is granted. The doctrine of non-suability. The discussion of this Court in Department of Agriculture v. National Labor Relations Commission32 on the doctrine of non-suability is enlightening. The basic postulate enshrined in the constitution that (t)he State may not be sued without its consent, reflects nothing less than a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It is based on the very essence of sovereignty. x x x [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. True, the doctrine, not too infrequently, is derisively called the royal prerogative of dishonesty because it grants the state the prerogative to defeat any legitimate claim against it by simply invoking its nonsuability. We have had occasion to explain in its defense, however, that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its multifarious functions would be far greater in severity than the inconvenience that may be caused private parties, if such fundamental principle is to be abandoned and the availability of judicial remedy is not to be accordingly restricted. The rule, in any case, is not really absolute for it does not say that the state may not be sued under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, the state may not be sued without its consent; its clear import then is that the State may at times be sued. The States consent may be given either expressly or impliedly. Express consent may be made through a general law or a special law. x x x Implied consent, on the other hand, is conceded when the State itself commences litigation, thus opening itself to a counterclaim or when it enters into a contract. In this situation, the government is deemed to have descended to the level of the other contracting party and to have divested itself of its sovereign immunity. This rule, x x x is not, however, without qualification. Not all contracts entered into by the government operate as a waiver of its non-suability; distinction must still be made between one which is executed in the exercise of its sovereign function and another which is done in its proprietary capacity.33 As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly, then it may be the subject of a suit.34 There is express consent when a law, either special or general, so provides. On the other hand, there is implied consent when the state "enters into a contract or it itself commences litigation."35 However, it must be clarified that when a state enters into a contract, it does not automatically mean that it has waived its non-suability. 36 The State "will be deemed to have impliedly waived its non-suability [only] if it has entered into a contract in its proprietary or private capacity.

[However,] when the contract involves its sovereign or governmental capacity[,] x x x no such waiver may be implied."37 "Statutory provisions waiving [s]tate immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of sovereignty."38 The DOH can validly invoke state immunity. a) DOH is an unincorporated agency which performs sovereign or governmental functions. In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke the defense of immunity from suit because it has not consented, either expressly or impliedly, to be sued. Significantly, the DOH is an unincorporated agency which performs functions of governmental character. The ruling in Air Transportation Office v. Ramos40 is relevant, viz: 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. 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; 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.41 b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants for damages which constitutes a charge or financial liability against the state. Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against the state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically prayed, in its Complaint and Amended and Supplemental Complaint, for the DOH, together with Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and severally liable for moral damages, exemplary damages, attorneys fees and costs of suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or the state through the DOH would become vulnerable to an imposition or financial charge in the form of damages. This would require an appropriation from the national treasury which is precisely the situation which the doctrine of state immunity aims to protect the state from. The mantle of non-suability extends to complaints filed against public officials for acts done in the performance of their official functions. As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary Galon, it must be stressed that the doctrine of state immunity extends its protective mantle also to complaints filed against state officials for acts done in the discharge and performance of their duties.44 "The suability of a government official depends on whether the official concerned was acting within his official or jurisdictional capacity, and whether the acts done in the performance of official functions will result in a charge or financial liability against the government."45 Otherwise stated, "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."46 Moreover, "[t]he 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 x x x. In such a situation, the state may move to dismiss the [C]omplaint on the ground that it has been filed without its consent." 47 It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as Undersecretary Galon, were done while in the performance and discharge of their official functions or in

their official capacities, and not in their personal or individual capacities. Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders. On the other hand, Undersecretary Galon was being charged with implementing the assailed issuances. By no stretch of imagination could the same be categorized as ultra vires simply because the said acts are well within the scope of their authority. Section 4 of RA 3720 specifically provides that the BFAD is an office under the Office of the Health Secretary. Also, the Health Secretary is authorized to issue rules and regulations as may be necessary to effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is authorized by law to supervise the offices under the DOHs authority,49 such as the BFAD. Moreover, there was also no showing of bad faith on their part. The assailed issuances were not directed only against PPI. The suspension of PPIs accreditation only came about after it failed to submit its comment as directed by Undersecretary Galon. It is also beyond dispute that if found wanting, a financial charge will be imposed upon them which will require an appropriation from the state of the needed amount. Thus, based on the foregoing considerations, the Complaint against them should likewise be dismissed for being a suit against the state which absolutely did not give its consent to be sued. Based on the foregoing considerations, and regardless of the merits of PPIs case, this case deserves a dismissal. Evidently, the very foundation of Civil Case No. 68200 has crumbled at this initial juncture. PPI was not denied due process. However, we cannot end without a discussion of PPIs contention that it was denied due process when its accreditation was suspended "without due notice and hearing." It is undisputed that during the October 27, 2000 meeting, Undersecretary Galon directed representatives of pharmaceutical companies, PPI included, to submit their comment and/or reactions to the Report on Violative Products furnished them within a period of 10 days. PPI, instead of submitting its comment or explanation, wrote a letter addressed to Undersecretary Galon informing her that the matter had already been referred to its lawyer for the drafting of an appropriate reply. Aside from the fact that the said letter was belatedly submitted, it also failed to specifically mention when such reply would be forthcoming. Finding the foregoing explanation to be unmeritorious, Undersecretary Galon ordered the suspension of PPIs accreditation for two years. Clearly these facts show that PPI was not denied due process. It was given the opportunity to explain its side. Prior to the suspension of its accreditation, PPI had the chance to rebut, explain, or comment on the findings contained in the Report on Violative Products that several of PPIs products are not fit for human consumption. However, PPI squandered its opportunity to explain. Instead of complying with the directive of the DOH Undersecretary within the time allotted, it instead haughtily informed Undersecretary Galon that the matter had been referred to its lawyers. Worse, it impliedly told Undersecretary Galon to just wait until its lawyers shall have prepared the appropriate reply. PPI however failed to mention when it will submit its "appropriate reply" or how long Undersecretary Galon should wait. In the meantime, PPIs drugs which are included in the Report on Violative Products are out and being sold in the market. Based on the foregoing, we find PPIs contention of denial of due process totally unfair and absolutely lacking in basis. At this juncture, it would be trite to mention that "[t]he essence of due process in administrative proceedings is the opportunity to explain ones side or seek a reconsideration of the action or ruling complained of. As long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met. What is offensive to due process is the denial of the opportunity to be heard. The Court has repeatedly stressed that parties who chose not to avail themselves of the opportunity to answer charges against them cannot complain of a denial of due process."50 Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on the same issuances which it assails in the present case. In the earlier case of Department of Health v. Phil Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the inclusion of its products in the list of accredited drugs as required by AO 27 series of 1998 which was later amended by AO 10 series of 2000. In the instant case, however, PPI interestingly claims that these issuances are null and void. WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is ordered DISMISSED.

SO ORDERED. MARIANO C. DEL CASTILLO Associate Justice WE CONCUR: ANTONIO T. CARPIO Associate Justice Chairperson
ARTURO D. BRION Associate Justice DIOSDADO M. PERALTA* Associate Justice

JOSE PORTUGAL PEREZ Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ANTONIO T. CARPIO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. MARIA LOURDES P. A. SERENO Chief Justice

Footnotes
*

Per Raffle dated February 4, 2013. Rollo, pp. 27-44.

Id. at 7-21; penned by Associate Justice Monina Arevalo-Zenarosa and concurred in by Presiding Justice Conrado M. Vasquez, Jr. and Associate Justice Edgardo F. Sundiam.
3

Id. at 22-23. CA rolla, pp. 156-164. Records, pp. 16-17.

Id. at 19-25. Id. at 24. Id. at 26. Id. at 111. Id. at 27. Id. at 28-40.

10

11

12

Per Republic Act No. 9711 or the Food and Drug Administration (FDA) Act of 2009 which was signed by the President on August 18, 2009, the Bureau of Food and Drugs (BFAD) was renamed and is now called the Food and Drug Administration (FDA).
13

Records, p. 41. Id. Id. at 42. Id. at 43-44. FOOD, DRUG, AND COSMETIC ACT. June 22, 1963.

14

15

16

17

18

FURTHER AMENDING REPUBLIC ACT NO 3720, ENTITLED "AN ACT TO ENSURE THE SAFETY AND PURITY OF FOODS, DRUGS, AND COSMETICS BEING MADE AVAILABLE TO THE PUBLIC BY CREATING THE FOOD AND DRUG ADMINISTRATION WHICH SHALL ADMINISTER AND ENFORCE THE LAWS PERTAINING THERETO", AS AMENDED, AND FOR OTHER PURPOSES. May 22, 1987.
19

Records, pp. 2-15. Id. at 400-424.

20

21

Id. at 454-457. Administrative Order No. 14 was a later issuance by DOH Secretary Dayrit which was subsequently included in PPIs amended and supplemental complaint as one of the issuances sought to be nullified. It provided for new accreditation guidelines and granted the Accreditation Committee the power to suspend or revoke a suppliers accreditation after deliberation and notice, and without need of a hearing.
22

Id. at 489-505. Id. at 124. Id. at 500-513. Id. at 532-541. Id. at 555-561; penned by Judge Amelia A. Fabros. Id. at 562-569.

23

24

25

26

27

28

See Order dated April 19, 2005, id. at 593. Rollo, pp. 7-21. Id. at 21. Emphases in the original. Id. at 730. G.R. No. 104269, November 11, 1993, 227 SCRA 693. Id. at 698-699. Citations omitted. United States of America v. Judge Guinto, 261 Phil. 777, 790 (1990). Id. at 792. Id. at 793. Id. at 795.

29

30

31

32

33

34

35

36

37

38

Equitable Insurance and Casualty Co., Inc. v. Smith, Bell & Co. (Phils.), Inc., 127 Phil. 547, 549 (1967).
39

Department of Health v. Phil Pharmawealth, Inc., 547 Phil. 148, 154 (2007). G.R. No. 159402, February 23, 2011, 644 SCRA 36. Id. at 42-43. Citations omitted. Department of Health v. Phil Pharmawealth, Inc., supra at 154.

40

41

42

43

See Complaint, pp. 12-13, records, pp. 13-14; Amended and Supplemental Complaint, p. 13, records, p. 422.
44

United States of America v. Judge Guinto, supra note 34 at 791. Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 153.

45

46

M. H. Wylie v. Rarang, G.R. No. 74135, May 28, 1992, 209 SCRA 357, 368. Citation omitted. See alsoUnited States of America v. Reyes, G.R. No. 79253, March 1, 1993, 219 SCRA 192, 209 where the Court held: x x x The doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they are sued in their individual capacity. This situation usually arises where the public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his personal private capacity for whatever damage he may have caused by his act done with malice and in bad faith, or beyond the scope of his authority or jurisdiction. (Citations omitted)
47

United States of America v. Judge Guinto, supra note 34 at 791-792. See also Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 155.

48

See Section 26, Republic Act No. 3720. See Section 12, Chapter 3, Title IX, Book IV, Administrative Code of 1987. Flores v. Montemavor, Ci.R. No. 170146. llll''~ 1' .. 20 i i, 651 SCEA 396, 406-407. Citations omitted Supranote39. ld

49

50

51

52

EPG CONSTRUCTION CO., CIPER ELECTRICAL & ENGINEERING, SEPTA CONSTRUCTION CO., PHIL. PLUMBING CO., HOME CONSTRUCTION INC., WORLD BUILDERS CO., GLASS WORLD INC., PERFORMANCE BUILDERS DEVT. CO., DE LEON-ARANETA CONST. CO., J.D. MACAPAGAL CONST. CO., All represented by their Atty. IN FACT, MARCELO D, FORONDA, petitioners, vs. HON. GREGORIO R. VIGILAR, In His Capacity as Secretary of Public Works and Highways, respondent. DECISION BUENA, J.: Sought to be reversed in the instant Petition for Certiorari is the Decision, dated 07 November 1997, of the Regional Trial Court of Quezon City, Branch 226, in Civil Case No. Q-96-29243,[1] dismissing the Petition for Mandamus filed by herein petitioners against herein respondent Hon. Gregorio Vigilar, in his capacity as Secretary of the Department of Public Works and Highways (DPWH). The tapestry of facts unfurls. In 1983, the Ministry of Human Settlement, through the BLISS Development Corporation, initiated a housing project on a government property along the east bank of the Manggahan Floodway in Pasig City. For this purpose, the Ministry of Human Settlement entered into a Memorandum of Agreement (MOA) with the Ministry of Public Works and Highways,[2] where the latter undertook to develop the housing site and construct thereon 145 housing units. By virtue of the MOA, the Ministry of Public Works and Highways forged individual contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., Glass World Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., for the construction of the housing units. Under the contracts, the scope of construction and funding therefor covered only around 2/3 of each housing unit.[3] After complying with the terms of said contracts, and by reason of the verbal request and assurance of then DPWH Undersecretary AberCanlas 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 DominadorMadamba, who recognized the existence of implied contracts covering the additional constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined that payment of petitioners money claims should be based on quantum 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 Auditors Technical Staff, the DPWH Auditor interposed no objection to the payment of the money claims subject to whatever action the COA may adopt.

In a Second Indorsement dated 27 July 1992, the COA returned the documents to the DPWH, stating that funds should first be made available before COA could pass upon and act on the money claims. In a Memorandum dated 30 July 1992, then DPWH Secretary Jose De Jesus requested the Secretary of Budget and Management to release public funds for the payment of petitioners money claims, stating that the amount is urgently needed in order to settle once and for all this (sic) outstanding obligations of the government. In a Letter of the Undersecretary of Budget and Management dated 20 December 1994, the amount of P5,819,316.00 was then released for the payment of petitioners money claims, under Advise of Allotment No. A4-1303-04-41-303. In an Indorsement dated 27 December 1995, the COA referred anew the money claims to the DPWH pursuant to COA Circular 95-006, thus: Respectfully returned thru the Auditor to the Honorable Secretary, Department of Public Works and Highways, Port Area, Manila, the above-captioned subject (Re: Claim of Ten (10) contractors for payment of Work accomplishments on the construction of the COGEO II Housing Project, Pasig, Metro Manila) and reiterating the policy of this office as embodied in COA Circular No. 95-006 dated May 18, 1995 totally lifting its pre-audit activities on all financial transactions of the agencies of the government involving implementation/prosecution of projects and/or payment of claims without exception so as to vest on agency heads the prerogative to exercise fiscal responsibility thereon. The audit of the transaction shall be done after payment. In a letter dated 26 August 1996, respondent DPWH Secretary Gregorio Vigilar denied the subject money claims prompting herein petitioners to file before the Regional Trial Court of Quezon City, Branch 226, a Petition for Mandamus praying that herein respondent be ordered: 1) To pay petitioners the total of P5,819,316.00; 2) To pay petitioners moral and exemplary damages in the amount to be fixed by the Court and sum of P500,000.00 as attorneys fees. On 18 February 1997, the lower court conducted a pre-trial conference where the parties appeared and filed their respective pre-trial briefs. Further, respondent submitted a Memorandum to which petitioners filed a Rejoinder. On 07 November 1997, the lower court denied the Petition for Mandamus, in a Decision which disposed as follows: WHEREFORE, in view of all the foregoing, the instant Petition for Mandamus is dismissed. The order of September 24, 1997, submitting the Manifestation and Motion for Resolution, is hereby withdrawn. SO ORDERED. Hence, this petition where the core issue for resolution focuses on the right of petitionerscontractors to compensation for a public works housing project. In the case before us, respondent, citing among others Sections 46[6] and 47,[7] Chapter 7, Sub-Title B, Title I, Book V of the Administrative Code of 1987 (E.O 292), posits that the existence of appropriations and availability of funds as certified to and verified by the proper accounting officials are conditions sine qua non for the execution of government contracts.[8] Respondent harps on the fact

that the additional work was pursued through the verbal request of then DPWH Undersecretary Aber P. Canlas, despite the absence of the corresponding supplemental contracts and appropriate funding.[9] According to respondent, sans showing of certificate of availability of funds, the implied contracts are considered fatally defective and considered inexistent and void ab initio. Respondent concludes that inasmuch as the additional work done was pursued in violation of the mandatory provisions of the laws concerning contracts involving expenditure of public funds and in excess of the public officials contracting authority, the same is not binding on the government and impose no liability therefor.[10] Although this Court agrees with respondents postulation that the implied contracts, which covered the additional constructions, are void, in view of violation of applicable laws, auditing rules and lack of legal requirements,[11] we nonetheless find the instant petition laden with merit and uphold, in the interest of substantial justice, petitioners-contractors right to be compensated for the "additional constructions" on the public works housing project, applying the principle of quantum meruit. Interestingly, this case is not of first impression. In Eslao vs. Commission on Audit,[12] this Court likewise allowed recovery by the contractor on the basis of quantum meruit, following our pronouncement in Royal Trust Construction vs. Commission on Audit,[13] thus: In Royal Trust Construction vs. COA, a case involving the widening and deepening of the Betis River in Pampanga at the urgent request of the local officials and with the knowledge and consent of the Ministry of Public Works, even without a written contract and the covering appropriation, the project was undertaken to prevent the overflowing of the neighboring areas and to irrigate the adjacent farmlands. The contractor sought compensation for the completed portion in the sum of over P1 million. While the payment was favorably recommended by the Ministry of Public Works, it was denied by the respondent COA on the ground of violation of mandatory legal provisions as the existence of corresponding appropriations covering the contract cost. Under COA Res. No. 36-58 dated November 15, 1986, its existing policy is to allow recovery from covering contracts on the basis of quantum meruit if there is delay in the accomplishment of the required certificate of availability of funds to support a contract. (Emphasis ours) In the Royal Construction case, this Court, applying the principle of quantum meruit in allowing recovery by the contractor, elucidated: The work done by it (the contractor) was impliedly authorized and later expressly acknowledged by the Ministry of Public Works, which has twice recommended favorable action on the petitioners request for payment. Despite the admitted absence of a specific covering appropriation as required under COA Resolution No. 36-58, the petitioner may nevertheless be compensated for the services rendered by it,concededly for the public benefit, from the general fund allotted by law to the Betis River project. Substantial compliance with the said resolution, in view of the circumstances of this case, should suffice. The Court also feels that the remedy suggested by the respondent, to wit, the filing of a complaint in court for recovery of the compensation claimed, would entail additional expense, inconvenience and delay which in fairness should be imposed on the petitioner. Accordingly, in the interest of substantial justice and equity, the respondent Commission on Audit is DIRECTED to determine on a quantum meruit basis the total compensation due to the petitioner for the services rendered by it in the channel improvement of the Betis River in Pampanga and to allow the payment thereof immediately upon completion of the said determination. (Emphasis ours)

Similarly, this Court applied the doctrine of quantum meruit in Melchor vs. Commission on Audit[14] and explained that where payment is based on quantum meruit, the amount of recovery would only be the reasonable value of the thing or services rendered regardless of any agreement as to value.[15] Notably, the peculiar circumstances present in the instant case buttress petitioners claim for compensation for the additional constructions, despite the illegality and void nature of the implied contracts forged between the DPWH and petitioners-contractors. On this matter, it bears stressing that the illegality of the subject contracts proceeds from an express declaration or prohibition by law,[16] and not from any intrinsic illegality. Stated differently, the subject contracts are not illegal per se. Of equal significance are circumstances attendant and peculiar in this case which necessitate allowance of petitioners money claimson the basis of quantum meruit for work accomplished on the government housing project. To begin with, petitioners-contractors assented and agreed to undertake additional constructions for the completion of the housing units, believing in good faith and in the interest of the government and, in effect, the public in general, that appropriations to cover the additional constructions and completion of the public works housing project would be available and forthcoming. On this particular score, the records reveal that the verbal request and assurance of then DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of the government housing project, despite the absence of covering appropriations, written contracts, and certification of availability of funds, as mandated by law and pertinent auditing rules and issuances. To put it differently, the implied contracts, declared void in this case, covered only the completion and final phase of construction of the housing units, which structures, concededly, were already existing, albeit not yet finished in their entirety at the time the implied contracts were entered into between the government and the contractors. Further, petitioners-contractors sent to the DPWH Secretary a demand letter pressing for their money claims, on the strength of a favorable recommendation from the DPWH Assistant Secretary for Legal Affairs to the effect that implied contracts existed and that the money claims had ample basis applying the principle of quantum meruit. Moreover, as can be gleaned from the records, even the DPWH Auditor interposed no objection to the payment of the money claims, subject to whatever action the COA may adopt. Beyond this, the sum of P5,819,316.00 representing the amount of petitioners money claims, had already been released by the Department of Budget and Management (DBM), under Advise of Allotment No. A4-1303-04-41-303. Equally important is the glaring fact that the construction of the housing units had already been completed by petitioners-contractors and the subject housing units had been, since their completion, under the control and disposition of the government pursuant to its public works housing project. To our mind, it would be the apex of injustice and highly inequitable for us to defeat petitionerscontractors right to be duly compensated for actual work performed and services rendered, where both the government and the public have, for years, received and accepted benefits from said housing project and reaped the fruits of petitioners-contractors honest toil and labor. Incidentally, respondent likewise argues that the State may not be sued in the instant case, invoking the constitutional doctrine of Non-suability of the State,[17] otherwise known as the Royal Prerogative of Dishonesty.

Respondents argument is misplaced inasmuch as the Principle of State Immunity finds no application in the case before us. Under these circumstances, respondent may not validly invoke the Royal Prerogative of Dishonesty and conveniently hide under the States cloak of invincibility against suit, considering that this principle yields to certain settled exceptions. True enough, the rule, in any case, is not absolute for it does not say that the state may not be sued under any circumstance.[18] Thus, in Amigable vs. Cuenca,[19] this Court, in effect, shred the protective shroud which shields the State from suit, reiterating our decree in the landmark case of Ministerio vs. CFI of Cebu[20] that the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained.[21] Although the Amigable and Ministerio cases generously tackled the issue of the States immunity from suit vis a vis the payment of just compensation for expropriated property, this Court nonetheless finds the doctrine enunciated in the aforementioned cases applicable to the instant controversy, considering that the ends of justice would be subverted if we were to uphold, in this particular instance, the States immunity from suit. To be sure, this Court as the staunch guardian of the citizens rights and welfare cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof. Justice and equity sternly demand that the States cloak of invincibility against suit be shred in this particular instance, and that petitionerscontractors be duly compensated on the basis of quantum meruit for construction done on the public works housing project. IN VIEW WHEREOF, the instant petition is GRANTED. The assailed decision of the Regional Trial Court dated 07 November 1997 is REVERSED AND SET ASIDE. ACCORDINGLY, the Commission on Audit is hereby directed to determine and ascertain with dispatch, on a quantum meruit basis, the total compensation due to petitioners-contractors for the additional constructions on the housing project and to allow payment thereof upon the completion of said determination. No costs. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and De Leon, Jr., JJ., concur.

G.R. No. L-48214 December 19, 1978 ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T. SANTIAGO, petitioner, vs. THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the Director, Bureau of Plant Industry, and the Regional Director, Region IX, Zamboanga City, respondent, Ahmad D. Sahak for petitioner. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez and Solicitor Mariano M. Martinez for respondents.

FERNANDO, J.: The first impression yielded by a perusal of this petition for certiorari is its inherent weakness considering the explicit provision in the present Constitution prohibiting a suit against the Republic without its consent. 1 Here petitioner Ildefonso Santiago 2 filed on August 9, 1976 an action in the Court of First Instance of Zamboanga City naming as defendant the government of the Republic of the Philippines represented by the Director of the Bureau of Plant Industry. 3 His plea was for the revocation of a deed of donation executed by him and his spouse in January of 1971, 4 with the Bureau of Plant Industry as the donee. As alleged in such complaint, such Bureau, contrary to the terms of the donation, failed to "install lighting facilities and water system on the property donated and to build an office building and parking [lot] thereon which should have been constructed and ready for occupancy on or before December 7, 1974. 5 That led him to conclude that under the circumstances, he was exempt from compliance with such an explicit constitutional command. The lower court, in the order challenged in this petition, was of a different view. It sustained a motion to dismiss on the part of the defendant Republic of the Philippines, now named as one of the respondents, the other respondent being the Court of First Instance of Zamboanga City, Branch II. It premised such an order on the settled "rule that the state cannot be sued without its consent. This is so, because the New Constitution of the Philippines expressly provides that the state may not be sued without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the com ment on the petition filed with this Court, is for the affirmance of the order of dismissal of respondent Court precisely to accord deference to the above categorical constitutional mandate. On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is impressed with the unique aspect of this petition for certiorari, dealing as it does with a suit for the revocation of a donation to the Republic, which allegedly fatted to conform with what was agreed to by the donee. If an order of dismissal would suffice, then the element of unfairness enters, the facts alleged being hypothetically admitted. It is the considered opinion of this Court then that to conform to the high dictates of equity and justice, the presumption of consent could be indulged in safely. That would serve to accord to petitioner as plaintiff, at the very least, the right to be heard. certiorari lies.

1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in language plain and unmistakable: "The State may not be sued without its consent. 8 The Republic cannot be proceeded against unless it allows itself to be sued. Neither can a department, bureau, agency, office, or instrumentality of the government where the suit, according to the then Justice, now Chief Justice, Castro in Del Mar v. Philippine Veterans Administration, 9 may result "in adverse consequences to the public treasury, whether in the disbursements of funds or loss of property. 10 Such a doctrine was reiterated in the following cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v. Francisco, 13 and Republic v. Purisima. 14 2. It is contended by counsel for petitioner that the above constitutional provision would be given a retroactive application in this case if the suit for the revocation of donation were dismissed. That is not the case at all. InRepublic v. Purisima, this Court made clear that such a basic postulate is part and parcel of the system of government implanted in the Philippines from the time of the acquisition of sovereignty by the United States, and therefore, was implicit in the 1935 Constitution even in the absence of any explicit language to that effect. This it did in a citation from Switzerland General Insurance Co., Ltd. v. Republic of the Philippines: 15 "The doctrine of non-suability recognized in this jurisdiction even prior to the effectivity of the [1935] Constitution is a logical corollary of the positivist concept of law which, to paraphrase Holmes, negates the assertion of any legal right as against the state, in itself the source of the law on which such a right may be predicated. Nor is this all. Even if such a principle does give rise to problems, considering the vastly expanded role of government enabling it to engage in business pursuits to promote the general welfare, it is not obeisance to the analytical school of thought alone that calls for its continued applicability. 16 That is the teaching of the leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service,17 promulgated in December of 1966. As a matter of fact, the Switzerland General Insurance Co. decision was the thirty-seventh of its kind after Mobil. Clearly, then, the contention that to dismiss the suit would be to give the applicable constitutional provision a retroactive effect is, to put it at its mildest, untenable. 3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough analysis ought to have cautioned him against reliance on such a case. It was therein clearly pointed out that the government entity involved was originally the National Airports Corporation. Thereafter, it "was abolished by Executive Order No. 365, series of 1950, and in its place and stead the Civil Aeronautics Administration was created and took over all the assets and assumed all the liabilities of the abolished corporation. The Civil Aeronautics Administration, even if it is not a juridical entity, cannot legally prevent a party or parties from enforcing their proprietary rights under the cloak or shield of lack of juridical personality, because to took over all the powers and assumed all the obligations of the defunct corporation which had entered into the contract in question." 19 Then came National Shipyard and Steel Corporation v. Court of Industrial Relations, 20 a 1963 decision, where the then Justice, later Chief Justice, Concepcion, as ponente, stated that a government-owned and controlled corporation "has a personality of its own distinct and separate from that of the government. ... Accordingly, it may sue and be sued and may be subjected to court processes just like any other corporation. (Section 13, Act 1459, as amended). 21 In three recent decisions, Philippine National Bank v. Court of Industrial Relations, 22 Philippine National Bank v. Honorable Judge Pabalan, 23 and Philippine National Railways v. Union de Maquinistas, 24 this constitutional provision on non-suability was unavailing in view of the suit being against a government-owned or controlled corporation. That point apparently escaped the attention of counsel for petitioner. Hence Santos v. Santos is hardly controlling. 4. It is to be noted further that the trend against the interpretation sought to be fastened in the broad language of Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M.

Gatmaitan, 25 decided in 1957, it was held that an action [against] Government officials, is essentially one against the Government, ... . 26 In the same year, this Court, in Angat River Irrigation System v. Angat River Workers 27 Union, after referring to the "basic and fundamental principle of the law that the Government cannot be sued before courts of justice without its consent," pointed out that "this privilege of non-suability of the Government" covers with the mantle of its protection "an entity," in this case, the Angat River Irrigation System. 28 Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a reaffirmation of the doctrine that a "claim [constituting] a charge against, or financial liability to, the Government cannot be entertained by the courts except with the consent of said government. 30 Bureau of Printing v. Bureau of Printing Employees Association 31 came a year later; it reiterated such a doctrine. It was not surprising therefore that in 1966, Mobil Philippines Exploration, Inc. was decided the way it was. The remedy, where the liability is based on contract, according to this Court, speaking through Justice J. P. Bengzon, is for plaintiff to file a claim with the general office in accordance with the controlling statute, Commonwealth Act No. 327.32 To repeat, that doctrine has been adhered to ever since. The latest case in point is Travelers Indemnity Company v. Barber Steamship Lines, Inc. 33 Justice Aquino's opinion concluded with this paragraph: "It is settled that the Bureau of Customs, acting as part of the machinery of the national government in the operation of the arrastre service, is immune from suit under the doctrine of non-suability of the State. The claimant's remedy to recover the loss or damage to the goods under the custody of the customs arrastre service is to file a claim with the Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. 327. 34 With the explicit provision found in the present Constitution, the fundamental principle of non-suability becomes even more exigent in its command. 5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily follow that this suit cannot prosper. Nonetheless, as set forth at the outset, there is a novel aspect that suffices to call for a contrary conclusion. It would be manifestly unfair for the Republic, as donee, alleged to have violated the conditions under which it received gratuitously certain property, thereafter to put as a barrier the concept of non-suitability. That would be a purely one-sided arrangement offensive to one's sense of justice. Such conduct, whether proceeding from an individual or governmental agency, is to be condemned. As a matter of fact, in case it is the latter that is culpable, the affront to decency is even more manifest. The government, to paraphrase Justice Brandeis, should set the example. If it is susceptible to the charge of having acted dishonorably, then it forfeits public trust-and rightly so. 6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a suit may be filed. Consent need not be express. It can be implied. So it was more than implied in Ministerio v. Court of First Instance of Cebu: 35 "The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. 36 The fact that this decision arose from a suit against the Public Highways Commissioner and the Auditor General for failure of the government to pay for land necessary to widen a national highway, the defense of immunity without the consent proving unavailing, is not material. The analogy is quite obvious. Where the government ordinarily benefited by the taking of the land, the failure to institute the necessary condemnation proceedings should not be a bar to an ordinary action for the collection of the just compensation due. Here, the alleged failure to abide by the conditions under which a donation was given should not prove an insuperable obstacle to a civil action, the consent likewise being presumed. This conclusion is strengthened by the fact that while a donation partakes of a contract, there is no money claim, and therefore reliance on Commonwealth Act No. 327 would be futile. 7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the Republic or any of its agency being the donee, is entitled to go to court in case of an alleged breach of the conditions

of such donation. He has the right to be heard. Under the circumstances, the fundamental postulate of non-suability cannot stand in the way. It is made to accommodate itself to the demands of procedural due process, which is the negation of arbitrariness and inequity. The government, in the final analysis, is the beneficiary. It thereby manifests its adherence to the highest ethical standards, which can only be ignored at the risk of losing the confidence of the people, the repository of the sovereign power. The judiciary under this circumstance has the grave responsibility of living up to the ideal of objectivity and impartiality, the very essence of the rule of law. Only by displaying the neutrality expected of an arbiter, even if it happens to be one of the departments of a litigant, can the decision arrived at, whatever it may be, command respect and be entitled to acceptance. WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of October 20, 1977 is nullified, set aside and declared to be without force and effect. The Court of First Instance of Zamboanga City, Branch II, is hereby directed to proceed with this case, observing the procedure set forth in the Rules of Court. No costs. Barredo, Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.

G.R. No. L-29993 October 23, 1978 LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO R. MAGSANOC, JESUS MACARANAS, MAXIMO MANANGAN, FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all Members of the Municipal Council of Malasiqui in 1959, Malasiqui, Pangasinan, petitioners, vs. ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and THE HONORABLE COURT OF APPEALS,respondents. G.R. No. L-30183 October 23, 1978 MUNICIPALITY OF MALASIQUI, petitioner, vs. ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and the Honorable COURT OF APPEALS,respondents. Julian M. Armas, Assistant Provincial Fiscal for petitioners. Isidro L. Padilla for respondents.

MUOZ PALMA, J.: These Petitions for review present the issue of whether or not the celebration of a town fiesta authorized by a municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised Administrative Code is a governmental or a corporate or proprietary function of the municipality. A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a death which occurred during the celebration of the town fiesta on January 22, 1959, and which was attributed to the negligence of the municipality and its council members. The following facts are not in dispute: On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23, 1959." Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman. the council appropriated the amount of P100.00 for the construction of 2 stages, one for the "zarzuela" and another for the cancionan Jose Macaraeg supervised the construction of the stage and as constructed the stage for the "zarzuela" was "5- meters by 8 meters in size, had a wooden floor high at the rear and was supported by 24 bamboo posts 4 in a row in front, 4 in the rear and 5 on each side with bamboo braces." 1

The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui employees of the Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of January 22 for the performance and one of the members of the group was Vicente Fontanilla. The program started at about 10:15 o'clock that evening with some speeches, and many persons went up the stage. The "zarzuela" then began but before the dramatic part of the play was reached, the stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned underneath. Fontanilia was taken to tile San Carlos General Hospital where he died in the afternoon of the following day. The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on September 11, 1959 to recover damages. Named party-defendants were the Municipality of Malasiqui, the Municipal Council of Malasiqui and all the individual members of the Municipal Council in 1959. Answering the complaint defendant municipality invoked inter alia the principal defense that as a legally and duly organized public corporation it performs sovereign functions and the holding of a town fiesta was an exercise of its governmental functions from which no liability can arise to answer for the negligence of any of its agents. The defendant councilors inturn maintained that they merely acted as agents of the municipality in carrying out the municipal ordinance providing for the management of the town fiesta celebration and as such they are likewise not liable for damages as the undertaking was not one for profit; furthermore, they had exercised due care and diligence in implementing the municipal ordinance. 2 After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the defendants exercised due diligence 'm the construction of the stage. From his findings he arrived at the conclusion that the Executive Committee appointed by the municipal council had exercised due diligence and care like a good father of the family in selecting a competent man to construct a stage strong enough for the occasion and that if it collapsed that was due to forces beyond the control of the committee on entertainment, consequently, the defendants were not liable for damages for the death of Vicente Fontanilla. The complaint was accordingly dismissed in a decision dated July 10, 1962. 3 The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968, the Court of Appeals through its Fourth Division composed at the time of Justices Salvador V. Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered all the defendants-appellees to pay jointly and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual damages: P1200.00 its attorney's fees; and the costs. 4 The case is now before Us on various assignments of errors all of which center on the proposition stated at the sentence of this Opinion and which We repeat: Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or public function or is it or a private or proprietary character? 1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with the faculties of municipal corporations to be exercised by and through their respective municipal governments in conformity with law, and in their proper corporate name, they may inter alia sue and be sued, and contract and be contracted with.5

The powers of a municipality are twofold in character public, governmental or political on the one hand, and corporate, private, or proprietary on the other. Governmental powers are those exercised by the corporation in administering the powers of the state and promoting the public welfare and they include the legislative, judicial public, and political Municipal powers on the other hand are exercised for the special benefit and advantage of the community and include those which are ministerial private and corporate. 6 As to when a certain activity is governmental and when proprietary or private, that is generally a difficult matter to determine. The evolution of the municipal law in American Jurisprudence, for instance, has shown that; none of the tests which have evolved and are stated in textbooks have set down a conclusive principle or rule, so that each case will have to be determined on the basis of attending circumstances. In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper has ... a public character as regards the state at large insofar as it is its agent in government, and private (socalled) insofar as it is to promote local necessities and conveniences for its own community. 7 Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of Indiana in 1916, thus: Municipal corporations exist in a dual capacity, and their functions are two fold. In one they exercise the right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and governmental Their officers and agents in such capacity, though elected or appointed by the are nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities exercise a private. proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or in. individual capacity, and not for the state or sovereign power. (112 N. E 994-995) In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant T. Trent, relying mainly on American Jurisprudence classified certain activities of the municipality as governmental, e.g.: regulations against fire, disease, preservation of public peace, maintenance of municipal prisons, establishment of schools, post-offices, etc. while the following are corporate or proprietary in character, viz: municipal waterwork, slaughter houses, markets, stables, bathing establishments, wharves, ferries, and fisheries. 8 Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as municipal or city activities of a proprietary character. 9 2. This distinction of powers becomes important for purposes of determining the liability of the municipality for the acts of its agents which result in an injury to third persons. If the injury is caused in the course of the performance of a governmental function or duty no recovery, as a rule, can be. had from the municipality unless there is an existing statute on the matter, 10 nor from its officers, so long as they performed their duties honestly and in good faith or that they did not act wantonly and maliciously. 11 InPalafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck driver employed by the provincial government of Ilocos Norte ran over ProcetoPalafox in the course of his

work at the construction of a road. The Supreme Court in affirming the trial court's dismissal of the complaint for damages held that the province could not be made liable because its employee was in the performance of a governmental function the construction and maintenance of roads and however tragic and deplorable it may be, the death of Palafox imposed on the province no duty to pay monetary consideration. 12 With respect to proprietary functions, the settled rule is that a municipal corporation can be held liable to third persons ex contract 13 or ex delicto. 14 Municipal corporations are subject to be sued upon contracts and in tort. ... xxxxxxxxx The rule of law is a general one, that the superior or employer must answer civilly for the negligence or want of skill of its agent or servant in the course or fine of his employment, by which another, who is free from contributory fault, is injured. Municipal corporations under the conditions herein stated, fall within the operation of this rule of law, and are liable, accordingly, to civil actions for damages when the requisite elements of liability co-exist. ... (Dillon on Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de Leon, supra. 514) 3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of the town fiesta in 1959 by the municipality of MalsiquiPangasinan was an exercise of a private or proprietary function of the municipality. Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides: Section 2282. Celebration of fiesta. fiesta may be held in each municipality not oftener than once a year upon a date fixed by the municipal council A fiesta s not be held upon any other date than that lawfully fixed therefor, except when, for weighty reasons, such as typhoons, foundations, earthquakes, epidemics, or other public ties, the fiesta cannot be hold in the date fixed in which case it may be held at a later date in the same year, by resolution of the council. This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not impose upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or historical event of the town is in essence an act for the special benefit of the community and not for the general welfare of the public performed in pursuance of a policy of the state. The mere fact that the celebration, as claimed was not to secure profit or gain but merely to provide entertainment to the town inhabitants is not a conclusive test. For instance, the maintenance of parks is not a source of income for the nonetheless it is private undertaking as distinguished from the maintenance of public schools, jails, and the like which are for public service. As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an undertaking or function of a municipality; the surrounding circumstances of a particular case are to be considered and will be decisive. The basic element, however beneficial to the public the undertaking may be, is that it is governmental in essence, otherwise. the function becomes private or proprietary in

character. Easily, no overnmental or public policy of the state is involved in the celebration of a town fiesta. 15 4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable for damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the municipality's officers, employees, or agents. Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. . . Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one's own acts or omission, but also for those of persons for whom one is responsible. . . On this point, the Court of Appeals found and held that there was negligence. The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now petitioners), that a member of the "extravaganza troupe removed two principal braces located on the front portion of the stage and u them to hang the screen or "telon", and that when many people went up the stage the latter collapsed. This testimony was not believed however by respondent appellate court, and rightly so. According to said defendants, those two braces were "mother" or "principal" braces located semi-diagonally from the front ends of the stage to the front posts of the ticket booth located at the rear of the stage and were fastened with a bamboo twine. 16 That being the case, it becomes incredible that any person in his right mind would remove those principal braces and leave the front portion of the stage practically unsuported Moreover, if that did happen, there was indeed negligence as there was lack of suspension over the use of the stage to prevent such an occurrence. At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo braces denied having done go. The Court of Appeals said "Amor by himself alone could not have removed the two braces which must be about ten meters long and fastened them on top of the stags for the curtain. The stage was only five and a half meters wide. Surely, it, would be impractical and unwieldy to use a ten meter bamboo pole, much more two poles for the stage curtain. 17 The appellate court also found that the stage was not strong enough considering that only P100.00 was appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of wooden planks, the Post and braces used were of bamboo material We likewise observe that although the stage was described by the Petitioners as being supported by "24" posts, nevertheless there were only 4 in front, 4 at the rear, and 5 on each side. Where were the rest? The Court of Appeals thus concluded The court a quo itself attributed the collapse of the stage to the great number of onlookers who mounted the stage. The municipality and/or its agents had the necessary means within its command to prevent such an occurrence. Having filed to take the necessary steps to maintain the safety of the stage for the use of the participants in the stage presentation prepared in connection with the celebration of the town fiesta, particularly, in preventing non participants or spectators from mounting and

accumulating on the stage which was not constructed to meet the additional weightthe defendant-appellees were negligent and are liable for the death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993) The findings of the respondent appellate court that the facts as presented to it establish negligence as a matter of law and that the Municipality failed to exercise the due diligence of a good father of the family, will not disturbed by Us in the absence of a clear showing of an abuse of discretion or a gross misapprehension of facts." 18 Liability rests on negligence which is "the want of such care as a person of ordinary prudence would exercise under the circumstances of the case." 19 Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during the town fiesta was a "donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and constructed precisely a "zarzuela stage" for the purpose, the participants in the stage show had the right to expect that the Municipality through its "Committee on entertainment and stage" would build or put up a stage or platform strong enough to sustain the weight or burden of the performance and take the necessary measures to insure the personal safety of the participants. 20 We agree. Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which was an action against the city for injuries sustained from a fall when plaintiff was descending the steps of the city auditorium. The city was conducting a "Know your City Week" and one of the features was the showing of a motion picture in the city auditorium to which the general public was invited and plaintiff Sanders was one of those who attended. In sustaining the award for Damages in favor of plaintiff, the District Court of Appeal, Second district, California, heldinter alia that the "Know your City Week" was a "proprietary activity" and not a "governmental one" of the city, that defendant owed to plaintiff, an invitee the duty of exercising ordinary care for her safety, and plaintiff was entitled to assume that she would not be exposed to a danger (which in this case consisted of lack of sufficient illumination of the premises) that would come to her through a violation of defendant duty. 21 We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality of Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a committee in charge of the entertainment and stage; an association of Malasiqui residents responded to the call for the festivities and volunteered to present a stage show; Vicente Fontanilla was one of the participants who like Sanders had the right to expect that he would be exposed to danger on that occasion. Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was Jose Macaraeg who constructed the stage. The municipality acting through its municipal council appointed Macaraeg as chairman of the sub-committee on entertainment and in charge of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine of respondent superior mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting within his assigned tasks. 22 ... when it is sought to render a municipal corporation liable for the act of servants or agents, a cardinal inquiry is, whether they are the servants or agents of the corporation. If the corporation appoints or elects them, can control them in the discharge of their duties, can continue or remove the can hold

them responsible for the manner in which they discharge their trust, and if those duties relate to the exercise of corporate powers, and are for the benefit of the corporation in its local or special interest, they may justly be regarded as its agents or servants, and the maxim of respondent superior applies." ... (Dillon on Municipal Corporations, 5th Ed., Vol IV, p. 2879) 5. The remaining question to be resolved centers on the liability of the municipal councilors who enacted the ordinance and created the fiesta committee. The Court of Appeals held the councilors jointly and solidarity liable with the municipality for damages under Article 27 of the Civil Code which provides that d any person suffering ing material or moral loss because a public servant or employee refuses or neglects, without just cause to perform his official duty may file an action for damages and other relief at the latter. 23 In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling that the holding of a town fiesta is not a governmental function and that there was negligence on their part for not maintaining and supervising the safe use of the stage, in applying Article 27 of the Civil Code against them and in not holding Jose Macaraeg liable for the collapse of the stage and the consequent death of Vicente Fontanilla. 24 We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code against the for this particular article covers a case of nonfeasance or non-performance by a public officer of his official duty; it does not apply to a case of negligence or misfeasance in carrying out an official duty. If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are concerned, it is because of a plain error committed by respondent court which however is not invoked in petitioners' brief. In Miguel v.The Court of appeal. et al., the Court, through Justice, now Chief Justice, Fred Ruiz Castro, held that the Supreme Court is vested with ample authority to review matters not assigned as errors in an appeal if it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision in a given case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We believe that this pronouncement can well be applied in the instant case. The Court of Appeals in its decision now under review held that the celebration of a town fiesta by the Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal consequence thereof is that the Municipality stands on the same footing as an ordinary private corporation with the municipal council acting as its board of directors. It is an elementary principle that a corporation has a personality, separate and distinct from its officers, directors, or persons composing it 26 and the latter are not as a rule co-responsible in an action for damages for tort or negligence culpa aquilla committed by the corporation's employees or agents unless there is a showing of bad faith or gross or wanton negligence on their part. 27 xxxxxxxxx The ordinary doctrine is that a director, merely by reason of his office, is not personally Stable for the torts of his corporation; he Must be shown to have personally voted for or

otherwise participated in them ... Fletcher Encyclopedia Corporations, Vol 3A Chapt 11, p. 207) Officers of a corporation 'are not held liable for the negligence of the corporation merely because of their official relation to it, but because of some wrongful or negligent act by such officer amounting to a breach of duty which resulted in an injury ... To make an officer of a corporation liable for the negligence of the corporation there must have been upon his part such a breach of duty as contributed to, or helped to bring about, the injury; that is to say, he must be a participant in the wrongful act. ... (pp. 207208, Ibid.) xxxxxxxxx Directors who merely employ one to give a fireworks Ambition on the corporate are not personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.) On these people We absolve Use municipal councilors from any liability for the death of Vicente Fontanilla. The records do not show that said petitioners directly participated in the defective construction of the "zarzuela" stage or that they personally permitted spectators to go up the platform. 6. One last point We have to resolve is on the award of attorney's fees by respondent court. Petitionermunicipality assails the award. Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be granted when the court deems it just and equitable. In this case of Vicente Fontanilla, although respondent appellate court failed to state the grounds for awarding attorney's fees, the records show however that attempts were made by plaintiffs, now private respondents, to secure an extrajudicial compensation from the municipality: that the latter gave prorases and assurances of assistance but failed to comply; and it was only eight month after the incident that the bereaved family of Vicente Fontanilla was compelled to seek relief from the courts to ventilate what was believed to be a just cause. 28 We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a matter of judicial discretion. The amount of P1,200.00 is fair and reasonable. PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the Municipality of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from liability and SET ASIDE the judgment against them (L-9993). Without pronouncement as to costs. SO ORDERED, Teehankee (Chairman), Makasiar, Fernandez, and Guerrero, JJ., concur.

G.R. No. L-52179 April 8, 1991 MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner vs. HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIA, IAUREANO BANIA, JR., SOR MARIETA BANIA, MONTANO BANIA, ORJA BANIA, AND LYDIA R. BANIA, respondents. Mauro C. Cabading, Jr. for petitioner. Simeon G. Hipol for private respondent.

MEDIALDEA, J.:p This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory injunction seeking the nullification or modification of the proceedings and the orders issued by the respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-BG, entitled "Juana RimandoBania, et al. vs. MacarioNieveras, et al." dated November 4, 1975; July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7, 1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally, the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of MacarioNieveras and Bernardo Balagot. The antecedent facts are as follows: Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Bania, LaureanoBania, Jr., Sor Marietta Bania, Montano Bania, OrjaBania and Lydia R. Bania are heirs of the deceased LaureanoBania Sr. and plaintiffs in Civil Case No. 107-Bg before the aforesaid court. At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger jeepney driven by Bernardo Balagot and owned by the Estate of MacarioNieveras, a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several passengers of the jeepney including LaureanoBania Sr. died as a result of the injuries they sustained and four (4) others suffered varying degrees of physical injuries. On December 11, 1966, the private respondents instituted a compliant for damages against the Estate of MacarioNieveras and Bernardo Balagot, owner and driver, respectively, of the passenger jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7, 1975, the private respondents amended the complaint wherein the petitioner and its regular employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer and raised affirmative defenses such as lack of cause of action, non-suability of the State, prescription of cause of action and the negligence of the owner and driver of the passenger jeepney as the proximate cause of the collision. In the course of the proceedings, the respondent judge issued the following questioned orders, to wit: (1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot; (2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with respect to the supposed lack of jurisdiction; (3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to Dismiss until the trial; (4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July 13, 1976 filed by the Municipality and Bislig for having been filed out of time; (5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the order of July 13, 1976; (6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing that parties have not yet submitted their respective memoranda despite the court's direction; and (7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or order to recall prosecution witnesses for cross examination. On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted as follows: IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs, and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to pay jointly and severally, plaintiffs Juana Rimando-Bania, Mrs. Priscilla B. Surell, LaureanoBania Jr., Sor Marietta Bania, Mrs. Fe B. Soriano, Montano Bania, OrjaBania and Lydia B. Bania the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected earnings of the late LaureanoBania Sr., P30,000.00 as moral damages, and P2,500.00 as attorney's fees. Costs against said defendants. The Complaint is dismissed as to defendants Estate of MacarioNieveras and Bernardo Balagot. SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion which was then pending. However, respondent judge issued another order dated November 7, 1979 denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of time. Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979, such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition. Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore, petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and adequate remedy in the ordinary course of law. On the other hand, private respondents controvert the position of the petitioner and allege that the petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner has not considered that every court, including respondent court, has the inherent power to amend and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.) The controversy boils down to the main issue of whether or not the respondent court committed grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the State amounting to lack of jurisdiction in a motion to dismiss. In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve such defense, proceeded with the trial and thereafter rendered a decision against the municipality and its driver. The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the municipality. However, said judge acted in excess of his jurisdiction when in his decision dated October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular employee. The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the Constitution, to wit: "the State may not be sued without its consent." Stated in simple parlance, the general rule is that the State may not be sued except when it gives consent to be sued. Consent takes the form of express or implied consent. Express consent may be embodied in a general law or a special law. The standing consent of the State to be sued in case of money claims involving liability arising from contracts is found in Act No. 3083. A special law may be passed to enable a person to sue the government for an alleged quasi-delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)

Consent is implied when the government enters into business contracts, thereby descending to the level of the other contracting party, and also when the State files a complaint, thus opening itself to a counterclaim. (Ibid) Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the performance of such functions because their charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39) A distinction should first be made between suability and liability. "Suability depends on the consent of the state to be sued, liability on the applicable law and the established facts. The circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of America vs. Guinto, supra, p. 659-660) Anent the issue of whether or not the municipality is liable for the torts committed by its employee, the test of liability of the municipality depends on whether or not the driver, acting in behalf of the municipality, is performing governmental or proprietary functions. As emphasized in the case of Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of powers becomes important for purposes of determining the liability of the municipality for the acts of its agents which result in an injury to third persons. Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of Indiana in 1916, thus: Municipal corporations exist in a dual capacity, and their functions are twofold. In one they exercise the right springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political and governmental. Their officers and agents in such capacity, though elected or appointed by them, are nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants of the state. In the other capacity the municipalities exercise a private, proprietary or corporate right, arising from their existence as legal persons and not as public agencies. Their officers and agents in the performance of such functions act in behalf of the municipalities in their corporate or individual capacity, and not for the state or sovereign power." (112 N.E., 994-995) (Ibid, pp. 605-606.) It has already been remarked that municipal corporations are suable because their charters grant them the competence to sue and be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmental functions and can be held answerable only if it can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued, the State merely gives the claimant the right to show that the defendant was not acting in its governmental capacity when the injury was committed or that the case comes under the exceptions recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to the Naguilianriver to get a load of sand and gravel for the repair of San Fernando's municipal streets." (Rollo, p. 29.) In the absence of any evidence to the contrary, the regularity of the performance of official duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that the driver of the dump truck was performing duties or tasks pertaining to his office. We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer, and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which the truck and the driver worked at the time of the accident are admittedly governmental activities." After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the municipality cannot be held liable for the torts committed by its regular employee, who was then engaged in the discharge of governmental functions. Hence, the death of the passenger tragic and deplorable though it may be imposed on the municipality no duty to pay monetary compensation. All premises considered, the Court is convinced that the respondent judge's dereliction in failing to resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge exceeded his jurisdiction when it ruled on the issue of liability. ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby modified, absolving the petitioner municipality of any liability in favor of private respondents. SO ORDERED. Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

G.R. No. L-30671 November 28, 1973 REPUBLIC OF THE PHILIPPINES, petitioner, vs. HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION, respondents. Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner. Andres T. Velarde and Marcelo B. Fernan for respondents.

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

properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued pursuant thereto are null and void." 3 In the answer filed by respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted with the only qualification being that the total award was in the amount of P2,372,331.40. 4 The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. . It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well as its government is immune from suit unless it gives its consent. It is readily understandable why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends." 5 Sociological jurisprudence supplies an answer not dissimilar. So it was indicated in a recent decision, Providence Washington Insurance Co. v. Republic of the Philippines, 6 with its affirmation that "a continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to go to court, at the least provocation, the loss of time and energy required to defend against law suits, in the absence of such a basic principle that constitutes such an effective obstacle, could very well be imagined." 7 This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided: "The State may not be sued without its consent." 8 A corollary, both dictated by logic and sound sense from a basic concept is that public funds cannot be the object of a garnishment proceeding even if the consent to be sued had been previously granted and the state liability adjudged. Thus in the recent case ofCommissioner of Public Highways v. San Diego, 9 such a wellsettled doctrine was restated in the opinion of Justice Teehankee: "The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law." 10 Such a principle applies even to an attempted garnishment of a salary that had accrued in favor of an employee. Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money in the hands of public officers, although it may be due government employees, is not liable to the creditors of these employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its own courts except by express authorization by the Legislature, and to subject its officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as they remain in the hands of the disbursing officer of the Government, belong to the latter, although the defendant in garnishment may be entitled to a specific portion thereof. And still

another reason which covers both of the foregoing is that every consideration of public policy forbids it." 12 In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a legitimate grievance. WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent. Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur. Barredo, J, took no part.

REPUBLIC OF THE PHILIPPINES, Petitioner,

G.R. No. 161657 Present:

- versus -

HON. VICENTE A. HIDALGO, in his capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 37, CARMELO V. CACHERO, in his capacity as Sheriff IV, Regional Trial Court of Manila, and TARCILA LAPERAL MENDOZA, Respondents.

PUNO, C.J.,Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ.

Promulgated:

October 4, 2007 x----------------------------------------------------------------------------------------x

DECISION GARCIA, J.:

Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the Republic of the Philippines (Republic, for short), thru the Office of the Solicitor General (OSG), comes to this Court to nullify and set aside the decision dated August 27, 2003 and other related issuances of the Regional Trial Court (RTC) of Manila, Branch 37, in its Civil Case No. 99-94075. In directly invoking the Courts original jurisdiction to issue the extraordinary writs of certiorari and prohibition, without challenge from any of the respondents, the Republic gave as justification therefor the fact that the case involves an over TWO BILLION PESO judgment against the State, allegedly rendered in blatant violation of the Constitution, law and jurisprudence. By any standard, the case indeed involves a colossal sum of money which, on the face of the assailed decision, shall be the liability of the national government or, in fine, the taxpayers. This consideration, juxtaposed with the constitutional and legal questions surrounding the controversy, presents special and compelling reasons of public interests why direct recourse to the Court should be allowed, as an exception to the policy on hierarchy of courts. At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title (TCT) No. 118527 of the Registry of Deeds of Manila in the name of the herein private respondent

TarcilaLaperal Mendoza (Mendoza), married to Perfecto Mendoza. The lot is situated at No. 1440 Arlegui St., San Miguel, Manila, near the Malacaang Palace complex. On this lot, hereinafter referred to as the Arlegui property, now stands the Presidential Guest House which was home to two (2) former Presidents of the Republic and now appears to be used as office building of the Office of the President.[1] The facts: Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the corresponding declaration of nullity of a deed of sale and title against the Republic, the Register of Deeds of Manila and one Atty. Fidel Vivar. In her complaint, as later amended, docketed as Civil Case No. 99-94075 and eventually raffled to Branch 35 of the court, Mendoza essentially alleged being the owner of the disputed Arlegui property which the Republic forcibly dispossessed her of and over which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic.

Answering, the Republic set up, among other affirmative defenses, the States immunity from suit. The intervening legal tussles are not essential to this narration. What is material is that in an Order of March 17, 2000, the RTC of Manila, Branch 35, dismissed Mendozas complaint. The court would also deny, in another order dated May 12, 2000, Mendozas omnibus motion for reconsideration. On a petition for certiorari, however, the Court of Appeals (CA), in CA-G.R. SP No. 60749, reversed the trial courts assailed orders and remanded the case to the court a quo for further proceedings.[2] On appeal, this Court, inG.R. No. 155231, sustained the CAs reversal action.[3] From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the remanded Civil Case No. 99-94075, the case was re-raffled to Branch 37 thereof, presided by the respondent judge. On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a copy of the intended third amended complaint thereto attached. In the May 16, 2003 setting to hear the motion, the RTC, in open court and in the presence of the Republics counsel, admitted the third amended complaint, ordered the Republic to file its answer thereto within five (5) days from May 16, 2003 and set a date for pre-trial. In her adverted third amended complaint for recovery and reconveyance of the Arlegui property, Mendoza sought the declaration of nullity of a supposed deed of sale dated July 15, 1975 which

provided the instrumentation toward the issuance of TCT No. 118911 in the name of the Republic. And aside from the cancellation of TCT No. 118911, Mendoza also asked for the reinstatement of her TCT No. 118527.[4] In the same third amended complaint, Mendoza averred that, since time immemorial, she and her predecessors-in-interest had been in peaceful and adverse possession of the property as well as of the owners duplicate copy of TCT No. 118527. Such possession, she added, continued until the first week of July 1975 when a group of armed men representing themselves to be members of the Presidential Security Group [PSG] of the then President Ferdinand E. Marcos, had forcibly entered [her] residence and ordered [her] to turn over to them her Copy of TCT No. 118525 and compelled her and the members of her household to vacate the same ; thus, out of fear for their lives, [she] handed her Owners Duplicate Certificate Copy of TCT No. 118527 and had left and/or vacated the subject property. Mendoza further alleged the following: 1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in favor of the Republic allegedly executed by her and her deceased husband on July 15, 1975 and acknowledged before Fidel Vivar which deed was annotated at the back of TCT No. 118527 under PE: 2035/T-118911 dated July 28, 1975; and 2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not executed any deed of conveyance covering the disputed property in favor of the Republic, let alone appearing before Fidel Vivar.

Inter alia, she prayed for the following: 4. Ordering the Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the use or occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS a month with a five (5%) per cent yearly increase, plus interest thereon at the legal rate, beginning July 1975 until it finally vacates the same; 5. Ordering the Republic to pay plaintiffs counsel a sum equivalent to TWENTY FIVE (25%) PER CENT of the current value of the subject property and/or whatever amount is recovered under the premises; Further, plaintiff prays for such other relief, just and equitable under the premises. On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion for Cancellation of scheduled pre-trial). In it, the Republic manifested its inability to simply adopt its previous answer and, accordingly, asked that it be given a period of thirty (30) days from May 21, 2003 or until June 20, 2003 within which to submit an Answer.[5] June 20, 2003 came and went, but no answer was filed. On July 18, 2003 and again on August 19, 2003, the OSG moved for a 30-day extension at each instance. The filing of the last two motions for extension proved to be an idle gesture, however, since the

trial court had meanwhile issued an order[6] dated July 7, 2003 declaring the petitioner Republic as in default and allowing the private respondent to present her evidence ex-parte. The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having executed the alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT No. 118911. According to her, said deed is fictitious or inexistent, as evidenced by separate certifications, the first (Exh. E), issued by the Register of Deeds for Manila and the second (Exh. F), by the Office of Clerk of Court, RTC Manila. Exhibit E[7] states that a copy of the supposed conveying deed cannot, despite diligent efforts of records personnel, be located, while Exhibit F[8] states that Fidel Vivar was not a commissioned notary public for and in the City of Manila for the year 1975.Three other witnesses[9] testified, albeit their testimonies revolved around the appraisal and rental values of the Arlegui property. Eventually, the trial court rendered a judgment by default[10] for Mendoza and against the Republic. To the trial court, the Republic had veritably confiscated Mendozas property, and deprived her not only of the use thereof but also denied her of the income she could have had otherwise realized during all the years she was illegally dispossessed of the same. Dated August 27, 2003, the trial courts decision dispositively reads as follows: WHEREFORE, judgment is hereby rendered: 1. Declaring the deed of sale dated July 15, 1975, annotated at the back of [TCT] No. 118527 as PE:2035/T-118911, as non-existent and/or fictitious, and, therefore, null and void from the beginning; Declaring that [TCT] No. 118911 of the defendant Republic of the Philippines has no basis, thereby making it null and void from the beginning; Ordering the defendant Register of Deeds for the City of Manila to reinstate plaintiff [Mendozas TCT] No. 118527; Ordering the defendant Republic to pay just compensation in the sum of ONE HUNDRED FORTY THREE MILLION SIX HUNDRED THOUSAND (P143,600,000.00) PESOS, plus interest at the legal rate, until the whole amount is paid in full for the acquisition of the subject property; Ordering the plaintiff, upon payment of the just compensation for the acquisition of her property, to execute the necessary deed of conveyance in favor of the defendant Republic ; and, on the other

2.

3.

4.

5.

hand, directing the defendant Register of Deeds, upon presentation of the said deed of conveyance, to cancel plaintiffs TCT No. 118527 and to issue, in lieu thereof, a new Transfer Certificate of Title in favor of the defendant Republic; 6. Ordering the defendant Republic to pay the plaintiff the sum of ONE BILLION FOUR HUNDRED EIGHTY MILLION SIX HUNDRED TWENTY SEVEN THOUSAND SIX HUNDRED EIGHTY EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental for the use of the subject property, the interest thereon at the legal rate, and the opportunity cost at the rate of three (3%) per cent per annum, commencing July 1975 continuously up to July 30, 2003, plus an additional interest at the legal rate, commencing from this date until the whole amount is paid in full;

Ordering the defendant Republic to pay the plaintiff attorneys fee, in an amount equivalent to FIFTEEN (15%) PER CENT of the amount due to the plaintiff. With pronouncement as to the costs of suit. SO ORDERED. (Words in bracket and emphasis added.)

7.

Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of October 7, 2003.[11] Denied also was its subsequent plea for reconsideration.[12] These twin denial orders were followed by several orders and processes issued by the trial court on separate dates as hereunder indicated: 1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final and executory.[13] December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003, the same having been filed beyond the reglementary period.[14] December 19, 2003 - - Order[15] granting the private respondents motion for execution. December 22, 2003 - - Writ of Execution.[16]

2.

3. 4.

Hence, this petition for certiorari. By Resolution[17] of November 20, 2006, the case was set for oral arguments. On January 22, 2007, when this case was called for the purpose, both parties manifested their willingness to settle the case amicably, for which reason the Court gave them up to February 28, 2007 to submit the compromise

agreement for approval. Following several approved extensions of the February 28, 2007 deadline, the OSG, on August 6, 2007, manifested that it is submitting the case for resolution on the merits owing to the inability of the parties to agree on an acceptable compromise. In this recourse, the petitioner urges the Court to strike down as a nullity the trial courts order declaring it in default and the judgment by default that followed. Sought to be nullified, too, also on the ground that they were issued in grave abuse of discretion amounting to lack or in excess of jurisdiction, are the orders and processes enumerated immediately above issued after the rendition of the default judgment. Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the order of default and the judgment by default. To the petitioner, the respondent judge committed serious jurisdictional error when he proceeded to hear the case and eventually awarded the private respondent a staggering amount without so much as giving the petitioner the opportunity to present its defense. Petitioners posture is simply without merit. Deprivation of procedural due process is obviously the petitioners threshold theme. Due process, in its procedural aspect, guarantees in the minimum the opportunity to be heard.[18] Grave abuse of discretion, however, cannot plausibly be laid at the doorstep of the respondent judge on account of his having issued the default order against the petitioner, then proceeding with the hearing and eventually rendering a default judgment. For, what the respondent judge did hew with what Section 3, Rule 9 of the Rules of Court prescribes and allows in the event the defending party fails to seasonably file a responsive pleading. The provision reads: SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence .[19] While the ideal lies in avoiding orders of default,[20] the policy of the law being to have every litigated case tried on its full merits,[21] the act of the respondent judge in rendering the default judgment after an order of default was properly issued cannot be struck down as a case of grave abuse of discretion.

The term grave abuse of discretion, in its juridical sense, connotes capricious, despotic, oppressive or whimsical exercise of judgment as is equivalent to lack of jurisdiction.[22] The abuse must be of such degree as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in a capricious manner. The word capricious, usually used in tandem with arbitrary, conveys the notion of willful and unreasoning action.[23] Under the premises, the mere issuance by the trial court of the order of default followed by a judgment by default can easily be sustained as correct and doubtless within its jurisdiction. Surely, a disposition directing the Republic to pay an enormous sum without the trial court hearing its side does not, without more, vitiate, on due procedural ground, the validity of the default judgment. The petitioner may have indeed been deprived of such hearing, but this does not mean that its right to due process had been violated. For, consequent to being declared in default, the defaulting defendant is deemed to have waived his right to be heard or to take part in the trial. The handling solicitors simply squandered the Republics opportunity to be heard. But more importantly, the law itself imposes such deprivation of the right to participate as a form of penalty against one unwilling without justification to join issue upon the allegations tendered by the plaintiff. And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge for denying its motion for new trial based on any or a mix of the following factors, viz., (1) the failure to file an answer is attributable to the negligence of the former handling solicitor; (2) the meritorious nature of the petitioners defense; and (3) the value of the property involved. The Court is not convinced. Even as the Court particularly notes what the trial court had said on the matter of negligence: that all of the petitioners pleadings below bear at least three signatures, that of the handling solicitor, the assistant solicitor and the Solicitor General himself, and hence accountability should go up all the way to the top of the totem pole of authority, the cited reasons advanced by the petitioner for a new trial are not recognized under Section 1, Rule 37 of the Rules of Court for such recourse.[24] Withal, there is no cogent reason to disturb the denial by the trial court of the motion for new trial and the denial of the reiterative motion for reconsideration. Then, too, the issuance by the trial court of the Order dated December 17, 2003[25] denying the petitioners notice of appeal after the court caused the issuance on November 27, 2003 of a certificate of finality of its August 27, 2003 decision can hardly be described as arbitrary, as the petitioner would have this Court believe. In this regard, the Court takes stock of the following key events and material dates set forth in the assailed December 17, 2003 order, supra: (a) The petitioner, thru the OSG, received on August 29, 2003 a copy of the RTC decision in this case, hence had up to September 13,

2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG filed its motion for new trial, which the RTC denied, the OSG receiving a copy of the order of denial on October 9, 2003; and (c) On October 24, 2003, the OSG sought reconsideration of the order denying the motion for new trial. The motion for reconsideration was denied per Order dated November 25, 2003, a copy of which the OSG received on the same date. Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order of December 17, 2003 merits approval: In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the decision was received on August 29, 2003 was denied and the moving party has only the remaining period from notice of notice of denial within which to file a notice of appeal. xxx Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of the fifteen day (15) prescribed for taking an appeal, which motion was subsequently denied, they had one (1) day from receipt of a copy of the order denying new trial within which to perfect [an] appeal . Since defendants had received a copy of the order denying their motion for new trial on 09 October 2003, reckoned from that date, they only have one (1) day left within which to file the notice of appeal. But instead of doing so, the defendants filed a motion for reconsideration which was later declared by the Court as pro forma motion in the Order dated 25 November 2003. The running of the prescriptive period, therefore, can not be interrupted by a pro forma motion. Hence the filing of the notice of appeal on 27 November 2007 came much too late for by then the judgment had already become final and executory.[26] (Words in bracket added; Emphasis in the original.) It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to resolving only errors of jurisdiction; it is not a remedy to correct errors of judgment. Hence, the petitioners lament, partly covered by and discussed under the first ground for allowing its petition, about the trial court taking cognizance of the case notwithstanding private respondents claim or action being barred by prescription and/or laches cannot be considered favorably. For, let alone the fact that an action for the declaration of the inexistence of a contract, as here, does not prescribe;[27] that a void transfer of property can be recovered by accionreivindicatoria;[28] and that the legal fiction of indefeasibility of a Torrens title cannot be used as a shield to perpetuate fraud,[29] the trial courts disinclination not to appreciate in favor of the Republic the general principles of prescription or laches constitutes, at best, errors of judgment not correctable by certiorari. The evidence adduced below indeed adequately supports a conclusion that the Office of the President, during the administration of then President Marcos, wrested possession of the property in question and somehow secured a certificate of title over it without a conveying deed having been

executed to legally justify the cancellation of the old title (TCT No. 118527) in the name of the private respondent and the issuance of a new one (TCT No. 118911) in the name of petitioner Republic. Accordingly, granting private respondents basic plea for recovery of the Arlegui property, which was legally hers all along, and the reinstatement of her cancelled certificate of title are legally correct as they are morally right. While not exactly convenient because the Office of the President presently uses it for mix residence and office purposes, restoring private respondent to her possession of the Arlegui property is still legally and physically feasible. For what is before us, after all, is a registered owner of a piece of land who, during the early days of the martial law regime, lost possession thereof to the Government which appropriated the same for some public use, but without going through the legal process of expropriation, let alone paying such owner just compensation. The Court cannot, however, stop with just restoring the private respondent to her possession and ownership of her property. The restoration ought to be complemented by some form of monetary compensation for having been unjustly deprived of the beneficial use thereof, but not, however, in the varying amounts and level fixed in the assailed decision of the trial court and set to be executed by the equally assailed writ of execution. The Court finds the monetary award set forth therein to be erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of discretion. As may be noted, private respondent fixed the assessed value of her Arlegui

property at P2,388,990.00. And in the prayer portion of her third amended complaint for recovery, she asked to be restored to the possession of her property and that the petitioner be ordered to pay her, as reasonable compensation or rental use or occupancy thereof, the sum of P500,000.00 a month, or P6 Million a year, with a five percent (5%) yearly increase plus interest at the legal rate beginning July 1975. From July 1975 when the PSG allegedly took over the subject property to July 2003, a month before the trial court rendered judgment, or a period of 28 years, private respondents total rental claim would, per the OSGs computation, only amount to P371,440,426.00. In its assailed decision, however, the trial court ordered the petitioner to pay private respondent the total amount of over P1.48 Billion or the mind-boggling amount of P1,480,627,688.00, to be exact, representing the reasonable rental for the property, the interest rate thereon at the legal rate and the opportunity cost. This figure is on top of the P143,600,000.00 which represents the acquisition cost of the disputed property. All told, the trial court would have the Republic pay the total amount of about P1.624 Billion, exclusive of interest, for the taking of a property with a declared assessed value of P2,388,900.00. This is not to mention the award of attorneys fees in an amount equivalent to 15% of the amount due the private respondent. In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d) of the Rules of Court[30] which defines the extent of the relief that may be awarded in a judgment by

default, i.e., only so much as has been alleged and proved. The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the complaint or beyond that proved by the evidence.[31] While a defaulted defendant may be said to be at the mercy of the trial court, the Rules of Court and certainly the imperatives of fair play see to it that any decision against him must be in accordance with law.[32] In the abstract, this means that the judgment must not be characterized by outrageous one-sidedness, but by what is fair, just and equitable that always underlie the enactment of a law. Given the above perspective, the obvious question that comes to mind is the level of compensation which for the use and occupancy of the Arlegui property - would be fair to both the petitioner and the private respondent and, at the same time, be within acceptable legal bounds. The process of balancing the interests of both parties is not an easy one. But surely, the Arlegui property cannot possibly be assigned, even perhaps at the present real estate business standards, a monthly rental value of at least P500,000.00 orP6,000,000.00 a year, the amount private respondent particularly sought and attempted to prove. This asking figure is clearly unconscionable, if not downright ridiculous, attendant circumstances considered. To the Court, an award of P20,000.00 a month for the use and occupancy of the Arlegui property, while perhaps a little bit arbitrary, is reasonable and may be granted pro hac vice considering the following hard realities which the Court takes stock of: 1. The property is relatively small in terms of actual area and had an assessed value of only P2,388,900.00; 2. What the martial law regime took over was not exactly an area with a new and imposing structure, if there was any; and 3. The Arlegui property had minimal rental value during the relatively long martial law years, given the very restrictive entry and egress conditions prevailing at the vicinity at that time and even after.

To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,[33] a case where a registered owner also lost possession of a piece of lot to a municipality which took it for a public purposes without instituting expropriation proceedings or paying any compensation for the lot, the Court, citing Herrera v. Auditor General,[34] ordered payment of just compensation but in the form of interest when a return of the property was no longer feasible. The award of attorneys fees equivalent to 15% of the amount due the private respondent, as reduced herein, is affirmed.

The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed against the Republic, unless otherwise provided by law.[35] The assailed trial courts issuance of the writ of execution[36] against government funds to satisfy its money judgment is also nullified. It is basic that government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments.[37] Republic v. Palacio[38] teaches that a judgment against the State generally operates merely to liquidate and establish the plaintiffs claim in the absence of express provision; otherwise, they can not be enforced by processes of law. Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the Office of the President which has beneficial possession of and use over it since the 1975 takeover. Accordingly, and in accord with the elementary sense of justice, it behooves that office to make the appropriate budgetary arrangements towards paying private respondent what is due her under the premises. This, to us, is the right thing to do. The imperatives of fair dealing demand no less. And the Court would be remiss in the discharge of its duties as dispenser of justice if it does not exhort the Office of the President to comply with what, in law and equity, is its obligation. If the same office will undertake to pay its obligation with reasonable dispatch or in a manner acceptable to the private respondent, then simple justice, while perhaps delayed, will have its day. Private respondent is in the twilight of her life, being now over 90 years of age.[39] Any delay in the implementation of this disposition would be a bitter cut. WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it nullified TCT No. 118911 of petitioner Republic of the Philippines and ordered the Register of Deeds of Manila to reinstate private respondent Tarcila L. Mendozas TCT No. 118527, or to issue her a new certificate of title is AFFIRMED. Should it be necessary, the Register of Deeds of Manila shall execute the necessary conveying deed to effect the reinstatement of title or the issuance of a new title to her. It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner Republic is ordered to pay private respondent the reasonable amount ofP20,000.00 a month beginning July 1975 until it vacates the same and the possession thereof restored to the private respondent, plus an additional interest of 6% per annum on the total amount due upon the finality of this Decision until the same is fully paid. Petitioner is further ordered to pay private respondent attorney's fees equivalent to 15% of the amount due her under the premises. Accordingly, a writ of certiorari is hereby ISSUED in the sense that:

1. The respondent courts assailed decision of August 27, 2003 insofar as it ordered the petitioner Republic of the Philippines to pay private respondent Tarcila L. Mendoza the sum of One Billion Four Hundred Eighty Million Six Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos (P1,480,627,688.00) representing the purported rental use of the property in question, the interest thereon and the opportunity cost at the rate of 3% per annum plus the interest at the legal rate added thereon is nullified. The portion assessing the petitioner Republic for costs of suit is also declared null and void. 2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of execution and the Writ of Execution dated December 22, 2003 against government funds are hereby declared null and void. Accordingly, the presiding judge of the respondent court, the private respondent, their agents and persons acting for and in their behalves are permanently enjoined from enforcing said writ of execution. However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru the Office of the President, is hereby strongly enjoined to take the necessary steps, and, with reasonable dispatch, make the appropriate budgetary arrangements to pay private respondent Tarcila L. Mendoza or her assigns the amount adjudged due her under this disposition. SO ORDERED.

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

CORTS, 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 265537154-3) 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: xxxxxxxxx (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. xxxxxxxxx [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 [SeeViuda 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. deVillaroya, 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 nonextendible 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. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No. 164282 October 12, 2005 TERESITA M. YUJUICO, Petitioner vs. HON. JOSE L. ATIENZA, Chairman, City School, Board of Manila, DR. MA. LUISA S. QUIONES, Co-Chairman, City School Board, and Schools Division Superintendent, ROGER GERNALE, Member, City School Board of Manila, HON. MANUEL M. ZARCAL, (in substitution of ARLENE ORTIZ), Member, City School Board of Manila, BENJAMIN VALBUENA (In substitution of MILES ROCES), Member, City School Board of Manila, LIBERTY TOLEDO, Member, City School Board of Manila, HON. FRANCESCA GERNALE (In substitution of PERCIVAL FLORIENDO), Member, City School Board of Manila, ISABELITA SANTOS, Secretary, City School Board of Manila, VICENTE MACARUBBO (In substitution of IsabelitaChing), Assistant Secretary, City School Board of Manila, CITY SCHOOL BOARD OF MANILA and JUDGE MERCEDES POSADA-LACAP, in her capacity as PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF MANILA, BRANCH 15, Respondents. DECISION Tinga, J.: This is a Petition for Review on Certiorari instituted by Teresita M. Yujuico, petitioner in the case for mandamus docketed as Civil Case No. 02-103748 before the Regional Trial Court (RTC) of Manila, Branch 15. Petitioner is questioning the propriety of the Order1 dated 25 June 2004, granting respondents Petition for Relief from Judgment under Section 2, Rule 38 of the 1997 Rules of Civil Procedure. The operative facts are not disputed. On 8 December 1995, the City Council of Manila enacted an Ordinance2 authorizing the City Mayor to acquire by negotiation or expropriation certain parcels of land for utilization as a site for the Francisco Benitez Elementary School.3 The property chosen is located along Solis St. near Juan Luna St. in the Second District of Manila and contains an approximate area of 3,979.10 square meters. It is covered by Transfer Certificates of Title Nos. 71541, 71548, 24423, 71544 and 71546, all in the name of petitioner. The Ordinance provides that an amount not to exceed the fair market value of the land then prevailing in the area will be allocated out of the Special Education Fund (SEF) of the City of Manila (City) to defray the cost of the propertys acquisition.4

Failing to acquire the land by negotiation, the City filed a case for eminent domain against petitioner as owner of the property. Filed on 22 August 1996, the case was raffled to Branch 15, RTC of Manila and docketed as Civil Case No. 96-79699.5 On 30 June 2000, the RTC rendered a Decision6in the expropriation case in favor of the City. The dispositive portion reads: WHEREFORE, judgment is hereby rendered as follows: 1.) The lots including the improvements therein of defendant Teresita M. Yujuico, as described in the complaint, are declared expropriated for public use; 2.) The fair market value of the lots of defendant is fixed at P18,164.80 per square meter. The fair market value of the improvements of lots subject of this action is fixed at P 978,000.00; 3.) The plaintiff must pay defendant the sum of P72,279,555.68 (3,979.10 sq. m. x P18,164.80) representing the value of the subject lots plus P978,000.00 representing the value of the improvements or the total amount of P73,257,555.00 as just compensation for the whole property (including the improvements) minus the sum of P5,363,289.00 that plaintiff deposited in Court per Order dated April 30, 1997, hence the balance of P67,894,266.00 with interest at the rate of 6% per annum from July 15, 1997 (date of possession of subject property for the purpose of this proceedings) until the day full payment is made to defendant or deposited in Court.7 The judgment became final and executory, no appeal having been interposed by either party.8 On 6 April 2001, petitioner filed a Motion for Execution of Judgment9 which the trial court granted. Pursuant to a Writ of Execution10 dated 28 June 2001, the branch sheriff served a Notice ofGarnishment on the funds of the City deposited with the Land Bank of the Philippines, YMCA Branch, Manila (Land Bank) to satisfy the judgment amount of P67,894,226.00, with interest at 6% per annum.11 Invoking jurisprudence holding that public funds cannot be made subject to garnishment, the City filed a motion to quash the Notice of Garnishment.12 Acting on the motion, the trial court issued an Order dated 2 August 2001. In the Order, the lower court recalled that during the hearing on the motion, the counsel for the City manifested that the amount of P36,403,170.00 had been appropriated by the City School Board (CSB) under CSB Resolutions Nos. 613 and 623, of which P31,039,881.00 was available for release. The amount of P5,363,269.00, representing fifteen percent (15%) of the assessed value of the property, had been deposited in court at the start of the expropriation proceedings and subsequently received by petitioner. In line with the manifestation made by the counsel for the City, the trial court ordered the release to petitioner of the amount of P31,039,881.00 deposited with the Land Bank, in partial payment of the just compensation adjudged in favor of petitioner.13 The trial court further stated in the Order:

Considering that this case is on all fours with the case of the Municipality of Makati vs. Court of Appeals (190 SCRA 206), wherein it was ruled that "x xx Public funds are not subject to levy and execution," the Court therefore grants plaintiffs Motion to Quash the Notice of Garnishment and the Notice of Garnishment to the Landbank of the Philippines issued by the Branch Sheriff of this Court is hereby ordered lifted. There being no opposition for the release of the Thirty One Million Thirty Nine Thousand Eight Hundred Eighty One Pesos (P31,039,881.00) deposited with the Land Bank, YMCA Branch as Special Education Fund, the Manager of the Landbank of the Philippines, YMCA, Manila is hereby directed to release the said amount to defendant Teresita M. Yujuico in partial payment of the just compensation adjudged by this Court in its Decision dated June 30, 2000. Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the authority to pass a resolution allocating funds for the full satisfaction of the just compensation fixed, the said body is hereby given thirty (30) days from receipt of this Order to pass the necessary resolution for the payments of the remaining balance due to defendant Teresita M. Yujuico.14 A copy of the Order dated 2 August 2001 was served on the CSB on 3 August 2001.15 On 30 August 2001, petitioner submitted a manifestation before the trial court requesting that she be informed by both the City and the CSB if a resolution had already been passed by the latter in compliance with the Order.16 Earlier, petitioner sent a letter to the Superintendent of City Schools of Manila to verify the CSBs compliance with the Order.17 Not having been favored with a reply to her queries even after the lapse of the thirty (30)-day compliance period, petitioner sent a letter to the CSB dated 10 September 2001, demanding compliance with the Order.18 As there was no action from the CSB, on 1 February 2002, petitioner filed a petition for contempt of court against respondents Hon. Jose L. Atienza, Jr., Dr. Ma. Luisa S. Quioes, Roger Gernale, Arlene Ortiz, Miles Roces, Percival Floriendo, Liberty Toledo, Isabelita Santos and IsabelitaChing in their capacities as officers and members of the CSB.19 The case was docketed as Civil Case No. 02-102837 of the Manila RTC.20 Countering the petition for contempt, respondents filed a Motion to Dismiss,21 wherein they alleged inter alia that they never disregarded the Order as the matter had in fact been calendared and deliberated upon during the meetings of the CSB.22 In their subsequent Omnibus Reply,23 respondents argued that petitioners failure to avail of the proper recourse to enforce the final and executory judgment24 should not be a ground to hold them in contempt of court. Citing the case of Municipality of Makati v. Court of Appeals,25 respondents asserted that petitioner should have filed a petition for mandamus to force the CSB to pass the necessary resolution for immediate payment of the balance of the just compensation awarded in her favor.26 According to respondents, petitioner took the Order as a writ of mandamus when in fact it was a mere order in furtherance of the Writ of Execution.27 This interpretation, respondents insisted,

should never be allowed since petitioner merely wanted to escape the payment of docket fees in the filing of the petition for mandamus.28 In an Order29 dated 17 May 2002, the trial court denied the petition for contempt of court. On 6 June 2002, petitioner filed a Petition for Mandamus30 against the members of the CSB, the same respondents in the petition for contempt of court, seeking to compel them to pass a resolution appropriating the amount necessary to pay the balance of the just compensation awarded to petitioner in the expropriation case, Civil Case No. 96-79699. The petition was docketed as Spl. Civil Action No. 02-103748 and raffled to Branch 51 of the RTC of Manila. 31 Upon petitioners motion,32 Branch 51 of the Manila RTC before which the mandamus case was pending, in an Order33 dated 23 August 2002, directed its consolidation with the expropriation case before Branch 15.34 In a Decision35 dated 9 October 2002, the lower court (Branch 15) granted the petition for mandamus. Specifically, it ordered respondents to immediately pass a resolution appropriating the necessary amount and the corresponding disbursement thereof for the full and complete payment of the balance of the court-adjudged compensation still due petitioner, ratiocinating as follows:36 This case is on all fours with the case of Municipality of Makati v. Court of Appeals (190 SCRA 206). .... The States 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 the public purpose, for three (3) years, the Court finds that the municipality has had more than reasonable time to pay full compensation. The arguments of the herein respondents that passing the ordinance or the act of appropriating special educational fund is a discretionary act that could not be compelled by mandamus should be thrown overboard. It must be stressed that what we have here is a final and executory judgment, establishing a legal right for the petitioner to demand fulfillment which on the other hand became an imperative duty on the part of the respondent to perform the act required. WHEREFORE, premises considered, the petition is GRANTED, and the respondents are hereby ordered to immediately pass a resolution appropriating the necessary amount; and the corresponding disbursement thereof, for the full and complete payment of the remaining balance of the court-adjudged compensation due and owing to petitioner Teresita M. Yujuico. SO ORDERED.37

Respondents filed a motion for reconsideration, which the trial court denied in an Order38 dated 13 December 2002. With respondents not interposing an appeal, the Decision became final and executory on 2 January 200339 and eventually, the corresponding Entry of Judgment was issued on 15 January 2003.40 The court granted petitioners Motion for Execution41 in an Order42 dated 12 March 2003. However, on 14 March 2003, respondents filed a Petition for Relief from Judgment,43wherein they also prayed for a temporary restraining order (TRO) and a writ of preliminary injunction. Respondents invoked excusable negligence as a ground for their failure to seasonably file an appeal.44 While it denied the application for TRO in view of its prior order granting petitioners Motion for Execution, the court granted the Petition for Relief from Judgment in an Order45 dated 25 June 2004. This had the effect of giving due course to respondents appeal despite the fact that the decision of the trial court had already attained finality. Finding the Order unacceptable, petitioner elevated it to this Court by way of a petition for certiorari under Rule 45. In her petition, petitioner asks that the order of the lower court giving due course to respondents appeal be reversed and set aside on a pure question of law.46 Before resolving the substantive issues raised by the parties, the Court will first address the procedural infirmities ascribed by respondents to the petition at bar. Respondents assail the correctness and propriety of the mode of appeal resorted to by petitioner.47 According to them, the order granting the petition for relief from judgment is an interlocutory order which cannot be made the subject of an appeal.48 Respondents likewise argue that petitioner failed to respect the rule on hierarchy of courts. This Court, they aver, had consistently held that its original jurisdiction to issue a writ of certiorari is not exclusive but is concurrent with that of the RTC and the Court of Appeals in certain cases.49 Respondents have correctly pointed out that an interlocutory order cannot be made subject to an appeal. However, when viewed in context, the recitals of the petition clearly disclose and the Court is convinced that the lower court committed grave abuse of discretion amounting to lack or excess of jurisdiction when it granted respondents petition for relief from judgment. While this case should have been elevated to this Court not by way of a petition for review under Rule 45 but through a special civil action for certiorari under Rule 65, in the exercise of our sound discretion and in order to write finis to this case which has needlessly dragged on for so long, we shall treat the petition as a special civil action for certiorari. After all, it was filed within the reglementary period for the filing of a Rule 65 petition. As we held in Salinas v. NLRC,50 in the interest of justice, this Court has often judiciously treated petitions erroneously captioned as petitions for review on certiorari as special civil actions for certiorari. This is in line with the principle that the strict application of procedural technicalities should not hinder the speedy disposition of the case on the merits.51 Accordingly, facial allegations of reversible error in the petition will be treated, as they should be, as contextual averments of grave abuse of discretion on the part of the court a quo.

Appropriately, petitioner impleaded the RTC Presiding Judge as party-respondent in the instant petition. Anent the alleged breach of the rule on hierarchy of courts, the doctrine is not an iron-clad dictum.52 The rule may be relaxed when exceptional and compelling circumstances warrant the exercise of this Courts primary jurisdiction.53 In this case, the judgment sought to be satisfied has long attained finality and the expropriated property has been utilized as a school site for five (5) years now; yet, the awarded just compensation has not been fully paid. These circumstances, in the Courts estimation, merit the relaxation of the technical rules of procedure to ensure that substantial justice will be served. Concerning petitioners alleged failure to implead the CSB or its new members before the trial court,54 respondents argue that since there are five (5) new members in the CSB any decision in the case requiring the CSB to act as a body would prove to be legally impossible. The former members of the CSB could no longer be compelled to act according to the orders of the Court since they no longer have the capacity to do so. On the other hand, respondents continue, the new members cannot be directed to comply with the Courts judgment either; they have never been impleaded in the case; thus, the Court never acquired jurisdiction over their persons.55 The arguments were effectively neutered in our Resolution dated 8 August 2005. There, we declared: Considering the arguments posited by both parties, this Court is of the view that a substitution of the original respondents by the members of the CSB who replaced them is warranted. The phrase "or such time as may be granted by the Court" in Sec. 17, Rule 3 of the 1997 Rules of Civil Procedure denotes that the Court before whom the motion for substitution is filed may grant a period longer than thirty (30) days for the purpose. In any event, technical rules on substitution of a party should not be so narrowly construed as to prevent this Court from taking cognizance of a case and deciding it on the merits. Moreover, petitioner did make an attempt to implead the new members of the CSB by making the CSB itself a respondent before this Court. There is also no showing that the new members of the CSB have deviated from the stand of their predecessors-in-interest; hence, there is a substantial need for continuing or maintaining petitioners action against them.56 In the same Resolution, the Court ordered the impleading of the new CSB members Roger Gernale, Manuel M. Zarcal, Benjamin Valbuena and Francesca Gernale as party respondents the last three in substitution of Arlene Ortiz, Percival Floriendo, Miles Rocesand the new CSB Assistant Secretary Vicente Macarubbo in substitution of Isabelita Ching.57 Only Manuel Zarcal filed a Comment58 dated 30 August 2005 through a new counsel, adopting in toto the comment of his co-respondents. Hence, the other four newly impleaded party respondents are deemed to have retained the Office of the City Legal Officer (OCLO) as their counsel and to have adopted the Comment already filed by the OCLO in behalf of their co-respondents. Thus, the proper substitutions of some party respondents have already taken place in this case.

The last procedural hurdle thrown petitioners way by respondents refers to the supposed failure of the petition to comply with the requirements of Section 4, Rule 7 and Section 4, Rule 45 of the 1997 Rules of Civil Procedure59 as amended by Supreme Court Circular A.M. No. 00-2-10-SC.60 Respondents claim that there was failure to include a verified statement indicating the material dates relative to the receipt of the judgments and the filing of the pleadings. The verification, moreover, allegedly failed to state that petitioner has read the petition61 and that the copies attached thereto are based on authentic records.62 The defects of the verification allegedly render the petition without legal effect and constitute grounds for its dismissal. The purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made in good faith; or are true and correct, not merely speculative.63 This requirement is simply a condition affecting the form of pleadings and non-compliance therewith does not necessarily render it fatally defective.64 Perusal of the verification in question shows that there was sufficient compliance with the requirements of the Rules and the alleged defects are not so material as to justify the dismissal of the petition. Now, the substantial issues. Up for determination is the tenability of the RTCs favorable action on respondents petition for relief from judgment. This engenders a look at the grounds and defenses relied upon by respondents in support of their petition. Sections 2 and 3, Rule 38 of the 1997 Rules of Civil Procedure provide that a petition for relief may be granted upon a showing that (1) through fraud, accident, mistake or excusable negligence, a party has been prevented from taking an appeal, and (2) the party has a good and substantial cause of action or defense. The above requisites notwithstanding, it bears stressing that relief from judgment is premised on equity. It is an act of grace which is allowed only in exceptional cases.65 In this case, according to respondents they were unable to seasonably file a notice of appeal due to "excusable negligence."66 One Ronald Silva (Silva), an employee of the OCLO, allegedly failed to forward the Order denying respondents motion for reconsideration in Civil Case No. 02-103748 to the handling lawyers. When the order was delivered to the OCLO on 17 December 2002,67 Silva was the one who received it because the employee designated to do so was out on official business.68 Since the employees were busy preparing for the office Christmas party that day,69 Silva forgot all about the order. He only remembered it when the order for entry of judgment in the case was received on 29 January 2003. By that time, however, the order dated 17 December 2002 had already been misplaced.70 Clearly, the situation does not present a case of excusable negligence which would warrant relief under Rule 38. Time and again, this Court has ruled that the inability to perfect an appeal in due time by reason of failure of a counsels clerk to notify the handling lawyer is not a pardonable oversight.71 As held in one case: . . . The excuse offered by respondent . . . as reason for his failure to perfect in due time his appeal from the judgment of the Municipal Court, that counsels clerk forgot to hand him the court notice, is the most hackneyed and habitual subterfuge employed by litigants who fail to

observe the procedural requirements prescribed by the Rules of Court. The uncritical acceptance of this kind of common-place excuses, in the face of the Supreme Courts repeated rulings that they are neither credible nor constitutive of excusable negligence (Gaerlan v. Bernal, L-4039, 29 January 1952; Mercado v. Judge Domingo, L-19457, 17 December 1966) is certainly such whimsical exercise of judgment as to be a grave abuse of discretion. .... In the face of all these facts and circumstances, . . . the respondent judge revealed a simpleminded willingness to swallow a story patently concocted to delay as much as possible the satisfaction of a judgment against respondent . . . .This indiscriminating credulity does not conform to what is to be expected of a judicial mind.72 Reiterated in numerous cases is the rule that the clerks faults are attributable to the handling lawyers.73 Thus, excuses offered based on the formers negligence are not deemed excusable. That the admonitions issued out by this Court were mostly directed against lawyers in law firms does not exempt respondents herein from the same treatment. For all intents and purposes, the set-up at the OCLO is akin to that of a law firm, the only difference being that the former serves a public entity while the latter caters to private clients. The following pronouncement in Negros Stevedoring Co., Inc. v. Court of Appeals74 is apropos: The negligence committed in the case at bar cannot be considered excusable, nor is it unavoidable. Time and again, the Court has admonished law firms to adopt a system of distributing pleadings and notices, whereby lawyers working therein receive promptly notices and pleadings intended for them, so that they will always be informed of the status of their cases. The Court has also often repeated that the negligence of clerks which adversely affect the cases handled by lawyers is binding upon the latter.75 Without doubt, it was grave abuse of discretion for the lower court to have given due course to respondents appeal through the grant of their petition for relief from judgment based on the flimsy ground they proferred. Even assuming that the negligence invoked by respondents could be considered excusable, still the petition should not have been granted. It must be borne in mind that two requisites must be satisfied before a petition under Rule 38 may be granted, the other being the existence of a good and substantial cause of action or defense. Respondents defense consisted of their claim that the CSB has a personality separate and distinct from the City such that it should not be made to pay for the Citys obligations.76 However, the argument is undercut by the particular circumstances of this case. It is worthy of note that the records of this case clearly show that the same counsel, the OCLO, represented the City in the expropriation case and now, all except one of the individual respondents in the case at bar. Worthy of note are the following manifestations relied upon by the lower court in issuing the order on the motion to quash the Notice of Garnishment over the funds of the City, to wit:

The Motion to Quash Notice of Garnishment was heard by this court this morning and Atty. Joseph Aquino appeared for the plaintiff (City of Manila) and Atty. Federico Alday, for the defendant. Atty. Aquino manifested that the amount of Thirty Six Million Four Hundred Three Thousand One Hundred Seventy Pesos (P36,403,170.00) had been appropriated by the City School Board (CSB) under CSB Resolution Nos. 613 and 623 for this purpose. .... Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the authority to pass a resolution allocating funds for the full satisfaction of the just compensation fixed, the said body is hereby given thirty (30) days from receipt of this Order to pass the necessary resolution for the payments of the remaining balance due to defendant Teresita M. Yujuico. (Emphasis supplied.)77 The manifestation was made by the same counsel now claiming that it is actually the City which should be made liable for the payment of its own obligations. This, after it trotted out the CSB as the entity with authority to pass a resolution that would satisfy the obligation it had vigorously pursued. The above circumstances, coupled with the rule that an act performed by counsel within the scope of a "general or implied authority" is regarded as an act of the client,78 render the City and, through it, respondents in estoppel. By estoppel is meant that an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon.79 Petitioner and the courts acted in accordance with the Citys own manifestations by running after the CSB. At this point, respondents and the OCLO can no longer turn around and toss the obligation back to the City. After all, it was the legal counsel of both the City and respondents who made a big production out of showing that the liability incurred by the City will be borne by the CSB. Contrary to respondents claim, the law does not make the CSB an entity independent from the City of Manila. This is evident from the provisions of the Local Government Code of 1991, the law providing for the creation of school boards. It states: TITLE IV.- LOCAL SCHOOL BOARDS Section 98.Creation, Composition and Compensation.(a) There shall be established in every province, city or municipality a provincial, city, or municipal school board, respectively. (b) The composition of local school boards shall be as follows: ... (2) The city school board shall be composed of the city mayor and the city superintendent of schools as co-chairmen; the chairman of the education committee of the

sangguniangpanlungsod, the city treasurer, the representative of the "pederasyonngmgasangguniangkabataan" in the sangguniangpanlungsod, the duly elected president of the city federation of parents-teachers associations, the duly elected representative of the non-academic personnel of public schools in the city, as members; ... Section 101.Compensation and Remuneration.The co-chairmen and members of the provincial, city or municipal school board shall perform their duties as such without compensation or remuneration. Members thereof who are not government officials or employees shall be entitled to traveling expenses and allowances chargeable against the funds of the local school board concerned, subject to existing accounting and auditing rules and regulations.80 The fact that the highest ranking official of a local government unit (LGU) is designated as cochairman of the school board negates the claim in this case that the CSB has a personality separate and distinct from the City. The other fact that government officials in the school board do not receive any compensation or remuneration while NGO representatives merely receive allowances underscores the absurdity of respondents argument all the more. Indeed, such would not be the situation if the school board has a personality separate and distinct from the LGU. Respondents also argue that the members of the CSB cannot be directed to decide a discretionary function in the specific manner the court desires.81 The question of whether the enactment of an ordinance to satisfy the appropriation of a final money judgment rendered against an LGU may be compelled by mandamus has already been settled in Municipality of Makati v. Court of Appeals.82 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 therefore [SeeViuda De Tan Toco v. The Municipal Council of Iloilo, supra, Baldivia v. Lota, 107 Phil 1099 (1960); Yuviengco v. Gonzales, 108 Phil 247 (1960)].83 Clearly, mandamus is a remedy available to a property owner when a money judgment is rendered in its favor and against a municipality or city, as in this case. Moreover, the very ordinance authorizing the expropriation of petitioners property categorically states that the payment of the expropriated property will be defrayed from the SEF. To quote: An amount not to exceed the current fair market value, prevailing in the area appraised in accordance with the requirements of existing laws, rules and regulations, of the property to be acquired or so much thereof as may be necessary for the purpose shall be allocated out of the

Special Education Fund of the City to defray the cost of acquisition of the above-mentioned parcels of land.84 The legality of the above-quoted provision is presumed. The source of the amount necessary to acquire petitioners property having in fact been specified by the City Council of Manila, the passage of the resolution for the allocation and disbursement thereof is indeed a ministerial duty of the CSB. Furthermore, respondents had argued in the petition for contempt filed against them by petitioner that the latters failure to invoke the proper remedy of mandamus should not be a ground to penalize them with contempt. In their haste to have the contempt petition dismissed, respondents consistently contended that what petitioner should have filed was a case for mandamus to compel passage of the corresponding resolution of the CSB if she wanted immediate payment.85 Having relied on these representations of respondents and having filed the action they adverted to, petitioner cannot now be sent by respondents on another wild goose chase to obtain ultimate recovery of what she is legally entitled to. While this Court recognizes the power of LGU to expropriate private property for public use, it will not stand idly by while the expropriating authority maneuvers to evade the payment of just compensation of property already in its possession. The notion of expropriation is hard enough to take for a private owner. He is compelled to give up his property for the common weal. But to give it up and wait in vain for the just compensation decreed by the courts is too much to bear. In cases like these, courts will not hesitate to step in to ensure that justice and fair play are served. As we have already ruled: . . . This Court will not condone petitioners 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 States 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 (Consculluela 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).86 The decision rendering just compensation in petitioners favor was promulgated way back in the year 2000.87 Five years have passed, yet the award still has not been fully satisfied. Recently, in Republic v. Lim,88this Court made the following pronouncement: . . . while the prevailing doctrine is that the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots, however, in cases where the government failed to pay just compensation within five (5) years from the finality of judgment

in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that the government cannot keep the property and dishonor the judgment. To be sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation.89 (Citations omitted) Given the above ruling, the reversion of the expropriated property to the petitioner would prove not to be a remote prospect should respondents and the City they represent insist on trudging on their intransigent course. One final note. Respondents appeal from the Decision dated 9 October 2002 of the lower court, made possible by its grant of their petition for relief, is before the Court of Appeals where it is docketed as CA-G.R. No. 86692.90 The courts Decision in this case would have obvious consequences on said appeal; hence, referral of this Decision to the Court of Appeals is in order. WHEREFORE, the petition is GRANTED. The Order of the trial court dated 25 June 2004, granting respondents Petition for Relief from Judgment is REVERSED and set aside and its Decision dated 9 October 2002, ordering respondents to immediately pass a resolution for the payment of the balance of the court-adjudged compensation due petitioner, is reinstated. Let a copy of this Decision be furnished the Court of Appeals for its information and guidance in relation to CA-G.R. No. 86692 entitled "Teresita M. Yujuico v. Hon. Jose L. Atienza, Jr., et al." SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: REYNATO S. PUNO Associate Justice Chairman (On Leave) MA. ALICIA AUSTRIA-MARTINEZ, ROMEO J. CALLEJO, SR. Associate Justice Associate Justice MINITA V. CHICO-NAZARIO

Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Associate Justice Chairman, Second Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. HILARIO G. DAVIDE, JR. Chief Justice

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 77765 August 15, 1988 SEBASTIAN COSCULLUELA, petitioner, vs. THE HONORABLE COURT OF APPEALS and the REPUBLIC OF THE PHILIPPINES, represented by NATIONAL IRRIGATION ADMINISTRATION, respondents. Pio G. Villoso for petitioner.

GUTIERREZ, JR., J.: This is a petition for review on certiorari which seeks to set aside the decision of the Court of Appeals nullifying the orders of the trial court on the ground that said orders in effect, sought the enforcement of a writ of execution against government funds. The petitioner contends that to set aside the writ of execution would be an abridgment of his right to just compensation and due process of law. The public respondents on the other hand, state that government funds cannot be disbursed without proper appropriation and that a writ of execution cannot legally issue against the State. On March 8, 1976, the Republic of the Philippines filed a complaint with the Court of First Instance of Iloilo to expropriate two parcels of land in the municipality of Barotac, Iloilo owned by petitioner Sebastian Cosculluela and one MitaLumampao, for the construction of the canal network of the Barotac Irrigation Project. On April 4, 1976, the trial court rendered a decision granting the expropriation and ordered the public respondent to pay the following amounts:
1. To MitaLumampao, the sum of P20,000 minus P4,001.82 which she had already withdrawn plus P3,000 attorney's fees; and 2. Sebastian Cosculluela, the sum of P200,000.00 which is the reasonable estimate of his actual and consequential loss by reason of the taking of his 3 hectares of land, destruction of the sugarcane therein and the reduce in the yield of his sugarcane farm due to water lagging and seepage; plus attorney's fees of P10,000 and litigation expenses of P5,000.00. (p. 36, Rollo)

On appeal, the Court of Appeals modified the trial court's decision in that the attorney's fees and litigation expenses were reduced from P10,000.00 and P5,000.00 to P5,000.00 and P2,500.00 respectively. The decision became final and executory on September 21, 1985. On May 7, 1986, on motion of the petitioner, the trial court ordered the issuance of a writ of execution to implement the judgment of the appellate court. On August 11, 1986, the respondent Republic filed a motion to set aside the order of May 7, 1986 as well as the writ of execution issued pursuant thereto, contending that the funds of the National Irrigation Authority (NIA) are government funds and therefore, cannot be disbursed without a government appropriation. On October 6, 1986, the lower court issued an order modifying its order of May 7, 1986, directing instead that the respondenit Republic deposit with the Philippine National Bank (PNB) in the name of the petitioner, the amount adjudged in favor of the latter. The respondent filed a petition with the Court of Appeals to annul the orders of May 7 and October 6, 1986. On November 25, 1986, the appellate court rendered the questioned decision setting aside the aforementioned orders of the trial court on the ground that public or government funds are not subject to levy and execution. In this instant petition, the petitioner assails the decision of the appellate court as being violative of his right to just compensation and due process of law. He maintains that these constitutional guarantees transcend all administrative and procedural laws and jurisprudence for as between these said laws and the constitutional rights of private citizens, the latter must prevail. As admitted by the respondent Republic, the NIA took possession of the expropriated property in 1975 and for around ten (10) years already, it has been servicing the farmers on both sides of the Barotac Viejo Irrigation Project in Iloilo Province and has been collecting fees therefor by way of taxes at the expense of the petitioner. On the other hand, the petitioner, who is already more than eighty (80) years old and sickly, is undergoing frequent hospitalization, and is made to suffer further by the unconscionable delay in the payment of just compensation based on a final and executory judgment. The respondent Republic, on the other hand, argues that while it has no intention of keeping the land and dishonoring the judgment, the manner by which the same will have to be satisfied must not be inconsistent with prevailing jurisprudence, and that is, that public funds such as those of the respondent NIA cannot be disbursed without the proper appropriation. We rule for the petitioner.

One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private property without due process of law; and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use. Thus, in the case of Province of Pangasinan v. CFI Judge of Pangasinan, Branch VIII (80 SCRA 117, 120-121), this Court speaking through then Chief Justice Fernando ruled:
There is full and ample recognition of the power of eminent domain by Justice Street in a leading case of Visayan Refining Co. v. Camus (4C) Phil. 550 [1919]) decided prior to the Commonwealth, the matter being governed by the Philippine Autonomy Act of 1916, otherwise known as the Jones Law. It was characterized as "inseparable from sovereignty being essential to the existence of the State and inherent in government even in its most primitive forms." (Ibid, 558) Nonetheless, he was careful to point out: "In other words, the provisions now generally found in the modern laws of constitutions of civilized countries to the effect that private property shall not be taken for public use without just compensation have their origin in the recognition of a necessity for restraining the sovereign and protecting the individual. (Ibid, 559) Moreover, he did emphasize: "Nevertheless it should be noted that the whole problem of expropriation is resolvable in its ultimate analysis into a constitutional question of due process of law. ... Even were there no organic or constitutional provision in force requiring compensation to be paid, the seizure of one's property without payment, even though intended for a public use, would undoubtedly be held to be a taking without due process of law and a denial of the equal protection of the laws. That aspect of the matter was stressed in the recent case of J. M. Tuason and Co., Inc. v. Land Tenure Administration. (31 SCRA 413) Conformably to such a fundamental principle then, in accordance with a constitutional mandate, this Court has never hesitated to assure that there be just compensation. If it were otherwise, the element of arbitrariness certainly would enter. It is bad enough that an owner of a property, in the event of the exercise of this sovereign prerogative, has no choice but to yield to such a taking. It is infinitely worse if thereafter, he is denied all these years the payment to which he is entitled. This is one of the instances where law and morals speak to the same effect. (Cf. Province of Tayabas v. Perez, 66 Phil. 467 [1938] and other related cases).

The property of the petitioner was taken by the government in 1975. The following year, respondent NIA made the required deposit of P2,097.30 with the Philippine National Bank and within the same year, the Barotac Viejo Irrigation Project was finished. Since then, for more than a period of ten (10) years, the project has been of service to the farmers nearby in the province of Iloilo. It is, thus, inconceivable how this project could have been started without the necessary appropriation for just compensation. Needless to state, no government instrumentality, agency, or subdivision has any business initiating expropriation proceedings unless it has adequate funds, supported by proper appropriation acts, to pay for the property to be seized from the owner. Not only was the government able to make an initial deposit of P2,097.30 but the project was finished in only a year's time. We agree with the petitioner that before the respondent NIA undertook the construction of the Barotac Viejo Irrigation Project, the same was duly authorized, with the corresponding funds appropriated for the payment of expropriated land and to pay for equipment, salaries of personnel, and other expenses incidental to the project. The NIA officials responsible for the project have to do plenty of explaining as to where they misdirected the funds intended for the expropriated property.

The present case must be distinguished from earlier cases where payment for property expropriated by the National Government may not be realized upon execution. As a rule, the legislature must first appropriate the additional amount to pay the award. (See Commissioner of Public Highways v. San Diego, 31 SCRA 616 and Visayan Refining Co. v. Camus &Paredes, 40 Phil. 550). In the present case, the Barotac Viejo Project was a package project of government. Money was allocated for an entire project. Before bulldozers and ditch diggers tore up the place and before millions of pesos were put into the development of the project, the basic responsibility of paying the owners for property seized from them should have been met. Another distinction lies in the fact that the NIA collects fees for the use of the irrigation system constructed on the petitioner's land. It does not have to await an express act of Congress to locate funds for this specific purpose. The rule in earlier precedents that 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 (Commissioner of Public Highways v. San Diego, supra, at p. 625) is not applicable here. There is no showing of any public service to be disrupted if the fees collected from the farmers of Iloilo for the use of irrigation water from the disrupted property were utilized to pay for that property. We must emphasize that nowhere in any expropriation case has there been a deviation from the rule that the Government must pay for expropriated property. In the Commissioner of Public Highways case, the Court stressed that it is incumbent upon the legislature to appropriate the necessary amount because it cannot keep the land and dishonor the judgment. This case illustrates the expanded meaning of "public use" in the eminent domain clause. (Constitution, Article III, Section 9.) The petitioner's land was not taken for the construction of a road, bridge, school, public buildings, or other traditional objects of expropriation. When the National Housing Authority expropriates raw land to convert into housing projects for rent or sale to private persons or the NIA expropriates land to construct irrigation systems and sells water rights to farmers, it would be the height of abuse and ignominy for the agencies to start earning from those properties while ignoring final judgments ordering the payment of just compensation to the former owners. Just 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. Thus, in the case of Provincial Government of Sorsogon v. Rosa E. Vda.deVillaroyo(153 SCRA 291), we ruled:

The petitioners have been waiting for more than thirty years to be paid for their land which was taken for use as a public high school. As a matter of fair procedure, it is the duty of the Government whenever it takes property from private persons against their will to supply all required documentation and facilitate payment of just compensation. The imposition of unreasonable requirements and vexatious delays before effecting payment is not only galling and arbitrary but a rich source of discontent with government. There should be some kind of swift and effective recourse against unfeeling and uncaring acts of middle or lower level bureaucrats. Under ordinary circumstances, immediate return to the owners of the unpaid property is the obvious remedy. ln cases where land is taken for public use, public interest, however, must, be considered. The children of Gubat, Sorsogon have been using the disputed land as their high school athletic grounds for thirty years. (Emphasis supplied) In the present case, the irrigation project was completed and has been in operation since 1976. The project is benefitting the farmers specifically and the community in general. Obviously, the petitioner's land cannot be returned to him. However, it is high time that the petitioner be paid what was due him eleven years ago. It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a person's property, allow the judgment of the court to become final and executory and then refuse to pay on the ground that there are no appropriations for the property earlier taken and profitably used. We condemn in the strongest possible terms the cavalier attitude of government officials who adopt such a despotic and irresponsible stance.

WHEREFORE, the petition is hereby GRANTED. The decision and order of the respondent appellate court dated November 25, 1987 and February 16, 1987 respectively are ANNULLED and SET ASIDE. The Regional Trial Court of Iloilo City is ordered to immediately execute the final judgment in Civil Case No. 10530 and effect payment of P200,000.00 as just compensation deducting therefrom the partial payment already deposited by the respondent at the institution of the action below with legal interest from September 21, 1985, plus P5,000.00 attorney's fees and P2,500.00 litigation expenses. SO ORDERED. Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC

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. 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.
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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.
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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.
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Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate business.
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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 Paraaque, Metro Manila and registered in the name of petitioner.
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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).
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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.
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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). I 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).
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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.
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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.
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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.
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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).
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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.
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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).
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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.
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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).
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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.
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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).
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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.
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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]).
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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.
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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.
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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.
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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.
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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]).
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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]).
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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]).
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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).
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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]).
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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]).
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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.
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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.
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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]).
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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 imperiiof 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]).
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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."
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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 gestionisor an act jure imperii.
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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.
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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]).
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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.
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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. 90183 against petitioner is DISMISSED.
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SO ORDERED. Narvasa, C.J., Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan and Mendoza, JJ.,concur.
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Padilla, J., took no part.

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Feliciano, J., is on leave.

EN BANC [G.R. No. 154705. June 26, 2003] THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES VINZON, doing business under the name and style of VINZON TRADE AND SERVICES, respondent. 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 CounselorAzhariKasim 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, SitiPartinah, 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

AzhariKasim, 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 respondents 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.[2 Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision to terminate the agreement. On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful. Respondent cites various circumstances which purportedly negated petitioners alleged dissatisfaction over respondents 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 complaint3 against petitioners docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy diplomatic immunity.4 In turn, respondent filed on March 20, 2001, an Opposition to the said motion alleging that the Republic of Indonesia has expressly waived its immunity from suit. He based this claim upon the following provision in the Maintenance Agreement: Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the Philippines and by the proper court of Makati City, Philippines. Respondents 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 courts denial of the Motion to Dismiss was brought up to the Court of Appeals by herein petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived their immunity from suit. On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit.[6 On August 16, 2002, it denied herein petitioners motion for reconsideration.[7 Hence, this petition. In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in sustaining the trial courts decision that petitioners have waived their immunity from suit by using as its basis the abovementioned provision in the Maintenance Agreement. The petition is impressed with merit. International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.8 The rule that a State may not be sued without its consent is a necessary consequence of the principles of independence and equality of States.[9 As enunciated in Sanders v. Veridiano II,[10 the practical justification for the doctrine of sovereign immunity is that there can be no legal right against the authority that makes the law on which the right depends. In the case of foreign States, the rule is derived from the principle of the sovereign equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another.[11 A contrary attitude would unduly vex the peace of nations.12

The rules of International Law, however, are neither unyielding nor impervious to change. The increasing need of sovereign States to enter into purely commercial activities remotely connected with the discharge of their governmental functions brought about a new concept of sovereign immunity. This concept, the restrictive theory, holds that the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not with regard to private acts or acts jure gestionis.13 In United States v. Ruiz,[14 for instance, we held that the conduct of public bidding for the repair of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the hiring of a cook in the recreation center catering to American servicemen and the general public at the John Hay Air Station in Baguio City,15 as well as the bidding for the operation of barber shops in Clark Air Base in Angeles City.[16 Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be construed as the ultimate test of whether or not it is an 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, 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: x xx 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. x xx The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance Agreement is not covered by the exceptions provided in the abovementioned provision. The Solicitor General believes that said act may fall under subparagraph (c) thereof,[20 but said provision clearly applies only to a situation where the diplomatic agent engages in any professional or commercial activity outside official functions, which is not the case herein. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against petitioners is DISMISSED. No costs. SO ORDERED. Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, and Callejo, Sr., JJ., concur. Austria-Martinez, J., on leave.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 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 trumpedup 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 Attach 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 Iigo, an informer of the Intelligence Unit of the military. Jose Iigo, 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 Iigo, 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 defendants 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.nt "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 attach 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 pretrial. In his answer, Scalzo denied the material allegations of the complaint and raised the affirmative defenses (a) of Minuchers 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 Courts 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 Scalzos 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.3 Even while 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 Scalzos 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 counsel6 to show (a) that the United States Embassy, affirmed by its Vice Consul, 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 Attach 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.7 By the end of the 16th century, when the earliest treatises on diplomatic law were published, the inviolability of ambassadors was firmly established as a rule of customary international law.8 Traditionally, the exercise of diplomatic intercourse among states was undertaken by the head of state 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,10 (b) envoys,11 ministers or internuncios accredited to the heads of states; and (c) charges d' affairs12 accredited to the ministers of foreign affairs.13 Comprising the "staff of the (diplomatic) mission" 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 Attach of the United States diplomatic mission and was accredited as such by the Philippine Government. An attach 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.14 These officials are not generally 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 Attach 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,15 the Court has recognized that, in such matters, the hands 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.16 The government of the United States itself, which Scalzo claims to be acting for, has 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."17 Supplementary criteria for accreditation are the possession of a valid diplomatic passport or, from States 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.18 Diplomatic missions are requested to provide the most 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 suit20 and, with the emergence of democratic states, made to attach not just to the person of the head of state, or his representative, but also distinctly to the state itself in its sovereign capacity.21 If the acts giving rise to a suit are those of a foreign government done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a state is believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit of an individual but for the State, in whose service he is, under the maxim - par in parem, non habet imperium - that all states are sovereign equals and cannot assert jurisdiction over one another.22 The 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,24 involving officers of the United States Air Force and special officers of the 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 Appeals26 elaborates: "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 buybust 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. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 140231 July 9, 2007

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), represented by ORLANDO L. SALVADOR, petitioner, vs. HON. ANIANO A. DESIERTO, Office of the Ombudsman-Manila, CONCERNED MEMBERS OF THE PNB BOARD OF DIRECTORS, REYNALDO TUASON, CARLOS CAJELO, JOSE BARQUILLO, JR., LORETO SOLSONA, PRIMICIAS BANAGA, JOHN DOES, and NORTHERN COTABATO SUGAR INDUSTRIES, INC. (NOCOSII), respondents. DECISION AUSTRIA-MARTINEZ, J.: The Presidential Commission on Good Government1 (petitioner) filed the herein Petition for Certiorari under Rule 65 of the Rules of Court assailing the Resolution2 dated May 21, 1999 of Ombudsman Aniano A. Desierto in OMB No. 0-95-0890 which dismissed petitioner's criminal complaint for violation of Section 3(e) and (g) of Republic Act (R.A.) No. 30193 against concerned members of Philippine National Bank (PNB) Board of Directors and Northern Cotabato Sugar Industries, Inc. (NOCOSII) officers, namely: Reynaldo Tuason, Carlos Cajelo, Jose Barquillo, Jr., Loreto Solsona, PrimiciasBanaga and John Does (respondents); and the Order4 dated July 23, 1999 which denied petitioner's Motion for Reconsideration. The facts: On October 8, 1992, then President Fidel V. Ramos issued Administrative Order No. 13 creating the Presidential Ad Hoc Fact-Finding Committee on Behest Loans (Committee) which was tasked to inventory all behest loans, determine the parties involved and recommend whatever appropriate actions to be pursued thereby. On November 9, 1992, President Ramos issued Memorandum Order No. 61 expanding the functions of the Committee to include the inventory and review of all non-performing loans, whether behest or non-behest. The Memorandum set the following criteria to show the earmarks of a "behest loan," to wit: "a) it is undercollaterized; b) the borrower corporation is undercapitalized; c) a direct or indirect endorsement by high government officials like presence of marginal notes; d) the stockholders,

officers or agents of the borrower corporation are identified as cronies; e) a deviation of use of loan proceeds from the purpose intended; f) the use of corporate layering; g) the non-feasibility of the project for which financing is being sought; and, h) the extraordinary speed in which the loan release was made." Among the accounts referred to the Committee's Technical Working Group (TWG) were the loan transactions between NOCOSII and PNB. After it had examined and studied all the documents relative to the said loan transactions, the Committee classified the loans obtained by NOCOSII from PNB as behest because of NOCOSII's insufficient capital and inadequate collaterals. Specifically, the Committee's investigation revealed that in 1975, NOCOSII obtained loans by way of Stand-By Letters of Credit from the PNB; that NOCOSII was able to get 155% loan value from the offered collateral or an excess of 85% from the required percentage limit; that the plant site offered as one of the collaterals was a public land contrary to the General Banking Act; that by virtue of the marginal note of then President Marcos in the letter of Cajelo, NOCOSII was allowed to use the public land as plant site and to dispense with the mortgage requirement of PNB; that NOCOSII's paidup capital at the time of the approval of the guaranty was only P2,500,000.00 or only about 6% of its obligation. Based on the Sworn Statement of PCGG consultant Orlando Salvador, petitioner filed with the Office of the Ombudsman the criminal complaint against respondents. Petitioner alleges that respondents violated the following provisions of Section 3 (e) and (g) of R.A. No. 3019: Sec. 3.Corrupt practices of public officers. In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful: x xx e. Causing undue injury to any party, including the Government or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions. x xx g. Entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby. The respondents failed to submit any responsive pleading before the the Ombudsman, prompting Graft Investigator Officer (GIO) I Melinda S. Diaz-Salcedo to resolve the case based on the available evidence.

In a Resolution dated January 12, 1998 in OMB-0-95-0890, GIO Diaz-Salcedo recommended the dismissal of the case on the ground of insufficiency of evidence or lack of probable cause against the respondents and for prescription of the offense. Ombudsman Desierto approved the recommendation on May 21, 1999.5 Petitioner filed a Motion for Reconsideration6 but it was denied by GIO Diaz-Salcedo in the Order dated July 9, 1999, which was approved by Ombudsman Desierto on July 23, 1999.7 Forthwith, petitioner elevated the case to this Court and in support of its petition alleges that: A) The Respondent Ombudsman gravely abused his discretion or acted without or in excess of jurisdiction in dismissing the complaint filed by the Petitioner on the ground of Prescription considering that: 1. THE RIGHT OF THE STATE TO RECOVER BEHEST LOANS AS ILLGOTTEN WEALTH IS IMPRESCRIPTIBLE UNDER ARTICLE XI, SECTION 15, OF THE 1987 CONSTITUTION; 2. PRESCRIPTION DOES NOT RUN IN FAVOR OF A TRUSTEE TO THE PREJUDICE OF THE BENEFICIARY; 3. THE OFFENSES CHARGED ARE IN THE NATURE OF CONTINUING CRIMES AS THE STATE CONTINUES TO SUFFER INJURY ON EACH DAY OF DEFAULT IN PAYMENT. HENCE, PRESCRIPTION DOES NOT APPLY; 4. PRESCRIPTION AS A MATTER OF DEFENSE MUST BE PLEADED, OTHERWISE, IT IS DEEMED WAIVED; 5. PRESCRIPTION HAS NOT BEEN INVOKED IN THIS CASE. SINCE IT MAY BE WAIVED OR MAY NOT BE SET IN DEFENSE, THE OMBUDSMAN CANNOT MOTU PROPRIO DISMISS THE COMPLAINT ON GROUND OF PRESCRIPTION; 6. ARTICLE 91 OF THE REVISED PENAL CODE WHICH ADOPTS THE "DISCOVERY RULE" SHALL APPLY IN THIS CASE; 7. THE LOAN CONTRACT AS OTHER LOAN TRANSACTIONS IN THE NATURE OF BEHEST LOANS ARE KEPT SECRET.8 B) The respondent Ombudsman gravely abused his discretion or acted without or in excess of jurisdiction in not finding that a probable cause exists for violation by the private respondents of section 3 (e) and (g) of RA 3019 despite the presence of clear, overwhelming and unrebutted evidence.9

In its Comment, the Ombudsman, without delving on the issue of prescription, in view of Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto(1999),10 contends that its finding of insufficiency of evidence or lack of probable cause against respondents deserves great weight and respect, and must be accorded full weight and credit. No comment was filed by the rest of the respondents. The issue before the Court is whether the Ombudsman committed grave abuse of discretion in ruling that: (a) the offense leveled against respondents has prescribed; and (b) no probable cause exists against respondents. The petition is partly meritorious. Respondent Ombudsman committed grave abuse of discretion in dismissing the subject complaint on the ground of prescription. Respondents members of the PNB Board of Directors and Officers of NOCOSII are charged with violation of R.A. No. 3019, a special law. Amending said law, Section 4, Batas PambansaBlg. 195,11 increased the prescriptive period from ten to fifteen years. The applicable law in the computation of the prescriptive period is Section 2 of Act No. 3326,12 as amended, which provides: Sec. 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same not be known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The prescription shall be interrupted when proceedings are instituted against the guilty person, and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. The issue of prescription has long been laid to rest in the aforementioned Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto,13 where the Court held: x xx it was well-nigh impossible for the State, the aggrieved party, to have known the violations of R.A. No. 3019 at the time the questioned transactions were made because, as alleged, the public officials concerned connived or conspired with the "beneficiaries of the loans.' Thus, we agree with the COMMITTEE that the prescriptive period for the offenses with which respondents in OMB-0-96-0968 were charged should be computed from the discovery of the commission thereof and not from the day of such commission. The assertion by the Ombudsman that the phrase 'if the same not be known' in Section 2 of Act No. 3326 does not mean 'lack of knowledge' but that the crime 'is not reasonably knowable' is unacceptable, as it provides an interpretation that defeats or negates the intent of the law, which is written in a clear and unambiguous language and thus provides no room for interpretation but only application.14

The Court reiterated the above ruling in Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto (2001),15 thus: In cases involving violations of R.A. No. 3019 committed prior to the February 1986 Edsa Revolution that ousted President Ferdinand E. Marcos, we ruled that the government as the aggrieved party could not have known of the violations at the time the questioned transactions were made (PCGG vs. Desierto, G.R. No. 140232, January 19, 2001, 349 SCRA 767; Domingo v. Sandiganbayan, supra, Note 14; Presidential Ad Hoc Fact Finding Committee on Behest Loans v. Desierto, supra, Note 16). Moreover, no person would have dared to question the legality of those transactions. Thus, the counting of the prescriptive period commenced from the date of discovery of the offense in 1992 after an exhaustive investigation by the Presidential Ad Hoc Committee on Behest Loans. As to when the period of prescription was interrupted, the second paragraph of Section 2, Act No. 3326, as amended, provides that prescription is interrupted 'when proceedings are instituted against the guilty person.16 Records show that the act complained of was discovered in 1992. The complaint was filed with the Office of the Ombudsman on April 5, 1995,17 or within three (3) years from the time of discovery. Thus, the filing of the complaint was well within the prescriptive period of 15 years. On the issue of whether the Ombudsman committed grave abuse of discretion in finding that no probable cause exists against respondents, it must be stressed that the Ombudsman is empowered to determine whether there exists reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof and, thereafter, to file the corresponding information with the appropriate courts.18 Settled is the rule that the Supreme Court will not ordinarily interfere with the Ombudsman's exercise of his investigatory and prosecutory powers without good and compelling reasons to indicate otherwise.19 Said exercise of powers is based upon his constitutional mandate20 and the courts will not interfere in its exercise. The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman, but upon practicality as well. Otherwise, innumerable petitions seeking dismissal of investigatory proceedings conducted by the Ombudsman will grievously hamper the functions of the office and the courts, in much the same way that courts will be swamped if they had to review the exercise of discretion on the part of public prosecutors each time they decided to file an information or dismiss a complaint by a private complainant.21 While there are certain instances when this Court may intervene in the prosecution of cases, such as, (1) when necessary to afford adequate protection to the constitutional rights of the accused; (2) when necessary for the orderly administration of justice or to avoid oppression or multiplicity of actions; (3) when there is a prejudicial question which is sub-judice; (4) when the acts of the officer are without or in excess of authority; (5) where the prosecution is under an invalid law, ordinance or regulation; (6) when double jeopardy is clearly apparent; (7) where the court has no jurisdiction over the offense; (8) where it is a case of persecution rather than prosecution; (9) where the charges are manifestly false and motivated by the lust for vengeance; and (10) when

there is clearly no prima facie case against the accused and a motion to quash on that ground has been denied,22 none apply here. After examination of the records and the evidence presented by petitioner, the Court finds no cogent reason to disturb the findings of the Ombudsman. No grave abuse of discretion can be attributed to the Ombudsman. Grave abuse of discretion implies a capricious and whimsical exercise of judgment tantamount to lack of jurisdiction.23 The exercise of power must have been done in an arbitrary or despotic manner by reason of passion or personal hostility. It must be so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.24 The disquisition of GIO Diaz-Salcedo, in dismissing the criminal complaint, as approved by Ombudsman Desierto, is worth-quoting, thus: Taking into consideration the provisions of Administrative Order No. 13 and Memorandum Order No. 61, the subject transactions can not be classified as behest. Evaluation of the records of this case reveals that the loans acquired by NOCOSII are actually foreign loans from Midland Bank Ltd. of London. There were no direct loans released by PNB but merely credit accommodations to guaranty the loans from Midland Bank. Anent complainant's claim that the collaterals offered by NOCOSII are insufficient, it should be noted that under PNB Board Resolution No. 689 dated July 30, 1975, one of the conditions imposed to NOCOSII was the execution of contract assigning all NOCOSII's share of sugar and molasses to PNB. NOCOSII was also required to increase its paid up capital at P5,000,000.00 a year starting April 30, 1976 up to April 30, 1980 or a total of P25,000,000.00. In addition thereto, the stockholders of NOCOSII were required to pledge or assign all their present and future shares to PNB while the accommodation remains standing. The proposed plant site which was offered as collateral was estimated to cost P307,903,000.00. The foregoing collaterals offered by NOCOSII are more than sufficient to cover the loans of P333,465,260.00. Furthermore, since the loan was approved by PNB, it presupposes that all the required clearances were submitted by NOCOSII including the clearance from the Office of the President; and having complied with all the documentary requirements, NOCOSII became entitled to the release of the loan. Complainant further alleged that NOCOSII was undercapitalized because its paid up capital was only P50,000,000.00. Complainant, however, failed to consider the other assets of NOCOSII which also form part of its capital. x x x25 The finding of insufficiency of evidence or lack of probable cause by the Ombudsman is borne out by the evidence presented by petitioner: firstly, there were no direct loans released by PNB but merely credit accommodations to guaranty NOCOSII's foreign loans from Midland Bank

Ltd. of London; secondly, NOCOSII effectively came under government control since 1975 when PNB acquired a majority of the voting rights in NOCOSII and was given the power to appoint a comptroller therein; thirdly, PNB's credit accommodations to NOCOSII between 1975 and 1981 in the aggregate sum of P333,465,260.00 were sufficiently secured by: (1) the Assignment of Subscription Rights and/or Pledge of Shares dated September 5, 1975 whereby NOCOSII officers pledged their shares of stock, representing 90% of NOCOSII's subscribed capital stock, and assigned their subscription rights to future stocks in favor of PNB;26 (2) the Deed of Assignment dated September 5, 1975 whereby NOCOSII assigned its share of sugar and molasses from the operation of its sugar central located at Barrio Mateo, Matalam, North Cotabato in favor of PNB;27 (3) the Joint and Solidary Agreement dated September 5, 1975 whereby the NOCOSII officers bound themselves jointly and severally liable with the corporation for the payment of NOCOSII's obligations to PNB;28 (4) the Real Estate Mortgage dated October 2, 1981 whereby NOCOSII mortgaged various buildings, machineries and equipments, otherwise known as the NOCOSII Sugar Mill Plant, with an estimated value of P307,593,000.00 in favor of PNB;29 and (5) the Chattel Mortgage with Power of Attorney dated October 2, 1981 whereby NOCOSII mortgaged various transportation, agricultural and heavy equipment in favor of the PNB;30fourthly, PNB imposed other conditions, such as, (1) the submission by NOCOSII of the Central Bank's approval of its foreign loans; (2) the submission by NOCOSII of the required clearances from the National Economic Development Authority (NEDA) and/or Presidential Committee on Sugar Industry (PHILSUGIN); (3) submission by NOCOSII of its milling contracts covering a total area of not less than 14,000 hectares; (4) submission by NOCOSII of the government permit that the planters can cultivate the required hectarage; (5) further increase in NOCOSII's total paid-in capital to P25,000,000.00 at P5,000,000.00 a year starting April 30, 1976 up to April 30, 1980; (6) deposit in NOCOSII's account with the PNB of all cash proceeds of NOCOSII's foreign loans the disposition of which shall be subject to the bank's control; and, (7) designation by the PNB of its own representatives in NOCOSII's Board of Directors and its own comptroller who shall have the authority to control all disbursements and receipts of funds of NOCOSII.31 The herein assailed Orders being supported by substantial evidence, there is no basis for the Court to exercise its supervisory powers over the ruling of the Ombudsman. As long as substantial evidence supports the Ombudsman's ruling, that decision will not be overturned.32 WHEREFORE, the petition is DISMISSED. Except as to prescription, the assailed Resolution dated May 21, 1999 and Order dated July 23, 1999 of the Ombudsman in OMB No. 0-95-0890 are AFFIRMED. No costs. SO ORDERED. Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 125865 March 26, 2001

JEFFREY LIANG (HUEFENG), petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent. RESOLUTION YNARES-SANTIAGO, J.: This resolves petitioner's Motion for Reconsideration of our Decision dated January 28, 2000, denying the petition for review. The Motion is anchored on the following arguments: 1) THE DFA'S DETERMINATION OF IMMUNITY IS A POLITICAL QUESTION TO BE MADE BY THE EXECUTIVE BRANCH OF THE GOVERNMENT AND IS CONCLUSIVE UPON THE COURTS. 2) THE IMMUNITY OF INTERNATIONAL ORGANIZATIONS IS ABSOLUTE. 3) THE IMMUNITY EXTENDS TO ALL STAFF OF THE ASIAN DEVELOPMENT BANK (ADB). 4) DUE PROCESS WAS FULLY AFFORDED THE COMPLAINANT TO REBUT THE DFA PROTOCOL. 5) THE DECISION OF JANUARY 28, 2000 ERRONEOUSLY MADE A FINDING OF FACT ON THE MERITS, NAMELY, THE SLANDERING OF A PERSON WHICH PREJUDGED PETITIONER'S CASE BEFORE THE METROPOLITAN TRIAL COURT (MTC)-MANDALUYONG. 6) THE VIENNA CONVENTION ON DIPLOMATIC RELATIONS IS NOT APPLICABLE TO THIS CASE. This case has its origin in two criminal Informations1 for grave oral defamation filed against petitioner, a Chinese national who was employed as an Economist by the Asian Development Bank (ADB), alleging that on separate occasions on January 28 and January 31, 1994, petitioner

allegedly uttered defamatory words to Joyce V. Cabal, a member of the clerical staff of ADB. On April 13, 1994, the Metropolitan Trial Court of Mandaluyong City, acting pursuant to an advice from the Department of Foreign Affairs that petitioner enjoyed immunity from legal processes, dismissed the criminal Informations against him. On a petition for certiorari and mandamus filed by the People, the Regional Trial Court of Pasig City, Branch 160, annulled and set aside the order of the Metropolitan Trial Court dismissing the criminal cases.2 Petitioner, thus, brought a petition for review with this Court. On January 28, 2000, we rendered the assailed Decision denying the petition for review. We ruled, in essence, that the immunity granted to officers and staff of the ADB is not absolute; it is limited to acts performed in an official capacity. Furthermore, we held that the immunity cannot cover the commission of a crime such as slander or oral defamation in the name of official duty. On October 18, 2000, the oral arguments of the parties were heard. This Court also granted the Motion for Intervention of the Department of Foreign Affairs. Thereafter, the parties were directed to submit their respective memorandum. For the most part, petitioner's Motion for Reconsideration deals with the diplomatic immunity of the ADB, its officials and staff, from legal and judicial processes in the Philippines, as well as the constitutional and political bases thereof. It should be made clear that nowhere in the assailed Decision is diplomatic immunity denied, even remotely. The issue in this case, rather, boils down to whether or not the statements allegedly made by petitioner were uttered while in the performance of his official functions, in order for this case to fall squarely under the provisions of Section 45 (a) of the "Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank," to wit: 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. After a careful deliberation of the arguments raised in petitioner's and intervenor's Motions for Reconsideration, we find no cogent reason to disturb our Decision of January 28, 2000. As we have stated therein, the slander of a person, by any stretch, cannot be considered as falling within the purview of the immunity granted to ADB officers and personnel. Petitioner argues that the Decision had the effect of prejudging the criminal case for oral defamation against him. We wish to stress that it did not. What we merely stated therein is that slander, in general, cannot be considered as an act performed in an official capacity. The issue of whether or not petitioner's utterances constituted oral defamation is still for the trial court to determine. WHEREFORE, in view of the foregoing, the Motions for Reconsideration filed by petitioner and intervenor Department of Foreign Affairs are DENIED with FINALITY.

SO ORDERED. Kapunan and Pardo, JJ ., concur. Davide, Jr., C.J., I also join concurring opinion of Mr. Justice Puno. Puno, J., Please see concurring opinion.

Concurring Opinions PUNO, J.,concurring: For resolution is the Motion for Reconsideration filed by petitioner Jeffrey Liang of this Court's decision dated January 28, 2000 which denied the petition for review. We there held that: the protocol communication of the Department of Foreign Affairs to the effect that petitioner Liang is covered by immunity is only preliminary and has no binding effect in courts; the immunity provided for under Section 45(a) of the Headquarters Agreement is subject to the condition that the act be done in an "official capacity"; that slandering a person cannot be said to have been done in an "official capacity" and, hence, it is not covered by the immunity agreement; 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; the commission of a crime is not part of official duty; and that a preliminary investigation is not a matter of right in cases cognizable by the Metropolitan Trial Court. Petitioner's motion for reconsideration is anchored on the following arguments: 1. The DFA's determination of immunity is a political question to be made by the executive branch of the government and is conclusive upon the courts; 2. The immunity of international organizations is absolute; 3. The immunity extends to all staff of the Asian Development Bank (ADB); 4. Due process was fully accorded the complainant to rebut the DFA protocol; 5. The decision of January 28, 2000 erroneously made a finding of fact on the merits, namely, the slandering of a person which prejudged petitioner's case before the Metropolitan Trial Court (MTC) Mandaluyong; and 6. The Vienna Convention on diplomatic relations is not applicable to this case. Petitioner contends that a determination of a person's diplomatic immunity by the Department of Foreign Affairs is a political question. It is solely within the prerogative of the executive department and is conclusive upon the courts. In support of his submission, petitioner cites the

following cases: WHO vs. Aquino;1International Catholic Migration Commission vs. Calleja;2The Holy See vs. Rosario, Jr.;3Lasco vs. United Nations;4 and DFA vs. NLRC.5 It is further contended that the immunity conferred under the ADB Charter and the Headquarters Agreement is absolute. It is designed to safeguard the autonomy and independence of international organizations against interference from any authority external to the organizations. It is necessary to allow such organizations to discharge their entrusted functions effectively. The only exception to this immunity is when there is an implied or express waiver or when the immunity is expressly limited by statute. The exception allegedly has no application to the case at bar. Petitioner likewise urges that the international organization's immunity from local jurisdiction empowers the ADB alone to determine what constitutes "official acts" and the same cannot be subject to different interpretations by the member states. It asserts that the Headquarters Agreement provides for remedies to check abuses against the exercise of the immunity. Thus, Section 49 states that the "Bank shall waive the immunity accorded to any person if, in its opinion, such immunity would impede the course of justice and the waiver would not prejudice the purposes for which the immunities are accorded." Section 51 allows for consultation between the government and the Bank should the government consider that an abuse has occurred. The same section provides the mechanism for a dispute settlement regarding, among others, issues of interpretation or application of the agreement. Petitioner's argument that a determination by the Department of Foreign Affairs that he is entitled to diplomatic immunity is a political question binding on the courts, is anchored on the ruling enunciated in the case of WHO, et al. vs. Aquino, et al.,6viz: "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, the Solicitor General in this case, or other officer acting under his direction. Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction by seizure and detention of property, as to embarrass the executive arm of the government in conducting foreign relations, it is accepted doctrine that in such cases the judicial department of the government follows the action of the political branch and will not embarrass the latter by assuming an antagonistic jurisdiction." This ruling was reiterated in the subsequent cases of International Catholic Migration Commission vs. Calleja;7The Holy See vs. Rosario, Jr.;8Lasco vs. UN;9 and DFA vs. NLRC.10 The case of WHO vs. Aquino involved the search and seizure of personal effects of petitioner LeonceVerstuyft, an official of the WHO. Verstuyft was certified to be entitled to diplomatic immunity pursuant to the Host Agreement executed between the Philippines and the WHO.

ICMC vs. Calleja concerned a petition for certification election filed against ICMC and IRRI. As international organizations, ICMC and IRRI were declared to possess diplomatic immunity. It was held that they are not subject to local jurisdictions. It was ruled that the exercise of jurisdiction by the Department of Labor over the case would defeat the very purpose of immunity, which is to shield the affairs of international organizations from political pressure or control by the host country and to ensure the unhampered performance of their functions. Holy See v. Rosario, Jr. involved an action for annulment of sale of land against the Holy See, as represented by the Papal Nuncio. The Court upheld the petitioner's defense of sovereign immunity. It ruled that where 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, with all the more reason should immunity be recognized as regards the sovereign itself, which in that case is the Holy See. In Lasco vs. United Nations, the United Nations Revolving Fund for Natural Resources Exploration was sued before the NLRC for illegal dismissal. The Court again upheld the doctrine of diplomatic immunity invoked by the Fund. Finally, DFA v. NLRC involved an illegal dismissal case filed against the Asian Development Bank. Pursuant to its Charter and the Headquarters Agreement, the diplomatic immunity of the Asian Development Bank was recognized by the Court. It bears to stress that all of these cases pertain to the diplomatic immunity enjoyed by international organizations. Petitioner asserts that he is entitled to the same diplomatic immunity and he cannot be prosecuted for acts allegedly done in the exercise of his official functions. The term "international organizations" "is generally used to describe an organization set up by agreement between two or more states. Under contemporary international law, such organizations are endowed with some degree of international legal personality such that they are capable of exercising specific rights, duties and powers. They are organized mainly as a means for conducting general international business in which the member states have an interest."11 International public officials have been defined as: ". . . persons who, on the basis of an international treaty constituting a particular international community, are appointed by this international community, or by an organ of it, and are under its control to exercise, in a continuous way, functions in the interest of this particular international community, and who are subject to a particular personal status."12 "Specialized agencies" are international organizations having functions in particular fields, such as posts, telecommunications, railways, canals, rivers, sea transport, civil aviation, meteorology, atomic energy, finance, trade, education and culture, health and refugees.13

Issues 1. Whether petitioner Liang, as an official of an international organization, is entitled to diplomatic immunity; 2. Whether an international official is immune from criminal jurisdiction for all acts, whether private or official; 3. Whether the authority to determine if an act is official or private is lodged in the courts; 4. Whether the certification by the Department of Foreign Affairs that petitioner is covered by immunity is a political question that is binding and conclusive on the courts. Discussion I A perusal of the immunities provisions in various international conventions and agreements will show that the nature and degree of immunities vary depending on who the recipient is. Thus: 1. Charter of the United Nations "Article 105 (1): The Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfillment of its purposes. Article 105 (2): Representatives of the Members of the United Nations and officials of the Organization shall similarly enjoy such privileges and immunities as are necessary for the independent exercise of their functions in connection with the Organization." 2. Convention on the Privileges and Immunities of the United Nations "Section 2: The United Nations, its property and assets wherever located and by whomsoever held, shall enjoy immunity from every form of legal process except insofar as in any particular case it has expressly waived its immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution. xxxxxxxxx Section 11 (a): Representatives of Members to the principal and subsidiary organs of the United Nations . . shall . . . enjoy . . . immunity from personal arrest or detention and from seizure of their personal baggage, and, in respect of words spoken or written and all acts done by them in their capacity as representatives, immunity from legal process of every kind. xxxxxxxxx

Section 14: Privileges and immunities are accorded to the representatives of Members not for the personal benefit of the individuals themselves, but in order to safeguard the independent exercise of their functions in connection with the United Nations. Consequently, a Member not only has the right but is under a duty to waive the immunity of its representative in any case where in the opinion of the Member the immunity would impede the course of justice, and it can be waived without prejudice to the purpose for which the immunity is accorded. xxxxxxxxx Section 18 (a): Officials of the United Nations shall be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity. xxxxxxxxx Section 19: In addition to the immunities and privileges specified in Section 18, the Secretary-General and all Assistant Secretaries-General shall be accorded in respect of themselves, their spouses and minor children, the privileges and immunities, exemptions and facilities accorded to diplomatic envoys, in accordance with international law. Section 20: Privileges and immunities are granted to officials in the interest of the United Nations and not for the personal benefit of the individuals themselves. The SecretaryGeneral shall have the right and the duty to waive the immunity of any official in any case where, in his opinion, the immunity would impede the course of justice and can be waived without prejudice to the interests of the United Nations. xxxxxxxxx Section 22: Experts . . . performing missions for the United Nations . . . shall be accorded: (a) immunity from personal arrest or detention and from seizure of their personal baggage; (b) in respect of words spoken or written and acts done by them in the course of the performance of their mission, immunity from legal process of every kind." 3. Vienna Convention on Diplomatic Relations "Article 29: The person of a diplomatic agent shall be inviolable. He shall not be liable to any form of arrest or detention. The receiving State shall treat him with due respect and shall take all appropriate steps to prevent any attack on his person, freedom, or dignity. xxxxxxxxx Article 31 (1): A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in certain cases.

xxxxxxxxx Article 38 (1): Except in so far as additional privileges and immunities may be granted by the receiving State, a diplomatic agent who is a national of or permanently a resident in that State shall enjoy only immunity from jurisdiction, and inviolability, in respect of official acts performed in the exercise of his functions." 4. Vienna Convention on Consular Relations "Article 41 (1): Consular officials shall not be liable to arrest or detention pending trial, except in the case of a grave crime and pursuant to a decision by the competent judicial authority. xxxxxxxxx Article 43 (1): Consular officers and consular employees shall not be amenable to the jurisdiction of the judicial or administrative authorities of the receiving State in respect of acts performed in the exercise of consular functions. Article 43 (2): The provisions of paragraph 1 of this Article shall not, however, apply in respect of a civil action either: (a) arising out of a contract concluded by a consular officer or a consular employee in which he did not contract expressly or impliedly as an agent of the sending State; or (b) by a third party for damage arising from an accident in the receiving State caused by a vehicle, vessel or aircraft." 5. Convention on the Privileges and Immunities of the Specialized Agencies "Section 4: The specialized agencies, their property and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of legal process except in so far as in any particular case they have expressly waived their immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution. Section 13 (a): Representatives of members at meetings convened by a specialized agency shall, while exercising their functions and during their journeys to and from the place of meeting, enjoy immunity from personal arrest or detention and from seizure of their personal baggage, and in respect of words spoken or written and all acts done by them in their official capacity, immunity from legal process of every kind. xxxxxxxxx Section 19 (a): Officials of the specialized agencies shall be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity. xxxxxxxxx

Section 21: In addition to the immunities and privileges specified in sections 19 and 20, the executive head of each specialized agency, including a any official acting on his behalf during his absence from duty, shall be accorded in respect of himself, his spouse and minor children, the privileges and immunities, exemptions and facilities accorded to diplomatic envoys, in accordance with international law." 6. Charter of the ADB "Article 50 (1): The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or in connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and sell or underwrite the sale of securities, in which cases actions may be brought against the Bank in a court of competent jurisdiction in the territory of a country in which the Bank has its principal or a branch office, or has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. xxxxxxxxx Article 55 (i): All Governors, Directors, alternates, officers and employees of the Bank, including experts performing missions for the Bank shall be immune from legal process with respect to acts performed by them in their official capacity, except when the Bank waives the immunity." 7. ADB Headquarters Agreement "Section 5: The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or in connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and sell or underwrite the sale of securities, in which cases actions may be brought against the Bank in a court of competent jurisdiction in the Republic of the Philippines. xxxxxxxxx Section 44: Governors, other representatives of Members, Directors, the President, VicePresident and executive officers as may be agreed upon between the Government and the Bank shall enjoy, during their stay in the Republic of the Philippines in connection with their official duties with the Bank: (a) immunity from personal arrest or detention and from seizure of their personal baggage; (b) immunity from legal process of every kind in respect of words spoken or written and all acts done by them in their official capacity; and (c) in respect of other matters not covered in (a) and (b) above, such other immunities, exemptions, privileges and facilities as are enjoyed by members of diplomatic missions of comparable rank, subject to corresponding conditions and obligations. Section 45 (a): Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy . . . immunity from

legal process with respect to acts performed by them in their official capacity, except when the Bank waives the immunity." II There are three major differences between diplomatic and international immunities. Firstly, one of the recognized limitations of diplomatic immunity is that members of the diplomatic staff of a mission may be appointed from among the nationals of the receiving State only with the express consent of that State; apart from inviolability and immunity from jurisdiction in respect of official acts performed in the exercise of their functions, nationals enjoy only such privileges and immunities as may be granted by the receiving State. International immunities may be specially important in relation to the State of which the official is a national. Secondly, the immunity of a diplomatic agent from the jurisdiction of the receiving State does not exempt him from the jurisdiction of the sending State; in the case of international immunities there is no sending State and an equivalent for the jurisdiction of the Sending State therefore has to be found either in waiver of immunity or in some international disciplinary or judicial procedure. Thirdly, the effective sanctions which secure respect for diplomatic immunity are the principle of reciprocity and the danger of retaliation by the aggrieved State; international immunities enjoy no similar protection.14 The generally accepted principles which are now regarded as the foundation of international immunities are contained in the ILO Memorandum, which reduced them in three basic propositions, namely: (1) that international institutions should have a status which protects them against control or interference by any one government in the performance of functions for the effective discharge of which they are responsible to democratically constituted international bodies in which all the nations concerned are represented; (2) that no country should derive any financial advantage by levying fiscal charges on common international funds; and (3) that the international organization should, as a collectivity of States Members, be accorded the facilities for the conduct of its official business customarily extended to each other by its individual member States. The thinking underlying these propositions is essentially institutional in character. It is not concerned with the status, dignity or privileges of individuals, but with the elements of functional independence necessary to free international institutions from national control and to enable them to discharge their responsibilities impartially on behalf of all their members.15 III Positive international law has devised three methods of granting privileges and immunities to the personnel of international organizations. The first is by simple conventional stipulation, as was the case in the Hague Conventions of 1899 and 1907. The second is by internal legislation whereby the government of a state, upon whose territory the international organization is to carry out its functions, recognizes the international character of the organization and grants, by unilateral measures, certain privileges and immunities to better assure the successful functioning of the organization and its personnel. In this situation, treaty obligation for the state in question to grant concessions is lacking. Such was the case with the Central Commission of the Rhine at Strasbourg and the International Institute of Agriculture at Rome. The third is a combination of

the first two. In this third method, one finds a conventional obligation to recognize a certain status of an international organization and its personnel, but the status is described in broad and general terms. The specific definition and application of those general terms are determined by an accord between the organization itself and the state wherein it is located. This is the case with the League of Nations, the Permanent Court of Justice, and the United Nations.16 The Asian Development Bank and its Personnel fall under this third category. There is a connection between diplomatic privileges and immunities and those extended to international officials. The connection consists in the granting, by contractual provisions, of the relatively well-established body of diplomatic privileges and immunities to international functionaries. This connection is purely historical. Both types of officials find the basis of their special status in the necessity of retaining functional independence and freedom from interference by the state of residence. However, the legal relationship between an ambassador and the state to which he is accredited is entirely different from the relationship between the international official and those states upon whose territory he might carry out his functions.17 The privileges and immunities of diplomats and those of international officials rest upon different legal foundations. Whereas those immunities awarded to diplomatic agents are a right of the sending state based on customary international law, those granted to international officials are based on treaty or conventional law. Customary international law places no obligation on a state to recognize a special status of an international official or to grant him jurisdictional immunities. Such an obligation can only result from specific treaty provisions.18 The special status of the diplomatic envoy is regulated by the principle of reciprocity by which a state is free to treat the envoy of another state as its envoys are treated by that state. The juridical basis of the diplomat's position is firmly established in customary international law. The diplomatic envoy is appointed by the sending State but it has to make certain that the agreement of the receiving State has been given for the person it proposes to accredit as head of the mission to that State.19 The staff personnel of an international organization the international officials assume a different position as regards their special status. They are appointed or elected to their position by the organization itself, or by a competent organ of it; they are responsible to the organization and their official acts are imputed to it. The juridical basis of their special position is found in conventional law,20 since there is no established basis of usage or custom in the case of the international official. Moreover, the relationship between an international organization and a member-state does not admit of the principle of reciprocity,21 for it is contradictory to the basic principle of equality of states. An international organization carries out functions in the interest of every member state equally. The international official does not carry out his functions in the interest of any state, but in serving the organization he serves, indirectly, each state equally. He cannot be, legally, the object of the operation of the principle of reciprocity between states under such circumstances. It is contrary to the principle of equality of states for one state member of an international organization to assert a capacity to extract special privileges for its nationals from other member states on the basis of a status awarded by it to an international organization. It is upon this principle of sovereign equality that international organizations are built.

It follows from this same legal circumstance that a state called upon to admit an official of an international organization does not have a capacity to declare him persona non grata. The functions of the diplomat and those of the international official are quite different. Those of the diplomat are functions in the national interest. The task of the ambassador is to represent his state, and its specific interest, at the capital of another state. The functions of the international official are carried out in the international interest. He does not represent a state or the interest of any specific state. He does not usually "represent" the organization in the true sense of that term. His functions normally are administrative, although they may be judicial or executive, but they are rarely political or functions of representation, such as those of the diplomat. There is a difference of degree as well as of kind. The interruption of the activities of a diplomatic agent is likely to produce serious harm to the purposes for which his immunities were granted. But the interruption of the activities of the international official does not, usually, cause serious dislocation of the functions of an international secretariat.22 On the other hand, they are similar in the sense that acts performed in an official capacity by either a diplomatic envoy or an international official are not attributable to him as an individual but are imputed to the entity he represents, the state in the case of the diplomat, and the organization in the case of the international official.23 IV Looking back over 150 years of privileges and immunities granted to the personnel of international organizations, it is clear that they were accorded a wide scope of protection in the exercise of their functions The Rhine Treaty of 1804 between the German Empire and France which provided "all the rights of neutrality" to persons employed in regulating navigation in the international interest; The Treaty of Berlin of 1878 which granted the European Commission of the Danube "complete independence of territorial authorities" in the exercise of its functions; The Covenant of the League which granted "diplomatic immunities and privileges." Today, the age of the United Nations finds the scope of protection narrowed. The current tendency is to reduce privileges and immunities of personnel of international organizations to a minimum. The tendency cannot be considered as a lowering of the standard but rather as a recognition that the problem on the privileges and immunities of international officials is new. The solution to the problem presented by the extension of diplomatic prerogatives to international functionaries lies in the general reduction of the special position of both types of agents in that the special status of each agent is granted in the interest of function. The wide grant of diplomatic prerogatives was curtailed because of practical necessity and because the proper functioning of the organization did not require such extensive immunity for its officials. While the current direction of the law seems to be to narrow the prerogatives of the personnel of international organizations, the reverse is true with respect to the prerogatives of the organizations themselves, considered as legal entities. Historically, states have been more generous in granting privileges and immunities to organizations than they have to the personnel of these organizations.24 Thus, Section 2 of the General Convention on the Privileges and Immunities of the United Nations states that the UN shall enjoy immunity from every form of legal process except insofar

as in any particular case it has expressly waived its immunity. Section 4 of the Convention on the Privileges and Immunities of the Specialized Agencies likewise provides that the specialized agencies shall enjoy immunity from every form of legal process subject to the same exception. Finally, Article 50(1) of the ADB Charter and Section 5 of the Headquarters Agreement similarly provide that the bank shall enjoy immunity from every form of legal process, except in cases arising out of or in connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and sell or underwrite the sale of securities. The phrase "immunity from every form of legal process" as used in the UN General Convention has been interpreted to mean absolute immunity from a state's jurisdiction to adjudicate or enforce its law by legal process, and it is said that states have not sought to restrict that immunity of the United Nations by interpretation or amendment. Similar provisions are contained in the Special Agencies Convention as well as in the ADB Charter and Headquarters Agreement. These organizations were accorded privileges and immunities in their charters by language similar to that applicable to the United Nations. It is clear therefore that these organizations were intended to have similar privileges and immunities.25From this, it can be easily deduced that international organizations enjoy absolute immunity similar to the diplomatic prerogatives granted to diplomatic envoys. Even in the United States this theory seems to be the prevailing rule. The Foreign Sovereign Immunities Act was passed adopting the "restrictive theory" limiting the immunity of states under international law essentially to activities of a kind not carried on by private persons. Then the International Organizations Immunities Act came into effect which gives to designated international organizations the same immunity from suit and every form of judicial process as is enjoyed by foreign governments. This gives the impression that the Foreign Sovereign Immunities Act has the effect of applying the restrictive theory also to international organizations generally. However, aside from the fact that there was no indication in its legislative history that Congress contemplated that result, and considering that the Convention on Privileges and Immunities of the United Nations exempts the United Nations "from every form of legal process," conflict with the United States obligations under the Convention was sought to be avoided by interpreting the Foreign Sovereign Immunities Act, and the restrictive theory, as not applying to suits against the United Nations.26 On the other hand, international officials are governed by a different rule. Section 18(a) of the General Convention on Privileges and Immunities of the United Nations states that officials of the United Nations shall be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity. The Convention on Specialized Agencies carries exactly the same provision. The Charter of the ADB provides under Article 55(i) that officers and employees of the bank shall be immune from legal process with respect to acts performed by them in their official capacity except when the Bank waives immunity. Section 45 (a) of the ADB Headquarters Agreement accords the same immunity to the officers and staff of the bank. There can be no dispute that international officials are entitled to immunity only with respect to acts performed in their official capacity, unlike international organizations which enjoy absolute immunity.

Clearly, the most important immunity to an international official, in the discharge of his international functions, is immunity from local jurisdiction. There is no argument in doctrine or practice with the principle that an international official is independent of the jurisdiction of the local authorities for his official acts. Those acts are not his, but are imputed to the organization, and without waiver the local courts cannot hold him liable for them. In strict law, it would seem that even the organization itself could have no right to waive an official's immunity for his official acts. This permits local authorities to assume jurisdiction over an individual for an act which is not, in the wider sense of the term, his act at all. It is the organization itself, as a juristic person, which should waive its own immunity and appear in court, not the individual, except insofar as he appears in the name of the organization. Provisions for immunity from jurisdiction for official acts appear, aside from the aforementioned treatises, in the constitution of most modern international organizations. The acceptance of the principle is sufficiently widespread to be regarded as declaratory of international law.27 V What then is the status of the international official with respect to his private acts? Section 18 (a) of the General Convention has been interpreted to mean that officials of the specified categories are denied immunity from local jurisdiction for acts of their private life and empowers local courts to assume jurisdiction in such cases without the necessity of waiver.28 It has earlier been mentioned that historically, international officials were granted diplomatic privileges and immunities and were thus considered immune for both private and official acts. In practice, this wide grant of diplomatic prerogatives was curtailed because of practical necessity and because the proper functioning of the organization did not require such extensive immunity for its officials. Thus, the current status of the law does not maintain that states grant jurisdictional immunity to international officials for acts of their private lives.29This much is explicit from the Charter and Headquarters Agreement of the ADB which contain substantially similar provisions to that of the General Convention. VI Who is competent to determine whether a given act is private or official? This is an entirely different question. In connection with this question, the current tendency to narrow the scope of privileges and immunities of international officials and representatives is most apparent. Prior to the regime of the United Nations, the determination of this question rested with the organization and its decision was final. By the new formula, the state itself tends to assume this competence. If the organization is dissatisfied with the decision, under the provisions of the General Convention of the United States, or the Special Convention for Specialized Agencies, the Swiss Arrangement, and other current dominant instruments, it may appeal to an international tribunal by procedures outlined in those instruments. Thus, the state assumes this competence in the first instance. It means that, if a local court assumes jurisdiction over an act without the necessity of waiver from the organization, the determination of the nature of the act is made at the national level.30

It appears that the inclination is to place the competence to determine the nature of an act as private or official in the courts of the state concerned. That the prevalent notion seems to be to leave to the local courts determination of whether or not a given act is official or private does not necessarily mean that such determination is final. If the United Nations questions the decision of the Court, it may invoke proceedings for settlement of disputes between the organization and the member states as provided in Section 30 of the General Convention. Thus, the decision as to whether a given act is official or private is made by the national courts in the first instance, but it may be subjected to review in the international level if questioned by the United Nations.31 A similar view is taken by Kunz, who writes that the "jurisdiction of local courts without waiver for acts of private life empowers the local courts to determine whether a certain act is an official act or an act of private life," on the rationale that since the determination of such question, if left in the hands of the organization, would consist in the execution, or non-execution, of waiver, and since waiver is not mentioned in connection with the provision granting immunities to international officials, then the decision must rest with local courts.32 Under the Third Restatement of the Law, it is suggested that since an international official does not enjoy personal inviolability from arrest or detention and has immunity only with respect to official acts, he is subject to judicial or administrative process and must claim his immunity in the proceedings by showing that the act in question was an official act. Whether an act was performed in the individual's official capacity is a question for the court in which a proceeding is brought, but if the international organization disputes the court's finding, the dispute between the organization and the state of the forum is to be resolved by negotiation, by an agreed mode of settlement or by advisory opinion of the International Court of Justice.33 Recognizing the difficulty that by reason of the right of a national court to assume jurisdiction over private acts without a waiver of immunity, the determination of the official or private character of a particular act may pass from international to national control, Jenks proposes three ways of avoiding difficulty in the matter. The first would be for a municipal court before which a question of the official or private character of a particular act arose to accept as conclusive in the matter any claim by the international organization that the act was official in character, such a claim being regarded as equivalent to a governmental claim that a particular act is an act of State. Such a claim would be in effect a claim by the organization that the proceedings against the official were a violation of the jurisdictional immunity of the organization itself which is unqualified and therefore not subject to delimitation in the discretion of the municipal court. The second would be for a court to accept as conclusive in the matter a statement by the executive government of the country where the matter arises certifying the official character of the act. The third would be to have recourse to the procedure of international arbitration. Jenks opines that it is possible that none of these three solutions would be applicable in all cases; the first might be readily acceptable only in the clearest cases and the second is available only if the executive government of the country where the matter arises concurs in the view of the international organization concerning the official character of the act. However, he surmises that taken in combination, these various possibilities may afford the elements of a solution to the problem.34 One final point. The international official's immunity for official acts may be likened to a consular official's immunity from arrest, detention, and criminal or civil process which is not

absolute but applies only to acts or omissions in the performance of his official functions, in the absence of special agreement. Since a consular officer is not immune from all legal process, he must respond to any process and plead and prove immunity on the ground that the act or omission underlying the process was in the performance of his official functions. The issue has not been authoritatively determined, but apparently the burden is on the consular officer to prove his status as well as his exemption in the circumstances. In the United States, the US Department of State generally has left it to the courts to determine whether a particular act was within a consular officer's official duties.35 Submissions On the bases of the foregoing disquisitions, I submit the following conclusions: First, petitioner Liang, a bank official of ADB, is not entitled to diplomatic immunity and hence his immunity is not absolute. Under the Vienna Convention on Diplomatic Relations, a diplomatic envoy is immune from criminal jurisdiction of the receiving State for all acts, whether private or official, and hence he cannot be arrested, prosecuted and punished for any offense he may commit, unless his diplomatic immunity is waived.36 On the other hand, officials of international organizations enjoy "functional" immunities, that is, only those necessary for the exercise of the functions of the organization and the fulfillment of its purposes.37 This is the reason why the ADB Charter and Headquarters Agreement explicitly grant immunity from legal process to bank officers and employees only with respect to acts performed by them in their official capacity, except when the Bank waives immunity. In other words, officials and employees of the ADB are subject to the jurisdiction of the local courts for their private acts, notwithstanding the absence of a waiver of immunity. Petitioner cannot also seek relief under the mantle of "immunity from every form of legal process" accorded to ADB as an international organization. The immunity of ADB is absolute whereas the immunity of its officials and employees is restricted only to official acts. This is in consonance with the current trend in international law which seeks to narrow the scope of protection and reduce the privileges and immunities granted to personnel of international organizations, while at the same time aims to increase the prerogatives of international organizations. Second, considering that bank officials and employees are covered by immunity only for their official acts, the necessary inference is that the authority of the Department of Affairs, or even of the ADB for that matter, to certify that they are entitled to immunity is limited only to acts done in their official capacity. Stated otherwise, it is not within the power of the DFA, as the agency in charge of the executive department's foreign relations, nor the ADB, as the international organization vested with the right to waive immunity, to invoke immunity for private acts of bank officials and employees, since no such prerogative exists in the first place. If the immunity does not exist, there is nothing to certify.

As an aside, ADB cannot even claim to have the right to waive immunity for private acts of its officials and employees. The Charter and the Headquarters Agreement are clear that the immunity can be waived only with respect to official acts because this is only the extent to which the privilege has been granted. One cannot waive the right to a privilege which has never been granted or acquired. Third, I choose to adopt the view that it is the local courts which have jurisdiction to determine whether or not a given act is official or private. While there is a dearth of cases on the matter under Philippine jurisprudence, the issue is not entirely novel. The case of M.H. Wylie, et al. vs. Rarang, et al.38 concerns the extent of immunity from suit of the officials of a United States Naval Base inside the Philippine territory. Although a motion to dismiss was filed by the defendants therein invoking their immunity from suit pursuant to the RP-US Military Bases Agreement, the trial court denied the same and, after trial, rendered a decision declaring that the defendants are not entitled to immunity because the latter acted beyond the scope of their official duties. The Court likewise applied the ruling enunciated in the case of Chavez vs. Sandiganbayan39 to the effect that a mere invocation of the immunity clause does not ipso facto result in the charges being automatically dropped. While it is true that the Chavez case involved a public official, the Court did not find any substantial reason why the same rule cannot be made to apply to a US official assigned at the US Naval Station located in the Philippines. In this case, it was the local courts which ascertained whether the acts complained of were done in an official or personal capacity. In the case of The Holy See vs. Rosario, Jr.,40 a complaint for annulment of contract of sale, reconveyance, specific performance and damages was filed against petitioner. Petitioner moved to dismiss on the ground of, among others, lack of jurisdiction based on sovereign immunity from suit, which was denied by the trial court. A motion for reconsideration, and subsequently, a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for Claim of Immunity as a Jurisdictional Defense" were filed by petitioner. The trial court deferred resolution of said motions until after trial on the merits. On certiorari, the Court there ruled on the issue of petitioner's non-suability on the basis of the allegations made in the pleadings filed by the parties. This is an implicit recognition of the court's jurisdiction to ascertain the suability or nonsuability of the sovereign by assessing the facts of the case. The Court hastened to add that when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, in some cases, the defense of sovereign immunity was submitted directly to the local courts by the respondents through their private counsels, or 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. Finally, it appears from the records of this case that petitioner is a senior economist at ADB and as such he makes country project profiles which will help the bank in deciding whether to lend money or support a particular project to a particular country.41 Petitioner stands charged of grave slander for allegedly uttering defamatory remarks against his secretary, the private complainant herein. Considering that the immunity accorded to petitioner is limited only to acts performed in his official capacity, it becomes necessary to make a factual determination of whether or not the

defamatory utterances were made pursuant and in relation to his official functions as a senior economist. I vote to deny the motion for reconsideration. Davide, Jr., C.J., concurs.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 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 via a 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.1wphi1.nt 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 motupropio 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.1 At any rate, it has been ruled that the mere invocation of the immunity clause 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.3 The imputation of theft is ultra 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.4 It appears that even the government's chief legal 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.5 As already mentioned above, the commission of a crime is not part of official duty. 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.6 Being purely a statutory right, preliminary investigation may be invoked only when specifically granted by law.7 The rule on the criminal procedure is clear that no preliminary investigation is required in cases falling within the jurisdiction of the MeTC.8 Besides the absence of preliminary investigation does not affect the court's jurisdiction nor does it impair the validity of the information or otherwise render it defective.9 WHEREFORE, the petition is DENIED. SO ORDERED.1wphi1.nt Davide, Jr., C.J., Puno, Kapunan and Pardo, JJ., concur.

SECOND DIVISION G.R. No. 152318 : April 16, 2009 DEUTSCHE GESELLSCHAFT FR TECHNISCHE ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and ANNE NICOLAY,Petitioners,v.HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration Branch, National Labor Relations Commission, and BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO RAMILLO,Respondents. DECISION TINGA, J.: On 7 September 1971, the governments of the Federal Republic of Germany and the Republic of the Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in Bonn, capital of what was then West Germany. The Agreement affirmed the countries' "common interest in promoting the technical and economic development of their States, and recogni[zed] the benefits to be derived by both States from closer technical co-operation," and allowed for the conclusion of "arrangements concerning individual projects of technical co-operation."1 While the Agreement provided for a limited term of effectivity of five (5) years, it nonetheless was stated that "[t]he Agreement shall be tacitly extended for successive periods of one year unless either of the two Contracting Parties denounces it in writing three months prior to its expiry," and that even upon the Agreement's expiry, its provisions would "continue to apply to any projects agreed upon x x x until their completion."2
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On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary Domingo Siazon, and the German government, agreed to an Arrangement in furtherance of the 1971 Agreement. This Arrangement affirmed the common commitment of both governments to promote jointly a project called, Social Health Insurance-Networking and Empowerment (SHINE), which was designed to "enable Philippine families-especially poor ones-to maintain their health and secure health care of sustainable quality."3 It appears that SHINE had already been in existence even prior to the effectivity of the Arrangement, though the record does not indicate when exactly SHINE was constituted. Nonetheless, the Arrangement stated the various

obligations of the Filipino and German governments. The relevant provisions of the Arrangement are reproduced as follows:
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3. The Government of the Federal Republic of Germany shall make the following contributions to the project. It shall (a) second - one expert in health economy, insurance and health systems for up to 48 expert/months, - one expert in system development for up to 10 expert/months - short-term experts to deal with special tasks for a total of up to 18 expert/months, - project assistants/guest students as required, who shall work on the project as part of their basic and further training and assume specific project tasks under the separately financed junior staff promotion programme of the Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ); (b) provide in situ - short-term experts to deal with diverse special tasks for a total of up to 27 expert/months, - five local experts in health economy, health insurance, community health systems, information technology, information systems, training and community mobilization for a total of up to 240 expert/months, - local and auxiliary personnel for a total of up to 120 months; (c) supply inputs, in particular - two cross-country vehicles, - ten computers with accessories, - office furnishings and equipment up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark); (c) meet - the cost of accommodation for the seconded experts and their families in so far as this cost is not met by the seconded experts themselves, - the cost of official travel by the experts referred to in sub-paragraph (a) above within and outside the Republic of the Philippines,

- the cost of seminars and courses, - the cost of transport and insurance to the project site of inputs to be supplied pursuant to subparagraph (c) above, excluding the charges and storage fees referred to in paragraph 4(d) below, - a proportion of the operating and administrative costs; xxx 4. The Government of the Republic of the Philippines shall make the following contributions to the project:
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It shall (a) - provide the necessary Philippine experts for the project, in particular one project coordinator in the Philippine Health Insurance Corporation (Philhealth), at least three further experts and a sufficient number of administrative and auxiliary personnel, as well as health personnel in the pilot provinces and in the other project partners, in particular one responsible expert for each pilot province and for each association representing the various target groups, - release suitably qualified experts from their duties for attendance at the envisaged basic and further training activities; it shall only nominate such candidates as have given an undertaking to work on the project for at least five years after completing their training and shall ensure that these Philippine experts receive appropriate remuneration, - ensure that the project field offices have sufficient expendables, - make available the land and buildings required for the project; (b) assume an increasing proportion of the running and operating costs of the project; (c) afford the seconded experts any assistance they may require in carrying out the tasks assigned to them and place at their disposal all necessary records and documents; (d) guarantee that - the project is provided with an itemized budget of its own in order to ensure smooth continuation of the project. - the necessary legal and administrative framework is created for the project, - the project is coordinated in close cooperation with other national and international agencies relevant to implementation, - the inputs supplied for the project on behalf of the Government of the Federal Republic of Germany are exempted from the cost of licenses, harbour dues, import and export duties and

other public charges and fees, as well as storage fees, or that any costs thereof are met, and that they are cleared by customs without delay. The aforementioned exemptions shall, at the request of the implementing agencies also apply to inputs procured in the Republic of the Philippines, - the tasks of the seconded experts are taken over as soon as possible by Philippine experts, - examinations passed by Philippine nationals pursuant to this Arrangement are recognized in accordance with their respective standards and that the persons concerned are afforded such opportunities with regard to careers, appointments and advancement as are commensurate with their training.4 In the arraignment, both governments likewise named their respective implementing organizations for SHINE. The Philippines designated the Department of Health (DOH) and the Philippine Health Insurance Corporation (Philhealth) with the implementation of SHINE. For their part, the German government "charge[d] the Deustche Gesellschaft fr Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn, with the implementation of its contributions."7

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Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various dates between December of 1998 to September of 1999. Bernadette Carmela Magtaas was hired as an "information systems manager and project officer of SHINE;"8 Carolina Dionco as a "Project Assistant of SHINE;"9 Christopher Ramos as "a project assistant and liason personnel of NHI related SHINE activities by GTZ;"10 Melvin Dela Paz and Randy Tamayo as programmers;11 and Edgardo Ramilo as "driver, messenger and multipurpose service man."12 The employment contracts of all six private respondents all specified Dr. Rainer Tollkotter, identified as an adviser of GTZ, as the "employer." At the same time, all the contracts commonly provided that "[i]t is mutually agreed and understood that [Dr. Tollkotter, as employer] is a seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a Philippine-German bilateral project named 'Social Health Insurance-Networking and Empowerment (SHINE)' which will end at a given time."13
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In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE Project Manager. Disagreements eventually arose between Nicolay and private respondents in matters such as proposed salary adjustments, and the course Nicolay was taking in the implementation of SHINE different from her predecessors. The dispute culminated in a letter14 dated 8 June 2000, signed by the private respondents, addressed to Nicolay, and copies furnished officials of the DOH, Philheath, and the director of the Manila office of GTZ. The letter raised several issues which private respondents claim had been brought up several times in the past, but have not been given appropriate response. It was claimed that SHINE under Nicolay had veered away from its original purpose to facilitate the development of social health insurance by shoring up the national health insurance program and strengthening local initiatives, as Nicolay had refused to support local partners and new initiatives on the premise that community and local government unit schemes were not sustainable-a philosophy that supposedly betrayed Nicolay's lack of understanding of the purpose of the project. Private respondents further alleged that as a result of Nicolay's "new thrust, resources have been used inappropriately;" that the new management style was "not congruent with the original goals of the project;" that Nicolay herself

suffered from "cultural insensitivity" that consequently failed to sustain healthy relations with SHINE's partners and staff. The letter ended with these ominous words:
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The issues that we [the private respondents] have stated here are very crucial to us in working for the project. We could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately.15
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In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all similarly worded except for their respective addressees. She informed private respondents that the "project's orientations and evolution" were decided in consensus with partner institutions, Philhealth and the DOH, and thus no longer subject to modifications. More pertinently, she stated:
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You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that you and the five other staff "could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately." Under the foregoing premises and circumstances, it is now imperative that I am to accept your resignation, which I expect to receive as soon as possible.16
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Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was not intended as a resignation letter, but one that merely intended to raise attention to what they perceived as vital issues.17 Negotiations ensued between private respondents and Nicolay, but for naught. Each of the private respondents received a letter from Nicolay dated 11 July 2000, informing them of the pre-termination of their contracts of employment on the grounds of "serious and gross insubordination, among others, resulting to loss of confidence and trust."18
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On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC. Named as respondents therein where GTZ, the Director of its Manila office Hans Peter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay. On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no jurisdiction over the case, as its acts were undertaken in the discharge of the governmental functions and sovereign acts of the Government of the Federal Republic of Germany. This was opposed by private respondents with the arguments that GTZ had failed to secure a certification that it was immune from suit from the Department of Foreign Affairs, and that it was GTZ and not the German government which had implemented the SHINE Project and entered into the contracts of employment. On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to Dismiss. The Order cited, among others, that GTZ was a private corporation which entered into an employment contract; and that GTZ had failed to secure from the DFA a certification as to its diplomatic status.

On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to Dismiss," again praying that the Motion to Dismiss be granted on the jurisdictional ground, and reprising the arguments for dismissal it had earlier raised.20 No action was taken by the Labor Arbiter on this new motion. Instead, on 15 October 2001, the Labor Arbiter rendered a Decision21 granting the complaint for illegal dismissal. The Decision concluded that respondents were dismissed without lawful cause, there being "a total lack of due process both substantive and procedural [sic]."22 GTZ was faulted for failing to observe the notice requirements in the labor law. The Decision likewise proceeded from the premise that GTZ had treated the letter dated 8 June 2000 as a resignation letter, and devoted some focus in debunking this theory. The Decision initially offered that it "need not discuss the jurisdictional aspect considering that the same had already been lengthily discussed in the Order de[n]ying respondents' Motion to Dismiss."23 Nonetheless, it proceeded to discuss the jurisdictional aspect, in this wise:
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Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to entertain the complaint on the following grounds: Firstly, under the employment contract entered into between complainants and respondents, specifically Section 10 thereof, it provides that "contract partners agree that his contract shall be subject to the LAWS of the jurisdiction of the locality in which the service is performed." Secondly, respondent having entered into contract, they can no longer invoke the sovereignty of the Federal Republic of Germany. Lastly, it is imperative to be immune from suit, respondents should have secured from the Department of Foreign Affairs a certification of respondents' diplomatic status and entitlement to diplomatic privileges including immunity from suits. Having failed in this regard, respondents cannot escape liability from the shelter of sovereign immunity.[sic]24
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Notably, GTZ did not file a motion for reconsideration to the Labor Arbiter's Decision or elevate said decision for appeal to the NLRC. Instead, GTZ opted to assail the decision by way of a special civil action for certiorari filed with the Court of Appeals.25 On 10 December 2001, the Court of Appeals promulgated a Resolution26 dismissing GTZ's petition, finding that "judicial recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of the petitioners [being] an appeal to the NLRC x x x."27 A motion for reconsideration to this Resolution proved fruitless for GTZ.28 Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court of Appeals and of the Labor Arbiter. GTZ's arguments center on whether the Court of Appeals could have entertained its petition for certiorari despite its not having undertaken an appeal before the NLRC; and whether the complaint for illegal dismissal should have been dismissed for lack of jurisdiction on account of GTZ's insistence that it enjoys immunity from suit. No special arguments are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay, respectively the then Director and the then Project Manager of GTZ in the Philippines; so we have to presume that the arguments raised in behalf of GTZ's alleged immunity from suit extend to them as well.

The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the petition be granted on the ground that GTZ was immune from suit, citing in particular its assigned functions in implementing the SHINE program-a joint undertaking of the Philippine and German governments which was neither proprietary nor commercial in nature. The Court of Appeals had premised the dismissal of GTZ's petition on its procedural misstep in bypassing an appeal to NLRC and challenging the Labor Arbiter's Decision directly with the appellate court by way of a Rule 65 petition. In dismissing the petition, the Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter rendered without jurisdiction over the subject matter may be annulled in a petition before a Regional Trial Court. That case may be differentiated from the present case, since the Regional Trial Court does not have original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by way of its original certiorari jurisdiction, decisions ruling on complaints for illegal dismissal. Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air Services is in fact clearly detrimental to petitioner's position in one regard. The Court therein noted that on account of the failure to correctly appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently became final and executory.30 GTZ goes as far as to "request" that the Court re-examine Air Services, a suggestion that is needlessly improvident under the circumstances. Air Services affirms doctrines grounded in sound procedural rules that have allowed for the considered and orderly disposition of labor cases. The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even when appeal is available, the Court has nonetheless allowed a writ of certiorari when the orders of the lower court were issued either in excess of or without jurisdiction. Indeed, the Court has ruled before that the failure to employ available intermediate recourses, such as a motion for reconsideration, is not a fatal infirmity if the ruling assailed is a patent nullity. This approach suggested by the OSG allows the Court to inquire directly into what is the main issue-whether GTZ enjoys immunity from suit. The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE project was implemented pursuant to the bilateral agreements between the Philippine and German governments. GTZ was tasked, under the 1991 agreement, with the implementation of the contributions of the German government. The activities performed by GTZ pertaining to the SHINE project are governmental in nature, related as they are to the promotion of health insurance in the Philippines. The fact that GTZ entered into employment contracts with the private respondents did not disqualify it from invoking immunity from suit, as held in cases such as Holy See v. Rosario, Jr.,32 which set forth what remains valid doctrine:
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Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.33
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Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ was not performing proprietary functions notwithstanding its entry into the particular employment contracts. Yet there is an equally fundamental premise which GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy the Federal Republic's immunity from suit?
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The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section 9, Article XVI of the Constitution, which states that "the State may not be sued without its consent." Who or what consists of "the State"? For one, the doctrine is available to foreign States insofar as they are sought to be sued in the courts of the local State,34 necessary as it is to avoid "unduly vexing the peace of nations." If the instant suit had been brought directly against the Federal Republic of Germany, there would be no doubt that it is a suit brought against a State, and the only necessary inquiry is whether said State had consented to be sued. However, the present suit was brought against GTZ. It is necessary for us to understand what precisely are the parameters of the legal personality of GTZ. Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the Federal Republic of Germany," a depiction similarly adopted by the OSG. Assuming that characterization is correct, it does not automatically invest GTZ with the ability to invoke State immunity from suit. The distinction lies in whether the agency is incorporated or unincorporated. The following lucid discussion from Justice Isagani Cruz is pertinent:
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Where suit is filed not against the government itself or its officials but against one of its entities, it must be ascertained whether or not the State, as the principal that may ultimately be held liable, has given its consent to be sued. This ascertainment will depend in the first instance on whether the government agency impleaded is incorporated or unincorporated. An incorporated agency has a charter of its own that invests it with a separate juridical personality, like the Social Security System, the University of the Philippines, and the City of Manila. By contrast, the unincorporated agency is so called because it has no separate juridical personality but is merged in the general machinery of the government, like the Department of Justice, the Bureau of Mines and the Government Printing Office. If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is performing. Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental functions and therefore should enjoy the sovereign immunity

from suit. Nevertheless, they are subject to suit even in the performance of such functions because their charter provides that they can sue and be sued.35
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State immunity from suit may be waived by general or special law.36 The special law can take the form of the original charter of the incorporated government agency. Jurisprudence is replete with examples of incorporated government agencies which were ruled not entitled to invoke immunity from suit, owing to provisions in their charters manifesting their consent to be sued. These include the National Irrigation Administration,37 the former Central Bank,38 and the National Power Corporation.39 In SSS v. Court of Appeals,40 the Court through Justice Melencio-Herrera explained that by virtue of an express provision in its charter allowing it to sue and be sued, the Social Security System did not enjoy immunity from suit:
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We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score considering that the SSS is a juridical entity with a personality of its own. It has corporate powers separate and distinct from the Government. SSS' own organic act specifically provides that it can sue and be sued in Court. These words "sue and be sued" embrace all civil process incident to a legal action. So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in damages arising from contract, and even for tort. A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
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"It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by the petitioners."41
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It is useful to note that on the part of the Philippine government, it had designated two entities, the Department of Health and the Philippine Health Insurance Corporation (PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was established under Republic Act No. 7875, Section 16(g) of which grants the corporation the power "to sue and be sued in

court." Applying the previously cited jurisprudence, PHIC would not enjoy immunity from suit even in the performance of its functions connected with SHINE, however, governmental in nature as they may be. Is GTZ an incorporated agency of the German government? There is some mystery surrounding that question. Neither GTZ nor the OSG go beyond the claim that petitioner is "the implementing agency of the Government of the Federal Republic of Germany." On the other hand, private respondents asserted before the Labor Arbiter that GTZ was "a private corporation engaged in the implementation of development projects."42 The Labor Arbiter accepted that claim in his Order denying the Motion to Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private respondents argue in their Comment that the finding that GTZ was a private corporation "was never controverted, and is therefore deemed admitted."44 In its Reply, GTZ controverts that finding, saying that it is a matter of public knowledge that the status of petitioner GTZ is that of the "implementing agency," and not that of a private corporation.45
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In truth, private respondents were unable to adduce any evidence to substantiate their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly in accepting such claim without explanation. But neither has GTZ supplied any evidence defining its legal nature beyond that of the bare descriptive "implementing agency." There is no doubt that the 1991 Agreement designated GTZ as the "implementing agency" in behalf of the German government. Yet the catch is that such term has no precise definition that is responsive to our concerns. Inherently, an agent acts in behalf of a principal, and the GTZ can be said to act in behalf of the German state. But that is as far as "implementing agency" could take us. The term by itself does not supply whether GTZ is incorporated or unincorporated, whether it is owned by the German state or by private interests, whether it has juridical personality independent of the German government or none at all. GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website.46 In the "Corporate Profile" section of the English language version of its site, GTZ describes itself as follows:
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As an international cooperation enterprise for sustainable development with worldwide operations, the federally owned Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its development-policy objectives. It provides viable, forward-looking solutions for political, economic, ecological and social development in a globalised world. Working under difficult conditions, GTZ promotes complex reforms and change processes. Its corporate objective is to improve people's living conditions on a sustainable basis. GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975 as a company under private law. The German Federal Ministry for Economic Cooperation and Development (BMZ) is its major client. The company also operates on behalf of other German ministries, the governments of other countries and international clients, such as the European Commission, the United Nations and the World Bank, as well as on behalf of private enterprises. GTZ works on a public-benefit basis. All surpluses generated are channeled [sic] back into its own international cooperation projects for sustainable development.47
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GTZ's own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in 1975 as a company under private law." GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually organized not through a legislative public charter, but under private law, in the same way that Philippine corporations can be organized under the Corporation Code even if fully owned by the Philippine government. This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners' argument that GTZ is entitled to immunity from suit because it is "an implementing agency." The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency of the Federal Republic of Germany," yet it bolsters the notion that as a company organized under private law, it has a legal personality independent of that of the Federal Republic of Germany. The Federal Republic of Germany, in its own official website,48 also makes reference to GTZ and describes it in this manner:
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x x x Going by the principle of "sustainable development," the German Technical Cooperation (Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on non-profit projects in international "technical cooperation." The GTZ is a private company owned by the Federal Republic of Germany.49
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Again, we are uncertain of the corresponding legal implications under German law surrounding "a private company owned by the Federal Republic of Germany." Yet taking the description on face value, the apparent equivalent under Philippine law is that of a corporation organized under the Corporation Code but owned by the Philippine government, or a government-owned or controlled corporation without original charter. And it bears notice that Section 36 of the Corporate Code states that "[e]very corporation incorporated under this Code has the power and capacity x x x to sue and be sued in its corporate name."50
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It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not been vested or has been specifically deprived the power and capacity to sue and/or be sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that under German law, it has not consented to be sued despite it being owned by the Federal Republic of Germany. We adhere to the rule that in the absence of evidence to the contrary, foreign laws on a particular subject are presumed to be the same as those of the Philippines,51 and following the most intelligent assumption we can gather, GTZ is akin to a governmental owned or controlled corporation without original charter which, by virtue of the Corporation Code, has expressly consented to be sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ enjoys immunity from suit. This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his rulings. Our ruling in Holy See v. Del Rosario52 provided a template on how a foreign entity desiring to invoke State immunity from suit could duly prove such immunity before our local

courts. The principles enunciated in that case were derived from public international law. We stated then:
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In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that said defendant is entitled to immunity. In the United States, the procedure followed is the process of "suggestion," where the foreign state or the international organization sued in an American court requests the Secretary of State to make a determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]). In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae.53
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It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for petitioners to secure from the Department of Foreign Affairs "a certification of respondents' diplomatic status and entitlement to diplomatic privileges including immunity from suits."54 The requirement might not necessarily be imperative. However, had GTZ obtained such certification from the DFA, it would have provided factual basis for its claim of immunity that would, at the very least, establish a disputable evidentiary presumption that the foreign party is indeed immune which the opposing party will have to overcome with its own factual evidence. We do not see why GTZ could not have secured such certification or endorsement from the DFA for purposes of this case. Certainly, it would have been highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the motion to dismiss. Still, even at this juncture, we do not see any evidence that the DFA, the office of the executive branch in charge of our diplomatic relations, has indeed endorsed GTZ's claim of immunity. It may be possible that GTZ tried, but failed to secure such certification, due to the same concerns that we have discussed herein. Would the fact that the Solicitor General has endorsed GTZ's claim of State's immunity from suit before this Court sufficiently substitute for the DFA certification? Note that the rule in public international law quoted in Holy See referred to endorsement by the Foreign Office of the State

where the suit is filed, such foreign office in the Philippines being the Department of Foreign Affairs. Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed GTZ's claim, or that the OSG had solicited the DFA's views on the issue. The arguments raised by the OSG are virtually the same as the arguments raised by GTZ without any indication of any special and distinct perspective maintained by the Philippine government on the issue. The Comment filed by the OSG does not inspire the same degree of confidence as a certification from the DFA would have elicited. Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make a "suggestion" to the trial court, accomplished by way of a Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated in the text of Baer itself and was likely supplied in Holy See because its author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which directed the OSG to intervene in behalf of the United States government in the Baer case, and such fact is manifest enough of the endorsement by the Foreign Office. We do not find a similar circumstance that bears here. The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction that it enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of Germany. Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds when they refused to acknowledge that GTZ is so immune by dismissing the complaint against it. Our finding has additional ramifications on the failure of GTZ to properly appeal the Labor Arbiter's decision to the NLRC. As pointed out by the OSG, the direct recourse to the Court of Appeals while bypassing the NLRC could have been sanctioned had the Labor Arbiter's decision been a "patent nullity." Since the Labor Arbiter acted properly in deciding the complaint, notwithstanding GTZ's claim of immunity, we cannot see how the decision could have translated into a "patent nullity." As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with the Court of Appeals the petition for certiorari . It then follows that the Court of Appeals acted correctly in dismissing the petition on that ground. As a further consequence, since petitioners failed to perfect an appeal from the Labor Arbiter's Decision, the same has long become final and executory. All other questions related to this case, such as whether or not private respondents were illegally dismissed, are no longer susceptible to review, respecting as we do the finality of the Labor Arbiter's Decision. A final note. This decision should not be seen as deviation from the more common methodology employed in ascertaining whether a party enjoys State immunity from suit, one which focuses on the particular functions exercised by the party and determines whether these are proprietary or sovereign in nature. The nature of the acts performed by the entity invoking immunity remains the most important barometer for testing whether the privilege of State immunity from suit should apply. At the same time, our Constitution stipulates that a State immunity from suit is conditional on its withholding of consent; hence, the laws and circumstances pertaining to the creation and legal personality of an instrumentality or agency invoking immunity remain

relevant. Consent to be sued, as exhibited in this decision, is often conferred by the very same statute or general law creating the instrumentality or agency. WHEREFORE, the petition is DENIED. No pronouncement as to costs. SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: LEONARDO A. QUISUMBING Associate Justice Chairperson CONCHITA CARPIO MORALES Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice

ARTURO D. BRION Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. LEONARDO A. QUISUMBING Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. REYNATO S. PUNO Chief Justice