G.R. No.

129406
March 6, 2006
REPUBLIC OF THE PHILIPPINES represented by the PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT (PCGG) vs.
SANDIGANBAYAN (SECOND DIVISION) and ROBERTO S. BENEDICTO.
FACTS:
The PCGG issued writs placing under sequestration all business enterprises,
entities and other properties, real and personal, owned or registered in the name of
private respondent Benedicto, or of corporations in which he appeared to have
controlling or majority interest due to his involvement in cases of ill-gotten wealth.
Among the properties thus sequestered and taken over by PCGG fiscal agents were the
227 shares in NOGCCI owned by and registered under the name of private respondent.
As sequester of the 227 shares formerly owned by Benedicto, PCGG did not pay the
monthly membership fee. Later on, the shares were declared to be delinquent to be put
into an auction sale. Despite filing a writ of injunction, it was nevertheless dismissed. So
petitioner Republic and private respondent Benedicto entered into a Compromise
Agreement which contains a general release clause where petitioner agreed and bound
itself to lift the sequestration on the 227 NOGCCI shares acknowledging that it was
within private respondents capacity to acquire the same shares out of his income from
business and the exercise of his profession. Implied in this undertaking is the
recognition by petitioner that the subject shares of stock could not have been ill-gotten
Benedicto filed a Motion for Release from Sequestration and Return of
Sequestered Shares/Dividends praying, inter alia, that his NOGCCI shares of stock be
specifically released from sequestration and returned, delivered or paid to him as part of
the parties Compromise Agreement in that case. It was granted but the shares were
ordered to be put under the custody of the Clerk of Court. Along with this, PCGG was
ordered to deliver the shares to the Clerk of Court which it failed to comply with without
any justifiable grounds.
In a last-ditch attempt to escape liability, petitioner Republic, through the PCGG,
invokes state immunity from suit.
ISSUE: WON the Republic can invoke state immunity.
HELD:
NO. In fact, by entering into a Compromise Agreement with private respondent
Benedicto, petitioner Republic thereby stripped itself of its immunity from suit and
placed itself in the same level of its adversary. When the State enters into contract,
through its officers or agents, in furtherance of a legitimate aim and purpose and
pursuant to constitutional legislative authority, whereby mutual or reciprocal benefits
accrue and rights and obligations arise therefrom, the State may be sued even without
its express consent, precisely because by entering into a contract the sovereign
descends to the level of the citizen. Its consent to be sued is implied from the very act of
entering into such contract, breach of which on its part gives the corresponding right to
the other party to the agreement.

A.M. No. RTJ-05-1959

REPUBLIC OF THE PHILIPPINES vs. JUDGE VICENTE A. HIDALGO, Presiding
Judge of the Regional Trial Court of Manila, Branch 37
FACTS:
Tarcila Laperal Mendoza filed an action for the annulment or declaration of nullity
of the title and deed of sale, reconveyance and/or recovery of ownership and
possession a property against the Republic of the Philippinesin the RTC of Manila.
It is also known as the Arlegui Residence which housed two Philippine presidents
and which now holds the Office of the Press Secretary and the News Information
Bureau.
The case was initially dismissed by the presiding Judge of the Manila RTC
(Branch 35) on the ground of state immunity. The case was re-raffled to the Manila RTC
(Branch 37), with respondent Vicente A. Hidalgo as presiding Judge. In an Order, Judge
Hidalgo declared the Republic in default for failure of Solicitor Gabriel Francisco
Ramirez, the handling solicitor, to file the required Answer within the period prayed for in
his motion for extension.
It is contended that the respondent Judge violated the Constitution and the
fundamental rule that government funds are exempt from execution or garnishment
when he caused the issuance of the writ of execution against the Republic.
ISSUE: WON the Republic can invoke immunity from suit.
HELD:
It is settled that when the State gives its consent to be sued, it does not thereby
necessarily consent to an unrestrained execution against it. Tersely put, when the State
waives its immunity, all it does, in effect, is to give the other party an opportunity to
prove, if it can, that the state has a liability.
The functions and public services rendered by the State cannot be allowed to
paralyzed or disrupted by the diversion of public funds from their legitimate and specific
objects, as appropriated by law
National Housing Authority vs. HEIRS OF GUIVELONDO
Topic: Execution/Garnishment
Facts:
NHA filed with RTC of Cebu Branch 11 a complaint as amended regarding the
eminent domain against Heirs of Guivelondo docketed as civil case.
The petitioner alleged that defendant heirs et. al were the rightful private owners of
the land which the petitioner intends to develop a socialized housing project.
The respondent heirs filed a manifestation of waiving their objections to petitioners
power to expropriate their properties, thereafter trial court declares plaintiff has a
right to expropriate the properties of the defendant heirs and appointed 3
commissioners who ascertain the just compensation of the said properties be fixed
at 11, 200.00 php/square meter.
Petitioner NHA filed 2 motion for reconsideration that assails inclusion of lots 12, 13
and 19 as well as the amount of just compensation, however the respondents filed a

motion for reconsideration of the trial courts partial judgment but the trial court
issued an omnibus order to deny the motion of respondent granting the petitioners
motion and of just compensation.
Petitioner filed with the Court of Appeals a petition for certiorari. Thereafter, heirs
filed a motion for execution since the trial court move for the entry of the partial
judgment as modified by the omnibus order.
The Court of Appeals rendered dismissal of the petition for certiorari on the ground
of partial judgment and omnibus order became a final and executory when petitioner
failed to appeal.
The petitioner filed a motion for reconsideration but then it was denied by the court.
The courts of appeals serve on petitioner for a notice of levy pursuant to writ of
Execution and a Notice of third garnishment from the Land bank of the Philippines.

ISSUE:
1.
Whether or not the state can be compelled and coerced by the courts to continue
with its inherent power of eminent domain.
2.
Whether or not judgment has become final and executory and if estoppel or
laches applies to government.
3.
Whether or not writs of execution and garnishment may be issued against the
state in an expropriation where in the exercise of power of eminent domain will not
serve public use or purpose
Ruling:
The state as represented by the NHA for housing project can continue its
inherent power of eminent domain provided that the just compensation for the
property sought is taken. After the rendition of such order the plaintiff shouldnt be
permitted to dismiss or discontinue such proceedings except on such terms of
the court be equitable.
The order was final after the non-appealing of the petitioner as the lawful right to
expropriate the properties of respondent heirs of Guivelondo.
Petitioner NHA are not exempt from garnishment or execution, although it is
public in character since it is arbitrary and capricious for a government entity to
initiate expropriation proceedings that seize a private owners property.
Petition was DENIED and the trial courts decision denying petitioners motion to
dismiss expropriation proceeding was AFFIRMED. Its injunctive relief against the
levy and garnishment of its funds and personal properties was also DENIED. The
temporary Restraining Order was LIFTED.
REPUBLIC vs. UNIMEX MICRO-ELECTRONICS
March 9, 2007

FACTS:
The Bureau of Customs (BOC) seized and forfeited the shipment owned by
UNIMEX Micro-Electronics. When the latter filed a petition for review in the Court of Tax
Appeals (CTA), the forfeiture decree was reversed and the court ordered the release of
the goods. However, respondents counsel failed to secure a writ of execution to
enforce the CTA decision. When respondent asked for release of its shipment, BOC
could no longer find subject shipment in its warehouses. The CTA ordered the BOC to

pay UNIMEX the commercial value of the goods with interest. The Republic of the
Philippines, represented by the BOC Commissioner, assailed the decision of the CTA in
the SC. One of its grounds was that the government funds cannot be charged with
respondents claim without a corresponding appropriation and cannot be decreed by
mere judicial order.
ISSUE: Can the government be held for actual damages?
HELD:
Although the satisfaction of respondents demand will ultimately fall on the
government, and that under the political doctrine of state immunity, it cannot be held
liable for governmental acts (jus imperil), the court still holds that petitioner cannot
escape its liability. The circumstances of the case warrant its exclusion from the
purview of the state immunity doctrine. The court cannot turn a blind eye to BOCs
ineptitude and gross negligence in the safekeeping of respondents goods. The
situation does not allow us to reject respondents claim on the mere invocation of the
doctrine of state immunity. The doctrine must be fairly observed and the State should
not avail itself of this prerogative to take undue advantage of parties that may have
legitimate claims against it.
The SC, as the staunch guardian of the peoples rights and welfare, cannot
sanction an injustice so patent in its face, and allow itself to be an instrument in the
perpetration thereof. Courts have recognized with almost pedantic adherence that what
is inconvenient and contrary to reason is not allowed in law. Justice and equity now
demand that the States cloak of invincibility against suit and liability be shredded.
Assailed decision of the CTA is AFFIRMED with MODIFICATION.
G.R. No. 176628
March 19, 2012
PHILIPPINE TOURISM AUTHORITY, Petitioner,
vs.
PHILIPPINE GOLF DEVELOPMENT & EQUIPMENT, INC., Respondent.
Facts:
On April 3, 1996, PTA, an agency of the Department of Tourism, whose main function is to
bolster and promote tourism, entered into a contract with Atlantic Erectors, Inc. (AEI) for the
construction of the Intramuros Golf Course Expansion Projects (PAR 60-66) for a contract price
of Fifty-Seven Million Nine Hundred Fifty-Four Thousand Six Hundred Forty-Seven and 94/100
Pesos (P57,954,647.94).
On October 2, 2003, PHILGOLF filed a collection suit against PTA amounting to Eleven Million
Eight Hundred Twenty Thousand Five Hundred Fifty and 53/100 Pesos (P11,820,550.53), plus
interest, for the construction of the golf course.
Despite the RTCs liberality of granting two successive motions for extension of time, PTA failed
to answer the complaint. Hence, on April 6, 2004, the RTC rendered a judgment of default.
On July 11, 2005, PTA filed a petition for annulment of judgment under Rule 47 of the Rules of
Court. The petition for annulment of judgment was premised on the argument that the gross
negligence of PTAs counsel prevented the presentation of evidence before the RTC. The CA
dismissed the petition for annulment of judgment for lack of merit.
Issue:
Whether or not PTA, as a government entity, should be bound by the inactions or negligence of
its counsel.
Ruling:

PTA was acting in a proprietary character.

PTA erred in invoking state immunity simply because it is a government entity. The application of
state immunity is proper only when the proceedings arise out of sovereign transactions and not
in cases of commercial activities or economic affairs. The State, in entering into a business
contract, descends to the level of an individual and is deemed to have tacitly given its consent to
be sued.
Since the Intramuros Golf Course Expansion Projects partakes of a proprietary character
entered into between PTA and PHILGOLF, PTA cannot avoid its financial liability by merely
invoking immunity from suit.

China National Machinery v. Santamaria

Facts: On 14 September 2002, petitioner China National Machinery & Equipment Corp.
(Group) (CNMEG), represented by its chairperson, Ren Hongbin, entered into a
Memorandum of Understanding with the North Luzon Railways Corporation (Northrail),
represented by its president, Jose L. Cortes, Jr. for the conduct of a feasibility study on
a possible railway line from Manila to San Fernando, La Union (the Northrail Project).
On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the Department
of Finance of the Philippines (DOF) entered into a Memorandum of Understanding (Aug
30 MOU), wherein China agreed to extend Preferential Buyers Credit to the Philippine
government to finance the Northrail Project. 3 The Chinese government designated EXIM
Bank as the lender, while the Philippine government named the DOF as the borrower.
Under the Aug 30 MOU, EXIM Bank agreed to extend an amount not exceeding USD
400,000,000 in favor of the DOF, payable in 20 years, with a 5-year grace period, and at
the rate of 3% per annum.
On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui (Amb.
Wang), wrote a letter to DOF Secretary Jose Isidro Camacho (Sec. Camacho) informing
him of CNMEGs designation as the Prime Contractor for the Northrail Project.
On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon Railway System from Caloocan to
Malolos on a turnkey basis (the Contract Agreement). 7 The contract price for the
Northrail Project was pegged at USD 421,050,000.
On 26 February 2004, the Philippine government and EXIM Bank entered into a
counterpart financial agreement Buyer Credit Loan Agreement No. BLA 04055 (the
Loan Agreement). In the Loan Agreement, EXIM Bank agreed to extend Preferential
Buyers Credit in the amount of USD 400,000,000 in favor of the Philippine government
in order to finance the construction of Phase I of the Northrail Project.
On 13 February 2006, respondents filed a Complaint for Annulment of Contract and
Injunction with Urgent Motion for Summary Hearing to Determine the Existence of Facts
and Circumstances Justifying the Issuance of Writs of Preliminary Prohibitory and
Mandatory Injunction and/or TRO against CNMEG, the Office of the Executive
Secretary, the DOF, the Department of Budget and Management, the National
Economic Development Authority and Northrail. The case was filed before the Regional
Trial Court, National Capital Judicial Region, Makati City, Branch 145 (RTC Br. 145). In
the Complaint, respondents alleged that the Contract Agreement and the Loan

Agreement were void for being contrary to (a) the Constitution; (b) Republic Act No.
9184 (R.A. No. 9184), otherwise known as the Government Procurement Reform Act;
(c) Presidential Decree No. 1445, otherwise known as the Government Auditing Code;
and (d) Executive Order No. 292, otherwise known as the Administrative Code.
On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEGs Motion to
Dismiss and setting the case for summary hearing to determine whether the injunctive
reliefs prayed for should be issued. CNMEG then filed a Motion for Reconsideration,
which was denied by the trial court in an Order dated 10 March 2008. Thus, CNMEG
filed before the CA a Petition for Certiorari with Prayer for the Issuance of TRO and/or
Writ of Preliminary Injunction dated 4 April 2008.
the appellate court dismissed the Petition for Certiorari. Subsequently, CNMEG filed a
Motion for Reconsideration, which was denied by the CA in a Resolution dated 5
December 2008.
Petitioners Argument: Petitioner claims that the EXIM Bank extended financial
assistance to Northrail because the bank was mandated by the Chinese government, and
not because of any motivation to do business in the Philippines, it is clear from the
foregoing provisions that the Northrail Project was a purely commercial transaction.
Respondents Argument: respondents alleged that the Contract Agreement and the
Loan Agreement were void for being contrary to (a) the Constitution; (b) Republic Act
No. 9184 (R.A. No. 9184), otherwise known as the Government Procurement Reform
Act; (c) Presidential Decree No. 1445, otherwise known as the Government Auditing
Code; and (d) Executive Order No. 292, otherwise known as the Administrative Code.
Issues: Whether or not petitioner CNMEG is an agent of the sovereign Peoples
Republic of China.
Whether or not the Northrail contracts are products of an executive agreement between
two sovereign states.
Ruling:
The instant Petition is DENIED. Petitioner China National Machinery &
Equipment Corp. (Group) is not entitled to immunity from suit, and the Contract Agreement
is not an executive agreement. CNMEGs prayer for the issuance of a TRO and/or Writ of
Preliminary Injunction is DENIED for being moot and academic.
The Court explained the doctrine of sovereign immunity in Holy See v. Rosario, to
wit:
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without
its consent, be made a respondent in the courts of another sovereign. According to
the newer or restrictive theory, the immunity of the sovereign is recognized only
with regard to public acts or acts jure imperii of a state, but not with regard to
private acts or acts jure gestionis. (Emphasis supplied; citations omitted.)
As it stands now, the application of the doctrine of immunity from suit has been
restricted to sovereign or governmental activities (jure imperii). The mantle of state

immunity cannot be extended to commercial, private and proprietary acts (jure

gestionis).
Since the Philippines adheres to the restrictive theory, it is crucial to ascertain the
legal nature of the act involved whether the entity claiming immunity performs
governmental, as opposed to proprietary, functions. As held in United States of America
v. Ruiz
Admittedly, the Loan Agreement was entered into between EXIM Bank and the
Philippine government, while the Contract Agreement was between Northrail and
CNMEG. Although the Contract Agreement is silent on the classification of the legal
nature of the transaction, the foregoing provisions of the Loan Agreement, which is an
inextricable part of the entire undertaking, nonetheless reveal the intention of the parties
to the Northrail Project to classify the whole venture as commercial or proprietary in
character.
Thus, piecing together the content and tenor of the Contract Agreement, the
Memorandum of Understanding dated 14 September 2002, Amb. Wangs letter dated 1
October 2003, and the Loan Agreement would reveal the desire of CNMEG to construct
the Luzon Railways in pursuit of a purely commercial activity performed in the ordinary
course of its business.