RepublicofthePhilippines

SUPREMECOURT
Manila
ENBANC
G.R.No.76607 February26,1990
UNITEDSTATESOFAMERICA,FREDERICKM.SMOUSEANDYVONNEREEVES,
petitioners,
vs.
HON.ELIODOROB.GUINTO

Thesecaseshavebeenconsolidatedbecausetheyallinvolvethedoctrineofstateimmunity.TheUnitedStatesof
Americawasnotimpleadedinthecomplaintsbelowbuthasmovedtodismissonthegroundthattheyarein
effectsuitsagainstittowhichithasnotconsented.Itisnowcontestingthedenialofitsmotionsbythe
respondentjudges.
In G.R. No.76607, theprivaterespondents aresuingseveralofficersoftheU.S.AirForcestationedinClarkAir
Baseinconnectionwiththebiddingconductedbythemforcontractsforbarberservicesinthesaidbase.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air Force,
solicited bids for such contracts through its contracting officer, James F.Shaw. Among thosewhosubmitted
their bids were private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar.
ValenciahadbeenaconcessionaireinsideClarkfor34yearsdelPilarfor12yearsandTanglaofor50years.
Thebidding was won by Ramon Dizon, over the objection of the private respondents,whoclaimedthathe had
made a bid for four facilities, including the Civil Engineering Area, which wasnotincludedintheinvitationto
bid.
The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through its
representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil Engineering
concession hadnot been awarded to Dizon as a resultofthe February 24, 1986 solicitation.Dizon wasalready
operating this concession, then knownasthe NCO club concession, and the expirationof thecontracthadbeen
extended from June 30, 1986 to August 31, 1986. They further explained that the solicitation of the CE
barbershopwouldbeavailableonlybytheendofJuneandtheprivaterespondentswouldbenotified.
On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and the
individual petitioners to cancel the award to defendant Dizon, to conduct a rebidding for the barbershop
concessions and to allow the private respondents by a writ ofpreliminary injunction to continue operating the
1
concessionspendinglitigation.
Upon the filing of the complaint, the respondent court issued an
ex parte order directing the individual
petitionerstomaintainthe
statusquo
.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for preliminary
injunction on theground that theaction was in effecta suitagainst theUnitedStatesofAmerica,whichhadnot
waived its nonsuability. The individual defendants, as official employees of the U.S. Air Force, were also
immunefromsuit.
Onthesamedate,July22,1986,thetrialcourtdeniedtheapplicationforawritofpreliminaryinjunction.
OnOctober10,1988,thetrialcourtdeniedthepetitioners'motiontodismiss,holdinginpartasfollows:
From the pleadings thus far presented tothis Court bythe parties, theCourt'sattentionis calledbythe
relationship between theplaintiffsas well as the defendants, including the US Government, in that prior tothe
biddingor solicitation in question, there was a binding contractbetweenthe plaintiffsaswellasthedefendants,
including the US Government. By virtue of said contract of concession it is the Court's understanding that

neither the US Government northe herein principaldefendants wouldbecome the employer/sof the plaintiffs
but that the latter are the employers themselves of the barbers, etc. with the employer, the plaintiffs herein,
remitting the stipulated percentage of commissions to the Philippine Area Exchange.The samecircumstance
would become in effect when the Philippine Area Exchange opened for biddingorsolicitation the questioned
barber shop concessions. To this extent, therefore, indeed a commercial transaction has been entered, and for
purposesofthesaidsolicitation,wouldnecessarilybeenteredbetweentheplaintiffsaswellasthedefendants.
The Court, further, is of the view that Article XVIII of the RPUS Bases Agreement doesnotcover
2
suchkindofservicesfallingundertheconcessionaireship,suchasabarbershopconcession.
On December 11,1986,following thefilingofthehereinpetitionfor
certiorariandprohibitionwithpreliminary
3
injunction,weissuedatemporaryrestrainingorderagainstfurtherproceedingsinthecourtbelow.
In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia,
Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook inthe U.S.Air Force Recreation
Center attheJohnHayAir StationinBaguioCity. Ithadbeenascertainedafterinvestigation, fromthetestimony
of BelsaCartalla and Orascion, that Genovehadpouredurineintothesoupstockusedincookingthevegetables
served to the club customers. Lamachia,asclubmanager, suspended him and thereafter referredthe case to a
board of arbitrators conformably tothe collective bargaining agreement betweenthe Center anditsemployees.
Theboard unanimously found him guilty and recommended his dismissal.Thiswas effectedonMarch 5, 1986,
by Col. David C. Kimball, Commander of the 3rd Combat Support Group, PACAF Clark Air Force Base.
Genove's reaction was to file Ms complaint in the Regional Trial Court of Baguio City against the individual
4
petitioners.
On March 13, 1987, the defendants, joined bythe United States of America, movedto dismiss the complaint,
alleging that Lamachia, as an officer of the U.S. AirForcestationedatJohnHayAirStation,wasimmune from
suit for the acts doneby him in hisofficial capacity. They argued that the suit was in effect againstthe United
States,whichhadnotgivenitsconsenttobesued.
ThismotionwasdeniedbytherespondentjudgeonJune4,1987,inanorderwhichreadinpart:
It is the understanding of the Court, based on the allegations of the complaint
which have been
hypothetically admitted by defendants uponthe filing of theirmotiontodismiss
thatalthoughdefendantsacted
initially in their official capacities, their going beyondwhat their functions called for brought them out of the
protective mantle ofwhatever immunities they may have hadinthebeginning.Thus,theallegationthattheacts
complained of were illegal, done. with extreme bad faith and with preconceived sinister plan to harass and
5
finallydismisstheplaintiff,gainssignificance.
ThepetitionersthencametothisCourtseeking
certiorari
andprohibitionwithpreliminaryinjunction.
In G.R. No. 80018, Luis Bautista, who was employed asa barracksboyin Camp O' Donnell, anextension of
Clark Air Base, was arrested following a buybust operation conducted by the individual petitioners herein,
namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S.AirForceandspecialagents
of theAirForceOffice ofSpecialInvestigators(AFOSI).Onthebasisoftheswornstatementsmadebythem,an
information for violation ofR.A.6425,otherwiseknownastheDangerousDrugsAct,wasfiledagainstBautista
in theRegional TrialCourt of Tarlac. The abovenamed officerstestifiedagainst him at his trial.Asaresultof
the filing of the charge, Bautista was dismissed from his employment. He then filedacomplaint for damages
6
againsttheindividualpetitionershereinclaimingthatitwasbecauseoftheiractsthathewasremoved.
During the period forfiling ofthe answer, Mariano Y. Navarro aspecialcounsel assigned tothe International
Law Division, Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the
defendantsand moved for an extension within which to filean"answerand/orotherpleadings."Hisreason was
that the AttorneyGeneral of the United States had not yet designated counsel to represent the defendants,who
were being sued for their official acts. Within the extended period, the defendants, without the assistance of
counselor authority from the U.S. Department of Justice,filedtheiranswer.Theyallegedthereinasaffirmative

defenses thattheyhadonlydonetheirdutyintheenforcementofthelawsofthePhilippinesinsidetheAmerican
basespursuanttotheRPUSMilitaryBasesAgreement.
On May7,1987,the law firmofLuna,SisonandManas,havingbeenretainedtorepresentthe defendants,filed
withleaveofcourtamotiontowithdrawtheansweranddismissthecomplaint.The groundinvokedwasthatthe
defendants were acting in their official capacity when theydidthe actscomplained of and that the complaint
againstthemwasineffectasuitagainsttheUnitedStateswithoutitsconsent.
The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the
claimed immunity under theMilitary BasesAgreementcoveredonly criminalandnotcivilcases.Moreover,the
7
defendantshadcomeunderthejurisdictionofthecourtwhentheysubmittedtheiranswer.
Following the filing of the hereinpetition for
certiorari and prohibition with preliminary injunction, weissued
8
onOctober14,1987,atemporaryrestrainingorder.
In G.R. No. 80258, a complaint for damages wasfiled by theprivaterespondents againstthehereinpetitioners
(except the United StatesofAmerica), for injuries allegedlysustained bythe plaintiffs as aresultoftheactsof
the defendants. 9
There is a conflict of factual allegations here. According to the plaintiffs,the defendantsbeat
them up, handcuffed them and unleashed dogs on them which bit them in several parts of their bodies and
caused extensive injuries to them. Thedefendants deny this and claim theplaintiffs werearrested for theftand
were bitten by the dogs because they were struggling and resisting arrest, The defendants stress that the dogs
werecalledoffandtheplaintiffswereimmediatelytakentothemedicalcenterfortreatmentoftheirwounds.
In a motion to dismiss the complaint, the United States of America and the individually named defendants
argued that the suitwas ineffectasuitagainsttheUnitedStates,whichhadnotgivenitsconsenttobe sued.The
defendantswerealso immunefromsuitunderthe RPUSBasesTreatyforactsdonebythemintheperformance
oftheirofficialfunctions.
The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as
follows:
Thedefendants certainly cannotcorrectly argue that theyareimmunefromsuit.Theallegations,ofthe
complaint which is sought to be dismissed, had to be hypothetically admitted and whatever ground the
defendants may have, had to be ventilated during the trial of the case on the merits. The complaint alleged
criminal acts against the individuallynamed defendants and fromthenatureofsaid actsitcouldnotbesaidthat
they are Acts of State, for which immunity should be invoked. If the Filipinosthemselves are duty bound to
respect, obey and submit themselvesto the laws of the country, with more reason, themembers ofthe United
States Armed Forces who arebeingtreatedas guestsofthiscountryshould respect, obeyandsubmitthemselves
10
toitslaws.
and so was the motion for reconsideration. Thedefendants submitted their answerasrequired butsubsequently
filed their petition for
certiorari and prohibition with preliminary injunction with this Court. We issued a
11
temporaryrestrainingorderonOctober27,1987.
II
Therule that a state maynot be sued without its consent, now expressedinArticleXVI,Section3,ofthe1987
Constitution, is one of the generally accepted principles ofinternational lawthatwehaveadoptedaspartofthe
lawofourlandunderArticleII,Section 2. Thislatterprovisionmerelyreiteratesapolicyearlierembodiedinthe
1935and 1973 Constitutionsand also intended tomanifest our resolve toabidebytherules oftheinternational
community.
Even without such affirmation, wewouldstillbebound bythegenerallyacceptedprinciplesofinternationallaw
under thedoctrineofincorporation. Underthisdoctrine,asacceptedbythemajority ofstates,suchprinciplesare
deemed incorporated in the lawof every civilizedstateasaconditionandconsequenceofitsmembershipinthe
society of nations.Upon its admission to such society, the state isautomaticallyobligated tocomplywiththese
principlesinitsrelationswithotherstates.

As applied to thelocal state,thedoctrineofstateimmunityis basedonthe justificationgivenbyJusticeHolmes

that "there can be no legal right againstthe authoritywhichmakesthelawonwhichtherightdepends."12
There
are other practical reasons for the enforcement of the doctrine. In the case of the foreign state sought to be
impleaded in the local jurisdiction, the added inhibition is expressed in the maxim
par in parem, non habet
imperium. All states are sovereign equals andcannotassertjurisdictionoveroneanother.Acontrarydisposition
13
would,inthelanguageofacelebratedcase,"undulyvexthepeaceofnations."
While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed against officials of the state for acts allegedly performed by them in the discharge of their
duties. The ruleis thatifthejudgmentagainstsuchofficialswillrequire thestateitselftoperformanaffirmative
act to satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against
them, the suit must be regardedas against thestateitselfalthoughithasnotbeenformallyimpleaded. 14
Insuch
asituation,thestatemaymovetodismissthecomplaintonthegroundthatithasbeenfiledwithoutitsconsent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it
grants the state todefeat any legitimate claim againstitbysimplyinvoking itsnonsuability.Thatishardlyfair,
at least in democratic societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its
citizens. In fact, thedoctrine is not absolute and doesnotsaythestatemaynotbesuedunderanycircumstance.
On the contrary, the rule says that the state may not be sued withoutits consent, which clearly imports that it
maybesuedifitconsents.
Theconsent of thestatetobesuedmay bemanifestedexpresslyorimpliedly.Expressconsentmaybeembodied
in a general law or a special law. Consent is impliedwhen thestateentersintoacontractorititselfcommences
litigation.
The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the
Philippine government "consents and submits to be sued upon any moneyed claim involving liability arising
fromcontract,expressorimplied,whichcouldserve asabasisofcivilactionbetweenprivateparties."In
Merritt
v. Governmentofthe
PhilippineIslands
,15
aspeciallawwaspassed toenableapersonto suethe governmentfor
an alleged tort. Whenthe governmententers into a contract, it isdeemed to havedescended to the levelofthe
other contracting partyand divested of its sovereign immunityfromsuit with its implied consent. 16
Waiver is
17
alsoimpliedwhenthegovernmentfilesacomplaint,thusopeningitselftoacounterclaim.
The above rules are subject to qualification. Express consent is effected only by the will of the legislature
through the medium of a duly enacted statute. 18
We have held that not all contracts entered into by the
government will operate as a waiver of its nonsuabilitydistinction must be made betweenits sovereign and
proprietary acts. 19
As for the filing of a complaint by the government, suability will result only where the
20
governmentisclaimingaffirmativerelieffromthedefendant.
In the case of the United States of America, the customary rule of international law on state immunity is
expressedwithmorespecificityintheRPUSBasesTreaty.ArticleIIIthereofprovidesasfollows:
It is mutually agreed that the United States shall havethe rights,power and authoritywithinthebases
which are necessary for the establishment, use, operation and defense thereof or appropriate for the control
thereof and all the rights, power andauthoritywithinthelimitsoftheterritorialwatersandairspaceadjacentto,
orinthevicinityof,thebaseswhicharenecessarytoprovideaccesstothemorappropriatefortheircontrol.
Thepetitioners also rely heavily on
Baerv.Tizon
,21
alongwithseveralotherdecisions,to support theirposition
that they are not suable in the cases below, the United States not havingwaived its sovereign immunity from
suit.ItisemphasizedthatinBaer,theCourtheld:
The invocation of the doctrine of immunity from suit of a foreign state without its consent is
appropriate. More specifically, insofar as alien armed forces is concerned, the starting point is Raquiza v.
Bradford
, a 1945 decision. In dismissing a habeas corpus petition for the release of petitioners confined by
American army authorities, Justice Hilado speaking for the Court, cited
Coleman v. Tennessee
, where it was
explicitly declared: 'Itiswell settled that a foreignarmy, permitted tomarchthrougha friendlycountryor tobe

stationed in it, by permission of its government or sovereign,is exempt fromthe civilandcriminaljurisdiction

of the place.' Two years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v.
Bradford and cited in support thereof excerpts from the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy demands the
clarification that after the conclusion of the PhilippineAmerican Military Bases Agreement, the treaty
provisions should control on such matter, theassumptionbeing that therewasamanifestationofthesubmission
to jurisdiction on the part of the foreign power whenever appropriate. More tothe point is
Syquia v. Almeda
Lopez
, where plaintiffs as lessors suedthe Commanding Generalof the United States Army inthePhilippines,
seekingthe restoration to them of the apartmentbuildings they owned leased to theUnitedStatesarmedforces
stationed in the Manila area. A motion to dismiss on the ground of nonsuability was filed and upheld by
respondent Judge. Thematterwas taken tothis Courtina mandamusproceeding.Itfailed.Itwastherulingthat
respondent Judge acted correctly considering that the 4 action must be considered as one against the U.S.
Government. The opinion of Justice Montemayor continued: 'It is clear that the courts of the Philippines
including the Municipal Court of Manilahave 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 citizenfilingasuitagainsthisownGovernmentwithoutthelatter's
consent but it is of a citizen firing an action against a foreign government without said government's consent,
which renders more obvious thelack of jurisdictionof the courtsof his country. The principlesoflaw behind
this rule are so elementary and of such general acceptance that we deem it unnecessaryto cite authorities in
support thereof then came
Marvel Building Corporation v. Philippine War Damage Commission
, where
respondent, a United States Agency established to compensate damages suffered by the Philippines during
World War II was held asfalling within the above doctrine as thesuit againstit would eventually be a charge
against or financial liability of the UnitedStates Government because ... , the Commission has no funds of its
own forthepurposeofpayingmoneyjudgments.'TheSyquiarulingwasagainexplicitlyrelieduponin
Marquez
Lim v. Nelson
, involving a complaint for the recovery of a motor launch, plus damages, the special defense
interposed being 'that the vessel belonged to the United States Government,thatthedefendantsmerelyactedas
agents of saidGovernment, and that the United States Government istherefore the real party in interest.' So it
wasin
Philippine
Alien Property Administration v. Castelo
, where itwasheldthatasuitagainstAlien Property
Custodian and the Attorney General of the United Statesinvolvingvested property under the Trading with the
Enemy Act is in substance a suit against the United States.To the same effect is
Parrenov.McGranery
, asthe
following excerpt from the opinion of justice Tuazon clearly shows: 'It is a widely accepted principle of
international law, which is made a part of the law ofthe land (Article II, Section 3 of the Constitution), that a
foreign state may not be brought to suit before the courts of another stateoritsown courtswithoutitsconsent.'
Finally, there is Johnson v. Turner
, an appeal by the defendant, then Commanding General, Philippine
Command (Air Force, with office at Clark Field) from a decision ordering the return to plaintiff of the
confiscated military payment certificates known as scrip money. In reversing the lower court decision, this
Tribunal, through Justice Montemayor, relied on
Syquia v. Almeda
Lopez
, explaining why it could not be
sustained.
It bears stressing at this point that the above observations do not confer on the United States of America a
blanket immunity forall actsdone by it or its agents in thePhilippines.Neithermaytheother petitionersclaim
that they are also insulated from suit in this country merely because they have actedas agents of the United
Statesinthedischargeoftheirofficialfunctions.
There is no question that theUnited States of America, like any other state, will be deemed tohave impliedly
waived its nonsuability if it hasentered intoa contract initsproprietaryorprivatecapacity. Itis onlywhenthe
contract involves its sovereign or governmental capacity that no such waiver may be implied. This was our
ruling in United
StatesofAmericav.Ruiz,22
wherethetransactioninquestiondealtwith theimprovementofthe

wharves in the naval installation at Subic Bay. As this wasaclearly governmental function, we held that the
contract did not operate to divest theUnited States of its sovereign immunity from suit.InthewordsofJustice
VicenteAbadSantos:
Thetraditional rule of immunity exempts aStatefrombeingsuedinthecourtsofanotherStatewithout
its consent or waiver. This rule is a necessary consequence of the principles of independence andequalityof
States. However, therules ofInternational Law arenotpetrified they are constantly developing and evolving.
And because the activities of states have multiplied, it has been necessary to distinguish them
between
sovereign andgovernmentalacts(jureimperii)andprivate,commercialandproprietaryacts(juregestionis).The
resultis that State immunity now extendsonly toactsjureimperiiTherestrictiveapplicationofStateimmunity
isnowtheruleintheUnitedStates,theUnitedkingdomandotherstatesinWesternEurope.
xxx
xxx
xxx
The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated
differently, a State may besaid to havedescended to the levelof an individualandcanthusbedeemedtohave
tacitly given its consent to be sued only when it enters into business contracts. It does not apply where the
contract relatestotheexerciseofitssovereign functions.In thiscasetheprojectsareanintegralpartof thenaval
basewhich is devoted tothedefenseofboththeUnitedStatesandthePhilippines,indisputablya functionofthe
governmentofthehighestordertheyarenotutilizedfornordedicatedtocommercialorbusinesspurposes.
Theother petitioners in the cases before usallavertheyhaveactedinthedischargeoftheirofficialfunctionsas
officersor agents of the United States.However, thisisamatterofevidence.Thechargesagainstthem may not
be summarily dismissed on their mere assertion that their acts are imputableto the United States of America,
which has not given its consent tobe sued. Infact,thedefendantsaresoughttobeheldanswerableforpersonal
torts in which the United States itself is not involved. If found liable, they and they alone must satisfy the
judgment.
In
Festejo v. Fernando
, 23
a bureaudirector, acting withoutany authoritywhatsoever,appropriatedprivateland
and converted it into public irrigation ditches.Sued forthevalueofthelotsinvalidlytakenbyhim, hemovedto
dismiss the complaint on the groundthatthesuitwasin effectagainstthePhilippinegovernment,whichhad not
given its consent to be sued. This Court sustained the denial of the motion and held that the doctrine of state
immunitywasnotapplicable.Thedirectorwasbeingsuedinhisprivatecapacityforapersonaltort.
Withtheseconsiderationsinmind,wenowproceedtoresolvethecasesathand.
III
It is clear from a study ofthe records of G.R. No. 80018 that theindividuallynamed petitioners therein were
acting in the exercise of their official functions when they conducted the buybust operation against the
complainant and thereafter testified against him at his trial. The said petitionerswereinfactconnectedwiththe
Air Force Office of Special Investigators and were charged precisely with the function of preventing the
distribution, possession and use of prohibited drugs and prosecuting those guilty of such acts. Itcannot for a
moment be imagined that they were acting in their private or unofficial capacity when they apprehended and
latertestifiedagainst thecomplainant. It follows that for dischargingtheir dutiesasagentsoftheUnitedStates,
they cannot be directly impleaded for acts imputable to their principal, which hasnotgiven its consentto be
24
sued.Asweobservedin
Sandersv.Veridiano
:
Given the official character of the abovedescribed letters, we have to conclude that the petitioners
were, legally speaking, being sued as officers of the UnitedStates government. Astheyhaveacted onbehalfof
that government, andwithinthe scopeoftheirauthority,itisthatgovernment,andnotthepetitionerspersonally,
thatisresponsiblefortheiracts.
The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts
through a special agent. The argument, it would seem, is premised on the ground that since the officers are
designated"specialagents,"theUnitedStatesgovernmentshouldbeliablefortheirtorts.

There seemsto be a failure todistinguish between suabilityandliabilityandamisconceptionthatthetwoterms

are synonymous. Suability depends on the consent of the statetobesued,liabilityontheapplicablelawandthe
established facts.The circumstance thatastate is suable does not necessarilymean that itisliableontheother
hand, itcan never be held liable if it doesnotfirstconsenttobesued.Liabilityis not concededbythe merefact
that the statehas alloweditself tobe sued. When the state does waive its sovereign immunity,itisonlygiving
theplaintiffthechancetoprove,ifitcan,thatthedefendantisliable.
The said article establishes a rule of
liability,
not suability. The government may be held liable under this rule
onlyifitfirstallowsitselftobesuedthroughanyoftheacceptedformsofconsent.
Moreover, the agent performing his regular functions is not aspecialagent even if he is so denominated, asin
the case at bar. No less important,thesaidprovisionappearstoregulateonlytherelations ofthelocalstatewith
its inhabitants and,hence, applies only to the Philippine governmentandnottoforeigngovernments impleaded
inourcourts.
We reject the conclusion ofthetrialcourtthattheanswerfiledbythespecialcounseloftheOffice oftheSheriff
Judge Advocate of Clark AirBase was a submission by the United Statesgovernment toits jurisdiction. Aswe
noted in
Republic v. Purisima
, 25
express waiver of immunity cannot be made by a mere counsel of the
government but must be effected through a dulyenacted statute. Neither does such answer come under the
impliedformsofconsentasearlierdiscussed.
But even as we are certain that theindividualpetitionersin G.R.No.80018were actinginthedischargeoftheir
official functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual
allegations in this case deserve inourviewacloserstudyofwhatactuallyhappenedtothe plaintiffs.Therecord
is too meager to indicateif the defendants were really discharging theirofficialdutiesorhadactually exceeded
their authority when the incident in question occurred. Lacking this information, this Court cannot directly
decide this case. The needed inquiry must first be made by the lower court so itmayassess and resolve the
conflicting claims ofthe parties on the basisoftheevidencethathasyettobepresentedatthetrial.Onlyafterit
shall have determined inwhat capacitythepetitionerswereactingat thetime oftheincidentinquestionwillthis
Courtdetermine,ifstillnecessary,ifthedoctrineofstateimmunityisapplicable.
In G.R. No. 79470, private respondentGenovewasemployedasacookintheMainClublocatedat theU.S.Air
Force Recreation Center, also knownas the Open Mess Complex, at John Hay Air Station. Asmanagerofthis
complex, petitioner Lamachia isresponsible for eleven diversified activities generating anannualincomeof $2
million. Under hisexecutive management are three service restaurants, a cafeteria,a bakery,aClassVIstore,a
coffee and pantry shop, a main cashier cage, an administrative office, and a decentralized warehouse which
maintains a stock level of $200,000.00 per month in resale items. He supervises 167 employees,one of whom
wasGenove,withwhomtheUnitedStatesgovernmenthasconcludedacollectivebargainingagreement.
From these circumstances, the Courtcan assume that therestaurantservicesofferedatthe JohnHayAirStation
partake of the nature of a business enterprise undertaken by the United States government in its proprietary
capacity.Such services are notextendedto the American servicemenfor free as a perquisite of membershipin
the Armed Forces of the United States. Neither does it appear that they are exclusively offered to these
servicemen onthe contrary, it is well known that they are available tothegeneralpublicaswell,includingthe
tourists in Baguio City, many of whom make itapoint to visit John Hay for this reason.Allpersons availing
themselves of this facility pay for the privilege like all other customers asinordinaryrestaurants.Although the
prices are concededly reasonable and relatively low, such services are undoubtedly operated for profit, as a
commercialandnotagovernmentalactivity.
Theconsequence of this findingis that thepetitionerscannotinvokethedoctrineofstateimmunityto justifythe
dismissalofthedamagesuitagainstthembyGenove.Suchdefense willnotprosperevenifitbe establishedthat
they were acting as agents of the United States when they investigated and later dismissed Genove. For that
matter, not even the United States government itself can claim such immunity. Thereason is that byentering

into the employment contract with Genove in the discharge of its proprietary functions, itimpliedly divested
itselfofitssovereignimmunityfromsuit.
But theseconsiderationsnotwithstanding, we hold that the complaintagainst thepetitioners in thecourt below
must still be dismissed. While suable, thepetitioners are nevertheless not liable. It is obviousthatthe claimfor
damagescannotbeallowedonthestrengthoftheevidencebeforeus,whichwehavecarefullyexamined.
The dismissal of the private respondent was decided upon only after a thorough investigation where it was
established beyond doubt that he hadpolluted the soup stock with urine. Theinvestigation,in fact,didnotstop
there. Despite the definitive finding of Genove's guilt, the case was still referred to the board of arbitrators
provided for in the collective bargaining agreement. This board unanimously affirmed the findings of the
investigators and recommended Genove's dismissal. There was nothing arbitrary about the proceedings. The
petitioners acted quite properly in terminating the private respondent's employment for his unbelievably
nauseating act. It is surprising that he should still have the temerity to file his complaint for damages after
committinghisutterlydisgustingoffense.
Concerning G.R. No. 76607,we alsofind that the barbershopssubject oftheconcessions granted bytheUnited
States government are commercialenterprises operated byprivateperson's.TheyarenotagenciesoftheUnited
States Armed Forces nor are their facilitiesdemandable asamatterofrightbytheAmericanservicemen.These
establishments provide forthe grooming needs of theircustomersandoffernotonlythebasichaircutand shave
(as required in most military organizations)butsuch other amenities asshampoo, massage,manicureandother
similar indulgences.Andallforafee.Interestingly,oneoftheconcessionaires,privaterespondentValencia,was
even sent abroad to improve his tonsorial business, presumably for the benefit of his customers. No less
significantly, if notmore so,allthebarbershop concessionairesareunderthetermsoftheircontracts,requiredto
remit to the United States government fixed commissions in considerationoftheexclusiveconcessionsgranted
tothemintheirrespectiveareas.
This being the case, the petitioners cannot plead any immunity from the complaint filed by the private
respondentsin thecourtbelow.Thecontractsinquestionbeing decidedlycommercial,theconclusionreachedin
the
UnitedStatesofAmericav.Ruiz
casecannotbeappliedhere.
TheCourt would have directly resolved theclaims against the defendants as we have done in G.R. No.79470,
except for thepaucity of the record inthe case at hand.The evidence of the allegedirregularity in thegrantof
the barbershop concessions is not before us. This means that, as in G.R. No.80258, the respondent court will
have to receive thatevidencefirst,soitcanlater determineonthebasisthereofiftheplaintiffsareentitledtothe
relieftheyseek.Accordingly,thiscasemustalsoberemandedtothecourtbelowforfurtherproceedings.
IV
There are anumberofothercases now pendingbefore uswhichalsoinvolvethequestionoftheimmunityofthe
United States from the jurisdiction ofthePhilippines.Thisiscauseforregret,indeed,astheymarthetraditional
friendship between two countries long allied in the cause of democracy. Itishopedthatthesocalled"irritants"
in their relations will be resolved in a spirit of mutual accommodation and respect, without the inconvenience
andasperityoflitigationandalwayswithjusticetobothparties.
WHEREFORE,afterconsideringalltheabovepremises,theCourtherebyrendersjudgmentasfollows:
1.
In G.R. No. 76607, the petition is DISMISSED andthe respondent judge is directed toproceed
with the hearingand decision of Civil Case No. 4772. The temporary restraining order dated December
11,1986,isLIFTED.
2.
InG.R.No.79470,thepetitionisGRANTEDandCivilCaseNo.829R(298)isDISMISSED.
3.
In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115C87 is DISMISSED. The
temporaryrestrainingorderdatedOctober14,1987,ismadepermanent.
4.
In G.R. No. 80258, the petition is DISMISSED andthe respondent court is directed to proceed
with the hearingand decision of Civil Case No. 4996. ThetemporaryrestrainingorderdatedOctober27,
1987,isLIFTED.
Allwithoutanypronouncementastocosts.SOORDERED.


RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.164785March15,2010
ELISEOF.SORIANO,Petitioner,
vs.
MA. CONSOLIZA P. LAGUARDIA, inhercapacityasChairpersonoftheMovieandTelevision Reviewand
Classification Board, MOVIE AND TELEVISION REVIEW AND CLASSIFICATION BOARD,JESSIE L.
GALAPON, ANABEL M. DELA CRUZ, MANUEL M. HERNANDEZ, JOSE L. LOPEZ, CRISANTO
SORIANO, BERNABE S. YARIA, JR., MICHAEL M. SANDOVAL, and ROLDAN A. GAVINO,
Respondents.
xx
G.R.No.165636
ELISEOF.SORIANO,Petitioner,
vs.
MOVIEAND TELEVISION REVIEWANDCLASSIFICATIONBOARD,ZOSIMOG.ALEGRE,JACKIE
AQUINOGAVINO, NOEL R. DEL PRADO, EMMANUEL BORLAZA, JOSE E. ROMERO IV, and
FLORIMONDO C.ROUS, in their capacity as members of the Hearing and AdjudicationCommitteeofthe
MTRCB, JESSIE L. GALAPON, ANABEL M. DELA CRUZ, MANUEL M. HERNANDEZ, JOSE L.
LOPEZ, CRISANTO SORIANO, BERNABES. YARIA,JR., MICHAELM.SANDOVAL,andROLDANA.
GAVINO,intheircapacityascomplainantsbeforetheMTRCB,
Respondents.
RESOLUTION
VELASCO,JR.,
J.:
Before us is this motion of petitioner Eliseo F. Sorianofor reconsiderationof theDecisionofthe CourtdatedApril
29,2009,modifying that of the Movie and Television Review andClassificationBoard(MTRCB)by imposingthe
penalty ofthreemonthsuspensiononthe televisionshow AngDatingDaan,insteadofonpetitionerSoriano,ashost
ofthatprogram.
Petitioner seeks reconsideration on the following grounds or issues: (1) the suspension thus meted out to the
1
program constitutes prior restraint (2) the Court erred in ruling that his utterances
did not constituteexercise of
religion (3) the Court erred in finding the language used as offensive and obscene (4) the Court should have
applied its policy of noninterference in cases of conflict between religious groups and (5) the Court erred in
penalizingthetelevisionprogramfortheactsofpetitioner.
Themotionhasnomerit.
Petitioner
s thresholdposture that the suspensionthus imposed constitutes prior restraint and an abridgement ofhis
exercise of religion and freedom of expression is a mere rehash of the position he articulated in the underlying
2
petitions for certiorari and expounded in his memorandum.
So are the supportive arguments and some of the
citations of decisional law, Philippine and American, holding it together. They have beenconsidered,sufficiently
discussed in some detail, and found to be without meritin ourDecision. Itwould,thus,makelittlesensetoembark
onanotherlengthydiscussionofthesameissuesandarguments.
Suffice it to reiterate that the sanction imposed on the TVprograminquestiondoesnot,underthefactualmilieu of
the case, constitute prior restraint, but partakesofthenatureof subsequentpunishmentforpastviolationcommitted
by petitioner in the course of the broadcast of the program on August 10, 2004. To be sure, petitioner has not
contested the fact of his having made statements on the air that were contextually violativeof the program
s "G"
rating. Tomerita"G"rating,theprogrammust be"suitablefor allages,"which,inturn,meansthatthe"materialfor
television [doesnot], in the judgment of the [MTRCB], x x x contain anythingunsuitable forchildrenandminors,

3
and may be viewed without adult guidance or supervision."
As previously discussed by the Court, the vulgar
language petitioner used on primetime television can in no way be characterized as suitable for all ages, andis
whollyinappropriateforchildren.
Petitioner nextharpsontheprimacyofhis freedoms,referringparticularly totheexerciseofhisreligiousbeliefsand
profession, as presiding minister of his flock, over the right and duty of the state as
parens patriae
. Petitioner
s
position maybeaccorded somecogency,butforthefactthatitfailstoconsiderthatthemediumheusedtomakehis
statements was a televisionbroadcast, whichis accessibleto childrenof virtually all ages. Asalreadylaiddownin
the Decisionsubject of this recourse, the interest of thegovernmentinprotectingchildrenwhomaybesubjectedto
petitioner
s invectives must take precedence over his desiretoairpublicly hisdirtylaundry.Thepublicsoapboxthat
is television must be guarded by the state, which purpose the MTRCB serves, and has served, in suspending Ang
4
Dating Daan for petitioner
s statements. Asemphasized in Gonzalez v. Kalaw Katigbak,
the freedom of broadcast
media is, in terms of degreeofprotection itdeserves,lesserinscope, especiallyasregardstelevision,whichreaches
everyhome where there is a set, and where children will likely be among theavidviewersof theprogramsshown.
Thesame case also laid the basis for the classification systemofthe MTRCBwhen it stated, "It cannot be denied
5
thoughthattheStateasparenspatriaeiscalledupontomanifestanattitudeofcaringforthewelfareoftheyoung."
Thepenalty ofsuspension imposedonpetitionerhasdrivenhimtolikentheCourtto"ablindmanwhowasaskedto
describe an elephant, andby his description he stubbornly believed that an elephant is just thesame as a Meralco
6
post aftertouching one ifitslegs."
Petitionermakesthiscomparisonwiththeviewthatthefactualbackdropagainst
whichhisstatementsweremadewaspurportedlynotconsideredbytheCourt.Ashepresentlyargues:
The Honorable Court should have rendered its decision in light of the surrounding circumstances whyand what
prompted herein petitioner to utter those words. Clearly, he was provoked because of the malicious and blatant
splicing by the INC ministersof his recorded voice. Verily, Petitioner submitsthatthechoiceofwords heused has
beenharshbutstronglymaintains that thesamewasconsistentwithhis constitutionalrightoffreedomofspeechand
religion.
Contrary to petitioner
s impression, the Court has, in fact, considered the factual antecedentsof and his motive in
making his utterances, and has found thosecircumstanceswanting asdefenseforviolatingthe program
s"G"rating.
ConsiderthefollowingexcerptsfromtheCourt
sDecision:
There is nothing in petitioner
s statements subject of the complaints expressing any particular religious belief,
nothingfurthering his avowedevangelicalmission. Thefactthathecameoutwithhisstatementsinatelevisedbible
exposition program does not automatically accord them the character of a religious discourse. Plain and simple
insults directedat another person cannot be elevated tothe status of religious speech.Even petitioner
s attempts to
place hiswords incontext show that he was moved by anger andthe need to seekretribution,notbyanyreligious
conviction. His claim, assuming its veracity, that some INC ministers distorted his statementsrespecting amounts
Ang Dating Daan owed to a TV station does not convert the foul language used in retaliation as religiousspeech.
We cannot accept that petitioner made his statements in defenseofhis reputation andreligion, astheyconstituteno
intelligible defense or refutation of the alleged liesbeing spread by a rival religious group. They simply illustrate
that petitioner had descended tothelevelofnamecallingandfoullanguagediscourse.Petitionercouldhave chosen
tocontradictanddisprovehisdetractors,butoptedforthelowroad.
Andjusttosetthingsstraight,thepenaltyimposedisontheprogram,notonpetitioner.
Petitioner would next have the Court adopt a handsoff approach to the conflict between him and the Iglesia Ni
7
Cristo.Insupportofhisurging,hecitesIglesianiCristov.CourtofAppeals.
Petitioner
s invocation of
Iglesia ni Cristo to support his handsoff thesis is erroneous. Obviously, he fails to
appreciate what the Court stated in that particular case when it rejected the argument that areligious program is
beyond MTRCB
s review and regulatory authority. We reproduce what the Court pertinently wrote in
Iglesia ni
Cristo
:
We thusreject petitioner
s postulatethatits religious programispersebeyondreview bytherespondent[MTRCB].
Its public broadcast on TV of its religious program brings it out of the bosom of internal belief. Televisionisa
medium that reaches even the eyes and ears of children. The Courtiterates the rule that
the exercise of religious

freedom can beregulatedby the State when itwill bring about the clear andpresentdangerofsome substantive
evil which the State is duty bound to prevent, i.e. serious detrimentto themoreoverridinginterestofpublichealth,
public morals, or public welfare. A laissez faire policy on the exercise of religion can be seductiveto the liberal
mind but history counsels the Court against its blind adoption as religion is and continues to be a volatile area of
concern in our country today. Across the sea and in ourshore, the bloodiest andbitterestwarsfoughtbymenwere
caused by irreconcilable religious differences. Our country is still not safe from the recurrence of thisstultifying
strife considering our warring religious beliefs and the fanaticism withwhich some of us cling and claw to these
beliefs. x x x
For when religiondividesand its exercise destroys, the State shouldnot stand still
.8
(Emphasis
added.)
Lastly,petitionerclaims that there was violation of due process oflaw, alleging that the registered producerofthe
programisnotapartytotheproceedings.Hence,theprogramcannot,sopetitionerasserts,bepenalized.
Wewilllettherecordsspeakforthemselvestorefutethatargument.
As per petitioner
s admission in his petition for certiorari filed withthe Court,heis"theExecutiveProducerofAng
Dating Daan,atelevised bibleexposition program producedbythe Philippinebasedreligiousorganization,Church
9
of God International."
It is unclear, then, which producerthe movant is referring to in claiming that there was no
representation before the MTRCB. He was and is the representative of Ang Dating Daan, and the claim that there
wasnodueprocessoflawissimplybereftofmerit.
Even as the foregoing disquisitions would suffice to write finis to theinstant motion, certain relevant issues have
been raised by some members of the Court that ought to be addressed if only to put things in their proper
perspective.Werefertothematterofobscenity.
As stressed at every possible turn in the challenged Court
s Decision, the defining standards to be employed in
judgingthe harmful effectsof the statements petitioner used would be those fortheaveragechild,notthoseforthe
average adult. We note thattheratingsandregulationoftelevisionbroadcaststakeintoaccountthe protection ofthe
child, and itis fromthechild
s narrowviewpointthat theutterancesmustbeconsidered,if notmeasured.Theratings
"G," "PG" (parental guidance), "PG13," and "R" (restricted or foradults only)suggestas much.The concern was
then, as now, that the program petitioner hosted and produced would reach an unintended audience, the average
child, and so it is how this audience would view hiswords that matters. The averagechildwouldnotbe concerned
withcolorful speech, but, instead, focus on the literal, everydaymeaning ofwordsused.Itwasthisliteralapproach
thatrenderedpetitioner
sutterancesobscene.1avvphi1
10
The Court has taken stock of Action for Children
s Television v. FCC,
but finds this U.S. case not to be of
governing application tothis jurisdiction under thepresentstateofthings.Thesocalled"safeharbor"of10:00 p.m.
to 6:00 a.m., adverted to in Action for Children
sTelevisionasthetimewhereinbroadcastofindecentmaterialmay
be permitted, isbelievedinapplicablehere.Asitwere,thereisnolegislativeenactmentorexecutiveissuance setting
a similar period inthePhilippineswherein indecentmaterialmaybebroadcast.Ratherthanfix aperiod forallowing
indecent programming, what is used inthis jurisdiction isthesystemofclassificationoftelevisionprograms,which
the petitioner violated.His program was rated"G,"purportedtobesuitableforall ages. Wecannotlosesightofthe
violation of his program
s classificationthatcarriedwithittheproducer
simpliedassurancethattheprogram did not
contain anything unsuitablefor children and minors. The hourat which it was broadcasted was oflittlemoment in
lightoftheguaranteethattheprogramwassafeforchildren
sviewing.
Thesuspension of theprogram has not beenarrived at lightly. Taking intoaccount all thefactorsinvolvedandthe
arguments pressed on the Court, the suspension ofthe program is a sufficientlylimited disciplinary action,bothto
address the violation and to serve as an object lesson for the future. Thelikelihoodis great that any disciplinary
action imposedonpetitionerwouldbemetwithanequally energeticdefenseashasbeenputuphere.Thesimplebut
stubbornfactis that therehasbeenaviolationofgovernmentregulationsthathavebeenputinplacewithalaudable
purpose, and this violation must accordingly be dealtwith. We are not unmindfuloftheconcernsontherestriction
of freedoms that may occur in imposing sanctions upon erring individuals and institutions, but it cannot be
overemphasized that the freedoms encased in the Bill of Rights are far from absolute. Each has its own limits,

responsibilities, and obligations. Everyone is expected to beartheburdenimplicitin theexercise ofthesefreedoms.

Soitmustbehere.
WHEREFORE,petitioner
smotionforreconsiderationisherebyDENIED.
Nofurtherpleadingsshallbeentertainedinthiscase.Letentryofjudgmentbemadeinduecourse.
SOORDERED.

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC

G.R.No.79253 March1,1993
UNITEDSTATESOFAMERICAandMAXINEBRADFORD,
petitioners,
vs.
HON.LUISR.REYES,asPresidingJudgeofBranch22,RegionalTrialCourtofCavite,andNELIAT.
MONTOYA,
respondents.
Luna,Sison&Manasforpetitioners.
EvelynR.Dominguezforprivaterespondent.

DAVIDE,JR.,
J.:
Thisis a petitionfor
certiorari
andprohibitionunderRule 65oftheRulesofCourt.PetitionerswouldhaveUsannul
and set aside,forhaving beenissuedwithgraveabuseofdiscretionamountingtolackofjurisdiction,theResolution
of 17 July 1987 of Branch 22 of the Regional Trial Court (RTC) of Cavite in Civil Case No. 22487. The said
resolution denied, forlack of merit, petitioners' motion todismissthe saidcaseandgrantedtheprivaterespondent's
motion for the issuanceofawritofpreliminary attachment.Likewisesoughttobesetasideisthewritof attachment
subsequentlyissuedbytheRTCon28July1987.
Thedoctrineofstateimmunityisatthecoreofthiscontroversy.
Thereadingsdisclosethefollowingmaterialoperativefacts:
Private respondent, hereinafter referred to as Montoya,isanAmericancitizenwho,atthetimematerialtothiscase,
was employed as an identification (I.D.) checker at the U.S. Navy Exchange (NEX) at the Joint United States
MilitaryAssistanceGroup (JUSMAG) headquarters in Quezon City. She is married to oneEdgardoH.Montoya,a
FilipinoAmerican serviceman employed by the U.S. Navy and stationed in San Francisco, California. Petitioner
MaxineBradford,hereinafterreferredtoas Bradford,islikewiseanAmericancitizenwhowas theactivityexchange
manageratthesaidJUSMAGHeadquarters.
As a consequence of an incident which occurred on 22 January 1987 whereby her body and belongings were
searched after she had bought some items from the retailstore ofthe NEX JUSMAG, where she had purchasing
privileges,andwhileshewasalreadyattheparkingarea,Montoyafiledon
7 May 1987 a complaint 1
with the Regional Trial Court of her place of residence
Cavite
against Bradfordfor
damages due to the oppressive and discriminatory acts committed by the latter in excess of her authorityasstore
manager of the NEXJUSMAG. The complaint,docketed as Civil Case No. 22487 andsubsequentlyraffledoffto
Branch22atImus,Cavite,allegesthefollowing,materialoperativefacts:
xxx
xxx
xxx
3.
That on January 22, 1987, after working as the duty ID checker from 7:45 to 11:45 a.m., plaintiff went
shoppingandleftthestoreatl2:00noonofthatday

4.
That on the way tohercar while alreadyoutside the store, Mrs. Yong Kennedy,alsoanIDchecker,upon
the instruction of thestore manager,Ms.MaxineBradford,approachedplaintiffandinformedherthatshe neededto
searchherbags
5.
That plaintiff went todefendant, who was then outsidethe storetalkingtosomemen,toprotestthe search
butshewasinformedbythedefendantthatthesearchistobemadeonallJusmagemployeesthatday
6.
That thesearch was thereafter made onthe person, car and bags oftheplaintiffbyMrs.YongKennedyin
thepresenceofthedefendantandnumerouscuriousonlookers
7.
That having found nothing irregular on her person and belongings, plaintiff was allowed to leave the
premises
8.
That feeling aggrieved, plaintiff checked the records and discovered that she was the only one whose
person and belonging was (
sic
) searched that day contrary to defendant's allegation assetforthinpar.5hereofand
as evidenced by the memorandum datedJanuary 30, 1987 made by other Filipino Jusmag employees,aphotocopy
ofwhichisheretoattachedasANNEX"A"andmadeintegral(
sic
)parthereof:
9.
That moreover, a check with Navy Exchange Security Manager, R.L. Roynon on January27, 1987 was
made and she was informed by Mr. Roynon that it is a matter of policy that customers and employees ofNEX
Jusmagarenotsearchedoutsidethestoreunlessthereisaverystrongevidenceofawrongdoing
10.
That plaintiff knows of no circumstances sufficient totriggersuspicionofawrongdoingonherpartbuton
theotherhand,isawareofthepropensityofdefendanttolaysuspiciononFilipinosfortheftand/orshoplifting
11.
That plaintiff formally protested the illegalsearchon February 14, 1987 in a letter addressedto Mr.R.L.
Roynon, a photocopyof which is hereto attached as ANNEX"B" andmadeintegral(
sic
)parthereofbutnoaction
wasundertakenbythesaidofficer
12.
That theillegal search on theperson and belongings of the plaintiff infront ofmanypeoplehas subjected
the plaintiff to speculations of theft, shoplifting and such other wrongdoings and has exposed her to contempt and
ridiculewhichwascausedherundueembarrassmentandindignity
13.
That since theactcouldnothavebeen motivatedbyother(
sic
)reasonthanracialdiscriminationinourown
land, the actconstitute(
sic
)a blowto ournationalprideanddignitywhichhascausedthe plaintiffafeelingofanger
forwhichshesufferssleeplessnightsandwoundedfeelings
14.
That consideringthe above, plaintiff is entitledtobecompensatedbywayofmoraldamagesintheamount
ofP500,000.00
15.
That to serve as a deterrent to those inclined to follow the oppressive act of the defendant, exemplary
2
damagesintheamountofP100,000.00shouldalsobeawarded.
She then prayed for judgment ordering Bradford to pay her P500,000.00 as moral damages, P100,000.00 as
3
exemplarydamagesandreasonableattorney'sfeesplusthecostsofthesuit.
Summons and a copy of the complaint were servedonBradfordon 13May1987.Inresponsethereto,shefiled two
(2) motions for extension of time to file her Answer which were bothgrantedby the trialcourt.Thefirstwasfiled
through Atty. Miguel Famularcano, Jr., who asked for a 20day extension from 28 May1987.The second, filed
through the law firm ofLuna,SisonandManas,soughta15dayextensionfrom17June1987.4
Thus,Bradfordhad
up to1 July 1987 tofile her Answer.Insteadofdoingso,however, she,togetherwiththegovernmentoftheUnited
States of America (hereinafter referred to asthe public petitioner), filedon25June 1987, alsothroughthelawfirm
5
ofLuna,SisonandManas,aMotiontoDismiss

basedonthefollowinggrounds:
1)
(This) action is in effectasuit againsttheUnitedStatesofAmerica,aforeignsovereign immunefromsuit
withoutitsconsentforthecauseofactionpleadedinthecomplaintand
2)
Defendant, Maxine Bradford, as manager of the US Navy Exchange BranchatJUSMAG, QuezonCity,is
immune from suit for act(s) done by her inthe performance of her official functions under the PhilippinesUnited
6
StatesMilitaryAssistanceAgreementof1947andMilitaryBasesAgreementof1947,asamended.
In support of the motion, the petitioners claimed that JUSMAG, composed of anArmy, Navy and Air Group, had
been established underthe PhilippineUnited States Military Assistance Agreement entered into on 21March1947
to implement the United States' program of rendering military assistance to the Philippines. Its headquarters in

Quezon City is considered a temporary installation under the provisions of Article XXI of the Military Bases
Agreement of 1947. Thereunder, "it is mutually agreed that the United States shall have the rights, power and
authority within the bases which are necessary for the establishment, use and operation and defense thereof or
appropriate for the control thereof." The 1979 amendment of theMilitary Bases Agreementmade it clear that the
United States shall have "the use of certain facilities and areas within the bases and shall have effective command
and control over such facilities and over United States personnel, employees, equipment and material." JUSMAG
maintains, at its Quezon City headquarters, a Navy Exchange referred to as the NEXJUSMAG. Checking of
purchases at the NEX is aroutine procedureobserved at base retail outlets to protect andsafeguard merchandise,
cash and equipment pursuant to paragraphs 2 and 4(b) of NAVRESALEACT SUBIC INST. 5500.1. 7
Thus,
Bradford's order to have purchases of all employees checked on 22January 1987 was made inthe exerciseofher
dutiesasManageroftheNEXJUSMAG.
They furtherclaimed that the Navy Exchange (NAVEX), an instrumentalityoftheU.S.Government,is considered
essential for theperformance of governmental functions. Itsmission is to provideaconvenient andreliablesource,
atthe lowestpracticable cost, of articles andservicesrequiredforthewellbeingofNavypersonnel,andoffundsto
be used for the latter's welfare and recreation.Montoya'scomplaint,relatingasitdoes tothemission,functionsand
responsibilitiesof aunit of theUnitedStatesNavy,cannotthenbeallowed.To dosowouldconstituteaviolationof
the military bases agreement. Moreover, the rights, powers and authority granted by the Philippine government to
the United States within the U.S. installations would be illusory and academic unless the latter has effective
command and control over suchfacilities and over American personnel, employees, equipment and material.Such
rights, power and authority within the bases can only be exercised by the United States through the officers and
officialsofitsarmedforces,suchasBradford.
Baervs
.
Tizon8

and
UnitedStatesofAmericavs
.
9
Ruiz

wereinvokedtosupporttheseclaims.
On 6 July 1987, Montoya filed a motion for preliminary attachment 10

on the ground that Bradford was about to

depart from the country andwasin theprocessofremovingand/ordisposingofherproperties withintent todefraud
her creditors. On 14 July 1987, Montoya filed her oppositionto the motion to dismiss 11

alleging therein that the
grounds proffered in the latter are bereft of merit because (a) Bradford, in ordering thesearchuponherperson and
belongings
outside
theNEXJUSMAGstoreinthe presenceofonlookers,hadcommittedanimproper,unlawful and
highly discriminatory act against a Filipino employee and had exceeded the scope of her authority (b) having
exceeded her authority,Bradfordcannotrelyonthesovereignimmunityofthepublicpetitionerbecauseherliability
is personal (c) Philippine courts are vested with jurisdictionover the case becauseBradfordisacivilian employee
who had committed the challenged act outside the U.S. Military Basessuch actis not oneofthoseexemptedfrom
the jurisdiction of Philippine courts and (d) Philippine courts can inquire intothe factualcircumstancesofthecase
todeterminewhetherornotBradfordhadactedwithinoroutsidethescopeofherauthority.
On 16 July 1987, public petitioner and Bradford filed a reply to Montoya's opposition and an opposition to the
12
motionforpreliminaryattachment.
13
14
On 17July 1987,
the trial court
resolved both themotiontodismissandthemotion forpreliminaryattachment
inthiswise:
On the motion todismiss, the grounds and arguments interposed for the dismissal ofthiscaseare determinedtobe
notindubitable.Hence,themotionisdeniedforlackofmerit.
Themotion for preliminary attachmentis granted intheinterestof justice,uponthe plaintiff'sfilingofabondinthe
sumofP50,000.00.
UponMontoya's filingofthe requiredbond,thetrialcourtissuedon28July1987an Order15

decreeingtheissuance
of a writ of attachment and directing the sheriff to serve the writ immediately at the expense of the private
16
respondent.Thewritofattachmentwasissuedonthatsamedate.
Instead of filing a motion to reconsider the last two (2)orders,orananswer
insofaras Bradfordis concerned
both
the latter and the public petitioner filed on 6 August 1987 the instant petition to annul and set aside the above
Resolutionof17July1987andthewritofattachmentissuedpursuantthereto.Asgroundstherefor,theyallegethat:

10.
Therespondent judge committed agrave abuseof discretion amounting tolack of jurisdictionin denying
the motion to dismiss thecomplaint in Civil Case No. 22487 "forlackof merit."Fortheactionwas ineffectasuit
against the United States of America, a foreign sovereign immune from suit without its consent for the cause of
action pleaded in the complaint, while its copetitioner was immune from suit for act(s) done by her in the
performance of her official functions as manager of the US Navy Exchange Branch at the Headquarters of
JUSMAG, under the PhilippinesUnited States Military Assistance Agreement of 1947 and Military Bases
17
Agreementof1947,asamended.
18
On5August1987,thetrialcourtsetCivilCaseNo.22487forpretrialandtrialon27August1987at9:30a.m.
19
On12August1987,thisCourtresolvedtorequiretherespondentstocommentonthepetition.
On19August1987,petitionersfiledwiththetrialcourtaMotion
20
21
toSuspendProceedings

whichthelatterdeniedinitsOrderof21August1987.
In the meantime, however, for failure to file an answer, Bradfordwas declared in defaultinCivilCaseNo.22487
and Montoya was allowed topresent her evidence
exparte
. 22

She thus took the witness stand and presented Mrs.
NamThiMooreandMrs.MissYuasherwitnesses.
On 10September1987,the trial courtrendered its decision 23

inCivil Case No. 22487, the dispositive portion of
whichreads:
Prescinding from the foregoing, it is hereby determined that the unreasonable search onthe plaintiff's person and
bagcaused (
sic
)donerecklesslyandoppressivelybythedefendant,violated,impairedandunderminedtheplaintiff's
liberty guaranteed by the Constitution, entitling her to moral and exemplary damages against the defendant. The
search has unduly subjected the plaintiff to intense humiliation and indignities andhad consequently ridiculedand
embarrassedpubliclysaidplaintiffsogravelyandimmeasurably.
WHEREFORE, judgment is hereby rendered for theplaintiffand againstthe defendantMaxineBradfordassessing
the latterto pay unto the former the sums of P300,000.00for moral damages,P100,000.00forexemplarydamages
andP50,000.00foractualexpensesandattorney'sfees.
Nocosts.
24
SOORDERED.
Bradford received a copy of the decision on 21 September 1987. On that same date,she andthe public petitioner
filed with this Court aPetitionforRestrainingOrder25

whichsoughttohavethetrial court's decisionvacatedandto

prevent the executionofthesame itwasalsoprayedthatthetrialcourt beenjoinedfromcontinuingwith CivilCase
26
No.22487.WenotedthispleadingintheResolutionof23September1987.
In the meantime, sinceno motion for reconsideration or appealhad beeninterposedby Bradfordchallengingthe10
September 1987 Decision whichshe hadreceived on 21 September 1987, respondent Judge issued on14 October
1987 an order directing thatan entryof final judgment be made. A copy thereof was received by Bradford on 21
27
October,1987.
Also on 14 October 1987, Montoya filed her Comment with Opposition to the Petition for Restraining Order. 28

29
RespondentJudgehadearlierfiledhisownCommenttothepetitionon14September1987.
On 27 October 1987, Montoya filed before the trial court a motion for the execution of the Decision of 10
September 1987which petitioners opposed on the ground that although this Court had not yet issuedinthiscasea
temporary restraining order, ithad nevertheless resolved to require the respondents to comment on the petition. It
was further averred that execution thereof would cause Bradford grave injurymoreover, enforcementof awrit of
execution may lead to regrettable incidents and unnecessarily complicate the situation in view of the public
petitioner'spositionon the issue of the immunity of itsemployees.InitsResolution of11November1987,the trial
30
courtdirectedtheissuanceofawritofexecution.
Consequently,thepetitionersfiledon4 December1987,aManifestationand Motionrecitingtheforegoing incidents
31
obtainingbeforethetrialcourtandprayingthattheirpetitionforarestrainingorderberesolved.
On 7 December 1987, this Court issued a Temporary Restraining Order "ENJOINING the respondents and the
Provincial Sheriff of Pasig, MetroManila, fromenforcing the DecisiondatedSeptember10,1987,andtheWritsof
32
AttachmentandExecutionissuedinCivilCaseNo.22487."

On 28 November 1988, after the private respondent filed a Rejoinder to the Consolidated Reply to the Comments
filed by the petitioners,this Court gave duecourse to thepetitionandrequiredthepartiestosubmittheirrespective
memorandaPetitionersfiledtheirMemorandumon8February
33
1989

whileprivaterespondentfiledherMemorandumon14November
34
1990.
The kernel issue presented in this case is whether or not the trial court committed grave abuse of discretion in
denying the motion to dismiss based on the following grounds: (a) the complaint in Civil Case No.22487 is in
effect a suit against the publicpetitioner,aforeignsovereignimmunefromsuitwhichhasnotgivenconsenttosuch
suit and (b) Bradford is immune from suit for acts done by her in the performance of her official functions as
manager of the U.S. Navy Exchange of JUSMAG pursuant to the PhilippinesUnited States Military Assistance
Agreementof1947andtheMilitaryBasesAgreementof1947,asamended.
Aside from maintaining the affirmative view, thepublic petitioner and Bradford even go further by asserting that
even if the latter's act were ultra vires she would still be immune from suit for the rule that public officers or
employees may be sued in their personal capacity for ultra vires and tortious acts is "domestic law" and not
applicable in International Law. It is claimed that theapplication of the immunity doctrine does not turn upon the
lawlessness of the act or omission attributable to the foreign national for if this were the case, the concept of
immunity would be meaninglessasinquiry into the lawlessness or illegality oftheactoromissionwouldfirsthave
to be made before considering the question of immunity in other words, immunity will lie only if such act or
omissionisfoundtobelawful.
On the other hand, Montoya submits that Bradford is not covered by the protective mantle of the doctrine of
sovereign immunityfrom suit as the latter is a mere civilian employee of JUSMAG performing nongovernmental
and proprietary functions. And even assuming arguendo that Bradford is performing governmentalfunctions,she
would stillremainoutsidethecoverageofthe doctrineofstateimmunitysincetheactcomplainedofis
ultravires
or
outside the scope of her authority.What is being questioned isnotthe fact of search alone, but also themannerin
which the same was conducted aswellasthefactofdiscriminationagainstFilipinoemployees. Bradford'sauthority
to order a search, it is asserted, should have been exercised with restraint andshouldhavebeeninaccordancewith
the guidelines and procedures laiddownbythecited"NAVRESALEACT, SubicInst."Moreover, ultraviresactsof
a public officer or employee, especially tortious andcriminalacts,arehis private actsandmaynotbeconsideredas
actsof the State. Such officer or employee alone is answerable for anyliability arising therefrom and maythusbe
proceededagainstinhispersonalcapacity.
Montoya further argues that both the acts and person of Bradford are not exempt from the Philippine courts'
jurisdiction because (a) the search was conducted in a parking lot at Scout Borromeo, Quezon City,outside the
JUSMAG store and, therefore, outside the territorial control of the U.S. Military Bases in the Philippines (b)
Bradford does not possess diplomatic immunity under Article 16(b) of the 1953 Military Assistance Agreement
creating the JUSMAG which provides that onlytheChief oftheMilitaryAdvisoryGroupand not morethansix(6)
other senior members thereof designated by him will be accorded diplomatic immunity 35

and (c) the acts
complained of do notfall under those offenses where the U.S. has been given theright to exercise its jurisdiction
(per Article 13 of the 1947 Military BasesAgreement,asamendedbythe,MendezBlairNotesof 10August1965).
36

Finally, Montoya maintains that attheveryleast,Philippinecourtsmayinquireintothefactualcircumstancesofthe

case to determine whether petitioner Bradfordis immune from suit or exempt fromPhilippinejurisdiction. Torule
otherwise would render the Philippine courts powerlessastheymaybeeasilydivestedoftheirjurisdictionuponthe
mereinvocationofthisprincipleofimmunityfromsuit.
Acarefulreview of the records of this case and a judicious scrutiny of the argumentsof bothpartiesyieldnothing
but the weakness of the petitioners' stand. While this can be easily demonstrated, We shall first consider some
proceduralmatters.
Despite the fact that public petitioner was not impleadedasadefendant in Civil Case No. 22487, it nevertheless
joined Bradford in the motion to dismiss
on the theory that the suitwasineffectagainst it
without,however,first

having obtained leave of court to intervenetherein. This was a procedural lapse, if not a downrightimproperlegal
tack. Since it was notimpleadedasan originalparty,thepublicpetitionercould,onitsownvolition,joininthecase
onlyby interveningtherein such intervention, the grant ofwhichisdiscretionaryuponthecourt,37

maybe allowed
onlyupon a prior motion for leave with notice to all the parties inthe action. Of course, Montoya couldhavealso
impleaded the public petitioner as an additional defendant by amending the complaint if she so believed that the
latterisanindispensibleornecessaryparty.
Sincethe trialcourtentertainedthemotiontodismissandthesubsequentpleadingsfiledbythepublic petitionerand
Bradford, it may be deemed to have allowed the public petitioner to intervene.Corollarily,becauseof itsvoluntary
appearance,thepublicpetitionermustbedeemedtohavesubmitteditselftothejurisdictionofthetrialcourt.
Moreover, the said motion does not specify any ofthe grounds for a motion to dismiss enumeratedin Section 1,
Rule 16 ofthe Rules of Court. It merely recites stateimmunityon thepart ofthepublicpetitionerand immunityon
the part of Bradford for the reason that theactimputedtoherwasdoneintheperformanceofherofficialfunctions.
Theupshot of thiscontention is actually
lack of cause of action
aspecificgroundfordismissalundertheaforesaid
Rule
because assuming
arguendo that Montoya's rights had been violated by the public petitioner and Bradford,
resulting in damage or injury to the former, both would not be liable therefor, andno action may be maintained
thereon,becauseoftheprincipleofstateimmunity.
Thetest of thesufficiency of thefactstoconstitute acauseofactioniswhether ornot,admittingthefacts allegedin
the complaint, the court could render a valid judgment upon the same, in accordance with the prayer in the
38
complaint.
A motion to dismiss on the ground of failure to state a cause of action hypothetically admits the truth of the
allegationsinthecomplaint.
In deciding a motionto dismiss, a courtmaygrant, deny, allow amendments to the pleadings or defer the hearing
and determination of thesame if the ground allegeddoes not appearto beindubitable. 39

In the instantcase,while
the trial court concluded that "the grounds and arguments interposed for the dismissal" are not "indubitable," it
denied the motion for
lack ofmerit.
What thetrialcourtshouldhavedonewastodefertheresolutiononthemotion
insteadofdenyingitforlackofmerit.
In any event, whatever may or should have been done, the public petitioner and Bradford were not expected to
accept theverdict,makingtheirrecourseto thisCourtviatheinstantpetitioninevitable.Thus,whetherthetrial court
should havedeferredresolutiononordeniedoutright themotiontodismissfor lackofmeritisnolongerpertinent or
relevant.
Thecomplaint in Civil Case No. 22487 is for damages arisingfrom whatMontoyadescribesasan"illegalsearch"
on her "person and belongings" conducted outside the JUSMAG premises in front of many people and upon the
orders of Bradford,whohas thepropensityforlayingsuspiciononFilipinosfortheftorshoplifting.Itisaverredthat
thesaidsearchwasdirectedonlyagainstMontoya.
Howsoever viewed, it is beyond doubt that Montoya's cause of action is premised on the theory that the acts
complained of were committed by Bradfordnotonly outside the scopeof her authority
ormorespecifically,inher
privatecapacity
butalsooutsidetheterritorywheresheexercises suchauthority,thatis,outsidetheNEXJUSMAG
particularly, at theparkingarea whichhasnotbeenshowntoformpartofthefacilityofwhichshewasthemanager.
By their motion to dismiss, public petitioner and Bradford are deemed to have hypotheticallyadmitted the truthof
theallegationinthecomplaintwhichsupportthistheory.
40
Thedoctrineofstateimmunityandtheexceptionstheretoaresummarizedin
Shaufvs
.
CourtofAppeals
,

thus:
I.
Therule that a state maynot be sued without its consent, now expressedin Article XVISection3,ofthe
1987Constitution,isoneofthegenerallyacceptedprinciplesofinternationallawthatwehave adoptedaspart ofthe
law of our land under Article II,Section 2. This latterprovision merely reiterates a policy earlier embodiedin the
1935 and 1973 Constitutions and also intended to manifest our resolve to abide by therules ofthe international
41
community.
While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed againstofficials of thestate foracts allegedly performed by themin the discharge of their duties.

The rule is that if the judgment against such officials willrequire thestate itself to perform anaffirmative act to
satisfy the same, such as theappropriation of the amountneeded topaythedamagesawardedagainstthem,thesuit
mustbe regardedasagainstthestateitselfalthoughithasnotbeenformallyimpleaded.42

Itmustbenoted,however,
thattheruleisnotsoallencompassingastobeapplicableunderallcircumstances.
It is a different matter where thepublic official is made toaccount in his capacity as such for acts contrary tolaw
and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, etal.vs.Aligaen,etc., etal.43

"Inasmuchas theStateauthorizesonlylegalacts byitsofficers,

unauthorized acts of government officialsor officers are not acts ofthe State, and an actionagainsttheofficialsor
officersby one whose rightshave been invadedorviolatedby suchacts,for theprotectionofhis rights,isnotasuit
against the Statewithin the rule of immunityoftheStatefromsuit.Inthesametenor,ithasbeensaid thatanaction
atlaw orsuitin equityagainsta Stateofficerorthedirector ofa Statedepartmenton theground that,whileclaiming
to act or the State, he violates or invades the personal and propertyrightsoftheplaintiff,underanunconstitutional
actorunderanassumptionofauthoritywhichhedoesnothave,isnotasuitagainsttheStatewithin
the constitutional provision that theStatemaynotbesuedwithoutitsconsent."44

Therationaleforthisrulingisthat
45
thedoctrinaireofstateimmunitycannotbeusedasaninstrumentforperpetratinganinjustice.
Inthecaseof
Baer,etc.vs.Tizon,etc.,etal.,46

itwasruledthat:
There should be no misinterpretation of the scope of the decision reached by this Court. Petitioner, as the
Commander of the United States NavalBaseinOlongapo,doesnotpossessdiplomaticimmunity.He maytherefore
be proceeded againstinhispersonalcapacity,orwhentheactiontaken byhimcannotbeimputedtothegovernment
whichherepresents.
47
Also,in
Animos,etal.vs.PhilippineVeteransAffairsOffice,etal.,

weheldthat:
. .. it is equally wellsettledthatwhere a litigation may haveadverseconsequencesonthepublictreasury, whether
in the disbursements of funds or loss of property, the public official proceeded against not being liable in his
personal capacity, then the doctrine of nonsuability may appropriately be invoked. It hasnoapplication,however,
where the suit against such afunctionaryhadtobeinstitutedbecauseofhisfailuretocomplywiththedutyimposed
bystatuteappropriatingpublicfundsforthebenefitofplaintifforpetitioner.....
Theaforecited authorities are clear on the matter. They state that the doctrine of immunityfromsuitwillnotapply
and may not be invoked where the public official is being sued inhis private and personalcapacity asanordinary
citizen. The cloak of protection affordedthe officersand agentsofthegovernmentisremoved themoment theyare
sued in their individual capacity. Thissituationusually arises where the publicofficial acts without authorityorin
excess of the powers vested in him. It is a wellsettled principleof law that a public officialmaybe liable in his
personalprivatecapacityforwhateverdamagehemayhavecausedbyhisactdone
48
withmaliceandinbadfaith,orbeyondthescopeofhisauthorityorjurisdiction.
Theagents and officialsof the United States armed forces stationed in ClarkAirBasearenoexceptionto thisrule.
49
InthecaseofUnitedStatesofAmerica,etal.vs.Guinto,etc.,etal.,ante,

wedeclared:
It bears stressing at this point that the above observationsdo not confer on theUnited States of America Blanket
immunity for allacts done byitoritsagentsinthePhilippines.Neithermaytheotherpetitionersclaimthattheyare
also insulated from suit in this country merely because they have acted as agents of the United States in the
dischargeoftheirofficialfunctions.
Sinceit is apparent fromthe complaint that Bradford was sued inherprivateorpersonalcapacity foractsallegedly
done beyond the scope and even beyond her place ofofficial functions, said complaint isnot thenvulnerable to a
motion to dismiss based on the grounds relied upon bythepetitionersbecauseasaconsequenceofthe hypothetical
admissionofthetruthoftheallegationstherein,thecasefallswithintheexceptiontothedoctrineofstateimmunity.
In the recent cases of
Williams vs. Rarang 50

and
Minucher vs. Court of Appeals
, 51

this Court reiterated this
exception.Intheformer,thisCourtobserved:
There is no question,therefore,thatthetwo(2)petitionersactivelyparticipatedinscreeningthefeaturesand articles
in thePOD as part of theirofficial functions. Under therule that U.S. officials in the performanceof theirofficial

functions are immune from suit, then it should follow that petitioners may not be held liable forthe questioned
publication.
It is to be noted, however, that the petitionerswere suedintheirpersonalcapacitiesfortheirallegedtortiousactsin
publishingalibelousarticle.
The question, therefore,arises
are American navalofficers who commit a crime or tortious actwhile discharging
official functions still covered by the principle of state immunityfrom suit?Pursuingthequestion further,does the
grant of rights, power, and authority to the United States under the RPUS Bases Treaty cover immunity of its
officersfromcrimesandtorts?OuranswerisNo.
In the latter, even on the claim of diplomatic immunity
which Bradford does not in fact pretend to have in the
instant case as she is not among those granted diplomatic immunity under Article 16(b) of the 1953 Military
52
AssistanceAgreementcreatingtheJUSMAG

thisCourtruled:

EvenArticle31oftheViennaConventiononDiplomaticRelationsadmitsofexceptions.Itreads:
1.
Adiplomaticagent shallenjoyimmunityfromthecriminaljurisdictionof thereceivingState.Heshallalso
enjoyimmunityfromitscivilandadministrativejurisdictionexceptinthecaseof:
xxx
xxx
xxx
(c)
an action relating to any professional or commercial activity exercised by the diplomatic agent in the
receivingState
outsidehisofficialfunctions(
Emphasissupplied).
There can be no doubt that on the basis of the allegations in the complaint, Montoyahas a sufficientand viable
causeofaction. Bradford's purported nonsuability on the groundofstateimmunityisthenadefensewhichmaybe
pleadedintheanswerandprovenatthetrial.
Since Bradford did not file her Answer within the reglementary period, the trial court correctly declared her in
default uponmotion of the private respondent.The judgmentthenrenderedagainstheron10September1987after
the ex parte
reception of the evidence for the private respondent and before this Court issued the Temporary
Restraining Order on 7 December 1987 cannot be impugned.The filing of theinstant petition and the knowledge
thereofbythetrialcourtdidnotpreventthelatterfromproceedingwithCivilCaseNo.
22487. "Itis elementary that the merependency of a special civilactionfor
certiorari
,commencedinrelationto a
case pending before a lower Court, does not interrupt the course of thelatter when there is no writ of injunction
53
restrainingit."
WHEREFORE, the instantpetition is DENIED for lack ofmerit.TheTemporaryRestrainingOrder of7December
1987isherebyLIFTED.
CostsagainstpetitionerBradford.
SOORDERED.

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.171182August23,2012
UNIVERSITYOF THE PHILIPPINES, JOSE V.ABUEVA,RAUL P.DE GUZMAN, RUBENP.ASPIRAS,
EMMANUELP. BELLO, WILFREDO P.DAVID,CASIANOS.ABRIGO, andJOSEFINAR.LICUANAN,
Petitioners,
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of Quezon City,
Branch80,STERNBUILDERS,INC.,andSERVILLANODELACRUZ,
Respondents.
DECISION
BERSAMIN,
J.:
Trial judges should not immediately issue writs of execution or garnishment against the Government or any of its
1
subdivisions, agencies and instrumentalities to enforce money judgments.
They should bear in mind that the

primary jurisdiction to examine, audit and settle all claims of any sort due from the Government or any of its
subdivisions, agencies and instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential
DecreeNo.1445(GovernmentAuditingCodeofthePhilippines).
TheCase
On appeal by theUniversity of the Philippinesand itsthenincumbentofficials(collectively,theUP)isthedecision
2
promulgated on September 16, 2005,
whereby the Court of Appeals(CA) upheld the orderof the Regional Trial
Court (RTC), Branch 80, in Quezon City that directed the garnishment of public funds amounting to P
16,370,191.74belonging to the UPto satisfy the writ ofexecutionissuedtoenforcethealready finalandexecutory
judgmentagainsttheUP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General Construction
Agreement with respondent Stern BuildersCorporation (SternBuilders), represented by its President and General
Manager Servillano dela Cruz, for the construction of theextension building and therenovationof the College of
3
ArtsandSciencesBuildinginthecampusoftheUniversityofthePhilippinesinLosBaos(UPLB).
In the course of the implementation of the contract, Stern Builders submittedthree progress billingscorresponding
to the work accomplished,butthe UP paid onlytwoof the billings. The third billing worth P 273,729.47 was not
paid due to its disallowance by the Commissionon Audit (COA). Despite the lifting of thedisallowance,the UP
failed to pay the billing, prompting Stern Builders and delaCruz to suethe UP and its corespondent officials to
collect the unpaid billing and to recover various damages. The suit, entitled
Stern Builders Corporation and
Servillano R. Dela Cruz v. University of the Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P.
Aspiras, Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R.Licuanan, was docketed as
4
CivilCaseNo.Q9314971oftheRegionalTrialCourtinQuezonCity(RTC).
5
Aftertrial,onNovember28,2001,theRTCrendereditsdecisioninfavoroftheplaintiffs,
viz:
Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the
defendantsorderingthelattertopayplaintiff,jointlyandseverally,thefollowing,towit:
1.P503,462.74amountofthethirdbilling,additionalaccomplishedworkandretentionmoney
2.P5,716,729.00inactualdamages
3.P10,000,000.00inmoraldamages
4.P150,000.00andP1,500.00perappearanceasattorneysfeesand
5.Costsofsuit.
SOORDERED.
6
Following the RTCsdenial of its motionfor reconsideration onMay 7, 2002,
the UP filed a notice of appeal on
7
June 3, 2002.
Stern Buildersand dela Cruz opposed the notice of appeal on the ground ofitsfilingbeingbelated,
and moved for the execution of the decision. The UP countered that the notice of appeal was filed within the
reglementary period because the UPs Office ofLegal Affairs(OLS)inDiliman,Quezon City receivedtheorderof
denial only on May 31,2002.OnSeptember26,2002,theRTCdenieddue coursetothenotice ofappealforhaving
8
beenfiledoutoftimeandgrantedtheprivaterespondentsmotionforexecution.
9
TheRTCissued the writof executionon October 4, 2002,
and the sheriff ofthe RTCservedthe writofexecution
10
and notice of demand upon the UP, through its counsel, on October 9, 2002.
The UP filed an urgent motion to
reconsider the order dated September26,2002,toquashthewritofexecution datedOctober4,2002,and torestrain
11
12
theproceedings.
However,theRTCdeniedtheurgentmotiononApril1,2003.
On June24, 2003,theUPassailedthedenialofduecoursetoitsappeal throughapetitionfor
certiorariintheCourt
13
ofAppeals(CA),docketedasCAG.R.No.77395.
On February 24, 2004, the CA dismissed thepetition for
certiorari upon findingthattheUPsnoticeof appealhad
14
beenfiledlate,
stating:
Records clearly show that petitioners received a copy of the Decision dated November 28, 2001 andJanuary 7,
2002, thus, they haduntil January22, 2002 within which tofiletheirappeal.On January16,2002orafterthelapse
of nine (9) days, petitionersthrough their counsel Atty.NolascofiledaMotion forReconsiderationoftheaforesaid

decision, hence, pursuant to therules, petitionersstillhadsix(6) remaining daystofiletheir appeal.Asadmittedby

the petitioners in their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Orderdenyingtheirmotionfor
reconsideration on May 17, 2002, thus, petitioners still has until May 23,2002 (the remaining six(6)days)within
which to filetheir appeal. Obviously, petitioners were not able to filetheir Notice ofAppealonMay23, 2002asit
wasonlyfiledonJune3,2002.
In viewofthesaidcircumstances,Weareof thebeliefandsoholdsthattheNoticeofAppeal filedbythe petitioners
was really filed out of time, the same having been filed seventeen (17) days late ofthe reglementary period.By
reason of which, the decision datedNovember28,2001hadalreadybecomefinalandexecutory."Settledistherule
that the perfection of an appeal in the manner and within the period permitted by lawis not only mandatory but
jurisdictional,and failureto perfect that appeal renders the challenged judgment final andexecutory.Thisis not an
empty procedural rule but is grounded onfundamental considerations of publicpolicyandsoundpractice."(Rams
Studio and Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco
received theorder ofdenialofthe MotionforReconsiderationonMay17,2002butfiled aNoticeofAppeal onlyon
June 3, 3003. As such, the decisionof the lower court
ipso factobecame final whenno appeal wasperfectedafter
15
thelapseofthereglementaryperiod.Thisproceduralcaveatcannotbetrifledwith,notevenbytheHighCourt.
16
TheUPsoughtareconsideration,buttheCAdeniedtheUPsmotionforreconsiderationonApril19,2004.
OnMay11,2004,theUPappealedtotheCourtbypetitionforreviewon
certiorari
(G.R.No.163501).
17
On June23, 2004, theCourt denied the petition forreview.
TheUPmovedforthe reconsiderationofthedenialof
18
19
its petition for review on August 29, 2004,
but the Court denied the motion on October 6, 2004.
The denial
20
becamefinalandexecutoryonNovember12,2004.
In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due courseto the
appeal and the issuance of the writ of execution, SternBuilders and dela Cruz filedin the RTC theirmotions for
execution despite their previous motion having already been granted and despite the writ of execution having
already issued. On June 11,2003,the RTCgrantedanothermotionforexecutionfiledonMay9,2003(althoughthe
21
RTChadalreadyissuedthewritofexecutiononOctober4,2002).
On June23, 2003 and July 25, 2003, respectively, the sheriff servednoticesof garnishmentontheUPsdepository
banks, namely: Land Bank of the Philippines (Buendia Branch) and the Development Bank of the Philippines
22
(DBP), Commonwealth Branch.
TheUPassailedthegarnishmentthroughanurgentmotiontoquash thenotices of
23
24
garnishment
andamotiontoquashthewritofexecutiondatedMay9,2003.
25
Ontheirpart,SternBuildersanddelaCruzfiledtheirexpartemotionforissuanceofareleaseorder.
On October 14, 2003, the RTC denied the UPs urgent motiontoquash,andgrantedSternBuildersanddelaCruzs
26
expartemotionforissuanceofareleaseorder.
The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the motion on
27
November7,2003.
28
On January 12, 2004, Stern Builders and dela Cruz again sought thereleaseof the garnished funds.
Despite the
29
30
UPs opposition, the RTC granted the motion to release the garnished funds on March16, 2004. OnApril 20,
2004, however, the RTC held inabeyance the enforcement of the writsofexecutionissuedonOctober4,2002and
June 3, 2003 and allthe ensuing notices of garnishment, citing Section 4, Rule52,RulesofCourt,whichprovided
31
thatthependencyofatimelymotionforreconsiderationstayedtheexecutionofthejudgment.
On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the release of the
32
garnishedfundsoftheUP,
towit:
WHEREFORE, premises considered, there being no morelegalimpedimentforthe release ofthegarnishedamount
in satisfaction of the judgment award inthe instant case, let the amount garnished be immediately released by the
DevelopmentBankofthePhilippines,CommonwealthBranch,QuezonCityinfavoroftheplaintiff.
SOORDERED.
TheUP was served onJanuary 3,2005withtheorderofDecember21,2004directingDBPtoreleasethegarnished
33
funds.

On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court for its
34
noncompliancewiththeorderofrelease.
Thereupon, on January 10, 2005, the UP brought a petition for
certiorari inthe CAtochallengethejurisdictionof
35
the RTCin issuingtheorderofDecember21,2004(CAG.R.CVNo.88125).
Asidefromraisingthedenialofdue
process, the UP averred that the RTC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in ruling that there was no longerany legal impediment to the release of the garnished funds. The UP
argued that government funds and properties couldnotbe seized by virtue ofwritsofexecutionorgarnishment,as
36
held in Department of Agriculture v. NationalLabor Relations Commission,
and citingSection84of Presidential
DecreeNo.1445totheeffectthat"revenue fundsshallnotbepaidoutofanypublictreasury ordepositoryexceptin
pursuance of anappropriation law or other specificstatutory authority" and that the order of garnishment clashed
37
with the ruling in University of the Philippines Board of Regents v. LigotTelan
to the effect that the funds
belongingtotheUPwerepublicfunds.
38
OnJanuary19,2005,theCAissuedatemporaryrestrainingorder(TRO)uponapplicationbytheUP.
On March 22, 2005,Stern Builders and dela Cruz filed in theRTCtheiramendedmotionforsheriffsassistanceto
implement the release order dated December 21, 2004, stating that the 60day period ofthe TRO ofthe CA had
39
already lapsed.
TheUPopposedtheamendedmotionandcounteredthattheimplementationofthereleaseorderbe
40
suspended.
On May3,2005,the RTC grantedtheamendedmotionfor sheriffsassistanceand directedthesheriff toproceedto
41
theDBPtoreceivethecheckinsatisfactionofthejudgment.
42
TheUPsoughtthereconsiderationoftheorderofMay3,2005.
On May 16, 2005, DBP filed a motion to consign the check representing the judgment awardand to dismiss the
43
motiontociteitsofficialsincontemptofcourt.
44
OnMay23,2005,theUPpresentedamotiontowithholdthereleaseofthepaymentofthejudgmentaward.
45
On July 8, 2005,theRTCresolvedallthependingmatters,
notingthattheDBPhadalreadydeliveredtothesheriff
Managers Check No. 811941 for P16,370,191.74 representing the garnished funds payable tothe order of Stern
46
Builders and dela Cruz as its compliance with the RTCs order dated December 21, 2004.
However, the RTC
directed in the same order that Stern Builders anddela Cruzshould not encash the check or withdraw its amount
47
pendingthefinalresolutionoftheUPspetitionforcertiorari,towit:
To enable the money represented in the check inquestion (No. 00008119411)to earn interestduringthependency
of thedefendantUniversityofthe Philippines applicationforawritofinjunctionwith theCourtofAppealsthesame
may now be deposited by theplaintiffatthegarnisheeBank(DevelopmentBank ofthePhilippines),thedisposition
of the amount represented therein being subject to the finaloutcomeofthe caseof theUniversityofthePhilippines
etal.,vs.Hon.AgustinS.Dizonetal.,(CAG.R.88125)beforetheCourtofAppeals.
Let it bestatedhereinthattheplaintiffisnotauthorized toencashandwithdrawtheamountrepresentedinthecheck
inquestion andenjoythesameinthefashionofanownerduringthependencyofthecasebetweenthepartiesbefore
theCourtofAppealswhichmayormaynotberesolvedinplaintiffsfavor.
Withthe end in view of seeingto itthatthecheckinquestionisdepositedby theplaintiffattheDevelopmentBank
of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is directed to accompany and/or escort the
plaintiffinmakingthedepositofthecheckinquestion.
SOORDERED.
On September 16, 2005, the CApromulgated itsassailed decisiondismissingtheUPspetitionfor certiorari,ruling
that the UP had beengiven ample opportunity to contest the motion todirect the DBP to deposit the check in the
name of Stern Builders and dela Cruz and that the garnished funds could be the proper subject of garnishment
because they had been already earmarked for the project, with the UP holding the funds only in a fiduciary
48
capacity,
viz:
Petitioners next argue that the UP funds may not be seized for executionor garnishmentto satisfy the judgment
award. Citing Department of Agriculture vs. NLRC, University of the Philippines Board of Regents vs. Hon.

LigotTelan, petitioners contend thatUPdepositsatLandBankand theDevelopmentBankofthePhilippines,being

governmentfunds,maynotbereleasedabsentanappropriationsbillfromCongress.
Theargument is specious. UP entered into a contract withprivaterespondents for the expansionandrenovationof
the Arts and Sciences Building of itscampusin Los Baos,Laguna.Decidedly, therewasalreadyanappropriations
earmarked for the said project.The saidfundsareretainedbyUP, inafiduciarycapacity,pendingcompletion ofthe
constructionproject.
WeagreewiththetrialCourt[sic]observationonthisscore:
"4. ExecutiveOrder No. 109 (Directing all National Government Agenciesto Revert Certain Accounts Payable to
the Cumulative Result ofOperations of the National Government and for Other Purposes)Section9.Reversionof
Accounts Payable, provides that, all 1995 and prior years documented accounts payable and all undocumented
accountsregardlessof the year they were incurred shall be revertedto the Cumulative Result ofOperations of the
National Government (CROU). This shallapply toaccounts payableofallfunds,exceptfiduciaryfunds,aslongas
the purpose for which the funds were created have not been accomplished and accounts payable under foreign
assisted projects for the duration of the said project. In this regard, the Department of Budgetand Management
issued JointCircularNo.9964.0(4.3) ProceduralGuidelineswhichprovides that allaccountspayablethatreverted
to the CROU may be considered for payment upon determination thru administrative process, of the existence,
validity and legality of the claim. Thus, the allegation of the defendants that considering noappropriation for the
payment of any amount awarded toplaintiffsappelleethe fundsofdefendantappellantsmaynotbeseizedpursuant
to a writ of executionissued by the regular courtismisplaced.Surelywhenthedefendantsandtheplaintiffentered
into the General Construction of Agreement there is an amount alreadyallocated by the latter for the said project
49
whichisnolongersubjectoffutureappropriation."
After the CA denied theirmotionforreconsiderationonDecember23,2005,thepetitionersappealedbypetitionfor
review.
MattersArisingDuringthePendencyofthePetition
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela Cruzs motion to
50
withdrawthedeposit,inconsiderationoftheUPsintentiontoappealtotheCA,
stating:
Sinceit appearsthatthe defendantsare intending tofile a petition forreview of the CourtofAppealsresolutionin
CAG.R. No. 88125 within the reglementaryperiod of fifteen(15)daysfromreceiptof resolution,theCourtagrees
withthedefendantsstandthatthegrantingofplaintiffssubjectmotionispremature.
Let it be stated thatwhattheCourtmeantbyitsOrderdatedJuly8,2005whichstatesinpartthatthe"dispositionof
the amount representedthereinbeingsubjecttothefinaloutcomeofthecaseoftheUniversityofthePhilippines,et.
al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the judgmentor
resolution of said court has to be final andexecutory, for if the same willstillbeelevated totheSupremeCourt,it
51
willnotattainfinalityyetuntilthehighestcourthasrendereditsownfinaljudgmentorresolution.
However, on January 22, 2007, the UP filed an
UrgentApplication for A Temporary Restraining Order and/or A
Writof Preliminary Injunction,52
averringthatonJanuary3,2007,JudgeMariaTheresadelaTorreYadao(whohad
meanwhile replacedJudgeDizon upon the latters appointment to the CA) hadissuedanotherorderallowingStern
53
BuildersanddelaCruztowithdrawthedeposit,
towit:
It bears stressingthatdefendantsliability forthepaymentofthejudgmentobligationhasbecomeindubitabledueto
the final and executory nature of the Decision dated November 28, 2001. Insofar as the payment of the [sic]
judgment obligation is concerned, the Court believes that there is nothing more the defendant can do to escape
liability. It is observed that there is nothing more the defendant can do to escape liability. It is observed that
defendant U.P. System had already exhausted all its legal remedies to overturn, set aside or modify the decision
(dated November 28, 2001( rendered againstit. The way theCourt sees it,defendantU.P.Systemspetitionbefore
the SupremeCourt concerns only with themannerbywhichsaidjudgmentawardshouldbesatisfied.Ithasnothing
to dowith thelegalityorproprietythereof,althoughitprays forthedeletionof[sic]reductionof theawardof moral
damages.

It must be emphasized that this Courts finding, i.e., that there was sufficient appropriation earmarked for the
project, was upheld bythe Court of Appeals in its decision dated September 16, 2005. Being afinding offact,the
Supreme Court will, ordinarily, not disturb the same was said Court is not a trier of fact. Such being the case,
defendants arguments that there was no sufficientappropriation for the payment of thejudgment obligation must
fail.
WhileitistruethattheformerPresidingJudgeofthisCourtinitsOrderdatedJanuary30,2006hadstatedthat:
Let it be stated thatwhattheCourtmeantbyitsOrderdatedJuly8,2005whichstatesinpartthatthe"dispositionof
the amount representedthereinbeingsubjecttothefinaloutcomeofthecaseoftheUniversityofthePhilippines,et.
al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the judgmentor
resolution of said court has to be final andexecutory, for if the same willstillbeelevated totheSupremeCourt,it
willnotattainfinalityyetuntilthehighestcourthasrendereditsownfinaljudgmentorresolution.
it should be notedthatneithertheCourtofAppeals northeSupremeCourtissueda preliminaryinjunctionenjoining
the release or withdrawal of the garnished amount. In fact, in its present petition for review before the Supreme
Court, U.P. System has not prayed for the issuance of a writ of preliminary injunction. Thus, the Court doubts
whethersuchwritisforthcoming.
TheCourt honestly believes that if defendants petition assailing the Order of this Courtdated December31,2004
granting the motion for the release of the garnished amount was meritorious, the Court of Appeals would have
issued a writ of injunction enjoining the same. Instead, said appellate court not only refused to issue a wit of
54
preliminaryinjunctionprayedforbyU.P.Systembutdeniedthepetition,aswell.
The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of Judge Dizon
disallowing the withdrawal of thegarnishedamountuntilafterthedecisionin thecasewouldhavebecomefinaland
executory.
Although theCourt issued a TRO on January24,2007toenjoinJudgeYadao andallpersonsactingpursuanttoher
55
authority from enforcing her order of January 3, 2007,
itappearsthatonJanuary16,2007,orpriortotheissuance
of the TRO, she had alreadydirected the DBPto forthwithreleasethegarnishedamounttoSternBuildersanddela
Cruz56
and that DBP had forthwithcomplied with the order onJanuary 17, 2007 upon the sheriffsserviceof the
57
orderofJudgeYadao.
58
These intervening developments impelled the UP tofileinthisCourta supplemental petitiononJanuary26,2007,

alleging that the RTC (Judge Yadao) gravely erred in ordering the immediate release of the garnished amount
despitethependencyofthepetitionforreviewinthisCourt.
59
TheUPfiledasecondsupplementalpetition
afterthe RTC (JudgeYadao)deniedtheUPsmotion fortheredeposit
60
ofthewithdrawnamountonApril10,2007,towit:
This resolves defendant U.P. Systems Urgent Motion to Redeposit Judgment Award praying that plaintiffs be
directed to redeposit the judgment award to DBP pursuant to the Temporary Restraining Order issued by the
Supreme Court. Plaintiffs opposed the motion and countered that the TemporaryRestraining Order issued by the
Supreme Court has become moot and academic considering that the act sought to be restrained by ithas already
been performed. They also alleged that the redeposit of the judgment award was no longer feasible as they have
alreadyspentthesame.
It bears stressing, if only to set the record straight, that this Court did not in its OrderdatedJanuary 3, 2007(the
implementationofwhichwasrestrainedbytheSupreme CourtinitsResolutiondated January24,2002)directthat
that garnished amount "be deposited with the garnishee bank (Development Bank of the Philippines)". In the first
place, there was no need toorder DBPto make such deposit, as the garnishedamountwasalreadydepositedinthe
account of plaintiffswith theDBP asearly as May 13, 2005. What theCourt granted in itsOrderdatedJanuary3,
2007was plaintiffs motionto allowthe release of said deposit. It must be recalled that theCourtfoundplaintiffs
motion meritorious and, at that time, there was no restraining order or preliminary injunction fromeithertheCourt
of Appeals or the Supreme Court which could have enjoined the release of plaintiffs deposit. TheCourtalsotook
intoaccountthefollowingfactors:
a)theDecisioninthiscasehadlongbeenfinalandexecutoryafteritwasrenderedonNovember28,2001

b)theproprietyofthedismissalofU.P.SystemsappealwasupheldbytheSupremeCourt
c)awritofexecutionhadbeenissued
d) defendant U.P. Systems deposit with DBP was garnished pursuant to a lawful writ ofexecution issued by the
Courtand
e)thegarnishedamounthadalreadybeenturnedovertotheplaintiffsanddepositedintheiraccountwithDBP.
The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by the plaintiffs,
having been delivered to them by the Deputy Sheriff of this Courtpursuant to par. (c), Section 9, Rule 39 of the
1997Rules of Civil Procedure. Moreover, the judgmentobligationhas alreadybeenfullysatisfiedas per Reportof
theDeputySheriff.
Anent the Temporary Restraining Order issued by the Supreme Court, the same has becomefunctusoficio,having
been issued after the garnished amount had been released to theplaintiffs. The judgment debt was released to the
plaintiffsonJanuary17, 2007, whiletheTemporaryRestrainingOrderissuedbytheSupremeCourtwas receivedby
this Courton February 2, 2007. At thetime of theissuanceoftheRestrainingOrder,theactsoughttoberestrained
hadalreadybeendone,therebyrenderingthesaidOrderineffectual.
After a careful and thorough study of thearguments advanced bytheparties,theCourtis oftheconsideredopinion
that thereis nolegalbasistograntdefendantU.P.Systemsmotiontoredepositthe judgmentamount.Granting said
motion isnotonly contrary to law,but itwillalsorenderthisCourtsfinalexecutoryjudgmentnugatory.Litigation
must end and terminate sometime and somewhere, and it is essential toan effective administration of justicethat
once a judgment has becomefinal the issueorcauseinvolvedthereinshouldbelaidtorest.Thisdoctrineoffinality
of judgment is groundedonfundamentalconsiderationsofpublicpolicyand soundpractice.Infact,nothingismore
settled in law than that once a judgment attains finality it thereby becomes immutable and unalterable. It may no
longer bemodified in any respect, even ifthe modification ismeant tocorrectwhatisperceived tobeanerroneous
conclusion of fact or law, andregardlessofwhetherthemodificationisattemptedtobe madebythecourtrendering
itorbythehighestcourtoftheland.
WHEREFORE, premises considered, finding defendant U.P. Systems Urgent Motion to Redeposit Judgment
Awarddevoidofmerit,thesameisherebyDENIED.
SOORDERED.
Issues
TheUPnowsubmitsthat:
I
THE COURTOFAPPEALSCOMMITTED GRAVEERRORINDISMISSINGTHEPETITION,ALLOWINGIN
EFFECT THE GARNISHMENT OF UP FUNDS, WHEN ITRULED THATFUNDS HAVE ALREADY BEEN
EARMARKED FOR THE CONSTRUCTION PROJECT AND THUS, THERE IS NO NEED FORFURTHER
APPROPRIATIONS.
II
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT OF A STATE
UNIVERSITYSFUNDSINVIOLATIONOFARTICLEXIV,SECTION5(5)OFTHECONSTITUTION.
III
IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW POWERS OF THIS
HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE AWARD OF P 10 MILLION AS
MORALDAMAGESTORESPONDENTS.
IV
THE RTCBRANCH80COMMITTEDGRAVEERRORINORDERINGTHEIMMEDIATERELEASEOFTHE
JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE GROUND OF EQUITY AND
JUDICIALCOURTESY.
V
THE RTCBRANCH80COMMITTEDGRAVEERRORINORDERINGTHEIMMEDIATERELEASEOFTHE
JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON THE GROUND THAT PETITIONER

UNIVERSITY STILL HAS A PENDING MOTION FOR RECONSIDERATION OF THE ORDER DATED 3
JANUARY2007.
VI
THE RTCBRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE REDEPOSIT OF THE
GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF THE SUPREME
COURTRESOLUTIONDATED24JANUARY2007.
The UP argues that the amount earmarked for the construction project had been purposelyset aside only for the
aborted project and did not include incidental matters like the awards of actual damages, moral damages and
attorneys fees. In support of its argument, theUPcitedArticle12.2oftheGeneralConstructionAgreement,which
stipulated that no deductions would be allowed for the paymentofclaims,damages,lossesandexpenses,including
attorneys fees, in case of any litigation arising out of the performance of the work. TheUP insists that the CA
61
decision was inconsistent with the rulings in Commissioner of Public Highways v. San Diego
andDepartmentof
62
Agriculture v. NLRC
to the effect that government funds and properties could not be seized under writs of
executionorgarnishmenttosatisfyjudgmentawards.
Furthermore, the UP contendsthatthe CA contravened Section 5, Article XIV of theConstitution by allowingthe
garnishment of UP funds, because the garnishment resulted in a substantial reduction of the UPs limited budget
allocated for the remuneration, job satisfaction and fulfillment of the best available teachers that Judge Yadao
should haveexhibited judicial courtesy towardsthe Court due to the pendency of theUPspetitionfor reviewand
thatsheshouldhavealsodesistedfromdeclaringthattheTROissuedbythisCourthadbecomefunctusofficio.
Lastly,the UPstates that theawards ofactual damagesofP5,716,729.00andmoraldamages ofP10millionshould
bereduced,ifnotentirelydeleted,duetoitsbeingunconscionable,inequitableanddetrimentaltopublicservice.
In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defectivefor its failure to
mention the other cases upon the same issuespending between the parties (i.e., CAG.R. No. 77395 and G.R No.
163501) that the UP was evidently resorting to forum shopping, and to delaying the satisfaction of the final
judgment bythe filing of its petition for review thattherulinginCommissionerofPublicWorksv.SanDiegohad
no application because there was an appropriation for the project that the UP retained the funds allotted forthe
project only in a fiduciary capacity that the contract price had been meanwhile adjusted toP 22,338,553.25, an
amount already more than sufficienttocoverthejudgmentawardthattheUPsprayertoreduce ordeletetheaward
of damages had no factual basis, because they had been gravely wronged, had been deprived of their source of
income, and had suffereduntold miseries, discomfort, humiliationandsleeplessyearsthatdelaCruz hadevenbeen
constrained to sell his house, his equipment and theimplements of his trade,andtogetherwithhisfamilyhadbeen
forced to live miserably because of the wrongful actuations of the UP and that the RTC correctly declared the
CourtsTROtobealreadyfunctusofficiobyreasonofthewithdrawalofthegarnishedamountfromtheDBP.
Thedecisiveissuestobeconsideredandpasseduponare,therefore:
(a) whetherthe fundsofthe UP were the proper subject ofgarnishmentinordertosatisfythejudgmentawardand
(b) whether the UPs prayerforthedeletionofthe awardsofactualdamagesofP5,716,729.00,moraldamagesof P
10,000,000.00 and attorneys fees of P 150,000.00 plus P 1,500.00 per appearance could be granted despite the
finalityofthejudgmentoftheRTC.
Ruling
Thepetitionforreviewismeritorious.
I.
UPsfunds,beinggovernmentfunds,
arenotsubjecttogarnishment
TheUP was founded on June 18, 1908 throughAct 1870to provideadvancedinstructioninliterature,philosophy,
63
the sciences, and arts, and to give professional and technical training to deserving students.
Despite its
64
65
establishment as a body corporate, the UP remains to be a "chartered institution" performing a legitimate
governmentfunction. It isaninstitutionofhigherlearning,notacorporationestablishedforprofitanddeclaringany
66
dividends.
In enacting Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congresshas

67
declared the UP as the national university
"dedicated to the search for truth and knowledge as well as the
68
developmentoffutureleaders."
69
Irrefragably, the UP is a government instrumentality,
performing the States constitutional mandate of promoting
70
quality and accessible education. As a governmentinstrumentality,theUPadministersspecialfundssourcedfrom
71
the fees and income enumerated under Act No. 1870 and Section 1 of Executive OrderNo. 714,
and fromthe
yearly appropriations,toachievethepurposeslaiddownbySection2ofAct1870,asexpandedinRepublicActNo.
72
9500.
All the funds going into the possession of theUP, including anyinterest accruing fromthedepositof such
funds in any banking institution, constitute a "special trust fund," the disbursement of which should always be
73
74
alignedwiththeUPsmissionandpurpose,
andshouldalwaysbesubjecttoauditingbytheCOA.
Presidential DecreeNo. 1445 defines a "trustfund"asafundthatofficiallycomesinthepossessionofanagencyof
the government orofapublicofficerastrustee,agentoradministrator,orthatisreceivedforthefulfillmentofsome
75
obligation.
A trustfund may beutilizedonly for the"specificpurposeforwhichthetrustwascreated orthefunds
76
received."
Thefunds of theUP are governmentfunds that are public in character. They includetheincome accruingfromthe
77
use of real propertycededtotheUPthatmaybespentonlyfortheattainmentofitsinstitutional objectives.
Hence,
the funds subjectof thisaction couldnotbevalidlymadethesubjectoftheRTCswritofexecutionorgarnishment.
The adverse judgment rendered against the UP in a suit to which it had impliedlyconsented wasnotimmediately
78
79
enforceablebyexecutionagainsttheUP,
becausesuabilityoftheStatedidnotnecessarilymeanitsliability.
A marked distinction exists between suability of the State and its liability. As the Court succinctly stated in
80
MunicipalityofSanFernando,LaUnionv.Firme:
Adistinction should first be made between suabilityand liability."Suability depends on the consent ofthestateto
be sued, liability on the applicable law andthe established facts.The circumstancethata state is suable does not
necessarily mean that it is liableon the otherhand,itcanneverbeheldliable ifitdoes not firstconsenttobesued.
Liability is not conceded by the mere fact that thestate has alloweditselftobesued.Whenthestatedoeswaiveits
sovereignimmunity,itisonlygivingtheplaintiffthechancetoprove,ifitcan,thatthedefendantisliable.
Also, in
Republic v. Villasor,81
where the issuance of an alias writ of execution directed against the funds of the
ArmedForcesofthePhilippinestosatisfyafinalandexecutoryjudgmentwasnullified,theCourtsaid:
xxx Theuniversal rulethatwheretheStategivesitsconsentto besued byprivatepartieseitherbygeneralorspecial
law, it may limit claimantsaction "onlyuptothecompletionofproceedingsanteriorto thestageofexecution" and
that the power oftheCourts endswhenthejudgmentisrendered,sincegovernmentfundsandpropertiesmaynotbe
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 asrequired by
law. The functions and public services rendered by theState cannot be allowed to be paralyzedordisruptedbythe
diversionofpublicfundsfromtheirlegitimateandspecificobjects,asappropriatedbylaw.
TheUP correctly submits here that the garnishmentof its funds to satisfythejudgmentawards ofactualandmoral
damages(including attorneysfees)wasnotvalidlymadeiftherewasnospecialappropriationbyCongresstocover
the liability. Itwas,therefore,legallyunwarranted fortheCAtoagreewiththeRTCsholdingintheorderissuedon
April 1, 2003 that no appropriation by Congress to allocateand setaside the payment of thejudgmentawardswas
82
necessary because "there (were) already anappropriations(sic) earmarked for the said project."
The CA and the
RTC thereby unjustifiably ignored the legal restriction imposed on the trust funds of the Government and its
agencies and instrumentalities to be used exclusively to fulfill the purposes for which thetrustswerecreatedorfor
which the funds were received except upon express authorization by Congress or by the head of a government
83
agencyincontrolofthefunds,andsubjecttopertinentbudgetarylaws,rulesandregulations.
Indeed, an appropriation by Congress wasrequired before the judgmentthatrendered the UPliable for moral and
actual damages (including attorneys fees) would be satisfied considering that such monetaryliabilities were not
covered by the "appropriations earmarked forthesaidproject." TheConstitutionstrictlymandatedthat"(n)omoney
84
shallbepaidoutoftheTreasuryexceptinpursuanceofanappropriationmadebylaw."
II

COAmustadjudicateprivaterespondentsclaim
beforeexecutionshouldproceed
Theexecution ofthe monetary judgment against theUPwas within the primary jurisdictionof theCOA.Thiswas
expresslyprovidedinSection26ofPresidentialDecreeNo.1445,towit:
Section 26.
General jurisdiction. The authorityandpowersofthe Commissionshallextendtoandcomprehendall
matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the
Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relatingto those accountsandtheauditandsettlementoftheaccounts
of all persons respecting funds or property received or held by them in an accountable capacity, as well as the
examination, audit, and settlement of alldebts and claims of any sort due from orowingtotheGovernmentorany
of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all governmentowned or
controlled corporations, including their subsidiaries, and otherselfgoverning boards, commissions, or agencies of
the Government, and as herein prescribed,includingnongovernmentalentitiessubsidizedbythegovernment,those
funded by donations throughthe government,thoserequiredtopayleviesorgovernmentshare,andthoseforwhich
thegovernmenthasputupacounterpartfundorthosepartlyfundedbythegovernment.
It was of no moment that a final and executory decision alreadyvalidated theclaimagainsttheUP.The settlement
of the monetaryclaim was still subject to the primaryjurisdictionoftheCOAdespitethefinaldecisionoftheRTC
85
having already validated the claim.
As such, Stern Builders and dela Cruz as the claimants had no alternative
excepttofirstseektheapprovaloftheCOAoftheirmonetaryclaim.
On its part, the RTC shouldhave exercised utmost caution,prudenceandjudiciousnessindealing withthemotions
for execution against the UP and the garnishment of the UPs funds. The RTC had no authority to direct the
immediate withdrawal of any portion of the garnished funds from the depository banks of the UP. By eschewing
utmost caution, prudenceand judiciousness in dealing with the execution and garnishment,and by authorizing the
withdrawal of the garnished funds of the UP, the RTCactedbeyonditsjurisdiction,andallitsordersandissuances
thereon were void and of no legaleffect,specifically:(a)theorderJudgeYadaoissuedonJanuary3,2007allowing
Stern Builders and dela Cruz to withdraw the deposited garnished amount (b) the order Judge Yadao issued on
January 16, 2007 directing DBP to forthwith release the garnish amount to Stern Builders and delaCruz (c) the
sheriffs report of January 17, 2007 manifesting the full satisfaction ofthe writ of execution and (d) the order of
April 10, 2007deyingtheUPsmotionfortheredepositofthewithdrawn amount.Hence,suchordersandissuances
shouldbestruckdownwithoutexception.
Nothing extenuated Judge Yadaos successive violations of Presidential Decree No. 1445. She was aware of
Presidential Decree No. 1445, considering that the Court circulated to all judges its AdministrativeCircular No.
86
102000,
issued on October 25, 2000, enjoining them "to observe utmost caution, prudence and judiciousness in
the issuance of writs of execution to satisfy money judgments against government agencies andlocal government
units" precisely in order to prevent the circumvention ofPresidential Decree No. 1445, as well as of the rules and
proceduresoftheCOA,towit:
Inorder to prevent possible circumvention ofthe rules and proceduresof the Commission on Audit,judges
are hereby enjoined to observe utmost caution, prudence and judiciousness in the issuance of writs of
executiontosatisfymoneyjudgmentsagainstgovernmentagenciesandlocalgovernmentunits.
Judges should bear in mind that in CommissionerofPublicHighwaysv.SanDiego(31SCRA617,6251970),this
Courtexplicitlystated:
"The universal rule thatwhere the State gives its consentto besued by private parties either by general or special
law, it may limit claimantsaction only uptothecompletionofproceedingsanteriorto thestageofexecution and
that the power ofthe Court ends whenthejudgmentisrendered,sincegovernmentfundsandpropertiesmaynotbe
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 asrequired by
law. The functions and public services rendered by theState cannot be allowed to be paralyzedordisruptedbythe
diversionofpublicfundsfromtheirlegitimateandspecificobjects,asappropriatedbylaw.

Moreover, itis settledjurisprudence that upon determination ofStateliability,theprosecution,enforcement

or satisfaction thereof must still be pursued inaccordance with the rules andprocedures laid down in P.D.
No.1445,otherwise known as the Government AuditingCode ofthePhilippines(DepartmentofAgriculture
v. NLRC, 227 SCRA 693, 70102 1993 citing Republic vs. Villasor, 54 SCRA 84 1973). All money claims
againstthe Government must firstbefiledwiththe CommissiononAudit whichmustactuponitwithinsixty
days. Rejection of the claim will authorize the claimant to elevate the matter to the Supreme Court on
certiorari
andineffect,suetheStatethereby(P.D.1445,Sections4950).
However, notwithstandingtherulethatgovernmentpropertiesarenotsubjecttolevyandexecutionunlessotherwise
provided for by statute (Republic v. Palacio, 23 SCRA 8991968Commissionerof Public Highwaysv.SanDiego,
supra) or municipalordinance (Municipality ofMakativ.CourtofAppeals,190SCRA2061990),theCourthas,in
various instances, distinguished between government funds and properties for public use and those not held for
public use. Thus, in ViudadeTanTocov.MunicipalCouncilofIloilo(49Phil52 1926, theCourtruled that "where
property of a municipal or other public corporation is sought to be subjected to execution to satisfy judgments
recovered againstsuchcorporation,thequestionastowhethersuchpropertyisleviableornotistobedeterminedby
the usage and purposes for which it isheld." The following can be culled from Viuda deTan Toco v. Municipal
CouncilofIloilo:
1.Propertiesheldforpublicuses andgenerallyeverythingheldforgovernmentalpurposesare notsubject
to levy and sale under execution against such corporation. Thesame rule applies tofunds in the hands of a
publicofficerandtaxesduetoamunicipalcorporation.
2. Where a municipalcorporation owns inits proprietary capacity, as distinguished from its public or government
capacity,propertynotusedorusedforapublicpurposebutforquasiprivatepurposes,itisthegeneral rulethatsuch
propertymaybeseizedandsoldunderexecutionagainstthecorporation.
3. Property held for public purposes is not subject to execution merely because it is temporarily used for private
purposes.Ifthepublicuseiswhollyabandoned,suchpropertybecomessubjecttoexecution.
This Administrative Circular shall take effect immediately and the Court Administrator shall see to it that it is
faithfullyimplemented.
Although Judge Yadao pointed out that neither the CA nor the Court hadissued
as of thenanywritofpreliminary
injunction to enjointhe release or withdrawal ofthegarnishedamount, shedidnotneed anywritofinjunctionfrom
a superior courttocompel her obediencetothelaw.The Courtisdisturbedthatanexperiencedjudgelikehershould
lookat publiclaws like Presidential DecreeNo.1445dismissivelyinsteadofloyallyfollowingand unquestioningly
implementing them. That she did so turned her court into an oppressive bastion of mindless tyranny instead of
havingitasatruehavenfortheseekersofjusticeliketheUP.
III
Periodofappealdidnotstartwithouteffective
serviceofdecisionuponcounselofrecord
Freshperiodrule
announcedin
Neypesv.CourtofAppeals
canbegivenretroactiveapplication
TheUPnextpleadsthattheCourtgives duecourse toits petitionforreviewinthename ofequityinordertoreverse
or modifythe adverse judgment againstit despite its finality. At stake in theUPspleaforequitywasthereturnof
the amount of P 16,370,191.74 illegally garnished from its trust funds. Obstructing the plea is thefinality of the
judgment basedon the supposedtardinessofUPsappeal,whichtheRTCdeclaredonSeptember26,2002.TheCA
upheld the declaration of finality onFebruary 24, 2004, andthe Court itself denied theUPspetitionforreviewon
thatissueonMay11,2004(G.R.No.163501).ThedenialbecamefinalonNovember12,2004.
It is true thatadecisionthathasattainedfinality becomesimmutableandunalterable,andcannotbemodifiedinany
87
respect,
even if the modification is meant to correct erroneous conclusions of fact and law, and whether the
88
modification is made by the court that rendered it or by this Court as the highest court of the land.
Publicpolicy
dictates that once a judgment becomes final, executory and unappealable, the prevailing party should not be

deprived of the fruits of victory by some subterfuge devised by the losing party. Unjustified delay in the
enforcementofsuch judgment sets at naught therole andpurpose of the courts to resolvejusticiablecontroversies
89
withfinality.
Indeed,alllitigationsmustatsometimeend,evenattheriskofoccasionalerrors.
But the doctrine of immutability of a final judgment hasnot been absolute,and hasadmitted several exceptions,
among them:(a) thecorrectionof clerical errors (b) thesocalled nuncpro tunc entries that cause no prejudiceto
any party (c) void judgments and(d)whenevercircumstancestranspireafterthefinalityofthedecisionthatrender
90
91
its execution unjust and inequitable.
Moreover, in Heirs of Maura So v. Obliosca,
we stated that despite the
absence of the preceding circumstances, the Court is notprecludedfrombrushing asideproceduralnormsifonlyto
92
serve the higher interests of justice and equity.Also, in Gumaru v. QuirinoState College,
the Court nullifiedthe
proceedings andthe writ of execution issuedby the RTC forthe reason that respondent statecollege had notbeen
representedinthelitigationbytheOfficeoftheSolicitorGeneral.
We rule that the UPs plea for equity warrants the Courts exercise of the exceptional power to disregard the
declarationoffinalityofthejudgmentoftheRTCforbeinginclearviolationoftheUPsrighttodueprocess.
Both the CAandtheRTCfoundthe filingonJune3,2002bytheUPof thenoticeof appealtobetardy.Theybased
their finding on the fact thatonlysixdaysremainedoftheUPsreglementary15dayperiodwithinwhichtofilethe
notice of appeal because the UP had filed a motion for reconsideration on January 16, 2002 visvis the RTCs
decision theUP received on January7,2002andthatbecausethedenialofthemotionforreconsiderationhadbeen
served upon Atty. Felimon D. Nolasco ofthe UPLB Legal Office onMay17,2002,theUPhadonlyuntilMay23,
2002withinwhichtofilethenoticeofappeal.
TheUP counters that the service of the denial of the motion for reconsiderationupon Atty. Nolasco wasdefective
considering that its counsel of record was not Atty. Nolasco of the UPLB Legal Office but the OLS in Diliman,
Quezon City and that theperiodofappeal shouldbereckoned fromMay31, 2002, thedatewhentheOLSreceived
the order. The UP submits that the filing of the notice of appeal on June3,2002 waswellwithinthereglementary
periodtoappeal.
WeagreewiththesubmissionoftheUP.
Firstly, theserviceofthe denialofthe motionforreconsiderationuponAtty.NolascooftheUPLBLegalOfficewas
invalid and ineffectual because he wasadmittedlynot the counsel of record of the UP.The rule is that it is on the
93
counselandnottheclientthattheserviceshouldbemade.
That counsel was the OLS inDiliman,Quezon City, which was served with the denial only on May 31, 2002. As
94
such, the running of the remaining period of sixdays resumed only on June1,2002,
renderingthe filing of the
UPsnoticeofappealonJune3,2002timelyandwellwithintheremainingdaysoftheUPsperiodtoappeal.
Verily, the service of the denial of the motion for reconsideration could only be validly made upon the OLS in
Diliman, and no other. The fact that Atty. Nolascowas in the employ of the UP at the UPLBLegalOfficedidnot
render the service uponhim effective.It issettledthatwhereapartyhasappearedbycounsel,servicemustbe made
95
uponsuchcounsel.
Serviceonthepartyorthepartysemployeeisnoteffectivebecausesuchnoticeisnotnoticein
96
law. This is clear enough from Section 2, second paragraph, of Rule 13,Rules of Court, which explicitly states
that:"If any partyhas appeared bycounsel,serviceuponhimshallbemadeuponhiscounsel oroneofthem,unless
service upon theparty himself is orderedby the court. Where onecounselappearsforseveralparties,heshallonly
be entitled to one copy of any paper served upon him by the opposite side." Assuch,theperiodtoappealresumed
onlyon June 1, 2002, thedate following the service on May 31, 2002 upon the OLS inDilimanofthecopyofthe
97
decisionoftheRTC,notfromthedatewhentheUPwasnotified.
Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factualand legal bases,isset
aside.
Secondly, even assumingthattheserviceuponAtty.Nolascowas validandeffective,suchthattheremainingperiod
for the UP to take atimelyappealwouldendbyMay23,2002,it wouldstillnotbecorrecttofindthatthe judgment
oftheRTCbecamefinalandimmutablethereafterduetothenoticeofappealbeingfiledtoolateonJune3,2002.
In so declaring the judgment of the RTC as final against the UP, theCAandtheRTCappliedtherulecontainedin
the second paragraph of Section 3, Rule 41 of the Rules of Court to the effect that the filing of a motion for

reconsideration interruptedthe running of the period for filing the appeal and that the period resumeduponnotice
of the denial of the motion forreconsideration. Forthatreason, the CA and theRTCmightnotbetaken totaskfor
strictlyadheringtotherulethenprevailing.
However, equity calls for the retroactiveapplication in the UPs favor of the freshperiod rulethat the Court first
98
announcedinmidSeptemberof2005throughitsrulinginNeypesv.CourtofAppeals,
viz:
To standardize the appeal periods provided in theRulesandtoaffordlitigantsfairopportunitytoappealtheir cases,
the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the
Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for
reconsideration.
The retroactive application of the freshperiod rule, a procedural law that aims "to regiment or make the appeal
period uniform, tobe counted fromreceiptoftheorderdenyingthemotionfornewtrial,motionforreconsideration
99
(whether full or partial) or any final order or resolution,"
is impervious to any serious challenge. This is because
100
there are no vested rights in rules of procedure.
A law orregulationis procedural when it prescribes rulesand
101
forms of procedure in order that courts may be able to administer justice.
It does not come within the legal
conception of a retroactive law, or is not subject of the general rule prohibitingtheretroactiveoperationofstatues,
but is given retroactive effect in actions pending and undetermined at the time of itspassagewithoutviolatingany
rightofapersonwhomayfeelthatheisadverselyaffected.
We have further said that a procedural rule that is amended for the benefit of litigants in furtherance of the
administration of justice shall beretroactively applied to likewise favor actions then pending, as equity delightsin
102
equality.
We mayeven relax stringent procedural rules in order to serve substantial justiceandintheexerciseof
103
this Courts equity jurisdiction.
Equity jurisdiction aims to docomplete justice incases where a courtof law is
unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or
104
legaljurisdiction.
It is cogent to add in thisregardthattodenythebenefitofthefreshperiodruletotheUPwouldamount toinjustice
and absurdity injustice, because the judgment in question was issued onNovember 28,2001 as compared to the
judgment in Neypesthatwas rendered in 1998 absurdity,because parties receiving noticesof judgment and final
orders issued in the year 1998 would enjoy the benefit of the freshperiod rule but thelater rulings of thelower
105
courtslikethathereinwouldnot.
Consequently,even if the reckoning started from May 17, 2002, when Atty. Nolasco receivedthe denial,theUPs
filing on June3,2002 of thenotice of appeal was not tardy within thecontextofthefreshperiodrule.FortheUP,
the fresh period of 15days counted from service of the denial ofthemotionforreconsiderationwouldendonJune
1, 2002, which was a Saturday. Hence, the UPhad until the next working day, orJune 3, 2002, a Monday,within
which to appeal, conformably with Section 1 of Rule 22, Rules of Court, which holds that:"If the last day of the
period, as thuscomputed, falls on a Saturday,aSunday,oralegalholidayintheplacewherethecourtsits,thetime
shallnotrununtilthenextworkingday."
IV
Awardsofmonetarydamages,
beingdevoidoffactualandlegalbases,
didnotattainfinalityandshouldbedeleted
Section 14 of Article VIII of the Constitutionprescribesthatexpressfindings of fact andoflawshould bemadein
thedecisionrenderedbyanycourt,towit:
Section 14.Nodecisionshall berenderedbyanycourtwithoutexpressingthereinclearlyanddistinctly thefactsand
thelawonwhichitisbased.
No petition for review or motionfor reconsideration ofadecisionofthecourt shallberefused duecourse ordenied
withoutstatingthelegalbasistherefor.
ImplementingtheconstitutionalprovisionincivilactionsisSection1ofRule36,
RulesofCourt,viz:

Section 1.
Rendition of judgments and final orders. Ajudgmentorfinalorderdeterminingthemeritsof thecase
shall be in writingpersonally and directly preparedby the judge, stating clearlyanddistinctlythefactsand thelaw
onwhichitisbased,signedbyhim,andfiledwiththeclerkofthecourt.(1a)
The Constitution and the Rules ofCourt apparently delineate two main essential parts of a judgment, namely: the
106
bodyand the decretal portion. Although the latter isthecontrollingpart,
theimportanceofthe formerisnottobe
lightly regarded because it is there where the court clearly and distinctly states its findings of fact and of law on
which the decision is based. Tostate it differently,onewithouttheotheris ineffectual anduseless.Theomissionof
eitherinevitablyresultsinajudgmentthatviolatestheletterandthespiritoftheConstitutionandtheRulesofCourt.
The term findings of fact that must be found in the body of the decision refers to statements of fact, not to
107
conclusions of law.
Unlike in pleadings where ultimate facts alone need to be stated, the Constitution and the
Rules of Court require not only that a decision should state the ultimate facts but also that it should specifythe
supportingevidentiaryfacts,fortheyarewhatarecalledthefindingsoffact.
Theimportanceof the findings of fact and of law cannot be overstated.Thereasonandpurpose oftheConstitution
and the Rules of Court inthatregard are obviously toinformthe partieswhytheywinorlose,andwhattheirrights
and obligations are. Only thereby is the demand of due process met as to the parties. As Justice Isagani A. Cruz
explainedin
NicosIndustrialCorporationv.CourtofAppeals:108

It is a requirement of due process that the parties to a litigation be informed of how it was decided, with an
explanation of the factual andlegalreasonsthatledto theconclusionsofthecourt.Thecourtcannot simplysay that
judgment is rendered in favor of XandagainstYandjustleaveitatthatwithoutanyjustificationwhatsoeverforits
action. Thelosing party is entitled to know why he lost, so he mayappealtoahighercourt,ifpermitted,shouldhe
believethatthedecisionshouldbereversed.Adecisionthatdoesnotclearly anddistinctlystatethefactsandthelaw
on which it is based leaves the partiesinthedarkastohowitwas reachedandisespeciallyprejudicialtothelosing
party,whoisunabletopinpointthepossibleerrorsofthecourtforreviewbyahighertribunal.
Here, the decision of the RTC justified the grant ofactual and moral damages, andattorneysfeesinthefollowing
tersemanner,viz:
xxx The Court is not unmindful that due to defendants unjustified refusal to pay their outstanding obligation to
plaintiff,the samesuffered lossesandincurredexpensesashewasforcedtoremortgagehishouseandlotlocated in
QuezonCitytoMetrobank(Exh."CC") andBPI Bankjusttopay itsmonetary obligationsintheformofinterestand
109
penaltiesincurredinthecourseoftheconstructionofthesubjectproject.
The statement that "due to defendants unjustified refusal topay their outstanding obligation to plaintiff, the same
sufferedlosses and incurred expenses as he wasforcedto remortgage his house and lot locatedinQuezonCityto
Metrobank (Exh. "CC") and BPI Bank just to pay its monetary obligations in the form of interest and penalties
incurred in the course of the construction of the subject project"was only a conclusion offactandlawthatdidnot
comply with the constitutional and statutory prescription. The statement specified no detailed expenses or losses
constituting the P5,716,729.00actual damages sustainedbySternBuildersinrelationtotheconstructionprojector
to other pecuniary hardships.The omission ofsuch expenses or lossesdirectlyindicatedthatSternBuildersdidnot
prove them at all, which then contravened Article 2199, Civil Code, the statutory basis for the award of actual
damages, which entitled a person to an adequate compensation only for such pecuniary loss suffered by him ashe
has duly proved. Assuch, theactualdamagesallowedbytheRTC,beingbereftoffactualsupport, werespeculative
and whimsical. Without the clear and distinctfindings of fact andlaw,the awardamountedonlytoanipsedixiton
110
thepartoftheRTC,
anddidnotattainfinality.
There was also noclearanddistinctstatementofthefactualandlegalsupportfortheawardofmoraldamagesinthe
substantial amount of P 10,000,000.00. The award was thus also speculative and whimsical. Like the actual
damages, the moral damages constituted another judicial ipse dixit, the inevitable consequence of which was to
render the award of moral damagesincapable of attaining finality. In addition, thegrant of moral damages in that
manner contravened the law that permitted the recovery of moral damages as the means to assuage "physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
111
humiliation, and similar injury."
The contraventionof thelawwasmanifestconsideringthatSternBuilders,asan

112
artificial person, was incapable of experiencing pain and moral sufferings.
Assuming that in granting the
substantial amount of P 10,000,000.00 as moral damages, the RTC might have had in mind that dela Cruz had
himself sufferedmental anguish andanxiety. If that was the case, then the RTCobviouslydisregardedhisseparate
113
and distinctpersonalityfromthatofSternBuilders.
Moreover,hismoralandemotionalsufferingsasthePresident
of Stern Builders were not thesufferings of Stern Builders.Lastly, the RTC violated thebasicprinciplethatmoral
damageswere not intended to enrich the plaintiff at the expense of the defendant, but to restore the plaintifftohis
status quo ante as much as possible. Taken together, therefore, all these considerations exposed the substantial
amount of P 10,000,000.00 allowed as moral damagesnotonlytobefactuallybaselessandlegallyindefensible,but
alsotobeunconscionable,inequitableandunreasonable.
Like the actual and moral damages, the P 150,000.00, plus P 1,500.00 per appearance, granted as attorneys fees
were factually unwarranted and devoid of legalbasis.The general rule is that a successful litigantcannot recover
attorneys fees as part ofthe damages to be assessedagainstthelosingpartybecauseofthepolicy that nopremium
114
should be placed on the rightto litigate.
Prior to theeffectivityof thepresentCivilCode,indeed,suchfeescould
be recovered only whenthere was a stipulation to that effect.ItwasonlyunderthepresentCivil Codethattheright
115
116
to collect attorneys fees in the cases mentioned in Article 2208
of the Civil Code came to be recognized.

117
Nonetheless, with attorneys fees being allowedintheconceptofactualdamages,theiramountsmustbefactually
118
and legally justified in the body ofthe decisionand not statedforthefirsttimeinthedecretalportion.
Statingthe
119
amounts only in the dispositive portion of the judgment is not enough a rendition of the factual and legal
120
justificationsforthemmustalsobelaidoutinthebodyofthedecision.
That theattorneys fees granted to the private respondents didnotsatisfytheforegoingrequirementsuffices forthe
121
Court toundo them.
The grant was ineffectual forbeing contraryto law and publicpolicy, itbeing clearthatthe
express findingsof fact and law were intended to bring the casewithin theexceptionandtherebyjustifytheaward
of the attorneys fees. Devoid of such express findings, the award was a conclusion without a premise,its basis
122
beingimproperlylefttospeculationandconjecture.
Nonetheless, the absence of findingsof fact and ofanystatementof thelawandjurisprudenceonwhichtheawards
of actual and moral damages, as well as of attorneysfees, werebasedwas afatalflawthatinvalidatedthedecision
123
of the RTC only as to such awards. As the Court declared in Velarde v. Social Justice Society,
the failure to
comply with the constitutional requirement for a clear and distinctstatement of the supporting facts andlaw "is a
grave abuse of discretion amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in
124
careless disregard of the constitutionalmandate are a patentnullity andmust be struckdownasvoid."
Theother
itemgrantedbytheRTC(i.e.,P503,462.74)shallstand,subjecttotheactionoftheCOAasstatedherein.
WHEREFORE
, the Court
GRANTS the petition for review on certiorari
REVERSES and
SETS ASIDE the
decision of the Court of Appeals under review
ANNULS the orders for the garnishment of the funds of the
University of the Philippines and for the release of the garnished amount to Stern Builders Corporation and
Servillano dela Cruz and
DELETES from the decision of the Regional Trial Courtdated November 28, 2001 for
beingvoid only the awards of actual damages ofP5,716,729.00,moraldamagesofP10,000,000.00, andattorney's
fees of P 150,000.00, plus P 1,500.00 per appearance, in favor of Stern BuildersCorporation and Servillano dela
Cruz.
The Court
ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the amount of P
16,370,191.74within10daysfromreceiptofthisdecision.
Costsofsuittobepaidbytheprivaterespondents.
SOORDERED.
LUCASP.BERSAMIN
AssociateJustice
WECONCUR:
TERESITAJ.LEONARDODECASTRO
AssociateJustice
ActingChairperson,FirstDivision

MARIANOC.DELCASTILLO
AssociateJustice

MARTINS.VILLARAMA,JR.
AssociateJustice

ESTELAM.PERLASBERNABE
AssociateJustice
ATTESTATION
I attest that the conclusions in the above Decisionhad been reachedinconsultationbeforethecasewasassignedto
thewriteroftheopinionoftheCourt'sDivision.
TERESITAJ.LEONARDODECASTRO
AssociateJustice
ActingChairperson,FirstDivision
CERTIFICATION
Pursuantto Section 13,ArticleVIII ofthe Constitution and the Division ActingChairperson'sAttestation,I certify
that the conclusions in the above Decision had been reached in consultation before thecasewas assigned tothe
writeroftheopinionoftheCourt'sDivision.
ANTONIOT.CARPIO
SeniorAssociateJustice
(PerSection12,R.A.296,
TheJudiciaryActof1948,asamended)

PhilippineVirginiaTobaccoAdministration,petitioner,vs.
CourtofIndustrialRelations,etal.,respondents.
G.R.No.L32052July25,1975

TheprincipalissuethatcallsforresolutioninthisappealbycertiorarifromanorderofrespondentCourtof
IndustrialRelationsisoneofconstitutionalsignificance.Itisconcernedwiththeexpandedroleofgovernment
necessitatedbytheincreasedresponsibilitytoprovideforthegeneralwelfare.Morespecifically,itdealswiththe
questionofwhetherpetitioner,thePhilippineVirginiaTobaccoAdministration,dischargesgovernmentalandnot
proprietaryfunctions.ThelandmarkopinionofthethenJustice,rowChiefJustice,MakalintalinAgriculturalCredit
andCooperativeFinancingAdministrationv.ConfederationofUnionsinGovernmentCorporationsandoffices,
pointsthewaytotherightanswer.1Itinterpretedthethenfundamentallawashostiletotheviewofalimitedor
negativestate.Itisantitheticaltothelaissezfaireconcept.Forasnotedinanearlierdecision,thewelfarestate
concept"isnotalientothephilosophyof[the1935]Constitution."2ItismuchmoresounderthepresentCharter,
whichisimpressedwithanevenmoreexplicitrecognitionofsocialandeconomicrights.3Thereismanifest,to
recallLaski,"adefiniteincreaseintheprofundityofthesocialconscience,"resultingin"astatewhichseeksto
realizemorefullythecommongoodofitsmembers."4Itdoesnotnecessarilyfollow,however,justbecause
petitionerisengagedingovernmentalratherthanproprietaryfunctions,thatthelaborcontroversywasbeyondthe
jurisdictionofthenowdefunctrespondentCourt.Noristheobjectionraisedthatpetitionerdoesnotcomewithinthe
coverageoftheEightHourLaborLawpersuasive.5Wecannotthengrantthereversalsought.Weaffirm.

Thefactsareundisputed.OnDecember20,1966,claimants,nowprivaterespondents,filedwithrespondentCourta
petitionwhereintheyallegedtheiremploymentrelationship,theovertimeservicesinexcessoftheregulareight
hoursadayrenderedbythem,andthefailuretopaythemovertimecompensationinaccordancewith
CommonwealthActNo.444.Theirprayerwasforthedifferentialbetweentheamountactuallypaidtothemandthe
amountallegedlyduethem.6TherewasananswerfiledbypetitionerPhilippineVirginiaTobaccoAdministration
denyingtheallegationsandraisingthespecialdefensesoflackofacauseofactionandlackofjurisdiction.7The
issueswerethereafterjoined,andthecasesetfortrial,withbothpartiespresentingtheirevidence.8Aftertheparties
submittedthecasefordecision,thethenPresidingJudgeArsenioT.MartinezofrespondentCourtissuedanorder

sustainingtheclaimsofprivaterespondentsforovertimeservicesfromDecember23,1963uptothedatethe
decisionwasrenderedonMarch21,1970,anddirectingpetitionertopaythesame,minuswhatithadalreadypaid.
9Therewasamotionforreconsideration,butrespondentCourtenbancdeniedthesame.10Hencethispetitionfor
certiorari.

PetitionerPhilippineVirginiaTobaccoAdministration,ashadbeennoted,wouldpredicateitspleaforthereversal
oftheordercomplainedofonthebasicpropositionthatitisbeyondthejurisdictionofrespondentCourtasitis
exercisinggovernmentalfunctionsandthatitisexemptfromtheoperationofCommonwealthActNo.444.
11While,torepeat,itssubmissionastothegovernmentalcharacterofitsoperationistobegivencredence,itisnota
necessaryconsequencethatrespondentCourtisdevoidofjurisdiction.Norcouldthechallengedorderbesetaside
ontheadditionalargumentthattheEightHourLaborLawisnotapplicabletoit.Soitwas,attheoutset,madeclear.

1.Areferencetotheenactmentscreatingpetitionercorporationsufficestodemonstratethemeritofpetitioner'splea
thatitperformsgovernmentalandnotproprietaryfunctions.AsoriginallyestablishedbyRepublicActNo.2265,
12itspurposesandobjectivesweresetforththus:"(a)TopromotetheeffectivemerchandisingofVirginiatobaccoin
thedomesticandforeignmarketssothatthoseengagedintheindustrywillbeplacedonabasisofeconomic
security(b)ToestablishandmaintainbalancedproductionandconsumptionofVirginiatobaccoandits
manufacturedproducts,andsuchmarketingconditionsaswillinsureandstabilizethepriceofalevelsufficientto
coverthecostofproductionplusreasonableprofitbothinthelocalaswellasintheforeignmarket(c)Tocreate,
establish,maintain,andoperateprocessing,warehousingandmarketingfacilitiesinsuitablecentersandsupervise
thesellingandbuyingofVirginiatobaccosothatthefarmerswillenjoyreasonablepricesthatsecureafairreturnof
theirinvestments(d)Toprescriberulesandregulationsgoverningthegrading,classifying,andinspectingof
Virginiatobaccoand(e)Toimprovethelivingandeconomicconditionsofthepeopleengagedinthetobacco
industry."13Theamendatorystatute,RepublicActNo.4155,14rendersevenmoreevidentitsnatureasa
governmentalagency.Itsfirstsectiononthedeclarationofpolicyreads:"Itisdeclaredtobethenationalpolicy,
withrespecttothelocalVirginiatobaccoindustry,toencouragetheproductionoflocalVirginiatobaccoofthe
qualitiesneededandinquantitiesmarketableinbothdomesticandforeignmarkets,toestablishthisindustryonan
efficientandeconomicbasis,and,tocreateaclimateconducivetolocalcigarettemanufactureofthequalities
desiredbytheconsumingpublic,blendingimportedandnativeVirginialeaftobaccotoimprovethequalityof
locallymanufacturedcigarettes."15Theobjectivesaresetforththus:"Toattainthisnationalpolicythefollowing
objectivesareherebyadopted:1.Financing2.Marketing3.ThedisposalofstocksoftheAgriculturalCredit
Administration(ACA)andthePhilippineVirginiaTobaccoAdministration(PVTA)atthebestobtainablepricesand
conditionsinorderthatareinvigoratedVirginiatobaccoindustrymaybeestablishedonasoundbasisand4.
ImprovingthequalityoflocallymanufacturedcigarettesthroughblendingofimportedandnativeVirginialeaf
tobaccosuchimportationwithcorrespondingexportationataratioofonekiloofimportedtofourkilosofexported
Virginiatobacco,purchasedbytheimporterexporterfromthePhilippineVirginiaTobaccoAdministration."
16chanroblesvirtuallawlibrary

Itisthusreadilyapparentfromacursoryperusalofsuchstatutoryprovisionswhypetitionercanrightfullyinvoke
thedoctrineannouncedintheleadingAgriculturalCreditandCooperativeFinancingAdministrationdecision17and
whytheobjectionofprivaterespondentswithitsovertonesofthedistinctionbetweenconstituentandministrant
functionsofgovernmentsassetforthinBacaniv.NationalCoconutCorporation18iffutile.Theirrelevanceofsuch
adistinctionconsideringtheneedsofthetimeswasclearlypointedoutbythepresentChiefJustice,whotooknote,
speakingofthereconstitutedAgriculturalCreditAdministration,thatfunctionsofthatsort"maynotbestrictlywhat
PresidentWilsondescribedas"constituent"(asdistinguishedfrom"ministrant"),suchasthoserelatingtothe
maintenanceofpeaceandthepreventionofcrime,thoseregulatingpropertyandpropertyrights,thoserelatingtothe
administrationofjusticeandthedeterminationofpoliticaldutiesofcitizens,andthoserelatingtonationaldefense
andforeignrelations.Underthistraditionalclassification,suchconstituentfunctionsareexercisedbytheStateas

attributesofsovereignty,andnotmerelytopromotethewelfare,progressandprosperityofthepeopletheselatter
functionsbeingministrant,theexerciseofwhichisoptionalonthepartofthegovernment."19Nonetheless,ashe
explainedsopersuasively:"Thegrowingcomplexitiesofmodernsociety,however,haverenderedthistraditional
classificationofthefunctionsofgovernmentquiteunrealistic,nottosayobsolete.Theareaswhichusedtobeleftto
privateenterpriseandinitiativeandwhichthegovernmentwascalledupontoenteroptionally,andonly"becauseit
wasbetterequippedtoadministerforthepublicwelfarethanisanyprivateindividualorgroupofindividuals",
continuetolosetheirwelldefinedboundariesandtobeabsorbedwithinactivitiesthatthegovernmentmust
undertakeinitssovereigncapacityifitistomeettheincreasingsocialchallengesofthetimes.Hereasalmost
everywhereelsethetendencyisundoubtedlytowardsagreatersocializationofeconomicforces.Hereofcoursethis
developmentwasenvisioned,indeedadoptedasanationalpolicy,bytheConstitutionitselfinitsdeclarationof
principleconcerningthepromotionofsocialjustice."20ThuswaslaidtorestthedoctrineinBacaniv.National
CoconutCorporation,21basedontheWilsonianclassificationofthetasksincumbentongovernmentinto
constituentandministrantinaccordancewiththelaissezfaireprinciple.Thatconcept,thendominantineconomics,
wascarriedintothegovernmentalsphere,asnotedinatextbookonpoliticalscience,22thefirsteditionofwhich
waspublishedin1898,itsauthorbeingthethenProfessor,laterAmericanPresident,WoodrowWilson.Hetook
painstoemphasizethatwhatwascategorizedbyhimasconstituentfunctionshaditsbasisinarecognitionofwhat
wasdemandedbythe"strictest[conceptof]laissezfaire,[asthey]areindeedtheverybondsofsociety."23The
otherfunctionshewouldminimizeasministrantoroptional.
ItisamatteroflawthatinthePhilippines,thelaissezfaireprinciplehardlycommandedtheauthoritativeposition
whichatonetimeitheldintheUnitedStates.Asearlyas1919,JusticeMalcolminRubiv.ProvincialBoard
24couldaffirm:"Thedoctrinesoflaissezfaireandofunrestrictedfreedomoftheindividual,asaxiomsofeconomic
andpoliticaltheory,areofthepast.Themodernperiodhasshownawidespreadbeliefintheamplestpossible
demonstrationofgovernmentactivity."25The1935Constitution,aswasindicatedearlier,continuedthatapproach.
AsnotedinEduv.Ericta:26"Whatismore,toeraseanydoubts,theConstitutionalConventionsawtoitthatthe
conceptoflaissezfairewasrejected.Itentrustedtoourgovernmenttheresponsibilityofcopingwithsocialand
economicproblemswiththecommensuratepowerofcontrolovereconomicaffairs.Therebyitcouldliveuptoits
commitmenttopromotethegeneralwelfarethroughstateaction."27NordidtheopinioninEdustopthere:"To
repeat,ourConstitutionwhichtookeffectin1935erasedwhateverdoubtstheremightbeonthatscore.Its
philosophyisarepudiationoflaissezfaire.OneoftheleadingmembersoftheConstitutionalConvention,Manuel
A.Roxas,laterthefirstPresidentoftheRepublic,madeitclearwhenhedisposedoftheobjectionofDelegateJose
ReyesofSorsogon,whonotedthe"vastextensionsinthesphereofgovernmentalfunctions"andthe"almost
unlimitedpowertointerfereintheaffairsofindustryandagricultureaswellastocompetewithexistingbusiness"as
"reflectionsofthefascinationexertedby[thethen]currenttendencies'inotherjurisdictions.Hespokethus:"My
answeristhatthisconstitutionhasadefiniteandwelldefinedphilosophy,notonlypoliticalbutsocialand
economic....IfinthisConstitutionthegentlemenwillfinddeclarationsofeconomicpolicytheyaretherebecause
theyarenecessarytosafeguardtheinterestandwelfareoftheFilipinopeoplebecausewebelievethatthedayshave
comewheninselfdefense,anationmayprovideinitsconstitutionthosesafeguards,thepatrimony,thefreedomto
grow,thefreedomtodevelopnationalaspirationsandnationalinterests,nottobehamperedbytheartificial
boundarieswhichaconstitutionalprovisionautomaticallyimposes."28

ItwouldbethentorejectwhatwassoemphaticallystressedintheAgriculturalCreditAdministrationdecisionabout
whichtheobservationwasearliermadethatitreflectedthephilosophyofthe1935Constitutionandisevenmorein
consonancewiththeexpandedroleofgovernmentaccordedrecognitioninthepresentCharterifthepleaof
petitionerthatitdischargesgovernmentalfunctionwerenotheeded.ThatpaththisCourtisnotpreparedtotake.
Thatwouldbetogobackward,toretreatratherthantoadvance.Nothingcanthusbeclearerthanthatthereisno
constitutionalobstacletoagovernmentpursuinglinesofendeavor,formerlyreservedforprivateenterprise.Thisis
oneway,inthelanguageofLaski,bywhichthroughsuchactivities,"theharshcontractwhich[does]obtainbetween
thelevelsoftherichandthepoor"maybeminimized.29ItisaresponsetoatrendnotedbyJusticeLaurelin

Calalangv.Williams30forthehumanizationoflawsandthepromotionoftheinterestofallcomponentelementsof
societysothatman'sinnateaspirations,inwhatwassofelicitouslytermedbytheFirstLadyas"acompassionate
society"beattained.31

2.Thesuccessthatattendedtheeffortsofpetitionertobeadjudgedasperforminggovernmentalratherthan
proprietaryfunctionscannotmilitateagainstrespondentCourtassumingjurisdictionoverthislabordispute.Soit
wasmentionedearlier.AsfarbackasTaborav.Montelibano,32thisCourt,speakingthroughJusticePadilla,
declared:TheNARICwasestablishedbytheGovernmenttoprotectthepeopleagainstexcessiveorunreasonable
riseinthepriceofcerealsbyunscrupulousdealers.Withthatmainobjectivethereisnoreasonwhyitsfunction
shouldnotbedeemedgovernmental.TheGovernmentowesitsveryexistencetothataimandpurposetoprotect
thepeople."33Inasubsequentcase,NaricWorker'sUnionv.Hon.Alvendia,34decidedfouryearslater,thisCourt,
relyingonPhilippineAssociationofFreeLaborUnionsv.Tan,35whichspecifiedthecaseswithintheexclusive
jurisdictionoftheCourtofIndustrialRelations,includedamongwhichisonethatinvolveshoursofemployment
undertheEightHourLaborLaw,ruledthatitispreciselyrespondentCourtandnotordinarycourtsthatshouldpass
uponthatparticularlaborcontroversy.ForJusticeJ.B.L.Reyes,theponente,thefactthattherewerejudicialas
wellasadministrativeandexecutivepronouncementstotheeffectthattheNaricwasperforminggovernmental
functionsdidnotsufficetoconfercompetenceonthethenrespondentJudgetoissueapreliminaryinjunctionandto
entertainacomplaintfordamages,whichaspointedoutbythelaborunion,wasconnectedwithanunfairlabor
practice.Thisisemphasizedbythedispositiveportionofthedecision:"Wherefore,therestrainingorders
complainedof,datedMay19,1958andMay27,1958,aresetaside,andthecomplaintisordereddismissed,without
prejudicetotheNationalRiceandCornCorporation'sseekingwhateverremedyitisentitledtointheCourtof
IndustrialRelations."36Then,too,inacaseinvolvingpetitioneritself,PhilippineVirginiaTobaccoAdministration,
37wherethepointindisputewaswhetheritwasrespondentCourtoracourtoffirstinstancethatispossessedof
competenceinadeclaratoryreliefpetitionfortheinterpretationofacollectivebargainingagreement,onethatcould
readilybethoughtofaspertainingtothejudiciary,theanswerwasthat"unlessthelawspeaksclearlyand
unequivocally,thechoiceshouldfallontheCourtofIndustrialRelations."38Referencetoanumberofdecisions
whichrecognizedinthethenrespondentCourtthejurisdictiontodeterminelaborcontroversiesby
governmentownedorcontrolledcorporationslendstosupporttosuchanapproach.39Norcoulditbeexplained
onlyontheassumptionthatproprietaryratherthangovernmentalfunctionsdidcallforsuchaconclusion.Itistobe
admittedthatsuchaviewwasnotpreviouslybereftofplausibility.WiththeaforecitedAgriculturalCreditand
CooperativeFinancingAdministrationdecisionrenderingobsoletetheBacanidoctrine,ithas,touseaWilsonian
phrase,nowlapsedinto"innocuousdesuetude."40RespondentCourtclearlywasvestedwithjurisdiction.

3.ThecontentionofpetitionerthattheEightHourLaborLaw41doesnotapplytoithardlydeservesanyextended
consideration.Thereisanairofcasualnessinthewaysuchanargumentwasadvancedinitspetitionforreviewas
wellasinitsbrief.Inbothpleadings,itdevotedlessthanafullpagetoitsdiscussion.Thereismuchtobesaidfor
brevity,butnotinthiscase.Suchaterseandsummarytreatmentappearstobeareflectionmoreoftheinherent
weaknessoftheplearatherthanthepossessionofanadvocate'senviabletalentforconcision.ItdidciteSection2of
theAct,butitsverylanguageleavesnodoubtthat"itshallapplytoallpersonsemployedinanyindustryor
occupation,whetherpublicorprivate...."42Norareprivaterespondentsincludedamongtheemployeeswhoare
therebybarredfromenjoyingthestatutorybenefits.ItcitedMarcelov.PhilippineNationalRedCross43andBoy
ScoutsofthePhilippinesv.Araos.44Certainly,theactivitiestowhichthetwoabovepubliccorporationsdevote
themselvescaneasilybedistinguishedfromthatengagedinbypetitioner.Areferencetothepertinentsectionsof
bothRepublicActs2265and2155onwhichitreliestoobtainarulingastoitsgovernmentalcharactershould
renderclearthedifferentiationthatexists.Ifasaresultoftheappealedorder,financialburdenwouldhavetobe
bornebypetitioner,ithasonlyitselftoblame.Itneednothaverequiredprivaterespondentstorenderovertime
service.Itcanhardlybesurmisedthatoneofitschiefproblemsispaucityofpersonnel.Thatwouldindeedbea

causeforastonishment.Itwouldappear,therefore,thatsuchanobjectionbasedonthisgroundcertainlycannot
sufficeforareversal.Torepeat,respondentCourtmustbesustained.

WHEREFORE,theappealedOrderofMarch21,1970andtheResolutionofrespondentCourtenbancofMay8,
1970denyingamotionforreconsiderationareherebyaffirmed.ThelastsentenceoftheOrderofMarch21,1970
readsasfollows:"Tofindhowmucheachofthem[privaterespondents]isentitledunderthisjudgment,theChiefof
theExaminingDivision,oranyofhisauthorizedrepresentative,isherebydirectedtomakeareexaminationof
records,papersanddocumentsinthepossessionofrespondentPVTApertinentandproperunderthepremisesand
tosubmithisreportofhisfindingstotheCourtforfurtherdispositionthereof."Accordingly,asprovidedbythe
NewLaborCode,thiscaseisreferredtotheNationalLaborRelationsCommissionforfurtherproceedings
conformablytolaw.Nocosts.

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.L46930
June10,1988
DALESANDERS,ANDA.S.MOREAU,JR,
petitioners,
vs.
HON.REGINOT.VERIDIANOII,asPresidingJudge,BranchI,CourtofFirstInstanceofZambales,
OlongapoCity,ANTHONYM.ROSSIandRALPHL.WYERS,
respondents.

CRUZ,
J.:
The basic issue to be resolved in this case is whether or not thepetitioners were performing their officialduties
when they did the acts for which they havebeensuedfordamagesbytheprivaterespondents.Once thisquestionis
decided,theotheranswerswillfallintoplaceandthispetitionneednotdetainusanylongerthanitalreadyhas.
Petitioner Sanders was, atthe timethe incident in question occurred, thespecialservices directoroftheU.S.Naval
Station (NAVSTA) in Olongapo City. 1
Petitioner Moreau was the commanding officer of theSubic Naval Base,
which includes the said station.2
Private respondent Rossi is an American citizen withpermanent residence inthe
Philippines, 3
as so wasprivaterespondentWyer,whodiedtwoyearsago.4
Theywerebothemployed asgameroom
attendants in thespecialservicesdepartment oftheNAVSTA,theformerhavingbeenhiredin1971andthelatterin
5
1969.
On October 3, 1975, the private respondents were advised that their employment had been converted from
permanent fulltime to permanent parttime, effective October 18, 1975. 6

Their reaction was to protest this

conversion and to institute grievance proceedings conformably to the pertinent rules and regulations of the U.S.
Department of Defense. Theresult was a recommendation from the hearingofficerwhoconductedtheproceedings
for the reinstatement of the private respondents to permanent fulltime status plus backwages. The report on the
7
hearingcontainedtheobservationthat"SpecialServicesmanagementpracticesanautocraticformofsupervision."
In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the complaint), Sanders disagreedwith
the hearing officer's report and asked for the rejection of the abovestated recommendation.Thelettercontainedthe
statements that: a ) "Mr. Rossi tends to alienate most coworkers and supervisors" b) "Messrs. Rossi and Wyers
have proven, according to their immediate supervisors, to bedifficultemployeestosupervise"andc)"eventhough
the grievants were under oath not todiscuss the case with anyone, (they) placed therecordsinpublicplaceswhere
othersnotinvolvedinthecasecouldhear."
On November 7, 1975, before the start of the grievancehearings,aletter(Annex"B"ofthecomplaint)purportedly
corningfrompetitionerMoreau as the commanding general of theU.S. Naval Station inSubicBaywassenttothe
Chief of Naval Personnel explaining the change of the private respondent's employment status and requesting

concurrence therewith. The letter did not carry his signature but was signed by W.B. Moore, Jr. "by direction,"
presumablyofMoreau.
On the basis of theseantecedentfacts, the privaterespondentfiledintheCourtofFirstInstanceofOlongapoCitya
for damages against the herein petitioners on November 8, 1976. 8 The plaintiffs claimed that theletters contained
libelous imputations that had exposed themto ridiculeandcausedthemmentalanguishandthattheprejudgment of
thegrievanceproceedingswasaninvasionoftheirpersonalandproprietaryrights.
The private respondents made it clear that the petitioners were being sued in their private or personal capacity.
However, in a motion to dismiss filed underaspecialappearance, thepetitionersarguedthattheactscomplained of
were performed bythem in thedischargeoftheirofficialdutiesandthat, consequently,thecourthadnojurisdiction
overthemunderthedoctrineofstateimmunity.
After extensive written argumentsbetween the parties, the motionwasdenied inan orderdatedMarch8,1977,9
on
the main ground that the petitioners had not presented any evidence that their acts were officialin nature and not
personal torts, moreover, the allegation in the complaint was that the defendants had acted maliciouslyand in bad
faith. The same order issued a writof preliminary attachment, conditioneduponthefiling ofa P10,000.00bondby
the plaintiffs, against the properties of petitioner Moreau, who allegedly was then about to leave the Philippines.
Subsequently, to make matters worse for the defendants, petitioner Moreau was declaredin a default by thetrial
court in its order dated August 9, 1977. The motion tolift the default orderon the ground that Moreau's failureto
appear at thepretrialconferencewas theresultof somemisunderstanding,andthemotionfor reconsiderationofthe
denial of the motion to dismiss, which was filed by the petitioner's newlawyers, were denied by the respondent
courtonSeptember7,1977.
This petition for
certiorari
, prohibition and preliminary injunction was thereafter filed before this Court, on the
contention that the abovenarrated acts of the respondentcourtaretaintedwithgraveabuse ofdiscretionamounting
tolackofjurisdiction.
We return now to the basic question of whether the petitioners were acting officially or only in their private
capacitieswhentheydidtheactsforwhichtheprivaterespondentshavesuedthemfordamages.
It is stressed at the outset that the mere allegation that a government functionary is being sued in his personal
capacity will not automaticallyremovehim from the protectionofthelawofpublicofficersand,ifappropriate,the
doctrineof state immunity. By the same token, the mere invocationof official character willnotsufficeto insulate
him fromsuability and liability for an act imputed to himas apersonal tort committed without or in excess of his
authority. These wellsettled principles are applicable not only to the officers of the local state but also where the
personsuedinitscourtspertainstothegovernmentofaforeignstate,asinthepresentcase.
Therespondentjudge,apparentlyfindingthatthecomplainedactswereprima
faciepersonalandtortious,decided to
proceed to trial to determine
inter alia
their precisecharacter onthestrengthoftheevidencetobesubmittedbythe
parties. The petitioners have objected, arguing that no such evidence was needed to substantiate their claim of
jurisdictional immunity. Pending resolution of this question, we issued a temporary restrainingorderonSeptember
26,1977,thathassincethensuspendedtheproceedingsinthiscaseinthecourt
aquo
.
In past cases, this Court has held that where the character of the act complained of canbe determined from the
pleadings exchanged between the parties before the trial, it isnotnecessary forthecourttorequirethemtobelabor
the pointat a trialstillto beconducted.Such a proceeding wouldbesuperfluous,nottosayunfairtothe defendant
whoissubjectedtounnecessaryandavoidableinconvenience.
Thus, in
Baer v. Tizon
, 10
we held that a motion to dismiss a complaint against the commanding general of the
Olongapo Naval Base should not have been deniedbecause ithad beensufficientlyshownthattheactfor whichhe
wasbeing sued was done in his official capacity on behalf oftheAmericangovernment.TheUnitedStates hadnot
givenitsconsenttobesued.Itwasthereversesituationin
Syquiav.AlmedaLopez,
"wherewesustainedtheorderof
the lowercourt granting a where we motion to dismiss acomplaintagainst certainofficersoftheU.S. armedforces
also shown tobe acting officiallyin the name of the American government.TheUnitedStateshadalsonotwaived
its immunity from suit. Only three years ago, in
United States of America v. Ruiz
, 12

weset aside thedenialbythe
lower court of a motion to dismiss a complaint for damages filed against the United States and several of its

officials, it appearing that the act complained of was governmental rather than proprietary, and certainly not
personal. In these and several other cases 13
theCourtfounditredundanttoprolongtheothercaseproceedingsafter
it hadbecome clear that the suit could not prosper because the acts complained of were coveredbythedoctrineof
stateimmunity.
It is abundantly clear in the present case that the acts for which the petitioners are being called to account were
performed by them in the dischargeoftheirofficialduties.Sanders,asdirectorof thespecialservicesdepartmentof
NAVSTA, undoubtedly had supervision over its personnel, including the private respondents, and had a hand in
their employment, work assignments, discipline, dismissal and otherrelatedmatters.Itis not disputedthattheletter
he had written was infacta replytoarequestfromhissuperior,theotherpetitioner,formoreinformationregarding
the case of theprivaterespondents.14
Moreover,evenintheabsenceof suchrequest,hestillwaswithinhisrightsin
reacting to the hearing officer's criticismin effect a direct attack against himthat Special Services was
practicing"anautocraticformofsupervision."
As for Moreau,what he is claimedto have done was write the Chief of Naval Personnelfor concurrence with the
conversion of the private respondents' type of employment even before the grievance proceedings had even
commenced.Disregarding forthenoncethequestionof itstimeliness,thisactisclearlyofficialinnature,performed
byMoreauastheimmediatesuperiorofSandersanddirectlyanswerabletoNavalPersonnelinmattersinvolvingthe
special services department of NAVSTA In fact, theletter dealt withthe financialand budgetary problems of the
department and contained recommendations for their solution, including the redesignation of the private
respondents.Therewasnothingpersonalorprivateaboutit.
Given the official character of the abovedescribed letters, we have to conclude that the petitioners were,legally
speaking,being sued as officers ofthe United States government.Astheyhaveactedonbehalfofthatgovernment,
and within the scope of their authority, it is that government, and not the petitioners personally, thatisresponsible
for their acts. Assuming that the trial can proceed andit is proved that theclaimantshave arighttothepaymentof
damages, such award willhave to be satisfied not by the petitioners in their personal capacities butby the United
States government astheir principal.This will require that government to perform an affirmativeact to satisfy the
judgment,
viz, the appropriation of the necessary amount to cover the damages awarded, thusmakingthe action a
suitagainstthatgovernmentwithoutitsconsent.
There should be no questionby now that such complaintcannot prosper unless the government sought to be held
ultimately liable has given itsconsent to' besued. So we have rulednotonly inBaer but in many other decisions
where we upheld thedoctrine of state immunityas applicable not only toour own government but also to foreign
15
statessoughttobesubjectedtothejurisdictionofourcourts.
Thepractical justification for the doctrine, as Holmesputit,isthat"therecanbenolegalrightagainsttheauthority
which makes the law on which the right depends. 16 In the case of foreign states, the rule is derived from the
principleofthesovereign equality ofstateswhichwisely admonishes that
parinparemnonhabetimperium
andthat
17
a contraryattitudewould"undulyvexthepeaceofnations."Ouradherencetothispreceptisformallyexpressedin
Article II, Section 2, of our Constitution, where we reiterate fromourpreviouschartersthatthePhilippines"adopts
thegenerallyacceptedprinciplesofinternationallawaspartofthelawoftheland.
All this is not to say that inno case may a public officerbe suedas such withoutthepreviousconsentofthestate.
To be sure, there are a number of wellrecognizedexceptions.Itisclearthata publicofficermaybesuedassuchto
compel him to doan act required by law, as where, say, a register ofdeeds refusestorecorda deedofsale18

orto
restrain a Cabinet member, for example, from enforcing a law claimedto beunconstitutional 19

or tocompel the
national treasurer to pay damages froman already appropriated assurancefund 20
or the commissioner of internal
revenue to refund tax overpayments from a fund already available for the purpose 21
or, in general, to secure a
judgment that theofficer impleadedmay satisfybyhimselfwithoutthegovernmentitselfhavingtodoapositiveact
to assist him. Wehavealsoheldthatwherethegovernmentitself hasviolateditsownlaws, theaggrievedpartymay
directly implead the government even without first filing his claim with the Commission on Audit as normally
22
required,asthedoctrineofstateimmunity"cannotbeusedasaninstrumentforperpetratinganinjustice."

This case must also be distinguished from such decisions as

Festejo v. Fernando
, 23

wherethe Court held that a
bureau directorcould be sued for damages on a personal tortcommittedbyhimwhenheactedwithoutorinexcess
of authority in forcibly taking private property withoutpayingjust compensation thereforalthoughhedidconvertit
into apublic irrigation canal. It was not necessarytosecurethepreviousconsentofthestate,norcould itbe validly
impleadedasapartydefendant,asitwasnotresponsibleforthedefendant'sunauthorizedact.
Thecaseat bar,to repeat, comes under the ruleand not underanyofthe recognizedexceptions.Thegovernmentof
the United States has not given its consent to be sued for the official acts ofthepetitioners,whocannotsatisfyany
judgment that may be rendered against them. As it is the American government itself thatwillhavetoperformthe
affirmative act of appropriatingthe amountthatmaybeadjudgedfortheprivaterespondents,thecomplaintmust be
dismissedforlackofjurisdiction.
The Court finds that, even under the law of public officers, the acts of the petitioners are protected by the
presumption of good faith, which has not been overturned by the private respondents. Even mistakes concededly
committed bysuchpublicofficersarenotactionableaslongasitisnotshownthattheyweremotivatedbymaliceor
gross negligence amounting to bad faith. 24
This, to, is well settled . 25 Furthermore, applying now our own penal
laws, the letterscome under the concept ofprivilegedcommunications and are not punishable, 26
letalone thefact
that the resentedremarks arenotdefamatory byourstandards.Itseemstheprivaterespondentshaveoverstatedtheir
case.
Afinal consideration is thatsince the questioned acts were donein the Olongapo NavalBaseby the petitionersin
the performanceoftheir officialdutiesandtheprivaterespondentsarethemselvesAmericancitizens,itwouldseem
onlyproper for the courts of this country to refrain from taking cognizance of this matter andto treatitascoming
undertheinternaladministrationofthesaidbase.
The petitioners' counsel have submitted a memorandum replete withcitations of American cases, as if they were
arguingbefore acourt of the UnitedStates. TheCourt is bemused by such attitude. While these decisionsdohave
persuasive effect upon us, they can at best be invoked only to support our own jurisprudence, which we have
developed and enriched on the basis of our own persuasions as apeople,particularlysincewebecameindependent
in1946.
We appreciate the assistance foreigndecisionsofferus,andnotonlyfromtheUnitedStatesbutalsofromSpainand
other countries from whichwe have derived some ifnotmostofourownlaws.Butweshould not placeundueand
fawningreliance upon themandregardthemasindispensablementalcrutcheswithoutwhichwecannotcometoour
own decisions through the employment of our own endowments Welivein a different ambience and must decide
our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a
people,andalwayswithourownconceptoflawandjustice.
Theprivaterespondentsmust,iftheyarestillsominded,pursuetheirclaimagainstthepetitionersinaccordancewith
the lawsof the United States, ofwhich they are all citizens andunder whosejurisdictionthealleged offenseswere
committed. Evenassuming that our own laws are applicable, the United States governmenthasnotdecidedtogive
itsconsenttobesuedinourcourts,whichthereforehasnotacquiredthecompetencetoactonthesaidclaim,.
WHEREFORE, the petition is GRANTED. The challenged orders dated March 8,1977, August 9,1977, and
September 7, 1977, are SET ASIDE. The respondent court is directed to DISMISS Civil Case No. 2077O. Our
TemporaryrestrainingorderofSeptember26,1977,ismadePERMANENT.Nocosts.
SOORDERED.
Narvasa,Gancayco,GrinoAquioandMedialdea,JJ.,Concur.

G.R.No.108813 December15,1994
JUSMAGPHILIPPINES,
petitioner,
vs.
THENATIONALLABORRELATIONSCOMMISSION(SecondDivision)andFLORENCIO
SACRAMENTO,UnionPresident,JPFCEA,
respondents.
Juan,Luces,LunaandAssociatesforpetitioner.

Galutera&AguilarLawOfficesforprivaterespondent.

PUNO,
J.:
The immunity from suit of the Joint United States Military Assistance Group to the Republicof the Philippines
(JUSMAGPhilippines)isthepivotalissueinthecaseatbench.
JUSMAG assails the
January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS COMMISSION
(public
respondent), in NLRC NCR CASENO. 00030209292, reversing the
July 30, 1991 Order of the Labor Arbiter
,
and ordering the latter to assume jurisdiction over the complaint for illegal dismissal filed by FLORENCIO
SACRAMENTO(privaterespondent)againstpetitioner.
First,theundisputedfacts.
Private respondent was one of the seventyfour (74)
security assistance support personnel
(SASP) working at
JUSMAGPhilippines.1

HehadbeenwithJUSMAGfromDecember18,1969,untilhisdismissalonApril27,1992.
When dismissed, he held the position of Illustrator 2 and was the incumbent President of JUSMAG
PHILIPPINESFILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a labor organization duly
registered with the Department of Labor and Employment. His services were terminated allegedly due to the
abolition of his position. 2
Hewas alsoadvisedthathewasunderadministrativeleaveuntilApril27,1992,although
thesamewasnotchargedagainsthisleave.
On March 31, 1992, private respondent filed a complaint with the Department of Laborand Employment on the
3
groundthathewasillegallysuspendedanddismissedfromservicebyJUSMAG.

Heaskedforhisreinstatement.
JUSMAG then filed a Motion to Dismiss invoking its
immunity from suit
as an agency of the United States. It
4
furtherallegedlackofemployeremployeerelationshipandthatithasnojuridicalpersonalitytosueandbesued.
In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for want of
jurisdiction
." 5
Private respondent appealed 6
to the National Labor Relations Commission (public respondent),
assailing the ruling that petitioner is immune from suit for alleged violation of our labor laws. JUSMAG filedits
7
Opposition,

reiteratingitsimmunityfromsuitforitsnoncontractual,governmentaland/orpublicacts.
InaResolution,datedJanuary29,1993,theNLRC8
reversedtherulingofthe LaborArbiterasitheldthatpetitioner
had lost its right not tobe sued. Theresolution was predicated on two grounds:(1)theprincipleof
estoppelthat
JUSMAG failed to refute the existence of employeremployee relationship under the "control test" and (2)
JUSMAG has waived its right toimmunity from suitwhen it hiredtheservices ofprivaterespondentonDecember
18,1969.
TheNLRC reliedon the case of
Harry Lyonsvs. United States of America
,9
wherethe"UnitedStatesGovernment
(was considered to have) waived its immunity fromsuit by entering into(a) contract of stevedoringservices, and
thus,itsubmitteditselftothejurisdictionofthelocalcourts."
Accordingly,thecasewasremandedtothelaborarbiterforreceptionofevidenceastotheissueonillegaldismissal.
Hence,thispetition,JUSMAGcontends:
I
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
AND/OREXCESSOFJURISDICTION
A.
IN REVERSING THE DECISION OF THE LABOR ARBITER AND IN NOT AFFIRMING THE
DISMISSAL OF THE COMPLAINT IT BEING A SUIT AGAINST THE UNITED STATES OF AMERICA
WHICHHADNOTGIVENITSCONSENTTOBESUEDAND
B.
INFINDINGWAIVERBYJUSMAGOFIMMUNITYFROMSUIT
II
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
AND/OREXCESSOFJURISDICTION
A.
WHEN IT FOUND AN EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN JUSMAG AND
PRIVATERESPONDENTAND

B.
WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYINGTHAT PRIVATE RESPONDENT
ISITSEMPLOYEEFORFAILURETOPRESENTPROOFTOTHECONTRARY.
Wefindthepetitionimpressedwithmerit.
ItismeettodiscussthehistoricalbackgroundoftheJUSMAGtodetermineitsimmunityfromsuit.
JUSMAG was created pursuant to the Military Assistance Agreement 10

dated March 21, 1947, between the
Government of the Republic of the Philippines and the Government of the United States of America. As agreed
upon, JUSMAG shall consist of Air, Naval and Army group, and its primary task was to advise and assist the
11
Philippines,onairforce,armyandnavalmatters.
Article 14 of the1947 Agreement provides,
interalia
,that"thecostofallservices requiredbythe Group,including
compensation of
locallyemployedinterpreters,clerks,laborers,andother personnel
,exceptpersonalservants,shall
bebornebytheRepublicofthePhilippines."
This setup was to change in 1991. In Note No 22, addressed to theDepartment ofForeign Affairs (DFA) of the
Philippines, dated January23, 1991, the United StatesGovernment,thru itsEmbassy, manifestedits preparedness
"
to provide funds to cover the salaries of security assistance support personnel
" and security guards, the rent of
JUSMAG occupied buildings and housing, and the cost of utilities. 12

This offer was acceptedby ourGovernment,
13
thrutheDFA,inNoteNo.911725,datedApril18,1991.
14
Consequently, a
Memorandum of Agreement
was forged between the Armed Forces of the Philippines and
JUSMAGPhilippines, thru General Lisandro C. Abadia and U.S. Brigadier General Robert G. Sausser. The
AgreementdelineatedthetermsoftheassistanceinkindofJUSMAGfor1991,therelevantpartsofwhichread:
a.
The term salaries as used in this agreement include those for the security guards currently contracted
betweenJUSMAGandA'PrimeSecurityServicesInc.,andthe
SecurityAssistanceSupportPersonnel
(SASP).....
b.
Theterm Security Assistance Support Personnel (SASP) does
not include active dutyuniformedmembers
oftheArmedForcesofthePhilippinesperformingdutyatJUSMAG.
c.
It is understood that SASP are employees of the Armed Forces of the Philippines
(
AFP
). Therefore,
the
AFP agrees to appoint, for service with JUSMAG, no more than 74 personnel to designated positions with
JUSMAG.
d.
SASP are under the total operational control of the Chief, JUSMAGPhilippines
. The term "Operational
Control" includes, but is notlimitedto,allpersonneladministrativeactions,suchas:hiringrecommendationsfiring
recommendations position classification discipline nomination and approval of incentive awards and payroll
computation. Personnel administration will be guided by Annex E of JUSMAGPhilippines Memo 102.
For the
period of time that there is an exceptional fundingagreement between the governmentof the Philippines and the
United States Government (USG), JUSMAG will pay thetotal payrollcosts for the SASP employees
. Payroll costs
include only regularsalary approved overtime, costs of living allowance medical insurance regularcontributions
to thePhilippine Social Security System, PAGIBIG FundandPersonnelEconomicReliefAllowance(PERA)and
the thirteenthmonth bonus. Payroll costs do not include gifts or other bonus payments in addition to those
previously definedabove.Entitlementsnotconsidered payrollcostsunderthis agreementwillbefundedandpaid by
theAFP.
e.
All SASPemployed
asofJuly1,1990 will continuetheir servicewithJUSMAGattheircurrentrateofpay
and benefits up to 30 June 1991, with an annual renewal of employment thereafter
subject to renewal of their
appointment with the AFP (employees and rates of pay are indicated at Enclosure 3). No promotion or transfer
internaltoJUSMAGofthelistedpersonnelwillresultinthereductionoftheirpayandbenefits.
f.
All SASP will, after proper classification, be paid salaries and benefitsat established AFP civilian rates.
Rules for computation of pay and allowances will be made available to the Comptroller, JUSMAG, by the
Comptroller, GHQ, AFP. Additionally, any legally mandated changes in salarylevelsor methods of computation
shallbetransmittedwithin48hoursofreceiptbyComptroller,GHQtoComptroller,JUSMAG.
g.
The AFP agrees not to terminate SASP without 60 days prior written notice to Chief,
JUSMAGPhilippines. Any termination of thesepersonnelthought tobenecessarybecauseof budgetaryrestrictions

or manpower ceilingwill be subjecttoconsultationsbetweenAFPandJUSMAGtoensurethatJUSMAG'smission

ofdedicatedsupporttotheAFPwillnotbedegradedorharmedinanyway.
h.
The AFP agrees to assume the severance pay/retirement payliabilityforallappointedSASP
.(Enclosure3
lists the severance pay liability date for current SASP). Any termination of services, other than voluntary
resignations or termination forcause,willresultinimmediatepaymentsof AFPofallterminationpaytotheentitled
employee. Vouchers for severance/retirement pay and accrued bonuses and annual leave will be presented to the
Comptroller,GHQ,AFP,notlaterthan14calendardayspriortorequireddateofpayment.
i.
AllSASPlistedinEnclosure3willcontinuetoparticipateinthePhilippineSocialSecuritySystem.
Ayear later, orin1992,theUnited StatesEmbassy sentanothernoteofsimilarimport totheDepartmentofForeign
Affairs (No. 227, dated April 8, 1992), extending the funding agreement for the salaries of SASP and security
guardsuntilDecember31,1992.
From the foregoing, itisapparent that when JUSMAGtook theservices ofprivaterespondent,itwasperforming a
governmental function on behalf of theUnited States pursuantto the Military Assistance Agreement dated March
21,1947.Hence, we agreewithpetitionerthatthesuitis,ineffect,oneagainsttheUnited StatesGovernment,albeit
itwasnotimpleadedinthecomplaint.ConsideringthattheUnitedStateshasnotwaivedorconsentedto thesuit,the
complaintagainstJUSMAGcannotnotprosper.
In this jurisdiction, we recognize and adopt the generally accepted principlesofinternationallawaspartofthe law
of the land. 15

Immunity of State from suit
is one ofthese universally recognized principles.In international law,
"immunity" is commonly understood as an exemption of the state and its organs from the judicial jurisdiction of
another state. 16

This is anchored on the principle of the sovereign equality of states under which one state cannot
assert jurisdiction over anotherin violation of the maxim parinparemnonhabetimperium
(an equalhasnopower
17
overanequal).
Under the
traditionalruleofStateimmunity,
astatecannotbesuedinthe courtsofanotherState,withoutitsconsent
or waiver.However, in
Santos, et al., vs. Santos, etal
., 18

we recognized an exception to the doctrineof immunity
fromsuitbyastate,thus:
. . . . Nevertheless, if, where and when the state or its government enters into a contract, through its officers or
agents, in furtherance of a legitimateaimand purpose and pursuant toconstitutional legislativeauthority,whereby
mutual or reciprocal benefits accrue and rights and obligationsarise therefrom,andifthelawgrantingtheauthority
to enter into suchcontractdoes not provideforornametheofficer againstwhomactionmaybebroughtin theevent
of a breach thereof,
the state itself may be sued, even without its consent, because by entering into a contract,the
sovereign state has descended to thelevel of the citizen and its consent to be sued is implied from the very act of
enteringintosuchcontract
.....(emphasisours)
Itwasinthislightthatthestateimmunityissuein
HarryLyons,Inc.,vs.UnitedStatesofAmerica
19

wasdecided.
In the case of
Harry Lyons, Inc
., the petitioner entered into a contract with the United States Government for
stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought to collect from the US
government sums of money arisingfromthe contract. One of the issues posedin the case was whether or not the
defunct Court of First Instance had jurisdiction over the defendant UnitedStates,asovereignstatewhichcannotbe
sued without its consent. This Court upheld the contentionofHarryLyons, Inc.,that"whenasovereignstateenters
into acontract with a private person, the state can be sued upon the theory that ithas descended to the level of an
individualfromwhichitcanbeimpliedthatithasgivenitsconsenttobesuedunderthecontract."
Thedoctrine of state immunityfromsuithasundergonefurthermetamorphosis.Theviewevolvedthattheexistence
of acontractdoesnot,perse
,meanthatsovereign statesmay,atalltimes,besuedinlocalcourts.The complexity of
relationships between sovereign states, brought about by their increasing commercial activities, mothered a more
restrictive application of the doctrine. 20

Thus, in
United States of America vs. Ruiz
, 21

we clarified that our
pronouncementin
HarryLyons
,
supra
,withrespectto thewaiverofStateimmunity,was
obiter and"hasnovalueas
animperativeauthority."

As it stands now, the application of the doctrine of immunity from suit has been
restricted to
sovereign or
governmental activities
( jure imperii
). 22

The mantle ofstate immunity

cannot be extendedto
commercial, private
andproprietaryacts
(
juregestionis
).AsaptlystatedbythisCourt(
Enbanc
)in
USvs.Ruiz,supra
:
Therestrictive application ofStateimmunityisproperwhentheproceedingsariseoutofcommercialtransactionsof
the foreign sovereign, its commercial activities oreconomic affairs. Stated differently,aState may be saidtohave
descended to the level of an individual and thus can be deemed to have tacitlygiven its consent to be used
only
when it enters into
business contracts
. It does
not
apply wherethe contract relatesto the exercise of its
sovereign
functions
.(emphasisours)
We held further, that the application ofthe doctrine ofstate immunitydependsonthe
legalnatureoftheact.
Ergo
,
since a
governmental function
was involved the transaction dealtwith theimprovementof the wharves in the
naval installation atSubic Bay it was held that the United States was not deemed to have waived its immunity
fromsuit.
Then came the caseof
United States vs. Hon.Rodrigo,et al
.23

Insaid case,Genovewasemployed asa cookinthe

Main Club located at U.S. AirForce RecreationCenter, JohnHayAirStation.Hewasdismissedfrom serviceafter
he was found to have polluted the stock of soup with urine. Genove countered with a complaint for damages.
Apparently, the restaurant services offered at the John HayAir Stationpartake ofthenatureofabusinessenterprise
undertaken by the United States government in its proprietary capacity
. The Court then notedthattherestaurantis
well known and available to the general public, thus,the servicesareoperatedfor profit,as acommercialandnota
governmentalactivity.SpeakingthroughAssociateJusticeIsaganiCruz,theCourt(
EnBanc
)said:
The consequence of this finding is that the petitioners cannotinvoke the doctrine of state immunity to justifythe
dismissal of the damage suitagainst them by Genove. Such defense will not prosper even ifit be established that
they were acting as agents ofthe United States when they investigated and laterdismissedGenove. Forthematter,
not even the United States government itself can claim such immunity. The reason is that by entering into the
employment contract with Genove
in the discharge of its proprietary functions
, it impliedly divested itself of its
sovereignimmunityfromsuit.(emphasisours)
Conversely,ifthecontractwasenteredintointhedischargeofits
governmentalfunctions
,thesovereignstatecannot
24
be deemed to have waived itsimmunity from suit.
Suchis the caseat bench. Prescinding from this premise,we
neednotdeterminewhetherJUSMAGcontrolstheemploymentconditionsoftheprivaterespondent.
We also holdthatthere appears to be no basis for public respondenttorulethatJUSMAGis stoppedfromdenying
the existence of employeremployee relationship with private respondent. On the contrary, initsOppositionbefore
the public respondent, JUSMAG consistently contended that the (74)SASP, includingprivaterespondent,working
in JUSMAG, are employees of the Armed Forces of the Philippines. This can begleaned from: (1) the Military
Assistance Agreement,
supra
, (2) the exchange of notes between our Government, thru Department of Foreign
Affairs, and the United States, thru the US Embassy to thePhilippines, and (3)the Agreement on May 21,1991,
supra
betweentheArmedForcesofthePhilippinesandJUSMAG.
We symphatize with the plight of private respondent who had served JUSMAG formore than twenty (20) years.
Considering his length of service with JUSMAG, he deserves a more compassionate treatment. Unfortunately,
JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the Executive branch, through the Department of
Foreign Affairs and the Armed Forces of thePhilippines, can takethe cudgel for private respondent and the other
SASPworkingforJUSMAG,pursuanttotheaforestatedMilitaryAssistanceAgreement.
IN VIEW OF THE FOREGOING, the petition for
certiorari
isGRANTED.Accordingly,theimpugnedResolution
datedJanuary29,1993oftheNationalLaborRelationsCommissionisREVERSEDandSETASIDE.Nocosts.
SOORDERED.