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A. Preliminary Considerations
1. In Re: Joaquin T. Borromeo, 241 SCRA 405 (1995)
A.M. No. 93-7-696-0 February 21, 1995
In Re JOAQUIN T. BORROMEO, Ex Rel. Cebu City Chapter of the Integrated Bar of the
Philippines.
It is said that a little learning is a dangerous thing; and that he who acts as his own lawyer has a
fool for a client. There would seem to be more than a grain of truth in these aphorisms; and they appear
to find validation in the proceeding at bench, at least.
The respondent in this case, Joaquin T. Borromeo, is not a lawyer but has apparently read some
law books, and ostensibly come to possess some superficial awareness of a few substantive legal
principles and procedural rules. Incredibly, with nothing more than this smattering of learning, the
respondent has, for some sixteen (16) years now, from 1978 to the present, been instituting and
prosecuting legal proceedings in various courts, dogmatically pontificating on errors supposedly committed
by the courts, including the Supreme Court. In the picturesque language of former Chief Justice Enrique
M. Fernando, he has "with all the valor of ignorance," been verbally jousting with various adversaries in
diverse litigations; or in the words of a well-known song, rushing into arenas "where angels fear to tread."
Under the illusion that his trivial acquaintance with the law had given him competence to undertake
litigation, he has ventured to represent himself in numerous original and review proceedings. Expectedly,
the results have been disastrous. In the process, and possibly in aid of his interminable and quite
unreasonable resort to judicial proceedings, he has seen fit to compose and circulate many scurrilous
statements against courts, judges and their employees, as well as his adversaries, for which he is now
being called to account.
Respondent Borromeo's ill-advised incursions into lawyering were generated by fairly prosaic
transactions with three (3) banks which came to have calamitous consequences for him chiefly because of
his failure to comply with his contractual commitments and his stubborn insistence on imposing his own
terms and conditions for their fulfillment. These banks were: Traders Royal Bank (TRB), United Coconut
Planters Bank (UCPB), Security Bank & Trust Co. (SBTC). Borromeo obtained loans or credit
accommodation from them, to secure which he constituted mortgages over immovables belonging to him
or members of his family, or third persons. He failed to pay these obligations, and when demands were
made for him to do so, laid down his own terms for their satisfaction which were quite inconsistent with
those agreed upon with his obligees or prescribed by law. When, understandably, the banks refused to let
him have his way, he brought suits right and left, successively if not contemporaneously, against said
banks, its officers, and even the lawyers who represented the banks in the actions brought by or against
him. He sued, as well, the public prosecutors, the Judges of the Trial Courts, and the Justices of the Court
of Appeals and the Supreme Court who at one time or another, rendered a judgment, resolution or order

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adverse to him, as well as the Clerks of Court and other Court employees signing the notices thereof. In
the aggregate, he has initiated or spawned in different fora the astounding number of no less-than fifty
(50) original or review proceedings, civil, criminal, administrative. For some sixteen (16) years now, to
repeat, he has been continuously cluttering the Courts with his repetitive, and quite baseless if not
outlandish complaints and contentions.
I. CASES INVOLVING TRADERS ROYAL BANK (TRB)
The first bank that Joaquin T. Borromeo appears to have dealt with was the Traders Royal Bank
(TRB). On June 2, 1978, he got a loan from it in the sum of P45,000.00. This he secured by a real estate
mortgage created over two parcels of land covered by TCT No. 59596 and TCT No. 59755 owned,
respectively, by Socorro Borromeo-Thakuria (his sister) and Teresita Winniefred Lavarino. On June 16,
1978, Borromeo obtained a second loan from TRB in the amount of P10,000.00, this time giving as
security a mortgage over a parcel of land owned by the Heirs of Vicente V. Borromeo, covered by TCT No.
RT-7634. Authority to mortgage these three lots was vested in him by a Special Power of Attorney
executed by their respective owners.
Additionally, on April 23, 1980, Borromeo obtained a Letter of Credit from TRB in the sum of
P80,000.00, in consideration of which he executed a Trust Receipt (No. 595/80) falling due on July 22,
1980.
Borromeo failed to pay the debts as contracted despite demands therefor. Consequently, TRB
caused the extra-judicial foreclosure of the mortgages given to secure them. At the public sale conducted
by the sheriff on September 7, 1981, the three mortgaged parcels of land were sold to TRB as the highest
bidder, for P73,529.09.
Within the redemption period, Borromeo made known to the Bank his intention to redeem the
properties at their auction price. TRB manager Blas C. Abril however made clear that Borromeo would also
have to settle his outstanding account under Trust Receipt No. 595/80 (P88,762.78), supra. Borromeo
demurred, and this disagreement gave rise to a series of lawsuits commenced by him against the Bank, its
officers and counsel, as aforestated.
A. CIVIL CASES
1. RTC Case No. R-22506; CA-G.R.CV No. 07015; G.R. No. 83306

On October 29, 1982 Borromeo filed a complaint in the Cebu City Regional Trial Court for specific
performance and damages against TRB and its local manager, Blas Abril, docketed as Civil Case No. R22506. The complaint sought to compel defendants to allow redemption of the foreclosed properties only
at their auction price, with stipulated interests and charges, without need of paying the obligation secured
by the trust receipt above mentioned. Judgment was rendered in his favor on December 20, 1984 by

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Branch 23 of the Cebu City RTC; but on defendants' appeal to the Court of Appeals docketed as CA-G.R.
CV No. 07015 the judgment was reversed, by decision dated January 27, 1988. The Court of Appeals
held that the "plaintiff (Borromeo) has lost his right of redemption and can no longer compel defendant to
allow redemption of the properties in question."
Borromeo elevated the case to this court where his appeal was docketed as G.R. No. 83306. By
Resolution dated August 15, 1988, this Court's First Division denied his petition for review "for failure . . .
to sufficiently show that the respondent Court of Appeals had committed any reversible error in its
questioned judgment, it appearing on the contrary that the said decision is supported by substantial
evidence and is in accord with the facts and applicable law." Reconsideration was denied, by Resolution
dated November 23, 1988. A second motion for reconsideration was denied by Resolution dated January
30, 1989, as was a third such motion, by Resolution dated April 19, 1989. The last resolution also directed
entry of judgment and the remand of the case to the court of origin for prompt execution of judgment.
Entry of judgment was made on May 12, 1989. By Resolution dated August 7, 1989, the Court denied
another motion of Borromeo to set aside judgment; and by Resolution dated December 20, 1989, the
Court merely noted without action his manifestation and motion praying that the decision of the Court of
Appeals be overturned, and declared that "no further motion or pleading . . . shall be entertained . . . ."
2. RTC Case No. CEB 8750; CA-G.R. SP No. 22356

The ink was hardly dry on the resolutions just mentioned before Borromeo initiated another civil
action in the same Cebu City Regional Court by which he attempted to litigate the same issues. The
action, against the new TRB Branch Manager, Jacinto Jamero, was docketed as Civil Case No. CEB-8750.
As might have been anticipated, the action was, on motion of the defense, dismissed by Order dated May
18, 1990, on the ground of res judicata, the only issue raised in the second action i.e., Borromeo's right
to redeem the lots foreclosed by TRB having been ventilated in Civil Case No. R-22506 (Joaquin T.
Borromeo vs. Blas C. Abril and Traders Royal Bank) (supra) and, on appeal, decided with finality by the
Court of Appeals and the Supreme Court in favor of defendants therein.
The Trial Court's judgment was affirmed by the Court of Appeals in CA-G.R. SP No. 22356.
3. RTC Case No. CEB-9485; CA-G.R. SP No. 28221

In the meantime, and during the pendency of Civil Case No. R-22506, TRB consolidated its
ownership over the foreclosed immovables. Contending that act of consolidation amounted to a criminal
offense, Borromeo filed complaints in the Office of the City Prosecutor of Cebu against the bank officers
and lawyers. These complaints were however, and quite correctly, given short shrift by that Office.
Borromeo then filed suit in the Cebu City RTC, this time not only against the TRB, TRB officers Jacinto
Jamero and Arceli Bustamante, but also against City Prosecutor Jufelinito Pareja and his assistants,
Enriqueta Belarmino and Eva A. Igot, and the TRB lawyers, Mario Ortiz and the law, firm, HERSINLAW.

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The action was docketed as Civil Case No. CEB-9485. The complaint charged Prosecutors Pareja,
Belarmino and Igot with manifest partiality and bias for dismissing the criminal cases just mentioned; and
faulted TRB and its manager, Jamero, as well as its lawyers, for consolidating the titles to the foreclosed
properties in favor of the bank despite the pendency of Case No. R-22506. This action also failed. On
defendants' motion, it was dismissed on February 19, 1992 by the RTC. (Branch 22) on the ground of res
judicata (being identical with Civil Case Nos. R-22506 and CEB-8750, already decided with finality in favor
of TRB), and lack of cause of action (as to defendants Pareja, Belarmino and Igot).
Borromeo's certiorari petition to the Court of Appeals (CA G.R. SP No. 28221) was dismissed by
that Court's 16th Division on October 6, 1992, for the reason that the proper remedy was appeal.
4. RTC Case No. CEB-10368; CA-G.R. SP No. 27100

Before Case No. CEB-9845 was finally decided, Borromeo filed, on May 30, 1991, still another civil
action for the same cause against TRB, its manager, Jacinto Jamero, and its lawyers, Atty. Mario Ortiz and
the HERSINLAW law office. This action was docketed as Civil Case No. CEB-10368, and was described as
one for "Recovery of Sums of Money, Annulment of Titles with Damages." The case met the same fate as
the others. It was, on defendants' motion, dismissed on September 9, 1991 by the RTC (Branch 14 ) on
the ground of litis pendentia.
The RTC ruled that
Civil Case No. CEB-9485 will readily show that the defendants therein, namely the Honorable Jufelinito
Pareja, Enriqueta Belarmino, Eva Igot, Traders Royal Bank, Arceli Bustamante, Jacinto Jamero, Mario Ortiz
and HERSINLAW are the same persons or nearly all of them who are impleaded as defendants in the
present Civil Case No. CEB-10368, namely, the Traders Royal Bank, Jacinto Jamero, Mario Ortiz and
HERSINLAW. The only difference is that more defendants were impleaded in Civil Case No. CEB-9485,
namely, City Prosecutor Jufelinito Pareja and his assistants Enriqueta Belarmino and Eva Igot. The
inclusion of the City Prosecutor and his two assistants in Civil Case No. CEB-9485 was however merely
incidental as apparently they had nothing to do with the questioned transaction in said case. . . .
The Court likewise found that the reliefs prayed for were the same as those sought in Civil Case No.
CEB-9485, and the factual bases of the two cases were essentially the same the alleged fraudulent
foreclosure and consolidation of the three properties mortgaged years earlier by Borromeo to TRB.
For some reason, the Order of September 9, 1991 was set aside by an Order rendered by another
Judge on November 11, 1991 the Judge who previously heard the case having inhibited himself; but
this Order of November 11, 1991 was, in turn, nullified by the Court of Appeals (9th Division), by Decision
promulgated on March 31, 1992 in CA-G.R. SP No. 27100 (Traders Royal Bank vs. Hon. Celso M. Gimenez,
etc. and Joaquin T. Borromeo), which decision also directed dismissal of Borromeo's complaint.

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5. RTC Case No. CEB-6452
When a new branch manager, Ronald Sy, was appointed for TRB, Cebu City, Borromeo forthwith
made that event the occasion for another new action, against TRB, Ronald Sy, and the bank's attorneys
Mario Ortiz, Honorato Hermosisima, Jr., Wilfredo Navarro and HERSINLAW firm. This action was docketed
as Civil Case No. CEB-6452, and described as one for "Annulment of Title with Damages." The complaint,
dated October 20, 1987, again involved the foreclosure of the three (3) immovables above mentioned, and
was anchored on the alleged malicious, deceitful, and premature consolidation of titles in TRB's favor
despite the pendency of Civil Case No. 22506. On defendant's motion, the trial court dismissed the case
on the ground of prematurity, holding that "(a)t this point . . ., plaintiff's right to seek annulment of
defendant Traders Royal Bank's title will only accrue if and when plaintiff will ultimately and finally win Civil
Case No. R-22506."
6. RTC Case No. CEB-8236
Having thus far failed in his many efforts to demonstrate to the courts the "merit" of his cause
against TRB and its officers and lawyers, Borromeo now took a different tack by also suing (and thus also
venting his ire on) the members of the appellate courts who had ruled adversely to him. He filed in the
Cebu City RTC, Civil Case No. CEB-8236, impleading as defendants not only the same parties he had
theretofore been suing TRB and its officers and lawyers (HERSINLAW, Mario Ortiz) but also the
Chairman and Members of the First Division of the Supreme Court who had repeatedly rebuffed him in
G.R. No. 83306 (SEE sub-head I, A, 1, supra), as well as the Members of the 5th, 9th and 10th Divisions
of the Court of Appeals who had likewise made dispositions unfavorable to him. His complaint, dated
August 22, 1989, aimed to recover damages from the defendants Justices for
. . . maliciously and deliberately stating blatant falsehoods and disregarding evidence and pertinent laws,
rendering manifestly unjust and biased resolutions and decisions bereft of signatures, facts or laws in
support thereof, depriving plaintiff of his cardinal rights to due process and against deprivation of property
without said process, tolerating, approving and legitimizing the patently illegal, fraudulent, and
contemptuous acts of defendants TRB, (which) constitute a) GRAVE DERELICTION OF DUTY AND ABUSE
OF POWER emanating from the people, b) FLAGRANT VIOLATIONS OF THE CONSTITUTION, CARDINAL
PRIMARY RIGHTS DUE PROCESS, ART. 27, 32, CIVIL CODE, Art. 208, REV. PENAL CODE, and R.A. 3019,
for which defendants must be held liable under said laws.
The complaint also prayed for reconveyance of the "fake titles obtained fraudulently by TRB/HERSINLAW,"
and recovery of "100,000.00 moral damages; 30,000.00 exemplary damages; and P5,000.00 litigation
expenses." This action, too, met a quick and unceremonious demise. On motion of defendants TRB and
HERSINLAW, the trial court, by Order dated November 7, 1989, dismissed the case.
7. RTC Case No. CEB-13069

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It appears that Borromeo filed still another case to litigate the same cause subject of two (2) prior actions
instituted by him. This was RTC Case No. CEB-13069, against TRB and the latter's lawyers, Wilfredo
Navarro and Mario Ortiz. The action was dismissed in an Order dated October 4, 1993, on the ground of
res judicata the subject matter being the same as that in Civil Case No. R-22506, decision in which was
affirmed by the Court of Appeals in CA-G.R. CV No. 07015 as well as by this Court in G.R. No. 83306
and litis pendentia the subject matter being also the same as that in Civil Case No. CEB-8750, decision
in which was affirmed by the Court of Appeals in CA G.R. SP No. 22356.
8. RTC Criminal Case No. CBU-19344;
CA-G.R. SP No. 28275; G.R. No. 112928

On April 17, 1990 the City Prosecutor of Cebu City filed an information with the RTC of Cebu
(Branch 22) against Borromeo charging him with a violation of the Trust Receipts Law. The case was
docketed as Criminal Case No. CBU-19344. After a while, Borromeo moved to dismiss the case on the
ground of denial of his right to a speedy trial. His motion was denied by Order of Judge Pampio A.
Abarintos dated April 10, 1992. In the same order, His Honor set an early date for Borromeo's arraignment
and placed the case "under a continuous trial system on the dates as may be agreed by the defense and
prosecution." Borromeo moved for reconsideration. When his motion was again found without merit, by
Order dated May 21, 1992, he betook himself to the Court of Appeals on a special civil action of certiorari,
to nullify these adverse orders, his action being docketed as CA-G.R. SP No. 28275.
Here again, Borromeo failed. The Court of Appeals declared that the facts did not show that there
had been unreasonable delay in the criminal action against him, and denied his petition for being without
merit.
Borromeo then filed a petition for review with this Court (G.R. No. 112928), but by resolution dated
January 31, 1994, the same was dismissed for failure of Borromeo to comply with the requisites of
Circulars Numbered 1-88 and 19-91. His motion for reconsideration was subsequently denied by
Resolution dated March 23, 1994.
a. Clarificatory Communications to Borromeo Re Minute Resolutios
He next filed a Manifestation dated April 6, 1994 calling the Resolution of March 23, 1994 "UnConstitutional, Arbitrary and tyrannical and a gross travesty of 'Justice,'" because it was "signed only by a
mere clerk and . . . (failed) to state clear facts and law," and "the petition was not resolved on MERITS nor
by any Justice but by a mere clerk."
The Court responded with another Resolution, promulgated on June 22, 1994, and with some
patience drew his attention to the earlier resolution "in his own previous case (Joaquin T. Borromeo vs.
Court of Appeals and Samson Lao, G.R. No. 82273, 1 June 1990; 186 SCRA 1) and on the same issue he
now raises." Said Resolution of June 22, 1994, after reiterating that the notices sent by the Clerk of Court

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of the Court En Banc or any of the Divisions simply advise of and quote the resolution actually adopted by
the Court after deliberation on a particular matter, additionally stated that Borromeo "knew, as well, that
the communications (notices) signed by the Clerk of Court start with the opening clause
Quoted hereunder, for your information, is a resolution of the First Division of this Court dated.
_________, thereby indisputably showing that it is not the Clerk of Court who prepared or signed the
resolutions."
This was not, by the way, the first time that the matter had been explained to Borromeo. The
record shows that on July 10, 1987, he received a letter from Clerk of Court Julieta Y. Carreon (of this
Court's Third Division) dealing with the subject, in relation to G.R. No. 77243. The same matter was also
dealt with in the letter received by him from Clerk of Court Luzviminda D. Puno, dated April 4, 1989, and
in the letter to him of Clerk of Court (Second Division) Fermin J. Garma, dated May 19, 1989. And the
same subject was treated of in another Resolution of this Court, notice of which was in due course served
on him, to wit: that dated July 31, 1989, in G.R. No. 87897.
B. CRIMINAL CASES
Mention has already been made of Borromeo's attempt with "all the valor of ignorance" to
fasten not only civil, but also criminal liability on TRB, its officers and lawyers. Several other attempts on
his part to cause criminal prosecution of those he considered his adversaries, will now be dealt with here.
1. I. S. Nos. 90-1187 and 90-1188
On March 7, 1990, Borromeo filed criminal complaints with the Office of the Cebu City Prosecutor
against Jacinto Jamero (then still TRB Branch Manager), "John Doe and officers of Traders Royal Bank."
The complaints (docketed as I.S. Nos. 90-1187-88) accused the respondents of "Estafa and Falsification of
Public Documents." He claimed, among others that the bank and its officers, thru its manager, Jacinto
Jamero, sold properties not owned by them: that by fraud, deceit and false pretenses, respondents
negotiated and effected the purchase of the (foreclosed) properties from his (Borromeo's) mother, who "in
duress, fear and lack of legal knowledge," agreed to the sale thereof for only P671,000.00, although in
light of then prevailing market prices, she should have received P588,030.00 more.
In a Joint Resolution dated April 11, 1990, the Cebu City Fiscal's office dismissed the complaints
observing that actually, the Deed of Sale was not between the bank and Borromeo's mother, but between
the bank and Mrs. Thakuria (his sister), one of the original owners of the foreclosed properties; and that
Borromeo, being a stranger to the sale, had no basis to claim injury or prejudice thereby. The Fiscal ruled
that the bank's ownership of the foreclosed properties was beyond question as the matter had been raised
and passed upon in a judicial litigation; and moreover, there was no proof of the document allegedly
falsified nor of the manner of its falsification.

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a. I.S. Nos. 87-3795 and 89-4234
Evidently to highlight Borromeo's penchant for reckless filing of unfounded complaints, the
Fiscal also adverted to two other complaints earlier filed in his Office by Borromeo involving the
same foreclosed properties and directed against respondent bank officers' predecessors (including
the former Manager, Ronald Sy) and lawyers both of which were dismissed for lack of merit.
These were:
a. I. S. No. 87-3795 (JOAQUIN T. BORROMEO vs. ATTY. MARIO ORTIZ and RONALD SY) for
"Estafa Through Falsification of Public Documents, Deceit and False Pretenses." This case was
dismissed by Resolution dated January 19, 1988 of the City Prosecutor's Office because based on
nothing more than a letter dated June 4, 1985, sent by Bank Manager Ronald Sy to the lessee of a
portion of the foreclosed immovables, advising the latter to remit all rentals to the bank as new
owner thereof, as shown by the consolidated title; and there was no showing that respondent Atty.
Ortiz was motivated by fraud in notarizing the deed of sale in TRB's favor after the lapse of the
period of redemption, or that Ortiz had benefited pecuniarily from the transaction to the prejudice
of complainant; and
b. I.S. No. 89-4234 (JOAQUIN T. BORROMEO vs. RONALD SY, ET AL.) for "Estafa Through False
Pretenses and Falsification of Public Documents." This case was dismissed by Resolution dated
January 31, 1990.
2. I.S.Nos. 88-205 to 88-207
While Joaquin Borromeo's appeal (G.R. No. 83306) was still pending before the Supreme Court, an
affidavit was executed in behalf of TRB by Arceli Bustamante, in connection with the former's fire
insurance claim over property registered in its name one of two immovables formerly owned by Socorro
B. Thakuria (Joaquin Borromeo's sister) and foreclosed by said bank. In that affidavit, dated September
10, 1987, Bustamante stated that "On 24 June 1983, TRB thru foreclosure acquired real property together
with the improvements thereon which property is located at F. Ramos St., Cebu City covered by TCT No.
87398 in the name or TRB." The affidavit was notarized by Atty. Manuelito B. Inso.
Claiming that the affidavit was "falsified and perjurious" because the claim of title by TRB over the
foreclosed lots was a "deliberate, wilful and blatant fasehood in that, among others: . . . the consolidation
was premature, illegal and invalid," Borromeo filed a criminal complaint with the Cebu City Fiscal's Office
against the affiant (Bustamante) and the notarizing lawyer (Atty. Inso) for "falsification of public
document, false pretenses, perjury." On September 28, 1988, the Fiscal's Office dismissed the complaint.
It found no untruthful statements in the affidavit or any malice in its execution, considering that
Bustamante's statement was based on the Transfer Certificate of Title in TRB's file, and thus the document
that Atty. Inso notarized was legally in order.

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3. OMB-VIS-89-00136
This Resolution of this Court (First Division) in G.R. No. 83306 dated August 15, 1988 sustaining
the judgment of the Court of Appeals (10th Division) of January 27, 1988 in CA-G.R. CV No. 07015, supra,
was made the subject of a criminal complaint by Borromeo in the Office of the Ombudsman, Visayas,
docketed as OMB-VIS-89-00136. His complaint against "Supreme Court Justice (First Div.) and Court of
Appeals Justice (10th Div)" was dismissed for lack of merit in a Resolution issued on February 14, 1990
which, among other things, ruled as follows:
It should be noted and emphasized that complainant has remedies available under the Rules of
Court, particularly on civil procedure and existing laws. It is not the prerogative of this Office to make a
review of Decisions and Resolutions of judicial courts, rendered within their competence. The records do
not warrant this Office to take further proceedings against the respondents.
In addition, Sec. 20. of R.A. 6770, "the Ombudsman Act states that the Office of the Ombudsman
may not conduct the necessary investigation of any administrative act or omission complained of if it
believes that (1) the complainant had adequate remedy in another judicial or quasi-judicial body;" and
Sec. 21 the same law provides that the Office of the Ombudsman does not have disciplinary authority over
members of the Judiciary.
II. CASES INVOLVING UNITED COCONUT PLANTERS BANK (UCPB)
As earlier stated, Borromeo (together with a certain Mercader) also borrowed money from the
United Coconut Planters Bank (UCPB) and executed a real estate mortgage to secure repayment thereof.
The mortgage was constituted over a 122-square-meter commercial lot covered by TCT No. 75680 in
Borromeo's name. This same lot was afterwards sold on August 7, 1980 by Borromeo to one Samson K.
Lao for P170,000.00, with a stipulation for its repurchase (pacto de retro) by him (Borromeo, as the
vendor). The sale was made without the knowledge and consent of UCPB.
A. CIVIL CASES
Now, just as he had defaulted in the payment of the loans and credit accommodations he had
obtained from the Traders Royal Bank, Borromeo failed in the fulfillment of his obligations to the UCPB.
Shortly after learning of Borromeo's default, and obviously to obviate or minimize the ill effects of
the latter's delinquency, Lao applied with the same bank (UCPB) for a loan, offering the property he had
purchased from Borromeo as collateral. UCPB was not averse to dealing with Lao but imposed several
conditions on him, one of which was for Lao to consolidate his title over the property. Lao accordingly
instituted a suit for consolidation of title, docketed as Civil Case No. R-21009. However, as will shortly be
narrated, Borromeo opposed the consolidation prayed for. As a result, UCPB cancelled Lao's application for

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a loan and itself commenced proceedings foreclose the mortgage constituted by Borromeo over the
property.
This signaled the beginning of court battles waged by Borromeo not only against Lao, but also
against UCPB and the latter's lawyers, battles which he (Borromeo) fought contemporaneously with his
court war with Traders Royal Bank.
1. RTC Case No. R-21009; AC-G.R. No. CV-07396; G.R. No. 82273
The first of this new series of court battles was, as just stated, the action initiated by Samson Lao
in the Regional Trial Court of Cebu (Branch 12), docketed as Case No. R-21009, for consolidation of title in
his favor over the 122-square-meter lot subject of the UCPB mortgage, in accordance with Article 1007 of
the Civil Code. In this suit Lao was represented by Atty. Alfredo Perez, who was later substituted by Atty.
Antonio Regis. Borromeo contested Lao's application.
Judgment was in due course rendered by the RTC (Branch 12, Hon. Francis Militante, presiding)
denying consolidation because the transaction between the parties could not be construed as a sale with
pacto de retro being in law an equitable mortgage; however, Borromeo was ordered to pay Lao the sum of
P170,000.00, representing the price stipulated in the sale a retro, plus the amounts paid by Lao for capital
gains and other taxes in connection with the transaction (P10,497.50).
Both Lao and Borromeo appealed to the Court of Appeals. Lao's appeal was dismissed for failure of
his lawyer to file brief in his behalf. Borromeo's appeal AC-G.R. No. CV-07396 resulted in a Decision
by the Court of Appeals dated December 14, 1987, affirming the RTC's judgment in toto.
The Appellate Court's decision was, in turn, affirmed by this Court (Third Division) in a four-page
Resolution dated September 13, 1989, promulgated in G.R. No. 82273 an appeal also taken by
Borromeo. Borromeo filed a motion for reconsideration on several grounds, one of which was that the
resolution of September 13, 1989 was unconstitutional because contrary to "Sec. 4 (3), Art. VIII of the
Constitution," it was not signed by any Justice of the Division, and there was "no way of knowing which
justices had deliberated and voted thereon, nor of any concurrence of at least three of the members."
Since the motion was not filed until after there had been an entry of judgment, Borromeo having failed to
move for reconsideration within the reglementary period, the same was simply noted without action, in a
Resolution dated November 27, 1989.
Notices of the foregoing Resolutions were, in accordance with established rule and practice, sent to
Borromeo over the signatures of the Clerk of Court and Assistant Clerk of Court (namely: Attys. Julieta Y.
CARREON and Alfredo MARASIGAN, respectively).
a. RTC Case No. CEB-8679

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Following the same aberrant pattern of his judicial campaign against Traders Royal Bank, Borromeo
attempted to vent his resentment even against the Supreme Court officers who, as just stated, had given
him notices of the adverse dispositions of this Court's Third Division. He filed Civil Case No. CEB-8679 in
the Cebu City RTC (CFI) for recovery of damages against "Attys. Julieta Y. Carreon and Alfredo Marasigan,
Division Clerk of Court and Asst. Division Clerk of Court, Third Division, and Atty. Jose I. Ilustre, Chief of
Judicial Records Office." He charged them with usurpation of judicial functions, for allegedly "maliciously
and deviously issuing biased, fake, baseless and unconstitutional 'Resolution' and 'Entry of Judgment' in
G.R. No. 82273."
Summonses were issued to defendants by RTC Branch 18 (Judge Rafael R. Ybaez, presiding).
These processes were brought to the attention of this Court's Third Division. The latter resolved to treat
the matter as an incident in G.R. No. 82273, and referred it to the Court En Banc on April 25, 1990. By
Resolution (issued in said G.R. No. 82273, supra) dated June 1, 1990, the Court En Banc ordered Judge
Ybaez to quash the summonses, to dismiss Civil Case No. CEB-8679, and "not to issue summons or
otherwise to entertain cases of similar nature which may in the future be filed in his court." Accordingly,
Judge Ibaez issued an Order on June 6, 1990 quashing the summonses and dismissing the complaint in
said Civil Case No. CEB-8679.
The Resolution of June 1, 1990 explained to Borromeo in no little detail the nature and purpose of
notices sent by the Clerks of Court of decisions or resolutions of the Court En Banc or the Divisions, in this
wise:
This is not the first time that Mr. Borromeo has filed charges/complaints against officials of
the Court. In several letter complaints filed with the courts and the Ombudsman, Borromeo had
repeatedly alleged that he "suffered injustices," because of the disposition of the four (4) cases he
separately appealed to this Court which were resolved by minute resolutions, allegedly in violation
of Sections 4 (3), 13 and 14 of Article VIII of the 1987 Constitution. His invariable complaint is that
the resolutions which disposed of his cases do not bear the signatures of the Justices who
participated in the deliberations and resolutions and do not show that they voted therein. He
likewise complained that the resolutions bear no certification of the Chief Justice and that they did
not state the facts and the law on which they were based and were signed only by the Clerks of
Court and therefore "unconstitutional, null and void."
xxx

xxx

xxx

The Court reminds all lower courts, lawyers, and litigants that it disposes of the bulk of its
cases by minute resolutions and decrees them as final and executory, as were a case is patently
without merit, where the issues raised are factual in nature, where the decision appealed from is in
accord with the facts of the case and the applicable laws, where it is clear from the records that the
petition is filed merely to forestall the early execution of judgment and for non-compliance with the

Page 12 of 319
rules. The resolution denying due course always gives the legal basis. As emphasized in In Re:
Wenceslao Laureta, 148 SCRA 382, 417 [1987], "[T]he Court is not 'duty bound' to render signed
Decisions all the time. It has ample discretion to formulate Decisions and/or Minute Resolutions,
provided a legal basis is given, depending on its evaluation of a case" . . . This is the only way
whereby it can act on all cases filed before it and, accordingly, discharge its constitutional
functions. . . .
. . . (W)hen the Court, after deliberating on a petition and any subsequent pleadings,
manifestations, comments, or motions decides to deny due course to the petition and states that
the questions raised are factual, or no reversible error in the respondent court's decision is shown,
or for some other legal basis stated in the resolution, there is sufficient compliance with the
constitutional requirement . . . (of Section 14, Article VIII of the Constitution "that no petition for
review or motion for reconsideration shall be refused due course or denied without stating the legal
basis thereof").
For a prompt dispatch of actions of the Court, minute resolutions are promulgated by the
Court through the Clerk of Court, who takes charge of sending copies thereof to the parties
concerned by quoting verbatim the resolution issued on a particular case. It is the Clerk of Court's
duty to inform the parties of the action taken on their cases quoting the resolution adopted by the
Court. The Clerk of Court never participates in the deliberations of a case. All decisions and
resolutions are actions of the Court. The Clerk of Court merely transmits the Court's action. This
was explained in the case G.R. No. 56280, "Rhine Marketing Corp. v. Felix Gravante, et al.,"
where, in a resolution dated July 6, 1981, the Court said "[M]inute resolutions of this Court
denying or dismissing unmeritorious petitions like the petition in the case at bar, are the result of a
thorough deliberation among the members of this Court, which does not and cannot delegate the
exercise of its judicial functions to its Clerk of Court or any of its subalterns, which should be
known to counsel. When a petition is denied or dismissed by this Court, this Court sustains the
challenged decision or order together with its findings of facts and legal conclusions.
Minute resolutions need not be signed by the members of the Court who took part in the
deliberations of a case nor do they require the certification of the Chief Justice. For to require
members of the Court to sign all resolutions issued would not only unduly delay the issuance of its
resolutions but a great amount of their time would be spent on functions more properly performed
by the Clerk of Court and which time could be more profitably used in the analysis of cases and the
formulation of decisions and orders of important nature and character. Even with the use of this
procedure, the Court is still struggling to wipe out the backlogs accumulated over the years and
meet the ever increasing number of cases coming to it. . . .
b. RTC CIVIL CASE NO. CEB-(6501) 6740; G.R. No. 84054

Page 13 of 319
It is now necessary to digress a little and advert to actions which, while having no relation to the
UCPB, TRB or SBTC, are relevant because they were the predicates for other suits filed by Joaquin
Borromeo against administrative officers of the Supreme Court and the Judge who decided one of the
cases adversely to him.
The record shows that on or about December 11, 1987, Borromeo filed a civil action for damages
against a certain Thomas B. Tan and Marjem Pharmacy, docketed as Civil Case No. CEB-6501. On January
12, 1988, the trial court dismissed the case, without prejudice, for failure to state a cause of action and
prematurity (for non-compliance with P.D. 1508).
What Borromeo did was simply to re-file the same complaint with the same Court, on March 18,
1988. This time it was docketed as Civil Case No. CEB-6740, and assigned to Branch 17 of the RTC of
Cebu presided by Hon. Mario Dizon. Again, however, on defendants' motion, the trial court dismissed the
case, in an order dated May 28, 1988. His first and second motions for reconsideration having been
denied, Borromeo filed a petition for review before this Court, docketed as G.R. No. 84054 (Joaquin T.
Borromeo vs. Tomas Tan and Non. Mario Dizon).
In a Resolution dated August 3, 1988, the Court required petitioner to comply with the rules by
submitting a verified statement of material dates and paying the docket and legal research fund fees; it
also referred him to the Citizens Legal Assistance Office for help in the case. His petition was eventually
dismissed by Resolution of the Second Division dated November 21, 1988, for failure on his part to show
any reversible error in the trial court's judgment. His motion for reconsideration was denied with finality,
by Resolution dated January 18, 1989.
Borromeo wrote to Atty. Fermin J. Garma (Clerk of Court of the Second Division) on April 27, 1989
once more remonstrating that the resolutions received by him had not been signed by any Justice, set
forth no findings of fact or law, and had no certification of the Chief Justice. Atty. Garma replied to him on
May 19, 1989, pointing out that "the minute resolutions of this Court denying dismissing petitions, like the
petition in the case at bar, which was denied for failure of the counsel and/or petitioner to sufficiently show
that the Regional Trial Court of Cebu, Branch 17, had committed any reversible error in the questioned
judgment [resolution dated November 21, 1988], are the result of a thorough deliberation among the
members of this Court, which does not and cannot delegate the exercise of its judicial function to its Clerk
of Court or any of its subalterns. When the petition is denied or dismissed by the Court, it sustains the
challenged decision or order together with its findings of facts and legal conclusions."
Borromeo obviously had learned nothing from the extended Resolution of June 1, 1990 in G.R. No.
82273, supra (or the earlier communications to him on the same subject) which had so clearly pointed out
that minute resolutions of the Court are as much the product of the Members' deliberations as full-blown
decisions or resolutions, and that the intervention of the Clerk consists merely in the ministerial and
routinary function of communicating the Court's action to the parties concerned.

Page 14 of 319
c. RTC Case No. CEB-9042
What Borromeo did next, evidently smarting from this latest judicial rebuff, yet another in an
already long series, was to commence a suit against Supreme Court (Second Division) Clerk of Court
Fermin J. Garma and Assistant Clerk of Court Tomasita Dris. They were the officers who had sent him
notices of the unfavorable resolutions in G.R. No. 84054, supra. His suit, filed on June 1, 1990, was
docketed as Case No. CEB-9042 (Branch 8, Hon. Bernardo Salas presiding). Therein he complained
essentially of the same thing he had been harping on all along: that in relation to G.R. No. 91030 in
which the Supreme Court dismissed his petition for "technical reasons" and failure to demonstrate any
reversible error in the challenged judgment the notice sent to him of the "unsigned and unspecific"
resolution of February 19, 1990, denying his motion for reconsideration had been signed only by the
defendant clerks of court and not by the Justices. According to him, he had thereupon written letters to
defendants demanding an explanation for said "patently unjust and un-Constitutional resolutions," which
they ignored; defendants had usurped judicial functions by issuing resolutions signed only by them and
not by any Justice, and without stating the factual and legal basis thereof; and defendants' "wanton,
malicious and patently abusive acts" had caused him "grave mental anguish, severe moral shock,
embarrassment, sleepless nights and worry;" and consequently, he was entitled to moral damages of no
less than P20,000.00 and exemplary damages of P10,000.00, and litigation expenses of P5,000.00.
On June 8, 1990, Judge Renato C. Dacudao ordered the records of the case transmitted to the
Supreme Court conformably with its Resolution dated June 1, 1990 in G.R. No. 82273, entitled "Joaquin T.
Borromeo vs. Hon. Court of Appeals and Samson-Lao," supra directing that all complaints against
officers of that Court be forwarded to it for appropriate action.
Borromeo filed a "Manifestation/Motion" dated June 27, 1990 asking the Court to "rectify the
injustices" committed against him in G.R. Nos. 83306, 84999, 87897, 77248 and 84054. This the Court
ordered expunged from the record (Resolution, July 19, 1990).
2. RTC Case No. R-21880; CA-G.R. CV No. 10951; G.R. No. 87897
Borromeo also sued to stop UCPB from foreclosing the mortgage on his property. In the Cebu City
RTC, he filed a complaint for "Damages with Injunction," which was docketed as Civil Case No. R-21880
(Joaquin T. Borromeo vs. United Coconut Planters Bank, et al.). Named defendants in the complaint were
UCPB, Enrique Farrarons (UCPB Cebu Branch Manager) and Samson K. Lao. UCPB was represented in the
action by Atty. Danilo Deen, and for a time, by Atty. Honorato Hermosisima (both being then resident
partners of ACCRA Law Office). Lao was represented by Atty. Antonio Regis. Once again, Borromeo was
rebuffed. The Cebu RTC (Br. 11, Judge Valeriano R. Tomol, Jr. presiding) dismissed the complaint, upheld
UCPB's right to foreclose, and granted its counterclaim for moral damages in the sum of P20,000.00;
attorney's fees amounting to P10,000.00; and litigation expenses of P1,000.00.

Page 15 of 319
Borromeo perfected an appeal to the Court of Appeals where it was docketed as CA-G.R. CV No.
10951. That Court, thru its Ninth Division (per Martinez, J., ponente, with de la Fuente and Pe, JJ.,
concurring), dismissed his appeal and affirmed the Trial Court's judgment.
Borromeo filed a petition far review with the Supreme Court which, in G.R. No. 87897 dismissed it
for insufficiency in form and substance and for being "largely unintelligible." Borromeo's motion for
reconsideration was denied by Resolution dated June 25, 1989. A second motion for reconsideration was
denied in a Resolution dated July 31, 1989 which directed as well entry of judgment (effected on August 1,
1989). In this Resolution, the Court (First Division) said:
The Court considered the Motion for Reconsideration dated July 4, 1989 filed by petitioner
himself and Resolved to DENY the same for lack of merit, the motion having been filed without
"express leave of court" (Section 2, Rule 52, Rules of Court) apart from being a reiteration merely
of the averments of the Petition for Review dated April 14, 1989 and the Motion for Reconsideration
dated May 25, 1989. It should be noted that petitioner's claims have already been twice rejected as
without merit, first by the Regional Trial Court of Cebu and then by the Court of Appeals. What
petitioner desires obviously is to have a third ruling on the merits of his claims, this time by this
Court. Petitioner is advised that a review of a decision of the Court of Appeals is not a matter of
right but of sound judicial discretion and will be granted only when there is a special and important
reason therefor (Section 4, Rule 45); and a petition for review may be dismissed summarily on the
ground that "the appeal is without merit, or is prosecuted manifestly for delay or the question
raised is too unsubstantial to require consideration" (Section 3, Rule 45), or that only questions of
fact are raised in the petition, or the petition otherwise fails to comply with the formal requisites
prescribed therefor (Sections 1 and 2, Rule 45; Circular No. 1-88). Petitioner is further advised that
the first sentence of Section 14, Article VIII of the 1987 Constitution refers to a decision, and has
no application to a resolution as to which said section pertinently provides that a resolution denying
a motion for reconsideration need state only the legal basis therefor; and that the resolution of
June 26, 1989 denying petitioner's first Motion for Reconsideration dated May 25, 1989 does indeed
state the legal reasons therefor. The plain and patent signification of the grounds for denial set out
in the Resolution of June 26, 1989 is that the petitioner's arguments aimed at the setting aside
of the resolution denying the petition for review and consequently bringing about a review of the
decision of the Court of Appeals had failed to persuade the Court that the errors imputed to the
Court of Appeals had indeed been committed and therefore, there was no cause to modify the
conclusions set forth in that judgment; and in such a case, there is obviously no point in
reproducing and restating the conclusions and reasons therefor of the Court of Appeals.
Premises considered, the Court further Resolved to DIRECT ENTRY OF JUDGMENT.
On August 13, 1989 Borromeo wrote to Atty. Estrella C. Pagtanac, then the Clerk of Court of the
Court's First Division, denouncing the resolution above mentioned as "a LITANY OF LIES, EVASIONS, and

Page 16 of 319
ABSURD SELF-SERVING LOGIC from a Supreme Court deluded and drunk with power which it has
forgotten emanates from the people," aside from being "patently UNCONSTITUTIONAL for absence of
signatures and facts and law: . . . and characterizing the conclusions therein as "the height of
ARROGANCE

and

ARBITRARINESS

assuming

KING-LIKE

AND

EVEN

GOD-LIKE

POWER totally at variance and contradicted by . . . CONSTITUTIONAL provisions . . ." To the letter
Borromeo attached copies of (1) his "Open Letter to the Ombudsman" dated August 10, 1989 protesting
the Court's "issuing UNSIGNED, UNSPECIFIC, and BASELESS 'MINUTE RESOLUTIONS;'" (2) his "Open
Letter of Warning" dated August 12, 1989; and (3) a communication of Domingo M. Quimlat, News
Ombudsman, Phil. Daily Inquirer, dated August 10, 1989. His letter was ordered expunged from the record
because containing "false, impertinent and scandalous matter (Section 5, Rule 9 of the Rules of Court)."
Another letter of the same ilk, dated November 7, 1989, was simply "NOTED without action" by Resolution
promulgated on December 13, 1989.
3. RTC Case No. CEB-4852; CA G.R. SP No. 14519; G.R. No. 84999
In arrant disregard of established rule and practice, Borromeo filed another action to invalidate the
foreclosure effected at the instance of UCPB, which he had unsuccessfully tried to prevent in Case No.
CEB-21880. This was Civil Case No. CEB-4852 of the Cebu City RTC (Joaquin T. Borromeo vs. UCPB, et al.)
for "Annulment of Title with Damages." Here, UCPB was represented by Atty. Laurence Fernandez, in
consultation with Atty. Deen.
On December 26, 1987, the Cebu City RTC (Br. VII, Hon. Generoso A. Juaban, presiding) dismissed
the complaint on the ground of litis pendentia and ordered Borromeo to pay attorney's fees (P5,000.00)
and litigation expenses (P1,000.00).
Borromeo instituted a certiorari action in the Court of Appeals to annul this judgment (CA G.R. SP
No. 14519); but his action was dismissed by the Appellate Court on June 7, 1988 on account of his failure
to comply with that Court's Resolution of May 13, 1988 for submission of certified true copies of the Trial
Court's decision of December 26, 1987 and its Order of February 26, 1988, and for statement of "the
dates he received . . . (said) decision and . . . order."
Borromeo went up to this Court on appeal, his appeal being docketed as G.R. No. 84999. In a
Resolution dated October 10, 1988, the Second Division required comment on Borromeo's petition for
review by the respondents therein named, and required Borromeo to secure the services of counsel. On
November 9, 1988, Atty. Jose L. Cerilles entered his appearance for Borromeo. After due proceedings,
Borromeo's petition was dismissed, by Resolution dated March 6, 1989 of the Second Division for failure to
sufficiently show that the Court of Appeals had committed any reversible error in the questioned
judgment. His motion for reconsideration dated April 4, 1989, again complaining that the resolution
contained no findings of fact and law, was denied.

Page 17 of 319
a. RTC Case No. CEB-8178
Predictably, another action, Civil Case No. CEB-8178, was commenced by Borromeo in the RTC of
Cebu City, this time against the Trial Judge who had lately rendered judgment adverse to him, Judge
Generoso Juaban. Also impleaded as defendants were UCPB, and Hon. Andres Narvasa (then Chairman,
First Division), Estrella G. Pagtanac and Marissa Villarama (then, respectively, Clerk of Court and Assistant
Clerk of Court of the First Division), and others. Judge German G. Lee of Branch 15 of said Court to
which the case was raffled caused issuance of summonses which were in due course served on
September 22, 1989, among others, on said defendants in and of the Supreme Court. In an En Banc
Resolution dated October 2, 1989 in G.R. No. 84999 this Court, required Judge Lee and the Clerk of
Court and Assistant Clerk of Court of the Cebu RTC to show cause why no disciplinary action should be
taken against them for issuing said summonses.
Shortly thereafter, Atty. Jose L. Cerilles who, as already stated, had for a time represented
Borromeo in G.R. No. 84999 filed with this Court his withdrawal of appearance, alleging that there was
"no compatibility" between him and his client, Borromeo because "Borromeo had been filing pleadings,
papers; etc. without . . . (his) knowledge and advice" and declaring that he had "not advised and . . .
(had) no hand in the filing of (said) Civil Case CEB 8178 before the Regional Trial Court in Cebu. On the
other hand, Judge Lee, in his "Compliance" dated October 23, 1989, apologized to the Court and informed
it that he had already promulgated an order dismissing Civil Case No. CEB-8178 on motion of the principal
defendants therein, namely, Judge Generoso Juaban and United Coconut Planters Bank (UCPB). Atty.
Cerilles' withdrawal of appearance, and Judge Lee's compliance, were noted by the Court in its Resolution
dated November 29, 1989.
4. RTC Case No. CEB-374; CA-G.R. CV No. 04097; G.R. No. 77248
It is germane to advert to one more transaction between Borromeo and Samson K. Lao which gave
rise to another action that ultimately landed in this Court.
The transaction involved a parcel of land of Borromeo's known as the "San Jose Property" (TCT No.
34785). Borromeo sued Lao and another person (Mariano Logarta) in the Cebu Regional Trial Court on the
theory that his contract with the latter was not an absolute sale but an equitable mortgage. The action
was docketed as Case No. CEB-374. Judgment was rendered against him by the Trial Court (Branch 12)
declaring valid and binding the purchase of the property by Lao from him, and the subsequent sale thereof
by Lao to Logarta. Borromeo appealed to the Court of Appeals, but that Court, in CA-G.R. CV No. 04097,
affirmed the Trial Court's judgment, by Decision promulgated on October 10, 1986.
Borromeo came up to this Court. on appeal, his review petition being docketed as G.R. No. 77248.
By Resolution of the Second Division of March 16, 1987, however, his petition was denied for the reason
that "a) the petition as well as the docket and legal research fund fees were filed and paid late; and (b)

Page 18 of 319
the issues raised are factual and the findings thereon of the Court of Appeals are final." He moved for
reconsideration; this was denied by Resolution dated June 3, 1987.
He thereafter insistently and persistently still sought reconsideration of said adverse resolutions
through various motions and letters, all of which were denied. One of his letters inter alia complaining
that the notice sent to him by the Clerk of Court did not bear the signature of any Justice elicited the
following reply from Atty. Julieta Y. Carreon, Clerk of Court of the Third Division, dated July 10, 1987,
reading as follows:
Dear Mr. Borromeo:
This refers to your letter dated June 9, 1987 requesting for a copy of the actual resolution
with the signatures of all the Justices of the Second Division in Case G.R. No. 77243 whereby the
motion for reconsideration of the dismissal of the petition was denied for lack of merit.
In connection therewith, allow us to cite for your guidance, Resolution dated July 6, 1981 in
G.R. No. 56280, Rhine Marketing Corp. v. Felix Gravante, Jr., et al., wherein the Supreme Court
declared that "(m)inute resolutions of this Court denying or dismissing unmeritorious petitions like
the petition in the case at bar, are the result of a thorough deliberation among the members of this
Court, which does not and cannot delegate the exercise of its judicial functions to its Clerk of Court
or any of its subalterns, which should be known to counsel. When a petition is denied or dismissed
by this Court, this Court sustains the challenged decision or order together with its findings of facts
and legal conclusions." It is the Clerk of Court's duty to notify the parties of the action taken on
their case by quoting the resolution adopted by the Court.
Very truly yours,
JULIETA Y. CARREON
B. CRIMINAL CASES
Just as he had done with regard to the cases involving the Traders Royal Bank, and similarly
without foundation, Borromeo attempted to hold his adversaries in the cases concerning the UCPB
criminally liable.
1. Case No; OMB-VIS-89-00181
In relation to the dispositions made of Borromeo's appeals and other attempts to overturn the
judgment of the RTC in Civil Case No. 21880, Borromeo filed with the Office of the Ombudsman (Visayas)
on August 18, 1989, a complaint against the Chairman and Members of the Supreme Court's First
Division; the Members of the Ninth Division of the Court of Appeals, Secretary of Justice Sedfrey Ordoez,
Undersecretary of Justice Silvestre Bello III, and Cebu City Prosecutor Jufelinito Pareja, charging them
with violations of the Anti-Graft and Corrupt Practices Act and the Revised Penal Code.
By Resolution dated January 12, 1990, the Office of the Ombudsman dismissed Borromeo's
complaint, opining that the matters therein dealt with had already been tried and their merits determined

Page 19 of 319
by different courts including the Supreme Court (decision, June 26, 1989, in G.R. No. 87987). The
resolution inter alia stated that, "Finally, we find it unreasonable for complainant to dispute and defiantly
refuse to acknowledge the authority of the decree rendered by the highest tribunal of the land in this case.
. . ."
2. Case No. OMB-VIS-90-00418
A second complaint was filed by Borromeo with the Office of the Ombudsman (Visayas), dated
January 12, 1990, against Atty. Julieta Carreon, Clerk of Court of the Third Division, Supreme Court, and
others, charging them with a violation of R.A. 3019 (and the Constitution, the Rules of Court, etc.) for
supposedly usurping judicial functions in that they issued Supreme Court resolutions (actually, notices of
resolutions) in connection with G.R. No. 82273 which did not bear the justices' signatures. In a Resolution
dated March 19, 1990, the Office of the Ombudsman dismissed his complaint for "lack of merit" declaring
inter alia that "in all the questioned actuations of the respondents alleged to constitute usurpation . . . it
cannot be reasonably and fairly inferred that respondents really were the ones rendering them," and "it is
not the prerogative of this office to review the correctness of judicial resolutions."
III. CASES INVOLVING SECURITY BANK & TRUST CO. (SBTC)
A. CIVIL CASES
1. RTC Case No. 21615; CA-G.R. No. 20617; G.R. No. 94769
The third banking institution which Joaquin T. Borromeo engaged in running court battles, was the
Security Bank & Trust Company (SBTC). From it Borromeo had obtained five (5) loans in the aggregate
sum of P189,126.19, consolidated in a single Promissory Note on May 31, 1979. To secure payment
thereof, Summa Insurance Corp. (Summa) issued a performance bond which set a limit of P200,000.00 on
its liability thereunder. Again, as in the case of his obligations to Traders Royal Bank and UCPB, Borromeo
failed to discharge his contractual obligations. Hence, SBTC brought an action in the Cebu City RTC against
Borromeo and Summa for collection.
The action was docketed as Civil Case No. R-21615, and was assigned to Branch 10, Judge
Leonardo Caares, presiding. Plaintiff SBTC was represented by Atty. Edgar Gica, who later withdrew and
was substituted by the law firm, HERSINLAW. The latter appeared in the suit through Atty. Wilfredo
Navarro.
Judgment by default was rendered in the case on January 5, 1989; both defendents were
sentenced to pay to SBTC, solidarily, the amount of P436,771.32; 25% thereof as attorney's fees (but in
no case less than P20,000.00); and P5,000.00 as litigation expenses; and the costs. A writ of execution
issued in due course pursuant to which an immovable of Borromeo was levied on, and eventually sold at
public auction on October 19, 1989 in favor of the highest bidder, SBTC.

Page 20 of 319
On February 5, 1990, Borromeo filed a motion to set aside the judgment by default, but the same
was denied on March 6, 1990. His Motion for Reconsideration having likewise been denied, Borromeo went
to the Court of Appeals for relief (CA-G.R. No. 20617), but the latter dismissed his petition. Failing in his
bid for reconsideration, Borromeo appealed to this Court on certiorari his appeal being docketed as G.R.
No. 94769. On September 17, 1990, this Court dismissed his petition, and subsequently denied with
finality his motion for reconsideration. Entry of Judgment was made on December 26, 1990.
However, as will now be narrated, and as might now have been anticipated in light of his history of
recalcitrance and bellicosity, these proceedings did not signify the end of litigation concerning Borromeo's
aforesaid contractual commitments to SBTC, but only marked the start of another congeries of actions and
proceedings, civil and criminal concerning the same matter, instituted by Borromeo.
2. RTC Case No. CEB-9267
While G.R. No. 94769 was yet pending in the Supreme Court, Borromeo commenced a suit of his
own in the Cebu RTC against SBTC; the lawyers who represented it in Civil Case No. R-21625
HERSINLAW, Atty. Wilfredo Navarro, Atty. Edgar Gica; and even the Judge who tried and disposed of the
suit, Hon. Leonardo Caares. He denominated his action, docketed as Civil Case No. CEB-9267, as one for
"Damages from Denial of Due Process, Breach of Contract, Fraud, Unjust Judgment, with Restraining
Order and Injunction." His complaint accused defendants of "wanton, malicious and deceitful acts" in
"conniving to deny plaintiff due process and defraud him through excessive attorney's fees," which acts
caused him grave mental and moral shock, sleepless nights, worry, social embarrassment and severe
anxiety for which he sought payment of moral and exemplary damages as well as litigation expenses.
By Order dated May 21, 1991, the RTC of Cebu City, Branch 16 (Hon. Godardo Jacinto, presiding)
granted the demurrer to evidence filed by defendants and dismissed the complaint, holding that "since
plaintiff failed to introduce evidence to support . . . (his) causes of action asserted . . ., it would be
superfluous to still require defendants to present their own evidence as there is nothing for them to
controvert."
2. RTC Case No. CEB-10458 CA-G.R. CV No. 39047
Nothing daunted, and running true to form, Borromeo filed on July 2, 1991 still another suit
against the same parties SBTC, HERSINLAW, and Judge Caares but now including Judge Godardo
Jacinto, who had rendered the latest judgment against him. This suit, docketed as Civil Case No. CEB10458, was, according to Borromeo, one "for Damages (For Unjust Judgment and Orders, Denial of Equal
Protection of the Laws Violation of the Constitution, Fraud and Breach of Contract)." Borromeo faulted
Judges Caares and Jacinto "for the way they decided the two cases (CVR-21615 & CEB NO. 9267)," and
contended that defendants committed "wanton, malicious, and unjust acts" by "conniving to defraud
plaintiff and deny him equal protection of the laws and due process," on account of which he had been

Page 21 of 319
"caused untold mental anguish, moral shock, worry, sleepless nights, and embarrassment for which the
former are liable under Arts. 20, 21, 27, and 32 of the Civil Code."
The defendants filed motions to dismiss. By Order dated August 30, 1991, the RTC of Cebu City,
Branch 15 (Judge German G. Lee, Jr., presiding) dismissed the complaint on grounds of res judicata,
immunity of judges from liability in the performance of their official functions, and lack of jurisdiction.
Borromeo took an appeal to the Court of Appeals, which docketed it as CA-G.R. CV No. 39047.
In the course thereof, he filed motions to cite Atty. Wilfredo F. Navarro, lawyer of SBTC, for
contempt of court. The motions were denied by Resolution of the Court of Appeals (Special 7th Division)
dated April 13, 1993. Said the Court:
Stripped of their disparaging and intemperate innuendoes, the subject motions, in fact,
proffer nothing but a stark difference in opinion as to what can, or cannot, be considered res
judicata under the circumstances.
xxx

xxx

xxx

By their distinct disdainful tenor towards the appellees, and his apparent penchant for
argumentum ad hominen, it is, on the contrary the appellant who precariously treads the
acceptable limits of argumentation and personal advocacy. The Court, moreover, takes particular
note of the irresponsible leaflets he admits to have authored and finds them highly reprehensible
and needlessly derogatory to the dignity, honor and reputation of the Courts. That he is not a
licensed law practitioner is, in fact, the only reason that his otherwise contumacious behavior is
presently accorded the patience and leniency it probably does not deserve. Considering the
temperament he has, by far, exhibited, the appellant is, however, sufficiently warned that similar
displays in the future shall accordingly be dealt with with commensurate severity.
IV. OTHER CASES
A. RTC Case No. CEB-2074; CA-G.R. CV No. 14770; G.R. No. 98929
One other case arising from another transaction of Borromeo with Samson K. Lao is pertinent. This
is Case No. CEB-2974 of the Regional Trial Court of Cebu. It appears that sometime in 1979, Borromeo
was granted a loan of P165,000.00 by the Philippine Bank of Communications (PBCom) on the security of
a lot belonging to him in San Jose Street, Cebu City, covered by TCT No. 34785. Later, Borromeo obtained
a letter of credit in the amount of P37,000.00 from Republic Planters Bank, with Samson Lao as co-maker.
Borromeo failed to pay his obligations; Lao agreed to, and did pay Borromeo's obligations to both banks
(PBCom and Republic), in consideration of which a deed of sale was executed in his favor by Borromeo

Page 22 of 319
over two (2) parcels of land, one of which was that mortgaged to PBCom, as above stated. Lao then
mortgaged the land to PBCom as security for his own loan in the amount of P240,000.00.
Borromeo subsequently sued PBCom, some of its personnel, and Samson Lao in the Cebu Regional
Trial Court alleging that the defendants had conspired to deprive him of his property. Judgment was
rendered against him by the Trial Court. Borromeo elevated the case to the Court of Appeals where his
appeal was docketed as CA-G.R. CV No. 14770. On March 21, 1990, said Court rendered judgment
affirming the Trial Court's decision, and on February 7, 1991, issued a Resolution denying Borromeo's
motion for reconsideration. His appeal to this Court, docketed as G.R. No. 98929, was given short shrift.
On May 29, 1991, the Court (First Division) promulgated a Resolution denying his petition for review "for
being factual and for failure . . . to sufficiently show that respondent court had committed any reversible
error in its questioned judgment."
Stubbornly, in his motion for reconsideration, he insisted the notices of the resolutions sent to him
were unconstitutional and void because bearing no signatures of the Justices who had taken part in
approving the resolution therein mentioned.
B. RTC Case No. CEB-11528
What would seem to be the latest judicial dispositions rendered against Borromeo, at least as of
date of this Resolution, are two orders issued in Civil Case No. CEB-11528 of the Regional Trial Court at
Cebu City (Branch 18), which was yet another case filed by Borromeo outlandishly founded on the theory
that a judgment promulgated against him by the Supreme Court (Third Division) was wrong and "unjust."
Impleaded as defendant in the action was former Chief Justice Marcelo B. Fernan, as Chairman of the
Third Division at the time in question. On August 31, 1994 the presiding judge, Hon. Galicano O.
Arriesgado, issued a Resolution inter alia dismissing Borromeo's complaint "on grounds of lack of
jurisdiction and res judicata." His Honor made the following pertinent observations:
. . . (T)his Court is of the well-considered view and so holds that this Court has indeed no
jurisdiction to review, interpret or reverse the judgment or order of the Honorable Supreme Court.
The acts or omissions complained of by the plaintiff against the herein defendant and the other
personnel of the highest Court of the land as alleged in paragraphs 6 to 12 of plaintiff's complaint
are certainly beyond the sphere of this humble court to consider and pass upon to determine their
propriety and legality. To try to review, interpret or reverse the judgment or order of the Honorable
Supreme Court would appear not only presumptuous but also contemptuous. As argued by the
lawyer for the defendant, a careful perusal of the allegations in the complaint clearly shows that all
material allegations thereof are directed against a resolution of the Supreme Court which was
allegedly issued by the Third Division composed of five (5) justices. No allegation is made directly
against defendant Marcelo B. Fernan in his personal capacity. That being the case, how could this
Court question the wisdom of the final order or judgment of the Supreme Court (Third Division)

Page 23 of 319
which according to the plaintiff himself had issued a resolution denying plaintiffs petition and
affirming the Lower Court's decision as reflected in the "Entry of Judgment." Perhaps, if there was
such violation of the Rules of Court, due process and Sec. 14, Art. 8 of the Constitution by the
defendant herein, the appropriate remedy should not have been obtained before this Court. For an
inferior court to reverse, interpret or review the acts of a superior court might be construed to a
certain degree as a show of an uncommon common sense. Lower courts are without supervising
jurisdiction to interpret or to reverse the judgment of the higher courts.
Borromeo's motion for reconsideration dated September 20, 1994 was denied "for lack of sufficient
factual and legal basis" by an Order dated November 15, 1994.
V. ADMINISTRATIVE CASE No. 3433
A. Complaint Against Lawyers of his Court Adversaries
Borromeo also initiated administrative disciplinary proceedings against the lawyers who had
appeared for his adversaries UCPB and Samson K. Lao in the actions above mentioned, and others.
As already mentioned, these lawyers were: Messrs. Laurence Fernandez, Danilo Deen, Honorato
Hermosisima, Antonio Regis, and Alfredo Perez. His complaint against them, docketed as Administrative
Case No. 3433, prayed for their disbarment. Borromeo averred that the respondent lawyers connived with
their clients in (1) maliciously misrepresenting a deed of sale with pacto de retro as a genuine sale,
although it was actually an equitable mortgage; (2) fraudulently depriving complainant of his proprietary
rights subject of the Deed of Sale; and (3) defying two lawful Court orders, all in violation of their lawyer's
oath to do no falsehood nor consent to the doing of any in Court. Borromeo alleged that respondents
Perez and Regis falsely attempted to consolidate title to his property in favor of Lao.
B. Answer of Respondent Lawyers
The respondent lawyers denounced the disbarment complaint as "absolutely baseless and nothing
but pure harassment." In a pleading dated July 10, 1990, entitled "Comments and Counter Motion to Cite
Joaquin Borromeo in Contempt of Court;" July 10, 1990, filed by the Integrated Bar of the Philippines
Cebu City Chapter, signed by Domero C. Estenzo (President), Juliano Neri (Vice-President), Ulysses
Antonio C. Yap (Treasurer); Felipe B. Velasquez (Secretary), Corazon E. Valencia (Director), Virgilio U.
Lainid (Director), Manuel A. Espina (Director), Ildefonsa A. Ybaez (Director), Sylvia G. Almase (Director),
and Ana Mar Evangelista P. Batiguin (Auditor). The lawyers made the following observations:
It is ironic. While men of the legal profession regard members of the Judiciary with
deferential awe and respect sometimes to the extent of cowering before the might of the courts,
here is a non-lawyer who, with gleeful abandon and unmitigated insolence, has cast aspersions and
shown utter disregard to the authority and name of the courts.

Page 24 of 319
And lawyers included. For indeed, it is very unfortunate that here is a non-lawyer who uses
the instruments of justice to harass lawyers and courts who crosses his path more especially if their
actuations do not conform with his whims and caprices.
Adverting to letters publicly circulated by Borromeo, inter alia charging then Chief Justice Marcelo
B. Fernan with supposed infidelity and violation of the constitution, etc., the lawyers went on to say the
following:
The conduct and statement of Borromeo against this Honorable Court, and other members
of the Judiciary are clearly and grossly disrespectful, insolent and contemptuous. They tend to
bring dishonor to the Judiciary and subvert the public confidence on the courts. If unchecked, the
scurrilous attacks will undermine the dignity of the courts and will result in the loss of confidence in
the country's judicial system and administration of justice.
. . . (S)omething should be done to protect the integrity of the courts and the legal
profession. So many baseless badmouthing have been made by Borromeo against this Honorable
Court and other courts that for him to go scot-free would certainly be demoralizing to members of
the profession who afforded the court with all the respect and esteem due them.
Subsequently, in the same proceeding; Borromeo filed another pleading protesting the alleged
"refusal" of the Cebu City Chapter of the Integrated Bar of the Philippines to act on his disbarment cases
"filed against its members."
C. Decision of the IBP
On March 28, 1994, the National Executive Director, IBP (Atty. Jose Aguila Grapilon) transmitted to
this Court the notice and copy of the decision in the case, reached after due investigation, as well as the
corresponding records in seven (7) volumes. Said decision approved and adopted the Report and
Recommendation dated December 15, 1993 of Atty. Manuel P. Legaspi, President, IBP, Cebu City Chapter,
representing the IBP Commission on Bar Discipline, recommending dismissal of the complaint as against
all the respondents and the issuance of a "warning to Borromeo to be more cautious and not be
precipitately indiscriminate in the filing of administrative complaints against lawyers."
VI. SCURRILOUS WRITINGS
Forming part of the records of several cases in this Court are copies of letters ("open" or
otherwise), "circulars," flyers or leaflets harshly and quite unwarrantedly derogatory of the many court
judgments or directives against him and defamatory of his adversaries and their lawyers and employees,
as well as the judges and court employees involved in the said adverse dispositions some of which
scurrilous writings were adverted to by the respondent lawyers in Adm. Case No. 3433, supra. The writing
and circulation of these defamatory writing were apparently undertaken by Borromeo as a parallel activity

Page 25 of 319
to his "judicial adventures." The Court of Appeals had occasion to refer to his "apparent penchant for
argumentum ad hominen" and of the "irresponsible leaflets he admits to have authored . . . (which were
found to be) highly reprehensible and needlessly derogatory to the dignity, honor and reputation of the
Courts."
In those publicly circulated writings, he calls judges and lawyers ignorant, corrupt, oppressors,
violators of the Constitution and the laws, etc.
Sometime in July, 1990, for instance, he wrote to the editor of the "Daily Star" as regards the
reported conferment on then Chief Justice Marcelo B. Fernan of an "Award from the University of Texas for
his contributions in upholding the Rule of Law, Justice, etc.," stressing that Fernan "and the Supreme
Court persist in rendering rulings patently violative of the Constitution, Due Process and Rule of Law,
particularly in their issuance of so-called Minute Resolutions devoid of FACT or LAW or SIGNATURES . . ."
He sent a copy of his letter in the Supreme Court.
He circulated an "OPEN LETTER TO SC justices, Fernan," declaring that he had "suffered INJUSTICE
after INJUSTICE from you who are sworn to render TRUE JUSTICE but done the opposite, AND INSTEAD
OF RECTIFYING THEM, labeled my cases as 'frivolous, nuisance, and harassment suits' while failing to
refute the irrefutable evidences therein . . .;" in the same letter, he specified what he considered to be
some of "the terrible injustices inflicted on me by this Court."
In another letter to Chief Justice Fernan, he observed that "3 years after EDSA, your pledges have
not been fulfilled. Injustice continues and as you said, the courts are agents of oppression, instead of
being saviours and defenders of the people. The saddest part is that (referring again to minute
resolutions) even the Supreme Court, the court of last resort, many times, sanctions injustice and the
trampling of the rule of law and due process, and does not comply with the Constitution when it should be
the first to uphold and defend it . . . ." Another circulated letter of his, dated June 21, 1989 and captioned,
"Open Letter to Supreme Court Justices Marcelo Fernan and Andres Narvasa," repeated his plaint of
having "been the victim of many . . . 'Minute Resolutions' . . . which in effect sanction the theft and
landgrabbing and arson of my properties by TRADERS ROYAL BANK, UNITED COCONUT PLANTERS BANK,
AND one TOMAS B. TAN all without stating any FACT or LAW to support your dismissal of . . . (my)
cases, despite your firm assurances (Justice Fernan) that you would cite me such facts or laws (during our
talk in your house last March 12 1989);" and that "you in fact have no such facts or laws but simply want
to ram down a most unjust Ruling in favor of a wrongful party. . . ."
In another flyer entitled in big bold letters, "A Gov't That Lies! Blatant attempt to fool people!" he
mentions what he regards as "The blatant lies and contradictions of the Supreme Court, CA to support the
landgrabbing by Traders Royal Bank of Borromeos' Lands." Another flyer has at the center the caricature
of a person, seated on a throne marked Traders Royal Bank, surrounded by such statements as, "Sa TRB
para kami ay royalty. Nakaw at nakaw! Kawat Kawat! TRB WILL STEAL!" etc Still another "circular"

Page 26 of 319
proclaims: "So the public may know: Supreme Court minute resolutions w/o facts, law, or signatures
violate the Constitution" and ends with the admonition: "Supreme Court, Justice Fernan: STOP VIOLATING
THE CHARTER."
One other "circular" reads:
SC, NARVASA TYRANTS!!!

CODDLERS OF CROOKS!
VIOLATOR OF LAWS

by: JOAQUIN BORROMEO

NARVASA's SC has denied being a DESPOT nor has it shielded CROOKS in the judiciary.
Adding "The SCRA (SC Reports) will attest to this continuing vigilance Of the supreme
Court." These are lame, cowardly and self-serving denials and another "self-exoneration"
belied by evidence which speak for themselves (Res Ipsa Loquitor) (sic) the SCRA itself.
It is pure and simply TYRANNY when Narvasa and associates issued UNSIGNED, UNCLEAR,
SWEEPING "Minute Resolutions" devoid of CLEAR FACTS and LAWS in patent violation of
Secs. 4(3), 14, Art. 8 of the Constitution. It is precisely through said TYRANNICAL, and
UNCONSTITUTIONAL sham rulings that Narvasa & Co. have CODDLED CROOKS like crony
bank TRB, UCPB, and SBTC, and through said fake resolutions that Narvasa has LIED or
shown IGNORANCE of the LAW in ruling that CONSIGNATION IS NECESSARY IN RIGHT OF
REDEMPTION (GR 83306). Through said despotic resolutions, NARVASA & CO. have
sanctioned UCPB/ACCRA's defiance of court orders and naked land grabbing What are
these if not TYRANNY? (GR 84999).
Was it not tyranny for the SC to issue an Entry of Judgment without first resolving the
motion for reconsideration (G.R No. 82273). Was it not tyranny and abuse of power for the
SC to order a case dismissed against SC clerks (CEBV-8679) and declare justices and said
clerks "immune from suit" despite their failure to file any pleading? Were Narvasa & Co.
not in fact trampling on the rule of law and rules of court and DUE PROCESS in so doing?
(GR No. 82273).
TYRANTS will never admit that they are tyrants. But their acts speak for themselves!
NARVASA & ASSOC: ANSWER AND REFUTE THESE SERIOUS CHARGES OR RESIGN!!
IMPEACH NARVASA

Page 27 of 319
ISSUING

UNSIGNED,

SWEEPING,

UNCLEAR,

UNCONSTITUTIONAL

"MINUTE

RESOLUTIONS" VIOLATIVE OF SECS. 4(3), 14, ART. 8, Constitution

VIOLATING RULES OF COURT AND DUE PROCESS IN ORDERING CASE AGAINST SC
CLERKS (CEB-8679) DISMISSED DESPITE THE LATTER'S FAILURE TO FILE PLEADINGS;
HENCE IN DEFAULT
CORRUPTION

AND/OR

GROSS

IGNORANCE

OF

THE

LAW

IN

RULING,

THAT

CONSIGNATION IS NECESSARY IN RIGHT OF REDEMPTION, CONTRADICTING LAW AND

SC'S OWN RULINGS TO ALLOW CRONY BANK TRB TO STEALS LOTS WORTH P3 MILLION
CONDONING CRONY BANK UCPB'S DEFIANCE OF TWO LAWFUL COURT ORDERS AND
STEALING OF TITLE OF PROPERTY WORTH P4 MILLION
BEING JUDGE AND ACCUSED AT THE SAME TIME AND PREDICTABLY EXONERATING
HIMSELF AND FELLOW CORRUPT JUSTICES
DECLARING HIMSELF, JUSTICES, and even MERE CLERKS TO BE IMMUNE FROM SUIT AND
UN-ACCOUNTABLE TO THE PEOPLE and REFUSING TO ANSWER AND REFUTE CHARGES
AGAINST HIMSELF
JOAQUIN T. BORROMEO
Mabolo, Cebu City
Te. 7-56-49.
VI. IMMEDIATE ANTECEDENTS OF PROCEEDINGS AT BAR
A. Letter of Cebu City Chapter IBP, dated June 21, 1992
Copies of these circulars evidently found their way into the hands, among others, of some
members of the Cebu City Chapter of the Integrated Bar of the Philippines. Its President thereupon
addressed a letter to this Court, dated June 21, 1992, which (1) drew attention to one of them that last
quoted, above " . . . .sent to the IBP Cebu City Chapter and probably other officers . . . in Cebu,"
described as containing "highly libelous and defamatory remarks against the Supreme Court and the
whole justice system" and (2) in behalf of the Chapter's "officers and members," strongly urged the
Court "to impose sanctions against Mr. Borromeo for his condemnable act."
B. Resolution of July 22, 1993
Acting thereon, the Court En Banc issued a Resolution on July 22, 1993, requiring comment by
Borromeo on the letter, notice of which was sent to him by the Office of the Clerk of Court. The resolution
pertinently reads as follows:

Page 28 of 319
xxx

xxx

xxx

The records of the Court disclose inter alia that as early as April 4, 1989, the Acting Clerk of
Court, Atty. Luzviminda D. Puno, wrote a four page letter to Mr. Borromeo concerning G.R. No.
83306 (Joaquin T. Borromeo vs. Traders Royal Bank [referred to by Borromeo in the "circular"
adverted to by the relator herein, the IBP Cebu City Chapter]) and two (2) other cases also filed
with the Court by Borromeo: G.R. No. 77248 (Joaquin T. Borromeo v. Samson Lao and Mariano
Logarta) and G.R. No. 84054 (Joaquin T. Borromeo v. Hon. Mario Dizon and Tomas Tan), all
resolved adversely to him by different Divisions of the Court. In that letter Atty. Puno explained to
Borromeo very briefly the legal principles applicable to his cases and dealt with the matters
mentioned in his circular.
The records further disclose subsequent adverse rulings by the Court in other cases
instituted by Borromeo in this Court, i.e., G.R. No. 87897 (Joaquin T. Borromeo v. Court of Appeals,
et al.) and No. 82273 (Joaquin T. Borromeo v. Court of Appeals and Samson Lao), as well as the
existence of other communications made public by Borromeo reiterating the arguments already
passed upon by the court in his cases and condemning the court's rejection of those arguments.
Acting on the letter dated June 21, 1993 of the Cebu City Chapter of the Integrated Bar of
the Philippines thru its above named, President, and taking account of the related facts on record,
the Court Resolved:
1) to REQUIRE:
(a) the Clerk of Court (1) to DOCKET the matter at bar as a proceeding for contempt
against Joaquin T. Borromeo instituted at the relation of said Cebu City Chapter, Integrated
Bar of the Philippines, and (2) to SEND to the City Sheriff, Cebu City, notice of this
resolution and copies of the Chapter's letter dated June 21, 1993 together with its annexes;
and
(b) said City Sheriff of Cebu City to CAUSE PERSONAL SERVICE of said notice of resolution
and a copy of the Chapter's letter dated June 21, 1993, together with its annexes, on
Joaquin T. Borromeo at his address at Mabolo, Cebu City; and
2) to ORDER said Joaquin T. Borromeo, within ten (10) days from receipt of such notice and the IBP
Chapter's letter of June 21, 1993 and its annexes, to file a comment on the letter and its annexes
as well as on the other matters set forth in this resolution, serving copy thereof on the relator, the
Cebu City Chapter of the Integrated Bar of the Philippines, Palace of Justice Building, Capitol, Cebu
City.
SO ORDERED.

Page 29 of 319
1. Atty. Puno's Letter of April 4, 1989
Clerk of Court Puno's letter to Borromeo of April 4, 1989, referred to in the first paragraph of the
resolution just mentioned, explained to Borromeo for perhaps the second time, precisely the principles and
established practice relative to "minute resolutions" and notices thereof, treated of in several other
communications and resolutions sent to him by the Supreme Court, to wit: the letter received by him on
July 10, 1987, from Clerk of Court Julieta Y. Carreon (of this Court's Third Division) (in relation to G.R No.
77243 ) the letter to him of Clerk of Court (Second Division) Fermin J. Garma, dated May 19,
1989, and three resolutions of this Court, notices of which were in due course served on him, to wit: that
dated July 31, 1989, in G.R. No. 87897; that dated June 1, 1990 in G.R. No. 82274 (186 SCRA 1), and
that dated June 11, 1994 in G. R. No. 112928.
C. Borromeo's Comment of August 27, 1993
In response to the Resolution of July 22, 1993, Borromeo filed a Comment dated August 27, 1993
in which he alleged the following:
1) the resolution of July 22, 1993 (requiring comment) violates the Constitution which requires
"signatures and concurrence of majority of members of the High Court;" hence, "a certified copy
duly signed by Justices is respectfully requested;"
2) the Chief Justice and other Members of the Court should inhibit themselves "since they cannot
be the Accused and Judge at the same time, . . . (and) this case should be heard by an impartial
and independent body;"
3) the letter of Atty. Legaspi "is not verified nor signed by members of said (IBP Cebu Chapter)
Board; . . . is vague, unspecific, and sweeping" because failing to point out "what particular
statements in the circular are allegedly libelous and condemnable;" and does not appear that Atty.
Legaspi has authority to speak or file a complaint "in behalf of those accused in the "libelous
circular;"
4) in making the circular, he (Borromeo) "was exercising his rights of freedom of speech, of
expression, and to petition the government for redress of grievances as guaranteed by the
Constitution (Sec. 4, Art. III) and in accordance with the accountability of public officials;" the
circular

merely

states

the

truth

and

asks

for

justice

based

on

the

facts

and

the

law; . . . it is not libelous nor disrespectful but rather to be commended and encouraged; . . . Atty.
Legaspi . . . should specify under oath which statements are false and lies;
5) he "stands by the charges in his circular and is prepared to support them with pertinent facts,
evidence and law;" and it is "incumbent on the Hon. Chief Justice and members of the High Court
to either refute said charges or dispense the justice that they are duty bound to dispense.

Page 30 of 319
D. Resolution of September 30, 1993
After receipt of the comment, and desiring to accord Borromeo the fullest opportunity to explain his
side, and be reprsented by an attorney, the Court promulgated the following Resolution on September 30,
1993, notice of which was again served on him by the Office of the Clerk of Court.
. . . The return of service filed by Sheriff Jessie A. Belarmino, Office of the Clerk of Court Regional
Trial Court of Cebu City, dated August 26, 1993, and the Comment of Joaquin Borromeo, dated August 27,
1993, on the letter of President Manuel P. Legaspi of the relator dated June 21, 1993, are both NOTED.
After deliberating on the allegations of said Comment, the Court Resolved to GRANT Joaquin T. Borromeo
an additional period of fifteen (15) days from notice hereof within which to engage the services or
otherwise seek the assistance of a lawyer and submit such further arguments in addition to or in
amplification of those set out in his Comment dated August 27, 1993, if he be so minded.
SO ORDERED.
E. Borromeo's Supplemental Comment of October 15, 1992
Borromeo filed a "Supplemental Comment" dated October 15, 1992, reiterating the arguments and
allegations in his Comment of August 27, 1993, and setting forth "additional arguments and amplification
to . . . (said) Comment," viz.:
1) the IBP and Atty. Legaspi have failed "to specify and state under oath the alleged 'libelous'
remarks contained in the circular . . .; (they should) be ordered to file a VERIFIED COMPLAINT . . .
(failing in which, they should) be cited in contempt of court for making false charges and wasting
the precious time of this Highest Court by filing a baseless complaint;
2) the allegations in their circular are not libelous nor disrespectful but "are based on the TRUTH
and the LAW", namely:
a) "minute resolutions" bereft of signatures and clear facts and laws are patent violations of
Secs. 4(32), 13, 14, Art. VIII of the Constitution;
b) there is no basis nor thruth to this Hon. Court's affirmation to the Appelate Court's ruling
that the undersigned "lost" his right of redemption price, since no less than this Hon. Court
has ruled in many rulings that CONSIGNATION IS UNNECESSARY in right of redemption;
c) this Hon. Court has deplorably condoned crony banks TRB and UCPB's frauds and
defiance of court orders in G.R. Nos. 83306 and 878997 and 84999.
F. Borromeo's Manifestation of November 26, 1993

Page 31 of 319
Borromeo afterwards filed a "Manifestation" under date of November 26, 1993, adverting to "the
failure of the IBP and Atty. Legaspi to substantiate his charges under oath and the failure of the concerned
Justices to refute the charges in the alledged "libelous circular" and, construing these as "and admission of
the thruth in said circular," theorized that it is "incumbent on the said Justices to rectify their grave as well
as to dismiss Atty. Legaspi's baseless and false charges."
VII. THE COURT CONCLUSIONS
A. Respondent's Liability for Contempt of Court
Upon the indubitable facts on record, there can scarcely be any doubt of Borromeo's guilt of
contempt, for abuse of and interference with judicial rules and processes, gross disrespect to courts and
judges and improper conduct directly impeding, obstructing and degrading the administration of justice.
He has stubbornly litigated issues already declared to be without merit, obstinately closing his eyes to the
many rulings rendered adversely to him in many suits and proceedings, rulings which had become final
and executory, obdurately and unreasonably insisting on the application of his own individual version of
the rules, founded on nothing more than his personal (and quite erroneous) reading of the Constitution
and the law; he has insulted the judges and court officers, including the attorneys appearing for his
adversaries, needlessly overloaded the court dockets and sorely tried the patience of the judges and court
employees who have had to act on his repetitious and largely unfounded complaints, pleadings and
motions. He has wasted the time of the courts, of his adversaries, of the judges and court employees who
have had the bad luck of having to act in one way or another on his unmeritorious cases. More
particularly, despite his attention having been called many times to the egregious error of his theory that
the so-called "minute resolutions" of this Court should contain findings of fact and conclusions of law, and
should be signed or certified by the Justices promulgating the same, he has mulishly persisted in
ventilating that self-same theory in various proceedings, causing much loss of time, annoyance and
vexation to the courts, the court employees and parties involved.
1. Untenability of Proffered Defenses
The first defense that he proffers, that the Chief Justice and other Members of the Court should
inhibit themselves "since they cannot be the Accused and Judge at the same time . . . (and) this case
should be heard by an impartial and independent body, is still another illustration of an entirely
unwarranted, arrogant and reprehensible assumption of a competence in the field of the law: he again
uses up the time of the Court needlessly by invoking an argument long since declared and adjudged to be
untenable. It is axiomatic that the "power or duty of the court to institute a charge for contempt against
itself, without the intervention of the fiscal or prosecuting officer, is essential to the preservation of its
dignity and of the respect due it from litigants, lawyers and the public. Were the intervention of the
prosecuting officer required and judges obliged to file complaints for contempts against them before the
prosecuting officer, in order to bring the guilty to justice, courts would be inferior to prosecuting officers

Page 32 of 319
and impotent to perform their functions with dispatch and absolute independence. The institution of
charges by the prosecuting officer is not necessary to hold persons guilty of civil or criminal contempt
amenable to trial and punishment by the court. All that the law requires is that there be a charge in
writing duly filed in court and an opportunity to the person charged to be heard by himself or counsel. The
charge may be made by the fiscal, by the judge, or even by a private person. . . ."
His claim that the letter of Atty. Legaspi "is not verified nor signed by members of said (IBP
Cebu Chapter) Board; . . . is vague, unspecific, and sweeping" because failing to point out what particular
statements in the circular are allegedly libelous and condemnable;" and it does not appear that Atty.
Legaspi has authority to speak or file a complaint "in behalf of those accused in the 'libelous' circular" is
in the premises, plainly nothing but superficial philosophizing, deserving no serious treatment.
Equally as superficial, and sophistical, is his other contention that in making the allegations claimed
to be contumacious, he "was exercising his rights of freedom of speech, of expression, and to petition the
government for redress of grievances as guaranteed by the Constitution (Sec. 4, Art. III) and in
accordance with the accountablity of public officials." The constitutional rights invoked by him afford no
justification for repetitious litigation of the same causes and issues, for insulting lawyers, judges, court
employees; and other persons, for abusing the processes and rules of the courts, wasting their time, and
bringing them into disrepute and disrespect.
B. Basic Principles Governing the Judicial Function
The facts and issues involved in the proceeding at bench make necessary a restatement of the
principles governing finality of judgments and of the paramount need to put an end to litigation at some
point, and to lay down definite postulates concerning what is perceived to be a growing predilection on the
part of lawyers and litigants like Borromeo to resort to administrative prosecution (or institution of
civil or criminal actions) as a substitute for or supplement to the specific modes of appeal or review
provided by law from court judgments or orders.
1. Reason for courts; Judicial Hierarchy
Courts exist in every civilized society for the settlement of controversies. In every country there is
a more or less established hierarchical organization of courts, and a more or less comprehensive system of
review of judgments and final orders of lower courts.
The judicial system in this jurisdiction allows for several levels of litigation, i.e., the presentation of
evidence by the parties a trial or hearing in the first instance as well as a review of the judgments of
lower courts by higher tribunals, generally by consideration anew and ventilation of the factual and legal
issues through briefs or memoranda. The procedure for review is fixed by law, and is in the very nature of
things, exclusive to the courts.

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2. Paramount Need to end Litigation at Some Point
It is withal of the essence of the judicial function that at some point, litigation must end. Hence,
after the procedures and processes for lawsuits have been undergone, and the modes of review set by law
have been exhausted, or terminated, no further ventilation of the same subject matter is allowed. To be
sure, there may be, on the part of the losing parties, continuing disagreement with the verdict, and the
conclusions therein embodied. This is of no moment, indeed, is to be expected; but, it is not their will, but
the Court's, which must prevail; and, to repeat, public policy demands that at some definite time, the
issues must be laid to rest and the court's dispositions thereon accorded absolute finality. As observed by
this Court in Rheem of the Philippines v. Ferrer, a 1967 decision, a party "may think highly of his
intellectual endowment. That is his privilege. And he may suffer frustration at what he feels is others' lack
of it. This is his misfortune. Some such frame of mind, however, should not be allowed to harden into a
belief that he may attack a court's decision in words calculated to jettison the time-honored aphorism that
courts are the temples of right."
3. Judgments of Supreme Court Not Reviewable
The sound, salutary and self-evident principle prevailing in this as in most jurisdictions, is that
judgments of the highest tribunal of the land may not be reviewed by any other agency, branch,
department, or official of Government. Once the Supreme Court has spoken, there the matter must rest.
Its decision should not and cannot be appealed to or reviewed by any other entity, much less reversed or
modified on the ground that it is tainted by error in its findings of fact or conclusions of law, flawed in its
logic or language, or otherwise erroneous in some other respect. This, on the indisputable and unshakable
foundation of public policy, and constitutional and traditional principle.
In an extended Resolution promulgated on March 12, 1987 in In Re: Wenceslao Laureta
involving an attempt by a lawyer to prosecute before the Tanod bayan "members of the First Division of
this Court collectively with having knowingly and deliberately rendered an 'unjust extended minute
Resolution' with deliberate bad faith in violation of Article 204 of the Revised penal Code ". . . and for
deliberatly causing "undue injury" to respondent . . . and her co-heirs because of the "unjust Resolution"
promulgated, in violation of the Anti-Graft and Corrupt Practices Act . . . the following pronouncements
were made in reaffirmation of established doctrine:
. . . As aptly declared in the Chief Justice's Statement of December 24, 1986, which the Court
hereby adopts in toto, "(I)t is elementary that the Supreme Court is supreme the third great
department of government entrusted exclusively with the judicial power to adjudicate with finality
all justiciable disputes, public and private. No other department or agency may pass upon its
judgments or declare them "unjust." It is elementary that "(A)s has ever been stressed since the
early case of Arnedo vs. Llorente (18 Phil. 257, 263 [1911]) "controlling and irresistible reasons of
public policy and of sound practice in the courts demand that at the risk of occasional error,

Page 34 of 319
judgments of courts determining controversies submitted to them should become final at some
definite time fixed by law, or by a rule of practice recognized by law, so as to be thereafter beyond
the control even of the court which rendered them for the purpose of correcting errors of fact or of
law, into which, in the opinion of the court it may have fallen. The very purpose for which the
courts are organized is to put an end to controversy, to decide the questions submitted to the
litigants, and to determine the respective rights of the parties. (Luzon Brokerage Co., Inc. vs.
Maritime Bldg., Co., Inc., 86 SCRA 305, 316-317)
xxx

xxx

xxx

Indeed, resolutions of the Supreme Court as a collegiate court, whether an en banc or

division, speak for themselves and are entitled to full faith and credence and are beyond
investigation or inquiry under the same principle of conclusiveness of enrolled bills of the
legislature. (U.S. vs. Pons, 34 Phil. 729; Gardiner, et al. vs. Paredes, et al., 61 Phil. 118; Mabanag
vs. Lopez Vito, 78 Phil. 1) The Supreme Court's pronouncement of the doctrine that "(I)t is well
settled that the enrolled bill . . . is conclusive upon the courts as regards the tenor of the measure
passed by Congress and approved by the President. If there has been any mistake in the printing
of the bill before it was certified by the officers of Congress and approved by the Executive [as
claimed by petitioner-importer who unsuccessfully sought refund of margin fees] on which we
cannot speculate, without jeopardizing the principle of separation of powers and undermining one
of the cornerstones of our democractic system the remedy is by amendment or curative
legislation, not by judicial decree" is fully and reciprocally applicable to Supreme Court orders,
resolutions and decisions, mutatis mutandis. (Casco Phil. Chemical Co., Inc. vs. Gimenez, 7 SCRA
347, 350. (Citing Primicias vs. Paredes, 61 Phil. 118, 120; Mabanag vs. Lopez Vito, 78 Phil. 1;
Macias vs. Comelec, 3 SCRA 1).
The Court has consistently stressed that the "doctrine of separation of powers calls for the
executive, legislative and judicial departments being left alone to discharge their duties as they see
fit" (Tan vs. Macapagal, 43 SCRA 677). It has thus maintained in the same way that the judiciary
has a right to expect that neither the President nor Congress would cast doubt on the mainspring
of its orders or decisions, it should refrain from speculating as to alleged hidden forces at work that
could have impelled either coordinate branch into acting the way it did. The concept of separation
of powers presupposes mutual respect by and between the three departments of the government.
(Tecson vs. Salas, 34 SCRA 275, 286-287).
4. Final and Executory Judgments of Lower Courts Not Reviewable Even by Supreme Court
In respect of Courts below the Supreme Court, the ordinary remedies available under law to a
party who is adversely affected by their decisions or orders are a motion for new trial (or reconsideration)
under Rule 37, and an appeal to either the Court of Appeals or the Supreme Court, depending on whether

Page 35 of 319
questions of both fact and law, or of law only, are raised, in accordance with fixed and familiar rules and
conformably with the hierarchy of courts. Exceptionally, a review of a ruling or act of a court on the
ground that it was rendered without or in excess of its jurisdiction, or with grave abuse of discretion, may
be had through the special civil action of certiorari or prohibition pursuant to Rule 65 of the Rules of Court.
However, should judgments of lower courts which may normally be subject to review by higher
tribunals become final and executory before, or without, exhaustion of all recourse of appeal, they, too,
become inviolable, impervious to modification. They may, then, no longer be reviewed, or in anyway
modified directly or indirectly, by a higher court, not even by the Supreme Court, much less by any other
official, branch or department of Government.
C. Administrative Civil or Criminal Action against Judge. Not Substitute for Appeal; Proscribed by Law and
Logic
Now, the Court takes judicial notice of the fact that there has been of late a regrettable increase in
the resort to administrative prosecution or the institution of a civil or criminal action as a substitute
for or supplement to appeal. Whether intended or not, such a resort to these remedies operates as a form
of threat or intimidation to coerce judges into timorous surrender of their prerogatives, or a reluctance to
exercise them. With rising frequency, administrative complaints are being presented to the Office of the
Court Administrator; criminal complaints are being filed with the Office of the Ombudsman or the public
prosecutor's office; civil actions for recovery of damages commenced in the Regional Trial Courts against
trial judges, and justices of the Court of Appeals and even of the Supreme Court.
1. Common Basis of Complaints Against Judges
Many of these complaints set forth a common indictment: that the respondent Judges or Justices
rendered manifestly unjust judgments or interlocutory orders i.e., judgments or orders which are
allegedly not in accord with the evidence, or with law or jurisprudence, or are tainted by grave abuse of
discretion thereby causing injustice, and actionable and compensable injury to the complainants
(invariably losing litigants). Resolution of complaints of this sort quite obviously entails a common
requirement for the fiscal, the Ombudsman or the Trial Court: a review of the decision or order of the
respondent Judge or Justice to determine its correctness or erroneousness, as basic premise for a
pronouncement of liability.
2. Exclusivity of Specific Procedures for Correction of Judgments and Orders
The question then, is whether or not these complaints are proper; whether or not in lieu of the
prescribed recourses for appeal or review of judgments and orders of courts, a party may file an
administrative or criminal complaint against the judge for rendition of an unjust judgment, or, having
opted for appeal, may nonetheless simultaneously seek also such administrative or criminal remedies.

Page 36 of 319
Given the nature of the judicial function, the power vested by the Constitution in the Supreme
Court and the lower courts established by law, the question submits to only one answer: the
administrative or criminal remedies are neither alternative nor cumulative to judicial review where such
review is available, and must wait on the result thereof.
Simple reflection will make this proposition amply clear, and demonstrate that any contrary
postulation can have only intolerable legal implications. Allowing a party who feels aggrieved by a judicial
order or decision not yet final and executory to mount an administrative, civil or criminal prosecution for
unjust judgment against the issuing judge would, at a minimum and as an indispensable first step, confer
the prosecutor (or Ombudsman) with an incongruous function pertaining, not to him, but to the courts:
the determination of whether the questioned disposition is erroneous in its findings of fact or conclusions
of law, or both. If he does proceed despite that impediment, whatever determination he makes could well
set off a proliferation of administrative or criminal litigation, a possibility here after more fully explored.
Such actions are impermissible and cannot prosper. It is not, as already pointed out, within the
power of public prosecutors, or the Ombudsman or his deputies, directly or vicariously, to review
judgments or final orders or resolutions of the Courts of the land. The power of review by appeal or
special civil action is not only lodged exclusively in the Courts themselves but must be exercised in
accordance with a well-defined and long established hierarchy, and long-standing processes and
procedures. No other review is allowed; otherwise litigation would be interminable, and vexatiously
repetitive.
These principles were stressed in In Re: Wenceslao Laureta, supra.
Respondents should know that the provisions of Article 204 of the Revised Penal Code as to
"rendering knowingly unjust judgment," refer to an individual judge who does so "in any case
submitted to him for decision" and even then, it is not the prosecutor who would pass judgment on
the "unjustness" of the decision rendered by him but the proper appellate court with jurisdiction to
review the same, either the Court of Appeals and/or the Supreme Court. Respondents should
likewise know that said penal article has no application to the members of a collegiate court such
as this Court or its Divisions who reach their conclusions in consultation and accordingly render
their collective judgment after due deliberation. It also follows, consequently, that a charge of
violation of the Anti-Graft and Corrupt Practices Act on the ground that such a collective decision is
"unjust" cannot prosper.
xxx

xxx

xxx

To subject to the threat and ordeal of investigation and prosecution, a judge, more so a
member of the Supreme Court for official acts done by him in good faith and in the regular exercise
of official duty and judicial functions is to subvert and undermine that very independence of the

Page 37 of 319
judiciary, and subordinate the judiciary to the executive. "For it is a general principle of the highest
importance to the proper administration of justice that a judicial officer in exercising the authority
vested in him, shall be free to act upon his own convictions, without apprehension of personal
consequences to himself. Liability to answer to everyone who might feel himself aggrieved by the
action of the judge would be inconsistent with the possession of this freedom, and would destroy
that independence without which no judiciary can be either respectable or useful." (Bradley vs.
Fisher, 80 U. S. 335).
xxx

xxx

xxx

To allow litigants to go beyond the Court's resolution and claim that the members acted
"with deliberate bad faith" and rendered an "unjust resolution" in disregard or violation of the duty
of their high office to act upon their own independent consideration and judgment of the matter at
hand would be to destroy the authenticity, integrity and conclusiveness of such collegiate acts and
resolutions and to disregard utterly the presumption of regular performance of official duty. To
allow such collateral attack would destroy the separation of powers and undermine the role of the
Supreme Court as the final arbiter of all justiciable disputes.
Dissatisfied litigants and/or their counsels cannot without violating the separation of powers
mandated by the Constitution relitigate in another forum the final judgment of this Court on legal
issues submitted by them and their adversaries for final determination to and by the Supreme
Court and which fall within the judicial power to determine and adjudicate exclusively vested by the
Constitution in the Supreme Court and in such inferior courts as may be established by law.
This is true, too, as regards judgments, otherwise appealable, which have become final and
executory. Such judgments, being no longer reviewable by higher tribunals, are certainly not reviewable
by any other body or authority.
3. Only Courts Authorized, under Fixed Rules to Declare Judgments or Orders Erroneous or Unjust
To belabor the obvious, the determination of whether or not a judgement or order is unjust or
was (or was not) rendered within the scope of the issuing judge's authority, or that the judge had
exceeded his jurisdiction and powers or maliciously delayed the disposition of a case is an essentially
judicial function, lodged by existing law and immemorial practice in a hierarchy of courts and ultimately in
the highest court of the land. To repeat, no other entity or official of the Government, not the prosecution
or investigation service or any other branch; nor any functionary thereof, has competence to review a
judicial order or decision whether final and executory or not and pronounce it erroneous so as to lay
the basis for a criminal or administrative complaint for rendering an unjust judgment or order. That
prerogative belongs to the courts alone.
4. Contrary Rule Results in Circuitousness and Leads to Absurd Consequences

Page 38 of 319
Pragmatic considerations also preclude prosecution for supposed rendition of unjust judgments or
interlocutory orders of the type above described, which, at bottom, consist simply of the accusation that
the decisions or interlocutory orders are seriously wrong in their conclusions of fact or of law, or are
tainted by grave abuse of discretion as distinguished from accusations of corruption, or immorality, or
other wrongdoing. To allow institution of such proceedings would not only be legally improper, it would
also result in a futile and circuitous exercise, and lead to absurd consequences.
Assume that a case goes through the whole gamut of review in the judicial hierarchy; i.e., a
judgment is rendered by a municipal trial court; it is reviewed and affirmed by the proper Regional Trial
Court; the latter's judgment is appealed to and in due course affirmed by the Court of Appeals; and finally,
the appellate court's decision is brought up to and affirmed by the Supreme Court. The prosecution of the
municipal trial court judge who rendered the original decision (for knowingly rendering a manifestly unjust
judgment) would appear to be out of the question; it would mean that the Office of the Ombudsman or of
the public prosecutor would have to find, at the preliminary investigation, not only that the judge's
decision was wrong and unjust, but by necessary implication that the decisions or orders of the Regional
Trial Court Judge, as well as the Justices of the Court of Appeals and the Supreme Court who affirmed the
original judgment were also all wrong and unjust most certainly an act of supreme arrogance and very
evident supererogation. Pursuing the proposition further, assuming that the public prosecutor or
Ombudsman should nevertheless opt to undertake a review of the decision in question despite its
having been affirmed at all three (3) appellate levels and thereafter, disagreeing with the verdict of all
four (4) courts, file an information in the Regional Trial Court against the Municipal Trial Court Judge, the
fate of such an indictment at the hands of the Sandiganbayan or the Regional Trial Court would be fairly
predictable.
Even if for some reason the Municipal Trial Court Judge is convicted by the Sandiganbayan or a
Regional Trial Court, the appeal before the Supreme Court or the Court of Appeals would have an
inevitable result: given the antecedents, the verdict of conviction would be set aside and the correctness
of the judgment in question, already passed upon and finally resolved by the same appellate courts, would
necessarily be sustained.
Moreover, in such a scenario, nothing would prevent the Municipal Trial Judge, in his turn, from
filing a criminal action against the Sandiganbayan Justices, or the Regional Trial Court Judge who should
convict him of the offense, for knowingly rendering an unjust judgment, or against the Justices of the
Court of Appeals or the Supreme Court who should affirm his conviction.
The situation is ridiculous, however the circumstances of the case may be modified, and regardless
of whether it is a civil, criminal or administrative proceeding that is availed of as the vehicle to prosecute
the judge for supposedly rendering an unjust decision or order.
5. Primordial Requisites for Administrative Criminal Prosecution

Page 39 of 319
This is not to say that it is not possible at all to prosecute judges for this impropriety, of rendering
an unjust judgment or interlocutory order; but, taking account of all the foregoing considerations, the
indispensable requisites are that there be a final declaration by a competent court in some appropriate
proceeding of the manifestly unjust character of the challenged judgment or order, and there be also
evidence of malice or bad faith, ignorance or inexcusable negligence, on the part of the judge in rendering
said judgement or order. That final declaration is ordinarily contained in the judgment rendered in the
appellate proceedings in which the decision of the trial court in the civil or criminal action in question is
challenged.
What immediately comes to mind in this connection is a decision of acquittal or dismissal in a
criminal action, as to which the same being unappealable it would be unreasonable to deny the State
or the victim of the crime (or even public-spirited citizens) the opportunity to put to the test of proof such
charges as they might see fit to press that it was unjustly rendered, with malice or by deliberate design,
through inexcusable ignorance or negligence, etc. Even in this case, the essential requisite is that there be
an authoritative judicial pronouncement of the manifestly unjust character of the judgment or order in
question. Such a pronouncement may result from either (a) an action of certiorari or prohibition in a
higher court impugning the validity of the; judgment, as having been rendered without or in excess of
jurisdiction, or with grave abuse of discretion; e.g., there has been a denial of due process to the
prosecution; or (b) if this be not proper, an administrative proceeding in the Supreme Court against the
judge precisely for promulgating an unjust judgment or order. Until and unless there is such a final,
authoritative judicial declaration that the decision or order in question is "unjust," no civil or criminal
action against the judge concerned is legally possible or should be entertained, for want of an
indispensable requisite.
D. Judges Must be Free from Influence or Pressure
Judges must be free to judge, without pressure or influence from external forces or factors. They
should not be subject to intimidation, the fear of civil, criminal or administrative sanctions for acts they
may do and dispositions they may make in the performance of their duties and functions. Hence it is
sound rule, which must be recognized independently of statute, that judges are not generally liable for
acts done within the scope of their jurisdiction and in good faith.
This Court has repeatedly and uniformly ruled that a judge may not be held administratively
accountable for every erroneous order or decision he renders. To hold otherwise would be nothing short of
harassment and would make his position doubly unbearable, for no one called upon to try the facts or
interpret the law in the process of administering justice can be infallible in his judgment. The error must
be gross or patent, deliberate and malicious, or incurred with evident bad faith; it is only in these cases
that administrative sanctions are called for as an imperative duty of the Supreme Court.

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As far as civil or criminal liability is concerned, existing doctrine is that "judges of superior and
general jurisdiction are not liable to respond in civil action for damages for what they may do in the
exercise of their judicial functions when acting within their legal powers and jurisdiction." Based on Section
9, Act No. 190, the doctrine is still good law, not inconsistent with any subsequent legislative issuance or
court rule: "No judge, justice of the peace or assessor shall be liable to a civil action for the recovery of
damages by reason of any judicial action or judgment rendered by him in good faith, and within the limits
of his legal powers and jurisdiction."
Exception to this general rule is found in Article 32 of the Civil Code, providing that any public
officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in
any manner impedes or impairs any of the enumerated rights and liberties of another person which
rights are the same as those guaranteed in the Bill of Rights (Article III of the Constitution); shall be
liable to the latter for damages. However, such liability is not demandable from a judge unless his act or
omission constitutes a violation of the Penal Code or other penal statute. But again, to the extent that the
offenses therein described have "unjust judgment or "unjust interlocutory order" for an essential element,
it need only be reiterated that prosecution of a judge for any of them is subject to the caveat already
mentioned: that such prosecution cannot be initiated, much less maintained, unless there be a final
judicial pronouncement of the unjust character of the decision or order in issue.
E. Afterword
Considering the foregoing antecedents and long standing doctrines, it may well be asked why it
took no less than sixteen (16) years and some fifty (50) grossly unfounded cases lodged by respondent
Borromeo in the different rungs of the Judiciary before this Court decided to take the present
administrative measure. The imposition on the time of the courts and the unnecessary work occasioned by
respondent's crass adventurism are self-evident and require no further elaboration. If the Court, however,
bore with him with Jobian patience, it was in the hope that the repeated rebuffs he suffered, with the
attendant lectures on the error of his ways, would somehow seep into his understanding and deter him
from further forays along his misguided path. After all, as has repeatedly been declared, the power of
contempt is exercised on the preservative and not the vindictive principle. Unfortunately the Court's
forbearance had no effect on him.
Instead, the continued leniency and tolerance extended to him were read as signs of weakness and
impotence. Worse, respondent's irresponsible audacity appears to have influenced and emboldened others
to just as flamboyantly embark on their own groundless and insulting proceedings against the courts, born
of affected bravado or sheer egocentrism, to the extent of even involving the legislative and executive
departments, the Ombudsman included, in their assaults against the Judiciary in pursuit of personal
agendas. But all things, good or bad, must come to an end, and it is time for the Court to now draw the
line, with more promptitude, between reasoned dissent and self-seeking pretense. The Court accordingly
serves notice to those with the same conceit or delusions that it will henceforth deal with them, decisively

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and fairly, with a firm and even hand, and resolutely impose such punitive sanctions as may be
appropriate to maintain the integrity and independence of the judicial institutions of the country.
WHEREFORE, Joaquin T. Borromeo is found and declared GUILTY of constructive contempt repeatedly
committed over time, despite warnings and instructions given to him, and to the end that he may ponder
his serious errors and grave misconduct and learn due respect for the Courts and their authority, he is
hereby sentenced to serve a term of imprisonment of TEN (10) DAYS in the City Jail of Cebu City and to
pay a fine of ONE THOUSAND PESOS (P1,000.00). He is warned that a repetition of any of the offenses of
which he is herein found guilty, or any similar or other offense against courts, judges or court employees,
will merit further and more serious sanctions.

2. Conducto v. Monzon, 291 SCRA 619 (1998)

[A.M. MTJ-98-1147. July 2, 1998]
JESUS S. CONDUCTO, complainant, vs. JUDGE ILUMINADO C. MONZON, respondent.
In a sworn letter-complaint dated 14 October 1996, complainant charged respondent Judge Iluminado C.
Monzon of the Municipal Trial Court in Cities, San Pablo City, with ignorance of law, in that he deliberately
refused to suspend a barangay chairman who was charged before his court with the crime of unlawful
appointment under Article 244 of the Revised Penal Code.
The factual antecedents recited in the letter-complaint are not controverted.
On 30 August 1993, complainant filed a complaint with the Sangguniang Panlungsod of San Pablo
City against one Benjamin Maghirang, the barangay chairman of Barangay III-E of San Pablo City, for
abuse of authority, serious irregularity and violation of law in that, among other things, said respondent
Maghirang appointed his sister-in-law, Mrs. Florian Maghirang, to the position of barangay secretary on 17
May 1989 in violation of Section 394 of the Local Government Code. At the same time, complainant filed
a complaint for violation of Article 244 of the Revised Penal Code with the Office of the City Prosecutor
against Maghirang, which was, however, dismissed on 30 September 1993 on the ground that Maghirangs
sister-in-law was appointed before the effectivity of the Local Government Code of 1991, which prohibits a
punong barangay from appointing a relative within the fourth civil degree of consanguinity or affinity as
barangay secretary. The order of dismissal was submitted to the Office of the Deputy Ombudsman for
Luzon.
On 22 October 1993, complainant obtained Opinion No. 246, s. 1993 from Director Jacob Montesa
of the Department of Interior and Local Government, which declared that the appointment issued by

Page 42 of 319
Maghirang to his sister-in-law violated paragraph (2), Section 95 of B.P. Blg. 337, the Local Government
Code prior to the Local Government Code of 1991.
In its Revised Resolution of 29 November 1993, the Office of the Deputy Ombudsman for Luzon
dismissed the case, but ordered Maghirang to replace his sister-in-law as barangay secretary.
On 20 December 1993, complainant moved that the Office of the Deputy Ombudsman for Luzon
reconsider the order of 29 November 1993, in light of Opinion No. 246, s. 1993 of Director Montesa.
Acting on the motion, Francisco Samala, Graft Investigation Officer II of the Office of the Deputy
Ombudsman for Luzon, issued an order on 8 February 1994 granting the motion for reconsideration and
recommending the filing of an information for unlawful appointment (Article 244 of the Revised Penal
Code) against Maghirang.

The recommendation was duly approved by Manuel C. Domingo, Deputy

Ombudsman for Luzon.

In a 3rd indorsement dated 4 March 1994, the Deputy Ombudsman for Luzon transmitted the
record of the case to the Office of the City Prosecutor of San Pablo City and instructed the latter to file the
corresponding information against Maghirang with the proper court and to prosecute the case.

The

information for violation of Article 244 of the Revised Penal Code was forthwith filed with the Municipal
Trial Court in Cities in San Pablo City and docketed as Criminal Case No. 26240. On 11 April 1994, the
presiding judge, respondent herein, issued a warrant for the arrest of Maghirang, with a recommendation
of a P200.00 bond for his provisional liberty.
With prior leave from the Office of the Deputy Ombudsman for Luzon, on 4 May 1995, the City
Prosecutor filed, in Criminal Case No. 26240, a motion for the suspension of accused Maghirang pursuant
to Section 13 of R.A. No. 3019, as amended, which reads, in part:
SEC. 13.

Any incumbent public officer against whom any criminal prosecution under a valid

information under this Act or under Title 7, Book II of the Revised Penal Code or for any offense
involving fraud upon government or public funds or property whether as a single or as complex
offense and in whatever stage of execution and mode of participation, is pending in Court, shall
be suspended from office.
In his Order of 30 June 1995, respondent judge denied the motion for suspension on the ground that:
[T]he alleged offense of UNLAWFUL APPOINTMENT under Article 244 of the Revised Penal Code
was committed on May 17, 1989, during [Maghirangs] terms (sic) of office from 1989 to 1994
and said accused was again re-elected as Barangay Chairman during the last Barangay Election of
May 9, 1994, hence, offenses committed during previous term is (sic) not a cause for removal
(Lizarez vs. Hechanova, et al., G.R. No. L-22059, May 17, 1965); an order of suspension from
office relating to a given term may not be the basis of contempt with respect to ones (sic)

Page 43 of 319
assumption of the same office under a new term (Oliveros vs. Villaluz, G.R. No. L-34636, May 30,
1971) and, the Court should never remove a public officer for acts done prior to his present term
of office.

To do otherwise would deprieve (sic) the people of their right to elect their officer.

When the people have elected a man to office, it must be assumed that they did this with
knowledge of his life and character, and that they disregarded or forgave his fault or misconduct
(sic), if he had been guilty if any.

(Aguinaldo vs. Santos, et al., G.R. No. 94115, August 21,

1992).
The prosecution moved for reconsideration of the order, alleging that the court had confused removal
as a penalty in administrative cases and the temporary removal from office (or suspension) as a means of
preventing the public official, while the criminal case against him is pending, from exerting undue
influence, intimidate (sic) witnesses which may affect the outcome of the case; the former is a penalty or
sanction whereas the latter is a mere procedural remedy. Accordingly, while a re-elected public official
cannot be administratively punished by removing him from office for offenses committed during his
previous term, said public official can be temporarily removed to prevent him from wielding undue
influence which will definitely be a hindrance for justice to take its natural course. The prosecution then
enumerated the cases decided by this Court reiterating the rule that what a re-election of a public official
obliterates are only administrative, not criminal, liabilities, incurred during previous terms.
In his order of 3 August 1995, respondent denied the motion for reconsideration, thus:
There is no dispute that the suspension sought by the prosecution is premised upon the act
charged allegedly committed during the accused [sic] previous term as Barangay Chairman of
Brgy. III-E. San Pablo City, who was subsequently re-elected as Barangay Chairman again during
the last Barangay Election of May 9, 1994. Certainly, had not the accused been re-elected the
prosecution will not file the instant motion to suspend him as there is no legal basis or the issue
has become academic.
The instant case run [sic] parallel with the case of Lizares vs. Hechanova, et al., L-22059, May
17, 1966, 17 SCRA 58, wherein the Supreme Court subscribed to the rule denying the right to
remove from office because of misconduct during a prior term.
It is opined by the Court that preventive suspension is applicable only if there is [sic]
administrative case filed against a local official who is at the same time criminally charged in
Court. At present, the records of the Court shows [sic] that there is no pending administrative
case existing or filed against the accused.
It was held in the concluding paragraph of the decision by the Honorable Supreme Court in
Lizares vs. Hechanova, et al., that Since petitioner, having been duly re-elected, is no longer
amenable to administrative sanctions for any acts committed during his former tenure, the
determination whether the respondent validly acted in imposing upon him one months

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suspension for act [sic] done during his previous term as mayor is now merely of theoretical
interest.
Complainant then moved that respondent inhibit himself from Criminal Case No. 26240. In his order
of 21 September 1995, respondent voluntarily inhibited himself. The case was assigned to Judge Adelardo
S. Escoses per order of Executive Judge Bienvenido V. Reyes of the Regional Trial Court of San Pablo City.
On 15 October 1996, complainant filed his sworn letter-complaint with the Office of the Court
Administrator.
In his comment dated 14 February 1997, filed in compliance with the resolution of this Court of 27
January 1997, respondent asserted that he had been continuously keeping abreast of legal and
jurisprudential development [sic] in the law since he passed the 1955 Bar Examinations; and that he
issued the two challenged orders only after due appreciation of prevailing jurisprudence on the matter,
citing authorities in support thereof. He thus prayed for dismissal of this case, arguing that to warrant a
finding of ignorance of law and abuse of authority, the error must be so gross and patent as to produce
an inference of ignorance or bad faith or that the judge knowingly rendered an unjust decision. He
emphasized, likewise, that the error had to be so grave and on so fundamental a point as to warrant
condemnation of the judge as patently ignorant or negligent; otherwise, to hold a judge administratively
accountable for every erroneous ruling or decision he renders, assuming that he has erred, would be
nothing short of harassment and that would be intolerable.
Respondent further alleged that he earned complainants ire after denying the latters Motion for the
Suspension of Barangay Chairman Maghirang, which was filed only after Maghirang was re-elected in
1994; and that complainant made inconsistent claims, concretely, while in his letter of 4 September 1995
requesting respondent to inhibit from the case, complainant declared that he believed in respondents
integrity, competence and dignity, after he denied the request, complainant branded respondent as a
judge of poor caliber and understanding of the law, very incompetent and has no place in Court of
Justice.
Finally, respondent Judge avowed that he would not dare soil his judicial robe at this time, for he had
only three (3) years and nine (9) months more before reaching the compulsory age of retirement of
seventy (70); and that for the last 25 years as municipal judge in the seven (7) towns of Laguna and as
presiding judge of the MTCC, San Pablo City, he had maintained his integrity.
In compliance with the Courts resolution of 9 March 1998, the parties, by way of separate letters,
informed the Court that they agreed to have this case decided on the basis of the pleadings already filed,
with respondent explicitly specifying that only the complaint and the comment thereon be considered.
The Office of the Court Administrator (OCA) recommends that this Court hold respondent liable for
ignorance of the law and that he be reprimanded with a warning that a repetition of the same or similar

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acts in the future shall be dealt with more severely. In support thereof, the OCA makes the following
findings and conclusions:
The claim of respondent Judge that a local official who is criminally charged can be preventively
suspended only if there is an administrative case filed against him is without basis. Section 13 of
RA 3019 (Anti-Graft and Corrupt Practices Act) states that:
Suspension and loss of benefits Any incumbent public officer against whom any criminal
prosecution under a valid information under this Act or under Title 7, Book II of the
Revised Penal Code or for any offense involving fraud upon government or public funds or
property whether as a simple or as a complex offense and in whatever stage of execution
and mode of participation, is pending in court, shall be suspended from office.
It is well settled that Section 13 of RA 3019 makes it mandatory for the Sandiganbayan (or the
Court) to suspend any public officer against whom a valid information charging violation of this
law, Book II, Title 7 of the RPC, or any offense involving fraud upon government or public funds
or property is filed in court. The court trying a case has neither discretion nor duty to determine
whether preventive suspension is required to prevent the accused from using his office to
intimidate witnesses or frustrate his prosecution or continue committing malfeasance in office. All
that is required is for the court to make a finding that the accused stands charged under a valid
information for any of the above-described crimes for the purpose of granting or denying the
sought for suspension. (Bolastig vs. Sandiganbayan, G.R. No. 110503 [August 4, 1994], 235
SCRA 103).
In the same case, the Court held that as applied to criminal prosecutions under RA 3019,
preventive suspension will last for less than ninety (90) days only if the case is decided within
that period; otherwise, it will continue for ninety (90) days.
Barangay Chairman Benjamin Maghirang was charged with Unlawful Appointment, punishable
under Article 244, Title 7, Book II of the Revised Penal Code. Therefore, it was mandatory on
Judge Monzons part, considering the Motion filed, to order the suspension of Maghirang for a
maximum period of ninety (90) days. This, he failed and refused to do.
Judge Monzons contention denying complainants Motion for Suspension because offenses
committed during the previous term (is) not a cause for removal during the present term is
untenable. In the case of Rodolfo E. Aguinaldo vs. Hon. Luis Santos and Melvin Vargas, 212 SCRA
768, the Court held that the rule is that a public official cannot be removed for administrative
misconduct committed during a prior term since his re-election to office operates as a
condonation of the officers previous misconduct committed during a prior term, to the extent of
cutting off the right to remove him therefor. The foregoing rule, however, finds no application to
criminal cases x x x (Underscoring supplied)

Page 46 of 319
Likewise, it was specifically declared in the case of Ingco vs. Sanchez, G.R. No. L-23220, 18
December 1967, 21 SCRA 1292, that The ruling, therefore, that when the people have elected a
man to office it must be assumed that they did this with knowledge of his life and character and
that they disregarded or forgave his faults or misconduct if he had been guilty of any refers only
to an action for removal from office and does not apply to a criminal case. (Underscoring ours)
Clearly, even if the alleged unlawful appointment was committed during Maghirangs first term
as barangay chairman and the Motion for his suspension was only filed in 1995 during his second
term, his re-election is not a bar to his suspension as the suspension sought for is in connection
with a criminal case.
Respondents denial of complainants Motion for Reconsideration left the complainant with no
other judicial remedy. Since a case for Unlawful Appointment is covered by Summary Procedure,
complainant is prohibited from filing a petition for certiorari, mandamus or prohibition involving
an interlocutory order issued by the court. Neither can he file an appeal from the courts adverse
final judgment, incorporating in his appeal the grounds assailing the interlocutory orders, as this
will put the accused in double jeopardy.
All things considered, while concededly, respondent Judge manifested his ignorance of the law
in denying complainants Motion for Suspension of Brgy. Chairman Maghirang, there was nothing
shown however to indicate that he acted in bad faith or with malice. Be that as it may, it would
also do well to note that good faith and lack of malicious intent cannot completely free respondent
from liability.
This Court, in the case of Libarios and Dabalos, 199 SCRA 48, ruled:
In the absence of fraud, dishonesty or corruption, the acts of a judge done in his judicial
capacity are not subject to disciplinary action, even though such acts may be erroneous.
But, while judges should not be disciplined for inefficiency on account merely of occasional
mistakes or errors of judgment, yet, it is highly imperative that they should be conversant
with basic principles.
A judge owes it to the public and the administration of justice to know the law he is
supposed to apply to a given controversy. He is called upon to exhibit more than a cursory
acquaintance with the statutes and procedural rules.

There will be faith in the

administration of justice only if there be a belief on the part of litigants that the occupants
of the bench cannot justly be accused of a deficiency in their grasp of legal principles.
The findings and conclusions of the Office of the Court Administrator are in order.

However, the

penalty recommended, i.e., reprimand, is too light, in view of the fact that despite his claim that he has
been continuously keeping abreast of legal and jurisprudential development [sic] in law ever since he
passed the Bar Examinations in 1995, respondent, wittingly or otherwise, failed to recall that as early as
18 December 1967 in Ingco v. Sanchez, this Court explicitly ruled that the re-election of a public official

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extinguishes only the administrative, but not the criminal, liability incurred by him during his previous
term of office, thus:
The ruling, therefore, that -- when the people have elected a man to his office it must be
assumed that they did this with knowledge of his life and character and that they disregarded or
forgave his faults or misconduct if he had been guilty of any -- refers only to an action for
removal from office and does not apply to a criminal case, because a crime is a public wrong
more atrocious in character than mere misfeasance or malfeasance committed by a public officer
in the discharge of his duties, and is injurious not only to a person or group of persons but to the
State as a whole.

This must be the reason why Article 89 of the Revised Penal Code, which

enumerates the grounds for extinction of criminal liability, does not include reelection to office as
one of them, at least insofar as a public officer is concerned. Also, under the Constitution, it is
only the President who may grant the pardon of a criminal offense.
In Ingco, this Court did not yield to petitioners insistence that he was benefited by the ruling in
Pascual v. Provincial Board of Nueva Ecija that a public officer should never be removed for acts done prior
to his present term of office, as follows:
There is a whale of a difference between the two cases. The basis of the investigation which
has been commenced here, and which is sought to be restrained, is a criminal accusation the
object of which is to cause the indictment and punishment of petitioner-appellant as a private
citizen; whereas in the cases cited, the subject of the investigation was an administrative charge
against the officers therein involved and its object was merely to cause his suspension or removal
from public office.

While the criminal cases involves the character of the mayor as a private

citizen and the People of the Philippines as a community is a party to the case, an administrative
case involves only his actuations as a public officer as [they] affect the populace of the
municipality where he serves.
Then on 20 June 1969, in Luciano v. The Provincial Governor, et al., this Court likewise categorically
declared that criminal liabilities incurred by an elective public official during his previous term of office
were not extinguished by his re-election, and that Pascual v. Provincial Governor and Lizares v.
Hechanova referred only to administrative liabilities committed during the previous term of an elective
official, thus:
1. The first problem we are to grapple with is the legal effect of the reelection of respondent
municipal officials.

Said respondents would want to impress upon us the fact that in the last

general elections of November 14,1967 the Makati electorate reelected all of them, except that
Vice-Mayor Teotimo Gealogo, a councilor prior thereto, was elevated to vice-mayor.

These

respondents contend that their reelection erected a bar to their removal from office for
misconduct committed prior to November 14, 1967. It is to be recalled that the acts averred in

Page 48 of 319
the criminal information in Criminal Case 18821 and for which they were convicted allegedly
occurred on or about July 26, 1967, or prior to the 1967 elections. They ground their position on
Pascual vs. Provincial Board of Nueva Ecija, 106 Phil. 466, and Lizares vs. Hechanova, 17 SCRA
58.
A circumspect view leaves us unconvinced of the soundness of respondents' position. The two
cases relied upon have laid down the precept that a reelected public officer is no longer amenable
to administrative sanctions for acts committed during his former tenure. But the present case
rests on an entirely different factual and legal setting.

We are not here confronted with

administrative charges to which the two cited cases refer. Here involved is a criminal prosecution
under a special statute, the Anti-Graft and Corrupt Practices Act (Republic Act 3019).
Then again, on 30 May 1974, in Oliveros v. Villaluz, this Court held:
I
The first question presented for determination is whether a criminal offense for violation of
Republic Act 3019 committed by an elective officer during one term may be the basis of his
suspension in a subsequent term in the event of his reelection to office.
Petitioner concedes that "the power and authority of respondent judge to continue trying the
criminal case against petitioner may not in any way be affected by the fact of petitioner's
reelection," but contends that "said respondent's power to preventively suspend petitioner under
section 13 of Republic Act 3019 became inefficacious upon petitioner's reelection" arguing that
the power of the courts cannot be placed over that of sovereign and supreme people who
ordained his return to office.
Petitioner's reliance on the loose language used in Pascual vs. Provincial Board of Nueva Ecija
that "each term is separate from other terms and that the reelection to office operates as a
condonation of the officer's previous misconduct to the extent of cutting off the right to remove
him therefor" is misplaced.
The Court has in subsequent cases made it clear that the Pascual ruling (which dealt with
administrative liability) applies exclusively to administrative and not to criminal liability and
sanctions. Thus, in Ingco vs. Sanchez the Court ruled that the reelection of a public officer for a
new term does not in any manner wipe out the criminal liability incurred by him in a previous
term.
In Luciano vs. Provincial Governor the Court stressed that the cases of Pascual and Lizares are
authority for the precept that "a reelected public officer is no longer amenable to administrative
sanctions for acts committed during his former tenure" but that as to criminal prosecutions,
particularly, for violations of the Anti-Graft and Corrupt Practices Act, as in the case at bar, the
same are not barred by reelection of the public officer, since, inter alia, one of the penalties

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attached to the offense is perpetual disqualification from public office and it "is patently offensive
to the objectives and the letter of the Anti-Graft and Corrupt Practice Act . . . that an official may
amass wealth thru graft and corrupt practices and thereafter use the same to purchase reelection
and thereby launder his evil acts."
Punishment for a crime is a vindication for an offense against the State and the body politic.
The small segment of the national electorate that constitutes the electorate of the municipality of
Antipolo has no power to condone a crime against the public justice of the State and the entire
body politic. Reelection to public office is not provided for in Article 89 of the Revised Penal Code
as a mode of extinguishing criminal liability incurred by a public officer prior to his reelection. On
the contrary, Article 9 of the Anti-Graft Act imposes as one of the penalties in case of conviction
perpetual disqualification from public office and Article 30 of the Revised Penal Code declares that
such penalty of perpetual disqualification entails "the deprivation of the public offices and
employments which the offender may have held, even if conferred by popular election."
It is manifest then, that such condonation of an officer's fault or misconduct during a previous
expired term by virtue of his reelection to office for a new term can be deemed to apply only to
his administrative and not to his criminal guilt. As succinctly stated in then Solicitor General (now
Associate Justice) Felix Q. Antonio's memorandum for the State, "to hold that petitioner's
reelection erased his criminal liability would in effect transfer the determination of the criminal
culpability of an erring official from the court to which it was lodged by law into the changing and
transient whim and caprice of the electorate. This cannot be so, for while his constituents may
condone the misdeed of a corrupt official by returning him back to office, a criminal action
initiated against the latter can only be heard and tried by a court of justice, his nefarious act
having been committed against the very State whose laws he had sworn to faithfully obey and
uphold. A contrary rule would erode the very system upon which our government is based, which
is one of laws and not of men."
Finally, on 21 August 1992, in Aguinaldo v. Santos, this Court stated:
Clearly then, the rule is that a public official cannot be removed from administrative
misconduct committed during a prior term, since his re-election to office operates as a
condonation of the officers previous misconduct to the extent of cutting off the right to remove
him therefor. The foregoing rule, however, finds no application to criminal cases pending against
petitioner for acts he may have committed during the failed coup.
Thus far, no ruling to the contrary has even rippled the doctrine enunciated in the above-mentioned
cases.

If respondent has truly been continuously keeping abreast of legal and jurisprudential

development [sic] in the law, it was impossible for him to have missed or misread these cases. What
detracts from his claim of assiduity is the fact that he even cited the cases of Oliveros v. Villaluz and
Aguinaldo v. Santos in support of his 30 June 1995 order. What is then evident is that respondent either

Page 50 of 319
did not thoroughly read these cases or that he simply miscomprehended them.

The latter, of course,

would only manifest either incompetence, since both cases were written in plain and simple language
thereby foreclosing any possibility of misunderstanding or confusion; or deliberate disregard of a long
settled doctrine pronounced by this Court.
While diligence in keeping up-to-date with the decisions of this Court is a commendable virtue of
judges -- and, of course, members of the Bar -- comprehending the decisions is a different matter, for it is
in that area where ones competence may then be put to the test and proven. Thus, it has been said that
a judge is called upon to exhibit more than just a cursory acquaintance with statutes and procedural rules;
it is imperative that he be conversant with basic legal principles and aware of well-settled and
authoritative doctrines. He should strive for excellence, exceeded only by his passion for truth, to the end
that he be the personification of justice and the Rule of Law.
Needless to state, respondent was, in this instance, wanting in the desired level of mastery of a
revered doctrine on a simple issue.
On the other hand, if respondent judge deliberately disregarded the doctrine laid down in Ingco v.
Sanchez and reiterated in the succeeding cases of Luciano v. Provincial Governor, Oliveros v. Villaluz and
Aguinaldo v. Santos, it may then be said that he simply wished to enjoy the privilege of overruling this
Courts doctrinal pronouncements. On this point, and as a reminder to all judges, it is apropos to quote
what this Court said sixty-one years ago in People v. Vera:
As already observed by this Court in Shioji vs. Harvey [1922], 43 Phil., 333, 337), and reiterated in
subsequent cases if each and every Court of First Instance could enjoy the privilege of overruling
decisions of the Supreme Court, there would be no end to litigation, and judicial chaos would result. A
becoming modesty of inferior courts demands conscious realization of the position that they occupy in the
interrelation and operation of the integrated judicial system of the nation.
Likewise, in Luzon Stevedoring Corp. v. Court of Appeals:
The spirit and initiative and independence on the part of men of the robe may at times be
commendable, but certainly not when this Court, not once but at least four times, had indicated
what the rule should be. We had spoken clearly and unequivocally. There was no ambiguity in
what we said. Our meaning was clear and unmistakable. We did take pains to explain why it
must be thus. We were within our power in doing so. It would not be too much to expect, then,
that tribunals in the lower rungs of the judiciary would at the very least, take notice and yield
deference. Justice Laurel had indicated in terms too clear for misinterpretation what is expected
of them. Thus: A becoming modesty of inferior court[s] demands conscious realization of the
position that they occupy in the interrelation and operation of the integrated judicial system of the

Page 51 of 319
nation. In the constitutional sense, respondent Court is not excluded from such a category. The
grave abuse of discretion is thus manifest.
In Caram Resources Corp. v. Contreras, this Court affirmed that by tradition and in our system of
judicial administration, this Court has the last word on what the law is, and that its decisions applying or
interpreting the Constitution and laws form part of this countrys legal system. All other courts should then
be guided by the decisions of this Court.

To judges who find it difficult to do so, Vivo v. Cloribel warned:

Now, if a Judge of a lower Court feels, in the fulfillment of his mission of deciding cases, that
the application of a doctrine promulgated by this Superiority is against his way of reasoning, or
against his conscience, he may state his opinion on the matter, but rather than disposing of the
case in accordance with his personal views he must first think that it is his duty to apply the law
as interpreted by the Highest Court of the Land, and that any deviation from the principle laid
down by the latter would unavoidably cause, as a sequel, unnecessary inconveniences, delays and
expenses to the litigants.

And if despite of what is here said, a Judge, still believes that he

cannot follow Our rulings, then he has no other alternative than to place himself in the position
that he could properly avoid the duty of having to render judgment on the case concerned (Art. 9,
C.C.), and he has only one legal way to do that.
Finally, the last sentence of Canon 18 of the Canons of Judicial Ethics directs a judge to administer his
office with due regard to the integrity of the system of the law itself, remembering that he is not a
depository of arbitrary power, but a judge under the sanction of law.
That having been said, we cannot but conclude that the recommended penalty of reprimand is not
commensurate with the misdeed committed. A fine of P5,000.00, with a warning that a commission of
similar acts in the future shall be dealt with more severely is, at the very least, appropriate, considering
respondent is due for compulsory retirement on 29 November 2000 and that this is his first offense.
WHEREFORE, for incompetence as a result of ignorance of a settled doctrine interpreting a law, or
deliberate disregard of such doctrine in violation of Canon 18 of the Canons of Judicial Ethics, respondent
Judge Iluminado C. Monzon is hereby FINED in the amount of Five Thousand Pesos (P5,000.00) and
warned that the commission of similar acts in the future shall be dealt with more severely.

3. Macariola v. Asuncion, 114 SCRA 77 (1982)

[Adm. Case No. 133-J. May 31, 1982.]
BERNARDITA R. MACARIOLA, complainant, vs. HONORABLE ELIAS B. ASUNCION, Judge of the Court of
First Instance of Leyte, respondent.

Page 52 of 319
In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B.
Asuncion of the Court of First Instance of Leyte, now Associate Justice of the Court of Appeals, with "acts
unbecoming a judge."
The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice Cecilia
Muoz Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to whom this
case was referred on October 28, 1968 for investigation, thus:
"Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for partition filed by Sinforosa
R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs,
against Bernardita R. Macariola, defendant, concerning the properties left by the deceased Francisco
Reyes, the common father of the plaintiff and defendant.
"In her defenses to the complaint for partition, Mrs. Macariola alleged among other things that: a) plaintiff
Sinforosa R. Bales was not a daughter of the deceased Francisco Reyes; b) the only legal heirs of the
deceased were defendant Macariola, she being the only offspring of the first marriage of Francisco Reyes
with Felisa Espiras, and the remaining plaintiffs who were the children of the deceased by his second
marriage with Irene Ondes; c) the properties left by the deceased were all the conjugal properties of the
latter and his first wife, Felisa Espiras, and no properties were acquired by the deceased during his second
marriage; d) if there was any partition to be made, those conjugal properties should first be partitioned
into two parts, and one part is to be adjudicated solely to defendant it being the share of the latter's
deceased mother, Felisa Espiras, and the other half which is the share of the deceased Francisco Reyes
was to be divided equally among his children by his two marriages.
"On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil Case 3010, the
dispositive portion of which reads:
"'IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a preponderance
of evidence, finds and so holds, and hereby renders judgment (1) Declaring the plaintiffs
Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the
only children legitimated by the subsequent marriage of Francisco Reyes Diaz to Irene
Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to have been an illegitimate child of
Francisco Reyes Diaz; (3) Declaring Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506
and 1/4 of Lot 1145 as belonging to the conjugal partnership of the spouses Francisco Reyes
Diaz and Felisa Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging to
the spouses Francisco Reyes Diaz and Irene Ondez in common partnership; (5) Declaring
that 1/2 of Lot No. 1184 as belonging exclusively to the deceased Francisco Reyes Diaz; (6)
Declaring the defendant Bernardita R. Macariola, being the only legal and forced heir of her
mother Felisa Espiras, as the exclusive owner of one-half of each of Lots Nos. 4474, 4475,
4892, 5265, 4803, 4581, 4506; and the remaining one-half (1/2) of each of said Lots Nos.
4474, 4475, 4892, 5265, 4803, 4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot

Page 53 of 319
No. 1154 as belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene Ondez to
be the exclusive owner of one-half (1/2) of Lot No. 2304 and one-half (1/2) of one-fourth
(1/4) of Lot No. 3416; the remaining one-half (1/2) of Lot 2304 and the remaining one-half
(1/2) of one fourth (1/4) of Lot No. 3416 as belonging to the estate of Francisco Reyes Diaz;
(8) Directing the division or partition of the estate of Francisco Reyes Diaz in such a manner
as to give or grant to Irene Ondez, as surviving widow of Francisco Reyes Diaz, a hereditary
share of one-twelfth (1/12) of the whole estate of Francisco Reyes Diaz (Art. 996 in relation
to Art. 892, par 2, New Civil Code), and the remaining portion of the estate to be divided
among the plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto Reyes,
Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola, in such a way that the
extent of the total share of plaintiff Sinforosa R. Bales in the hereditary estate shall not
exceed the equivalent of two-fifth (2/5) of the total share of any or each of the other
plaintiffs and the defendant (Art. 983, New Civil Code), each of the latter to receive equal
shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of
Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties, within thirty days after this judgment
shall have become final to submit to this court, for approval, a project of partition of the
hereditary estate in the proportion above indicated, and in such manner as the parties may,
by agreement, deemed convenient and equitable to them taking into consideration the
location, kind, quality, nature and value of the properties involved; (10) Directing the
plaintiff Sinforosa R. Bales and defendant Bernardita R. Macariola to pay the costs of this
suit, in the proportion of one-third (1/3) by the first named and two-thirds (2/3) by the
second named; and (11) Dismissing all other claims of the parties [pp. 27-29 of Exh. C].
"The decision in civil case 3010 became final for lack of an appeal, and on October 16, 1963, a project of
partition was submitted to Judge Asuncion which is marked Exh. A. Notwithstanding the fact that the
project of partition was not signed by the parties themselves but only by the respective counsel of
plaintiffs and defendant, Judge Asuncion approved it in his Order dated October 23, 1963, which for
convenience is quoted hereunder in full:
'The parties, through their respective counsels, presented to this Court for approval the
following project of partition:
'COMES NOW, the plaintiffs and the defendant in the above-entitled case, to this Honorable
Court respectfully submit the following Project of Partition:
'1. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to Bernardita Reyes
Macariola;
'2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along the eastern part of
the lot shall be awarded likewise to Bernardita R. Macariola;
'3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes Bales;

Page 54 of 319
'4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along the western part of
the lot shall likewise be awarded to Sinforosa Reyes-Bales;
'5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes Bakunawa, Anacorita
Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares;
'6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the portions
awarded under item (2) and (4) above shall be awarded to Luz Reyes Bakunawa, Anacorita
Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes in equal shares, provided, however
that the remaining portion of Lot No. 3416 shall belong exclusively to Priscilla Reyes.
'WHEREFORE, it is respectfully prayed that the Project of Partition indicated above which is
made in accordance with the decision of the Honorable Court be approved.
'Tacloban City, October 16, 1963.
(SGD) BONIFACIO RAMO
Atty. for the Defendant
Tacloban City
'(SGD) ZOTICO A. TOLETE
Atty. for the Plaintiff
Tacloban City
'While the Court thought it more desirable for all the parties to have signed this Project of
Partition, nevertheless, upon assurance of both counsels of the respective parties to this
Court that the Project of Partition, as above-quoted, had been made after a conference and
agreement of the plaintiffs and the defendant approving the above Project of Partition, and
that both lawyers had represented to the Court that they are given full authority to sign by
themselves the Project of Partition, the Court, therefore, finding the above-quoted project of
Partition to be in accordance with law, hereby approves the same. The parties, therefore,
are directed to execute such papers, documents or instrument sufficient in form and
substance for the vesting of the rights, interests and participations which were adjudicated
to the respective parties, as outlined in the Project of Partition and the delivery of the
respective properties adjudicated to each one in view of said Project of Partition, and to
perform such other acts as are legal and necessary to effectuate the said Project of
Partition.
'SO ORDERED.
'Given in Tacloban City, this 23rd day of October, 1963.
'(SGD) ELIAS B. ASUNCION

Page 55 of 319
Judge'
"EXH. B.
"The above Order of October 23, 1963, was amended on November 11, 1963, only for the
purpose of giving authority to the Register of Deeds of the Province of Leyte to issue the
corresponding transfer certificates of title to the respective adjudicatees in conformity with
the project of partition (see Exh. U).
"One of the properties mentioned in the project of partition was Lot 1184 or rather one-half
thereof with an area of 15,162.5 sq. meters. This lot, which according to the decision was
the exclusive property of the deceased Francisco Reyes, was adjudicated in said project of
partition to the plaintiffs Luz, Anacorita, Ruperto, Adela, and Priscilla all surnamed Reyes in
equal shares, and when the project of partition was approved by the trial court the
adjudicatees caused Lot 1184 to be subdivided into five lots denominated as Lot 1184-A to
1184-E inclusive (Exh. V).
"Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's court (Exhs. F, F-1
and V-1), while Lot 1184-E which had an area of 2,172.5556 sq. meters was sold on July 31, 1964 to Dr.
Arcadio Galapon (Exh. 2) who was issued transfer certificate of title No. 2338 of the Register of Deeds of
the city of Tacloban (Exh. 12).
"On March 6, 1965, Dr. Arcadio Galapon and his wife sold a portion of Lot 1184-E with an
area of around 1,306 sq. meters to Judge Asuncion and his wife, Victoria S. Asuncion (Exh.
11), which particular portion was declared by the latter for taxation purposes (Exh. F).
"On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their respective shares and
interest in Lot 1184-E to 'The Traders Manufacturing and Fishing Industries Inc.' (Exh. 15 & 16). At the
time of said sale the stockholders of the corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan,
Jaime Arigpa Tan, Judge Asuncion, and the latter's wife, Victoria S. Asuncion, with Judge Asuncion as the
President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of Incorporation of 'The
Traders Manufacturing and Fishing Industries, Inc.' which we shall henceforth refer to as 'TRADERS' were
registered with the Securities and Exchange Commission only on January 9, 1967 (Exh. E)" [pp. 378-385,
rec.].
Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6, 1968
alleging four causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491, paragraph
5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those
properties involved in Civil Case No. 3010 decided by him; [2] that he likewise violated Article 14,
paragraphs 1 and 5 of the Code of Commerce, Section 3, paragraph H, of R.A. 3019, otherwise known as
the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil Service Rules, and Canon 25 of
the Canons of Judicial Ethics, by associating himself with the Traders Manufacturing and Fishing Industries,

Page 56 of 319
Inc., as a stockholder and a ranking officer while he was a judge of the Court of First Instance of Leyte;
[3] that respondent was guilty of coddling an impostor and acted in disregard of judicial decorum by
closely fraternizing with a certain Dominador Arigpa Tan who openly and publicly advertised himself as a
practising attorney when in truth and in fact his name does not appear in the Rolls of Attorneys and is not
a member of the Philippine Bar; and [4] that there was a culpable defiance of the law and utter disregard
for ethics by respondent Judge (pp. 1-7, rec.).
Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on
October 16, 1968 by herein complainant. In Our resolution of October 28, 1968, We referred this case to
then Justice Cecilia Muoz Palma of the Court of Appeals, for investigation, report and recommendation.
After hearing, the said Investigating Justice submitted her report dated May 27, 1971 recommending that
respondent Judge should be reprimanded or warned in connection with the first cause of action alleged in
the complaint, and for the second cause of action, respondent should be warned in case of a finding that
he is prohibited under the law to engage in business. On the third and fourth causes of action, Justice
Palma recommended that respondent Judge be exonerated.
The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant
herein instituted an action before the Court of First Instance of Leyte, entitled "Bernardita R. Macariola,
plaintiff, versus Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case No. 4235,
seeking the annulment of the project of partition made pursuant to the decision in Civil Case No. 3010 and
the two orders issued by respondent Judge approving the same, as well as the partition of the estate and
the subsequent conveyances with damages. It appears, however, that some defendants were dropped
from the civil case. For one, the case against Dr. Arcadio Galapon was dismissed because he was no longer
a real party in interest when Civil Case No. 4234 was filed, having already conveyed on March 6, 1965 a
portion of lot 1184-E to respondent Judge and on August 31, 1966 the remainder was sold to the Traders
Manufacturing and Fishing Industries, Inc. Similarly, the case against defendant Victoria Asuncion was
dismissed on the ground that she was no longer a real party in interest at the time the aforesaid Civil Case
No. 4234 was filed as the portion of Lot 1184 acquired by her and respondent Judge from Dr. Arcadio
Galapon was already sold on August 31, 1966 to the Traders Manufacturing and Fishing Industries, Inc.
Likewise, the cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez,
Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial, Leopoldo
Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were dismissed
with the conformity of complainant herein, plaintiff therein, and her counsel.
On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was
directed and authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now Minister
of National Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a decision, the
dispositive portion of which reads as follows:
"A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION

Page 57 of 319
"(1) declaring that only Branch IV of the Court of First Instance of Leyte has
jurisdiction to take cognizance of the issue of the legality and validity of the
Project of Partition [Exhibit "B"] and the two Orders [Exhibits 'C' and 'C-3']
approving the partition;
"(2) dismissing the complaint against Judge Elias B. Asuncion;
"(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias
B. Asuncion,
"(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00] for moral
damages;
"(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.00] for
exemplary damages;
"(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal damages;
and
"(d) the sum of TEN THOUSAND PESOS [P10,000.00] for Attorney's Fees.
"B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR HERSELF AND FOR
THE HEIRS OF THE DECEASED GERARDO VILLASIN
"(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs
of the deceased Gerardo Villasin;
"(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of
Gerardo Villasin the cost of the suit.
"C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL., WHO WERE
PLAINTIFFS IN CIVIL CASE NO. 3010
"(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer,
Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto O. Reyes.
"D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO
"(1) Dismissing the complaint against Bonifacio Ramo;
"(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit.
"SO ORDERED" [pp. 531-533, rec.].
It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals
upon perfection of the appeal on February 22, 1971.
I
WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her
first cause of action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the
New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those properties
involved in Civil Case No. 3010.
That Article provides:

Page 58 of 319
"Article 1491. The following persons cannot acquire by purchase, even at a public or judicial
action, either in person or through the mediation of another:
xxx xxx xxx
"(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation or levied upon
an execution before the court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with
respect to the property and rights which may be the object of any litigation in which they may take part by
virtue of their profession" [italics supplied].
The prohibition in the aforesaid Article applies only to the sale or assignment of the property which
is the subject of litigation to the persons disqualified therein. WE have already ruled that ". . . for the
prohibition to operate, the sale or assignment of the property must take place during the pendency of the
litigation involving the property" (The Director of Lands vs. Ababa, et al., 88 SCRA 513, 519 [1979];
Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).
In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184E, the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because none
of the parties therein filed an appeal within the reglementary period; hence, the lot in question was no
longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965, respondent's order
dated October 23, 1963 and the amended order dated November 11, 1963 approving the October 16,
1963 project of partition made pursuant to the June 8, 1963 decision, had long become final for there was
no appeal from said orders.
Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the
plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31, 1964 Lot
1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa after the
finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or more specifically onehalf thereof was adjudicated in equal shares to Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes
and Anacorita Reyes in the project of partition, and the same was subdivided into five lots denominated as
Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for which he
was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and on March 6, 1965 he sold a
portion of said lot to respondent Judge and his wife who declared the same for taxation purposes only. The
subsequent sale on August 31, 1966 by spouses Asuncion and spouses Galapon of their respective shares
and interest in said Lot 1184-E to the Traders Manufacturing and Fishing Industries, Inc., in which
respondent was the president and his wife was the secretary, took place long after the finality of the
decision in Civil Case No. 3010 and of the subsequent two aforesaid orders therein approving the project
of partition.

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While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before
the Court of First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of
partition and the two orders approving the same, as well as the partition of the estate and the subsequent
conveyances, the same, however, is of no moment.
The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from
Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in Civil
Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963. Therefore,
the property was no longer subject of litigation.
The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter,
change or affect the aforesaid facts that the questioned sale to respondent Judge, now Court of Appeals
Justice, was effected and consummated long after the finality of the aforesaid decision or orders.
Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one
year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the project
of partition, and not during the pendency of the litigation, there was no violation of paragraph 5, Article
1491 of the New Civil Code.
It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio
Galapon by Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal the
illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval of the
project of partition. In this connection, We agree with the findings of the Investigating Justice thus:
"And so we are now confronted with this all-important question whether or not the acquisition by
respondent of a portion of Lot 1184-E and the subsequent transfer of the whole lot to 'TRADERS' of which
respondent was the President and his wife the Secretary, was intimately related to the Order of
respondent approving the project of partition, Exh. A.
"Respondent vehemently denies any interest or participation in the transactions between the
Reyeses and the Galapons concerning Lot 1184-E, and he insists that there is no evidence
whatsoever to show that Dr. Galapon had acted, in the purchase of Lot 1184-E, in mediation
for him and his wife. (See p. 14 of Respondent's Memorandum).
xxx xxx xxx
"On this point, I agree with respondent that there is no evidence in the record showing that
Dr. Arcadio Galapon acted as a mere 'dummy' of respondent in acquiring Lot 1184-E from
the Reyeses. Dr. Galapon appeared to this investigator as a respectable citizen, credible and
sincere, and I believe him when he testified that he bought Lot 1184-E in good faith and for
valuable consideration from the Reyeses without any intervention of, or previous
understanding with Judge Asuncion" (pp. 391-394, rec.).

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On the contention of complainant herein that respondent Judge acted illegally in approving the
project of partition although it was not signed by the parties, We quote with approval the findings of the
Investigating Justice, as follows:
"1. I agree with complainant that respondent should have required the signature of the parties more
particularly that of Mrs. Macariola on the project of partition submitted to him for approval; however,
whatever error was committed by respondent in that respect was done in good faith as according to Judge
Asuncion he was assured by Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, that he was
authorized by his client to submit said project of partition, (See Exh. B and tsn. p. 24, January 20, 1969).
While it is true that such written authority if there was any, was not presented by respondent in evidence,
nor did Atty. Ramo appear to corroborate the statement of respondent, his affidavit being the only one
that was presented as respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to
believe that she knew the contents of the project of partition, Exh. A, and that she gave her conformity
thereto. I refer to the following documents:
"1) Exh. 9 Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban
Cadastral Survey in which the deceased Francisco Reyes holds a '1/4 share' (Exh. 9a). On this certificate of title the Order dated November 11, 1963, (Exh. U)
approving the project of partition was duly entered and registered on November 26,
1963 (Exh. 9-D);
"2) Exh. 7 Certified copy of a deed of absolute sale executed by Bernardita Reyes
Macariola on October 22, 1963, conveying to Dr. Hector Decena the one-fourth share
of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale the vendee stated
that she was the absolute owner of said one-fourth share, the same having been
adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as
per decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A).
The deed of sale was duly registered and annotated at the back of OCT 19520 on
December 3, 1963 (see Exh. 9-e).
"In connection with the abovementioned documents it is to be noted that in the project of partition dated
October 16, 1963, which was approved by respondent on October 23, 1963, followed by an amending
Order on November 11, 1963, Lot 1154 or rather 1/4 thereof was adjudicated to Mrs. Macariola. It is this
1/4 share in Lot 1154 which complainant sold to Dr. Decena on October 22, 1963, several days after the
preparation of the project of partition.
"Counsel for complainant stresses the view, however, that the latter sold her one-fourth share in Lot 1154
by virtue of the decision in Civil Case 3010 and not because of the project of partition, Exh. A. Such
contention is absurd because from the decision, Exh. C, it is clear that one-half of one-fourth of Lot 1154
belonged to the estate of Francisco Reyes Diaz while the other half of said one-fourth was the share of
complainant's mother, Felisa Espiras; in other words, the decision did not adjudicate the whole of the one-

Page 61 of 319
fourth of Lot 1154 to the herein complainant (see Exhs. C-3 & C-4). Complainant became the owner of the
entire one fourth of Lot 1154 only by means of the project of partition, Exh. A. Therefore, if Mrs. Macariola
sold Lot 1154 on October 22, 1963, it was for no other reason than that she was well aware of the
distribution of the properties of her deceased father as per Exhs. A and B. It is also significant at this point
to state that Mrs. Macariola admitted during the cross-examination that she went to Tacloban City in
connection with the sale of Lot 1154 to Dr. Decena (tsn. p. 92, November 28, 1968) from which we can
deduce that she could not have been kept ignorant of the proceedings in civil case 3010 relative to the
project of partition.
"Complainant also assails the project of partition because according to her the properties
adjudicated to her were insignificant lots and the least valuable. Complainant, however, did
not present any direct and positive evidence to prove the alleged gross inequalities in the
choice and distribution of the real properties when she could have easily done so by
presenting evidence on the area, location, kind, the assessed and market value of said
properties. Without such evidence there is nothing in the record to show that there were
inequalities in the distribution of the properties of complainant's father" (pp. 386-389, rec.).
Finally, while it is true that respondent Judge did not violate paragraph 5, Article 1491 of the New
Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was,
however, improper for him to have acquired the same. He should be reminded of Canon 3 of the Canons of
Judicial Ethics which requires that: "A judge's official conduct should be free from the appearance of
impropriety, and his personal behavior, not only upon the bench and in the performance of judicial duties,
but also in his everyday life, should be beyond reproach." And as aptly observed by the Investigating
Justice: ". . . it was unwise and indiscreet on the part of respondent to have purchased or acquired a
portion of a piece of property that was or had been in litigation in his court and caused it to be transferred
to a corporation of which he and his wife were ranking officers at the time of such transfer. One who
occupies an exalted position in the judiciary has the duty and responsibility of maintaining the faith and
trust of the citizenry in the courts of justice, so that not only must he be truly honest and just, but his
actuations must be such as not give cause for doubt and mistrust in the uprightness of his administration
of justice. In this particular case of respondent, he cannot deny that the transactions over Lot 1184-E are
damaging and render his actuations open to suspicion and distrust. Even if respondent honestly believed
that Lot 1184-E was no longer in litigation in his court and that he was purchasing it from a third person
and not from the parties to the litigation, he should nonetheless have refrained from buying it for himself
and transferring it to a corporation in which he and his wife were financially involved, to avoid possible
suspicion that his acquisition was related in one way or another to his official actuations in civil case 3010.
The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers practising in his
court, and the public in general to doubt the honesty and fairness of his actuations and the integrity of our
courts of justice" (pp. 395-396, rec.). LexLib
II

Page 62 of 319
With respect to the second cause of action, the complainant alleged that respondent Judge violated
paragraphs 1 and 5, Article 14 of the Code of Commerce when he associated himself with the Traders
Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, said corporation having
been organized to engage in business. Said Article provides that:
"Article 14 The following cannot engage in commerce, either in person or by proxy, nor can they hold
any office or have any direct, administrative, or financial intervention in commercial or industrial
companies within the limits of the districts, provinces, or towns in which they discharge their duties:
"1. Justices of the Supreme Court, judges and officials of the department of public
prosecution in active service. This provision shall not be applicable to mayors,
municipal judges, and municipal prosecuting attorneys nor to those who by chance
are temporarily discharging the functions of judge or prosecuting attorney.
xxx xxx xxx
"5. Those who by virtue of laws or special provisions may not engage in commerce in
a determinate territory."
It is Our considered view that although the aforestated provision is incorporated in the Code of
Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the nature of a
political law as it regulates the relationship between the government and certain public officers and
employees, like justices and judges.
Political Law has been defined as that branch of public law which deals with the organization and
operation of the governmental organs of the State and define the relations of the state with the
inhabitants of its territory (People vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that political
law embraces constitutional law, law of public corporations, administrative law including the law on public
officers and elections. Specifically, Article 14 of the Code of Commerce partakes more of the nature of an
administrative law because it regulates the conduct of certain public officers and employees with respect
to engaging in business; hence, political in essence.
It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of
1885, with some modifications made by the "Comision de Codificacion de las Provincias de Ultramar,"
which was extended to the Philippines by the Royal Decree of August 6, 1888, and took effect as law in
this jurisdiction on December 1, 1888.
Upon the transfer of sovereignty from Spain to the United States and later on from the United
States to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have
been abrogated because where there is change of sovereignty, the political laws of the former sovereign,
whether compatible or not with those of the new sovereign, are automatically abrogated, unless they are
expressly re-enacted by affirmative act of the new sovereign.

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Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:
"'By well-settled public law, upon the cession of territory by one nation to another, either following a
conquest or otherwise, . . . those laws which are political in their nature and pertain to the prerogatives of
the former government immediately cease upon the transfer of sovereignty.' (Opinion, Atty. Gen., July 10,
1899).
"While municipal laws of the newly acquired territory not in conflict with the laws of the new
sovereign continue in force without the express assent or affirmative act of the conqueror,
the political laws do not. (Halleck's Int. Law, chap. 34, par. 14). However, such political laws
of the prior sovereignty as are not in conflict with the constitution or institutions of the new
sovereign, may be continued in force if the conqueror shall so declare by affirmative act of
the commander-in-chief during the war, or by Congress in time of peace. (Ely's
Administrator vs. United States, 171 U.S. 220, 43 L. Ed. 142). In the case of American and
Ocean Ins. Cos. vs. 356 Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief
Justice Marshall said:
'On such transfer (by cession) of territory, it has never been held that the relations of
the inhabitants with each other undergo any change. Their relations with their former
sovereign are dissolved, and new relations are created between them and the
government which has acquired their territory. The same act which transfers their
country, transfers the allegiance of those who remain in it; and the law which may be
denominated political, is necessarily changed, although that which regulates the
intercourse and general conduct of individuals, remains in force, until altered by the
newly-created power of the State.'"
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general
principle of the public law that on acquisition of territory the previous political relations of the ceded region
are totally abrogated."
There appears no enabling or affirmative act that continued the effectivity of the aforestated
provision of the Code of Commerce after the change of sovereignty from Spain to the United States and
then to the Republic of the Philippines. Consequently, Article 14 of the Code of Commerce has no legal and
binding effect and cannot apply to the respondent, then Judge of the Court of First Instance, now
Associate Justice of the Court of Appeals.
It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides that:

Page 64 of 319
"Sec. 3. Corrupt practices of public officers. In addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
xxx xxx xxx
"(h) Directly or indirectly having financial or pecuniary interest in any business, contract or transaction in
connection with which he intervenes or takes part in his official capacity, or in which he is prohibited by
the Constitution or by any law from having any interest."
Respondent Judge cannot be held liable under the aforestated paragraph because there is no
showing that respondent participated or intervened in his official capacity in the business or transactions
of the Traders Manufacturing and Fishing Industries, Inc. In the case at bar, the business of the
corporation in which respondent participated has obviously no relation or connection with his judicial
office. The business of said corporation is not that kind where respondent intervenes or takes part in his
capacity as Judge of the Court of First Instance. As was held in one case involving the application of Article
216 of the Revised Penal Code which has a similar prohibition on public officers against directly or
indirectly becoming interested in any contract or business in which it is his official duty to intervene, "(I)t
is not enough to be a public official to be subject to this crime: it is necessary that by reason of his office,
he has to intervene in said contracts or transactions; and, hence, the official who intervenes in contracts
or transactions which have no relation to his office cannot commit this crime" (People vs. Meneses, C.A.
40 O.G. 11th Supp. 134, cited by Justice Ramon C. Aquino; Revised Penal Code, p. 1174, Vol. II [1976]).
It does not appear also from the records that the aforesaid corporation gained any undue
advantage in its business operations by reason of respondent's financial involvement in it, or that the
corporation benefited in one way or another in any case filed by or against it in court. It is undisputed that
there was no case filed in the different branches of the Court of First Instance of Leyte in which the
corporation was either party plaintiff or defendant except Civil Case No. 4234 entitled "Bernardita R.
Macariola, plaintiff, versus Sinforosa O. Bales, et al.," wherein the complainant herein sought to recover
Lot 1184-E from the aforesaid corporation. It must be noted, however, that Civil Case No. 4234 was filed
only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI Judge Jose D. Nepomuceno
when respondent Judge was no longer connected with the corporation, having disposed of his interest
therein on January 31, 1967.
Furthermore, respondent is not liable under the same paragraph because there is no provision in
both the 1935 and 1973 Constitutions of the Philippines, nor is there an existing law expressly prohibiting
members of the Judiciary from engaging or having interest in any lawful business.
It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of
1948, does not contain any prohibition to that effect. As a matter of fact, under Section 77 of said law,

Page 65 of 319
municipal judges may engage in teaching or other vocation not involving the practice of law after office
hours but with the permission of the district judge concerned.
Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce
is, as heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to
America, because it is political in nature.
Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase
by judges of a property in litigation before the court within whose jurisdiction they perform their duties,
cannot apply to respondent Judge because the sale of the lot in question to him took place after the
finality of his decision in Civil Case No. 3010 as well as his two orders approving the project of partition;
hence, the property was no longer subject of litigation.
In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil
Service Act of 1959 prohibits an officer or employee in the civil service from engaging in any private
business, vocation, or profession or be connected with any commercial, credit, agricultural or industrial
undertaking without a written permission from the head of department, the same, however, may not fall
within the purview of paragraph h, Section 3 of the Anti-Graft and Corrupt Practices Act because the last
portion of said paragraph speaks of a prohibition by the Constitution or law on any public officer from
having any interest in any business and not by a mere administrative rule or regulation. Thus, a violation
of the aforesaid rule by any officer or employee in the civil service, that is, engaging in private business
without a written permission from the Department Head may not constitute graft and corrupt practice as
defined by law.
On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil
Service Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules
promulgated thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of the
Judiciary. Under said Section 12: "No officer or employee shall engage directly in any private business,
vocation, or profession or be connected with any commercial, credit, agricultural or industrial undertaking
without a written permission from the Head of Department . . ."
It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered
by Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7,
Article X, 1973 Constitution.
Under Section 67 of said law, the power to remove or dismiss judges was then vested in the
President of the Philippines, not in the Commissioner of Civil Service, and only on two grounds, namely,
serious misconduct and inefficiency, and upon the recommendation of the Supreme Court, which alone is
authorized, upon its own motion, or upon information of the Secretary (now Minister) of Justice to conduct

Page 66 of 319
the corresponding investigation. Clearly, the aforesaid section defines the grounds and prescribes the
special procedure for the discipline of judges.
And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can
discipline judges of inferior courts as well as other personnel of the Judiciary.
It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for . . .
violation of the existing Civil Service Law and rules or of reasonable office regulations, or in the interest of
the service, remove any subordinate officer or employee from the service, demote him in rank, suspend
him for not more than one year without pay or fine him in an amount not exceeding six months' salary."
Thus, a violation of Section 12 of Rule XVIII is a ground for disciplinary action against civil service officers
and employees.
However, judges cannot be considered as subordinate civil service officers or employees subject to
the disciplinary authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not the
head of the Judicial Department to which they belong. The Revised Administrative Code (Section 89) and
the Civil Service Law itself state that the Chief Justice is the department head of the Supreme Court (Sec.
20, R.A. No. 2260) [1959]); and under the 1973 Constitution, the Judiciary is the only other or second
branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a violation of Section 12, Rule
XVIII cannot be considered as a ground for disciplinary action against judges because to recognize the
same as applicable to them, would be adding another ground for the discipline of judges and, as
aforestated, Section 67 of the Judiciary Act recognizes only two grounds for their removal, namely, serious
misconduct and inefficiency.
Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil
Service who has original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after
submission to it, all administrative cases against permanent officers and employees in the competitive
service, and, except as provided by law, to have final authority to pass upon their removal, separation,
and suspension and upon all matters relating to the conduct, discipline, and efficiency of such officers and
employees; and prescribe standards, guidelines and regulations governing the administration of discipline"
(emphasis supplied). There is no question that a judge belong to the non-competitive or unclassified
service of the government as a Presidential appointee and is therefore not covered by the aforesaid
provision. WE have already ruled that ". . . in interpreting Section 16(i) of Republic Act No. 2260, we
emphasized that only permanent officers and employees who belong to the classified service come under
the exclusive jurisdiction of the Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710, 713
[1965l, Ang-Angco vs. Castillo, 9 SCRA 619 [1963]).
Although the actuation of respondent Judge in engaging in private business by joining the Traders
Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of the
provisions of Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt Practices

Page 67 of 319
Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to the Civil Service
Act of 1959, the impropriety of the same is clearly unquestionable because Canon 25 of the Canons of
Judicial Ethics expressly declares that:
"A judge should abstain from making personal investments in enterprises which are apt to be involved in
litigation in his court; and, after his accession to the bench, he should not retain such investments
previously made, longer than a period sufficient to enable him to dispose of them without serious loss. It
is desirable that he should, so far as reasonably possible, refrain from all relations which would normally
tend to arouse the suspicion that such relations warp or bias his judgment, or prevent his impartial
attitude of mind in the administration of his judicial duties. . . ."
WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on
January 31, 1967 from the aforesaid corporation and sold their respective shares to third parties, and it
appears also that the aforesaid corporation did not in anyway benefit in any case filed by or against it in
court as there was no case filed in the different branches of the Court of First Instance of Leyte from the
time of the drafting of the Articles of Incorporation of the corporation on March 12, 1966, up to its
incorporation on January 9, 1967, and the eventual withdrawal of respondent on January 31, 1967 from
said corporation. Such disposal or sale by respondent and his wife of their shares in the corporation only
22 days after the in corporation of the corporation, indicates that respondent realized that early that their
interest in the corporation contravenes the aforesaid Canon 25. Respondent Judge and his wife therefore
deserve the commendation for their immediate withdrawal from the firm after its incorporation and before
it became involved in any court litigation.
III
With respect to the third and fourth causes of action, complainant alleged that respondent was
guilty of coddling an impostor and acted in disregard of judicial decorum, and that there was culpable
defiance of the law and utter disregard for ethics. WE agree, however, with the recommendation of the
Investigating Justice that respondent Judge be exonerated because the aforesaid causes of action are
groundless, and WE quote the pertinent portion of her report which reads as follows:
"The basis for complainant's third cause of action is the claim that respondent associated and closely
fraternized with Dominador Arigpa Tan who openly and publicly advertised himself as a practising attorney
(see Exhs. I, I-1 and J) when in truth and in fact said Dominador Arigpa Tan does not appear in the Roll of
Attorneys and is not a member of the Philippine Bar as certified to in Exh. K.
The "respondent denies knowing that Dominador Arigpa Tan was an 'impostor' and claims
that all the time he believed that the latter was a bona fide member of the bar. I see no
reason for disbelieving this assertion of respondent. It has been shown by complainant that
Dominador Arigpa Tan represented himself publicly as an attorney-at-law to the extent of

Page 68 of 319
putting up a signboard with his name and the words 'Attorney-at-Law' (Exh. I and I-1) to
indicate his office, and it was but natural for respondent and any person for that matter to
have accepted that statement on its face value.
"Now with respect to the allegation of complainant that respondent is guilty of fraternizing with Dominador
Arigpa Tan to the extent of permitting his wife to be a godmother of Mr. Tan's child at baptism (Exh. M &
M-1), that fact even if true did not render respondent guilty of violating any canon of judicial ethics as
long as his friendly relations with Dominador A. Tan and family did not influence his official actuations as a
judge where said persons were concerned. There is no tangible convincing proof that herein respondent
gave any undue privileges in his court to Dominador Arigpa Tan or that the latter benefitted in his practice
of law from his personal relations with respondent, or that he used his influence, if he had any, on the
Judges of the other branches of the Court to favor said Dominador Tan.
"Of course it is highly desirable for a member of the judiciary to refrain as much as possible from
maintaining close friendly relations with practising attorneys and litigants in his court so as to avoid
suspicion 'that his social or business relations or friendship constitute an element in determining his
judicial course" (par. 30, Canons of Judicial Ethics), but if a Judge does have social relations, that in itself
would not constitute a ground for disciplinary action unless it be clearly shown that his social relations
beclouded his official actuations with bias and partiality in favor of his friends" (pp. 403-405, rec.).
In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did not
violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in
engaging in business by joining a private corporation during his incumbency as judge of the Court of First
Instance of Leyte, he should be reminded to be more discreet in his private and business activities,
because his conduct as a member of the Judiciary must not only be characterized with propriety but must
always be above suspicion.
WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS HEREBY REMINDED
TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.

4. Republic v. Sandiganbayan, 407 SCRA 10 (2003)

REPUBLIC OF THE PHILIPPINES, petitioner, vs. HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION),
FERDINAND E. MARCOS (REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA
[IMEE] MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND IMELDA
ROMUALDEZ MARCOS, respondents.
This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the Resolution
dated January 31, 2002 issued by the Special First Division of the Sandiganbayan in Civil Case No. 0141

Page 69 of 319
entitled Republic of the Philippines vs. Ferdinand E. Marcos, et. al., and (2) reinstate its earlier decision
dated September 19, 2000 which forfeited in favor of petitioner Republic of the Philippines (Republic) the
amount

held

in

escrow

in

the

Philippine

National

Bank

(PNB)

in

the

aggregate

amount

of

US$658,175,373.60 as of January 31, 2002.

On December 17, 1991, petitioner Republic, through the Presidential Commission on Good Government
(PCGG), represented by the Office of the Solicitor General (OSG), filed a petition for forfeiture before the
Sandiganbayan, docketed as Civil Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E.
Marcos, represented by his Estate/Heirs and Imelda R. Marcos, pursuant to RA 1379 in relation to
Executive Order Nos. 1, 2, 14 and 14-A.
In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now estimated
to be more than US$658 million inclusive of interest) deposited in escrow in the PNB, as ill-gotten wealth.
The funds were previously held by the following five account groups, using various foreign foundations in
certain Swiss banks:
(1)

Azio-Verso-Vibur Foundation accounts;

(2)

Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts;

(3)

Trinidad-Rayby-Palmy Foundation accounts;

(4)

Rosalys-Aguamina Foundation accounts and

(5)

Maler Foundation accounts.

In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes which
exceeded the Marcos couples salaries, other lawful income as well as income from legitimately acquired
property. The treasury notes are frozen at the Central Bank of the Philippines, now Bangko Sentral ng
Pilipinas, by virtue of the freeze order issued by the PCGG.
On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and
Ferdinand R. Marcos, Jr. filed their answer.
Before the case was set for pre-trial, a General Agreement and the Supplemental Agreements dated
December 28, 1993 were executed by the Marcos children and then PCGG Chairman Magtanggol
Gunigundo for a global settlement of the assets of the Marcos family. Subsequently, respondent Marcos
children filed a motion dated December 7, 1995 for the approval of said agreements and for the
enforcement thereof.
The General Agreement/Supplemental Agreements sought to identify, collate, cause the inventory of and
distribute all assets presumed to be owned by the Marcos family under the conditions contained therein.

Page 70 of 319
The aforementioned General Agreement specified in one of its premises or whereas clauses the fact that
petitioner obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the Three
Hundred Fifty-six Million U.S. dollars (US$356 million) belongs in principle to the Republic of the
Philippines provided certain conditionalities are met x x x.

The said decision of the Swiss Federal

Supreme Court affirmed the decision of Zurich District Attorney Peter Consandey, granting petitioners
request for legal assistance. Consandey declared the various deposits in the name of the enumerated
foundations to be of illegal provenance and ordered that they be frozen to await the final verdict in favor
of the parties entitled to restitution.
Hearings were conducted by the Sandiganbayan on the motion to approve the General/Supplemental
Agreements. Respondent Ferdinand, Jr. was presented as witness for the purpose of establishing the
partial implementation of said agreements.
On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the pleadings.
Respondent Mrs. Marcos filed her opposition thereto which was later adopted by respondents Mrs.
Manotoc, Mrs. Araneta and Ferdinand, Jr.
In its resolution dated November 20, 1997, the Sandiganbayan denied petitioners motion for summary
judgment and/or judgment on the pleadings on the ground that the motion to approve the compromise
agreement (took) precedence over the motion for summary judgment.
Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to the motion
for approval of the Compromise Agreement and that she owned 90% of the funds with the remaining 10%
belonging to the Marcos estate.
Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland, an
additional request for the immediate transfer of the deposits to an escrow account in the PNB.

The

request was granted. On appeal by the Marcoses, the Swiss Federal Supreme Court, in a decision dated
December 10, 1997, upheld the ruling of the District Attorney of Zurich granting the request for the
transfer of the funds.

In 1998, the funds were remitted to the Philippines in escrow. Subsequently,

respondent Marcos children moved that the funds be placed in custodia legis because the deposit in
escrow in the PNB was allegedly in danger of dissipation by petitioner. The Sandiganbayan, in its resolution
dated September 8, 1998, granted the motion.
After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated October
28, 1999 and January 21, 2000, respectively, the case was set for trial. After several resettings, petitioner,
on March 10, 2000, filed another motion for summary judgment pertaining to the forfeiture of the US$356
million, based on the following grounds:
I

Page 71 of 319
THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS SUBJECT OF THE PETITION
UNDER R.A. NO. 1379 ARE ADMITTED BY RESPONDENTS IN THEIR PLEADINGS AND OTHER
SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING.
II
RESPONDENTS ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT HAVE ANY INTEREST OR
OWNERSHIP OVER THE FUNDS SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO GENUINE ISSUE
OR CONTROVERSY AS TO ANY MATERIAL FACT IN THE PRESENT ACTION, THUS WARRANTING THE
RENDITION OF SUMMARY JUDGMENT.
Petitioner contended that, after the pre-trial conference, certain facts were established, warranting a
summary judgment on the funds sought to be forfeited.
Respondent Mrs. Marcos filed her opposition to the petitioners motion for summary judgment, which
opposition was later adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.
On March 24, 2000, a hearing on the motion for summary judgment was conducted.
In a decision dated September 19, 2000, the Sandiganbayan granted petitioners motion for summary
judgment:
CONCLUSION
There is no issue of fact which calls for the presentation of evidence.
The Motion for Summary Judgment is hereby granted.
The Swiss deposits which were transmitted to and now held in escrow at the PNB are deemed unlawfully
acquired as ill-gotten wealth.
DISPOSITION
WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines and against the
respondents, declaring the Swiss deposits which were transferred to and now deposited in escrow at the
Philippine National Bank in the total aggregate value equivalent to US$627,608,544.95 as of August 31,
2000 together with the increments thereof forfeited in favor of the State.
Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise, Mrs.
Manotoc and Ferdinand, Jr. filed their own motion for reconsideration dated October 5, 2000. Mrs. Araneta
filed a manifestation dated October 4, 2000 adopting the motion for reconsideration of Mrs. Marcos, Mrs.
Manotoc and Ferdinand, Jr.

Page 72 of 319
Subsequently, petitioner filed its opposition thereto.
In a resolution dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000 decision,
thus denying petitioners motion for summary judgment:
CONCLUSION
In sum, the evidence offered for summary judgment of the case did not prove that the money in the Swiss
Banks belonged to the Marcos spouses because no legal proof exists in the record as to the ownership by
the Marcoses of the funds in escrow from the Swiss Banks.
The basis for the forfeiture in favor of the government cannot be deemed to have been established and
our judgment thereon, perforce, must also have been without basis.
WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and set aside, and this
case is now being set for further proceedings.
Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in reversing its
September 19, 2000 decision, committed grave abuse of discretion amounting to lack or excess of
jurisdiction considering that -I
PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE REQUISITES OF SECTIONS 2
AND 3 OF R.A. NO. 1379:
A.

PRIVATE

RESPONDENTS

CATEGORICALLY

ADMITTED

NOT

ONLY

THE

PERSONAL

CIRCUMSTANCES OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC

OFFICIALS BUT ALSO THE EXTENT OF THEIR SALARIES AS SUCH PUBLIC OFFICIALS, WHO
UNDER THE CONSTITUTION, WERE PROHIBITED FROM ENGAGING IN THE MANAGEMENT
OF FOUNDATIONS.
B.

PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE SWISS DEPOSITS AND
THEIR OWNERSHIP THEREOF:
1.

ADMISSIONS IN PRIVATE RESPONDENTS ANSWER;

2.

ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS THEY SIGNED AND

SOUGHT TO IMPLEMENT;

3.

ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT IMELDA R. MARCOS

AND IN THE MOTION TO PLACE THE RES IN CUSTODIA LEGIS; AND

Page 73 of 319
4.
C.

ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS VICTIMS.

PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME OF FERDINAND E.

MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS.

D.

PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF UNLAWFULLY ACQUIRED

WEALTH.
II

SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT RAISED ANY GENUINE ISSUE
OF FACT CONSIDERING THAT:
A.

PRIVATE RESPONDENTS DEFENSE THAT SWISS DEPOSITS WERE LAWFULLY ACQUIRED

DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS CLEARLY A SHAM; AND

B. IN

SUBSEQUENTLY

DISCLAIMING

OWNERSHIP

OF

THE

SWISS

DEPOSITS,

PRIVATE

RESPONDENTS ABANDONED THEIR SHAM DEFENSE OF LEGITIMATE ACQUISITION, AND THIS

FURTHER JUSTIFIED THE RENDITION OF A SUMMARY JUDGMENT.
III
THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.
IV
THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING
HIMSELF ON THE GROUND THAT ORIGINAL COPIES OF THE AUTHENTICATED SWISS DECISIONS AND
THEIR AUTHENTICATED TRANSLATIONS HAVE NOT BEEN SUBMITTED TO THE COURT, WHEN EARLIER
THE SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE TRANSLATION OF ONE OF THESE
SWISS DECISIONS IN HIS PONENCIA DATED JULY 29, 1999 WHEN IT DENIED THE MOTION TO RELEASE
ONE HUNDRED FIFTY MILLION US DOLLARS ($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS.
V
PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO THE AUTHENTICITY OF
THE SWISS FEDERAL SUPREME COURT DECISIONS.
Petitioner, in the main, asserts that nowhere in the respondents motions for reconsideration and
supplemental motion for reconsideration were the authenticity, accuracy and admissibility of the Swiss
decisions ever challenged. Otherwise stated, it was incorrect for the Sandiganbayan to use the issue of
lack of authenticated translations of the decisions of the Swiss Federal Supreme Court as the basis for

Page 74 of 319
reversing

itself

because

respondents

themselves

never

raised

this

issue

in

their

motions

for

reconsideration and supplemental motion for reconsideration. Furthermore, this particular issue relating to
the translation of the Swiss court decisions could not be resurrected anymore because said decisions had
been previously utilized by the Sandiganbayan itself in resolving a decisive issue before it.
Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated translations of
the Swiss Federal Supreme Court decisions as this was a marginal and technical matter that did not
diminish by any measure the conclusiveness and strength of what had been proven and admitted before
the Sandiganbayan, that is, that the funds deposited by the Marcoses constituted ill-gotten wealth and
thus belonged to the Filipino people.
In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May 22,
2002. After several motions for extension which were all granted, the comment of Mrs. Manotoc and
Ferdinand, Jr. and the separate comment of Mrs. Araneta were filed on May 27, 2002.
Mrs. Marcos asserts that the petition should be denied on the following grounds:
A. PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE SANDIGANBAYAN.
B. THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE FOR FURTHER
PROCEEDINGS.
Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary course of
law in view of the resolution of the Sandiganbayan dated January 31, 2000 directing petitioner to submit
the authenticated translations of the Swiss decisions. Instead of availing of said remedy, petitioner now
elevates the matter to this Court. According to Mrs. Marcos, a petition for certiorari which does not comply
with the requirements of the rules may be dismissed. Since petitioner has a plain, speedy and adequate
remedy, that is, to proceed to trial and submit authenticated translations of the Swiss decisions, its
petition before this Court must be dismissed. Corollarily, the Sandiganbayans ruling to set the case for
further proceedings cannot and should not be considered a capricious and whimsical exercise of judgment.
Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the petition on
the grounds that:
(A) BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10 MARCH 2000, IT WAS
ALREADY BARRED FROM DOING SO.
(1)

The Motion for Summary Judgment was based on private respondents Answer and other
documents that had long been in the records of the case. Thus, by the time the Motion was
filed on 10 March 2000, estoppel by laches had already set in against petitioner.

Page 75 of 319
(2)

By its positive acts and express admissions prior to filing the Motion for Summary Judgment
on 10 March 1990, petitioner had legally bound itself to go to trial on the basis of existing
issues. Thus, it clearly waived whatever right it had to move for summary judgment.

(B) EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING THE MOTION FOR
SUMMARY JUDGMENT, THE SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER HAS NOT YET
ESTABLISHED A PRIMA FACIE CASE FOR THE FORFEITURE OF THE SWISS FUNDS.
(1)

Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions,
particularly the essential elements stated in section 3 thereof, are mandatory in nature.
These should be strictly construed against petitioner and liberally in favor of private
respondents.

(2)

Petitioner has failed to establish the third and fourth essential elements in Section 3 of R.A.
1379 with respect to the identification, ownership, and approximate amount of the property
which the Marcos couple allegedly acquired during their incumbency.
(a)

Petitioner has failed to prove that the Marcos couple acquired or own the Swiss
funds.

(b)

Even assuming, for the sake of argument, that the fact of acquisition has been
proven, petitioner has categorically admitted that it has no evidence showing how
much of the Swiss funds was acquired during the incumbency of the Marcos couple
from 31 December 1965 to 25 February 1986.

(3)

In contravention of the essential element stated in Section 3 (e) of R.A. 1379, petitioner has
failed to establish the other proper earnings and income from legitimately acquired property
of the Marcos couple over and above their government salaries.

(4)

Since petitioner failed to prove the three essential elements provided in paragraphs (c), (d),
and (e) of Section 3, R.A. 1379, the inescapable conclusion is that the prima facie
presumption of unlawful acquisition of the Swiss funds has not yet attached. There can,
therefore, be no premature forfeiture of the funds.

(C) IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN STATEMENTS MADE BY
PRIVATE RESPONDENTS OUT OF CONTEXT THAT PETITIONER WAS ABLE TO TREAT THESE AS JUDICIAL
ADMISSIONS SUFFICIENT TO ESTABLISH A PRIMA FACIE AND THEREAFTER A CONCLUSIVE CASE TO
JUSTIFY THE FORFEITURE OF THE SWISS FUNDS.
(1)

Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental
Agreements, as well as the other written and testimonial statements submitted in relation

Page 76 of 319
thereto,

are

expressly

barred

from

being

admissible

in

evidence

against

private

respondents.
(2)

Had petitioner bothered to weigh the alleged admissions together with the other statements
on record, there would be a demonstrable showing that no such judicial admissions were
made by private respondents.

(D) SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO ESTABLISH A PRIMA
FACIE CASE FOR FORFEITURE, AND PRIVATE RESPONDENTS HAVE NOT MADE ANY JUDICIAL ADMISSION
THAT WOULD HAVE FREED IT FROM ITS BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT COMMIT
GRAVE ABUSE OF DISCRETION IN DENYING THE MOTION FOR SUMMARY JUDGMENT. CERTIORARI,
THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF FACTS.
For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is unable to
comply with a very plain requirement of respondent Sandiganbayan. The instant petition is allegedly an
attempt to elevate to this Court matters, issues and incidents which should be properly threshed out at
the Sandiganbayan.

To respondent Mrs. Araneta, all other matters, save that pertaining to the

authentication of the translated Swiss Court decisions, are irrelevant and impertinent as far as this Court is
concerned. Respondent Mrs. Araneta manifests that she is as eager as respondent Sandiganbayan or any
interested person to have the Swiss Court decisions officially translated in our known language. She says
the authenticated official English version of the Swiss Court decisions should be presented. This should
stop all speculations on what indeed is contained therein. Thus, respondent Mrs. Araneta prays that the
petition be denied for lack of merit and for raising matters which, in elaborated fashion, are impertinent
and improper before this Court.
PROPRIETY OF PETITIONERS ACTION FOR CERTIORARI
But before this Court discusses the more relevant issues, the question regarding the propriety of petitioner
Republic's action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure assailing the
Sandiganbayan Resolution dated January 21, 2002 should be threshed out.
At the outset, we would like to stress that we are treating this case as an exception to the general rule
governing petitions for certiorari. Normally, decisions of the Sandiganbayan are brought before this Court
under Rule 45, not Rule 65. But where the case is undeniably ingrained with immense public interest,
public policy and deep historical repercussions, certiorari is allowed notwithstanding the existence and
availability of the remedy of appeal.
One of the foremost concerns of the Aquino Government in February 1986 was the recovery of the
unexplained or ill-gotten wealth reputedly amassed by former President and Mrs. Ferdinand E. Marcos,
their relatives, friends and business associates. Thus, the very first Executive Order (EO) issued by then
President Corazon Aquino upon her assumption to office after the ouster of the Marcoses was EO No. 1,

Page 77 of 319
issued on February 28, 1986. It created the Presidential Commission on Good Government (PCGG) and
charged it with the task of assisting the President in the "recovery of all ill-gotten wealth accumulated by
former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates,
whether located in the Philippines or abroad, including the takeover or sequestration of all business
enterprises and entities owned or controlled by them during his administration, directly or through
nominees, by taking undue advantage
influence, connections or relationship."

of their public office and/or using their powers, authority,

The urgency of this undertaking was tersely described by this

Court in Republic vs. Lobregat: surely x x x an enterprise "of great pith and moment"; it was attended by
"great expectations"; it was initiated not only out of considerations of simple justice but also out of sheer
necessity - the national coffers were empty, or nearly so.
In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set aside
technicalities and formalities that merely serve to delay or impede judicious resolution. This Court prefers
to have such cases resolved on the merits at the Sandiganbayan. But substantial justice to the Filipino
people and to all parties concerned, not mere legalisms or perfection of form, should now be relentlessly
and firmly pursued. Almost two decades have passed since the government initiated its search for and
reversion of such ill-gotten wealth. The definitive resolution of such cases on the merits is thus long
overdue. If there is proof of illegal acquisition, accumulation, misappropriation, fraud or illicit conduct, let
it be brought out now. Let the ownership of these funds and other assets be finally determined and
resolved with dispatch, free from all the delaying technicalities and annoying procedural sidetracks.
We thus take cognizance of this case and settle with finality all the issues therein.
ISSUES BEFORE THIS COURT
The crucial issues which this Court must resolve are: (1) whether or not respondents raised any genuine
issue of fact which would either justify or negate summary judgment; and (2) whether or not petitioner
Republic was able to prove its case for forfeiture in accordance with Sections 2 and 3 of RA 1379.
(1) THE PROPRIETY OF SUMMARY JUDGMENT
We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings. Thus, on
motion of petitioner Republic, summary judgment should take place as a matter of right.
In the early case of Auman vs. Estenzo summary judgment was described as a judgment which a court
may render before trial but after both parties have pleaded. It is ordered by the court upon application by
one party, supported by affidavits, depositions or other documents, with notice upon the adverse party
who may in turn file an opposition supported also by affidavits, depositions or other documents. This is
after the court summarily hears both parties with their respective proofs and finds that there is no genuine
issue between them. Summary judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of the
1997 Rules of Civil Procedure:

Page 78 of 319
SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been
served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor
upon all or any part thereof.
Summary judgment is proper when there is clearly no genuine issue as to any material fact in the action.
The theory of summary judgment is that, although an answer may on its face appear to tender issues
requiring trial, if it is demonstrated by affidavits, depositions or admissions that those issues are not
genuine but sham or fictitious, the Court is justified in dispensing with the trial and rendering summary
judgment for petitioner Republic.
The Solicitor General made a very thorough presentation of its case for forfeiture:
xxx
4.

Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public

officer for several decades continuously and without interruption as Congressman, Senator, Senate
President and President of the Republic of the Philippines from December 31, 1965 up to his ouster by
direct action of the people of EDSA on February 22-25, 1986.
5.

Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM

during the 14-year martial law regime, occupied the position of Minister of Human Settlements from June
1976 up to the peaceful revolution in February 22-25, 1986. She likewise served once as a member of the
Interim Batasang Pambansa during the early years of martial law from 1978 to 1984 and as Metro Manila
Governor in concurrent capacity as Minister of Human Settlements. x x x
xxx

xxx

xxx

11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of
Budget, the total salaries of former President Marcos as President form 1966 to 1976 was P60,000 a year
and from 1977 to 1985, P100,000 a year; while that

of the former First Lady, Imelda R. Marcos, as

Minister of Human Settlements from June 1976 to February 22-25, 1986 was P75,000 a year xxx.
ANALYSIS OF RESPONDENTS
LEGITIMATE INCOME
xxx
12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975 were filed under
Tax Identification No. 1365-055-1. For the years 1976 until 1984, the returns were filed under Tax
Identification No. M 6221-J 1117-A-9.

Page 79 of 319
13.

The data contained in the ITRs and Balance Sheet filed by the Marcoses are summarized and

attached to the reports in the following schedules:

Schedule A: Schedule of Income (Annex T hereof);
Schedule B: Schedule of Income Tax Paid (Annex T-1 hereof);
Schedule C: Schedule of Net Disposable Income (Annex T-2 hereof);
Schedule D: Schedule of Networth Analysis (Annex T-3 hereof).
14.

As summarized in Schedule A (Annex T hereof), the Marcoses reported P16,408,442.00 or

US$2,414,484.91 in total income over a period of 20 years from 1965 to 1984. The sources of income are
as follows:
Official Salaries

P 2,627,581.00 -

16.01%

Legal Practice

11,109,836.00 -

67.71%

Farm Income

149,700.00

.91%

Others

2,521,325.00 -

15.37%

P16,408,442.00 -

100.00%

Total
15.

FMs official salary pertains to his compensation as Senate President in 1965 in the amount of

P15,935.00 and P1,420,000.00 as President of the Philippines during the period 1966 until 1984. On the
other hand, Imelda reported salaries and allowances only for the years 1979 to 1984 in the amount of
P1,191,646.00. The records indicate that the reported income came from her salary from the Ministry of
Human Settlements and allowances from Food Terminal, Inc., National Home Mortgage Finance
Corporation, National Food Authority Council, Light Rail Transit Authority and Home Development Mutual
Fund.
16. Of the P11,109,836.00 in reported income from legal practice, the amount of P10,649,836.00 or 96%
represents receivables from prior years during the period 1967 up to 1984.
17. In the guise of reporting income using the cash method under Section 38 of the National Internal
Revenue Code, FM made it appear that he had an extremely profitable legal practice before he became a
President (FM being barred by law from practicing his law profession during his entire presidency) and
that, incredibly, he was still receiving payments almost 20 years after. The only problem is that in his
Balance Sheet attached to his 1965 ITR immediately preceeding his ascendancy to the presidency he did
not show any Receivables from client at all, much less the P10,65-M that he decided to later recognize as
income. There are no documents showing any withholding tax certificates. Likewise, there is nothing on
record that will show any known Marcos client as he has no known law office. As previously stated, his

Page 80 of 319
networth was a mere P120,000.00 in December, 1965. The joint income tax returns of FM and Imelda
cannot, therefore, conceal the skeletons of their kleptocracy.
18.

FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976 which he

referred to in his return as Miscellaneous Items and Various Corporations. There is no indication of any
payor of the dividends or earnings.
19. Spouses Ferdinand and Imelda did not declare any income from any deposits and placements which
are subject to a 5% withholding tax. The Bureau of Internal Revenue attested that after a diligent search
of pertinent records on file with the Records Division, they did not find any records involving the tax
transactions of spouses Ferdinand and Imelda in Revenue Region No. 1, Baguio City, Revenue Region
No.4A, Manila, Revenue Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the
Office of the Revenue Collector of Batac. Further, BIR attested that no records were found on any filing of
capital gains tax return involving spouses FM and Imelda covering the years 1960 to 1965.
20. In Schedule B, the taxable reported income over the twenty-year period was P14,463,595.00 which
represents 88% of the gross income.

The Marcoses paid income taxes totaling P8,233,296.00 or

US$1,220,667.59. The business expenses in the amount of P861,748.00 represent expenses incurred for
subscription, postage, stationeries and contributions while the other deductions in the amount of
P567,097.00 represents interest charges, medicare fees, taxes and licenses. The total deductions in the
amount of P1,994,845.00 represents 12% of the total gross income.
21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or US$980,709.77.
This is the amount that represents that portion of the Marcoses income that is free for consumption,
savings and investments.

The amount is arrived at by adding back to the net income after tax the

personal and additional exemptions for the years 1965-1984, as well as the tax-exempt salary of the
President for the years 1966 until 1972.
22. Finally, the networth analysis in Schedule D, represents the total accumulated networth of spouses,
Ferdinand and Imelda.

Respondents Balance Sheet attached to their 1965 ITR, covering the year

immediately preceding their ascendancy to the presidency, indicates an ending networth of P120,000.00
which FM declared as Library and Miscellaneous assets.

In computing for the networth, the income

approach was utilized. Under this approach, the beginning capital is increased or decreased, as the case
may be, depending upon the income earned or loss incurred. Computations establish the total networth of
spouses Ferdinand and Imelda, for the years 1965 until 1984 in the total amount of US$957,487.75,
assuming the income from legal practice is real and valid x x x.
G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS
23.

The following presentation very clearly and overwhelmingly

show in detail how both respondents

clandestinely stashed away the countrys wealth to Switzerland and hid the same under layers upon layers

Page 81 of 319
of foundations and other corporate entities to prevent its detection. Through their dummies/nominees,
fronts or agents who formed those foundations or corporate entities, they opened and maintained
numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all
those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is
confined to five identified accounts groups, with balances amounting to about $356-M with a reservation
for the filing of a supplemental or separate forfeiture complaint should the need arise.
H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS
24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau, legal counsel of
Schweizeresche Kreditanstalt or SKA, also known as Swiss Credit Bank, for him to establish the AZIO
Foundation.

On the same date, Marcos executed a power of attorney in favor of Roberto S. Benedicto

empowering him to transact business in behalf of the said foundation.

Pursuant to the said Marcos

mandate, AZIO Foundation was formed on June 21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also
of SKA Legal Service, and Dr. Helmuth Merling from Schaan were designated as members of the Board of
Trustees of the said foundation. Ferdinand Marcos was named first beneficiary and the Marcos Foundation,
Inc. was second beneficiary.

On November 12, 1971, FM again issued another written order naming

Austrahil PTY Ltd. In Sydney, Australia, as the foundations first and sole beneficiary. This was recorded on
December 14, 1971.
25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS FOUNDATION.
This change was recorded on December 4, 1972.
26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO FOUNDATION. The Board of
Trustees remained the same. On March 11, 1981, Marcos issued a written directive to liquidated VERSO
FOUNDATION and to transfer all its assets to account of FIDES TRUST COMPANY at Bank Hofman in Zurich
under the account Reference OSER. The Board of Trustees decided to dissolve the foundation on June 25,
1981.
27. In an apparent maneuver to bury further the secret deposits beneath the thick layers of corporate
entities, FM effected the establishment of VIBUR FOUNDATION on May 13, 1981 in Vaduz. Atty. Ivo Beck
and Limag Management, a wholly-owned subsidiary of Fides Trust, were designated as members of the
Board of Trustees. The account was officially opened with SKA on September 10, 1981. The beneficial
owner was not made known to the bank since Fides Trust Company acted as fiduciary.

However,

comparison of the listing of the securities in the safe deposit register of the VERSO FOUNDATION as of
February 27, 1981 with that of VIBUR FOUNDATION

as of

December 31, 1981 readily reveals that

exactly the same securities were listed.

28.

Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the beneficial

successor of VERSO FOUNDATION.

Page 82 of 319
29.

On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate VIBUR

FOUNDATION.
1986.

A notice of such liquidation was sent to the Office of the Public Register on March 21,

However, the bank accounts and respective balances of the said VIBUR FOUNDATION remained

with SKA. Apparently, the liquidation was an attempt by the Marcoses to transfer the foundations funds to
another account or bank but this was prevented by the timely freeze order issued by the Swiss authorities.
One of the latest documents obtained by the PCGG from the Swiss authorities is a declaration signed by
Dr. Ivo Beck (the trustee) stating that the beneficial owner of VIBUR FOUNDATION is Ferdinand E. Marcos.
Another document signed by G. Raber of SKA shows that VIBUR FOUNDATION is owned by the Marcos
Familie
30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION with SKA, Zurich,
under the General Account No. 469857 totaled $3,597,544.00
I. XANDY-WINTROP: CHARIS-SCOLARI-VALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS
31. This is the most intricate and complicated account group. As the Flow Chart hereof shows, two (2)
groups under the foundation organized by Marcos dummies/nominees for FMs benefit, eventually joined
together and became one (1) account group under the AVERTINA FOUNDATION for the benefit of both FM
and Imelda. This is the biggest group from where the $50-M investment fund of the Marcoses was drawn
when they bought the Central Banks dollar-denominated treasury notes with high-yielding interests.
32. On March 20, 1968, after his second year in the presidency, Marcos opened bank accounts with SKA
using an alias or pseudonym WILLIAM SAUNDERS, apparently to hide his true identity.

The next day,

March 21, 1968, his First Lady, Mrs. Imelda Marcos also opened her own bank accounts with the same
bank using an American-sounding alias, JANE RYAN.

Found among the voluminous documents in

Malacaang shortly after they fled to Hawaii in haste that fateful night of February 25, 1986, were
accomplished forms for Declaration/Specimen Signatures submitted by the Marcos couple.

Under the

caption signature(s) Ferdinand and Imelda signed their real names as well as their respective aliases
underneath. These accounts were actively operated and maintained by the Marcoses for about two (2)
years until their closure sometime in February, 1970 and the balances transferred to XANDY FOUNDATION.
33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W. Fessler, C. Souviron and
E. Scheller were named as members of the Board of Trustees.
34.

FM and Imelda issued the written mandate to establish the foundation to Markus Geel of SKA on

March 3, 1970. In the handwritten Regulations signed by the Marcos couple as well as in the type-written
Regulations signed by Markus Geel both dated February 13, 1970, the Marcos spouses were named the
first beneficiaries, the surviving spouse as the second beneficiary and the Marcos children Imee,
Ferdinand, Jr. (Bongbong) and Irene as equal third beneficiaries.

Page 83 of 319
35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29, 1978. The Board of
Trustees remained the same at the outset. However, on March 27, 1980, Souviron was replaced by Dr.
Peter Ritter. On March 10. 1981, Ferdinand and Imelda Marcos issued a written order to the Board of
Wintrop to liquidate the foundation and transfer all its assets to Bank Hofmann in Zurich in favor of FIDES
TRUST COMPANY. Later, WINTROP FOUNDATION was dissolved.
36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag
Management, a wholly-owned subsidiary of FIDES TRUST CO., as members of the Board of Trustees. Two
(2) account categories, namely: CAR and NES, were opened on September 10, 1981.

The beneficial

owner of AVERTINA was not made known to the bank since the FIDES TRUST CO. acted as fiduciary.
However, the securities listed in the safe deposit register of WINTROP FOUNDATION Category R as of
December 31, 1980 were the same as those listed in the register of AVERTINA FOUNDATION Category
CAR as of December 31, 1981. Likewise, the securities listed in the safe deposit register of WINTROP
FOUNDATION

Category S as of December 31, 1980 were the same as those listed in the register of

Avertina Category NES as of December 31, 1981.Under the circumstances, it is certain that the beneficial
successor of WINTROP FOUNDATION is AVERTINA FOUNDATION.

The balance of Category CAR as of

December 31, 1989 amounted to US$231,366,894.00 while that of Category NES as of 12-31-83 was
US$8,647,190.00. Latest documents received from Swiss authorities included a declaration signed by IVO
Beck stating that the beneficial owners of AVERTINA FOUNDATION are FM and Imelda. Another document
signed by G. Raber of SKA indicates that Avertina Foundation is owned by the Marcos Families.
37.

The other groups of foundations that eventually joined AVERTINA were also established by FM

through his dummies, which started with the CHARIS FOUNDATION.

38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971. Walter Fessler and Ernst
Scheller of SKA and Dr. Peter Ritter were named as directors. Dr. Theo Bertheau, SKA legal counsel,
acted as founding director in behalf of FM by virtue of the mandate and agreement dated November 12,
1971.

FM himself was named the first beneficiary and Xandy Foundation as second beneficiary in

accordance with the handwritten instructions of FM on November 12, 1971 and the Regulations. FM gave
a power of attorney to Roberto S. Benedicto on February 15, 1972 to act in his behalf with regard to
Charis Foundation.
39.

On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the directors

remained the same. On March 11, 1981 FM ordered in writing that the Valamo Foundation be liquidated
and all its assets be transferred to Bank Hofmann, AG in favor of Fides Trust Company under the account
Reference OMAL. The Board of Directors decided on the immediate dissolution of Valamo Foundation on
June 25, 1981.
40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag
Management, a wholly-owned subsidiary of Fides Trust Co., as members of the Foundations Board of

Page 84 of 319
Directors. The account was officially opened with SKA on September 10, 1981. The beneficial owner of the
foundation was not made known to the bank since Fides Trust Co. acted as fiduciary. However, the list of
securities in the safe deposit register of Valamo Foundation as of December 31, 1980 are practically the
same with those listed in the safe deposit register of Spinus Foundation as of December 31, 1981. Under
the circumstances, it is certain that the Spinus Foundation is the beneficial successor of the Valamo
Foundation.
41. On September 6, 1982, there was a written instruction from Spinus Foundation to SKA to close its
Swiss Franc account and transfer the balance to Avertina Foundation.

In July/August, 1982, several

transfers from the foundations German marks and US dollar accounts were made to Avertina Category
CAR totaling DM 29.5-M and $58-M, respectively. Moreover, a comparison of the list of securities of the
Spinus Foundation as of February 3, 1982 with the safe deposit slips of the Avertina Foundation Category
CAR as of August 19, 1982 shows that all the securities of Spinus were transferred to Avertina.
J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS
42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W. Fessler and E. Scheller
of SKA and Dr. Otto Tondury as the foundations directors. Imelda issued a written mandate to establish
the foundation to Markus Geel on August 26, 1970. The regulations as well as the agreement, both dated
August 28, 1970 were likewise signed by Imelda. Imelda was named the first beneficiary and her children
Imelda (Imee), Ferdinand, Jr. (Bongbong) and, Irene were named as equal second beneficiaries.
43.

Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller and Ritter as

members of the board of directors. Imelda issued a written mandate to Dr. Theo Bertheau to establish the
foundation with a note that the foundations capitalization as well as the cost of establishing it be debited
against the account of Trinidad Foundation.

Imelda was named the first and only beneficiary of Rayby

foundation. According to written information from SKA dated November 28, 1988, Imelda apparently had
the intention in 1973 to transfer part of the assets of Trinidad Foundation to another foundation, thus the
establishment of Rayby Foundation. However, transfer of assets never took place. On March 10, 1981,
Imelda issued a written order to transfer all the assets of Rayby Foundation to Trinidad Foundation and to
subsequently liquidate Rayby. On the same date, she issued a written order to the board of Trinidad to
dissolve the foundation and transfer all its assets to Bank Hofmann in favor of Fides Trust Co. Under the
account Reference Dido, Rayby was dissolved on April 6, 1981 and Trinidad was liquidated on August 3,
1981.
44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo Beck and Limag
Management, a wholly-owned subsidiary of Fides Trust Co, as members of the Foundations Board of
Directors. The account was officially opened with the SKA on September 10, 1981. The beneficial owner
was not made known to the bank since Fides Trust Co. acted as fiduciary. However, when one compares
the listing of securities in the safe deposit register of Trinidad Foundation as of December 31,1980 with

Page 85 of 319
that of the Palmy Foundation as of December 31, 1980, one can clearly see that practically the same
securities were listed. Under the circumstances, it is certain that the Palmy Foundation is the beneficial
successor of the Trinidad Foundation.
45.

As of December 31, 1989, the ending balance of the bank accounts of Palmy Foundation under

General Account No. 391528 is $17,214,432.00.

46.

Latest documents received from Swiss Authorities included a declaration signed by Dr. Ivo Beck

stating that the beneficial owner of Palmy Foundation is Imelda. Another document signed by Raber shows
that the said Palmy Foundation is owned by Marcos Familie.
K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS
47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of Incorporation
was executed on September 24, 1971 and its By-Laws on October 3, 1971. This foundation maintained
several accounts with Swiss Bank Corporation (SBC) under the general account 51960 where most of the
bribe monies from Japanese suppliers were hidden.
48.

On December 19, 1985, Rosalys Foundation was liquidated and all its assets were transferred to

Aguamina Corporations (Panama) Account No. 53300 with SBC. The ownership by Aguamina Corporation
of Account No. 53300 is evidenced by an opening account documents from the bank. J. Christinaz and R.L.
Rossier, First Vice-President and Senior Vice President, respectively, of SBC, Geneva issued a declaration
dated September 3, 1991 stating that the by-laws dated October 3, 1971 governing Rosalys Foundation
was the same by-law applied to Aguamina Corporation Account No. 53300. They further confirmed that no
change of beneficial owner was involved while transferring the assets of Rosalys to Aguamina. Hence, FM
remains the beneficiary of Aguamina Corporation Account No. 53300.
As of August 30, 1991, the ending balance of Account No. 53300 amounted to $80,566,483.00.
L. MALER FOUNDATION ACCOUNTS
49.

Maler was first created as an establishment. A statement of its rules and regulations was found

among Malacaang documents. It stated, among others, that 50% of the Companys assets will be for sole
and full right disposal of FM and Imelda during their lifetime, which the remaining 50% will be divided in
equal parts among their children. Another Malacaang document dated October 19,1968 and signed by
Ferdinand and Imelda pertains to the appointment of Dr. Andre Barbey and Jean Louis Sunier as attorneys
of the company and as administrator and manager of all assets held by the company. The Marcos couple,
also mentioned in the said document that they bought the Maler Establishment from SBC, Geneva. On the
same date, FM and Imelda issued a letter addressed to Maler Establishment, stating that all instructions to
be transmitted with regard to Maler will be signed with the word JOHN LEWIS. This word will have the

Page 86 of 319
same value as the couples own personal signature. The letter was signed by FM and Imelda in their
signatures and as John Lewis.
50.

Maler Establishment opened and maintained bank accounts with SBC, Geneva. The opening bank

documents were signed by Dr. Barbey and Mr. Sunnier as authorized signatories.
51.

On November 17, 1981, it became necessary to transform Maler Establishment into a foundation.

Likewise, the attorneys were changed to Michael Amaudruz, et. al. However, administration of the assets
was left to SBC. The articles of incorporation of Maler Foundation registered on November 17, 1981 appear
to be the same articles applied to Maler Establishment. On February 28, 1984, Maler Foundation cancelled
the power of attorney for the management of its assets in favor of SBC and transferred such power to
Sustrust Investment Co., S.A.
52. As of June 6, 1991, the ending balance of Maler Foundations Account Nos. 254,508 BT and 98,929 NY
amount SF 9,083,567 and SG 16,195,258, respectively, for a total of SF 25,278,825.00. GM only until
December 31, 1980. This account was opened by Maler when it was still an establishment which was
subsequently transformed into a foundation.
53. All the five (5) group accounts in the over-all flow chart have a total balance of about Three Hundred
Fifty Six Million Dollars ($356,000,000.00) as shown by Annex R-5 hereto attached as integral part
hereof.
xxx

x x x.

Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand Marcos, Jr., in
their answer, stated the following:
xxx

xxx

xxx

4.

Respondents ADMIT paragraphs 3 and 4 of the Petition.

5.

Respondents specifically deny paragraph 5 of the Petition in so far as it states that summons and

other court processes may be served on Respondent Imelda R. Marcos at the stated address the truth of
the matter being that Respondent Imelda R. Marcos may be served with summons and other processes at
No. 10-B Bel Air Condominium 5022 P. Burgos Street, Makati, Metro Manila, and ADMIT the rest.
xxx

xxx

xxx

10. Respondents ADMIT paragraph 11 of the Petition.

Page 87 of 319
11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge sufficient to form a
belief as to the truth of the allegation since Respondents were not privy to the transactions and that they
cannot remember exactly the truth as to the matters alleged.
12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs and Balance Sheet.
13. Respondents specifically DENY paragraph 14 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
14. Respondents specifically DENY paragraph 15 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
15. Respondents specifically DENY paragraph 16 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes willful duplicity on
the part of the late President Marcos, for being false, the same being pure conclusions based on pure
assumption and not allegations of fact; and specifically DENY the rest for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs or the attachments thereto.
17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs and that they are not privy to the activities of the BIR.
19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.

Page 88 of 319
21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with
exactitude the contents of the alleged ITRs.
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely
stashed the countrys wealth in Switzerland and hid the same under layers and layers of foundation and
corporate entities for being false, the truth being that Respondents aforesaid properties were lawfully
acquired.
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of
knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents
were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that
as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully
acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the
Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations
since Respondents are not privy to the transactions and as to such transaction they were privy to they
cannot remember with exactitude the same having occurred a long time ago, except that as to
Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge
or information sufficient to form a belief as to the truth of the allegations since Respondents were not
privy to the transactions and as to such transaction they were privy to they cannot remember with
exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she
specifically remembers that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegations since Respondents were not privy
to the transactions and as to such transaction they were privy to they cannot remember with exactitude
the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically
remembers that the funds involved were lawfully acquired.
Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos
children indubitably failed to tender genuine issues in their answer to the petition for forfeiture. A genuine
issue is an issue of fact which calls for the presentation of evidence as distinguished from an issue which is
fictitious and contrived, set up in bad faith or patently lacking in substance so as not to constitute a
genuine issue for trial. Respondents defenses of lack of knowledge for lack of privity or (inability to)
recall because it happened a long time ago or, on the part of Mrs. Marcos, that the funds were lawfully

Page 89 of 319
acquired are fully insufficient to tender genuine issues. Respondent Marcoses defenses were a sham and
evidently calibrated to compound and confuse the issues.
The following pleadings filed by respondent Marcoses are replete with indications of a spurious defense:
(a)

Respondents' Answer dated October 18, 1993;

(b)

Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-trial Brief dated
October 19, 1999 of Ferdinand, Jr. and Mrs. Imee Marcos-Manotoc adopting the pre-trial
brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene Marcos-Araneta
adopting the pre-trial briefs of her co- respondents;

(c)

Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs. Marcos
which the other respondents (Marcos children) adopted;

(d)

Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the Marcos
children;

(e)

Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion for
Reconsideration dated October 5, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr., and
Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly filed by Mrs.
Manotoc and Ferdinand, Jr.;

(f)

Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated December
17, 2000 of the Marcos children;

(g)

Manifestation dated May 26, 1998; and

(h)

General/Supplemental Agreement dated December 23, 1993.

An examination of the foregoing pleadings is in order.

Respondents Answer dated October 18, 1993.
In their answer, respondents failed to specifically deny each and every allegation contained in the petition
for forfeiture in the manner required by the rules. All they gave were stock answers like they have no
sufficient knowledge or they could not recall because it happened a long time ago, and, as to Mrs.
Marcos, the funds were lawfully acquired, without stating the basis of such assertions.
Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:

Page 90 of 319
A defendant must specify each material allegation of fact the truth of which he does not admit and,
whenever practicable, shall set forth the substance of the matters upon which he relies to support his
denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is
true and material and shall deny the remainder. Where a defendant is without knowledge or information
sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state,
and this shall have the effect of a denial.
The purpose of requiring respondents to make a specific denial is to make them disclose facts
which will disprove the allegations of petitioner at the trial, together with the matters they rely upon in
support of such denial. Our jurisdiction adheres to this rule to avoid and prevent unnecessary expenses
and waste of time by compelling both parties to lay their cards on the table, thus reducing the controversy
to its true terms. As explained in Alonso vs. Villamor,
A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the
subtle art of movement and position, entraps and destroys the other. It is rather a contest in which each
contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly
trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done
upon the merits. Lawsuits, unlike duels, are not to be won by a rapiers thrust.
On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she failed
to particularly state the ultimate facts surrounding the lawful manner or mode of acquisition of the subject
funds. Simply put, she merely stated in her answer with the other respondents that the funds were
lawfully acquired without detailing how exactly these funds were supposedly acquired legally by them.
Even in this case before us, her assertion that the funds were lawfully acquired remains bare and
unaccompanied by any factual support which can prove, by the presentation of evidence at a hearing, that
indeed the funds were acquired legitimately by the Marcos family.
Respondents denials in their answer at the Sandiganbayan were based on their alleged lack of
knowledge or information sufficient to form a belief as to the truth of the allegations of the petition.
It is true that one of the modes of specific denial under the rules is a denial through a statement
that the defendant is without knowledge or information sufficient to form a belief as to the truth of the
material averment in the complaint. The question, however, is whether the kind of denial in respondents
answer qualifies as the specific denial called for by the rules. We do not think so. In Morales vs. Court of
Appeals, this Court ruled that if an allegation directly and specifically charges a party with having done,
performed or committed a particular act which the latter did not in fact do, perform or commit, a
categorical and express denial must be made.
Here, despite the serious and specific allegations against them, the Marcoses responded by simply
saying that they had no knowledge or information sufficient to form a belief as to the truth of such

Page 91 of 319
allegations.

Such a general, self-serving claim of ignorance of the facts alleged in the petition for

forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how it was
that they were supposedly ignorant of the facts alleged.
To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture stated:
23. The following presentation very clearly and overwhelmingly show in detail how both respondents
clandestinely stashed away the countrys wealth to Switzerland and hid the same under layers upon layers
of foundations and other corporate entities to prevent its detection. Through their dummies/nominees,
fronts or agents who formed those foundations or corporate entities, they opened and maintained
numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all
those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is
confined to five identified accounts groups, with balances amounting to about $356-M with a reservation
for the filing of a supplemental or separate forfeiture complaint should the need arise.
Respondents lame denial of the aforesaid allegation was:
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely
stashed the countrys wealth in Switzerland and hid the same under layers and layers of foundations and
corporate entities for being false, the truth being that Respondents aforesaid properties were lawfully
acquired.
Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative
pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded
to which are not squarely denied.

It was in effect an admission of the averments it was directed at.

Stated otherwise, a negative pregnant is a form of negative expression which carries with it an affirmation
or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an
admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or
modifying language and the words of the allegation as so qualified or modified are literally denied, has
been held that the qualifying circumstances alone are denied while the fact itself is admitted.
In the instant case, the material allegations in paragraph 23 of the said petition were not
specifically denied by respondents in paragraph 22 of their answer. The denial contained in paragraph 22
of the answer was focused on the averment in paragraph 23 of the petition for forfeiture that
Respondents clandestinely stashed the countrys wealth in Switzerland and hid the same under layers and
layers of foundations and corporate entities. Paragraph 22 of the respondents answer was thus a denial
pregnant with admissions of the following substantial facts:
(1)
(2)

the Swiss bank deposits existed and

that the estimated sum thereof was US$356 million as of December, 1990.

Page 92 of 319
Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits
in the sum of about US$356 million, not having been specifically denied by respondents in their answer,
were deemed admitted by them pursuant to Section 11, Rule 8 of the 1997 Revised Rules on Civil
Procedure:
Material averment in the complaint, xxx shall be deemed admitted when not specifically denied. xxx.
By the same token, the following unsupported denials of respondents in their answer were pregnant with
admissions of the substantial facts alleged in the Republics petition for forfeiture:
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of
knowledge or information sufficient to form a belief as to the truth of the allegation since respondents
were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except
that, as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully
acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 of the Petition for
lack of knowledge or information sufficient to form a belief as to the truth of the allegations since
respondents were not privy to the transactions and as to such transactions they were privy to, they cannot
remember with exactitude the same having occurred a long time ago, except as to respondent Imelda R.
Marcos, she specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack of knowledge or
information sufficient to from a belief as to the truth of the allegations since respondents were not privy to
the transactions and as to such transaction they were privy to, they cannot remember with exactitude, the
same having occurred a long time ago, except that as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack of knowledge and
information sufficient to form a belief as to the truth of the allegations since respondents were not privy to
the transactions and as to such transaction they were privy to they cannot remember with exactitude the
same having occurred a long time ago, except that as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.
The matters referred to in paragraphs 23 to 26 of the respondents answer pertained to the
creation of five groups of accounts as well as their respective ending balances and attached documents
alleged in paragraphs 24 to 52 of the Republics petition for forfeiture.

Respondent Imelda R. Marcos

never specifically denied the existence of the Swiss funds. Her claim that the funds involved were lawfully
acquired was an acknowledgment on her part of the existence of said deposits. This only reinforced her
earlier admission of the allegation in paragraph 23 of the petition for forfeiture regarding the existence of
the US$356 million Swiss bank deposits.

Page 93 of 319
The allegations in paragraphs 47 and 48 of the petition for forfeiture referring to the creation and
amount of the deposits of the Rosalys-Aguamina Foundation as well as the averment in paragraph 52-a of
the said petition with respect to the sum of the Swiss bank deposits estimated to be US$356 million were
again not specifically denied by respondents in their answer. The respondents did not at all respond to the
issues raised in these paragraphs and the existence, nature and amount of the Swiss funds were therefore
deemed admitted by them.

As held in Galofa vs. Nee Bon Sing, if a defendants denial is a negative

pregnant, it is equivalent to an admission.

Moreover, respondents denial of the allegations in the petition for forfeiture for lack of knowledge
or information sufficient to form a belief as to the truth of the allegations since respondents were not privy
to the transactions was just a pretense. Mrs. Marcos privity to the transactions was in fact evident from
her signatures on some of the vital documents attached to the petition for forfeiture which Mrs. Marcos
failed to specifically deny as required by the rules.
It is worthy to note that the pertinent documents attached to the petition for forfeiture were even
signed personally by respondent Mrs. Marcos and her late husband, Ferdinand E. Marcos, indicating that
said documents were within their knowledge. As correctly pointed out by Sandiganbayan Justice Francisco
Villaruz, Jr. in his dissenting opinion:
The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3) approving
regulations of the Foundations for the distribution of capital and income of the Foundations to the First and
Second beneficiary (who are no other than FM and his family), 4) opening of bank accounts for the
Foundations, 5) changing the names of the Foundations, 6) transferring funds and assets of the
Foundations to other Foundations or Fides Trust, 7) liquidation of the Foundations as substantiated by the
Annexes U to U-168, Petition [for forfeiture] strongly indicate that FM and/or Imelda were the real owners
of the assets deposited in the Swiss banks, using the Foundations as dummies.
How could respondents therefore claim lack of sufficient knowledge or information regarding the
existence of the Swiss bank deposits and the creation of five groups of accounts when Mrs. Marcos and
her late husband personally masterminded and participated in the formation and control of said
foundations? This is a fact respondent Marcoses were never able to explain.
Not only that. Respondents' answer also technically admitted the genuineness and due execution
of the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda R.
Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof.
The answer again premised its denials of said ITRs and balance sheets on the ground of lack of
knowledge or information sufficient to form a belief as to the truth of the contents thereof. Petitioner
correctly points out that respondents' denial was not really grounded on lack of knowledge or information
sufficient to form a belief but was based on lack of recollection. By reviewing their own records,

Page 94 of 319
respondent Marcoses could have easily determined the genuineness and due execution of the ITRs and the
balance sheets. They also had the means and opportunity of verifying the same from the records of the
BIR and the Office of the President. They did not.
When matters regarding which respondents claim to have no knowledge or information sufficient to
form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack of
information will not be considered a specific denial. An unexplained denial of information within the control
of the pleader, or is readily accessible to him, is evasive and is insufficient to constitute an effective denial.
The form of denial adopted by respondents must be availed of with sincerity and in good faith, and
certainly not for the purpose of confusing the adverse party as to what allegations of the petition are
really being challenged; nor should it be made for the purpose of delay. In the instant case, the Marcoses
did not only present unsubstantiated assertions but in truth attempted to mislead and deceive this Court
by presenting an obviously contrived defense.
Simply put, a profession of ignorance about a fact which is patently and necessarily within the
pleaders knowledge or means of knowing is as ineffective as no denial at all. Respondents ineffective
denial thus failed to properly tender an issue and the averments contained in the petition for forfeiture
were deemed judicially admitted by them.
As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.:
Its specific denial of the material allegation of the petition without setting forth the substance of the
matters relied upon to support its general denial, when such matters were plainly within its knowledge and
it could not logically pretend ignorance as to the same, therefore, failed to properly tender on issue.
Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture for lack of
knowledge or information sufficient to form a belief as to the truth of the allegations since they were not
privy to the transactions cannot rightfully be accepted as a defense because they are the legal heirs and
successors-in-interest of Ferdinand E. Marcos and are therefore bound by the acts of their father vis-a-vis
the Swiss funds.
PRE-TRIAL BRIEF DATED OCTOBER 18, 1993
The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs.
Marcos stressed that the funds involved were lawfully acquired. But, as in their answer, they failed to state
and substantiate how these funds were acquired lawfully. They failed to present and attach even a
document

that

would

show

and

Rules of Civil Procedure provides:

single

prove the truth of their allegations. Section 6, Rule 18 of the 1997

Page 95 of 319
The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial
briefs which shall contain, among others:
xxx
(d) the documents or exhibits to be presented, stating the purpose thereof;
xxx
(f) the number and names of the witnesses, and the substance of their respective testimonies.
It is unquestionably within the courts power to require the parties to submit their pre-trial briefs
and to state the number of witnesses intended to be called to the stand, and a brief summary of the
evidence each of them is expected to give as well as to disclose the number of documents to be submitted
with a description of the nature of each. The tenor and character of the testimony of the witnesses and of
the documents to be deduced at the trial thus made known, in addition to the particular issues of fact and
law, it becomes apparent if genuine issues are being put forward necessitating the holding of a trial.
Likewise, the parties are obliged not only to make a formal identification and specification of the issues
and their proofs, and to put these matters in writing and submit them to the court within the specified
period for the prompt disposition of the action.
The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children, merely stated:
xxx
WITNESSES
4.1 Respondent Imelda will present herself as a witness and reserves the right to present additional
witnesses as may be necessary in the course of the trial.
xxx
DOCUMENTARY EVIDENCE
5.1 Respondent Imelda reserves the right to present and introduce in evidence documents as may be
necessary in the course of the trial.
Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither the
names of witnesses nor the nature of their testimony was stated. What alone appeared certain was the
testimony of Mrs. Marcos only who in fact had previously claimed ignorance and lack of knowledge. And
even then, the substance of her testimony, as required by the rules, was not made known either. Such

Page 96 of 319
cunning tactics of respondents are totally unacceptable to this Court. We hold that, since no genuine issue
was raised, the case became ripe for summary judgment.
OPPOSITION TO MOTION FOR SUMMARY JUDGMENT DATED MARCH 21, 2000
The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000 of
petitioner Republic was merely adopted by the Marcos children as their own opposition to the said motion.
However, it was again not accompanied by affidavits, depositions or admissions as required by Section 3,
Rule 35 of the 1997 Rules on Civil Procedure:
x x x The adverse party may serve opposing affidavits, depositions, or admissions at least three (3) days
before hearing. After hearing, the judgment sought shall be rendered forthwith if the pleadings,
supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages,
there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.
The absence of opposing affidavits, depositions and admissions to contradict the sworn declarations
in the Republics motion only demonstrated that the averments of such opposition were not genuine and
therefore unworthy of belief.
Demurrer to Evidence dated May 2, 2000; Motions for Reconsideration; and Memoranda of Mrs.
Marcos and the Marcos children
All these pleadings again contained no allegations of facts showing their lawful acquisition of the
funds. Once more, respondents merely made general denials without alleging facts which would have been
admissible in evidence at the hearing, thereby failing to raise genuine issues of fact.
Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-trial, her
counsel stated that his client was just a beneficiary of the funds, contrary to petitioner Republics
allegation that Mrs. Marcos disclaimed ownership of or interest in the funds.
This is yet another indication that respondents presented a fictitious defense because, during the
pre-trial, Mrs. Marcos and the Marcos children denied ownership of or interest in the Swiss funds:
PJ Garchitorena: Make of record that as far as Imelda Marcos is concerned through the statement of Atty.
Armando M. Marcelo that the US$360 million more or less subject matter of the instant lawsuit as
allegedly obtained from the various Swiss Foundations do not belong to the estate of Marcos or to Imelda
Marcos herself. Thats your statement of facts?
Atty. MARCELO: Yes, Your Honor.

Page 97 of 319
PJ Garchitorena: Thats it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here? Does the
estate of Marcos own anything of the $360 million subject of this case.
Atty. TECSON: We joined the Manifestation of Counsel.
PJ Garchitorena: You do not own anything?
Atty. TECSON: Yes, Your Honor.
PJ Garchitorena: Counsel for Irene Araneta?
Atty. SISON: I join the position taken by my other compaeros here, Your Honor.
xxx
Atty. SISON: Irene Araneta as heir do (sic) not own any of the amount, Your Honor.
We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic as to
what facts they would prove or what issues they intended to pose for the court's resolution. There is no
doubt in our mind that they were leading petitioner Republic, and now this Court, to perplexity, if not
trying to drag this forfeiture case to eternity.
Manifestation dated May 26, 1998 filed by MRS. Marcos; General/Supplemental Compromise
Agreement dated December 28, 1993
These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier
pleadings, respondents alleged either that they had no knowledge of the existence of the Swiss deposits or
that they could no longer remember anything as it happened a long time ago. As to Mrs. Marcos, she
remembered that it was lawfully acquired.
In her Manifestation dated May 26, 1998, Mrs. Marcos stated that:
COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this Honorable Court,
most respectfully manifests:
That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled case, being the
sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the
late President Ferdinand E. Marcos.

Page 98 of 319
In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the
agreed distribution of the Marcos assets, including the Swiss deposits. This was, to us, an unequivocal
admission of ownership by the Marcoses of the said deposits.
But, as already pointed out, during the pre-trial conference, respondent Marcoses denied
knowledge as well as ownership of the Swiss funds.
Anyway we look at it, respondent Marcoses have put forth no real defense. The facts pleaded by
respondents, while ostensibly raising important questions or issues of fact, in reality comprised mere
verbiage that was evidently wanting in substance and constituted no genuine issues for trial.
We therefore rule that, under the circumstances, summary judgment is proper.
In fact, it is the law itself which determines when summary judgment is called for. Under the rules,
summary judgment is appropriate when there are no genuine issues of fact requiring the presentation of
evidence in a full-blown trial. Even if on their face the pleadings appear to raise issue, if the affidavits,
depositions and admissions show that such issues are not genuine, then summary judgment as prescribed
by the rules must ensue as a matter of law.
In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a
hearing, are not sufficient to raise genuine issues of fact and will not defeat a motion for summary
judgment. A summary judgment is one granted upon motion of a party for an expeditious settlement of
the case, it appearing from the pleadings, depositions, admissions and affidavits that there are no
important questions or issues of fact posed and, therefore, the movant is entitled to a judgment as a
matter of law. A motion for summary judgment is premised on the assumption that the issues presented
need not be tried either because these are patently devoid of substance or that there is no genuine issue
as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a
civil action where there exists no serious controversy. Summary judgment is a procedural device for the
prompt disposition of actions in which the pleadings raise only a legal issue, not a genuine issue as to any
material fact. The theory of summary judgment is that, although an answer may on its face appear to
tender issues requiring trial, if it is established by affidavits, depositions or admissions that those issues
are not genuine but fictitious, the Court is justified in dispensing with the trial and rendering summary
judgment for petitioner.
In the various annexes to the petition for forfeiture, petitioner Republic attached sworn statements
of witnesses who had personal knowledge of the Marcoses' participation in the illegal acquisition of funds
deposited in the Swiss accounts under the names of five groups or foundations. These sworn statements
substantiated the ill-gotten nature of the Swiss bank deposits. In their answer and other subsequent
pleadings, however, the Marcoses merely made general denials of the allegations against them without
stating facts admissible in evidence at the hearing, thereby failing to raise any genuine issues of fact.

Page 99 of 319
Under these circumstances, a trial would have served no purpose at all and would have been totally
unnecessary, thus justifying a summary judgment on the petition for forfeiture. There were no opposing
affidavits to contradict the sworn declarations of the witnesses of petitioner Republic, leading to the
inescapable conclusion that the matters raised in the Marcoses answer were false.
Time and again, this Court has encountered cases like this which are either only half-heartedly
defended or, if the semblance of a defense is interposed at all, it is only to delay disposition and gain time.
It is certainly not in the interest of justice to allow respondent Marcoses to avail of the appellate remedies
accorded by the Rules of Court to litigants in good faith, to the prejudice of the Republic and ultimately of
the Filipino people. From the beginning, a candid demonstration of respondents good faith should have
been made to the court below.

Without the deceptive reasoning and argumentation, this protracted

litigation could have ended a long time ago.

Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have
offered are foxy responses like lack of sufficient knowledge or lack of privity or they cannot recall
because it happened a long time ago or, as to Mrs. Marcos, the funds were lawfully acquired. But,
whenever it suits them, they also claim ownership of 90% of the funds and allege that only 10% belongs
to the Marcos estate. It has been an incredible charade from beginning to end.
In the hope of convincing this Court to rule otherwise, respondents Maria Imelda Marcos-Manotoc
and Ferdinand R. Marcos Jr. contend that "by its positive acts and express admissions prior to filing the
motion for summary judgment on March 10, 2000, petitioner Republic had bound itself to go to trial on
the basis of existing issues. Thus, it had legally waived whatever right it had to move for summary
judgment."
We do not think so.

The alleged positive acts and express admissions of the petitioner did not

preclude it from filing a motion for summary judgment.

Rule 35 of the 1997 Rules of Civil Procedure provides:
Rule 35 Summary Judgment

Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto
has been served, move with supporting affidavits, depositions or admissions for a summary judgment in
his favor upon all or any part thereof.
Section 2. Summary judgment for defending party. - A party against whom a claim, counterclaim, or
cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor as to all or any part thereof. (Emphasis
ours)

Page 100 of 319

Under the rule, the plaintiff can move for summary judgment at any time after the pleading in answer
thereto (i.e., in answer to the claim, counterclaim or cross-claim) has been served."

No fixed

reglementary period is provided by the Rules. How else does one construe the phrase "any time after the
answer has been served?
This issue is actually one of first impression. No local jurisprudence or authoritative work has touched
upon this matter. This being so, an examination of foreign laws and jurisprudence, particularly those of the
United States where many of our laws and rules were copied, is in order.
Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a claim,
counterclaim or cross-claim may move for summary judgment at any time after the expiration of 20 days
from the commencement of the action or after service of a motion for summary judgment by the adverse
party, and that a party against whom a claim, counterclaim or cross-claim is asserted may move for
summary judgment at any time.
However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically provide
that a motion for summary judgment may not be made until issues have been joined, that is, only after an
answer has been served. Under said rule, after issues have been joined, the motion for summary
judgment may be made at any stage of the litigation. No fixed prescriptive period is provided.
Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for summary
judgment may not be made until issues have been joined, meaning, the plaintiff has to wait for the
answer before he can move for summary judgment. And like the New York rules, ours do not provide for a
fixed reglementary period within which to move for summary judgment.
This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil Practice can
be applied by analogy to the interpretation of Section 1, Rule 35, of our 1997 Rules of Civil Procedure.
Under the New York rule, after the issues have been joined, the motion for summary judgment may be
made at any stage of the litigation. And what exactly does the phrase "at any stage of the litigation"
mean? In Ecker vs. Muzysh, the New York Supreme Court ruled:
"PER CURIAM.
Plaintiff introduced her evidence and the defendants rested on the case made by the plaintiff. The case
was submitted. Owing to the serious illness of the trial justice, a decision was not rendered within sixty
days after the final adjournment of the term at which the case was tried. With the approval of the trial
justice, the plaintiff moved for a new trial under Section 442 of the Civil Practice Act. The plaintiff also
moved for summary judgment under Rule 113 of the Rules of Civil Practice. The motion was opposed
mainly on the ground that, by proceeding to trial, the plaintiff had waived her right to summary
judgment and that the answer and the opposing affidavits raised triable issues. The amount due and

Page 101 of 319

unpaid under the contract is not in dispute. The Special Term granted both motions and the defendants
have appealed.
The Special Term properly held that the answer and the opposing affidavits raised no triable issue. Rule
113 of the Rules of Civil Practice and the Civil Practice Act prescribe no limitation as to the time
when a motion for summary judgment must be made. The object of Rule 113 is to empower the
court to summarily determine whether or not a bona fide issue exists between the parties, and
there is no limitation on the power of the court to make such a determination at any stage of
the litigation." (emphasis ours)
On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the plaintiff
has proceeded to trial, this does not preclude him from thereafter moving for summary judgment."
In the case at bar, petitioner moved for summary judgment after pre-trial and before its scheduled date
for presentation of evidence. Respondent Marcoses argue that, by agreeing to proceed to trial during the
pre-trial conference, petitioner "waived" its right to summary judgment.
This argument must fail in the light of the New York Supreme Court ruling which we apply by analogy to
this case. In Ecker, the defendant opposed the motion for summary judgment on a ground similar to that
raised by the Marcoses, that is, "that plaintiff had waived her right to summary judgment" by her act of
proceeding to trial.

If, as correctly ruled by the New York court, plaintiff was allowed to move for

summary judgment even after trial and submission of the case for resolution, more so should we permit it
in the present case where petitioner moved for summary judgment before trial.
Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section 1, Rule
35 of our Rules of Civil Procedure means "at any stage of the litigation." Whenever it becomes evident at
any stage of the litigation that no triable issue exists, or that the defenses raised by the defendant(s) are
sham or frivolous, plaintiff may move for summary judgment. A contrary interpretation would go against
the very objective of the Rule on Summary Judgment which is to "weed out sham claims or defenses
thereby avoiding the expense and loss of time involved in a trial."
In cases with political undertones like the one at bar, adverse parties will often do almost anything to
delay the proceedings in the hope that a future administration sympathetic to them might be able to
influence the outcome of the case in their favor. This is rank injustice we cannot tolerate.
The law looks with disfavor on long, protracted and expensive litigation and encourages the speedy and
prompt disposition of cases. That is why the law and the rules provide for a number of devices to ensure
the speedy disposition of cases. Summary judgment is one of them.
Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary expense
and loss of time in a trial, we hereby rule that petitioner Republic could validly move for summary

Page 102 of 319

judgment any time after the respondents answer was filed or, for that matter, at any subsequent stage of
the litigation. The fact that petitioner agreed to proceed to trial did not in any way prevent it from moving
for summary judgment, as indeed no genuine issue of fact

was ever validly raised by respondent

Marcoses.
This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997 Rules of
Civil Procedure that the "[r]ules should be liberally construed in order to promote their objective of
securing a just, speedy and inexpensive disposition of every action and proceeding."
Respondents further allege that the motion for summary judgment was based on respondents' answer and
other documents that had long been in the records of the case. Thus, by the time the motion was filed on
March 10, 2000, estoppel by laches had already set in against petitioner.
We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained length
of time to do that which, by exercising due diligence, could or should have been done earlier, warranting a
presumption that the person has abandoned his right or declined to assert it. In effect, therefore, the
principle of laches is one of estoppel because "it prevents people who have slept on their rights from
prejudicing the rights of third parties who have placed reliance on the inaction of the original parties and
their successors-in-interest".
A careful examination of the records, however, reveals that petitioner was in fact never remiss in
pursuing its case against respondent Marcoses through every remedy available to it, including the motion
for summary judgment.
Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The motion
was denied because of the pending compromise agreement between the Marcoses and petitioner. But
during the pre-trial conference, the Marcoses denied ownership of the Swiss funds, prompting petitioner to
file another motion for summary judgment now under consideration by this Court. It was the subsequent
events that transpired after the answer was filed, therefore, which prevented petitioner from filing the
questioned motion. It was definitely not because of neglect or inaction that petitioner filed the (second)
motion for summary judgment years after respondents' answer to the petition for forfeiture.
In invoking the doctrine of estoppel by laches, respondents must show not only unjustified inaction
but also that some unfair injury to them might result unless the action is barred.
This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses
disclaimed ownership of the Swiss deposits. Not being the owners, as they claimed, respondents did not
have any vested right or interest which could be adversely affected by petitioner's alleged inaction.

Page 103 of 319

But even assuming for the sake of argument that laches had already set in, the doctrine of
estoppel or laches does not apply when the government sues as a sovereign or asserts governmental
rights. Nor can estoppel validate an act that contravenes law or public policy.
As a final point, it must be emphasized that laches is not a mere question of time but is principally
a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. Equity
demands that petitioner Republic should not be barred from pursuing the people's case against the
Marcoses.
(2) The Propriety of Forfeiture
The matter of summary judgment having been thus settled, the issue of whether or not petitioner
Republic was able to prove its case for forfeiture in accordance with the requisites of Sections 2 and 3 of
RA 1379 now takes center stage.
The law raises the prima facie presumption that a property is unlawfully acquired, hence subject to
forfeiture, if its amount or value is manifestly disproportionate to the official salary and other lawful
income of the public officer who owns it. Hence, Sections 2 and 6 of RA 1379 provide:
xxx

xxx

Section 2. Filing of petition. Whenever any public officer or employee has acquired during his
incumbency an amount or property which is manifestly out of proportion to his salary as such public officer
or employee and to his other lawful income and the income from legitimately acquired property, said
property shall be presumed prima facie to have been unlawfully acquired.
xxx

xxx

Sec. 6. Judgment If the respondent is unable to show to the satisfaction of the court that he has lawfully
acquired the property in question, then the court shall declare such property in question, forfeited in favor
of the State, and by virtue of such judgment the property aforesaid shall become the property of the
State.

Provided, That no judgment shall be rendered within six months before any general election or

within three months before any special election.

The Court may, in addition, refer this case to the

corresponding Executive Department for administrative or criminal action, or both.

From the above-quoted provisions of the law, the following facts must be established in order that
forfeiture or seizure of the Swiss deposits may be effected:
(1)

ownership by the public officer of money or property

whether it be in his name or otherwise, and

acquired

during his incumbency,

Page 104 of 319

(2)

the extent to which the amount of that money or property exceeds, i. e., is grossly
disproportionate to, the legitimate income of the public officer.

That spouses Ferdinand and Imelda Marcos were public officials during the time material to the
instant case was never in dispute. Paragraph 4 of respondent Marcoses' answer categorically admitted the
allegations in paragraph 4 of the petition for forfeiture as to the personal circumstances of Ferdinand E.
Marcos as a public official who served without interruption as Congressman, Senator, Senate President and
President of the Republic of the Philippines from December 1, 1965 to February 25, 1986. Likewise,
respondents admitted in their answer the contents of paragraph 5 of the petition as to the personal
circumstances of Imelda R. Marcos who once served as a member of the Interim Batasang Pambansa from
1978 to 1984 and as Metro Manila Governor, concurrently Minister of Human Settlements, from June 1976
to February 1986.
Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of paragraph
11 of the petition for forfeiture which referred to the accumulated salaries of respondents Ferdinand E.
Marcos and Imelda R. Marcos. The combined accumulated salaries of the Marcos couple were reflected in
the Certification dated May 27, 1986 issued by then Minister of Budget and Management Alberto Romulo.
The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and Imelda R. Marcos had
accumulated salaries in the amount of P1,570,000 and P718,750, respectively, or a total of P2,288,750:
Ferdinand E. Marcos, as President
1966-1976 at P60,000/year

P660,000

1977-1984 at P100,000/year

800,000

1985 at P110,000/year

110,000
P1,570,000

Imelda R. Marcos, as Minister

June 1976-1985 at P75,000/year

P718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couples combined
salaries from January to February 1986 in the amount of P30,833.33.

Hence, their total accumulated

salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis of the corresponding pesodollar exchange rates prevailing during the applicable period when said salaries were received, the total
amount had an equivalent value of $304,372.43.

Page 105 of 319

The dollar equivalent was arrived at by using the official annual rates of exchange of the Philippine
peso and the US dollar from 1965 to 1985 as well as the official monthly rates of exchange in January and
February 1986 issued by the Center for Statistical Information of the Bangko Sentral ng Pilipinas.
Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides that:
Section 4. Judicial admissions An admission, verbal or written, made by a party in the course of the
proceedings in the same case does not require proof. The admission may be contradicted only by showing
that it was made through palpable mistake or that no such admission was made.
It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in
the course of the trial either by verbal or written manifestations or stipulations; or (c) in other stages of
judicial proceedings, as in the pre-trial of the case. Thus, facts pleaded in the petition and answer, as in
the case at bar, are deemed admissions of petitioner and respondents, respectively, who are not permitted
to contradict them or subsequently take a position contrary to or inconsistent with such admissions.
The sum of $304,372.43 should be held as the only known lawful income of respondents since they did
not file any Statement of Assets and Liabilities (SAL), as required by law, from which their net worth could
be determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos as President could not receive
any other emolument from the Government or any of its subdivisions and instrumentalities. Likewise,
under the 1973 Constitution, Ferdinand E. Marcos as President could not receive during his tenure any
other emolument from the Government or any other source. In fact, his management of businesses, like
the administration of foundations to accumulate funds, was expressly prohibited under the 1973
Constitution:
Article VII, Sec. 4(2) The President and the Vice-President shall not, during their tenure, hold any other
office except when otherwise provided in this Constitution, nor may they practice any profession,
participate directly or indirectly in the management of any business, or be financially interested directly or
indirectly in any contract with, or in any franchise or special privilege granted by the Government or any
other subdivision, agency, or instrumentality thereof, including any government owned or controlled
corporation.
Article VII, Sec. 11 No Member of the National Assembly shall appear as counsel before any court
inferior to a court with appellate jurisdiction, x x x.

Neither shall he, directly or indirectly, be interested

financially in any contract with, or in any franchise or special privilege granted by the Government, or any
subdivision, agency, or instrumentality thereof including any government owned or controlled corporation
during his term of office.

He shall not intervene in any matter before any office of the government for his

pecuniary benefit.
Article IX, Sec. 7 The Prime Minister and Members of the Cabinet shall be subject to the provision of
Section 11, Article VIII hereof and may not appear as counsel before any court or administrative body, or

Page 106 of 319

manage any business, or practice any profession, and shall also be subject to such other disqualification
as may be provided by law.
Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for
determining the existence of a prima facie case of forfeiture of the Swiss funds.
Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture of
the Swiss funds since it failed to prove the essential elements under Section 3, paragraphs (c), (d) and (e)
of RA 1379. As the Act is a penal statute, its provisions are mandatory and should thus be construed
strictly against the petitioner and liberally in favor of respondent Marcoses.
We hold that it was not for petitioner to establish the Marcoses other lawful income or income from
legitimately acquired property for the presumption to apply because, as between petitioner and
respondents, the latter were in a better position to know if there were such other sources of lawful
income.

And if indeed there was such other lawful income, respondents should have specifically stated

the same in their answer. Insofar as petitioner Republic was concerned, it was enough to specify the
known lawful income of respondents.
Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence of illgotten wealth, the value of the accumulated assets, properties and other material possessions of those
covered by Executive Order Nos. 1 and 2 must be out of proportion to the known lawful income

of

such persons. The respondent Marcos couple did not file any Statement of Assets and Liabilities (SAL)
from which their net worth could be determined. Their failure to file their SAL was in itself a violation of
law and to allow them to successfully assail the Republic for not presenting their SAL would reward them
for their violation of the law.
Further, contrary to the claim of respondents, the admissions made by them in their various
pleadings and documents were valid. It is of record that respondents judicially admitted that the money
deposited with the Swiss banks belonged to them.
We agree with petitioner that respondent Marcoses made judicial admissions of their ownership of
the subject Swiss bank deposits in their answer, the General/Supplemental Agreements, Mrs. Marcos'
Manifestation and Constancia dated May 5, 1999, and the Undertaking dated February 10, 1999. We take
note of the fact that the Associate Justices of the Sandiganbayan were unanimous in holding that
respondents had made judicial admissions of their ownership of the Swiss funds.
In their answer, aside from admitting the existence of the subject funds, respondents likewise admitted
ownership thereof. Paragraph 22 of respondents' answer stated:
22.

Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that respondents clandestinely

stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and

Page 107 of 319

corporate entities for being false, the truth being that respondents' aforesaid properties were
lawfully acquired. (emphasis supplied)
By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly admitted their
ownership thereof.
Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny
under oath the genuineness and due execution of certain actionable documents bearing her signature
attached to the petition. As discussed earlier, Section 11, Rule 8 of the 1997 Rules of Civil Procedure
provides that material averments in the complaint shall be deemed admitted when not specifically denied.
The General and Supplemental Agreements executed by petitioner and respondents on December
28, 1993 further bolstered the claim of petitioner Republic that its case for forfeiture was proven in
accordance with the requisites of Sections 2 and 3 of RA 1379. The whereas clause in the General
Agreement declared that:
WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal on December 21,
1990, that the $356 million belongs in principle to the Republic of the Philippines provided certain
conditionalities are met, but even after 7 years, the FIRST PARTY has not been able to procure a final
judgment of conviction against the PRIVATE PARTY.
While the Supplemental Agreement warranted, inter alia, that:
In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be
entitled to the equivalent of 25% of the amount that may be eventually withdrawn from said $356 million
Swiss deposits.
The stipulations set forth in the General and Supplemental Agreements undeniably indicated the
manifest intent of respondents to enter into a compromise with petitioner. Corollarily, respondents
willingness to agree to an amicable settlement with the Republic only affirmed their ownership of the
Swiss deposits for the simple reason that no person would acquiesce to any concession over such huge
dollar deposits if he did not in fact own them.
Respondents make much capital of the pronouncement by this Court that the General and
Supplemental Agreements were null and void. They insist that nothing in those agreements could thus be
admitted in evidence against them because they stood on the same ground as an accepted offer which,
under Section 27, Rule 130 of the 1997 Rules of Civil Procedure, provides that in civil cases, an offer of
compromise is not an admission of any liability and is not admissible in evidence against the offeror.
We find no merit in this contention. The declaration of nullity of said agreements was premised on
the following constitutional and statutory infirmities: (1) the grant of criminal immunity to the Marcos

Page 108 of 319

heirs was against the law; (2) the PCGGs commitment to exempt from all forms of taxes the properties to
be retained by the Marcos heirs was against the Constitution; and (3) the governments undertaking to
cause the dismissal of all cases filed against the Marcoses pending before the Sandiganbayan and other
courts encroached on the powers of the judiciary.

The reasons relied upon by the Court never in the least

bit even touched on the veracity and truthfulness of respondents admission with respect to their
ownership of the Swiss funds.

Besides, having made certain admissions in those agreements,

respondents cannot now deny that they voluntarily admitted owning the subject Swiss funds,
notwithstanding the fact that the agreements themselves were later declared null and void.
The following observation of Sandiganbayan Justice Catalino Castaeda, Jr. in the decision dated
September 19, 2000 could not have been better said:
x x x The declaration of nullity of the two agreements rendered the same without legal effects but it did
not detract from the admissions of the respondents contained therein. Otherwise stated, the admissions
made in said agreements, as quoted above, remain binding on the respondents.
A written statement is nonetheless competent as an admission even if it is contained in a document
which is not itself effective for the purpose for which it is made, either by reason of illegality, or
incompetency of a party thereto, or by reason of not being signed, executed or delivered. Accordingly,
contracts have been held as competent evidence of admissions, although they may be unenforceable.
The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the approval of
the Compromise Agreement on April 29, 1998 also lent credence to the allegations of petitioner Republic
that respondents admitted ownership of the Swiss bank accounts.

We quote the salient portions of

Ferdinand Jr.s formal declarations in open court:

ATTY. FERNANDO: Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol C.
Gunigundo?
F. MARCOS, JR.: Yes. I have had very many meetings in fact with Chairman.
ATTY. FERNANDO: Would you recall when the first meeting occurred?
PJ GARCHITORENA: In connection with what?
ATTY. FERNANDO: In connection with the ongoing talks to compromise the various cases initiated by PCGG
against your family?
F. MARCOS, JR.: The nature of our meetings was solely concerned with negotiations towards achieving
some kind of agreement between the Philippine government and the Marcos family. The discussions that
led up to the compromise agreement were initiated by our then counsel Atty. Simeon Mesina x x x.

Page 109 of 319

xxx

xxx

xxx

ATTY. FERNANDO: What was your reaction when Atty. Mesina informed you of this possibility?
F. MARCOS, JR.: My reaction to all of these approaches is that I am always open, we are always open, we
are very much always in search of resolution to the problem of the family and any approach that has been
made us, we have entertained.

And so my reaction was the same as what I have always why not?

Maybe this is the one that will finally put an end to this problem.
xxx

xxx

xxx

ATTY. FERNANDO: Basically, what were the true amounts of the assets in the bank?
PJ GARCHITORENA: So, we are talking about liquid assets here? Just Cash?
F. MARCOS, JR.: Well, basically, any assets.

Anything that was under the Marcos name in any of the

banks in Switzerland which may necessarily be not cash.

xxx

xxx

PJ GARCHITORENA: x x x

xxx
What did you do in other words, after being apprised of this contract in

connection herewith?
F. MARCOS, JR.: I assumed that we are beginning to implement the agreement because this was
forwarded through the Philippine government lawyers through our lawyers and then, subsequently, to me.
I was a little surprised because we hadnt really discussed the details of the transfer of the funds, what the
bank accounts, what the mechanism would be. But nevertheless, I was happy to see that as far as the
PCGG is concerned, that the agreement was perfected and that we were beginning to implement it and
that was a source of satisfaction to me because I thought that finally it will be the end.
Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of
respondents recognition of their ownership of the Swiss bank deposits.
testimony

are

receivable

against

him.

Admissions of a party in his

If a party, as a witness, deliberately concedes a fact, such

concession has the force of a judicial admission. It is apparent from Ferdinand Jr.s testimony that the
Marcos family agreed to negotiate with the Philippine government in the hope of finally putting an end
to the problems besetting the Marcos family regarding the Swiss accounts.

This was doubtlessly an

acknowledgment of ownership on their part. The rule is that the testimony on the witness stand partakes
of the nature of a formal judicial admission when a party testifies clearly and unequivocally to a fact which
is peculiarly within his own knowledge.
In her Manifestation dated May 26, 1998, respondent Imelda Marcos furthermore revealed the following:

Page 110 of 319

That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled case,
being the sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the
late President Ferdinand E. Marcos;
xxx

xxx

xxx

Respondents ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation is
as bright as sunlight. And her claim that she is merely a beneficiary of the Swiss deposits is belied by her
own signatures on the appended copies of the documents substantiating her ownership of the funds in the
name of the foundations. As already mentioned, she failed to specifically deny under oath the authenticity
of such documents, especially those involving William Saunders and Jane Ryan which actually referred
to Ferdinand Marcos and Imelda Marcos, respectively. That failure of Imelda Marcos to specifically deny
the existence, much less the genuineness and due execution, of the instruments bearing her signature,
was tantamount to a judicial admission of the genuineness and due execution of said instruments, in
accordance with Section 8, Rule 8 of the 1997 Rules of Civil Procedure.
Likewise, in her Constancia dated May 6, 1999, Imelda Marcos prayed for the approval of the
Compromise Agreement and the subsequent release and transfer of the $150 million to the rightful owner.
She further made the following manifestations:
xxx

xxx

xxx

2. The Republics cause of action over the full amount is its forfeiture in favor of the government if found
to be ill-gotten. On the other hand, the Marcoses defend that it is a legitimate asset.

Therefore,

both parties have an inchoate right of ownership over the account. If it turns out that the account is of
lawful origin, the Republic may yield to the Marcoses.

Conversely, the Marcoses must yield to the

Republic. (underscoring supplied)

xxx
3.

xxx

xxx

Consistent with the foregoing, and the Marcoses having committed themselves to helping the less

fortunate, in the interest of peace, reconciliation and unity, defendant MADAM IMELDA ROMUALDEZ
MARCOS, in firm abidance thereby, hereby affirms her agreement with the Republic for the release and
transfer of the US Dollar 150 million for proper disposition, without prejudice to the final outcome of the
litigation respecting the ownership of the remainder.
Again, the above statements were indicative of Imeldas admission of the Marcoses ownership of
the Swiss deposits as in fact the Marcoses defend that it (Swiss deposits) is a legitimate (Marcos) asset.

Page 111 of 319

On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria
Irene Marcos-Araneta filed a motion on May 4, 1998 asking the Sandiganbayan to place the res (Swiss
deposits) in custodia legis:
7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss deposits are placed
in custodia legis or within the Courts protective mantle, its dissipation or misappropriation by the
petitioner looms as a distinct possibility.
Such display of deep, personal interest can only come from someone who believes that he has a
marked and intimate right over the considerable dollar deposits. Truly, by filing said motion, the Marcos
children revealed their ownership of the said deposits.
Lastly, the Undertaking entered into by the PCGG, the PNB and the Marcos foundations on February
10, 1999, confirmed the Marcoses ownership of the Swiss bank deposits.

The subject Undertaking

brought to light their readiness to pay the human rights victims out of the funds held in escrow in the PNB.
It stated:
WHEREAS, the Republic of the Philippines sympathizes with the plight of the human rights victimsplaintiffs in the aforementioned litigation through the Second Party, desires to assist in the satisfaction of
the judgment awards of said human rights victims-plaintiffs, by releasing, assigning and or waiving
US$150 million of the funds held in escrow under the Escrow Agreements dated August 14, 1995,
although the Republic is not obligated to do so under final judgments of the Swiss courts dated December
10 and 19, 1997, and January 8, 1998;
WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights and
interests over said US$150 million to the aforementioned human rights victims-plaintiffs.
All told, the foregoing disquisition negates the claim of respondents that petitioner failed to prove
that they acquired or own the Swiss funds and that it was only by arbitrarily isolating and taking certain
statements made by private respondents out of context that petitioner was able to treat these as judicial
admissions. The Court is fully aware of the relevance, materiality and implications of every pleading and
document submitted in this case. This Court carefully scrutinized the proofs presented by the parties. We
analyzed, assessed and weighed them to ascertain if each piece of evidence rightfully qualified as an
admission. Owing to the far-reaching historical and political implications of this case, we considered and
examined, individually and totally, the evidence of the parties, even if it might have bordered on factual
adjudication which, by authority of the rules and jurisprudence, is not usually done by this Court. There is
no doubt in our mind that respondent Marcoses admitted ownership of the Swiss bank deposits.
We have always adhered to the familiar doctrine that an admission made in the pleadings cannot
be controverted by the party making such admission and becomes conclusive on him, and that all proofs
submitted by him contrary thereto or inconsistent therewith should be ignored, whether an objection is

Page 112 of 319

interposed by the adverse party or not. This doctrine is embodied in Section 4, Rule 129 of the Rules of
Court:
SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof.

The admission may be contradicted only by

showing that it was made through palpable mistake or that no such admission was made.
In the absence of a compelling reason to the contrary, respondents judicial admission of ownership
of the Swiss deposits is definitely binding on them.
The individual and separate admissions of each respondent bind all of them pursuant to Sections
29 and 31, Rule 130 of the Rules of Court:
SEC. 29. Admission by co-partner or agent. The act or declaration of a partner or agent of the party
within the scope of his authority and during the existence of the partnership or agency, may be given in
evidence against such party after the partnership or agency is shown by evidence other than such act or
declaration. The same rule applies to the act or declaration of a joint owner, joint debtor, or other person
jointly interested with the party.
SEC. 31. Admission by privies. Where one derives title to property from another, the act, declaration, or
omission of the latter, while holding the title, in relation to the property, is evidence against the former.
The declarations of a person are admissible against a party whenever a privity of estate exists
between the declarant and the party, the term privity of estate generally denoting a succession in rights.
Consequently, an admission of one in privity with a party to the record is competent.

Without doubt,

privity exists among the respondents in this case. And where several co-parties to the record are jointly
interested in the subject matter of the controversy, the admission of one is competent against all.
Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed to
establish a prima facie case for the forfeiture of the Swiss deposits.
We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least, as
its findings and conclusions were not borne out by the voluminous records of this case.
Section 2 of RA 1379 explicitly states that whenever any public officer or employee has acquired
during his incumbency an amount of property which is manifestly out of proportion to his salary as such
public officer or employee and to his other lawful income and the income from legitimately acquired
property, said property shall be presumed prima facie to have been unlawfully acquired. x x x
The elements which must concur for this prima facie presumption to apply are:
(1) the offender is a public officer or employee;

Page 113 of 319

(2) he must have acquired a considerable amount of money or property during his incumbency; and
(3) said amount is manifestly out of proportion to his salary as such public officer or employee and to
his other lawful income and the income from legitimately acquired property.
It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence, the
first element is clearly extant.
The second element deals with the amount of money or property acquired by the public officer during
his incumbency. The Marcos couple indubitably acquired and owned properties during their term of office.
In fact, the five groups of Swiss accounts were admittedly owned by them. There is proof of the existence
and ownership of these assets and properties and it suffices to comply with the second element.
The third requirement is met if it can be shown that such assets, money or property is manifestly out
of proportion to the public officers salary and his other lawful income. It is the proof of this third element
that is crucial in determining whether a prima facie presumption has been established in this case.
Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos spouses
during their incumbency but also evidence that they had huge deposits beyond such lawful income in
Swiss banks under the names of five different foundations. We believe petitioner was able to establish the
prima facie presumption that the assets and properties acquired by the Marcoses were manifestly and
patently disproportionate to their aggregate salaries as public officials.

Otherwise stated, petitioner

presented enough evidence to convince us that the Marcoses had dollar deposits amounting to US $356
million representing the balance of the Swiss accounts of the five foundations, an amount way, way
beyond their aggregate legitimate income of only US$304,372.43 during their incumbency as government
officials.
Considering, therefore, that the total amount of the Swiss deposits was considerably out of proportion
to the known lawful income of the Marcoses, the presumption that said dollar deposits were unlawfully
acquired was duly established.

It was sufficient for the petition for forfeiture to state the approximate

amount of money and property acquired by the respondents, and their total government salaries. Section
9 of the PCGG Rules and Regulations states:
Prima Facie Evidence. Any accumulation of assets, properties, and other material possessions of those
persons covered by Executive Orders No. 1 and No. 2, whose value is out of proportion to their known
lawful income is prima facie deemed ill-gotten wealth.
Indeed, the burden of proof was on the respondents to dispute this presumption and show by clear
and convincing evidence that the Swiss deposits were lawfully acquired and that they had other legitimate
sources of income. A presumption is prima facie proof of the fact presumed and, unless the fact thus
prima facie established by legal presumption is disproved, it must stand as proved.

Page 114 of 319

Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as they
were indispensable parties without whom no complete determination of the issues could be made. She
asserts that the failure of petitioner Republic to implead the foundations rendered the judgment void as
the joinder of indispensable parties was a sine qua non exercise of judicial power. Furthermore, the noninclusion of the foreign foundations violated the conditions prescribed by the Swiss government regarding
the deposit of the funds in escrow, deprived them of their day in court and denied them their rights under
the Swiss constitution and international law.
The Court finds that petitioner Republic did not err in not impleading the foreign foundations.
Section 7, Rule 3 of the 1997 Rules of Civil Procedure, taken from Rule 19b of the American Federal Rules
of Civil Procedure, provides for the compulsory joinder of indispensable parties. Generally, an
indispensable party must be impleaded for the complete determination of the suit. However, failure to join
an indispensable party does not divest the court of jurisdiction since the rule regarding indispensable
parties is founded on equitable considerations and is not jurisdictional. Thus, the court is not divested of
its power to render a decision even in the absence of indispensable parties, though such judgment is not
binding on the non-joined party.
An indispensable party has been defined as one:
[who] must have a direct interest in the litigation; and if this interest is such that it cannot be separated
from that of the parties to the suit, if the court cannot render justice between the parties in his absence, if
the decree will have an injurious effect upon his interest, or if the final determination of the controversy in
his absence will be inconsistent with equity and good conscience.
There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff
without the presence of the other party? and (2) can the case be decided on its merits without prejudicing
the rights of the other party? There is, however, no fixed formula for determining who is an indispensable
party; this can only be determined in the context and by the facts of the particular suit or litigation.
In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998
Manifestation before the Sandiganbayan that she was the sole beneficiary of 90% of the subject matter in
controversy with the remaining 10% belonging to the estate of Ferdinand Marcos. Viewed against this
admission, the foreign foundations were not

indispensable parties. Their non-participation in the

proceedings did not prevent the court from deciding the case on its merits and according full relief to
petitioner Republic. The judgment ordering the return of the $356 million was neither inimical to the
foundations interests nor inconsistent with equity and good conscience. The admission of respondent
Imelda Marcos only confirmed what was already generally known: that the foundations were established
precisely to hide the money stolen by the Marcos spouses from petitioner Republic. It negated whatever
illusion there was, if any, that the foreign foundations owned even a nominal part of the assets in
question.

Page 115 of 319

The rulings of the Swiss court that the foundations, as formal owners, must be given an
opportunity to participate in the proceedings hinged on the assumption that they owned a nominal share
of the assets. But this was already refuted by no less than Mrs. Marcos herself. Thus, she cannot now
argue that the ruling of the Sandiganbayan violated the conditions set by the Swiss court. The directive
given by the Swiss court for the foundations to participate in the proceedings was for the purpose of
protecting whatever nominal interest they might have had in the assets as formal owners. But inasmuch
as their ownership was subsequently repudiated by Imelda Marcos, they could no longer be considered as
indispensable parties and their participation in the proceedings became unnecessary.
In Republic vs. Sandiganbayan, this Court ruled that impleading the firms which are the res of the
action was unnecessary:
And as to corporations organized with ill-gotten wealth, but are not themselves guilty of
misappropriation, fraud or other illicit conduct in other words, the companies themselves are not
the object or thing involved in the action, the res thereof there is no need to implead them either.
Indeed, their impleading is not proper on the strength alone of their having been formed with illgotten funds, absent any other particular wrongdoing on their part
Such showing of having been formed with, or having received ill-gotten funds, however strong or
convincing, does not, without more, warrant identifying the corporations in question with the
person who formed or made use of them to give the color or appearance of lawful, innocent
acquisition to illegally amassed wealth at the least, not so as place on the Government the onus
of impleading the former with the latter in actions to recover such wealth. Distinguished in terms of
juridical personality and legal culpability from their erring members or stockholders, said
corporations are not themselves guilty of the sins of the latter, of the embezzlement, asportation,
etc., that gave rise to the Governments cause of action for recovery; their creation or organization
was merely the result of their members (or stockholders) manipulations and maneuvers to conceal
the illegal origins of the assets or monies invested therein. In this light, they are simply the res in
the actions for the recovery of illegally acquired wealth, and there is, in principle, no cause of
action against them and no ground to implead them as defendants in said actions.
Just like the corporations in the aforementioned case, the foreign foundations here were set up to
conceal the illegally acquired funds of the Marcos spouses. Thus, they were simply the res in the action for
recovery of ill-gotten wealth and did not have to be impleaded for lack of cause of action or ground to
implead them.
Assuming arguendo, however, that the foundations were indispensable parties, the failure of
petitioner to implead them was a curable error, as held in the previously cited case of Republic vs.
Sandiganbayan:

Page 116 of 319

Even in those cases where it might reasonably be argued that the failure of the Government to
implead the sequestered corporations as defendants is indeed a procedural abberation, as where
said firms were allegedly used, and actively cooperated with the defendants, as instruments or
conduits for conversion of public funds and property or illicit or fraudulent obtention of favored
government contracts, etc., slight reflection would nevertheless lead to the conclusion that the
defect is not fatal, but one correctible under applicable adjective rules e.g., Section 10, Rule 5 of
the Rules of Court [specifying the remedy of amendment during trial to authorize or to conform to
the evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to the rule
respecting omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of
the Rules of Court. It is relevant in this context to advert to the old familiar doctrines that the
omission to implead such parties is a mere technical defect which can be cured at any stage of the
proceedings even after judgment; and that, particularly in the case of indispensable parties, since
their presence and participation is essential to the very life of the action, for without them no
judgment may be rendered, amendments of the complaint in order to implead them should be
freely allowed, even on appeal, in fact even after rendition of judgment by this Court, where it
appears that the complaint otherwise indicates their identity and character as such indispensable
parties.
Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the
dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at hand. The
better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule on
joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in Section 11,
Rule 3 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of nonjoinder or misjoinder of parties and allows the amendment of the complaint at any stage of the
proceedings, through motion or on order of the court on its own initiative.
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3 on
indispensable parties was copied, allows the joinder of

indispensable parties even after judgment has

been entered if such is needed to afford the moving party full relief. Mere delay in filing the joinder motion
does not necessarily result in the waiver of the right as long as the delay is excusable. Thus, respondent
Mrs. Marcos cannot correctly argue that the judgment rendered by the Sandiganbayan was void due to the
non-joinder of the foreign foundations. The court had jurisdiction to render judgment which, even in the
absence of indispensable parties, was binding on all the parties before it though not on the absent party. If
she really felt that she could not be granted full relief due to the absence of the foreign foundations, she
should have moved for their inclusion, which was allowable at any stage of the proceedings. She never
did. Instead she assailed the judgment rendered.
In the face of undeniable circumstances and the avalanche of documentary evidence against them,
respondent Marcoses failed to justify the lawful nature of their acquisition of the said assets. Hence, the

Page 117 of 319

Swiss deposits should be considered ill-gotten wealth and forfeited in favor of the State in accordance with
Section 6 of RA 1379:
SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of the court that he has
lawfully acquired the property in question, then the court shall declare such property forfeited in favor of
the State, and by virtue of such judgment the property aforesaid shall become property of the State x x x.
THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS DECISIONS
Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice Francis
Garchitorena committed grave abuse of discretion in reversing himself on the ground that the original
copies of the authenticated Swiss decisions and their authenticated translations were not submitted to the
court a quo. Earlier PJ Garchitorena had quoted extensively from the unofficial translation of one of these
Swiss decisions in his ponencia dated July 29, 1999 when he denied the motion to release US$150 Million
to the human rights victims.
While we are in reality perplexed by such an incomprehensible change of heart, there might
nevertheless not be any real need to belabor the issue. The presentation of the authenticated translations
of the original copies of the Swiss decision was not de rigueur for the public respondent to make findings
of fact and reach its conclusions. In short, the Sandiganbayans decision was not dependent on the
determination of the Swiss courts. For that matter, neither is this Courts.
The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of this
jurisdiction that said funds belong to the petitioner Republic. What is important is our own assessment of
the sufficiency of the evidence to rule in favor of either petitioner Republic or respondent Marcoses. In this
instance, despite the absence of the authenticated translations of the Swiss decisions, the evidence on
hand tilts convincingly in favor of petitioner Republic.
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated
January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are now deposited in
escrow at the Philippine National Bank in the estimated aggregate amount of US$658,175,373.60 as of
January 31, 2002, plus interest, are hereby forfeited in favor of petitioner Republic of the Philippines.
B. The State
1. Magallona v. Ermita, 655 SCRA 77 (2011)
EN BANC
[G.R No. 187167: August 16, 2011]
PROF. MERLIN M. MAGALLONA, AKBAYAN PARTY-LIST REP. RISA HONTIVEROS, PROF. HARRY
C. ROQUE, JR., AND UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW STUDENTS, ALITHEA

Page 118 of 319

BARBARA ACAS, VOLTAIRE ALFERES, CZARINA MAY ALTEZ, FRANCIS ALVIN ASILO, SHERYL
BALOT, RUBY AMOR BARRACA, JOSE JAVIER BAUTISTA, ROMINA BERNARDO, VALERIE PAGASA
BUENAVENTURA, EDAN MARRI CAETE, VANN ALLEN DELA CRUZ, RENE DELORINO, PAULYN
MAY DUMAN, SHARON ESCOTO, RODRIGO FAJARDO III, GIRLIE FERRER, RAOULLE OSEN
FERRER, CARLA REGINA GREPO, ANNA MARIE CECILIA GO, IRISH KAY KALAW, MARY ANN JOY
LEE, MARIA LUISA MANALAYSAY, MIGUEL RAFAEL MUSNGI, MICHAEL OCAMPO, JAKLYN HANNA
PINEDA, WILLIAM RAGAMAT, MARICAR RAMOS, ENRIK FORT REVILLAS, JAMES MARK TERRY
RIDON, JOHANN FRANTZ RIVERA IV, CHRISTIAN RIVERO, DIANNE MARIE ROA, NICHOLAS
SANTIZO, MELISSA CHRISTINA SANTOS, CRISTINE MAE TABING, VANESSA ANNE TORNO,
MARIA ESTER VANGUARDIA, AND MARCELINO VELOSO III, PETITIONERS, VS. HON. EDUARDO
ERMITA, IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. ALBERTO ROMULO, IN HIS
CAPACITY AS SECRETARY OF THE DEPARTMENT OF FOREIGN AFFAIRS, HON. ROLANDO
ANDAYA,

IN

HIS

CAPACITY

AS

SECRETARY

OF

THE

DEPARTMENT

OF

BUDGET

AND

MANAGEMENT, HON. DIONY VENTURA, IN HIS CAPACITY AS ADMINISTRATOR OF THE

NATIONAL MAPPING & RESOURCE INFORMATION AUTHORITY, AND HON. HILARIO DAVIDE,
JR., IN HIS CAPACITY AS REPRESENTATIVE OF THE PERMANENT MISSION OF THE REPUBLIC OF
THE PHILIPPINES TO THE UNITED NATIONS, RESPONDENTS.
This original action for the writs of certiorari and prohibition assails the constitutionality of Republic Act
No. 9522[1] (RA 9522) adjusting the country's archipelagic baselines and classifying the baseline regime of
nearby territories.
In 1961, Congress passed Republic Act No. 3046 (RA 3046) [2] demarcating the maritime baselines of
the Philippines as an archipelagic State.[3] This law followed the framing of the Convention on the
Territorial Sea and the Contiguous Zone in 1958 (UNCLOS I), [4] codifying, among others, the sovereign
right of States parties over their "territorial sea," the breadth of which, however, was left undetermined.
Attempts to fill this void during the second round of negotiations in Geneva in 1960 (UNCLOS II) proved
futile. Thus, domestically, RA 3046 remained unchanged for nearly five decades, save for legislation
passed in 1968 (Republic Act No. 5446 [RA 5446]) correcting typographical errors and reserving the
drawing of baselines around Sabah in North Borneo.
In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under scrutiny. The
change was prompted by the need to make RA 3046 compliant with the terms of the United Nations
Convention on the Law of the Sea (UNCLOS III), [5] which the Philippines ratified on 27 February 1984. [6]
Among others, UNCLOS III prescribes the water-land ratio, length, and contour of baselines of archipelagic
States like the Philippines[7] and sets the deadline for the filing of application for the extended continental
shelf.[8] Complying with these requirements, RA 9522 shortened one baseline, optimized the location of
some basepoints around the Philippine archipelago and classified adjacent territories, namely, the
Kalayaan Island Group (KIG) and the Scarborough Shoal, as "regimes of islands" whose islands generate
their own applicable maritime zones.

Page 119 of 319

Petitioners, professors of law, law students and a legislator, in their respective capacities as "citizens,
taxpayers or x x x legislators," [9] as the case may be, assail the constitutionality of RA 9522 on two
principal grounds, namely: (1) RA 9522 reduces Philippine maritime territory, and logically, the reach of
the Philippine state's sovereign power, in violation of Article 1 of the 1987 Constitution, [10] embodying the
terms of the Treaty of Paris [11] and ancillary treaties,[12] and (2) RA 9522 opens the country's waters
landward of the baselines to maritime passage by all vessels and aircrafts, undermining Philippine
sovereignty and national security, contravening the country's nuclear-free policy, and damaging marine
resources, in violation of relevant constitutional provisions.

[13]

In addition, petitioners contend that RA 9522's treatment of the KIG as "regime of islands" not only
results in the loss of a large maritime area but also prejudices the livelihood of subsistence fishermen. [14]
To buttress their argument of territorial diminution, petitioners facially attack RA 9522 for what it excluded
and included - its failure to reference either the Treaty of Paris or Sabah and its use of UNCLOS III's
framework of regime of islands to determine the maritime zones of the KIG and the Scarborough Shoal.
Commenting on the petition, respondent officials raised threshold issues questioning (1) the petition's
compliance with the case or controversy requirement for judicial review grounded on petitioners' alleged
lack of locus standi and (2) the propriety of the writs of certiorari and prohibition to assail the
constitutionality of RA 9522. On the merits, respondents defended RA 9522 as the country's compliance
with the terms of UNCLOS III, preserving Philippine territory over the KIG or Scarborough Shoal.
Respondents add that RA 9522 does not undermine the country's security, environment and economic
interests or relinquish the Philippines claim over Sabah.
Respondents also question the normative force, under international law, of petitioners' assertion that
what Spain ceded to the United States under the Treaty of Paris were the islands and all the waters found
within

the

boundaries

of

the

rectangular

area

drawn

under

the

Treaty

of

Paris.

We left unacted petitioners prayer for an injunctive writ.

The Issues
The petition raises the following issues:
1. Preliminarily 1. Whether petitioners possess locus standi to bring this suit; and
2. Whether the writs of certiorari and prohibition are the proper remedies to assail the
constitutionality of RA 9522.
2. On the merits, whether RA 9522 is unconstitutional.
The Ruling of the Court

Page 120 of 319

On the threshold issues, we hold that (1) petitioners possess locus standi to bring this suit as
citizens and (2) the writs of certiorari and prohibition are proper remedies to test the constitutionality of
RA 9522. On the merits, we find no basis to declare RA 9522 unconstitutional.
On the Threshold Issues Petitioners Possess Locus Standi as Citizens
Petitioners themselves undermine their assertion of locus standi as legislators and taxpayers
because the petition alleges neither infringement of legislative prerogative [15] nor misuse of public funds, [16]
occasioned by the passage and implementation of RA 9522. Nonetheless, we recognize petitioners' locus
standi as citizens with constitutionally sufficient interest in the resolution of the merits of the case which
undoubtedly raises issues of national significance necessitating urgent resolution. Indeed, owing to the
peculiar nature of RA 9522, it is understandably difficult to find other litigants possessing "a more direct
and specific interest" to bring the suit, thus satisfying one of the requirements for granting citizenship
standing.

[17]

The Writs of Certiorari and Prohibition Are Proper Remedies to Test the Constitutionality of
Statutes
In praying for the dismissal of the petition on preliminary grounds, respondents seek a strict
observance of the offices of the writs of certiorari and prohibition, noting that the writs cannot issue
absent any showing of grave abuse of discretion in the exercise of judicial, quasi-judicial or ministerial
powers

on

the

part

of

respondents

and

resulting

prejudice

on

the

part

of

petitioners. [18]

Respondents' submission holds true in ordinary civil proceedings. When this Court exercises its
constitutional power of judicial review, however, we have, by tradition, viewed the writs of certiorari and
prohibition as proper remedial vehicles to test the constitutionality of statutes, [19] and indeed, of acts of
other branches of government.[20] Issues of constitutional import are sometimes crafted out of statutes
which, while having no bearing on the personal interests of the petitioners, carry such relevance in the life
of this nation that the Court inevitably finds itself constrained to take cognizance of the case and pass
upon the issues raised, non-compliance with the letter of procedural rules notwithstanding. The statute
sought to be reviewed here is one such law.
RA 9522 is Not Unconstitutional RA 9522 is a Statutory Tool to Demarcate the Country's
Maritime Zones and Continental Shelf Under UNCLOS III, not to Delineate Philippine Territory
Petitioners submit that RA 9522 "dismembers a large portion of the national territory" [21] because it
discards the pre-UNCLOS III demarcation of Philippine territory under the Treaty of Paris and related
treaties, successively encoded in the definition of national territory under the 1935, 1973 and 1987
Constitutions. Petitioners theorize that this constitutional definition trumps any treaty or statutory
provision denying the Philippines sovereign control over waters, beyond the territorial sea recognized at
the time of the Treaty of Paris, that Spain supposedly ceded to the United States. Petitioners argue that
from the Treaty of Paris' technical description, Philippine sovereignty over territorial waters extends

Page 121 of 319

hundreds of nautical miles around the Philippine archipelago, embracing the rectangular area delineated in
the Treaty of Paris.

[22]

Petitioners theory fails to persuade us.

UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral treaty
regulating, among others, sea-use rights over maritime zones (i.e., the territorial waters [12 nautical
miles from the baselines], contiguous zone [24 nautical miles from the baselines], exclusive economic
zone [200 nautical miles from the baselines]), and continental shelves that UNCLOS III delimits. [23]
UNCLOS III was the culmination of decades-long negotiations among United Nations members to codify
norms regulating the conduct of States in the world's oceans and submarine areas, recognizing coastal
and archipelagic States' graduated authority over a limited span of waters and submarine lands along their
coasts.
On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States parties to
mark-out specific basepoints along their coasts from which baselines are drawn, either straight or
contoured, to serve as geographic starting points to measure the breadth of the maritime zones and
continental shelf. Article 48 of UNCLOS III on archipelagic States like ours could not be any clearer:
Article 48. Measurement of the breadth of the territorial sea, the contiguous zone, the exclusive economic
zone and the continental shelf. - The breadth of the territorial sea, the contiguous zone, the exclusive
economic zone and the continental shelf shall be measured from archipelagic baselines drawn in
accordance with article 47. (Emphasis supplied)
Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to delimit
with precision the extent of their maritime zones and continental shelves. In turn, this gives notice to the
rest of the international community of the scope of the maritime space and submarine areas within which
States parties exercise treaty-based rights, namely, the exercise of sovereignty over territorial waters
(Article 2), the jurisdiction to enforce customs, fiscal, immigration, and sanitation laws in the contiguous
zone (Article 33), and the right to exploit the living and non-living resources in the exclusive economic
zone (Article 56) and continental shelf (Article 77).
Even under petitioners' theory that the Philippine territory embraces the islands and all the waters
within the rectangular area delimited in the Treaty of Paris, the baselines of the Philippines would still have
to be drawn in accordance with RA 9522 because this is the only way to draw the baselines in conformity
with UNCLOS III. The baselines cannot be drawn from the boundaries or other portions of the rectangular
area delineated in the Treaty of Paris, but from the "outermost islands and drying reefs of the
archipelago."[24]
UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement or, as
petitioners claim, diminution of territory. Under traditional international law typology, States acquire (or
conversely, lose) territory through occupation, accretion, cession and prescription, [25] not by executing
multilateral treaties on the regulations of sea-use rights or enacting statutes to comply with the treaty's
terms to delimit maritime zones and continental shelves. Territorial claims to land features are outside

Page 122 of 319

UNCLOS

III,

and

are

instead

governed

by

the

rules

on

general

international

law.[26]

RA 9522's Use of the Framework of Regime of Islands to Determine the Maritime Zones of the
KIG and the Scarborough Shoal, not Inconsistent with the Philippines' Claim of Sovereignty
Over these Areas
Petitioners next submit that RA 9522's use of UNCLOS III's regime of islands framework to draw
the baselines, and to measure the breadth of the applicable maritime zones of the KIG, "weakens our
territorial claim" over that area.[27] Petitioners add that the KIG's (and Scarborough Shoal's) exclusion from
the Philippine archipelagic baselines results in the loss of "about 15,000 square nautical miles of territorial
waters," prejudicing the livelihood of subsistence fishermen. [28] A comparison of the configuration of the
baselines drawn under RA 3046 and RA 9522 and the extent of maritime space encompassed by each law,
coupled with a reading of the text of RA 9522 and its congressional deliberations, vis- -vis the
Philippines'

obligations

under

UNCLOS

III,

belie

this

view.

The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA 9522 merely
followed the basepoints mapped by RA 3046, save for at least nine basepoints that RA 9522 skipped to
optimize the location of basepoints and adjust the length of one baseline (and thus comply with UNCLOS
III's limitation on the maximum length of baselines). Under RA 3046, as under RA 9522, the KIG and the
Scarborough Shoal lie outside of the baselines drawn around the Philippine archipelago. This undeniable
cartographic fact takes the wind out of petitioners' argument branding RA 9522 as a statutory renunciation
of
Extent of maritime area using RA 3046, as Extent of maritime area using RA

the

amended, taking into account the Treaty of 9522, taking into account UNCLOS
Paris' delimitation (in square nautical miles)
Internal

or 166,858

III (in square nautical miles)

171,435

archipelagic
waters
Territorial Sea

274,136

32,106

Exclusive

382,669

Economic Zone
TOTAL

440,994

Philippines'

claim

over

the

586,210
KIG,

assuming

that

baselines

are

relevant

for

this

purpose.

Petitioners' assertion of loss of "about 15,000 square nautical miles of territorial waters" under RA
9522 is similarly unfounded both in fact and law. On the contrary, RA 9522, by optimizing the location of
basepoints, increased the Philippines' total maritime space (covering its internal waters, territorial sea
and exclusive economic zone) by 145,216 square nautical miles, as shown in the table below: [29]

Page 123 of 319

Thus, as the map below shows, the reach of the exclusive economic zone drawn under RA 9522
even extends way beyond the waters covered by the rectangular demarcation under the Treaty of Paris. Of
course, where there are overlapping exclusive economic zones of opposite or adjacent States, there will
have

to

be

delineation

of

maritime

boundaries

in

accordance

with

UNCLOS

III. [30]

Further, petitioners' argument that the KIG now lies outside Philippine territory because the
baselines that RA 9522 draws do not enclose the KIG is negated by RA 9522 itself. Section 2 of the law
commits to text the Philippines' continued claim of sovereignty and jurisdiction over the KIG and the
Scarborough Shoal:
SEC. 2. The baselines in the following areas over which the Philippines likewise exercises
sovereignty and jurisdiction shall be determined as "Regime of Islands" under the Republic of the
Philippines consistent with Article 121 of the United Nations Convention on the Law of the Sea (UNCLOS):
a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596 and
b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)
Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the Philippine
archipelago, adverse legal effects would have ensued. The Philippines would have committed a breach of
two provisions of UNCLOS III. First, Article 47 (3) of UNCLOS III requires that "[t]he drawing of such
baselines shall not depart to any appreciable extent from the general configuration of the archipelago."
Second, Article 47 (2) of UNCLOS III requires that "the length of the baselines shall not exceed 100
nautical miles," save for three per cent (3%) of the total number of baselines which can reach up to 125
nautical miles.

[31]

Although the Philippines has consistently claimed sovereignty over the KIG [32] and the Scarborough
Shoal for several decades, these outlying areas are located at an appreciable distance from the nearest
shoreline of the Philippine archipelago, [33] such that any straight baseline loped around them from the
nearest basepoint will inevitably "depart to an appreciable extent from the general configuration of the
archipelago."
The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took pains to
emphasize the foregoing during the Senate deliberations:
What we call the Kalayaan Island Group or what the rest of the world call[] the Spratlys and the
Scarborough Shoal are outside our archipelagic baseline because if we put them inside our baselines we
might be accused of violating the provision of international law which states: "The drawing of such
baseline shall not depart to any appreciable extent from the general configuration of the archipelago." So
sa loob ng ating baseline, dapat magkalapit ang mga islands. Dahil malayo ang Scarborough Shoal, hindi
natin masasabing malapit sila sa atin although we are still allowed by international law to claim them as
our own.

Page 124 of 319

This is called contested islands outside our configuration. We see that our archipelago is defined by
the orange line which [we] call[] archipelagic baseline. Ngayon, tingnan ninyo ang maliit na circle doon sa
itaas, that is Scarborough Shoal, itong malaking circle sa ibaba, that is Kalayaan Group or the Spratlys.
Malayo na sila sa ating archipelago kaya kung ilihis pa natin ang dating archipelagic baselines para lamang
masama itong dalawang circles, hindi na sila magkalapit at baka hindi na tatanggapin ng United Nations
because of the rule that it should follow the natural configuration of the archipelago.[34] (Emphasis
supplied)
Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS III's limits. The need to
shorten this baseline, and in addition, to optimize the location of basepoints using current maps, became
imperative as discussed by respondents:
[T]he amendment of the baselines law was necessary to enable the Philippines to draw the outer limits of
its maritime zones including the extended continental shelf in the manner provided by Article 47 of
[UNCLOS III]. As defined by R.A. 3046, as amended by R.A. 5446, the baselines suffer from some
technical deficiencies, to wit:
1.
The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to Tongquil Point) is
140.06 nautical miles x x x. This exceeds the maximum length allowed under Article 47(2) of the
[UNCLOS III], which states that "The length of such baselines shall not exceed 100 nautical miles,
except that up to 3 per cent of the total number of baselines enclosing any archipelago may exceed
that length, up to a maximum length of 125 nautical miles."
2.

The selection of basepoints is not optimal. At least 9 basepoints can be skipped or deleted from the
baselines system. This will enclose an additional 2,195 nautical miles of water.

3.

Finally, the basepoints were drawn from maps existing in 1968, and not established by geodetic
survey methods. Accordingly, some of the points, particularly along the west coasts of Luzon down
to Palawan were later found to be located either inland or on water, not on low-water line and
drying reefs as prescribed by Article 47.[35]

Hence, far from surrendering the Philippines' claim over the KIG and the Scarborough Shoal, Congress'
decision to classify the KIG and the Scarborough Shoal as "`Regime[s] of Islands' under the Republic of
the Philippines consistent with Article 121"[36] of UNCLOS III manifests the Philippine State's responsible
observance of its pacta sunt servanda obligation under UNCLOS III. Under Article 121 of UNCLOS III, any
"naturally formed area of land, surrounded by water, which is above water at high tide," such as portions
of the KIG, qualifies under the category of "regime of islands," whose islands generate their own
applicable maritime zones.

[37]

Statutory Claim Over Sabah under RA 5446 Retained

Page 125 of 319

Petitioners' argument for the invalidity of RA 9522 for its failure to textualize the Philippines' claim over
Sabah in North Borneo is also untenable. Section 2 of RA 5446, which RA 9522 did not repeal, keeps open
the door for drawing the baselines of Sabah:
Section 2. The definition of the baselines of the territorial sea of the Philippine Archipelago as provided in
this Act is without prejudice to the delineation of the baselines of the territorial sea around the
territory of Sabah, situated in North Borneo, over which the Republic of the Philippines has
acquired dominion and sovereignty. (Emphasis supplied)
UNCLOS III and RA 9522 not Incompatible with the Constitution's Delineation of Internal
Waters
As their final argument against the validity of RA 9522, petitioners contend that the law
unconstitutionally "converts" internal waters into archipelagic waters, hence subjecting these waters to the
right of innocent and sea lanes passage under UNCLOS III, including overflight. Petitioners extrapolate
that these passage rights indubitably expose Philippine internal waters to nuclear and maritime pollution
hazards, in violation of the Constitution.

[38]

Whether referred to as Philippine "internal waters" under Article I of the Constitution [39] or as
"archipelagic waters" under UNCLOS III (Article 49 [1]), the Philippines exercises sovereignty over the
body of water lying landward of the baselines, including the air space over it and the submarine areas
underneath. UNCLOS III affirms this:
Article 49. Legal status of archipelagic waters, of the air space over archipelagic waters and of their bed
and subsoil. 1. The sovereignty of an archipelagic State extends to the waters enclosed by the
archipelagic baselines drawn in accordance with article 47, described as archipelagic waters,
regardless of their depth or distance from the coast.
2. This sovereignty extends to the air space over the archipelagic waters, as well as to their
bed and subsoil, and the resources contained therein.
xxxx
4. The regime of archipelagic sea lanes passage established in this Part shall not in other respects
affect the status of the archipelagic waters, including the sea lanes, or the exercise by the
archipelagic State of its sovereignty over such waters and their air space, bed and
subsoil, and the resources contained therein.
(Emphasis supplied)
The fact of sovereignty, however, does not preclude the operation of municipal and international
law norms subjecting the territorial sea or archipelagic waters to necessary, if not marginal, burdens in the
interest of maintaining unimpeded, expeditious international navigation, consistent with the international
law principle of freedom of navigation. Thus, domestically, the political branches of the Philippine

Page 126 of 319

government, in the competent discharge of their constitutional powers, may pass legislation designating
routes within the archipelagic waters to regulate innocent and sea lanes passage. [40] Indeed, bills drawing
nautical

highways

for

sea

lanes

passage

are

now

pending

in

Congress. [41]

In the absence of municipal legislation, international law norms, now codified in UNCLOS III,
operate to grant innocent passage rights over the territorial sea or archipelagic waters, subject to the
treaty's limitations and conditions for their exercise. [42] Significantly, the right of innocent passage is a
customary international law,[43] thus automatically incorporated in the corpus of Philippine law.[44] No
modern State can validly invoke its sovereignty to absolutely forbid innocent passage that is exercised in
accordance with customary international law without risking retaliatory measures from the international
community.
The fact that for archipelagic States, their archipelagic waters are subject to both the right of
innocent passage and sea lanes passage [45] does not place them in lesser footing vis- -vis continental
coastal States which are subject, in their territorial sea, to the right of innocent passage and the right of
transit passage through international straits. The imposition of these passage rights through archipelagic
waters under UNCLOS III was a concession by archipelagic States, in exchange for their right to claim all
the waters landward of their baselines, regardless of their depth or distance from the coast, as
archipelagic waters subject to their territorial sovereignty. More importantly, the recognition of
archipelagic States' archipelago and the waters enclosed by their baselines as one cohesive entity
prevents the treatment of their islands as separate islands under UNCLOS III. [46] Separate islands generate
their own maritime zones, placing the waters between islands separated by more than 24 nautical miles
beyond the States' territorial sovereignty, subjecting these waters to the rights of other States under
UNCLOS III.

[47]

Petitioners' invocation of non-executory constitutional provisions in Article II (Declaration of

Principles and State Policies)[48] must also fail. Our present state of jurisprudence considers the provisions
in Article II as mere legislative guides, which, absent enabling legislation, "do not embody judicially
enforceable constitutional rights x x x."[49] Article II provisions serve as guides in formulating and
interpreting implementing legislation, as well as in interpreting executory provisions of the Constitution.
Although Oposa v. Factoran[50] treated the right to a healthful and balanced ecology under Section 16 of
Article II as an exception, the present petition lacks factual basis to substantiate the claimed constitutional
violation. The other provisions petitioners cite, relating to the protection of marine wealth (Article XII,
Section 2, paragraph 2[51]) and subsistence fishermen (Article XIII, Section 7 [52]), are not violated by RA
9522.
In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive economic
zone, reserving solely to the Philippines the exploitation of all living and non-living resources within such
zone. Such a maritime delineation binds the international community since the delineation is in strict
observance of UNCLOS III. If the maritime delineation is contrary to UNCLOS III, the international

Page 127 of 319

community

will

of

course

reject

it

and

will

refuse

to

be

bound

by

it.

UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a sui
generis maritime space - the exclusive economic zone - in waters previously part of the high seas.
UNCLOS III grants new rights to coastal States to exclusively exploit the resources found within this zone
up to 200 nautical miles.[53] UNCLOS III, however, preserves the traditional freedom of navigation of other
States

that

attached

to

this

zone

beyond

the

territorial

sea

before

UNCLOS

III.

RA 9522 and the Philippines Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not
bound to pass RA 9522.[54] We have looked at the relevant provision of UNCLOS III [55] and we find
petitioners' reading plausible. Nevertheless, the prerogative of choosing this option belongs to Congress,
not to this Court. Moreover, the luxury of choosing this option comes at a very steep price. Absent an
UNCLOS III compliant baselines law, an archipelagic State like the Philippines will find itself devoid of
internationally acceptable baselines from where the breadth of its maritime zones and continental shelf is
measured. This is recipe for a two-fronted disaster: first, it sends an open invitation to the seafaring
powers to freely enter and exploit the resources in the waters and submarine areas around our
archipelago; and second, it weakens the country's case in any international dispute over Philippine
maritime space. These are consequences Congress wisely avoided.
The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and adjacent
areas, as embodied in RA 9522, allows an internationally-recognized delimitation of the breadth of the
Philippines' maritime zones and continental shelf. RA 9522 is therefore a most vital step on the part of the
Philippines in safeguarding its maritime zones, consistent with the Constitution and our national interest.
WHEREFORE, we DISMISS the petition.
SO ORDERED.
Corona, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion,

Bersamin, Peralta,

Villarama, Jr., Del Castillo, Abad, Perez, Mendoza, and Sereno, JJ.
Endnotes:
[1]

Entitled "An Act to Amend Certain Provisions of Republic Act No. 3046, as Amended by Republic Act No.

5446,
[2]
[3]

to

Entitled

Define
"An

the
Act

Archipelagic
to

Define

Baselines
the

of

Baselines

the
of

Philippines,
the

Territorial

and
Sea

for

Other

of

the

Purposes."
Philippines."

The third "Whereas Clause" of RA 3046 expresses the import of treating the Philippines as an

archipelagic State:
"WHEREAS, all the waters around, between, and connecting the various islands of the Philippine
archipelago, irrespective of their width or dimensions, have always been considered as necessary
appurtenances of the land territory, forming part of the inland waters of the Philippines."

Page 128 of 319

[4]

One of the four conventions framed during the first United Nations Convention on the Law of the Sea in

Geneva,

this

treaty,

excluding

the

Philippines,

entered

into

force

on

10

September

1964.

UNCLOS III entered into force on 16 November 1994.

The Philippines signed the treaty on 10 December 1982.
[7]
Article 47, paragraphs 1-3, provide:
1. An archipelagic State may draw straight archipelagic baselines joining the outermost points of the
[5]
[6]

outermost islands and drying reefs of the archipelago provided that within such baselines are included the
main islands and an area in which the ratio of the area of the water to the area of the land, including
atolls, is between 1 to 1 and 9 to 1.
2. The length of such baselines shall not exceed 100 nautical miles, except that up to 3 per cent of the
total number of baselines enclosing any archipelago may exceed that length, up to a maximum length of
125 nautical miles.
3. The drawing of such baselines shall not depart to any appreciable extent from the general configuration
of the archipelago. (Empashis supplied).
xxxx
[8]

UNCLOS III entered into force on 16 November 1994. The deadline for the filing of application is

mandated in Article 4, Annex II: "Where a coastal State intends to establish, in accordance with article76,
the outer limits of its continental shelf beyond 200nautical miles, it shall submit particulars of such limits
to the Commission along with supporting scientific and technical data as soon as possible but in any case
within 10years of the entry into force of this Convention for that State. The coastal State shall at the same
time give the names of any Commission members who have provided it with scientific and technical
advice." (Underscoring supplied)
In a subsequent meeting, the States parties agreed that for States which became bound by the
treaty before 13 May 1999 (such as the Philippines) the ten-year period will be counted from that date.
Thus, RA 9522, which took effect on 27 March 2009, barely met the deadline.
[9]
Rollo, p. 34.
[10]
Which provides: "The national territory comprises the Philippine archipelago, with all the islands and
waters embraced therein, and all other territories over which the Philippines has sovereignty or
jurisdiction, consisting of its terrestrial, fluvial, and aerial domains, including its territorial sea, the seabed,
the subsoil, the insular shelves, and other submarine areas. The waters around, between, and connecting
the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters
of the Philippines.
[11]
Entered into between the Unites States and Spain on 10 December 1898 following the conclusion of the
Spanish-American War. Under the terms of the treaty, Spain ceded to the United States "the archipelago
known as the Philippine Islands lying within its technical description.
[12]
The Treaty of Washington, between Spain and the United States (7 November 1900), transferring to
the US the islands of Cagayan, Sulu, and Sibutu and the US-Great Britain Convention (2 January 1930)
demarcating boundary lines between the Philippines and North Borneo.
[13]
Article II, Section 7, Section 8, and Section 16.

Page 129 of 319

[14]

Allegedly in violation of Article XII, Section 2, paragraph 2 and Article XIII, Section 7 of the

Constitution.
[15]
[16]

Kilosbayan, Inc. V. Morato, 320 Phil. 171, 186 (1995).

Pascual v. Secretary of Public Works, 110 Phil. 331 (1960); Sanidad v. COMELEC, 165 Phil. 303

(1976).
[17]

Francisco, Jr. v. House of Representatives, 460 Phil. 830, 899 (2003) citing Kilosbayan, Inc. v.

Guingona, Jr., G.R. No. 113375, 5 May 1994, 232 SCRA 110, 155-156 (1995) (Feliciano, J., concurring).
The two other factors are: "the character of funds or assets involved in the controversy and a clear
disregard of constitutional or statutory prohibition. Id.
[18]
Rollo, pp. 144-147.
[19]
See e.g. Aquino III v. COMELEC, G.R. No. 189793, 7 April 2010, 617 SCRA 623 (dismissing a petition
for certiorari and prohibition assailing the constitutionality of Republic Act No. 9716, not for the
impropriety of remedy but for lack of merit); Aldaba v. COMELEC, G.R. No. 188078, 25 January 2010, 611
SCRA 137 (issuing the writ of prohibition to declare unconstitutional Republic Act No. 9591); Macalintal v.
COMELEC, 453 Phil. 586 (2003) (issuing the writs of certiorari and prohibition declaring unconstitutional
portions of Republci Act No. 9189).
[20]
See e.g. Neri v. Senate Committee on Accountability of Public Officers and Investigations, G.R. No.
180643, 25 March 2008, 549 SCRA 77 (granting a writ of certiorari against the Philippine Senate and
nullifying the Senate contempt order issued against petitioner).
[21]
Rollo, p. 31.
[22]
Respondents state in their Comment that petitioners' theory "has not been accepted or recognized by
either the United States or Spain," the parties to the Treaty of Paris. Respondents add that "no State is
known to have supported this proposition. Rollo, p. 179.
[23]
UNCLOS III belongs to that larger corpus of international law of the sea, which petitioner Magallona
himself defined as "a body of treaty rules and customary norms governing the uses of the sea, the
exploitation of its resources, and the exercise of jurisdiction over maritime regimes. x x x x" (Merlin M.
Magallona, Primer on the Law of the Sea 1 [1997]) (Italization supplied).
[24]
Following Article 47 (1) of UNCLOS III which provides:
An archipelagic State may draw straight archipelagic baselines joining the outermost points of the
outermost islands and drying reefs of the archipelago provided that within such baselines are
included the main islands and an area in which the ratio of the area of the water to the area of the land,
including atolls, is between 1 to 1 and 9 to 1. (Emphasis supplied)
[25]
Under the United Nations Charter, use of force is no longer a valid means of acquiring territory.
[26]

The last paragraph of the preamble of UNCLOS III states that "matters not regulated by this

Convention continue to be governed by the rules and principles of general international law."
Rollo, p. 51.
Id. At 51-52, 64-66.
[29]
Based on figures respondents submitted in their Comment (id. At 182).
[30]
Under Article 74.
[31]
See note 7.
[32]
Presidential Decree No. 1596 classifies the KIG as a municipality of Palawan.
[33]
KIG lies around 80 nautical miles west of Palawan while Scarborough Shoal is around 123 nautical west
[27]
[28]

of Zambales.
[34]
Journal, Senate 14th Congress 44th Session 1416 (27 January 2009).
[35]
Rollo, p. 159.

Page 130 of 319

Section 2, RA 9522.
Article 121 provides: "Regime of islands. -1. An island is a naturally formed area of land, surrounded by water, which is above water at high tide.
[36]

[37]

2. Except as provided for in paragraph 3, the territorial sea, the contiguous zone, the exclusive economic
zone and the continental shelf of an island are determined in accordance with the provisions of this
Convention applicable to other land territory.
3. Rocks which cannot sustain human habitation or economic life of their own shall have no exclusive
economic zone or continental shelf."
[38]
Rollo, pp. 56-57, 60-64.
[39]
Paragraph 2, Section 2, Article XII of the Constitution uses the term "archipelagic waters" separately
from "territorial sea." Under UNCLOS III, an archipelagic State may have internal waters - such as those
enclosed by closing lines across bays and mouths of rivers. See Article 50, UNCLOS III. Moreover, Article 8
(2) of UNCLOS III provides: "Where the establishment of a straight baseline in accordance with the
method set forth in article 7 has the effect of enclosing as internal waters areas which had not
previously been considered as such, a right of innocent passage as provided in this Convention shall exist
in those waters. (Emphasis supplied)
[40]
Mandated under Articles 52 and 53 of UNCLOS III:
Article 52. Right of innocent passage. -1. Subject to article 53 and without prejudice to article 50, ships of all States enjoy the right of
innocent

passage

through

archipelagic

waters,

in

accordance

with

Part

II,

section

3.

2. The archipelagic State may, without discrimination in form or in fact among foreign ships, suspend
temporarily in specified areas of its archipelagic waters the innocent passage of foreign ships if such
suspension is essential for the protection of its security. Such suspension shall take effect only after having
been duly published. (Emphasis supplied)
Article 53. Right of archipelagic sea lanes passage. -1. An archipelagic State may designate sea lanes and air routes thereabove, suitable for the continuous
and expeditious passage of foreign ships and aircraft through or over its archipelagic waters and the
adjacent territorial sea.
2. All ships and aircraft enjoy the right of archipelagic sea lanes passage in such sea lanes and
air routes.
3. Archipelagic sea lanes passage means the exercise in accordance with this Convention of the rights of
navigation and overflight in the normal mode solely for the purpose of continuous, expeditious and
unobstructed transit between one part of the high seas or an exclusive economic zone and another part of
the high seas or an exclusive economic zone.
4. Such sea lanes and air routes shall traverse the archipelagic waters and the adjacent territorial sea and
shall include all normal passage routes used as routes for international navigation or overflight through or
over archipelagic waters and, within such routes, so far as ships are concerned, all normal navigational
channels, provided that duplication of routes of similar convenience between the same entry and exit
points shall not be necessary.
5. Such sea lanes and air routes shall be defined by a series of continuous axis lines from the entry points
of passage routes to the exit points. Ships and aircraft in archipelagic sea lanes passage shall not deviate
more than 25 nautical miles to either side of such axis lines during passage, provided that such ships and
aircraft shall not navigate closer to the coasts than 10 per cent of the distance between the nearest points
on islands bordering the sea lane.

Page 131 of 319

6. An archipelagic State which designates sea lanes under this article may also prescribe traffic separation
schemes for the safe passage of ships through narrow channels in such sea lanes.
7. An archipelagic State may, when circumstances require, after giving due publicity thereto, substitute
other sea lanes or traffic separation schemes for any sea lanes or traffic separation schemes previously
designated or prescribed by it.
8. Such sea lanes and traffic separation schemes shall conform to generally accepted international
regulations.
9. In designating or substituting sea lanes or prescribing or substituting traffic separation schemes, an
archipelagic State shall refer proposals to the competent international organization with a view to their
adoption. The organization may adopt only such sea lanes and traffic separation schemes as may be
agreed with the archipelagic State, after which the archipelagic State may designate, prescribe or
substitute them.
10. The archipelagic State shall clearly indicate the axis of the sea lanes and the traffic separation
schemes

designated

or

prescribed

by

it

on

charts

to

which

due

publicity

shall

be

given.

11. Ships in archipelagic sea lanes passage shall respect applicable sea lanes and traffic separation
schemes established in accordance with this article.
12. If an archipelagic State does not designate sea lanes or air routes, the right of archipelagic sea lanes
passage may be exercised through the routes normally used for international navigation. (Emphasis
supplied)
[41]
Namely, House Bill No. 4153 and Senate Bill No. 2738, identically titled "AN ACT TO ESTABLISH THE
ARCHIPELAGIC SEA LANES IN THE PHILIPPINE ARCHIPELAGIC WATERS, PRESCRIBING THE RIGHTS AND
OBLIGATIONS OF FOREIGN SHIPS AND AIRCRAFTS EXERCISING THE RIGHT OF ARCHIPELAGIC SEA
LANES PASSAGE THROUGH THE ESTABLISHED ARCHIPELAGIC SEA LANES AND PROVIDING FOR THE
ASSOCIATED PROTECTIVE MEASURES THEREIN.
[42]
The relevant provision of UNCLOS III provides:
Article 17. Right of innocent passage. -Subject to this Convention, ships of all States, whether coastal or land-locked, enjoy the right of
innocent passage through the territorial sea. (Emphasis supplied)
Article 19. Meaning of innocent passage. -1. Passage is innocent so long as it is not prejudicial to the peace, good order or security of the coastal
State. Such passage shall take place in conformity with this Convention and with other rules of
international law.
2. Passage of a foreign ship shall be considered to be prejudicial to the peace, good order or security of
the coastal State if in the territorial sea it engages in any of the following activities:
(a) any threat or use of force against the sovereignty, territorial integrity or political independence of the
coastal State, or in any other manner in violation of the principles of international law embodied in the
Charter of the United Nations;
(b) any exercise or practice with weapons of any kind;
(c) any act aimed at collecting information to the prejudice of the defence or security of the coastal State;
(d) any act of propaganda aimed at affecting the defense or security of the coastal State;
(e) the launching, landing or taking on board of any aircraft;
(f) the launching, landing or taking on board of any military device;
(g) the loading or unloading of any commodity, currency or person contrary to the customs, fiscal,
immigration or sanitary laws and regulations of the coastal State;

Page 132 of 319

(h) any act of willful and serious pollution contrary to this Convention;
(i) any fishing activities;
(j) the carrying out of research or survey activities;
(k) any act aimed at interfering with any systems of communication or any other facilities or installations
of the coastal State;
(l) any other activity not having a direct bearing on passage
Article 21. Laws and regulations of the coastal State relating to innocent passage. -1. The coastal State may adopt laws and regulations, in conformity with the provisions of this Convention
and other rules of international law, relating to innocent passage through the territorial sea, in respect of
all or any of the following:
(a) the safety of navigation and the regulation of maritime traffic;
(b) the protection of navigational aids and facilities and other facilities or installations;
(c) the protection of cables and pipelines;
(d) the conservation of the living resources of the sea;
(e) the prevention of infringement of the fisheries laws and regulations of the coastal State;
(f) the preservation of the environment of the coastal State and the prevention, reduction and control of
pollution thereof;
(g) marine scientific research and hydrographic surveys;
(h) the prevention of infringement of the customs, fiscal, immigration or sanitary laws and regulations of
the coastal State.
2. Such laws and regulations shall not apply to the design, construction, manning or equipment of foreign
ships

unless

they

are

giving

effect

to

generally

accepted

international

rules

or

standards.

3. The coastal State shall give due publicity to all such laws and regulations.
4. Foreign ships exercising the right of innocent passage through the territorial sea shall comply with all
such laws and regulations and all generally accepted international regulations relating to the prevention of
collisions at sea.
[43]

The right of innocent passage through the territorial sea applies only to ships and not to aircrafts

(Article 17, UNCLOS III). The right of innocent passage of aircrafts through the sovereign territory of a
State arises only under an international agreement. In contrast, the right of innocent passage through
archipelagic
[44]

waters

applies

to

both

ships

and

aircrafts

(Article

53

(12),

UNCLOS

III).

Following Section 2, Article II of the Constitution: "Section 2. The Philippines renounces war as an

instrument of national policy, adopts the generally accepted principles of international law as part
of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and
amity with all nations. (Emphasis supplied)
[45]
"Archipelagic sea lanes passage is essentially the same as transit passage through straits" to which the
territorial sea of continental coastal State is subject. R.R. Churabill and A.V. Lowe, The Law of the Sea 127
(1999).
Falling under Article 121 of UNCLOS III (see note 37).
Within the exclusive economic zone, other States enjoy the following rights under UNCLOS III:
Article 58. Rights and duties of other States in the exclusive economic zone. -1. In the exclusive economic zone, all States, whether coastal or land-locked, enjoy, subject to the
[46]
[47]

relevant provisions of this Convention, the freedoms referred to in article 87 of navigation and overflight
and of the laying of submarine cables and pipelines, and other internationally lawful uses of the sea

Page 133 of 319

related to these freedoms, such as those associated with the operation of ships, aircraft and submarine
cables

and

pipelines,

and

compatible

with

the

other

provisions

of

this

Convention.

2. Articles 88 to 115 and other pertinent rules of international law apply to the exclusive economic zone in
so far as they are not incompatible with this Part.
xxxx
Beyond the exclusive economic zone, other States enjoy the freedom of the high seas, defined under
UNCLOS III as follows:
Article 87. Freedom of the high sees. -1. The high seas are open to all States, whether coastal or land-locked. Freedom of the high seas is
exercised under the conditions laid down by this Convention and by other rules of international law. It
comprises, inter alia, both for coastal and land-locked States:
(a) freedom of navigation;
(b) freedom of overflight;
(c) freedom to lay submarine cables and pipelines, subject to Part VI;
(d) freedom to construct artificial islands and other installations permitted under international law, subject
to Part VI;
(e) freedom of fishing, subject to the conditions laid down in section 2;
(f) freedom of scientific research, subject to Parts VI and XIII.
2. These freedoms shall be exercised by all States with due regard for the interests of other States in their
exercise of the freedom of the high seas, and also with due regard for the rights under this Convention
with respect to activities in the Area.
[48]
[49]

See note 13.

Kilosbayan, Inc. v. Morato, 316 Phil. 652, 698 (1995); Taada v. Angara, 338 Phil. 546, 580-581

(1997).
[50]
[51]

G.R. No. 101083, 30 July 1993, 224 SCRA 792.

"The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and

exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens."
[52]

"The State shall protect the rights of subsistence fishermen, especially of local communities, to the

preferential use of the communal marine and fishing resources, both inland and offshore. It shall provide
support to such fishermen through appropriate technology and research, adequate financial, production,
and marketing assistance, and other services. The State shall also protect, develop, and conserve such
resources. The protection shall extend to offshore fishing grounds of subsistence fishermen against foreign
intrusion. Fishworkers shall receive a just share from their labor in the utilization of marine and fishing
resources."
[53]

This can extend up to 350 nautical miles if the coastal State proves its right to claim an extended

continental shelf (see UNCLOS III, Article 76, paragraphs 4(a), 5 and 6, in relation to Article 77).
[54]
[55]

Rollo, pp. 67-69.

Article 47 (1) provides: "An archipelagic State may draw straight archipelagic baselines joining the

outermost points of the outermost islands and drying reefs of the archipelago provided that within such

Page 134 of 319

baselines are included the main islands and an area in which the ratio of the area of the water to the area
of the land, including atolls, is between 1 to 1 and 9 to 1. (Emphasis supplied)

2. Reagan v. Commissioner of Internal Revenue, 30 SCRA 968 (1969)

EN BANC
G.R. No. L-26379

December 27, 1969

WILLIAM C. REAGAN, ETC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

Quasha,

Asperilla,

Blanco,

Zafra

and

Tayag

for

petitioner.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete, Solicitor
Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for respondent.
-->
FERNANDO, J.:
A question novel in character, the answer to which has far-reaching implications, is raised by petitioner
William C. Reagan, at one time a civilian employee of an American corporation providing technical
assistance to the United States Air Force in the Philippines. He would dispute the payment of the income
tax assessed on him by respondent Commissioner of Internal Revenue on an amount realized by him on a
sale of his automobile to a member of the United States Marine Corps, the transaction having taken place
at the Clark Field Air Base at Pampanga. It is his contention, seriously and earnestly expressed, that in
legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional
power to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he would justify by
invoking, mistakenly as will hereafter be more fully shown an observation to that effect in a 1951 opinion,
1

petitioner ignoring that such utterance was made purely as a flourish of rhetoric and by way of

emphasizing the decision reached, that the trading firm as purchaser of army goods must respond for the
sales taxes due from an importer, as the American armed forces being exempt could not be taxed as such
under the National Internal Revenue Code.2 Such an assumption, inspired by the commendable aim to
render unavailing any attempt at tax evasion on the part of such vendee, found expression anew in a 1962
decision,3 coupled with the reminder however, to render the truth unmistakable, that "the areas covered
by the United States Military Bases are not foreign territories both in the political and geographical sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is moreover obiter.
It certainly cannot control the resolution of the specific question that confronts us. We declare our stand in

Page 135 of 319

an unequivocal manner. The sale having taken place on what indisputably is Philippine territory,
petitioner's liability for the income tax due as a result thereof was unavoidable. As the Court of Tax
Appeals reached a similar conclusion, we sustain its decision now before us on appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of the case, started the
recital of facts thus: "It appears that petitioner, a citizen of the United States and an employee of Bendix
Radio, Division of Bendix Aviation Corporation, which provides technical assistance to the United States Air
Force, was assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... . Nine (9) months
thereafter and before his tour of duty expired, petitioner imported on April 22, 1960 a tax-free 1960
Cadillac car with accessories valued at $6,443.83, including freight, insurance and other charges." 4 Then
came the following: "On July 11, 1960, more than two (2) months after the 1960 Cadillac car was
imported into the Philippines, petitioner requested the Base Commander, Clark Air Base, for a permit to
sell the car, which was granted provided that the sale was made to a member of the United States Armed
Forces or a citizen of the United States employed in the U.S. military bases in the Philippines. On the same
date, July 11, 1960, petitioner sold his car for $6,600.00 to a certain Willie Johnson, Jr. (Private first
class), United States Marine Corps, Sangley Point, Cavite, Philippines, as shown by a Bill of Sale . . .
executed at Clark Air Base. On the same date, Pfc. Willie (William) Johnson, Jr. sold the car to Fred
Meneses for P32,000.00 as evidenced by a deed of sale executed in Manila." 5
As a result of the transaction thus made, respondent Commissioner of Internal Revenue, after deducting
the landed cost of the car as well as the personal exemption to which petitioner was entitled, fixed as his
net taxable income arising from such transaction the amount of P17,912.34, rendering him liable for
income tax in the sum of P2,979.00. After paying the sum, he sought a refund from respondent claiming
that he was exempt, but pending action on his request for refund, he filed the case with the Court of Tax
Appeals seeking recovery of the sum of P2,979.00 plus the legal rate of interest.
As noted in the appealed decision: "The only issue submitted for our resolution is whether or not the said
income tax of P2,979.00 was legally collected by respondent for petitioner." 6 After discussing the legal
issues raised, primarily the contention that the Clark Air Base "in legal contemplation, is a base outside
the Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax Appeals found
nothing objectionable in the assessment and thereafter the payment of P2,979.00 as income tax and
denied the refund on the same. Hence, this appeal predicated on a legal theory we cannot accept.
Petitioner cannot make out a case for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective, petitioner apparently
feeling justified in his refusal to defer to basic postulates of constitutional and international law, induced
no doubt by the weight he would accord to the observation made by this Court in the two opinions earlier
referred to. To repeat, scant comfort, if at all is to be derived from such an obiter dictum, one which is
likewise far from reflecting the fact as it is.

Page 136 of 319

Nothing is better settled than that the Philippines being independent and sovereign, its authority may be
exercised over its entire domain. There is no portion thereof that is beyond its power. Within its limits, its
decrees are supreme, its commands paramount. Its laws govern therein, and everyone to whom it applies
must submit to its terms. That is the extent of its jurisdiction, both territorial and personal. Necessarily,
likewise, it has to be exclusive. If it were not thus, there is a diminution of its sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to a restriction of its
sovereign rights. There may thus be a curtailment of what otherwise is a power plenary in character. That
is the concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is the
property of a state-force due to which it has the exclusive capacity of legal self-determination and selfrestriction."7 A state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable
competence.
Its laws may as to some persons found within its territory no longer control. Nor does the matter end
there. It is not precluded from allowing another power to participate in the exercise of jurisdictional right
over certain portions of its territory. If it does so, it by no means follows that such areas become
impressed with an alien character. They retain their status as native soil. They are still subject to its
authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under lease
to the American armed forces by virtue of the military bases agreement of 1947. They are not and cannot
be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to that effect with
impressive unanimity. We start with the citation from Chief Justice Marshall, announced in the leading case
of Schooner Exchange v. M'Faddon,8 an 1812 decision: "The jurisdiction of the nation within its own
territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any
restriction upon it, deriving validity from an external source, would imply a diminution of its sovereignty to
the extent of the restriction, and an investment of that sovereignty to the same extent in that power
which could impose such restriction." After which came this paragraph: "All exceptions, therefore, to the
full and complete power of a nation within its own territories, must be traced up to the consent of the
nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision, 9 affirmed the fundamental principle of everyone within the
territorial domain of a state being subject to its commands: "For undoubtedly every person who is found
within the limits of a government, whether the temporary purposes or as a resident, is bound by its laws."
It is no exaggeration then for Justice Brewer to stress that the United States government "is one having
jurisdiction over every foot of soil within its territory, and acting directly upon each [individual found
therein]; . . ."10
Not too long ago, there was a reiteration of such a view, this time from the pen of Justice Van Devanter.
Thus: "It now is settled in the United States and recognized elsewhere that the territory subject to its

Page 137 of 319

jurisdiction includes the land areas under its dominion and control the ports, harbors, bays, and other in
closed arms of the sea along its coast, and a marginal belt of the sea extending from the coast line
outward a marine league, or 3 geographic miles."11 He could cite moreover, in addition to many American
decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson, Westlake, Wheaton and
Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on International Law, as
interpreted and applied by the United States, made clear that not even the embassy premises of a foreign
power are to be considered outside the territorial domain of the host state. Thus: "The ground occupied by
an embassy is not in fact the territory of the foreign State to which the premises belong through
possession or ownership. The lawfulness or unlawfulness of acts there committed is determined by the
territorial sovereign. If an attache commits an offense within the precincts of an embassy, his immunity
from prosecution is not because he has not violated the local law, but rather for the reason that the
individual is exempt from prosecution. If a person not so exempt, or whose immunity is waived, similarly
commits a crime therein, the territorial sovereign, if it secures custody of the offender, may subject him to
prosecution, even though its criminal code normally does not contemplate the punishment of one who
commits an offense outside of the national domain. It is not believed, therefore, that an ambassador
himself possesses the right to exercise jurisdiction, contrary to the will of the State of his sojourn, even
within his embassy with respect to acts there committed. Nor is there apparent at the present time any
tendency on the part of States to acquiesce in his exercise of it." 12
2. In the light of the above, the first and crucial error imputed to the Court of Tax Appeals to the effect
that it should have held that the Clark Air Force is foreign soil or territory for purposes of income tax
legislation is clearly without support in law. As thus correctly viewed, petitioner's hope for the reversal of
the decision completely fades away. There is nothing in the Military Bases Agreement that lends support to
such an assertion. It has not become foreign soil or territory. This country's jurisdictional rights therein,
certainly not excluding the power to tax, have been preserved. As to certain tax matters, an appropriate
exemption was provided for.
Petitioner could not have been unaware that to maintain the contrary would be to defy reality and would
be an affront to the law. While his first assigned error is thus worded, he would seek to impart plausibility
to his claim by the ostensible invocation of the exemption clause in the Agreement by virtue of which a
"national of the United States serving in or employed in the Philippines in connection with the
construction, maintenance, operation or defense of the bases and residing in the Philippines only by
reason of such employment" is not to be taxed on his income unless "derived from Philippine source or
sources other than the United States sources." 13 The reliance, to repeat, is more apparent than real for as
noted at the outset of this opinion, petitioner places more faith not on the language of the provision on
exemption but on a sentiment given expression in a 1951 opinion of this Court, which would be made to
yield such an unwarranted interpretation at war with the controlling constitutional and international law

Page 138 of 319

principles. At any rate, even if such a contention were more adequately pressed and insisted upon, it is on
its face devoid of merit as the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court affirmed a decision
rendered about seven months previously,15 holding liable as an importer, within the contemplation of the
National Internal Revenue Code provision, the trading firm that purchased army goods from a United
States government agency in the Philippines. It is easily understandable why. If it were not thus, tax
evasion would have been facilitated. The United States forces that brought in such equipment later
disposed of as surplus, when no longer needed for military purposes, was beyond the reach of our tax
statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting extensively from the earlier
opinion. He could have stopped there. He chose not to do so. The transaction having occurred in 1946, not
so long after the liberation of the Philippines, he proceeded to discuss the role of the American military
contingent in the Philippines as a belligerent occupant. In the course of such a dissertion, drawing on his
well-known gift for rhetoric and cognizant that he was making an as if statement, he did say: "While in
army bases or installations within the Philippines those goods were in contemplation of law on foreign
soil."
It is thus evident that the first, and thereafter the controlling, decision as to the liability for sales taxes as
an importer by the purchaser, could have been reached without any need for such expression as that
given utterance by Justice Tuason. Its value then as an authoritative doctrine cannot be as much as
petitioner would mistakenly attach to it. It was clearly obiter not being necessary for the resolution of the
issue before this Court.16 It was an opinion "uttered by the way." 17 It could not then be controlling on the
question before us now, the liability of the petitioner for income tax which, as announced at the opening of
this opinion, is squarely raised for the first time.18
On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a maxim, not to be
disregarded, that general expressions, in every opinion, are to be taken in connection with the case in
which those expressions are used. If they go beyond the case, they may be respected, but ought not to
control the judgment in a subsequent suit when the very point is presented for decision." 19
Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of Internal
Revenue,20 a 1962 decision relied upon by petitioner, put a different complexion on the matter. Again, it
was by way of pure embellishment, there being no need to repeat it, to reach the conclusion that it was
the purchaser of army goods, this time from military bases, that must respond for the advance sales taxes
as importer. Again, the purpose that animated the reiteration of such a view was clearly to emphasize that
through the employment of such a fiction, tax evasion is precluded. What is more, how far divorced from
the truth was such statement was emphasized by Justice Barrera, who penned the Co Po opinion, thus: "It

Page 139 of 319

is true that the areas covered by the United States Military Bases are not foreign territories both in the
political and geographical sense."21
Justice Tuason moreover made explicit that rather than corresponding with reality, what was said by him
was in the way of a legal fiction. Note his stress on "in contemplation of law." To lend further support to a
conclusion already announced, being at that a confirmation of what had been arrived at in the earlier case,
distinguished by its sound appreciation of the issue then before this Court and to preclude any tax
evasion, an observation certainly not to be taken literally was thus given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be utilized again, as it
undoubtedly was, especially so for the purpose intended, namely to stigmatize as without support in law
any attempt on the part of a taxpayer to escape an obligation incumbent upon him. So it was quoted with
that end in view in the Co Po case. It certainly does not justify any effort to render futile the collection of a
tax legally due, as here. That was farthest from the thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to discount the uses of a
fictio juris in the science of the law. It was Cardozo who pointed out its value as a device "to advance the
ends of justice" although at times it could be "clumsy" and even "offensive". 22 Certainly, then, while far
from objectionable as thus enunciated, this observation of Justice Tuason could be misused or
misconstrued in a clumsy manner to reach an offensive result. To repeat, properly used, a legal fiction
could be relied upon by the law, as Frankfurter noted, in the pursuit of legitimate ends. 23 Petitioner then
would be well-advised to take to heart such counsel of care and circumspection before invoking not a legal
fiction that would avoid a mockery of the law by avoiding tax evasion but what clearly is a
misinterpretation thereof, leading to results that would have shocked its originator.
The conclusion is thus irresistible that the crucial error assigned, the only one that calls for discussion to
the effect that for income tax purposes the Clark Air Force Base is outside Philippine territory, is utterly
without merit. So we have said earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner would fasten on it is, to
paraphrase Frankfurter, to be guilty of succumbing to the vice of literalness. To so conclude is, whether by
design or inadvertence, to misread it. It certainly is not susceptible of the mischievous consequences now
sought to be fastened on it by petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on the military bases under
lease to the American armed forces could not have been within the contemplation of Justice Tuason. To so
attribute such a bizarre consequence is to be guilty of a grave disservice to the memory of a great jurist.
For his real and genuine sentiment on the matter in consonance with the imperative mandate of
controlling constitutional and international law concepts was categorically set forth by him, not as an
obiter but as the rationale of the decision, in People v. Acierto24 thus: "By the [Military Bases] Agreement,

Page 140 of 319

it should be noted, the Philippine Government merely consents that the United States exercise jurisdiction
in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency over the
bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses
committed therein."
Nor did he stop there. He did stress further the full extent of our territorial jurisdiction in words that do not
admit of doubt. Thus: "This provision is not and can not on principle or authority be construed as a
limitation upon the rights of the Philippine Government. If anything, it is an emphatic recognition and
reaffirmation of Philippine sovereignty over the bases and of the truth that all jurisdictional rights granted
to the United States and not exercised by the latter are reserved by the Philippines for itself." 25
It is in the same spirit that we approach the specific question confronting us in this litigation. We hold, as
announced at the outset, that petitioner was liable for the income tax arising from a sale of his automobile
in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our territorial
jurisdiction to tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is nothing that stands in the
way of an affirmance of the Court of Tax Appeals decision. No useful purpose would be served by
discussing the other assigned errors, petitioner himself being fully aware that if the Clark Air Force Base is
to be considered, as it ought to be and as it is, Philippine soil or territory, his claim for exemption from the
income tax due was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for reversal. We
thus manifest fealty to a pronouncement made time and time again that the law does not look with favor
on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to
be mistaken and too categorical to be misinterpreted. 26 Petitioner had not done so. Petitioner cannot do
so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of P2,979.00 as
the income tax paid by petitioner is affirmed. With costs against petitioner. Concepcion, C.J., Dizon,
Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., Reyes, J.B.L., J., concurs in the result
Barredo, J., took no part.

Endnotes:
Saura Import and Export Co. v. Meer, 88 Phil. 199, 202 affirming Go Cheng Tee v. Meer, 87 Phil. 18
(1950).
2
Sec. 186, National Internal Revenue Code.
1

Page 141 of 319

Co Po v. Collector of Internal Revenue, 5 SCRA 1057.
Decision, Annex 4, Brief for Petitioner-Appellant, pp. 20-21.
5
Ibid., p. 21.
6
Ibid., p. 23.
7
Jellinek as quoted in Cohen, Recent Theories of Sovereignty, p. 35 (1937).
8
7 Cranch 116, 136.
9
Brown v. Duchesne, 19 How. 183, 194.
10
In re Debs. 158 US 564 (1894).
11
Cunard Steamship Co. v. Mellon, 262 US 100 (1922).
12
2 Hyde, International Law Chiefly as Interpreted and Applied by the United States, pp. 1285-1286
(1947).
3
4

13

Act XII of the Military Bases Agreement, par. 2, reads: "No national of the United States serving in or

employed in the Philippines in connection with the construction, maintenance, operation or defense of the
bases and residing in the Philippines by reason only of such employment, or his spouse and minor children
and dependent parents of either spouse, shall be liable to pay income tax in the Philippines except in
respect of income derived from Philippine source or sources other than the United States sources." (1
Philippine Treaty Series, 357, 362 [1968]).
88 Phil. 199 (1951).
Go Cheng Tee v. Meer, 87 Phil. 18 (1950).
16
Uy Po v. Collector of Customs, 34 Phil. 153 (1916); Morales v. Paredes, 55 Phil. 565 (1930); Abad v.
Carganillo Vda. de Yance, 95 Phil. 51 (1954).
17
People v. Macadaeg, 91 Phil. 410 (1952).
18
Cf. de los Reyes v. de Villa, 48 Phil. 227 (1925).
14
15

19

6 Wheat, 264, 399 (1821) reiterated in Myers v. United States, 272 US 52, (1926). Cf. Northern Nat.

Bank. v. Porter Township, 110 US 608 (1884); Weyerhaeuser v. Hoyt, 219 US 380 (1911); Osaka Shosen
Kaisha Line v. United States, 300 US 98; Wright v. United States, 302 US 583 (1938); Green v. United
States, 355 US 184 (1957).
20
21
22
23
24
25

26

25 SCRA 1057.
Ibid., p. 1059.
Cardozo, The Paradoxes of Legal Science, 34 (1928).
Nashville C. St. Louis Ry v. Browning, 310 US 362 (1940).
92 Phil. 534, 542 (1953).
Ibid., p. 534.
Cf. Commissioner of Internal Revenue v. Guerrero, 21 SCRA 180 (1967) and the cases therein cited.

See also E. Rodriguez, Inc. v. Collector of Internal Revenue, 28 SCRA 1119 (1969).

3. Bacani v. National Coconut Corporation (NACOCO), 100 Phil. 468 (1956)

[ G.R. No. L-9657, November 29, 1956 ]
LEOPOLDO T. BACANI AND MATEO A. MATOTO, PLAINTIFFS AND APPELLEES, VS. NATIONAL
COCONUT CORPORATION, ET AL., DEFENDANTS, NATIONAL COCONUT CORPORATION AND

Page 142 of 319

BOARD OF LIQUIDATORS, DEFENDANTS-APPELLANTS.
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila.
During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut
Corporation, Assistant Corporate Counsel Federico Alikpala, counsel for defendant, requested said
stenographers for copies of the transcript of the stenographic notes taken by them duririg the hearing.
Plaintiffs complied with the request by delivering to Counsel Alikpala the needed transcript containing 714
pages and thereafter submitted to him their bills for the payment of their fees. The National Coconut
Corporation paid the amount of P564 to Leopoldo T. Baeani and P150 to Mateo A. Matoto for said
transcript at the rate of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees
and sought the recovery of the amounts paid.

On January 19, 1953, the Auditor General required the

plaintiffs to reimburse said amounts on the strength of a circular of the Department of Justice wherein the
opinion was expressed that the National Coconut Corporation, being a government entity, was exempt
from the payment of the fees in question. On February 6, 1954, the Auditor General issued an order
directing the Cashier of the Department of Justice to deduct from the salary of Leopold T. Bacani the
amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every payday
beginning March 30, 1954. To prevent deduction of these fees from1 their salaries and secure a judicial
ruling that the National Coconut Corporation is not a government entity within the purview of section 16,
Rule 130 of the Rules of Court, this action was instituted in the Court of First Instance of Manila.
Defendants set up as a defense that the National Coconut Corporation is a government entity within the
purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the
stenographers' fees under Rule 130 of. the Rules of Court. After trial, the court found for the plaintiffs
declaring (1) "that defendant National Coconut Corporation is not a government entity within the purview
of section 16, Rule 130 of the. Rules of Court; (2) that the payments already made by said defendant to
plaintiffs herein and received by the latter from the former in the total amount of P714, for copies of the
stenographic transcripts in question, are valid, just and legal; and (3) that plaintiffs are under no
obligation whatsoever to make a refund of these payments already received by them." This is an appeal
from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying
the legal fees provided for therein, and among these fees are those which stenographers may charge for
the transcript of notes taken by them that may be requested by any interested person (section 8). The
fees in question are for the transcript of notes taken during the hearing of a ease in which the National
Coconut Corporation is interested, and the transcript was requested by its assistant corporate counsel for
the use of said corporation.

Page 143 of 319

On the other hand, section 2 of the Revised Administrative Code defines the scope of the term
"Government of the Republic of the Philippines" as follows:
" 'The Government of the Philippine Islands' is a term which refers to the corporate governmental entity
through which the functions of government are exercised throughout the Philippine Islands, including,
save as the contrary appears from the context, the various arras through which political authority is made
effective in said Islands, whether pertaining to the central Government or to the provincial or. municipal
branches or other form of local government."
The question now to be determined is whether the National Coconut Corporation may be considered as
included in the term "Government of the Republic of the Philippines" for the purposes of the exemption of
the legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term "Government of the Republic of the Philippines" refers to a government entity
through which the functions of government are exercised, including the various arms through which
political authority is made effective in the Philippines, whether pertaining to the central government or to
the provincial or municipal branches or other form of local government. This requires a little digression on
the nature and functions of our government as instituted in our Constitution.
To begin with, we state that the term "Government" may be defined as "that institution or aggregate of
institutions by which an independent society makes and carries out those rules of action which are
necessary to enable men to live in a social state, or which are imposed upon the people forming that
society by those who possess the power or authority of prescribing them" (U.S. vs. Dorr, 2 Phil., 332).
This institution, when referring to the national government, has reference to what our Constitution has
established composed of three great departments, the legislative, executive, and the judicial, through
which the powers and functions of government are exercised. These functions are twofold: constitute and
ministrant. The former are those which constitute the very bonds of society and are compulsory in nature;
the latter are those that are undertaken only by way of advancing the general interests of society, and are
merely optional. President Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and property from violence and
robbery.
'(2) The fixing of the legal relations between man and wife and between parents and children.
'(3) The regulation of the holding, transmission, and interchange of property, and the determination of its
liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.

Page 144 of 319

'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations of citizens.
'(8) Dealings of the state with foreign powers: the preservation of the state from external danger or
encroachment and the advancement of its international interests.'" (Malcolm, The Government of the
Philippine Islands, p. 19.)
The most important of the ministrant functions are: public works, public education, public charity, health
and safety regulations, and regulations of trade and industry. The principles determining whether or not a
government shall exercise certain o these optional functions are: (1) that a government should do for the
public welfare those things which private capital would not naturally undertake and (2) that a government
should do these things which by its very nature it is better equipped to administer for the public welfare
than is any private individual or group of individuals. (Malcom, The Government of the Philippine Islands,
pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our government is required
to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an
attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and
prosperity of the people. To this latter class belongs the organization of those corporations owned or
controlled by the government to promote certain aspects of the economic life of our people such as the
National Coconut Corporation. These are what we call government-owned or controlled corporations which
may take on the form of a private enterprise or one organized with powers and formal characteristics of a
private corporations under the Corporation Law.
The question that now arises is: Does the fact that these corporation perform certain functions of
government make them a part of the Government of the Philippines? The answer is simple: they do not
acquire that status for the simple reason that they do not come under the classification of municipal or
public corporation.

Take for instance the National Coconut Corporation.

While it was organized with

the purpose of "adjusting the coconut industry to a position independent of trade preferences in the
United States" and of providing "Facilities for
utilization of coconut by products",

the better curing of copra products

and the proper

a function which our government has chosen to exercise to promote

the coconut industry, however, it was given a corporate power separate and distinct from our government,
for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and
the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518).

It may

sue and be sued in the same manner as any other private corporations, and in this sense it is an entity
different from our government. As this Court has aptly said,

"The mere fact that the Government

happens to be a majority stockholder does not make it a public corporation" (National Goal Co. vs.
Collector of Internal Revenue, 46 PML, 586-587). "By becoming a stockholder in the National oal
Company, the Government divested itself of its sovereign character so far as respects the transactions of

Page 145 of 319

the corporation. * * * Unlike the Government, the corporation may be sued without its consent, an4 is
subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government."
(Government of the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term "Government of the Republic of the Philippines" used in
section 2 of the Revised Administrative Code refers only to that government entity through which the
functions of the government are exercised as an attribute of sovereignty, and in this are included those
arms through which political authority is made effective whether they be provincial, municipal or other
form of local government. These are what we call municipal corporations. They do not include government
entities which are given a corporate personality separate and distinct from the government and which are
governed by the Corporation Law. Their powers, duties and liabilities have to be determined in the light of
that law and of their corporate charters. They do not therefore come within the exemption clause
prescribed in section 16, Rule 130 of our Rules of Court.
"Public corporations are those formed or organized for the government of a portion of the State." (Section
3, Republic Act No. 1459, Corporation Law)
"'The generally accepted definition of a municipal corporation would only include organized cities and
towns, and like organizations, with political and legislative powers for the local, civil government and
police regulations of the inhabitants of the particular district included in the boundaries of the corporation.'
Heller vs. Stremmel, 52 Mo. 309, 312."
"In its more general sense the phrase ''municipal corporation' may include both towns and counties, and
other public corporations created by government for political purposes. In its more common and limited
signification, it

embraces

only incorporated villages, towns and cities.

Revenues, 85 Ala. l44, 146, 4 So. 661."

Dunn vs. Court of County

(McQuillin, Municipal Corporations, 2nd ed. Vol. I, p. 385.)

"We may, therefore , define a municipal corporation in its historical and strict sense to be the
incorporation, by the authority of the government, of the inhabitants of a particular place or district, and
authorizing them tin their corporate capacity to exercise subordinate specified powers of legislation and
regulation with respect to their local and internal concerns. This power of local government is the
distinctive purpose and the distinguishing feature of a municipal corporation proper." (Dillon, Municipal
Corporations, 5th ed.( Vol. I, p. 59.)
It is true that under section 3, Rule 130, stenographers may only charge as fees P0.30 for each page of
transcript of not less than 00 words before the appeal is taken and P0.15 for each page after the filing of
the appeal, but in this case the National Coconut Corporation has agreed and in fact has paid 1P1.00 per
page for the services rendered by the plaintiffs and has not raised any objection to the amount paid until
its propriety was disputed by the Auditor General. The payment of the fees in question became therefore

Page 146 of 319

contractual and as such is valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the
Rules of Court.
As regards the question of procedure raised by appellants, suffice it to say that the same is insubstantial,
considering that this case refers not to. a money claim disapproved by the Auditor General but to an
action of prohibition the purpose of which is to restrain the officials concerned from deducting from
plaintiffs' salaries the amount paid to them as stenographers' fees. This case does not come under section
1, Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

4. Agricultural Credit and Cooperative Financing Administration (ACCFA) v. Confederation of Unions in

Government Corporations and Offices (CUGCO), 30 SCRA 649 (1969)
[ G.R. No. L-21484, November 29, 1969 ]
THE AGRICULTURAL CREDIT AND COOPERATIVE FINANCING ADMINISTRATION (ACCFA), PETITIONER, VS.
CONFEDERATION OF UNIONS IN GOVERNMENT CORPORATIONS AND OFFICES (CUGCO), ACCFA
SUPERVISORS' ASSOCIATION (ASA), ACCFA WORKERS' ASSOCIATION (AWA) AND THE COURT OF INDUSTRIAL RELATIONS, RESPONDENTS.
[G.R. L-23605. NOVEMBER 29, 1969]
THE

AGRICULTURAL

CREDIT

ADMINISTRATION

(ACA),

PETITIONER,

VS.

ACCFA

SUPERVISORS'

ASSOCIATION, ACCFA WORKERS' ASSOCIATION, AND THE COURT OF INDUSTRIAL RELATIONS,

RESPONDENTS.
These are two separate appeals by certiorari from the decision dated March 25, 1963 (G.R. No. L-21484)
and the order dated May 21, 1964 (G.R. No. L-23605) as affirmed by the resolutions en banc, of the Court
of Industrial Relations, in Cases Nos. 3450-ULP and 1327-MC, respectively. The parties, except the
Confederation of Unions in Government Corporations and Offices (CUGCO), being practically the same and
the principal issues involved related, only one decision is now rendered in these two cases.
The Agricultural Credit and Cooperative Financing Administration (ACCFA) was a government agency
created under Republic Act No. 821, as amended. Its administrative machinery was reorganized and its
name changed to Agricultural Credit Administration (ACA) under the Land Reform Code (Republic Act No.
3844). On the other hand, the ACCFA Supervisors' Association (ASA) and the ACCFA Workers' Association
(AWA), hereinafter referred to as the Unions, are labor organizations composed of the supervisors and the
rank-and-file employees, respectively, in the ACCFA (now ACA).

Page 147 of 319

G.R. No. L-21484
On September 4, 1961 a collective bargaining agreement, which was to be effective for a period of one (1)
year from July 1, 1961, was entered into by and between the Unions and the ACCFA:

A few months

thereafter, the Unions started protesting against alleged violations and non-implementation of said
agreement. Finally, on October 25, 1962 the Unions declared a strike, which was ended when the strikers
voluntarily returned to work on November 26, 1962.
On October 30, 1962 the Unions, together with its mother union, the Confederation of Unions in
Government Corporations and Offices (CUGCO), filed a complaint with the Court of Industrial Relations
against the ACCFA (Case No. 3450-ULP) for having allegedly committed acts of unfair labor practice,
namely:

violation of the collective bargaining agreement in order to discourage the members of the

Unions in the exercise of their right to self-organization, discrimination against said members in the matter
of promotions, and refusal to bargain. The ACCFA denied the charges and interposed as affirmative and
special defenses lack of jurisdiction of the CIR over the case, illegality of the bargaining contract,
expiration of said contract and lack of approval by the office of the President of the fringe benefits
provided for therein. Brushing aside the foregoing defenses, the CIR in its decision dated March 25, 1963
ordered the ACCFA:
"1. To cease and desist from committing further acts tending to discourage the members of complainant
unions in the exercise of their right to self-organization;
"2. To comply with and implement the provision of the collective bargaining contract executed on
September 4, 1961, including the payment of P30.00 a month living allowance;
"3.

To bargain in good faith and expeditiously with the herein complainants."

The ACCFA moved to reconsider but was turned down in a resolution dated April 25, 1963 of the CIR en
banc. Thereupon it brought this appeal by certiorari.
The ACCFA raises the following issues in its petition, to wit:
"1. Whether or not the respondent court has jurisdiction over this case, which in turn depends on whether
or not the ACCFA exercised governmental or proprietary functions.
2.

Whether or not the collective bargaining agreement between the petitioner and the respondent

union is valid; if valid, whether or not it has already lapsed; and if not, whether or not its (sic) fringe
benefits are already enforceable.
3.

Whether or not there is a legal and/or factual basis for the finding of the respondent court that the

petitioner had committed acts of unfair labor practice.

4.

Whether or not it is within the competence of the court to enforce the collective bargaining

agreement between the petitioner and the respondent unions, the same having already expired."

Page 148 of 319

G.R. No. L-23605
During the pendency of the above mentioned case (G.R. No. L-21484), specifically on August 8, 1963, the
President of the Philippines signed into law the Agricultural Land Reform Code (Republic Act No. 3844),
which among other things required the reorganization of the administrative machinery of the Agricultural
Credit and Cooperative Financing Administration (ACCFA) and changed its name to Agricultural Credit
Administration (ACA). On March 17, 1964 the ACCFA Supervisors' Association and the ACCFA Workers'
Association filed a petition for certification election with the Court of Industrial Relations (Case No. 1327MC) praying that they be certified as the exclusive bargaining agents for the supervisors and rank-and-file
employees, respectively, in the ACA.

The trial Court in its order dated March 30, 1964 directed the

Manager or Officer-in-Charge of the ACA to allow the posting of said order "for the information of all
employees and workers thereof," and to answer the petition.

In compliance therewith, the ACA, while

admitting most of the allegations in the petition, denied that the Unions represented the majority of the
supervisors and rank-and-file workers, respectively, in the ACA. It further alleged that the petition was
premature, that the ACA was not the proper party to be notified and to answer the petition, and that the
employees and supervisors could not lawfully become members of the Unions, nor be represented by
them. However, in a joint manifestation of the Unions dated May 7, 1964, with the conformity of the ACA
Administrator and of the Agrarian Counsel in his capacity as such and as counsel for the National Land
Reform Council, it was agreed "that the union petitioners in this case represent the majority of the
employees in their respective bargaining units" and that only the legal issues raised would be submitted
for the resolution of the trial Court.
Finding the remaining grounds for ACA's opposition to the petition to be without merit, the trial Court in its
order dated May 21, 1964 certified "the ACCFA Workers' Association and the ACCFA Supervisors'
Association as the sole and exclusive bargaining representatives of the rank-and-file employees and
supervisors, respectively, of the Agricultural Credit Administration." Said order was affirmed by the CIR en
banc in its resolution dated August 24, 1964.
On October 2, 1964 the ACA filed in this Court a petition for certiorari with urgent motion to stay the CIR
order of May 21, 1964. In a resolution dated October 6, 1964, this Court dismissed the petition for "lack
of adequate allegations," but the dismissal was later reconsidered when the ACA complied with the formal
requirement stated in said resolution. As prayed for, this Court ordered the CIR to stay the execution of
its order of May 21, 1964.
In this appeal, the ACA in effect challenges the jurisdiction of the CIR to entertain the petition of the
Unions for certification election on the ground that it (ACA) is engaged in governmental functions. The
Unions join the issue on this single point, contending that the ACA performs proprietary functions.

Page 149 of 319

Under Section 3 of the Agricultural Land Reform Code the ACA was established, among other
governmental agencies,+ to extend credit and similar assistance to agriculture, in pursuance of the policy
enunciated in Section 2 as follows:
"Sec. 2. Declaration of Policy. - It is the policy of the State:
(1)

To establish owner-cultivatorships and the economic family-size farm as the basis of Philippine

agriculture and, as a consequence, divert landlord capital in agriculture to industrial development;

(2)

To achieve a dignified existence for the small farmers free from pernicious institutional restraints and

practices;
(3)

To create a truly viable social and economic structure in agriculture conducive to greater productivity

and higher farm incomes;

(4)

To apply all labor laws equally and without discrimination to both industrial and agricultural wage

earners;
(5)

To provide a more vigorous and systematic land resettlement program and public land distribution;

and
(6)

To make the small farmers more independent, self-reliant and responsible citizens, and a source of

genuine strength in our democratic society.

The implementation of the policy thus enunciated, insofar as the role of the ACA therein is concerned, is
spelled out in Sections 110 to 118, inclusive, of the Land Reform Code. Section 110 provides that "the
administrative machinery of the ACCFA shall be reorganized to enable it to align its activities with the
requirements and objectives of this Code and shall be known as the Agricultural Credit Administration."
Under Section 112 the sum of P150,000,000 was appropriated out of national funds to finance the
additional credit functions of the ACA as a result of the land reform program laid down in the Code.
Section 103 grants the ACA the privilege of rediscounting with the Central Bank, the Development Bank of
the Philippines and the Philippine National Bank. Section 105 directs the loaning activities of the ACA "to
stimulate the development of farmers' cooperatives," including those "relating to the production and
marketing of agricultural products and those formed to manage and/or own, on a cooperative basis,
services and facilities, such as irrigation and transport systems, established to support production and/or
marketing of agricultural products." Section 106 deals with the extension by ACA of credit to small farmers
in order to stimulate agricultural production.

Sections 107 to 112 lay down certain guidelines to be

followed in connection with the granting of loans, such as security, interest and supervision of credit.
Sections 113 to 118, inclusive, invest the ACA with certain rights and powers not accorded to nongovernmental entities, thus:
"SEC. 113. Auditing of Operations. - For the effective supervision of farmers' cooperatives, the head of the
Agricultural Credit Administration shall have the power to audit their operations, records and books of

Page 150 of 319

account and to issue subpoena and subpoena duces tecum to compel the attendance of witnesses and the
production of books, documents and records in the conduct of such audit or of any inquiry into their
affairs.

Any person who, without lawful cause, fails to obey such subpoena or subpoena duces tecum

shall, upon application of the head of Agricultural Credit Administration with the proper court, be liable to
punishment for contempt in the manner provided by law and if he is an officer of the Association, to
suspension or removal from office.
SEC. 114. Prosecution of Officials. - The Agricultural Credit Administration, through the appropriate
provincial or city fiscal, shall have the power to file and prosecute any and all actions which it may have
against any and all officials or employees of farmers' cooperatives arising from misfeasance or
malfeasance in office.
SEC. 115. Free Notarial Service. - Any justice of the peace, in his capacity as notary ex-oficio, shall render
service free of charge to any person applying for a loan under this Code either in administering the oath or
in the acknowledgement of instruments relating to such loan.
SEC. 116. Free Registration of Deeds. - Any register of deeds shall accept for registration, free of charge
any instrument relative to a loan made under this Code.
SEC. 117. Writing-off Unsecured and Outstanding Loans. - Subject to the approval of the President upon
recommendation of the Auditor General, the Agricultural Credit Administration may write-off from its
books, unsecured and outstanding loans and accounts receivable which may become uncollectible by
reason of the death or disappearance of the debtor, should there be no visible means of collecting the
same in the foreseeable future, or where the debtor has been verified to have no income or property
whatsoever with which to effect payment. In all cases, the writing-off shall be after five years from the
date the debtor defaults.
SEC. 118. Exemption from Duties, Taxes and Levies. - The Agricultural Credit Administration is hereby
exempted from the payment of all duties, taxes, levies, and fees, including docket and sheriff's fees, of
whatever nature or kind, in the performance of its functions and in the exercise of its powers hereunder."
The power to audit the operations of farmers' cooperatives and otherwise inquire into their affairs, as
given by Section 113, is in the nature of the visitorial power of the sovereign, which only a government
agency specially delegated to do so by the Congress may legally exercise.
On March 19, 1964 Executive Order No. 75 was promulgated. It is entitled: "Rendering in Full Force and
Effect the Plan of Reorganization Proposed by the Special Committee on Reorganization of Agencies for
Land Reform for the Administrative Machinery of the Agricultural Land Reform Code," and contains the
following pertinent provisions:
"Section 3. The Land Reform Project Administration (+) shall be considered a single organization and the
personnel complement of the member agencies including the legal officers of the Office of the Agrarian

Page 151 of 319

Counsel which shall provide legal services to the LRPA shall be regarded as one personnel pool from which
the requirements of the operations shall be drawn and subject only to the civil service laws, rules and
regulations, persons from one agency may be freely assigned to positions in another agency within the
LRPA when the interest of the service so demands.
"Section 4. The Land Reform Project Administration shall be considered as one organization with respect to
the standardization of job descriptions position classification and wage and salary structures to the end
that positions involving the same or equivalent qualifications and equal responsibilities and effort shall
have the same remuneration.
"Section 5. The Civil Service laws, rules and regulations with respect to promotions, particularly in the
consideration of person next in rank, shall be made applicable to the Land Reform Project Administration
as a single agency so that qualified individuals in one member agency must be considered in considering
promotion to higher positions in another member agency."
The implementation of the land reform program of the government according to Republic Act No. 3844 is
most certainly a governmental, not a proprietary, function; and far that purpose Executive Order No. 75
has placed the ACA under the Land Reform Project Administration, together with the other member
agencies, the personnel complement of all of which are placed in one single pool and made available for
assignment from one agency to another, subject only to Civil Service laws, rules and regulations, position
classification and wage structures.
The appointing authority in respect of the officials and employees of the ACA is the President of the
Philippines, as stated in a 1st indorsement by his office to the Chairman of the National Reform Council
dated May 22, 1964, as follows:
"Appointments of officials and employees of the National Land Reform Council and its agencies may be
made only by the President, pursuant to the provisions of Section 79(D) of the Revised Administrative
Code. In accordance with the policy and practice, such appointments should be prepared for the signature
of the Executive Secretary, 'By Authority of the President'."(+).
When the Agricultural Reform Code was being considered by the Congress, the nature of the ACA was the
subject of the following exposition on the Senate floor:
"Senator Tolentino: x x x "The ACA is not going to be a profit making institution. It is supposed to be a
public service of the government to the lessees and farmer-owners of the lands that may be bought after
expropriation from owners.

It is the government here that is the lender. The government should not

exact a higher interest than what we are telling a private landowner now in his relation to his tenants if we
give to their farmers a higher rate of interest x x x ." (pp. 17 & 18, Senate Journal No. 16, July 3, 1963)

Page 152 of 319

"The reason is obvious, to pinpoint responsibility for many losses in the government, in order to avoid
irresponsible lending of government money -- to pinpoint responsibility for many losses x x x."
"Senator Manglapus: "x x x But assuming that hypothesis, that is the reason why we are appropriating
P150,000,000.00 for the Agricultural Credit Administration which will go to intensified credit operations on
the barrio level x x x" (p. 3, Senate Journal No. 7)
"That it is the reason why we are providing for the expansion of the ACCFA and the weeding out of the
cooperative activity of the ACCFA and turning this over to the Agricultural Productivity Commission, so that
the Agricultural Credit Administration will concentrate entirely on the facilitation of credit on the barrio
level with the massive support of 150 million provided by the government. x x x" (pp. 4 & 5 of Senate
Journal No. 7, July 3, 1963)
"x x x But by releasing them from this situation, we feel that we are putting them in a much better
condition than that in which they are found by providing them with a business-like way of obtaining credit,
not depending on a paternalistic system but one which is business-like--that is to say, a government
office, which on the barrio level will provide them that credit directly x x x". (p. 40, Senate Journal No. 7,
July 3, 1963 (underscoring supplied)".
The considerations set forth above militate quite strongly against the recognition of collective bargaining
powers in the respondent Unions within the context of Republic Act No. 875, and hence against the grant
of their basic petition for certification election as proper bargaining units. The ACA is a government office
or agency engaged in governmental, not proprietary functions. These functions may not be strictly what
President Wilson described as "constituent" (as distinguished from "ministrant"), (++) such as those
relating to the maintenance of peace and the prevention of crime, those regulating property and property
rights, those relating to the administration of justice and the determination of political duties of citizens,
and those relating to national defense and foreign relations.

Under this traditional classification, such

constituent functions are exercised by the State as attributes of sovereignty, and not merely to promote
the welfare, progress and prosperity of the people - these latter functions being ministrant, the exercise of
which is optional on the part of the government.
The growing complexities of modern society, however, have rendered this traditional classification of the
functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private
enterprise and initiative and which the government was called upon to enter optionally, and only "because
it was better equipped to administer for the public welfare than is any private individual or group of
individuals,"+ continue to lose their well-defined boundaries and to be absorbed within activities that the
government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the
times.

(
+

Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of

Page 153 of 319

economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by
the Constitution itself in its declaration of principle concerning the promotion of social justice.
It was in furtherance of such policy that the Land Reform Code was enacted and the various agencies, the
ACA among them, established to carry out its purposes. There can be no dispute as to the fact that the
land reform program contemplated in the said Code is beyond the capabilities of any private enterprise to
translate into reality.

It is a purely governmental function, no less than, say, the establishment and

maintenance of public schools and public hospitals. And when, aside from the governmental objectives of
the ACA, geared as they are to the implementation of the land reform program of the State, the law itself
declares that the ACA is a government office, with the formulation of policies, plans and programs vested
no longer in a Board of Governors, as in the case of the ACCFA, but in the National Land Reform Council,
itself a government instrumentality; and that its personnel are subject to Civil Service laws and to rules of
standardization with respect to positions and salaries, any vestige of doubt as to the governmental
character of its functions disappears.
In view of the foregoing premises, we hold that the respondent Unions are not entitled to the certification
election sought in the Court below. Such certification is admittedly for purposes of bargaining in behalf of
the employees with respect to terms and conditions of employment, including the right to strike as a
coercive economic weapon, as in fact the said unions did strike in 1962 against the ACCFA (G.R. No. L21824).+ This is contrary to Section 11 of Republic Act No. 875, which provides:
"SEC. 11 Prohibition Against Strike in the Government. - The terms and conditions of employment in the
Government, including any political subdivision or instrumentality thereof, are governed by law and it is
declared to be the policy of this Act that employees therein shall not strike for the purposes of securing
changes or modification in their terms and conditions of employment. Such employees may belong to any
labor organization which does not impose the obligation to strike or to join in strike: Provided, However,
that this section shall apply only to employees employed in governmental functions of the Government
including but not limited to governmental corporations."++
With the reorganization of the ACCFA and its conversion into the ACA under the Land Reform Code and in
view of our ruling as to the governmental character of the functions of the ACA, the decision of the
respondent Court dated March 25, 1963, and the resolution en banc affirming it, in the unfair labor
practice case filed by the ACCFA, which decision is the subject of the present review in G.R. No. L-21484,
has become moot and academic, particularly insofar as the order to bargain collectively with the
respondent Unions is concerned.
What remains to be resolved is the question of fringe benefits provided for in the collective bargaining
contract of September 4, 1961. The position of the ACCFA in this regard is that the said fringe benefits

+
+

Page 154 of 319

have not become enforceable because the condition that they should first be approved by the Office of the
President has not been complied with. The Unions, on the other hand, contend that no such condi tion
existed in the bargaining contract, and the respondent Court upheld this contention in its decision.
It is to be noted that under Section 3, Article XIV, of the agreement, the same "shall not become effective
unless and until the same is duly ratified by the Board of Governors of the Administration." Such approval
was given even before the formal execution of the agreement, by virtue of "Resolution No. 67, Regular
Meeting No. 7, FY 1960-61, held August 17, 1961," but with the proviso that "the fringe benefits contained
therein shall take effect only if approved by the office of the President." The condition is, therefore,
deemed to be incorporated into the agreement by reference.
On October 23, 1962 the Office of the President, in a letter signed by the Executive Secretary, expressed
its approval of the bargaining contract "provided the salaries and benefits therein fixed are not in conflict
with applicable laws and regulations, are believed to be reasonable considering the exigencies of the
service and the welfare of the employees, and are well within the financial ability of the particular
corporation to bear."
On July 1, 1963 the ACCFA management and the Unions entered into an agreement for the
implementation of the decision of the respondent Court concerning the fringe benefits, thus:
"In the meantime, only Cost of Living Adjustment, Longevity Pay, and Night Differential Benefits accruing
from July 1, 1961 to June 30, 1963 shall be paid to all employees entitled thereto, in the following
manner:
(A) The sum of P180,000 shall be set aside for the payment of:
1) Night differential benefits for Security Guards.
2) Cost of Living Adjustment and Longevity Pay.
3) The unpaid balance due employees on Item A (1) and (2) this paragraph shall be paid in monthly
installments as finances permit but not beyond December 20, 1963.
3. All benefits accruing after July 1, 1963, shall be allowed to accumulate but payable only after all
benefits accruing up to June 30, 1963, as per CIR decision hereinabove referred to shall have been settled
in full; provided, however, that commencing July 1, 1963 and for a period of only two (2) months
thereafter (during which period the ACCFA and the Unions shall negotiate a new Collective Bargaining
Agreement) the provisions of the September 4, 1961 Collective Bargaining Agreement shall be temporarily
suspended, except as to Cost of Living Adjustment and "political" or non-economic privileges and benefits
thereunder."

Page 155 of 319

On July 24, 1963 the ACCFA Board of Governors ratified the agreement thus entered into, pursuant to the
provision thereof requiring such ratification, but with the express qualification that the same was "without
prejudice to the pending appeal in the Supreme Court...in Case No. 3450-ULP." The payment of the fringe
benefits agreed upon, to our mind, shows that the same were within the financial capability of the ACCFA
then, and hence justifies the conclusion that this particular condition imposed by the Office of the
President in its approval of the bargaining contract was satisfied.
We hold therefore that insofar as the fringe benefits already paid are concerned, there is no reason to set
aside the decision of the respondent Court, but that since the respondent Unions have no right to the
certification election sought by them nor, consequently, to bargain collectively with the petitioner, no
further fringe benefits may be demanded on the basis of any collective bargaining agreement.
The decisions and orders appealed from are set aside and/or modified in accordance with the foregoing
pronouncements. No costs.
Concepcion, C.J., Reyes, Dizon, Sanchez, Castro, Teehankee, and Barredo, JJ., concur.
Zaldivar, JJ., in the result.
Fernando, J., concurs in a separate opinion.

Land Authority, Land Bank, Agricultural Productivity Commission; Office of the Agrarian Counsel.

+) The Land Reform Project Administration is the organization through which the field operations of

member agencies (of which the ACA is one) shall be undertaken by their respective personnel under a
unified administration. (Section 2 of Article 1, Executive Order No. 75)
(

+) Section 79(D) of the Revised Administrative Code provides in part: "The Department Head, upon the

recommendation of the chief of bureaus or office concerned, shall appoint all subordinate officers and
employees whose appointments is not expressly vested by law in the President of the Philippines, x x x."
(

++) Bacani vs. National Coconut Corporation, G.R. No. L-9657, Nov. 29, 1956, 53 O.G. p. 2800.

Malcolm, The Government of the Philippines, pp. 19-20; Bacani vs. National Coconut Corporation, supra.

+
(
(
(
+

Page 156 of 319

It must be stated, however, that we do not here decide the question - not at issue in this case - of

whether or not a labor organization composed of employees discharging governmental functions, which is
allowed under the legal provision just quoted provided such organization does not impose the obligation to
strike or to join in strike, may petition for a certification election and compel the employer to bargain
collectively with it for purposes other than to secure changes or modifications in the terms and conditions
of their employment. Withal, it may not be amiss to observe, albeit obiter, that the right to organize thus
allowed would be meaningless unless there is a correlative right on the part of the organization to be
recognized as the proper representative of the employees and to bargain in their behalf in relation to
matters outside the limitations imposed by the statute, such as those provided for in Section 28(b) of
Republic Act No. 2260, concerning complaints and grievances of the employees.
+

+ Reenacted in Sec. 28(c) of the Civil Service Act of 1959, R.A. No. 2260.

5. Shipside Incorporated v. Court of Appeals, 352 SCRA 334 (2001)

[G.R. No. 143377. February 20, 2001]
SHIPSIDE INCORPORATED, petitioner, vs. THE HON. COURT OF APPEALS [Special Former Twelfth
Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San Fernando City, La Union) & The REPUBLIC OF
THE PHILIPPINES, respondents.
Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the 1997 Rules
on Civil Procedure against the resolutions of the Court of Appeals promulgated on November 4, 1999 and
May 23, 2000, which respectively, dismissed a petition for certiorari and prohibition and thereafter denied
a motion for reconsideration.
The antecedent facts are undisputed:
On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four
parcels of land Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with 1,583
square meters; and Lot 4, with 508 square meters.
On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra
Llana, Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115 OCT
No. 0-381 on August 10, 1960. Consequently, Transfer Certificate No. T-4304 was issued in favor of the
buyers covering Lots No. 1 and 4.

+
+

Page 157 of 319

Lot No. 1 is described as:
A parcel of land (Lot 1, Plan PSU-159621, L. R. Case No. N-361; L. R. C. Record No. N-14012, situated in
the Barrio of Poro, Municipality of San Fernando, Province of La Union, bounded on the NE, by the
Foreshore; on the SE, by Public Land and property of the Benguet Consolidated Mining Company; on the
SW, by properties of Rafael Galvez (US Military Reservation Camp Wallace) and Policarpio Munar; and on
the NW, by an old Barrio Road. Beginning at a point marked 1 on plan, being S. 74 deg. 11W. , 2670.
36 from B. L. L. M. 1, San Fernando, thence
S. 66 deg. 19E., 134.95 m. to point 2; S. 14 deg. 57W., 11.79 m. to point 3;
S. 12 deg. 45W., 27.00 m. to point 4; S. 12 deg. 45W, 6.90 m. to point 5;
N. 69 deg., 32W., 106.00 m. to point 6; N. 52 deg., 21W., 36. 85 m. to point 7;
N. 21 deg. 31E., 42. 01 m.

to the point of beginning; containing an area of SIX THOUSAND FIVE

HUNDRED AND SEVENTY-ONE (6,571) SQUARE METERS, more or less. All points referred to are indicated
on the plan; and marked on the ground; bearings true, date of survey, February 421, 1957.
Lot No. 4 has the following technical description:
A parcel of land (Lot 4, Plan PSU-159621, L. R. Case No. N-361 L. R. C. Record No. N-14012), situated in
the Barrio of Poro, Municipality of San Fernando, La Union. Bounded on the SE by the property of the
Benguet Consolidated Mining Company; on the S. by property of Pelagia Carino; and on the NW by the
property of Rafael Galvez (US Military Reservation, Camp Wallace). Beginning at a point marked 1 on
plan, being S. deg. 24W. 2591. 69 m. from B. L. L. M. 1, San Fernando, thence S. 12 deg. 45W., 73. 03
m. to point 2; N. 79 deg. 59W., 13.92 m. to point 3; N.

23 deg. 26E. , 75.00 m. to the point of

beginning; containing an area of FIVE HUNDED AND EIGHT (508) SQUARE METERS, more or less.

All

points referred to are indicated in the plan and marked on the ground; bearings true, date of survey,
February 4-21, 1957.
On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining Company. The
deed of sale covering the aforesaid property was inscribed as Entry No. 9173 on TCT No. T-4304.
Subsequently, Transfer Certificate No. T-4314 was issued in the name of Lepanto Consolidated Mining
Company as owner of Lots No. 1 and 4.
On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First Instance of La
Union, Second Judicial District, issued an Order in Land Registration Case No. N-361 (LRC Record No. N14012) entitled Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest; Republic of the
Philippines, Movant declaring OCT No. 0-381 of the Registry of Deeds for the Province of La Union issued
in the name of Rafael Galvez, null and void, and ordered the cancellation thereof.

Page 158 of 319

The Order pertinently provided:
Accordingly, with the foregoing, and without prejudice on the rights of incidental parties concerned herein
to institute their respective appropriate actions compatible with whatever cause they may have, it is
hereby declared and this court so holds that both proceedings in Land Registration Case No. N-361 and
Original Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in virtue thereof
and registered in the name of Rafael Galvez, are null and void; the Register of Deeds for the Province of
La Union is hereby ordered to cancel the said original certificate and / or such other certificates of title
issued subsequent thereto having reference to the same parcels of land; without pronouncement as to
costs.
On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1 and 4,
with the deed being entered in TCT NO. 4314 as entry No. 12381. Transfer Certificate of Title No. T-5710
was thus issued in favor of the petitioner which starting since then exercised proprietary rights over Lots
No. 1 and 4.
In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by the trial
court declaring OCT No. 0-381 null and void. The motion was denied on January 25, 1965. On appeal,
the Court of Appeals ruled in favor of the Republic of the Philippines in a Resolution promulgated on
August 14, 1973 in CA-G. R. No. 36061-R.
Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated August 14,
1973 became final and executory on October 23, 1973.
On April 22, 1974, the trial court in L. R. C. Case No. N-361 issued a writ of execution of the judgment
which was served on the Register of Deeds, San Fernando, La Union on April 29, 1974.
Twenty four long years thereafter, on January 14, 1999, the Office of the Solicitor General received a letter
dated January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development
Corporation, stating that the aforementioned orders and decision of the trial court in L. R. C. No. N-361
have not been executed by the Register of Deeds, San Fernando, La Union despite receipt of the writ of
execution.
On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and
cancellation of titles before the Regional Trial Court of the First Judicial Region (Branch 26, San Fernando,
La Union) docketed therein as Civil Case No. 6346 entitled, Republic of the Philippines, Plaintiff, versus
Heirs of Rafael Galvez, represented by Teresita Tan, Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat,
Regina Bustos, Shipside Incorporated and the Register of Deeds of La Union, Defendants.
The evidence shows that the impleaded defendants (except the Register of Deeds of the province of La
Union) are the successors-in-interest of Rafael Galvez (not Reynaldo Galvez as alleged by the Solicitor

Page 159 of 319

General) over the property covered by OCT No. 0-381, namely: (a) Shipside Inc. which is presently the
registered owner in fee simple of Lots No. 1 and 4 covered by TCT No. T-5710, with a total area of 7,079
square meters; (b) Elisa Bustos, Jesusito Galvez, and Teresita Tan who are the registered owners of Lot
No. 2 of OCT No. 0-381;and (c) Elisa Bustos, Filipina Mamaril, Regina Bustos and Erlinda Balatbat who are
the registered owners of Lot No. 3 of OCT No. 0-381, now covered by TCT No. T-4916, with an area of
1,583 square meters.
In its complaint in Civil Case No. 6346, the Solicitor General argued that since the trial court in LRC Case
No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling was subsequently
affirmed by the Court of Appeals, the defendants-successors-in-interest of Rafael Galvez have no valid title
over the property covered by OCT No. 0-381, and the subsequent Torrens titles issued in their names
should be consequently cancelled.
On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following grounds: (1)
the complaint stated no cause of action because only final and executory judgments may be subject of an
action for revival of judgment; (2) the plaintiff is not the real party-in-interest because the real property
covered by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace (Wallace Air Station),
were under the ownership and administration of the Bases Conversion Development Authority (BCDA)
under Republic Act No. 7227; (3) plaintiffs cause of action is barred by prescription; (4) twenty-five years
having lapsed since the issuance of the writ of execution, no action for revival of judgment may be
instituted because under Paragraph 3 of Article 1144 of the Civil Code, such action may be brought only
within ten (10) years from the time the judgment had been rendered.
An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999, alleging
among others, that: (1) the real party-in-interest is the Republic of the Philippines;and (2) prescription
does not run against the State.
On August 31, 1999, the trial court denied petitioners motion to dismiss and on October 14, 1999, its
motion for reconsideration was likewise turned down.
On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of
Appeals, docketed therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court
denying its motion to dismiss and its subsequent motion for reconsideration were issued in excess of
jurisdiction.
On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on the ground
that the verification and certification in the petition, under the signature of Lorenzo Balbin, Jr., was made
without authority, there being no proof therein that Balbin was authorized to institute the petition for and
in behalf and of petitioner.

Page 160 of 319

On May 23, 2000, the Court of Appeals denied petitioners motion for reconsideration on the grounds that:
(1) a complaint filed on behalf of a corporation can be made only if authorized by its Board of Directors,
and in the absence thereof, the petition cannot prosper and be granted due course;and (2) petitioner was
unable to show that it had substantially complied with the rule requiring proof of authority to institute an
action or proceeding.
Hence, the instant petition.
In support of its petition, Shipside, Inc. asseverates that:
1. The Honorable Court of Appeals gravely abused its discretion in dismissing the petition when it made a
conclusive legal presumption that Mr. Balbin had no authority to sign the petition despite the clarity of
laws, jurisprudence and Secretarys certificate to the contrary;
2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in effect affirming
the grave abuse of discretion committed by the lower court when it refused to dismiss the 1999 Complaint
for Revival of a 1973 judgment, in violation of clear laws and jurisprudence.
Petitioner likewise adopted the arguments it raised in the petition and comment/reply it filed with the
Court of Appeals, attached to its petition as Exhibit L and N, respectively.
In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the
following considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the verification
and certification of non-forum shopping portion of the petition, failed to show proof of his authorization to
institute the petition for certiorari and prohibition with the Court of Appeals, thus the latter court acted
correctly in dismissing the same; (2) the real party-in-interest in the case at bar being the Republic of the
Philippines, its claims are imprescriptible.
In order to preserve the rights of herein parties, the Court issued a temporary restraining order on June
26, 2000 enjoining the trial court from conducting further proceedings in Civil Case No. 6346.
The issues posited in this case are:

(1) whether or not an authorization from petitioners Board of

Directors is still required in order for its resident manager to institute or commence a legal action for and
in behalf of the corporation; and (2) whether or not the Republic of the Philippines can maintain the action
for revival of judgment herein.
We find for petitioner.
Anent the first issue:

Page 161 of 319

The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the resident
manager for petitioner, who was the signatory in the verification and certification on non-forum shopping,
failed to show proof that he was authorized by petitioners board of directors to file such a petition.
A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation
Code and those that are implied or incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and / or its duly authorized officers and agents. Thus, it has been observed
that the power of a corporation to sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers (Premium Marble Resources, Inc. v. CA, 264 SCRA 11 [1996]). In turn,
physical acts of the corporation, like the signing of documents, can be performed only by natural persons
duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the petition,
there was no proof attached thereto that Balbin was authorized to sign the verification and non-forum
shopping certification therein, as a consequence of which the petition was dismissed by the Court of
Appeals. However, subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to
said motion a certificate issued by its board secretary stating that on October 11, 1999, or ten days prior
to the filing of the petition, Balbin had been authorized by petitioners board of directors to file said
petition.
The Court has consistently held that the requirement regarding verification of a pleading is formal, not
jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a condition
affecting the form of the pleading, non-compliance with which does not necessarily render the pleading
fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading
are true and correct and not the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court may order the correction of the pleading if verification is lacking
or act on the pleading although it is not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with in order that the ends of justice may thereby be served.
On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure
provides that the failure of the petitioner to submit the required documents that should accompany the
petition, including the certification against forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file a petition on behalf
of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of the certification.
In Loyola v.

Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the filing of the

certification one day after the filing of an election protest as substantial compliance with the requirement.

Page 162 of 319

In Roadway Express, Inc. v. Court of Appeals, et. al. (264 SCRA 696 [1996]), the Court allowed the filing
of the certification 14 days before the dismissal of the petition. In Uy v. LandBank, supra, the Court had
dismissed Uys petition for lack of verification and certification against non-forum shopping. However, it
subsequently reinstated the petition after Uy submitted a motion to admit certification and non-forum
shopping certification.

In all these cases, there were special circumstances or compelling reasons that

justified the relaxation of the rule requiring verification and certification on non-forum shopping.
In the instant case, the merits of petitioners case should be considered special circumstances or
compelling reasons that justify tempering the requirement in regard to the certificate of non-forum
shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement
as to the certificate of non-forum shopping. With more reason should we allow the instant petition since
petitioner herein did submit a certification on non-forum shopping, failing only to show proof that the
signatory was authorized to do so.

That petitioner subsequently submitted a secretarys certificate

attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this
oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the
objective of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA 108
[1996]). Lastly, technical rules of procedure should be used to promote, not frustrate justice. While the
swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an even
more urgent ideal.
Now to the second issue:
The action instituted by the Solicitor General in the trial court is one for revival of judgment which is
governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil Procedure.
Article 1144(3) provides that an action upon a judgment must be brought within 10 years from the time
the right of action accrues." On the other hand, Section 6, Rule 39 provides that a final and executory
judgment or order may be executed on motion within five (5) years from the date of its entry, but that
after the lapse of such time, and before it is barred by the statute of limitations, a judgment may be
enforced by action. Taking these two provisions into consideration, it is plain that an action for revival of
judgment must be brought within ten years from the time said judgment becomes final.
From the records of this case, it is clear that the judgment sought to be revived became final on October
23, 1973.

On the other hand, the action for revival of judgment was instituted only in 1999, or more

than twenty-five (25) years after the judgment had become final.

Hence, the action is barred by

extinctive prescription considering that such an action can be instituted only within ten (10) years from
the time the cause of action accrues.

Page 163 of 319

The Solicitor General, nonetheless, argues that the States cause of action in the cancellation of the land
title issued to petitioners predecessor-in-interest is imprescriptible because it is included in Camp Wallace,
which belongs to the government.
The argument is misleading.
While it is true that prescription does not run against the State, the same may not be invoked by the
government in this case since it is no longer interested in the subject matter. While Camp Wallace may
have belonged to the government at the time Rafael Galvezs title was ordered cancelled in Land
Registration Case No. N-361, the same no longer holds true today.
Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, created
the Bases Conversion and Development Authority. Section 4 pertinently provides:
Section 4.

Purposes of the Conversion Authority. The Conversion Authority shall have the following

purposes:
(a)

To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air

Station, ODonnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita Station
(Hermosa, Bataan) and those portions of Metro Manila military camps which may be transferred to it by
the President;
Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:
Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development Authority.
All areas covered by the Wallace Air Station as embraced and defined by the 1947 Military Bases
Agreement between the Philippines and the United States of America, as amended, excluding those
covered by Presidential Proclamations and some 25-hectare area for the radar and communication station
of the Philippine Air Force, are hereby transferred to the Bases Conversion Development Authority
With the transfer of Camp Wallace to the BCDA, the government no longer has a right or interest to
protect.

Consequently, the Republic is not a real party in interest and it may not institute the instant

action. Nor may it raise the defense of imprescriptibility, the same being applicable only in cases where
the government is a party in interest. Under Section 2 of Rule 3 of the 1997 Rules of Civil Procedure,
every action must be prosecuted or defended in the name of the real party in interest. To qualify a
person to be a real party in interest in whose name an action must be prosecuted, he must appear to be
the present real owner of the right sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668 [1989]).
A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit. And by real interest is meant a present substantial interest, as
distinguished from a mere expectancy, or a future, contingent, subordinate or consequential interest
(Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]).

Being the owner of the areas covered by Camp

Page 164 of 319

Wallace, it is the Bases Conversion and Development Authority, not the Government, which stands to be
benefited if the land covered by TCT No. T-5710 issued in the name of petitioner is cancelled.
Nonetheless, it has been posited that the transfer of military reservations and their extensions to the
BCDA is basically for the purpose of accelerating the sound and balanced conversion of these military
reservations into alternative productive uses and to enhance the benefits to be derived from such property
as a measure of promoting the economic and social development, particularly of Central Luzon and, in
general, the countrys goal for enhancement (Section 2, Republic Act No. 7227). It is contended that the
transfer of these military reservations to the Conversion Authority does not amount to an abdication on
the part of the Republic of its interests, but simply a recognition of the need to create a body corporate
which will act as its agent for the realization of its program. It is consequently asserted that the Republic
remains to be the real party in interest and the Conversion Authority merely its agent.
We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality
separate and distinct from the government. Section 3 of Republic Act No. 7227 reads:
Section 3.

Creation of the Bases Conversion and Development Authority. There is hereby created a

body corporate to be known as the Conversion Authority which shall have the attribute of perpetual
succession and shall be vested with the powers of a corporation.
It may not be amiss to state at this point that the functions of government have been classified into
governmental or constituent and proprietary or ministrant.

While public benefit and public welfare,

particularly, the promotion of the economic and social development of Central Luzon, may be attributable
to the operation of the BCDA, yet it is certain that the functions performed by the BCDA are basically
proprietary in nature. The promotion of economic and social development of Central Luzon, in particular,
and the countrys goal for enhancement, in general, do not make the BCDA equivalent to the Government.
Other corporations have been created by government to act as its agents for the realization of its
programs, the SSS, GSIS, NAWASA and the NIA, to count a few, and yet, the Court has ruled that these
entities, although performing functions aimed at promoting public interest and public welfare, are not
government-function corporations invested with governmental attributes.

It may thus be said that the

BCDA is not a mere agency of the Government but a corporate body performing proprietary functions.
Moreover, Section 5 of Republic Act No. 7227 provides:
Section 5.

Powers of the Conversion Authority. To carry out its objectives under this Act, the

Conversion Authority is hereby vested with the following powers:

(a)

To succeed in its corporate name, to sue and be sued in such corporate name and to adopt, alter

and use a corporate seal which shall be judicially noticed;

Page 165 of 319

Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to cancel
petitioners title, not the Republic, the former being the real party in interest.

One having no right or

interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action (Ralla v.
Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if the plaintiff or the defendant is not a real party
in interest. If the suit is not brought in the name of the real party in interest, a motion to dismiss may be
filed, as was done by petitioner in this case, on the ground that the complaint states no cause of action
(Tanpingco v. IAC, 207 SCRA 652 [1992]).
However, E. B. Marcha Transport Co. , Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority that the
Republic is the proper party to sue for the recovery of possession of property which at the time of the
institution of the suit was no longer held by the national government but by the Philippine Ports Authority.
In E. B. Marcha, the Court ruled:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as
principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the
latter as its agent. We may presume that, by doing so, the Republic of the Philippines did not intend to
retain the said rentals for its own use, considering that by its voluntary act it had transferred the land in
question to the Philippine Ports Authority effective July 11, 1974.

The Republic of the Philippines had

simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the disputed property it
continues to recognize. We may expect then that the said rentals, once collected by the Republic of the
Philippines, shall be turned over by it to the Philippine Ports Authority conformably to the purposes of P. D.
No. 857.
E. B. Marcha is, however, not on all fours with the case at bar. In the former, the Court considered the
Republic a proper party to sue since the claims of the Republic and the Philippine Ports Authority against
the petitioner therein were the same.

To dismiss the complaint in E. B. Marcha would have brought

needless delay in the settlement of the matter since the PPA would have to refile the case on the same
claim already litigated upon.

Such is not the case here since to allow the government to sue herein

enables it to raise the issue of imprescriptibility, a claim which is not available to the BCDA. The rule that
prescription does not run against the State does not apply to corporations or artificial bodies created by
the State for special purposes, it being said that when the title of the Republic has been divested, its
grantees, although artificial bodies of its own creation, are in the same category as ordinary persons
(Kingston v. LeHigh Valley Coal Co., 241 Pa 469). By raising the claim of imprescriptibility, a claim which
cannot be raised by the BCDA, the Government not only assists the BCDA, as it did in E. B. Marcha, it
even supplants the latter, a course of action proscribed by said case.
Moreover, to recognize the Government as a proper party to sue in this case would set a bad precedent as
it would allow the Republic to prosecute, on behalf of government-owned or controlled corporations,
causes of action which have already prescribed, on the pretext that the Government is the real party in

Page 166 of 319

interest against whom prescription does not run, said corporations having been created merely as agents
for the realization of government programs.
Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced by the
Republic twenty-seven years for which it is now being made to answer, nay, being made to suffer financial
losses.
It should also be noted that petitioner is unquestionably a buyer in good faith and for value, having
acquired the property in 1963, or 5 years after the issuance of the original certificate of title, as a third
transferee.

If only not to do violence and to give some measure of respect to the Torrens System,

petitioner must be afforded some measure of protection.

One more point.
Since the portion in dispute now forms part of the property owned and administered by the Bases
Conversion and Development Authority, it is alienable and registerable real property.
We find it unnecessary to rule on the other matters raised by the herein parties.
WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October 4, 1999
of the Regional Trial Court of the First National Judicial Region (Branch 26, San Fernando, La Union) in Civil
Case No.

6346 entitled Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et. al.,

Defendants as well as the resolutions promulgated on November 4, 1999 and May 23, 2000 by the Court
of Appeals (Twelfth Division) in CA-G. R. SP No.

55535 entitled Shipside, Inc., Petitioner versus Hon.

Alfredo Cajigal, as Judge, RTC, San Fernando, La Union, Branch 26, and the Republic of the Philippines,
Respondents are hereby reversed and set aside.

The complaint in Civil Case No. 6346, Regional Trial

Court, Branch 26, San Fernando City, La Union entitled Republic of the Philippines, Plaintiff, versus Heirs
of Rafael Galvez, et al." is ordered dismissed, without prejudice to the filing of an appropriate action by
the Bases Development and Conversion Authority.
SO ORDERED.
Panganiban, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ. , concur.
Vitug, J. , Please see separate opinion.
SEPARATE OPINION
VITUG, J.:
I find no doctrinal difficulty in adhering to the draft ponencia written by our esteemed Chairman.

Mr.

Justice JARM, insofar as it declares that an action for revival of judgment is barred by extinctive

Page 167 of 319

prescription, if not brought within ten (10) years from the time the right of action accrues, pursuant to
Article 1144(3) of the New Civil Code.

It appears that the judgment in the instant case has become final

on 23 October 1973 or well more than two decades prior to the action for its revival instituted only in
1999.
With due respect, however, I still am unable to subscribe to the idea that prescription may not be invoked
by the government in this case upon the thesis that the transfer of Camp Wallace to the Bases Conversion
Development authority renders the Republic with no right or interest to protect and thus unqualified under
the rules of procedure to be the real party-in-interest.

While it is true that Republic Act 7227, otherwise

known as the Bases Conversion and Development Act of 1992, authorizes the transfer of the military
reservations and their extensions to the conversion Authority, the same, however, is basically for the
purpose of accelerating the sound and balanced conversion of these military reservations into alternative
productive uses and to enhance the benefits to be derived from such property as a measure of promoting
the economic and social development, particularly, of Central Luzon and, in general, the countrys goal for
enhancement.i[1] The transfer of these military reservations to the Conversion Authority does not amount
to an abdication on the part of the Republic of its interests but simply a recognition of the need to create a
body corporate which will act as its agent for the realization of its program specified in the Act.

It ought

to follow that the Republic remains to be the real party-in-interest and the Conversion authority being
merely its agent.
In E. B. Marcha Transport Co. , Inc. vs. Intermediate Appellate Court, ii[2] the Court succinctly resolved
the issue of whether or not the Republic of the Philippines would be a proper party to sue for the recovery
of possession of property which at time of the institution of the suit was no longer being held by the
national government but by the Philippine Ports Authority.

The Court ruled:

More importantly, as we see it, dismissing the complaint on the ground that the Republic of the
Philippines is not the proper party would result in needless delay in the settlement of this matter and also
in derogation of the policy against multiplicity of suits.

Such a decision would require the Philippine Ports

Authority to refile the very same complaint already proved by the Republic of the Philippines and bring
back the parties as it were to square one.
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as
principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the
latter as its agent. We may presume that, by doing so, the republic of the Philippines did not intend to
retain the said rentals for its own use, considering that by its voluntary act it had transferred the land in
question to the Philippine Ports authority effective July 11, 1974.

The Republic of the Philippines had

simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the disputed property it
continues to recognize. We may expect then that the said rentals, once collected by the Republic of the
Philippines, shall be turned over by it to the Philippine Ports Authority conformably to the purposes of P. D.
No. 857."

Page 168 of 319

There would seem to be no cogent reason for ignoring that rationale specially when taken in light of the
fact that the original suit for cancellation of title of petitioners predecessor-in-interest was commenced by
the Republic itself, and it was only in 1992 that the subject military camp was transferred to the
Conversion Authority.

i[1] Section 2, Republic Act 7227.

ii[2] 147 SCRA 276.

C. State Immunity [See also] Act 3083, CA 327, PD 1807, Art. 2180 of Civil Code
ACT NO. 3083 - AN ACT DEFINING THE CONDITIONS UNDER WHICH THE GOVERNMENT
OF THE PHILIPPINE ISLANDS MAY BE SUED
Section 1. Complaint against Government. Subject to the provisions of this Act, the
Government of the Philippine Islands hereby consents and submits to be sued upon any moneyed
claim involving liability arising from contract, expressed or implied, which could serve as a basis of
civil action between private parties.

Sec. 2. A person desiring to avail himself of the privilege herein conferred must show that he has
presented his claim to the Insular Auditor 1 and that the latter did not decide the same within two
months from the date of its presentation.
Sec. 3. Venue. Original actions brought pursuant to the authority conferred in this Act shall be
instituted in the Court of First Instance of the City of Manila or of the province were the claimant
resides, at the option of the latter, upon which court exclusive original jurisdiction is hereby
conferred to hear and determine such actions.
Sec. 4. Actions instituted as aforesaid shall be governed by the same rules of procedure, both
original and appellate, as if the litigants were private parties.
Sec. 5. When the Government of the Philippine Island is plaintiff in an action instituted in any
court of original jurisdiction, the defendant shall have the right to assert therein, by way of set-off
or counterclaim in a similar action between private parties.
Sec. 6. Process in actions brought against the Government of the Philippine Islands pursuant to
the authority granted in this Act shall be served upon the Attorney-General 2 whose duty it shall
be to appear and make defense, either himself or through delegates.
Sec. 7. Execution. No execution shall issue upon any judgment rendered by any court against
the Government of the Philippine Islands under the provisions of this Act; but a copy thereof duly
certified by the clerk of the Court in which judgment is rendered shall be transmitted by such clerk
to the Governor-General, 3 within five days after the same becomes final.

Sec. 8. Transmittal of Decision. The Governor-General, 4 at the commencement of each regular

session of the Legislature, 5 shall transmit to that body for appropriate action all decisions so
received by him, and if said body determine that payment should be made, it shall appropriate the
sum which the Government has been sentenced to pay, including the same in the appropriations
for the ensuing year.
Sec. 9. This Act shall take effect on its approval.
Approved: March 16, 1923.
Footnotes
1. Now Auditor-General.
2. Now Solicitor-General.
3. Now President of the Philippines.
4. Id.
5. Now Congress.
COMMONWEALTH ACT NO. 327 - AN ACT FIXING THE TIME WITHIN WHICH THE
AUDITOR GENERAL SHALL RENDER HIS DECISIONS AND PRESCRIBING THE MANNER OF
APPEAL THEREFROM

Section 1. In all cases involving the settlement of accounts or claims, other than those of
accountable officers, the Auditor General shall act and decide the same within sixty days,
exclusive of Sundays and holidays, after their presentation. If said accounts or claims need
reference to other persons, office or offices, or to a party interested, the period aforesaid shall be
counted from the time the last comment necessary to a proper decision is received by him. With
respect to the accounts of accountable officers, the Auditor General shall act on the same within
one hundred days after their submission, Sundays and holidays excepted.
In case of accounts or claims already submitted to but still pending decision by the Auditor
General on or before the approval of this Act, the periods provided in this section shall commence
from the date of such approval.
Section2. The party aggrieved by the final decision of the Auditor General in the settlement of an
account for claim may, within thirty days from receipt of the decision, take an appeal in writing:

(a) To the President of the United States, pending the final and complete withdrawal of her
sovereignty over the Philippines, or
(b) To the President of the Philippines, or
(c) To the Supreme Court of the Philippines if the appellant is a private person or entity.
If there are more than one appellant, all appeals shall be taken to the same authority resorted to
by the first appellant.
From a decision adversely affecting the interests of the Government, the appeal may be taken by
the proper head of the department or in case of local governments by the head of the office or
branch of the Government immediately concerned.
The appeal shall specifically set forth the particular action of the Auditor General to which
exception is taken with the reasons and authorities relied on for reversing such decision.
Section3. This Act shall take effect upon its approval.
Approved: June 18. 1938.
PRESIDENTIAL DECREE No. 1807
PRESCRIBING THE PROCEDURE WHEREBY THE REPUBLIC OF THE PHILIPPINES MAY
WAIVE SOVEREIGN IMMUNITY FROM SUIT AND OTHER LEGAL PROCEEDING WITH
RESPECT TO ITSELF OR ITS PROPERTY IN CONNECTION WITH FOREIGN OBLIGATIONS
CONTRACTED BY IT PURSUANT TO LAW
WHEREAS, in the pursuit of economic growth and development, it has become imperative for the
Republic of the Philippines to enter into contracts or transactions with international banking,
financial and other foreign enterprises;
WHEREAS, recognizing this need, existing legislation expressly authorize the Republic of the
Philippines to contract foreign obligations, including borrowings in foreign currency, and to
guarantee foreign obligations of corporations and other entities owned or controlled by the
Government of the Philippines;
WHEREAS, circumstances in the international market may require that sovereign states entering
into contracts or transactions make express waivers of sovereign immunity in connection with
such contracts or transactions;

WHEREAS, it is in the national interest that a procedure be prescribed with respect to the waiver
of sovereign immunity of the Republic of the Philippines in respect of international contracts or
transactions entered into by it;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby order and decree:
Section 1. Procedure for, and Conditions of, Waiver of Sovereign Immunity. In instances where
the law expressly authorizes the Republic of the Philippines to contract or incur a foreign
obligation, it may consent to be sued in connection therewith. The President of the Philippines or
his duly designated representative may, in behalf of the Republic of the Philippines, contractually
agree to waive any claim to sovereign immunity from suit or legal proceedings and from set-off,
attachment or executive with respect to its property, and to be sued in any appropriate jurisdiction
in regard to such foreign obligation.
For purposes of this decree, a foreign obligation means any direct, indirect, or contingent
obligation or liability capable of pecuniary estimation and payable in a currency other than
Philippine currency.
Section 2. Validity of existing Waivers. Nothing in this Decree shall be construed to revoke or
repeal any waiver of sovereign immunity from suit or legal proceedings or from set-off,
attachment or execution granted under or pursuant to other provisions of law.
Section 3. Effectivity. This Decree shall take effect immediately.
Done in the City of Manila, this 16th day of January in the year of Our Lord, nineteen hundred and
eighty-one.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on

the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which case
what is provided in Article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused
by their pupils and students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (1903a)

1. Merritt v. Government, 34 Phil. 311 (1916)

EN BANC
G.R. No. L-11154 March 21, 1916
E.

MERRITT, Plaintiff-Appellant ,

vs. GOVERNMENT

OF

THE

PHILIPPINE

ISLANDS, Defendant-Appellant.
TRENT, J.:
This is an appeal by both parties from a judgment of the Court of First Instance of the City of
Manila in favor of the plaintiff for the sum of P14,741, together with the costs of the cause.
Counsel for the plaintiff insist that the trial court erred (1) in limiting the general damages which
the plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint, and (2) in
limiting the time when plaintiff was entirely disabled to two months and twenty-one days and
fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint.

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding
that the collision between the plaintiffs motorcycle and the ambulance of the General Hospital was
due to the negligence of the chauffeur; (b) in holding that the Government of the Philippine
Islands is liable for the damages sustained by the plaintiff as a result of the collision, even if it be
true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment
against the defendant for the sum of P14,741.
The trial courts findings of fact, which are fully supported by the record, are as follows:
It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a
motorcycle, was going toward the western part of Calle Padre Faura, passing along the west side
thereof at a speed of ten to twelve miles an hour, upon crossing Taft Avenue and when he was ten
feet from the southwestern intersection of said streets, the General Hospital ambulance, upon
reaching said avenue, instead of turning toward the south, after passing the center thereof, so
that it would be on the left side of said avenue, as is prescribed by the ordinance and the Motor
Vehicle Act, turned suddenly and unexpectedly and long before reaching the center of the street,
into the right side of Taft Avenue, without having sounded any whistle or horn, by which
movement it struck the plaintiff, who was already six feet from the southwestern point or from the
post place there.
By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr.
Saleeby, who examined him on the very same day that he was taken to the General Hospital, he
was suffering from a depression in the left parietal region, a wound in the same place and in the
back part of his head, while blood issued from his nose and he was entirely unconscious.
The marks revealed that he had one or more fractures of the skull and that the grey matter and
brain has had suffered material injury. At ten oclock of the night in question, which was the time
set for performing the operation, his pulse was so weak and so irregular that, in his opinion, there
was little hope that he would live. His right leg was broken in such a way that the fracture
extended to the outer skin in such manner that it might be regarded as double and then would be
exposed to infection, for which reason it was of the most serious nature.
At another examination six days before the day of the trial, Dr. Saleeby noticed that the plaintiffs
leg showed a contraction of an inch and a half and a curvature that made his leg very weak and
painful at the point of the fracture. Examination of his head revealed a notable readjustment of
the functions of the brain and nerves. The patient apparently was slightly deaf, had a light
weakness in his eyes and in his mental condition. This latter weakness was always noticed when
the plaintiff had to do any difficult mental labor, especially when he attempted to use his money

for mathematical calculations.

According to the various merchants who testified as witnesses, the plaintiffs mental and physical
condition prior to the accident was excellent, and that after having received the injuries that have
been discussed, his physical condition had undergone a noticeable depreciation, for he had lost
the agility, energy, and ability that he had constantly displayed before the accident as one of the
best constructors of wooden buildings and he could not now earn even a half of the income that
he had secured for his work because he had lost 50 per cent of his efficiency. As a contractor, he
could no longer, as he had before done, climb up ladders and scaffoldings to reach the highest
parts of the building.
As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he
had to dissolve the partnership he had formed with the engineer. Wilson, because he was
incapacitated from making mathematical calculations on account of the condition of his leg and of
his mental faculties, and he had to give up a contract he had for the construction of the Uy Chaco
building.
We may say at the outset that we are in full accord with the trial court to the effect that the
collision between the plaintiffs motorcycle and the ambulance of the General Hospital was due
solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in question by the
plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the P2,666, the
amount allowed for the loss of wages during the time the plaintiff was incapacitated from pursuing
his occupation. We find nothing in the record which would justify us in increasing the amount of
the first. As to the second, the record shows, and the trial court so found, that the plaintiffs
services as a contractor were worth P1,000 per month. The court, however, limited the time to
two months and twenty-one days, which the plaintiff was actually confined in the hospital. In this
we think there was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in the hospital only two
months and twenty-one days while the remainder of the six months was spent in his home, would
not prevent recovery for the whole time. We, therefore, find that the amount of damages
sustained by the plaintiff, without any fault on his part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent or employee of the
Government, the inquiry at once arises whether the Government is legally liable for the damages
resulting therefrom.

Act No. 2457, effective February 3, 1915, reads:

An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands and
authorizing the Attorney-General of said Islands to appear in said suit.
Whereas a claim has been filed against the Government of the Philippine Islands by Mr. E. Merritt,
of Manila, for damages resulting from a collision between his motorcycle and the ambulance of the
General Hospital on March twenty-fifth, nineteen hundred and thirteen;
Whereas it is not known who is responsible for the accident nor is it possible to determine the
amount of damages, if any, to which the claimant is entitled; and
Whereas the Director of Public Works and the Attorney-General recommended that an Act be
passed by the Legislature authorizing Mr. E. Merritt to bring suit in the courts against the
Government, in order that said questions may be decided: Now, therefore, c
By authority of the United States, be it enacted by the Philippine Legislature, that:
SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of the city of
Manila against the Government of the Philippine Islands in order to fix the responsibility for the
collision between his motorcycle and the ambulance of the General Hospital, and to determine the
amount of the damages, if any, to which Mr. E. Merritt is entitled on account of said collision, and
the Attorney-General of the Philippine Islands is hereby authorized and directed to appear at the
trial on the behalf of the Government of said Islands, to defendant said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it
also concede its liability to the plaintiff? If only the former, then it cannot be held that the Act
created any new cause of action in favor of the plaintiff or extended the defendants liability to any
case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an individual without its
consent. It is also admitted that the instant case is one against the Government. As the consent of
the Government to be sued by the plaintiff was entirely voluntary on its part, it is our duty to look
carefully into the terms of the consent, and render judgment accordingly.

The plaintiff was authorized to bring this action against the Government in order to fix the
responsibility for the collision between his motorcycle and the ambulance of the General Hospital
and to determine the amount of the damages, if any, to which Mr. E. Merritt is entitled on account
of said collision, . . . . These were the two questions submitted to the court for determination.
The Act was passed in order that said questions may be decided. We have decided that the
accident was due solely to the negligence of the chauffeur, who was at the time an employee of
the defendant, and we have also fixed the amount of damages sustained by the plaintiff as a
result of the collision. Does the Act authorize us to hold that the Government is legally liable for
that amount? If not, we must look elsewhere for such authority, if it exists.
The Government of the Philippine Islands having been modeled after the Federal and State
Governments in the United States, we may look to the decisions of the high courts of that country
for aid in determining the purpose and scope of Act No. 2457.
In the United States the rule that the state is not liable for the torts committed by its officers or
agents whom it employs, except when expressly made so by legislative enactment, is well settled.
The Government, says Justice Story, does not undertake to guarantee to any person the fidelity
of the officers or agents whom it employs, since that would involve it in all its operations in
endless embarrassments, difficulties and losses, which would be subversive of the public interest.
(Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed.,
199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the
state for personal injuries received on account of the negligence of the state officers at the state
fair, a state institution created by the legislature for the purpose of improving agricultural and
kindred industries; to disseminate information calculated to educate and benefit the industrial
classes; and to advance by such means the material interests of the state, being objects similar to
those sought by the public school system. In passing upon the question of the states liability for
the negligent acts of its officers or agents, the court said:
No claim arises against any government is favor of an individual, by reason of the misfeasance,
laches, or unauthorized exercise of powers by its officers or agents. (Citing Gibbons vs. U. S., 8
Wall., 269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St.
Rep., 203; Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the state where the cause
of action arises out of either tort or contract, the rule is stated in 36 Cyc., 915, thus:

By consenting to be sued a state simply waives its immunity from suit. It does not thereby
concede its liability to plaintiff, or create any cause of action in his favor, or extend its liability to
any cause not previously recognized. It merely gives a remedy to enforce a preexisting liability
and submits itself to the jurisdiction of the court, subject to its right to interpose any lawful
defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of
1913, which authorized the bringing of this suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha
County, Wisconsin, to bring suit in such court or courts and in such form or forms as he may be
advised for the purpose of settling and determining all controversies which he may now have with
the State of Wisconsin, or its duly authorized officers and agents, relative to the mill property of
said George Apfelbacher, the fish hatchery of the State of Wisconsin on the Bark River, and the
mill property of Evan Humphrey at the lower end of Nagawicka Lake, and relative to the use of the
waters of said Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of
the state for the acts of its officers, and that the suit now stands just as it would stand between
private parties. It is difficult to see how the act does, or was intended to do, more than remove
the states immunity from suit. It simply gives authority to commence suit for the purpose of
settling plaintiffs controversies with the estate. Nowhere in the act is there a whisper or
suggestion that the court or courts in the disposition of the suit shall depart from well established
principles of law, or that the amount of damages is the only question to be settled. The act
opened the door of the court to the plaintiff. It did not pass upon the question of liability, but left
the suit just where it would be in the absence of the states immunity from suit. If the Legislature
had intended to change the rule that obtained in this state so long and to declare liability on the
part of the state, it would not have left so important a matter to mere inference, but would have
done so in express terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8
L. R. A., 399.)
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and
considered, are as follows:
All persons who have, or shall hereafter have, claims on contract or for negligence against the
state not allowed by the state board of examiners, are hereby authorized, on the terms and

conditions herein contained, to bring suit thereon against the state in any of the courts of this
state of competent jurisdiction, and prosecute the same to final judgment. The rules of practice in
civil cases shall apply to such suits, except as herein otherwise provided.
And the court said:
This statute has been considered by this court in at least two cases, arising under different facts,
and in both it was held that said statute did not create any liability or cause of action against the
state where none existed before, but merely gave an additional remedy to enforce such liability as
would have existed if the statute had not been enacted. (Chapman vs. State, 104 Cal., 690; 43
Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior court jurisdiction of all claims
against the commonwealth, whether at law or in equity, with an exception not necessary to be
here

mentioned.

In

construing

this

statute

the

court,

in Murdock

Grate

Co.

vs.

Commonwealth (152 Mass., 28), said:

The statute we are discussing disclose no intention to create against the state a new and
heretofore unrecognized class of liabilities, but only an intention to provide a judicial tribunal
where well recognized existing liabilities can be adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the
statute of New York, jurisdiction of claims for damages for injuries in the management of the
canals such as the plaintiff had sustained, Chief Justice Ruger remarks: It must be conceded that
the state can be made liable for injuries arising from the negligence of its agents or servants, only
by force of some positive statute assuming such liability.
It being quite clear that Act No. 2457 does not operate to extend the Governments liability to any
cause not previously recognized, we will now examine the substantive law touching the
defendants liability for the negligent acts of its officers, agents, and employees. Paragraph 5 of
article 1903 of the Civil Code reads:
The state is liable in this sense when it acts through a special agent, but not when the damage
should have been caused by the official to whom properly it pertained to do the act performed, in
which case the provisions of the preceding article shall be applicable.
The Supreme Court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by his fault
or negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person
obligated, by his own fault or negligence, takes part in the act or omission of the third party who
caused the damage. It follows therefrom that the state, by virtue of such provisions of law, is not
responsible for the damages suffered by private individuals in consequence of acts performed by
its employees in the discharge of the functions pertaining to their office, because neither fault nor
even negligence can be presumed on the part of the state in the organization of branches of public
service and in the appointment of its agents; on the contrary, we must presuppose all foresight
humanly possible on its part in order that each branch of service serves the general weal and that
of private persons interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a case where the state
acts as a judicial person capable of acquiring rights and contracting obligations. (Supreme Court of
Spain, January 7, 1898; 83 Jur. Civ., 24.)
That the Civil Code in Chapter 2, Title 16, Book 4, regulates the obligations which arise out of fault
or negligence; and whereas in the first article thereof. No. 1902, where the general principle is laid
down that where a person who by an act or omission causes damage to another through fault or
negligence, shall be obliged to repair the damage so done, reference is made to acts or omissions
of the persons who directly or indirectly cause the damage, the following articles refers to this
persons and imposes an identical obligation upon those who maintain fixed relations of authority
and superiority over the authors of the damage, because the law presumes that in consequence of
such relations the evil caused by their own fault or negligence is imputable to them. This legal
presumption gives way to proof, however, because, as held in the last paragraph of article 1903,
responsibility for acts of third persons ceases when the persons mentioned in said article prove
that they employed all the diligence of a good father of a family to avoid the damage, and among
these persons, called upon to answer in a direct and not a subsidiary manner, are found, in
addition to the mother or the father in a proper case, guardians and owners or directors of an
establishment or enterprise, the state, but not always, except when it acts through the agency of
a special agent, doubtless because and only in this case, the fault or negligence, which is the
original basis of this kind of objections, must be presumed to lie with the state.
That although in some cases the state might by virtue of the general principle set forth in Article
1902 respond for all the damage that is occasioned to private parties by orders or resolutions
which by fault or negligence are made by branches of the central administration acting in the
name and representation of the state itself and as an external expression of its sovereignty in the
exercise of its executive powers, yet said article is not applicable in the case of damages said to
have been occasioned to the petitioners by an executive official, acting in the exercise of his

powers, in proceedings to enforce the collections of certain property taxes owing by the owner of
the property which they hold in sublease.
That the responsibility of the state is limited by Article 1903 to the case wherein it acts through a
special agent (and a special agent, in the sense in which these words are employed, is one who
receives a definite and fixed order or commission, foreign to the exercise of the duties of his office
if he is a special official) so that in representation of the state and being bound to act as an agent
thereof, he executes the trust confided to him. This concept does not apply to any executive agent
who is an employee of the acting administration and who on his own responsibility performs the
functions which are inherent in and naturally pertain to his office and which are regulated by law
and the regulations. (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)
That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a
decision, among others, of the 18th of May, 1904, in a damage case, the responsibility of the state
is limited to that which it contracts through a special agent, duly empowered by a definite order or
commission to perform some act or charged with some definite purpose which gives rise to the
claim, and not where the claim is based on acts or omissions imputable to a public official charged
with some administrative or technical office who can be held to the proper responsibility in the
manner laid down by the law of civil responsibility. Consequently, the trial court in not so deciding
and in sentencing the said entity to the payment of damages, caused by an official of the second
class referred to, has by erroneous interpretation infringed the provisions of articles 1902 and
1903 of the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)
It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable,
according to the above quoted decisions of the Supreme Court of Spain, for the acts of its agents,
officers and employees when they act as special agents within the meaning of paragraph 5 of
article 1903, supra, and that the chauffeur of the ambulance of the General Hospital was not such
an agent.
For the foregoing reasons, the judgment appealed from must be reversed, without costs in this
instance. Whether the Government intends to make itself legally liable for the amount of damages
above set forth, which the plaintiff has sustained by reason of the negligent acts of one of its
employees, by legislative enactment and by appropriating sufficient funds therefor, we are not
called upon to determine. This matter rests solely with the Legislature and not with the courts.

2. United States of America v. Ruiz, 136 SCRA 487 (1985)

EN BANC
[ G.R. No. L-35645, May 22, 1985 ]
UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS AND
ROBERT GOHIER, PETITIONERS, VS. HON. V. M. RUIZ, PRESIDING JUDGE OF
BRANCH XV, COURT OF FIRST INSTANCE OF RIZAL AND ELIGIO DE GUZMAN &
CO., INC., RESPONDENTS.

This is a petition to review, set aside certain orders and restrain the respondent judge from trying
Civil Case No. 779-M of the defunct Court of First Instance of Rizal.
The factual background is as follows:
At times material to this case, the United States of America had a naval base in Subic, Zambales.
The base was one of those provided in the Military Bases Agreement between the Philippines and
the United States.
Sometime in May, 1972, the United States invited the submission of bids for the following
projects:
1. Repair fender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.
2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment,
NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines.
Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto,
the company received from the United States two telegrams requesting it to confirm its price
proposals and for the name of its bonding company. The company complied with the requests.
[In its complaint, the company alleges that the United States had accepted its bids because "A
request to confirm a price proposal confirms the acceptance of a bid pursuant to defendant United
States' bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested because
the

case

has

not

reached

the

trial

stage.]

In June, 1972, the company received a letter which was signed by William I. Collins, Director,
Contracts Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the
Navy of the United States, who is one of the petitioners herein. The letter said that the company
did not qualify to receive an award for the projects because of its previous unsatisfactory
performance rating on a repair contract for the sea wall at the boat landings of the U.S. Naval

Station in Subic Bay. The letter further said that the projects had been awarded to third parties.
In the abovementioned Civil Case No. 779-M, the company sued the United States of America and
Messrs. James E. Galloway, William I. Collins and Robert Gohier all members of the Engineering
Command of the U.S. Navy. The complaint is to order the defendants to allow the plaintiff to
perform the work on the projects and, in the event that specific performance was no longer
possible, to order the defendants to pay damages. The company also asked for the issuance of a
writ of preliminary injunction to restrain the defendants from entering into contracts with third
parties

for

work

on

the

projects.

The defendants entered their special appearance "for the purpose only of questioning the
jurisdiction of this court over the subject matter of the complaint and the persons of defendants,
the subject matter of the complaint being acts and omissions of the individual defendants as
agents of defendant United States of America, a foreign sovereign which has not given her
consent to this suit or any other suit for the causes of action asserted in the complaint. ( Rollo, p.
50.)
Subsequently the defendants filed a motion to dismiss the complaint which included an opposition
to the issuance of the writ of preliminary injunction. The company opposed the motion. The trial
court denied the motion and issued the writ. The defendants moved twice to reconsider but to no
avail. Hence the instant petition which seeks to restrain perpetually the proceedings in Civil Case
No. 779-M for lack of jurisdiction on the part of the trial court.
The petition is highly impressed with merit.
The traditional rule of State immunity exempts a State from being sued in the courts of another
State without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not petrified;
they are constantly developing and evolving. And because the activities of states have multiplied,
it has been necessary to distinguish them between sovereign and governmental acts (jure
imperii) and private, commercial and proprietary acts (jure gestionis). The result is that State
immunity now extends only to acts jure imperii. The restrictive application of State immunity is
now the rule in the United States, the United Kingdom and other states in western Europe. (See
Coquia and Defensor-Santiago, Public International Law, pp. 207-209 [1984].)
The respondent judge recognized the restrictive doctrine of State immunity when he said in his
Order denying the defendants' (now petitioners) motion: "A distinction should be made between a

strictly governmental function of the sovereign state from its private, proprietary or nongovernmental acts." (Rollo, p. 20.) However, the respondent judge also said: "It is the Court's
considered opinion that entering into a contract for the repair of wharves or shoreline is certainly
not a governmental function altho it may partake of a public nature or character. As aptly pointed
out by plaintiff's counsel in his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594
(1958)], and which this Court quotes with approval, viz.:
'It is however contended that when a sovereign state enters into a contract with a private person,
the state can be sued upon the theory that it has descended to the level of an individual from
which it can be implied that it has given its consent to be sued under the contract. x x x.
'x x x

xxx

xxx

.
'We agree to the above contention, and considering that the United States government, through
its agency at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous
labor services within the Subic Bay Area, a U.S. Naval Reservation, it is evident that it can bring
an action before our courts for any contractual liability that that political entity may assume under
the contract. The trial court, therefore, has jurisdiction to entertain this case x x x. '" (Rollo, pp.
20-21.)
The reliance placed on Lyons by the respondent judge is misplaced for the following reasons:
In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of
First Instance of Manila to collect several sums of money on account of a contract between
plaintiff and defendant. The defendant filed a motion to dismiss on the ground that the court had
no jurisdiction over defendant and over the subject matter of the action. The court granted the
motion on the grounds that:
(a) it had no jurisdiction over the defendant who did not give its consent to the suit; and (b)
plaintiff failed to exhaust the administrative remedies provided in the contract. The order of
dismissal was elevated to this Court for review.
In sustaining the action of the lower court, this Court said:
"It appearing in the complaint that appellant has not complied with the procedure laid down in
Article XXI of the contract regarding the prosecution of its claim against the United States
Government, or, stated differently, it has failed to first exhaust its administrative remedies against
said Government, the lower court acted properly in dismissing this case." (At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was
purely gratuitous and, therefore, obiter so that it has no value as an imperative authority.
The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level of an individual and can
thus be deemed to have tacitly given its consent to be sued only when it enters into business
contracts. It does not apply where the contract relates to the exercise of its sovereign functions.
In this case the projects are an integral part of the naval base which is devoted to the defense of
both the United States and the Philippines, indisputably a function of the government of the
highest order; they are not utilized for nor dedicated to commercial or business purposes.
That the correct test for the application of State immunity is not the conclusion of a contract by a
State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that
case the plaintiffs leased three apartment buildings to the United States of America for the use of
its military officials. The plaintiffs sued to recover possession of the premises on the ground that
the term of the leases had expired. They also asked for increased rentals until the apartments
shall

have

been

vacated.

The defendants who were armed forces officers of the United States moved to dismiss the suit for
lack of jurisdiction on the part of the court. The Municipal Court of Manila granted the motion to
dismiss; sustained by the Court of First Instance, the plaintiffs went to this Court for review on
certiorari. In denying the petition, this Court said:
"On the basis of the foregoing considerations we are of the belief and we hold that the real party
defendant in interest is the Government of the United States of America; that any judgment for
back or increased rentals or damages will have to be paid not by defendants Moore and Tillman
and their 64 co-defendants but by the said U.S. Government. On the basis of the ruling in the
case of Land vs. Dollar already cited, and on what we have already stated, the present action
must be considered as one against the U.S. Government. It is clear that the courts of the
Philippines including the Municipal Court of Manila have no jurisdiction over the present case for
unlawful detainer. The question of lack of jurisdiction was raised and interposed at the very
beginning of the action. The U.S. Government has not given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this is not only a case of a citizen
filing a suit against his own Government without the latter's consent but it is of a citizen filing an
action against a foreign government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule

are so elementary and of such general acceptance that we deem it unnecessary to cite authorities
in support thereof." (At p. 323.)
In Syquia, the United States concluded contracts with private individuals but the contracts
notwithstanding the United States was not deemed to have given or waived its consent to be sued
for the reason that the contracts were for jure imperii and not for jure gestionis.
WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set
aside and Civil Case No. 779-M is dismissed. Costs against the private respondent.
SO ORDERED.
[*]

He signed before he left.

3. Republic v. Sandiganbayan (2nd Division), 484 SCRA 119 (2006)

G.R. No. 129406
March 6, 2006
REPUBLIC OF THE PHILIPPINES represented by the PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT (PCGG), Petitioner, versus
SANDIGANBAYAN (SECOND DIVISION) and ROBERTO S. BENEDICTO, Respondents.

Before the Court is this petition for certiorari under Rule 65 of the Rules of Court to nullify
and set aside the March 28, 1995[1] and March 13, 1997[2] Resolutions of the Sandiganbayan,
Second Division, in Civil Case No. 0034, insofar as said resolutions ordered the Presidential
Commission on Good Government (PCGG) to pay private respondent Roberto S. Benedicto or his
corporations the value of 227 shares of stock of the Negros Occidental Golf and Country Club, Inc.
(NOGCCI) at P150,000.00 per share, registered in the name of said private respondent or his
corporations.
Civil Case No. 0034 entitled Republic of the Philippines, plaintiff, v. Roberto S. Benedicto,
et al., defendants, is a complaint for reconveyance, reversion, accounting, reconstitution and
damages. The case is one of several suits involving ill-gotten or unexplained wealth that petitioner

Republic, through the PCGG, filed with the Sandiganbayan against private respondent Roberto S.
Benedicto and others pursuant to Executive Order (EO) No. 14,[3] series of 1986.
Pursuant to its mandate under EO No. 1,[4] series of 1986, the PCGG issued writs placing
under sequestration all business enterprises, entities and other properties, real and personal,
owned or registered in the name of private respondent Benedicto, or of corporations in which he
appeared to have controlling or majority interest. Among the properties thus sequestered and
taken over by PCGG fiscal agents were the 227 shares in NOGCCI owned by private respondent
Benedicto and registered in his name or under the names of corporations he owned or controlled.
Following the sequestration process, PCGG representatives sat as members of the Board of
Directors of NOGCCI, which passed, sometime in October 1986, a resolution effecting a corporate
policy change. The change consisted of assessing a monthly membership due of P150.00 for
each NOGCCI share. Prior to this resolution, an investor purchasing more than one NOGCCI share
was exempt from paying monthly membership due for the second and subsequent shares that
he/she owned.
Subsequently, on March 29, 1987, the NOGCCI Board passed another resolution, this time
increasing the monthly membership due from P150.00 to P250.00 for each share.
As sequestrator of the 227 shares of stock in question, PCGG did not pay the
corresponding monthly membership due thereon totaling P2,959,471.00. On account thereof, the
227 sequestered shares were declared delinquent to be disposed of in an auction sale.
Apprised of the above development and evidently to prevent the projected auction sale of
the same shares, PCGG filed a complaint for injunction with the Regional Trial Court (RTC) of
Bacolod City, thereat docketed as Civil Case No. 5348. The complaint, however, was dismissed,
paving the way for the auction sale for the delinquent 227 shares of stock. On August 5, 1989, an
auction sale was conducted.
On November 3, 1990, petitioner Republic and private respondent Benedicto entered into a
Compromise Agreement in Civil Case No. 0034. The agreement contained a general release
clause[5] whereunder petitioner Republic agreed and bound itself to lift the sequestration on the
227 NOGCCI shares, among other Benedictos properties, petitioner Republic acknowledging that
it was within private respondent Benedictos capacity to acquire the same shares out of his income
from business and the exercise of his profession.[6] Implied in this undertaking is the recognition
by petitioner Republic that the subject shares of stock could not have been ill-gotten.

In a decision dated October 2, 1992, the Sandiganbayan approved the Compromise

Agreement and accordingly rendered judgment in accordance with its terms.
In the process of implementing the Compromise Agreement, either of the parties would,
from time to time, move for a ruling by the Sandiganbayan on the proper manner of implementing
or interpreting a specific provision therein.
On February 22, 1994, Benedicto filed in Civil Case No. 0034 a Motion for Release from
Sequestration and Return of Sequestered Shares/Dividends praying, inter alia, that his NOGCCI
shares of stock be specifically released from sequestration and returned, delivered or paid to
him as part of the parties Compromise Agreement in that case. In a Resolution[7] promulgated
on December 6, 1994, the Sandiganbayan granted Benedictos aforementioned motion but placed
the subject shares under the custody of its Clerk of Court, thus:
WHEREFORE, in the light of the foregoing, the said Motion for Release From
Sequestration and Return of Sequestered Shares/Dividends is hereby GRANTED
and it is directed that said shares/dividends be delivered/placed under the custody
of the Clerk of Court, Sandiganbayan, Manila subject to this Courts disposition.
On March 28, 1995, the Sandiganbayan came out with the herein first assailed
Resolution,[8] which clarified its aforementioned December 6, 1994 Resolution and directed the
immediate implementation thereof by requiring PCGG, among other things:
(b)

To deliver to the Clerk of Court the 227 sequestered shares of [NOGCCI]

registered in the name of nominees of ROBERTO S. BENEDICTO free from all
liens and encumbrances, or in default thereof, to pay their value at
P150,000.00 per share which can be deducted from [the Republics] cash
share in the Compromise Agreement. [Words in bracket added] (Emphasis
Supplied).

Owing to PCGGs failure to comply with the above directive, Benedicto filed in Civil Case
No. 0034 a Motion for Compliance dated July 25, 1995, followed by an Ex-Parte Motion for Early
Resolution dated February 12, 1996. Acting thereon, the Sandiganbayan promulgated yet another
Resolution[9] on February 23, 1996, dispositively reading:
WHEREFORE, finding merit in the instant motion for early resolution and considering
that, indeed, the PCGG has not shown any justifiable ground as to why it has not complied
with its obligation as set forth in the Order of December 6, 1994 up to this date and which

Order was issued pursuant to the Compromise Agreement and has already become final
and executory, accordingly, the Presidential Commission on Good Government is hereby
given a final extension of fifteen (15) days from receipt hereof within which to comply with
the Order of December 6, 1994 as stated hereinabove.
On April 1, 1996, PCGG filed a Manifestation with Motion for Reconsideration,[10] praying
for the setting aside of the Resolution of February 23, 1996. On April 11, 1996, private respondent
Benedicto filed a Motion to Enforce Judgment Levy. Resolving these two motions, the
Sandiganbayan, in its second assailed Resolution[11] dated March 13, 1997, denied that
portion of the PCGGs Manifestation with Motion for Reconsideration concerning the subject 227
NOGCCI shares and granted Benedictos Motion to Enforce Judgment Levy.
Hence, the Republics present recourse on the sole issue of whether or not the
public respondent Sandiganbayan, Second Division, gravely abused its discretion in holding that
the PCGG is at fault for not paying the membership dues on the 227 sequestered NOGCCI shares
of stock, a failing which eventually led to the foreclosure sale thereof.
The petition lacks merit.
To begin with, PCGG itself does not dispute its being considered as a receiver insofar as the
sequestered 227 NOGCCI shares of stock are concerned.[12] PCGG also acknowledges that as
such receiver, one of its functions is to pay outstanding debts pertaining to the sequestered entity
or property,[13] in this case the 227 NOGCCI shares in question. It contends, however, that
membership dues owing to a golf club cannot be considered as an outstanding debt for which
PCGG, as receiver, must pay. It also claims to have exercised due diligence to prevent the loss
through delinquency sale of the subject NOGCCI shares, specifically inviting attention to the
injunctive suit, i.e., Civil Case No. 5348, it filed before the RTC of Bacolod City to enjoin the
foreclosure sale of the shares.

The filing of the injunction complaint adverted to, without more, cannot plausibly tilt the
balance in favor of PCGG. To the mind of the Court, such filing is a case of acting too little and too
late. It cannot be over-emphasized that it behooved the PCGGs fiscal agents to preserve, like a
responsible father of the family, the value of the shares of stock under their administration. But
far from acting as such father, what the fiscal agents did under the premises was to allow the
element of delinquency to set in before acting by embarking on a tedious process of going to court
after the auction sale had been announced and scheduled.

The PCGGs posture that to the owner of the sequestered shares rests the burden of paying
the membership dues is untenable. For one, it lost sight of the reality that such dues are basically
obligations attached to the shares, which, in the final analysis, shall be made liable, thru
delinquency sale in case of default

in payment of the dues. For another, the PCGG as

sequestrator-receiver of such shares is, as stressed earlier, duty bound to preserve the value of
such shares. Needless to state, adopting timely measures to obviate the loss of those shares
forms part of such duty and due diligence.
The Sandiganbayan, to be sure, cannot plausibly be faulted for finding the PCGG liable for
the loss of the 227 NOGCCI shares. There can be no quibbling, as indeed the graft court so
declared in its assailed and related resolutions respecting the NOGCCI shares of stock, that
PCGGs fiscal agents, while sitting in the NOGCCI Board of Directors agreed to the amendment of
the rule pertaining to membership dues. Hence, it is not amiss to state, as did the Sandiganbayan,
that the PCGG-designated fiscal agents, no less, had a direct hand in the loss of the sequestered
shares through delinquency and their eventual sale through public auction. While perhaps anticlimactic to so mention it at this stage, the unfortunate loss of the shares ought not to have come
to pass had those fiscal agents prudently not agreed to the passage of the NOGCCI board
resolutions charging membership dues on shares without playing representatives.
Given the circumstances leading to the auction sale of the subject NOGCCI shares, PCGGs
lament about public respondent Sandiganbayan having erred or, worse still,

having gravely

abused its discretion in its determination as to who is at fault for the loss of the shares in question
can hardly be given cogency.
For sure, even if the Sandiganbayan were wrong in its findings, which does not seem to be
in this case, it is a well-settled rule of jurisprudence that certiorari will issue only to correct errors
of jurisdiction, not errors of judgment. Corollarily, errors of procedure or mistakes in the courts
findings and conclusions are beyond the corrective hand of certiorari.[14] The extraordinary writ
of certiorari may be availed only upon a showing, in the minimum, that the respondent tribunal or
officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion.[15]

The term grave abuse of discretion connotes capricious and whimsical exercise of
judgment as is equivalent to excess, or a lack of jurisdiction.[16] The abuse must be so patent
and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law as where the power is exercised in an

arbitrary and despotic manner by reason of passion or hostility.[17] Sadly, this is completely
absent in the present case. For, at bottom, the assailed resolutions of the Sandiganbayan did no
more than to direct PCGG to comply with its part of the bargain under the compromise agreement
it freely entered into with private respondent Benedicto. Simply put, the assailed resolutions of the
Sandiganbayan have firm basis in fact and in law.
Lest it be overlooked, the issue of liability for the shares in question had, as both public
and private respondents asserted, long

become

final

and executory. Petitioners narration of

facts in its present petition is even misleading as it conveniently fails to make reference to two
(2) resolutions issued by the Sandiganbayan. We refer to that courts resolutions of December 6,
1994[18] and February 23, 1996[19] as well as several intervening pleadings which served as
basis for the decisions reached therein. As it were, the present petition questions only and focuses
on the March 28, 1995[20] and March 13, 1997[21] resolutions, which merely reiterated and
clarified the graft courts underlying resolution of December 6, 1994. And to place matters in the
proper perspective, PCGGs failure to comply with the December 6, 1994 resolution prompted the
issuance of the clarificatory and/or reiteratory resolutions aforementioned.
In a last-ditch attempt to escape liability, petitioner Republic, through the PCGG, invokes
state immunity from suit.[22] As argued, the order for it to pay the value of the delinquent shares
would fix monetary liability on a government agency, thus necessitating the appropriation of public
funds to satisfy the judgment claim.[23] But, as private respondent Benedicto correctly countered,
the PCGG fails to take stock of one of the exceptions to the state immunity principle, i.e., when
the government itself is the suitor, as in Civil Case No. 0034. Where, as here, the State itself
is no less the plaintiff in the main case, immunity from suit cannot be effectively invoked.[24]
For, as jurisprudence teaches, when the State, through its duly authorized officers, takes the
initiative

in

suit

against

a private party, it thereby descends to the level of a private

individual and thus opens itself to whatever counterclaims or defenses the latter may have against
it.[25] Petitioner Republics act of filing its complaint in Civil Case No. 0034 constitutes a waiver
of its immunity from suit. Being itself the plaintiff in that case, petitioner Republic cannot set up
its immunity against private respondent Benedictos prayers in the same case.
In fact, by entering into a Compromise Agreement with private respondent

Benedicto,

petitioner Republic thereby stripped itself of its immunity from suit and placed itself in the
same level of its adversary. When the State enters into contract, through its officers or agents, in
furtherance of a legitimate aim and purpose and pursuant to constitutional legislative authority,
whereby mutual or reciprocal

benefits

accrue and rights and obligations arise therefrom, the

State may be sued even without its express consent, precisely

because

by entering into a

contract the sovereign descends to the level of the citizen. Its consent to be sued is implied from
the very act of entering into such contract,[26] breach of which on its part gives the
corresponding right to the other party to the agreement.
Finally, it is apropos to stress that the Compromise Agreement in Civil Case No. 0034
envisaged the immediate recovery of alleged ill-gotten wealth without further litigation by the
government, and buying peace on the part of the aging Benedicto.[27] Sadly, that stated
objective has come to naught as not only had the litigation continued to ensue, but, worse,
private respondent Benedicto passed away on May 15, 2000,[28] with the trial of Civil Case No.
0034 still in swing, so much so that the late Benedicto had to be substituted by the administratrix
of his estate.[29]
WHEREFORE, the instant petition is hereby DISMISSED.
SO ORDERED.

[1]
[2]
[3]

[4]

[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]

Penned by Associate Justice Romeo M. Escareal, with Associate Justices Minita Chico-Nazario
(now a member of this Court) and Roberto M. Lagman, concurring; Rollo, pp. 14-27.
Rollo, pp. 28-43.
Issued by then Pres. Corazon C. Aquino investing the Sandiganbayan exclusive and original
jurisdiction over cases involving the ill-gotten wealth of former President Ferdinand E. Marcos,
members of his immediate family, close relatives, subordinates, close and/or business
associates, dummies, agents and nominees.
Creating the PCGG to assist the President in the recovery of vast government resources
allegedly amassed by then former President Marcos, his immediate family, relatives and close
associates and defining its powers.
Par. II (a).
Petition, Rollo, p. 6.
Rollo, pp. 127-132, Annex 6 of Comment.
Rollo, pp. 14-27, Annex A of the Petition.
Rollo, pp. 138-139, Annex 9 of Comment.
Rollo, pp. 44-46, Annex C of the Petition.
Rollo, pp. 28-43, Annex B of the Petition.
Petition, Rollo, p. 7.
Id. at pp. 7-8, Petition, citing Bataan Shipyard & Engineering Co. v. PCGG, 150 SCRA 181
(1987).
Lee v. People, 393 SCRA 397 (2002).
Camacho v. Coresis, Jr., 387 SCRA 628 (2002).
Litton Mills, Inc. v. Galleon Trader, Inc., 163 SCRA 489 (1988).
Duero v. Court of Appeals, 373 SCRA 11 (2002).
See Note #7, supra.

[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]
[27]
[28]
[29]

See Note #9, supra.

See Note # 1, supra.
See Note #2, supra.
Reply, Rollo, p. 160; and Memorandum, Rollo, pp. 260-261.
Id., citing Garcia v. Chief of Staff, 16 SCRA 120 (1966).
Rejoinder, Rollo, pp. 169-170.
Froilan v. Pan Oriental Shipping Co., 95 Phil. 905, 912 (1954).
Santos v. Santos, 92 Phil. 281, 284 (1952).
March 28, 1995 Resolution of the Sandiganbayan; Rollo, p. 20.
Notice of death, Rollo, pp. 210-212.
Rollo, p. 228.

4. Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 18 SCRA 1120 (1966)
[ G.R. No. L-23139, December 17, 1966 ]
MOBIL

PHILIPPINES

EXPLORATION,

INC.,

PLAINTIFF-APPELLANT,

VS.

CUSTOMS

ARRASTRE SERVICE AND BUREAU OF CUSTOMS, DEFENDANTS-APPELLEES.

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November
of 1962, consigned to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port
of Manila on April 10, 1963, and was discharged to the custody of the Customs Arrastre Service,
the unit of the Bureau of Customs then handling arrastre operations therein. The Customs
Arrastre Service later delivered to the broker of the consignee three cases only of the shipment.
On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of
Manila against the Customs Arrastre Service and the Bureau of Customs to recover the value of
the undelivered case in the amount of P18,493.37 plus other damages.
On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not
being persons under the law, defendants cannot be sued.
After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the
ground that neither the Customs Arrastre Service nor the Bureau of Customs issuable. Plaintiff
appealed to Us from the order of dismissal.
Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the
facts stated.

Appellant contends that not all government entities are immune from suit; that defendant Bureau
of Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary
functions and as such can be sued by private individuals.
The Rules of Court, in Section 1, Rule 3, provide:
"SECTION 1. Who may be parties.Only natural or juridical persons or entities authorized by law
may be parties in a civil action."
Accordingly, a defendant in a civil suit must be (l) a natural person; (2) a juridical person or (3)
an entity authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function
unit, the Customs Arrastre Service, is a person. They are merely parts of the machinery of
Government. The Bureau of Customs is a bureau under the Department of Finance (Sec. 81,
Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau
of Customs, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex
"A" to Motion to Dismiss, pp. 13-15, Record on Appeal). It follows that the defendants herein
cannot be sued under the first two abovementioned categories of natural or juridical persons.
Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service,
the law thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the
nature of this function (arrastre service) is proprietary, not governmental. Thus, insofar as
arrastre operation is concerned, appellant would put defendants under the third category of
"entities authorized by law" to be sued. Stated differently, it is argued that while there is no law
expressly authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is
implied from its very power to render arrastre service at the Port of Manila, which, it is alleged,
amounts to the transaction of a private business.
The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff
and Customs Code, effective June 1, 1957), and it states:
"SEC. 1213. Receiving, Handling, Custody and Delivery of Articles. The Bureau of Customs shall
have exclusive supervision and control over the receiving, handling, custody and delivery of
articles on the wharves and piers at all ports of entry and in the exercise of its functions it is
nereby authorized to acquire, take over, operate and superintend such plants and facilities as may
"be necessary for the receiving, handling, custody and delivery of articles, and the convenience
and comfort of passengers and the handling of baggage, as well as to acquire fire protection
equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling,
custody and delivery of articles can be carried on by private parties with greater efficiency, the

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

Appropriations Act. Designed to meet the printing needs of the Government, it is primarily a
service bureau and, obviously, not engaged in business or occupation for pecuniary profit.
xxxx
"x x x Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot
be pretended that it is thereby an industrial or business concern. The additional work it executes
for private parties is merely incidental to its function, and although such work may be deemed
proprietary in character, there is no showing that the employees performing said proprietary
function are separate and distinct from those employed in its general governmental functions.
"Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau
of Printing cannot be sued. (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against
it, if it were to produce any effect, would actually be a suit, a ction or proceeding against the
Government itself, and the rule is settled that the Government cannot be sued without its consent,
much less over its objection. (See Metran vs. Paredes, 4-5 Off. Gaz. 2835; Angat River Irrigation
System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.)"
The situation here is not materially different. The Bureau of Customs, to repeat, is part of the
Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that
of the national government. Its primary function is governmental, that of assessing and collecting
lawful revenues from imported articles and all other tariff and customs duties, fees, charges, fines
and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident. For
practical reasons said revenues and customs duties can not be assessed and collected by simply
receiving the importer's or ship agent's or consignee's declaration of merchandise being imported
and imposing the duty provided in the Tariff law. Customs authorities and officers must see to it
that the declaration tallies with the merchandise actually landed. And this checking up requires
that the landed merchandise be hauled from the ship's side to a suitable place in the customs
premises to enable said customs officers to make it, that is, it requires arrastre operations. [1]
Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary
incident of the primary and governmental function of the Bureau of Customs, so that engaging in
the same does not necessarily render said Bureau liable to suit. For otherwise, it could not
perform its governmental function without necessarily exposing itself to suit. Sovereign immunity,
granted as to the end, should not be denied as to the necessary means to that end.
And herein lies the distinction between the present case and that of National Airports Corporation
v. Teodoro, 91 Phil. 203, on which appellant would rely. For there, the Civil Aeronautics

Administration was found to have for its prime reason for existence not a governmental but a
proprietary function, so that to it the latter was not a mere incidental function:
"Among the general powers of the Civil Aeronautics Administration are, under Section 3, to
execute contracts of any kind, to purchase property, and to grant concession rights, and under
Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories
and supplies, and rentals for the use of any property under its management.
"These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to
sue and be sued. The power to sue and be sued is implied from the power to transact private
business. x x x.
xxxxx
"The Civil Aeronautics Administration comes,under the category of a private entity. Although not a
body corporate it was created, like the National Airports Corporation, not to maintain a necessary
function of government, but to run what is essentially a business, even if revenues be not its
prime objective but rather the promotion of travel and the convenience of the travelling public. x x
x"
Regardless of the merits of the claim against it, the State, for obvious reasons of public policy,
cannot be sued without its consent. Plaintiff should have filed its present claim to the General
Auditing Office, it being for money, under the provisions of Commonwealth Act 327, which state
the conditions under which money claims against the Government may be filed.
It must be remembered that statutory provisions waiving State immunity from suit are strictly
construed and that waiver of immunity, being in derogation of sovereignty, will not be lightly
inferred. (49 Am. Jur., States, Territories and Dependencies, Sec. 96, p. 314; Petty v. TennesseeMissouri Bridge Com., 359 U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785.) From the provision authorizing
the Bureau of Customs to lease arrastre operations to private parties, We see no authority to sue
the said Bureau in the instances where it undertakes to conduct said operation itself. The Bureau
of Customs, acting as part of the machinery of the national government in the operation of the
arrastre service, pursuant to express legislative mandate and as a necessary incident of its prime
governmental function, is immune from suit, there being no statute to the contrary.
WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against
appellant.

SO ORDERED.
[1]

Associated Workers Union Case, supra.

5. Philippine National Bank v. Pabalan, 83 SCRA 595 (1978)

[ G.R. No. L-33112, June 15, 1978 ]
PHILIPPINE NATIONAL BANK, PETITIONER, VS. HON. JUDGE JAVIER PABALAN, JUDGE
OF THE COURT OF FIRST INSTANCE, BRANCH III, LA UNION, AGOO TOBACCO
PLANTERS

ASSOCIATION,

INC.,

PHILIPPINE

VIRGINIA

TOBACCO

ADMINISTRATION, AND PANFILO P. JIMENEZ, DEPUTY SHERIFF, LA UNION,

RESPONDENTS.
The reliance of petitioner Philippine National Bank in this certiorari and prohibition proceeding
against respondent Judge Javier Pabalan who issued a writ of execution, [1] followed thereafter by a
notice of garnishment of the funds of respondent Philippine Virginia Tobacco Administration, [2]
deposited with it, is on the fundamental constitutional law doctrine of non-suability of a state, it
being alleged that such funds are public in character. This is not the first time petitioner raised
that issue. It did so before in Philippine National Bank v. Court of Industrial Relations,[3] decided
only last January. It did not meet with success, this Court ruling in accordance with the two
previous cases of National Shipyard and Steel Corporation[4] and Manila Hotel Employees
Association v. Manila Hotel Company,[5] that funds of public corporations which can sue and be
sued were not exempt from garnishment. As respondent Philippine Virginia Tobacco Administration
is likewise a public corporation possessed of the same attributes, [6] a similar outcome is indicated.
This petition must be dismissed.
It is undisputed that the judgment against respondent Philippine Virginia Tobacco Administration
had reached the stage of finality. A writ of execution was, therefore, in order. It was accordingly
issued on December 17, 1970.[7] There was a notice of garnishment for the full amount mentioned
in such writ of execution in the sum of P12, 724.66. [8] In view of the objection, however, by
petitioner Philippine National Bank on the above ground, coupled with an inquiry as to whether or
not respondent Philippine Virginia Tobacco Administration had funds deposited with petitioner's La
Union branch, it was not until January 25, 1971 that the order sought to be set aside in this
certiorari proceeding was issued by respondent Judge. [9] Its dispositive portion reads as follows:
"Conformably with the foregoing, it is now ordered, in accordance with law, that sufficient funds of

the Philippine Virginia Tobacco Administration now deposited with the Philippine National Bank, La
Union Branch, shall be garnished and delivered to the plaintiff immediately to satisfy the Writ of
Execution for one-half of the amount awarded in the decision of November 16, 1970." [10] Hence
this certiorari and prohibition proceeding.
As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of nonsuability. It is to be admitted that under the present Constitution, what was formerly implicit as a
fundamental doctrine in constitutional law has been set forth in express terms: "The State may
not be sued without its consent." [11] If the funds appertained to one of the regular departments or
offices in the government, then, certainly, such a provision would be a bar to garnishment. Such is
not the case here. Garnishment would lie. Only last January, as noted in the opening paragraph of
this decision, this Court, in a case brought by the same petitioner precisely invoking such a
doctrine, left no doubt that the funds of public corporations could properly be made the object of a
notice of garnishment. Accordingly, this petition must fail.
1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was sought to be
justified on the failure of respondent Judge to set aside the notice of garnishment of funds
belonging to respondent Philippine Virginia Tobacco Administration. This excerpt from the
aforecited decision of Philippine National Bank v. Court of Industrial Relations makes manifest why
such an argument is far from persuasive: "The premise that the funds could be spoken of as
public in character may be accepted in the sense that the People's Homesite and Housing
Corporation was a government-owned entity. It does not follow though that they were exempt
from garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is
squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief Justice,
Concepcion: 'The allegation to the effect that the funds of the NASSCO are public funds of the
government, and that, as such, the same may not be garnished, attached or levied upon, is
untenable for, as a government-owned and controlled corporation, the NASSCO has a personality
of its own, distinct and separate from that of the Government. It has pursuant to Section 2 of
Executive Order No. 356, dated October 23, 1950 * * *, pursuant to which the NASSCO has been
established "all the powers of a corporation under the Corporation Law. . . ." Accordingly, it may
sue and be sued and may be subjected to court processes just like any other corporation (Section
13, Act No. 1459, as amended.)' . . . To repeat, the ruling was the appropriate remedy for the
prevailing party which could proceed against the funds of a corporate entity even if owned or
controlled by the government."[12]
2. The National Shipyard and Steel Corporation decision was not the first of its kind. The ruling
therein could be inferred from the judgment announced in Manila Hotel Employees Association v.

Manila Hotel Company, decided as far back as 1941.[13] In the language of its ponente, Justice
Ozaeta: "On the other hand, it is well-settled that when the government enters into commercial
business, it abandons its sovereign capacity and is to be treated like any other corporation. (Bank
of the United States v. Planters' Bank, 9 Wheat. 904, 6 L. ed. 244). By engaging in a particular
business thru the instrumentality of a corporation, the government divests itself pro hac vice of its
sovereign character, so as to render the corporation subject to the rules of law governing private
corporations."[14] It is worth mentioning that Justice Ozaeta could find support for such a
pronouncement from the leading American Supreme Court case of United States v. Planters' Bank,
[15]

with the opinion coming from the illustrious Chief Justice Marshall. It was handed down more

than one hundred fifty years ago, 1824 to be exact. It is apparent, therefore, that petitioner Bank
could not legally set forth as a bar or impediment to a notice of garnishment the doctrine of nonsuability.
WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.
Petition, Statement of Facts, par. 6, Annex A.
Ibid, par. 12, Annex S.
[3]
L-32667, January 31, 1978.
[4]
118 Phil. 782 (1963).
[5]
73 Phil. 374 (1941).
[6]
Cf. Philippine Virginia Tobacco Administration v. Court of Industrial Relations, L-32052, July 25,
1975, 65 SCRA 416.
[7]
Annex B to Petition.
[8]
Annex C to Petition.
[9]
Annex S to Petition.
[10]
Ibid, 11.
[11]
Article XV, Section 16, Constitution of the Philippines.
[12]
L-32667, January 31, 1978. The National Shipyard decision, as previously mentioned, was
promulgated in 1963 and reported in 118 Phil. 782.
[13]
73 Phil. 374.
[14]
Ibid, 388-389.
[15]
9 Wheat, 904, 6 L. ed. 244.
[1]
[2]

6. Ministerio v. Court of First Instance of Cebu, 40 SCRA 464 (1971)

G.R. No. L-31635 August 31, 1971

ANGEL MINISTERIO and ASUNCION SADAYA, Petitioners, vs. THE COURT OF FIRST
INSTANCE OF CEBU, Fourth Branch, Presided by the Honorable, Judge JOSE C.
BORROMEO, THE PUBLIC HIGHWAY COMMISSIONER, and THE AUDITOR GENERAL,

Respondents.
What is before this Court for determination in this appeal by certiorari to review a decision of the
Court of First Instance of Cebu is the question of whether or not plaintiffs, now petitioners,
seeking the just compensation to which they are entitled under the Constitution for the
expropriation of their property necessary for the widening of a street, no condemnation
proceeding having been filed, could sue defendants Public Highway Commissioner and the Auditor
General, in their capacity as public officials without thereby violating the principle of government
immunity from suit without its consent. The lower court, relying on what it considered to be
authoritative precedents, held that they could not and dismissed the suit. The matter was then
elevated to us. After a careful consideration and with a view to avoiding the grave inconvenience,
not to say possible injustice contrary to the constitutional mandate, that would be the result if no
such suit were permitted, this Court arrives at a different conclusion, and sustains the right of the
plaintiff to file a suit of this character. Accordingly, we reverse.chanroblesvirtualawlibrary
chanrobles virtual law library
Petitioners as plaintiffs in a complaint filed with the Court of First Instance of Cebu, dated April 13,
1966, sought the payment of just compensation for a registered lot, containing an area of 1045
square meters, alleging that in 1927 the National Government through its authorized
representatives took physical and material possession of it and used it for the widening of the
Gorordo Avenue, a national road, Cebu City, without paying just compensation and without any
agreement, either written or verbal. There was an allegation of repeated demands for the
payment of its price or return of its possession, but defendants Public Highway Commissioner and
the Auditor General refused to restore its possession. It was further alleged that on August 25,
1965, the appraisal committee of the City of Cebu approved Resolution No. 90, appraising the
reasonable and just price of Lot No. 647-B at P50.00 per square meter or a total price of
P52,250.00. Thereafter, the complaint was amended on June 30, 1966 in the sense that the
remedy prayed for was in the alternative, either the restoration of possession or the payment of
the just compensation.chanroblesvirtualawlibrary chanrobles virtual law library
In the answer filed by defendants, now respondents, through the then Solicitor General, now
Associate Justice, Antonio P. Barredo, the principal defense relied upon was that the suit in reality
was one against the government and therefore should be dismissed, no consent having been
shown. Then on July 11, 1969, the parties submitted a stipulation of facts to this effect: "That the
plaintiffs are the registered owners of Lot 647-B of the Banilad estate described in the Survey plan
RS-600 GLRO Record No. 5988 and more particularly described in Transfer Certificate of Title No.
RT-5963 containing an area of 1,045 square meters; That the National Government in 1927 took

possession of Lot 647-B Banilad estate, and used the same for the widening of Gorordo Avenue;
That the Appraisal Committee of Cebu City approved Resolution No. 90, Series of 1965 fixing the
price of Lot No. 647-B at P50.00 per square meter; That Lot No. 647-B is still in the possession of
the National Government the same being utilized as part of the Gorordo Avenue, Cebu City, and
that the National Government has not as yet paid the value of the land which is being utilized for
public use." 1 chanrobles virtual law library
The lower court decision now under review was promulgated on January 30, 1969. As is evident
from the excerpt to be cited, the plea that the suit was against the government without its
consent having been manifested met with a favorable response. Thus: "It is uncontroverted that
the land in question is used by the National Government for road purposes. No evidence was
presented whether or not there was an agreement or contract between the government and the
original owner and whether payment was paid or not to the original owner of the land. It may be
presumed that when the land was taken by the government the payment of its value was made
thereafter and no satisfactory explanation was given why this case was filed only in 1966. But
granting that no compensation was given to the owner of the land, the case is undoubtedly
against the National Government and there is no showing that the government has consented to
be sued in this case. It may be contended that the present case is brought against the Public
Highway Commissioner and the Auditor General and not against the National Government.
Considering that the herein defendants are sued in their official capacity the action is one against
the National Government who should have been made a party in this case, but, as stated before,
with its consent." 2 chanrobles virtual law library
Then came this petition for certiorari to review the above decision. The principal error assigned
would impugn the holding that the case being against the national government which was sued
without its consent should be dismissed, as it was in fact dismissed. As was indicated in the
opening paragraph of this opinion, this assignment of error is justified. The decision of the lower
court cannot stand. We shall proceed to explain why.chanroblesvirtualawlibrary chanrobles virtual
law library
1. The government is immune from suit without its consent. 3 Nor is it indispensable that it be the
party proceeded against. If it appears that the action, would in fact hold it liable, the doctrine calls
for application. It follows then that even if the defendants named were public officials, such a
principle could still be an effective bar. This is clearly so where a litigation would result in a
financial responsibility for the government, whether in the disbursements of funds or loss of
property. Under such circumstances, the liability of the official sued is not personal. The party that
could be adversely affected is government. Hence the defense of non-suability may be interposed.

chanrobles virtual law library

So it has been categorically set forth in Syquia v. Almeda Lopez: 5 "However, and this is important,
where the judgment in such a case would result not only in the recovery of possession of the
property in favor of said citizen but also in a charge against or financial liability to the
Government, then the suit should be regarded as one against the government itself, and,
consequently, it cannot prosper or be validly entertained by the courts except with the consent of
said Government." 6 chanrobles virtual law library
2. It is a different matter where the public official is made to account in his capacity as such for
acts contrary to law and injurious to the rights of plaintiff. As was clearly set forth by Justice
Zaldivar in Director of the Bureau of Telecommunications v. Aligean:

"Inasmuch as the State

authorizes only legal acts by its officers, unauthorized acts of government officials or officers are
not acts of the State, and an action against the officials or officers by one whose rights have been
invaded or violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said that an
action at law or suit in equity against a State officer or the director of a State department on the
ground that, while claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of authority which he
does not have, is not a suit against the State within the constitutional provision that the State
may not be sued without its consent." 8 chanrobles virtual law library
3. It would follow then that the prayer in the amended complaint of petitioners being in the
alternative, the lower court, instead of dismissing the same, could have passed upon the claim of
plaintiffs there, now petitioners, for the recovery of the possession of the disputed lot, since no
proceeding for eminent domain, as required by the then Code of Civil Procedure, was instituted.
However, as noted in Alfonso v. Pasay City,

10

this Court speaking through Justice Montemayor,

restoration would be "neither convenient nor feasible because it is now and has been used for
road purposes."

11

The only relief, in the opinion of this Court, would be for the government "to

make due compensation, ..."

12

It was made clear in such decision that compensation should have

been made "as far back as the date of the taking." Does it result, therefore, that petitioners would
be absolutely remediless since recovery of possession is in effect barred by the above decision? If
the constitutional mandate that the owner be compensated for property taken for public use

13

were to be respected, as it should, then a suit of this character should not be summarily
dismissed. The doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the
governing law at the time, a complaint would have been filed by it, and only upon payment of the

compensation fixed by the judgment, or after tender to the party entitled to such payment of the
amount fixed, may it "have the right to enter in and upon the land so condemned" to appropriate
the same to the public use defined in the judgment."

14

If there were an observance of procedural

regularity, petitioners would not be in the sad plaint they are now. It is unthinkable then that
precisely because there was a failure to abide by what the law requires, the government would
stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the
part of officialdom if the rule of law were to be maintained. It is not too much to say that when
the government takes any property for public use, which is conditioned upon the payment of just
compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of
a court. There is no thought then that the doctrine of immunity from suit could still be
appropriately invoked.

15

chanrobles virtual law library

Accordingly, the lower court decision is reversed so that the court may proceed with the complaint
and determine the compensation to which petitioners are entitled, taking into account the ruling in
the above Alfonso case: "As to the value of the property, although the plaintiff claims the present
market value thereof, the rule is that to determine due compensation for lands appropriated by
the Government, the basis should be the price or value at the time that it was taken from the
owner and appropriated by the Government."

16

chanrobles virtual law library

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

10 106 Phil. 1017 (1960).

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

7. Department of Health v. Phil. Pharmawealth, Inc., 518 SCRA 240 (2007)

[ G.R. No. 169304, March 13, 2007 ]
THE DEPARTMENT OF HEALTH, SECRETARY MANUEL M. DAYRIT, USEC. MA. MARGARITA
GALON

AND

USEC.

ANTONIO

M.

LOPEZ,

PETITIONERS,

VS.

PHIL.

PHARMAWEALTH, INC., RESPONDENT.

Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. SP No. 84457, to
wit: a) Decision[1] dated May 12, 2005 which affirmed the order issued by Judge Leoncio M.
Janolo, Jr. of the Regional Trial Court of Pasig City, Branch 264 denying petitioners' motion to
dismiss Civil Case No. 68208; and b) Resolution [2] dated August 9, 2005 which denied petitioners'
motion

for

reconsideration.

Phil. Pharmawealth, Inc. (respondent) is a domestic corporation engaged in the business of

manufacturing and supplying pharmaceutical products to government hospitals in the Philippines.

On December 22, 1998, then Secretary of Health Alberto G. Romualdez, Jr. issued Administrative
Order (A.O.) No. 27,[3] Series of 1998, outlining the guidelines and procedures on the accreditation
of government suppliers for pharmaceutical products.
A.O. No. 27 was later amended by A.O. No. 10, [4] Series of 2000, providing for additional
guidelines for accreditation of drug suppliers aimed at ensuring that only qualified bidders can
transact business with petitioner Department of Health (DOH). Part V of A.O. No. 10 reads, in
part:
1. Drug Manufacturer, Drug Trader and Drug Importer shall be allowed to apply for
accreditation.
2. Accreditation shall be done by the Central Office-Department of Health.
3. A separate accreditation is required for the drug suppliers and for their specific products.
xxxx
12. Only products accredited by the Committee shall be allowed to be procured by the DOH and
all other entities under its jurisdiction.[5] (Underscoring supplied)
On May 9, 2000[6] and May 29, 2000,[7] respondent submitted to petitioner DOH a request for the
inclusion of additional items in its list of accredited drug products, including the antibiotic
"Penicillin G Benzathine." Based on the schedule provided by petitioner DOH, it appears that
processing of and release of the result of respondent's request were due on September 2000, the
last month of the quarter following the date of its filing.

[8]

Sometime in September 2000, petitioner DOH, through petitioner Antonio M. Lopez, chairperson
of the pre-qualifications, bids and awards committee, issued an Invitation for Bids [9] for the
procurement of 1.2 million units vials of Penicilin G Benzathine (Penicilin G Benzathine contract).
Despite the lack of response from petitioner DOH regarding respondent's request for inclusion of
additional items in its list of accredited products, respondent submitted its bid for the Penicillin G
Benzathine contract. When the bids were opened on October 11, 2000, only two companies
participated, with respondent submitting the lower bid at P82.24 per unit, compared to
Cathay/YSS Laboratories' (YSS) bid of P95.00 per unit. In view, however, of the non-accreditation
of respondent's Penicillin G Benzathine product, the contract was awarded to YSS.

Respondent thus filed a complaint [10] for injunction, mandamus and damages with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order with the Regional
Trial Court of Pasig City praying, inter alia, that the trial court "nullify the award of the Penicillin G
Benzathine contract (IFB No. 2000-10-11

) to YSS Laboratories, Inc. and direct defendant DOH,

[14]

defendant Romualdez, defendant Galon and defendant Lopez to declare plaintiff Pharmawealth as
the lowest complying responsible bidder for the Benzathine contract, and that they accordingly
award the same to plaintiff company" and "adjudge defendants Romualdez, Galon and Lopez
liable, jointly and severally to plaintiff, for [the therein specified damages].

[11]

In their Comment,[12] petitioner DOH, Secretary Alberto Romualdez, Jr. who was later succeeded
by petitioner Secretary Manuel M. Dayrit, and individual petitioners Undersecretaries Margarita
Galon and Antonio Lopez argued for the dismissal of the complaint for lack of merit in view of the
express reservation made by petitioner DOH to accept or reject any or all bids without incurring
liability to the bidders, they positing that government agencies have such full discretion.
Petitioners subsequently filed a Manifestation and Motion [13] (motion to dismiss) praying for the
outright dismissal of the complaint based on the doctrine of state immunity. Additionally, they
alleged that respondent's representative was not duly authorized by its board of directors to file
the

complaint.

To petitioners' motion to dismiss, respondent filed its comment/opposition [14] contending, in the
main, that the doctrine of state immunity is not applicable considering that individual petitioners
are being sued both in their official and personal capacities, hence, they, not the state, would be
liable

for

damages.

By Order of December 8, 2003, the trial court [15] denied petitioners' motion to dismiss.
Their motion for reconsideration having been denied, [16] petitioners filed a petition for certiorari[17]
with the Court of Appeals, before which they maintained that the suit is against the state.
By the assailed Decision[18] of May 12, 2005, the Court of Appeals affirmed the trial court's Order.
And by Resolution of August 9, 2005, it denied petitioners' motion for reconsideration.
Hence, the instant petition for review which raises the sole issue of whether the Court of Appeals
erred in upholding the denial of petitioners motion to dismiss.

The petitition fails.

The suability of a government official depends on whether the official concerned was acting within
his official or jurisdictional capacity, and whether the acts done in the performance of official
functions will result in a charge or financial liability against the government. In the first case, the
Constitution itself assures the availability of judicial review,[19] and it is the official concerned who
should be impleaded as the proper party.

[20]

In its complaint, respondent sufficiently imputes grave abuse of discretion against petitioners in
their official capacity. Since judicial review of acts alleged to have been tainted with grave abuse
of discretion is guaranteed by the Constitution, it necessarily follows that it is the official
concerned who should be impleaded as defendant or respondent in an appropriate suit.

[21]

Moreover, part of the reliefs prayed for by respondent is the enjoinment of the implementation, as
well as the nullification of the award to YSS, the grant of which may not be enforced against
individual petitioners and their successors except in their official capacities as officials of the DOH.
[22]

As regards petitioner DOH, the defense of immunity from suit will not avail despite its being an
unincorporated agency of the government, for the only causes of action directed against it are
preliminary injunction and mandamus. Under Section 1, Rule 58 [23] of the Rules of Court,
preliminary injunction may be directed against a party or a court, agency or a person. Moreover,
the defense of state immunity from suit does not apply in causes of action which do not seek to
impose a charge or financial liability against the State.

[24]

As regards individual petitioners' suability for damages, the following discussion on the
applicability of the defense of state immunity from suit is relevant.
The rule that a state may not be sued without its consent, now embodied in Section 3, Article XVI
of the 1987 Constitution, is one of the generally accepted principles of international law, which we
have now adopted as part of the law of the land.

[25]

While the doctrine of state immunity appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. [26] The suit is regarded as one against the
state where satisfaction of the judgment against the officials will require the state itself to perform
a positive act, such as the appropriation of the amount necessary to pay the damages awarded

against

them.[27]

The rule, however, is not so all-encompassing as to be applicable under all circumstances. Shauf
v. Court of Appeals[28] elucidates:
It is a different matter where the public official is made to account in his capacity as such for acts
contrary to law and injurious to the rights of plaintiff. As was clearly set forth by Justice Zaldivar in
Director of the Bureau of Telecommunications, et al. vs. Aligaen, etc., et al.,[29] " Inasmuch as
the State authorizes only legal acts by its officers, unauthorized acts of government
officials or officers are not acts of the State, and an action against the officials or
officers by one whose rights have been invaded or violated by such acts, for the
protection of his rights, is not a suit against the State within the rule of immunity of the
State from suit. In the same tenor, it has been said that an action at law or suit in
equity against a State officer or the director of a State department on the ground that,
while claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of authority
which he does not have, is not a suit against the State within the constitutional
provision that the State may not be sued without its consent." The rationale for this ruling is
that the doctrine of state immunity cannot be used as an instrument for perpetrating an injustice.
(Emphasis and underscoring supplied)
Hence, the rule does not apply where the public official is charged in his official capacity for acts
that are unauthorized or unlawful and injurious to the rights of others. Neither does it apply where
the public official is clearly being sued not in his official capacity but in his personal capacity,
although the acts complained of may have been committed while he occupied a public position. [30]
In the present case, suing individual petitioners in their personal capacities for damages in
connection with their alleged act of "illegal[ly] abus[ing] their official positions to make sure that
plaintiff Pharmawealth would not be awarded the Benzathine contract [which act was] done in bad
faith and with full knowledge of the limits and breadth of their powers given by law" [31] is
permissible, in consonance with the foregoing principles. For an officer who exceeds the power
conferred on him by law cannot hide behind the plea of sovereign immunity and must bear the
liability personally.

[32]

It bears stressing, however, that the statements in the immediately foregoing paragraph in no way
reflect a ruling on the actual liability of petitioners to respondent. The mere allegation that a
government official is being sued in his personal capacity does not automatically remove the same
from the protection of the doctrine of state immunity. Neither, upon the other hand, does the

mere invocation of official character suffice to insulate such official from suability and liability for
an act committed without or in excess of his or her authority.[33] These are matters of evidence
which

should

be

presented

and

proven

at

the

trial.

WHEREFORE, the petition is DENIED. The assailed Decision dated May 12, 2005 and Resolution
dated August 9, 2005 issued by the Court of Appeals are AFFIRMED.
SO ORDERED.
[1]

CA rollo, pp. 186-197; penned by Associate Justice Monina Arevalo-Zenarosa and concurred in by
Associate Justices Remedios A. Salazar-Fernando and Rosmari D. Carandang.
[2]
Id. at 224-226.
[3]
Id. at 37-38.
[4]
Id. at 45-51.
[5]
Id. at 46-47.
[6]
Id. at 41-42.
[7]
Id. at 43-44.
[8]
Memorandum No. 125-A, s. 2000; RTC records, p. 33.
[9]
CA rollo, pp. 57-67.
[10]
RTC records, pp. 2-15.
[11]
Id. at 13-14.
[12]
Id. at 127-137.
[13]
Id. at 182-187.
[14]
Id. at 210-213.
[15]
Id. at 229-234.
[16]
Through Order dated March 15, 2004; Records, p. 255.
[17]
CA rollo, pp. 1-15.
[18]
Id. at 186-197.
[19]
Section 1, Article VIII of the 1987 Constitution.
[20]
See Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, G.R. No. 142362, May 3, 2006, 489 SCRA
22.
[21]
Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.
[22]
See Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.
[23]
Section 1. Preliminary injunction defined; classes. - A preliminary injunction is an order granted at
any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court,
agency or a person to refrain from a particular act or acts. It may also require the performance of a
particular act or acts, in which case it shall be know as a preliminary mandatory injunction.
[24]
Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, supra.
[25]
Shauf v. Court of Appeals, G.R. No. 90314, November 27, 1990, 191 SCRA 713 cited in United
States of America v. Reyes, G.R. No. 79253, March 1, 1993, 219 SCRA 192.
[26]
Ibid.
[27]
Shauf v. Court of Appeals, supra.
[28]
Id. at 727.
[29]
G.R. No. L-31135, May 29, 1970, 33 SCRA 368.
[30]
Lansang v. Court of Appeals, 383 Phil. 141 (2000).
[31]
RTC records, p. 11.

[32]

Festejo v. Fernando, 94 Phil. 504 (1954), as cited in Bernas, The Constitution of the Republic of the
Philippines: A Commentary 1275 (2003 ed.); See also Sanders v. Veridiano II, G.R. No. L-46930, June
10, 1988, 162 SCRA 88.
[33]
Sanders v. Veridiano II, supra.
8. Torio v. Fontanilla, 85 SCRA 599 (1978)
[ G.R. L- 29993, October 23, 1978 ]

LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN,

ALFONSO R. MAGSANOC, JESUS MACARANAS, MAXIMO MANANGAN,
FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, ALL
MEMBERS OF THE MUNICIPAL COUNCIL OF MALASIQUI IN 1959,
MALASIQUI, PANGASINAN, PETITIONERS, VS. ROSALINA, ANGELINA,
LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO,
NORMA, VIRGINIA, REMEDIOS AND ROBERTO, ALL SURNAMED
FONTANILLA, AND THE HONORABLE COURT OF APPEALS,
RESPONDENTS.
[G.R. L- 30183. OCTOBER 23, 1978]
MUNICIPALITY OF MALASIQUI, PETITIONER, VS. ROSALINA,
ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA,
ERNESTO, NORMA, VIRGINIA, REMEDIOS AND ROBERTO, ALL
SURNAMED FONTANILLA, AND THE HONORABLE COURT OF
APPEALS, RESPONDENTS.
These Petitions for review present the issue of whether or not the celebration of a town fiesta
authorized by a municipal council under Sec. 2282 of the Municipal Law as embodied in the
Revised Administrative Code is a governmental or a corporate or proprietary function of the
municipality.
A resolution of that issue will lead to another, viz: the civil liability for damages of the Municipality
of Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a
death which occurred during the celebration of the town fiesta on January 22, 1959, and which
was attributed to the negligence of the municipality and its council members.
The following facts are not in dispute:
On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed resolution No. 159
whereby "it resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and
23, 1959." Resolution No. 182 was also passed creating the "1959 Malasiqui Town Fiesta Executive
Committee" which in turn organized a subcommittee on entertainment and stage, with Jose

Macaraeg as Chairman. The council appropriated the amount of P100.00 for the construction of 2
stages, one for the "zarzuela" and another for the "cancionan". Jose Macaraeg supervised the
construction of the stage and as constructed the stage for the "zarzuela" was "5-1/2 meters by 8
meters in size, had a wooden floor high at the rear and was supported by 24 bamboo posts -- 4 in
a row in front, 4 in the rear and 5 on each side -- with bamboo braces."[1]
The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui
employees of the Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of
January 22 for the performance and one of the members of the group was Vicente Fontanilla. The
program started at about 10:15 o'clock that evening with some speeches, and many persons went
up the stage. The "zarzuela" then began but before the dramatic part of the play was reached, the
stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned underneath.
Fontanilla was taken to the San Carlos General Hospital where he died in the afternoon of the
following day.
The heirs of Vicente Fontanilla filed a complaint with the Court of First Instance of Manila on
September 11, 1959 to recover damages. Named party-defendants were the Municipality of
Malasiqui, the Municipal Council of Malasiqui and all the individual members of the Municipal
Council in 1959.
Answering the complaint defendant municipality invoked inter alia the principal defense that as a
legally and duly organized public corporation it performs sovereign functions and the holding of a
town fiesta was an exercise of its governmental functions from which no liability can arise to
answer for the negligence of any of its agents.
The defendant councilors in turn maintained that they merely acted as agents of the municipality
in carrying out the municipal ordinance providing for the management of the town fiesta
celebration and as such they are likewise not liable for damages as the undertaking was not one
for profit; furthermore, they had exercised due care and diligence in implementing the municipal
ordinance.[2]
After trial, the Presiding Judge, Hon. Gregorio T. Lantin, narrowed the issue to whether or not the
defendants exercised due diligence in the construction of the stage. From his findings he arrived
at the conclusion that the Executive Committee appointed by the municipal Council had exercised
due diligence and care like a good father of the family in selecting a competent man to construct a
stage strong enough for the occasion and that if it collapsed that was due to forces beyond the
control of the committee on entertainment, consequently, the defendants were not liable for
damages for the death of Vicente Fontanilla. The complaint was accordingly dismissed in a

decision dated July 10, 1962.[3]

The Fontanillas appealed to the Court of Appeals. In a decision promulgated on October 31, 1968,
the Court of Appeals through its Fourth Division composed at the time of Justices Salvador V.
Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered
all the defendants-appellees to pay jointly and severally the heirs of Vicente Fontanilla the sums of
P12,000.00 by way of moral and actual damages; P1,200.00 as attorney's fees; and the costs. [4]
The case is now before Us on various assignments of errors all of which center on the proposition
stated at the opening sentence of this Opinion and which We repeat:
Is the celebration of a town fiesta an undertaking in the exercise of a municipality's governmental
or public function or is it of a private or proprietary character?
1. Under Philippine laws municipalities are political bodies corporate and as such are endowed with
the faculties of municipal corporations to be exercised by and through their respective municipal
governments in conformity with law, and in their proper corporate name, they may, inter alia, sue
and be sued, and contract and be contracted with.[5]
The powers of a municipality are twofold in character - public, governmental, or political on the
one hand, and corporate, private, or proprietary on the other. Governmental powers are those
exercised by the corporation in administering the powers of the state and promoting the public
welfare and they include the legislative, judicial, public, and political. Municipal powers on the
other hand are exercised for the special benefit and advantage of the community and include
those which are ministerial, private and corporate.[6]
As to when a certain activity is governmental and when proprietary or private, that is generally a
difficult matter to determine. The evolution of the municipal law in American jurisprudence, for
instance, has shown that none of the tests which have evolved and are stated in textbooks have
set down a conclusive principle or rule, so that each case will have to be determined on the basis
of attending circumstances.
In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper
has .... a public character as regards the state at large insofar as it is its agent in government,
and private (so-called) insofar as it is to promote local necessities and conveniences for its own
community."[7]

Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of
Indiana in 1916, thus:
"Municipal corporations exist in a dual capacity, and their functions are twofold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental. Their officers and agents in such
capacity, though elected or appointed by them, are nevertheless public functionaries performing a
public service, and as such they are officers, agents, and servants of the state. In the other
capacity the municipalities exercise a private, proprietary or corporate right, arising from their
existence as legal persons and not as public agencies. Their officers and agents in the
performance of such functions act in behalf of the municipalities in their corporate or individual
capacity, and not for the state or sovereign power." (112 N.E., 994-995)
In the early Philippine case of Mendoza v. de Leon, 1916, the Supreme Court, through Justice
Grant T. Trent, relying mainly on American jurisprudence classified certain activities of the
municipality as governmental, e.g.: regulations against fire, disease, preservation of public peace,
maintenance of municipal prisons, establishment of schools, post-offices, etc., while the following
are corporate or proprietary in character, viz: municipal waterworks, slaughterhouses, markets,
stables, bathing establishments, wharves, ferries, and fisheries.[8] Maintenance of parks, golf
courses, cemeteries and airports among others, are also recognized as municipal or city activities
of a proprietary character.[9]
2. This distinction of powers becomes important for purposes of determining the liability of the
municipality for the acts of its agents which result in an injury to third persons.
If the injury is caused in the course of the performance of a governmental function or duty no
recovery, as a rule, can be had from the municipality unless there is an existing statute on the
matter,[10] nor from its officers, so long as they performed their duties honestly and in good faith
or that they did not act wantonly and maliciously.[11] In Palafox, et al. v. Province of Ilocos Norte,
et al., 1958, a truckddriver employed by the provincial government of Ilocos Norte ran over
Proceto Palafox in the course of his work at the construction of a road. The Supreme Court in
affirming the trial court's dismissal of the complaint for damages held that the province could not
be made liable because its employee was in the performance of a governmental function - the
construction and maintenance of roads - and however tragic and deplorable it may be, the death
of Palafox imposed on the province no duty to pay monetary consideration.[12]
With respect to proprietary functions, the settled rule is that a municipal corporation can be held
liable to third persons ex contractu[13] or ex delicto.[14]

"Municipal corporations are subject to be sued upon contracts and in tort. x x x

xxx xxx xxx
"The rule of law is a general one, that the superior or employer must answer civilly for the
negligence or want of skill of his agent or servant in the course or line of his employment, by
which another, who is free from contributory fault, is injured. Municipal corporations under the
conditions herein stated, fall within the operation of this rule of law, and are liable, accordingly, to
civil actions for damages when the requisite elements of liability coexist. xx xx" (Dillon on
Municipal Corporations, 5th ed. Secs. 1610, 1647, cited in Mendoza v. de Leon, supra, 514)
3. Coming to the case before Us, and applying the general tests given above, We hold that the
holding of the town fiesta in 1959 by the Municipality of Malasiqui, Pangasinan, was an exercise of
a private or proprietary function of the municipality.
Section 2282 of the Chapter on Municipal Law of the Revised Administrative Code provides:
"Section 2282. Celebration of fiestas. - A fiesta may be held in each municipality not oftener than
once a year upon a date fixed by the municipal council. A fiesta shall not be held upon any other
date than that lawfully fixed therefor, except when, for weighty reasons, such as typhoons,
inundations, earthquakes, epidemics, or other public calamities, the fiesta cannot be held in the
date fixed, in which case it may be held at a later date in the same year, by resolution of the
council."
This provision simply gives authority to the municipality to celebrate a yearly fiesta but it does not
impose upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a
religious or historical event of the town is in essence an act for the special benefit of the
community and not for the general welfare of the public performed in pursuance of a policy of the
state. The mere fact that the celebration, as claimed, was not to secure profit or gain but merely
to provide entertainment to the town inhabitants is not a conclusive test. For instance, the
maintenance of parks is not a source of income for the town, nonetheless it is a private
undertaking as distinguished from the maintenance of public schools, jails, and the like which are
for public service.
As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of
an undertaking or function of a municipality; the surrounding circumstances of a particular case
are to be considered and will be decisive. The basic element, however beneficial to the public the
undertaking may be, is that it is governmental in essence, otherwise, the function becomes

private or proprietary in character. Easily, no governmental or public policy of the state is involved
in the celebration of a town fiesta.[15]
4. It follows that under the doctrine of respondeat superior, petitioner municipality is to be held
liable for damages for the death of Vicente Fontanilla if that was attributable to the negligence of
the municipality's officers, employees, or agents.
"Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. x x x"
"Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one's
own acts or omission, but also for those of persons for whom one is responsible. x x x"
On this point, the Court of Appeals found and held that there was negligence.
The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now
petitioners), that a member of the "extravaganza troupe" removed two principal braces located on
the front portion of the stage and used them to hang the screen or "telon", and that when many
people went up the stage the latter collapsed. This testimony was not believed however by
respondent appellate court, and rightly so. According to said defendants, those two braces were
"mother" or "principal" braces located semi-diagonally from the front ends of the stage to the
front posts of the ticket booth located at the rear of the stage and were fastened with a bamboo
twine.[16] That being the case, it becomes incredible that any person in his right mind would
remove those principal braces and leave the front portion of the stage practically unsupported.
Moreover, if that did happen, there was indeed negligence as there was lack of supervision over
the use of the stage to prevent such an occurrence.
At any rate, the guitarist who was pointed to by Novado as the person who removed the two
bamboo braces denied having done so. The Court of Appeals said: "Amor by himself alone could
not have removed the two braces which must be about ten meters long and fastened them on top
of the stage for the curtain. The stage was only five and a half meters wide. Surely, it would be
impractical and unwieldy to use a ten meter bamboo pole, much more two poles, for the stage
curtain."[17]
The appellate court also found that the stage was not strong enough considering that only
P100.00 was appropriated for the construction of two stages and while the floor of the " zarzuela"
stage was of wooden planks, the posts and braces used were of bamboo material. We likewise
observe that although the stage was described by the petitioners as being supported by "24"

posts, nevertheless there were only 4 in front, 4 at the rear, and 5 on each side. Where were the
rest?
The Court of Appeals thus concluded:
"The court a quo itself attributed the collapse of the stage to the great number of onlookers who
mounted the stage. The municipality and/or its agents had the necessary means within its
command to prevent such an occurrence. Having failed to take the necessary steps to maintain
the safety of the stage for the use of the participants in the stage presentation prepared in
connection with the celebration of the town fiesta, particularly, in preventing nonparticipants or
spectators from mounting and accumulating on the stage which was not constructed to meet the
additional weight, the defendants-appellees were negligent and are liable for the death of Vicente
Fontanilla." (pp. 30-31, rollo, L-29993)
The findings of the respondent appellate court that the facts as presented to it establish
negligence as a matter of law and that the Municipality failed to exercise the due diligence of a
good father of the family, will not be disturbed by Us in the absence of a clear showing of an
abuse of discretion or a gross misapprehension of facts.[18]
Liability rests on negligence which is "the want of such care as a person of ordinary prudence
would exercise under the circumstances of the case."[19]
Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during
the town fiesta was a "donation" offered by an association of Malasiqui employees of the Manila
Railroad Co. in Caloocan, and that when the Municipality of Malasiqui accepted the donation of
services and constructed precisely a "zarzuela stage" for the purpose, the participants in the stage
show had the right to expect that the Municipality through its "Committee on entertainment and
stage" would build or put up a stage or platform strong enough to sustain the weight or burden of
the performance and take the necessary measures to insure the personal safety of the
participants.[20] We agree.
Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942,
which was an action against the city for injuries sustained from a fall when plaintiff was
descending the steps of the city auditorium. The city was conducting a "Know your City Week" and
one of the features was the showing of a motion picture in the city auditorium to which the
general public was invited and plaintiff Sanders was one of those who attended. In sustaining the
award for damages in favor of plaintiff, the District Court of Appeal, Second District, California,
held inter alia

that the "Know your City Week" was a "proprietary activity" and not a

"governmental one" of the city, that defendant owed to plaintiff, an "invitee", the duty of
exercising ordinary care for her safety, and plaintiff was entitled to assume that she would not be
exposed to a danger (which in this case consisted of lack of sufficient illumination of the premises)
that would come to her through a violation of defendant's duty.[21]
We can say that the deceased Vicente Fontanilla was similarly situated as Sanders. The
Municipality of Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a
committee in charge of the entertainment and stage; an association of Malasiqui residents
responded to the call for the festivities and volunteered to present a stage show; Vicente
Fontanilla was one of the participants who like Sanders had the right to expect that he would not
be exposed to danger on that occasion.
Lastly, petitioner or appellant Municipality cannot evade responsibility and/or liability under the
claim that it was Jose Macaraeg who constructed the stage. The Municipality acting through its
municipal council appointed Macaraeg as chairman of the sub-committee on entertainment and in
charge of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the
Municipality. Under the doctrine of respondeat superior mentioned earlier, petitioner is responsible
or liable for the negligence of its agent acting within his assigned tasks.[22]
"x x x when it is sought to render a municipal corporation liable for the act of servants or agents,
a cardinal inquiry is, whether they are the servants or agents of the corporation. If the corporation
appoints or elects them, can control them in the discharge of their duties, can continue or remove
them, can hold them responsible for the manner in which they discharge their trust, and if those
duties relate to the exercise of corporate powers, and are for the peculiar benefit of the
corporation in its local or special interest, they may justly be regarded as its agents or servants,
and the maxim of respondent superior applies." x x x (Dillon on Municipal Corporations, 5th Ed.,
Vol. IV, p. 2879)
5. The remaining question to be resolved centers on the liability of the municipal councilors who
enacted the ordinance and created the fiesta committee.
The Court of Appeals held the councilors jointly and solidarily liable with the municipality for
damages under Article 27 of the Civil Code which provides that "any person suffering material or
moral loss because a public servant or employee refuses or neglects, without just cause, to
perform his official duty may file an action for damages and other relief against the latter." [23]
In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling
that the holding of a town fiesta is not a governmental function and that there was negligence on

their part for not maintaining and supervising the safe use of the stage, in applying Article 27 of
the Civil Code against them, and in not holding Jose Macaraeg liable for the collapse of the stage
and the consequent death of Vicente Fontanilla.[24]
We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code
against them, for this particular article covers a case of non-feasance or nonperformance by a
public officer of his official duty; it does not apply to a case of negligence or misfeasance in
carrying out an official duty.
If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are
concerned, it is because of a plain error committed by respondent court which however is not
invoked in petitioners' brief.
In Miguel v. The Court of Appeals, et al., the Court, through Justice, now Chief Justice, Fred Ruiz
Castro, held that the Supreme Court is vested with ample authority to review matters not
assigned as errors in an appeal if it finds that their consideration and resolution are indispensable
or necessary in arriving at a just decision in a given case, and that this is authorized under Sec. 7,
Rule 51 of the Rules of Court. [25] We believe that this pronouncement can well be applied in the
instant case.
The Court of Appeals in its decision now under review held that the celebration of a town fiesta by
the Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal
consequence thereof is that the Municipality stands on the same footing as an ordinary private
corporation with the municipal council acting as its board of directors. It is an elementary principle
that a corporation has a personality, separate and distinct from its officers, directors, or persons
composing it[26] and the latter are not as a rule co-responsible in an action for damages for tort or
negligence (culpa aquiliana) committed by the corporation's employees or agents unless there is a
showing of bad faith or gross or wanton negligence on their part.[27]
xxx xxx xxx
"The ordinary doctrine is that a director, merely by reason of his office, is not personally liable for
the torts of his corporation; he must be shown to have personally voted for or otherwise
participated in them." xx xx xx
(Fletcher Cyclopedia Corporations, Vol. 3A, Chap. 11, p. 207)

"Officers of a corporation are not held liable for the negligence of the corporation merely because
of their official relation to it, but because of some wrongful or negligent act by such officer
amounting to a breach of duty which resulted in an injury ... To make an officer of a corporation
liable for the negligence of the corporation there must have been upon his part such a breach of
duty as contributed to, or helped to bring about, the injury; that is to say, he must be a
participant in the wrongful act." xx xx xx (pp. 207-208, ibid. )
xxx xxx xxx
"Directors who merely employ one to give a fireworks exhibition on the corporate grounds are not
personally liable for the negligent acts of the exhibitor." (p. 211, ibid.)
On these principles We absolve the municipal councilors from any liability for the death of Vicente
Fontanilla. The records do not show that said petitioners directly participated in the defective
construction of the "zarzuela" stage or that they personally permitted spectators to go up the
platform.
6. One last point We have to resolve is on the award of attorney's fees by respondent court.
Petitioner-municipality assails the award.
Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be
granted when the court deems it just and equitable. In this case of Vicente Fontanilla, although
respondent appellate court failed to state the grounds for awarding attorney's fees, the records
show however that attempts were made by plaintiffs, now private respondents, to secure an
extrajudicial compensation from the municipality; that the latter gave promises and assurances of
assistance but failed to comply; and it was only eight months after the incident that the bereaved
family of Vicente Fontanilla was compelled to seek relief from the courts to ventilate what was
believed to be a just cause.[28]
We hold, therefore, that there is no error committed in the grant of attorney's fees which after all
is a matter of judicial discretion. The amount of P1,200.00 is fair and reasonable.
PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the
Municipality of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from
liability and SET ASIDE the judgment against them (L-29993).
Without pronouncement as to costs.

pp. 3-4 of Petitioner's brief.

pp. 35-37, rollo of L-29993.
[3]
pp. 42-44, ibid.
[4]
pp. 21-31, ibid.
[5]
Sec. 2125, Art. 1, Municipal Law as embodied in the Revised Administrative Code.
[6]
Mendoza v. de Leon, 33 Phil. 508; 56 Am Jur 2d 254, sec. 199; Martin on the Revised
Administrative Code, 1963 ed., pp. 482-483, citing Cooleys Municipal Corporation, pp. 136-137.
[7]
2nd Ed. Vol. 1, Sec. 126, p. 381, cited in Dept. of Treasury v. City of Evansville, Sup. Ct. of
Indiana, 60 N.E. 2d 952,954.
[8]
supra, p. 509
[9]
Dept. of Treasury v. City of Evansville, supra, p. 956
[10]
For instance, Art. 2189, Civil Code provides "Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by, any person by reason of the defective condition of roads, streets, bridges,
public buildings, and other public works under their control or supervision."
[11]
Mendoza v. de Leon, supra, p. 513 In Palma v. Graciano, the City of Cebu, et. al., 99 Phil. 72,
the Court held that although the prosecution of crimes is a governmental function and as a rule
the province and city of Cebu are not civilly liable by reason thereof, nonetheless when a public
official goes beyond the scope of his duty, particularly when acting tortiously, he is not entitled to
protection on account of his office but is liable for his acts like any private individual.
[12]
L-10659, January 31, 1958, Unrep., 102 Phil. 1186
[13]
Municipality of Paoay, Ilocos Norte v. Manaois, et al., 86 Phil. 629; Municipality of Moncada v.
Cajuigan, et al., 21 Phil. 184
[14]
Mendoza v. de Leon, supra. 513
[15]
We came across an interesting case which shows that surrounding circumstances plus the
political, social, and cultural backgrounds may have a decisive bearing on this question. The case
of Pope v. City of New Haven, et al., was an action to recover damages for personal injuries
caused during a Fourth of July fireworks display resulting in the death of a bystander alleged to
have been caused by dependants' negligence. The dependants demurred to the complaint
invoking the defense that the city was engaged in the performance of a public governmental duty
from which it received no pecuniary benefit and for negligence in the performance of which no
statutory liability is imposed. This demurrer was sustained by the Superior Court of New Haven
County. Plaintiff sought to amend his complaint to allege that the celebration was for the corporate
advantage of the city. This was denied. In affirming the order, the Supreme Court of Errors of
Connecticut held inter alia:
Municipal corporations are exempt from liability for the negligent performance of purely public
governmental duties, unless made liable by statute. ...
"A municipal corporation, which, under permissive authority of its charter or of statute, conducted
a public Fourth of July celebration, including a display of fireworks, and sent up a bomb intended
to explode in the air, but which failed to explode until it reached the ground, and then killed a
spectator, was engaged in the performance of a governmental duty." (99 A.R. 51)
This decision was concurred in by three Judges while two dissented.
At any rate the rationale of the Majority Opinion is evident from this excerpt:
"July 4th, or, when that date falls upon Sunday, July 5th, is made a public holiday, called
Independence Day, by our statutes. All or nearly all of the other states have similar statutes.
While there is no United States statute making a similar provision, the different departments of
the government recognize, and have recognized since the government was established, July 4th
as a national holiday. Throughout the country it has been recognized and celebrated as such.
These celebrations, calculated to entertain and instruct the people generally and to arouse and
stimulate patriotic sentiments and love of country, frequently take the form of literary exercises
consisting of patriotic speeches and the reading of the Constitution, accompanied by a musical
program including patriotic airs, sometimes preceded by the firing of cannon and followed by
fireworks. That such celebrations are of advantage to the general public and their promotion a
proper subject of legislation can hardly be questioned. x x x" (ibid., p. 52)
[1]
[2]

See page 8 of Court of Appeals decision, p. 28 rollo L-29993

p. 29, ibid.
[18]
De Gala-Sison v. Manalo, 8 SCRA 595; Ramos v. Pepsi-Cola Bottling Co., 19 SCRA 289; Tan v.
Court of Appeals, et al., 20 SCRA 54; Chan v. Court of Appeals, et al., 33 SCRA 737, among
others.
[19]
19 Cal. Jur., p. 548; Corliss v. Manila Railroad Co., 27 SCRA 674
[20]
Respondents' brief, p. 70, rollo L-29993
[21]
129 P. 2d 511, 514
[22]
See page 8 of this Decision for quotation from Dillon on Municipal Corporations.
[23]
p. 31, rollo L-29993
[24]
pp. 1-3, petitioners' brief
[25]
29 SCRA 760
[26]
Banque General Belge, et al. v. Walter Bull & Co., Inc. and Walter Bull, 47 Off. Gaz., No. 1, 140
[27]
See Mindanao Motor Line, Inc. et al. v. Court of Industrial Relations, et al., 6 SCRA 710
[28]
pp. 34, 72-73, rollo L-29993
[16]
[17]

9. Municipality of San Fernando, La Union v. Firme, 195 SCRA 692 (1991)

G.R. No. L-52179 April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner
vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIA, IAUREANO BANIA, JR., SOR
MARIETA BANIA, MONTANO BANIA, ORJA BANIA, AND LYDIA R. BANIA,
Respondents.
This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by the
respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107BG, entitled "Juana Rimando Bania, et al. vs. Macario Nieveras, et al." dated November 4, 1975;
July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979
ordering defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and
severally, the plaintiffs for funeral expenses, actual damages consisting of the loss of earning
capacity of the deceased, attorney's fees and costs of suit and dismissing the complaint against
the Estate of Macario Nieveras and Bernardo Balagot.
The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo
N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance
of La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Bania,
Laureano Bania, Jr., Sor Marietta Bania, Montano Bania, Orja Bania and Lydia R. Bania are
heirs of the deceased Laureano Bania Sr. and plaintiffs in Civil Case No. 107-Bg before the
aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a
passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a
gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump
truck of the Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the
impact, several passengers of the jeepney including Laureano Bania Sr. died as a result of the
injuries they sustained and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union,
Branch I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint
against the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent
judge and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated
May 7, 1975, the private respondents amended the complaint wherein the petitioner and its
regular employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its
answer and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger
jeepney as the proximate cause of the collision.
In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:
(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;
(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San Fernando,
La Union and Bislig and setting the hearing on the affirmative defenses only with respect to the
supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;
(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July 13,
1976 filed by the Municipality and Bislig for having been filed out of time;
(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;
(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing that
parties have not yet submitted their respective memoranda despite the court's direction; and
(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.
On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder
quoted as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs, and
defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to pay jointly
and severally, plaintiffs Juana Rimando-Bania, Mrs. Priscilla B. Surell, Laureano Bania Jr., Sor
Marietta Bania, Mrs. Fe B. Soriano, Montano Bania, Orja Bania and Lydia B. Bania the sums
of P1,500.00 as funeral expenses and P24,744.24 as the lost expected earnings of the late
Laureano Bania Sr., P30,000.00 as moral damages, and P2,500.00 as attorney's fees. Costs
against said defendants.
The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo Balagot.
SO ORDERED. (Rollo, p. 30)
Petitioner filed a motion for reconsideration and for a new trial without prejudice to another
motion which was then pending. However, respondent judge issued another order dated
November 7, 1979 denying the motion for reconsideration of the order of September 7, 1979 for
having been filed out of time.
Finally, the respondent judge issued an order dated December 3, 1979 providing that if
defendants municipality and Bislig further wish to pursue the matter disposed of in the order of
July 26, 1979, such should be elevated to a higher court in accordance with the Rules of Court.
Hence, this petition.

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

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

It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only if
it can be shown that they were acting in a proprietary capacity. In permitting such entities to be
sued, the State merely gives the claimant the right to show that the defendant was not acting in
its governmental capacity when the injury was committed or that the case comes under the
exceptions recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)
In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way
to the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule
that the driver of the dump truck was performing duties or tasks pertaining to his office.
We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District
Engineer, and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of
roads in which the truck and the driver worked at the time of the accident are admittedly
governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that
the municipality cannot be held liable for the torts committed by its regular employee, who was
then engaged in the discharge of governmental functions. Hence, the death of the passenger
tragic and deplorable though it may be imposed on the municipality no duty to pay monetary
compensation.
All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.
SO ORDERED.
10. Republic V. Hidalgo, 534 SCRA 619 (2007)
[ G.R. No. 161657, October 04, 2007 ]

REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. HON. VICENTE A.

HIDALGO, IN HIS CAPACITY AS PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF MANILA, BRANCH 37, CARMELO V.
CACHERO, IN HIS CAPACITY AS SHERIFF IV, REGIONAL TRIAL
COURT OF MANILA, AND TARCILA LAPERAL MENDOZA,
RESPONDENTS.
Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the
Republic of the Philippines ("Republic," for short), thru the Office of the Solicitor General (OSG),
comes to this Court to nullify and set aside the decision dated August 27, 2003 and other related
issuances of the Regional Trial Court (RTC) of Manila, Branch 37, in its Civil Case No. 99-94075. In
directly invoking the Court's original jurisdiction to issue the extraordinary writs of certiorari and
prohibition, without challenge from any of the respondents, the Republic gave as justification therefor
the fact that the case involves an over TWO BILLION PESO judgment against the State, allegedly
rendered in blatant violation of the Constitution, law and jurisprudence.
By any standard, the case indeed involves a colossal sum of money which, on the face of the assailed
decision, shall be the liability of the national government or, in fine, the taxpayers. This consideration,
juxtaposed with the constitutional and legal questions surrounding the controversy, presents special and
compelling reasons of public interests why direct recourse to the Court should be allowed, as an
exception to the policy on hierarchy of courts.
At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title
(TCT) No. 118527 of the Registry of Deeds of Manila in the name of the herein private respondent
Tarcila Laperal Mendoza (Mendoza), married to Perfecto Mendoza. The lot is situated at No. 1440
Arlegui St., San Miguel, Manila, near the Malacaang Palace complex. On this lot, hereinafter referred
to as the Arlegui property, now stands the Presidential Guest House which was home to two (2)
former Presidents of the Republic and now appears to be used as office building of the Office of the
President.[1]
The facts:
Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the
corresponding declaration of nullity of a deed of sale and title against the Republic, the Register of
Deeds of Manila and one Atty. Fidel Vivar. In her complaint, as later amended, docketed as Civil Case
No. 99-94075 and eventually raffled to Branch 35 of the court, Mendoza essentially alleged being the
owner of the disputed Arlegui property which the Republic forcibly dispossessed her of and over
which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic.
Answering, the Republic set up, among other affirmative defenses, the State's immunity from suit.
The intervening legal tussles are not essential to this narration. What is material is that in an Order of
March 17, 2000, the RTC of Manila, Branch 35, dismissed Mendoza's complaint. The court would also
deny, in another order dated May 12, 2000, Mendoza's omnibus motion for reconsideration. On a
petition for certiorari, however, the Court of Appeals (CA), in CA-G.R. SP No. 60749, reversed the
trial court's assailed orders and remanded the case to the court a quo for further proceedings.[2] On
appeal, this Court, in G.R. No. 155231, sustained the CA's reversal action.[3]

From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the
remanded Civil Case No. 99-94075, the case was re-raffled to Branch 37 thereof, presided by the
respondent judge.
On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a
copy of the intended third amended complaint thereto attached. In the May 16, 2003 setting to hear the
motion, the RTC, in open court and in the presence of the Republic's counsel, admitted the third
amended complaint, ordered the Republic to file its answer thereto within five (5) days from May 16,
2003 and set a date for pre-trial.
In her adverted third amended complaint for recovery and reconveyance of the Arlegui property,
Mendoza sought the declaration of nullity of a supposed deed of sale dated July 15, 1975 which
provided the instrumentation toward the issuance of TCT No. 118911 in the name of the Republic. And
aside from the cancellation of TCT No. 118911, Mendoza also asked for the reinstatement of her TCT
No. 118527.[4] In the same third amended complaint, Mendoza averred that, since time immemorial, she
and her predecessors-in-interest had been in peaceful and adverse possession of the property as well as
of the owner's duplicate copy of TCT No. 118527. Such possession, she added, continued "until the
first week of July 1975 when a group of armed men representing themselves to be members of the
Presidential Security Group [PSG] of the then President Ferdinand E. Marcos, had forcibly entered
[her] residence and ordered [her] to turn over to them her ... Copy of TCT No. 118525 ... and
compelled her and the members of her household to vacate the same ...; thus, out of fear for their lives,
[she] handed her Owner's Duplicate Certificate Copy of TCT No. 118527 and had left and/or vacated
the subject property." Mendoza further alleged the following:
1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in
favor of the Republic allegedly executed by her and her deceased husband on July 15, 1975 and
acknowledged before Fidel Vivar which deed was annotated at the back of TCT No. 118527
under PE: 2035/T-118911 dated July 28, 1975; and
2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not
executed any deed of conveyance covering the disputed property in favor of the Republic, let
alone appearing before Fidel Vivar.
Inter alia, she prayed for the following:
4. Ordering the ... Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the
use or occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND
(P500,000.00) PESOS a month with a five (5%) per cent yearly increase, plus interest thereon at
the legal rate, beginning July 1975 until it finally vacates the same;
5. Ordering the ... Republic to pay plaintiff's counsel a sum equivalent to TWENTY FIVE (25%)
PER CENT of the current value of the subject property and/or whatever amount is recovered
under the premises; Further, plaintiff prays for such other relief, just and equitable under the
premises.
On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion
for Cancellation of scheduled pre-trial). In it, the Republic manifested its inability to simply adopt its
previous answer and, accordingly, asked that it be given a period of thirty (30) days from May 21, 2003

or until June 20, 2003 within which to submit an Answer.[5] June 20, 2003 came and went, but no
answer was filed. On July 18, 2003 and again on August 19, 2003, the OSG moved for a 30-day
extension at each instance. The filing of the last two motions for extension proved to be an idle gesture,
however, since the trial court had meanwhile issued an order[6] dated July 7, 2003 declaring the
petitioner Republic as in default and allowing the private respondent to present her evidence ex-parte.
The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having
executed the alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT No.
118911. According to her, said deed is fictitious or inexistent, as evidenced by separate certifications,
the first (Exh. "E"), issued by the Register of Deeds for Manila and the second (Exh. "F"), by the
Office of Clerk of Court, RTC Manila. Exhibit "E"[7] states that a copy of the supposed conveying deed
cannot, despite diligent efforts of records personnel, be located, while Exhibit "F"[8] states that Fidel
Vivar was not a commissioned notary public for and in the City of Manila for the year 1975. Three
other witnesses[9] testified, albeit their testimonies revolved around the appraisal and rental values of
the Arlegui property.
Eventually, the trial court rendered a judgment by default[10] for Mendoza and against the Republic. To
the trial court, the Republic had veritably confiscated Mendoza's property, and deprived her not only
of the use thereof but also denied her of the income she could have had otherwise realized during all
the years she was illegally dispossessed of the same.
Dated August 27, 2003, the trial court's decision dispositively reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring the deed of sale dated July 15, 1975, annotated at the back of [TCT] No. 118527 as
PE:2035/T-118911, as non-existent and/or fictitious, and, therefore, null and void from the
beginning;
2. Declaring that [TCT] No. 118911 of the defendant Republic of the Philippines has no basis,
thereby making it null and void from the beginning;
3. Ordering the defendant Register of Deeds for the City of Manila to reinstate plaintiff
[Mendoza's TCT] No. 118527;
4. Ordering the defendant Republic ... to pay just compensation in the sum of ONE HUNDRED
FORTY THREE MILLION SIX HUNDRED THOUSAND (P143,600,000.00) PESOS, plus
interest at the legal rate, until the whole amount is paid in full for the acquisition of the subject
property;
5. Ordering the plaintiff, upon payment of the just compensation for the acquisition of her
property, to execute the necessary deed of conveyance in favor of the defendant Republic ...;
and, on the other hand, directing the defendant Register of Deeds, upon presentation of the said
deed of conveyance, to cancel plaintiff's TCT No. 118527 and to issue, in lieu thereof, a new
Transfer Certificate of Title in favor of the defendant Republic;
6. Ordering the defendant Republic ... to pay the plaintiff the sum of ONE BILLION FOUR
HUNDRED EIGHTY MILLION SIX HUNDRED TWENTY SEVEN THOUSAND SIX
HUNDRED EIGHTY EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental
for the use of the subject property, the interest thereon at the legal rate, and the opportunity cost

at the rate of three (3%) per cent per annum, commencing July 1975 continuously up to July 30,
2003, plus an additional interest at the legal rate, commencing from this date until the whole
amount is paid in full;
7. Ordering the defendant Republic ... to pay the plaintiff attorney's fee, in an amount equivalent to
FIFTEEN (15%) PER CENT of the amount due to the plaintiff.
With pronouncement as to the costs of suit.
SO ORDERED. (Words in bracket and emphasis added.)
Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of
October 7, 2003.[11] Denied also was its subsequent plea for reconsideration.[12] These twin denial orders
were followed by several orders and processes issued by the trial court on separate dates as hereunder
indicated:
1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final and
executory.[13]
2. December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003, the
same having been filed beyond the reglementary period.[14]
3. December 19, 2003 - - Order[15] granting the private respondent's motion for execution.
4. December 22, 2003 - - Writ of Execution.[16]
Hence, this petition for certiorari.
By Resolution[17] of November 20, 2006, the case was set for oral arguments. On January 22, 2007,
when this case was called for the purpose, both parties manifested their willingness to settle the case
amicably, for which reason the Court gave them up to February 28, 2007 to submit the compromise
agreement for approval. Following several approved extensions of the February 28, 2007 deadline, the
OSG, on August 6, 2007, manifested that it is submitting the case for resolution on the merits owing to
the inability of the parties to agree on an acceptable compromise.
In this recourse, the petitioner urges the Court to strike down as a nullity the trial court's order declaring
it in default and the judgment by default that followed. Sought to be nullified, too, also on the ground
that they were issued in grave abuse of discretion amounting to lack or in excess of jurisdiction, are the
orders and processes enumerated immediately above issued after the rendition of the default judgment.
Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the
order of default and the judgment by default. To the petitioner, the respondent judge committed serious
jurisdictional error when he proceeded to hear the case and eventually awarded the private respondent a
staggering amount without so much as giving the petitioner the opportunity to present its defense.
Petitioner's posture is simply without merit.
Deprivation of procedural due process is obviously the petitioner's threshold theme. Due process, in its
procedural aspect, guarantees in the minimum the opportunity to be heard.[18] Grave abuse of
discretion, however, cannot plausibly be laid at the doorstep of the respondent judge on account of his
having issued the default order against the petitioner, then proceeding with the hearing and eventually

rendering a default judgment. For, what the respondent judge did hew with what Section 3, Rule 9 of
the Rules of Court prescribes and allows in the event the defending party fails to seasonably file a
responsive pleading. The provision reads:
SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof
of such failure, declare the defending party in default. Thereupon, the court shall proceed to render
judgment granting the claimant such relief as his pleading may warrant, unless the court in its
discretion requires the claimant to submit evidence ....[19]
While the ideal lies in avoiding orders of default,[20] the policy of the law being to have every litigated
case tried on its full merits,[21] the act of the respondent judge in rendering the default judgment after an
order of default was properly issued cannot be struck down as a case of grave abuse of discretion.
The term "grave abuse of discretion," in its juridical sense, connotes capricious, despotic, oppressive or
whimsical exercise of judgment as is equivalent to lack of jurisdiction.[22] The abuse must be of such
degree as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law, as where the power is exercised in a capricious manner. The word "capricious," usually used in
tandem with "arbitrary," conveys the notion of willful and unreasoning action.[23]
Under the premises, the mere issuance by the trial court of the order of default followed by a judgment
by default can easily be sustained as correct and doubtless within its jurisdiction. Surely, a disposition
directing the Republic to pay an enormous sum without the trial court hearing its side does not, without
more, vitiate, on due procedural ground, the validity of the default judgment. The petitioner may have
indeed been deprived of such hearing, but this does not mean that its right to due process had been
violated. For, consequent to being declared in default, the defaulting defendant is deemed to have
waived his right to be heard or to take part in the trial. The handling solicitors simply squandered the
Republic's opportunity to be heard. But more importantly, the law itself imposes such deprivation of the
right to participate as a form of penalty against one unwilling without justification to join issue upon
the allegations tendered by the plaintiff.
And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge for
denying its motion for new trial based on any or a mix of the following factors, viz., (1) the failure to
file an answer is attributable to the negligence of the former handling solicitor; (2) the meritorious
nature of the petitioner's defense; and (3) the value of the property involved.
The Court is not convinced. Even as the Court particularly notes what the trial court had said on the
matter of negligence: that all of the petitioner's pleadings below bear at least three signatures, that of
the handling solicitor, the assistant solicitor and the Solicitor General himself, and hence accountability
should go up all the way to the top of the totem pole of authority, the cited reasons advanced by the
petitioner for a new trial are not recognized under Section 1, Rule 37 of the Rules of Court for such
recourse.[24] Withal, there is no cogent reason to disturb the denial by the trial court of the motion for
new trial and the denial of the reiterative motion for reconsideration.
Then, too, the issuance by the trial court of the Order dated December 17, 2003[25] denying the
petitioner's notice of appeal after the court caused the issuance on November 27, 2003 of a certificate
of finality of its August 27, 2003 decision can hardly be described as arbitrary, as the petitioner would
have this Court believe. In this regard, the Court takes stock of the following key events and material
dates set forth in the assailed December 17, 2003 order, supra: (a) The petitioner, thru the OSG,
received on August 29, 2003 a copy of the RTC decision in this case, hence had up to September 13,
2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG

filed its motion for new trial, which the RTC denied, the OSG receiving a copy of the order of denial on
October 9, 2003; and (c) On October 24, 2003, the OSG sought reconsideration of the order denying
the motion for new trial. The motion for reconsideration was denied per Order dated November 25,
2003, a copy of which the OSG received on the same date.
Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order
of December 17, 2003 merits approval:
In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the
decision was received on August 29, 2003 was denied and the moving party has only the remaining
period from notice of notice of denial within which to file a notice of appeal. xxx
Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of the
fifteen day (15) prescribed for taking an appeal, which motion was subsequently denied, they had one
(1) day from receipt of a copy of the order denying ... new trial within which to perfect [an] appeal ....
Since defendants had received a copy of the order denying their motion for new trial on 09 October
2003, reckoned from that date, they only have one (1) day left within which to file the notice of appeal.
But instead of doing so, the defendants filed a motion for reconsideration which was later declared by
the Court as pro forma motion in the Order dated 25 November 2003. The running of the prescriptive
period, therefore, can not be interrupted by a pro forma motion. Hence the filing of the notice of appeal
on 27 November 2007 came much too late for by then the judgment had already become final and
executory.[26] (Words in bracket added; Emphasis in the original.)
It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to
resolving only errors of jurisdiction; it is not a remedy to correct errors of judgment. Hence, the
petitioner's lament, partly covered by and discussed under the first ground for allowing its petition,
about the trial court taking cognizance of the case notwithstanding private respondent's claim or action
being barred by prescription and/or laches cannot be considered favorably. For, let alone the fact that an
action for the declaration of the inexistence of a contract, as here, does not prescribe;[27] that a void
transfer of property can be recovered by accion reivindicatoria;[28] and that the legal fiction of
indefeasibility of a Torrens title cannot be used as a shield to perpetuate fraud,[29] the trial court's
disinclination not to appreciate in favor of the Republic the general principles of prescription or laches
constitutes, at best, errors of judgment not correctable by certiorari.
The evidence adduced below indeed adequately supports a conclusion that the Office of the President,
during the administration of then President Marcos, wrested possession of the property in question and
somehow secured a certificate of title over it without a conveying deed having been executed to legally
justify the cancellation of the old title (TCT No. 118527) in the name of the private respondent and the
issuance of a new one (TCT No. 118911) in the name of petitioner Republic. Accordingly, granting
private respondent's basic plea for recovery of the Arlegui property, which was legally hers all along,
and the reinstatement of her cancelled certificate of title are legally correct as they are morally right.
While not exactly convenient because the Office of the President presently uses it for mix residence
and office purposes, restoring private respondent to her possession of the Arlegui property is still
legally and physically feasible. For what is before us, after all, is a registered owner of a piece of land
who, during the early days of the martial law regime, lost possession thereof to the Government which
appropriated the same for some public use, but without going through the legal process of
expropriation, let alone paying such owner just compensation.
The Court cannot, however, stop with just restoring the private respondent to her possession and
ownership of her property. The restoration ought to be complemented by some form of monetary
compensation for having been unjustly deprived of the beneficial use thereof, but not, however, in the

varying amounts and level fixed in the assailed decision of the trial court and set to be executed by the
equally assailed writ of execution. The Court finds the monetary award set forth therein to be
erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of discretion.
As may be noted, private respondent fixed the assessed value of her Arlegui property at
P2,388,990.00. And in the prayer portion of her third amended complaint for recovery, she asked to be
restored to the possession of her property and that the petitioner be ordered to pay her, as reasonable
compensation or rental use or occupancy thereof, the sum of P500,000.00 a month, or P6 Million a
year, with a five percent (5%) yearly increase plus interest at the legal rate beginning July 1975. From
July 1975 when the PSG allegedly took over the subject property to July 2003, a month before the trial
court rendered judgment, or a period of 28 years, private respondent's total rental claim would, per the
OSG's computation, only amount to P371,440,426.00. In its assailed decision, however, the trial court
ordered the petitioner to pay private respondent the total amount of over P1.48 Billion or the mindboggling amount of P1,480,627,688.00, to be exact, representing the reasonable rental for the property,
the interest rate thereon at the legal rate and the opportunity cost. This figure is on top of the
P143,600,000.00 which represents the acquisition cost of the disputed property. All told, the trial court
would have the Republic pay the total amount of about P1.624 Billion, exclusive of interest, for the
taking of a property with a declared assessed value of P2,388,900.00. This is not to mention the award
of attorney's fees in an amount equivalent to 15% of the amount due the private respondent.
In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d)
of the Rules of Court[30] which defines the extent of the relief that may be awarded in a judgment by
default, i.e., only so much as has been alleged and proved. The court acts in excess of jurisdiction if it
awards an amount beyond the claim made in the complaint or beyond that proved by the evidence. [31]
While a defaulted defendant may be said to be at the mercy of the trial court, the Rules of Court and
certainly the imperatives of fair play see to it that any decision against him must be in accordance with
law.[32] In the abstract, this means that the judgment must not be characterized by outrageous onesidedness, but by what is fair, just and equitable that always underlie the enactment of a law.
Given the above perspective, the obvious question that comes to mind is the level of compensation
which - for the use and occupancy of the Arlegui property - would be fair to both the petitioner and
the private respondent and, at the same time, be within acceptable legal bounds. The process of
balancing the interests of both parties is not an easy one. But surely, the Arlegui property cannot
possibly be assigned, even perhaps at the present real estate business standards, a monthly rental value
of at least P500,000.00 or P6,000,000.00 a year, the amount private respondent particularly sought and
attempted to prove. This asking figure is clearly unconscionable, if not downright ridiculous, attendant
circumstances considered. To the Court, an award of P20,000.00 a month for the use and occupancy of
the Arlegui property, while perhaps a little bit arbitrary, is reasonable and may be granted pro hac
vice considering the following hard realities which the Court takes stock of:
1. The property is relatively small in terms of actual area and had an assessed value of only
P2,388,900.00;
2. What the martial law regime took over was not exactly an area with a new and imposing
structure, if there was any; and
3. The Arlegui property had minimal rental value during the relatively long martial law years,
given the very restrictive entry and egress conditions prevailing at the vicinity at that time and
even after.

To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,[33] a case
where a registered owner also lost possession of a piece of lot to a municipality which took it for a
public purposes without instituting expropriation proceedings or paying any compensation for the lot,
the Court, citing Herrera v. Auditor General,[34] ordered payment of just compensation but in the form
of interest when a return of the property was no longer feasible.
The award of attorney's fees equivalent to 15% of the amount due the private respondent, as reduced
herein, is affirmed.
The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed
against the Republic, unless otherwise provided by law.[35]
The assailed trial court's issuance of the writ of execution[36] against government funds to satisfy its
money judgment is also nullified. It is basic that government funds and properties may not be seized
under writs of execution or garnishment to satisfy such judgments.[37] Republic v. Palacio[38] teaches
that a judgment against the State generally operates merely to liquidate and establish the plaintiff's
claim in the absence of express provision; otherwise, they can not be enforced by processes of law.
Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the
Office of the President which has beneficial possession of and use over it since the 1975 takeover.
Accordingly, and in accord with the elementary sense of justice, it behooves that office to make the
appropriate budgetary arrangements towards paying private respondent what is due her under the
premises. This, to us, is the right thing to do. The imperatives of fair dealing demand no less. And the
Court would be remiss in the discharge of its duties as dispenser of justice if it does not exhort the
Office of the President to comply with what, in law and equity, is its obligation. If the same office will
undertake to pay its obligation with reasonable dispatch or in a manner acceptable to the private
respondent, then simple justice, while perhaps delayed, will have its day. Private respondent is in the
twilight of her life, being now over 90 years of age.[39] Any delay in the implementation of this
disposition would be a bitter cut.
WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it
nullified TCT No. 118911 of petitioner Republic of the Philippines and ordered the Register of Deeds
of Manila to reinstate private respondent Tarcila L. Mendoza's TCT No. 118527, or to issue her a new
certificate of title is AFFIRMED. Should it be necessary, the Register of Deeds of Manila shall
execute the necessary conveying deed to effect the reinstatement of title or the issuance of a new title to
her.
It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner
Republic is ordered to pay private respondent the reasonable amount of P20,000.00 a month beginning
July 1975 until it vacates the same and the possession thereof restored to the private respondent, plus an
additional interest of 6% per annum on the total amount due upon the finality of this Decision until the
same is fully paid. Petitioner is further ordered to pay private respondent attorney's fees equivalent to
15% of the amount due her under the premises.
Accordingly, a writ of certiorari is hereby ISSUED in the sense that:
1. The respondent court's assailed decision of August 27, 2003 insofar as it ordered the petitioner
Republic of the Philippines to pay private respondent Tarcila L. Mendoza the sum of One
Billion Four Hundred Eighty Million Six Hundred Twenty Seven Thousand Six Hundred Eighty

Eight Pesos (P1,480,627,688.00) representing the purported rental use of the property in
question, the interest thereon and the opportunity cost at the rate of 3% per annum plus the
interest at the legal rate added thereon is nullified. The portion assessing the petitioner
Republic for costs of suit is also declared null and void.
2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of
execution and the Writ of Execution dated December 22, 2003 against government funds are
hereby declared null and void. Accordingly, the presiding judge of the respondent court, the
private respondent, their agents and persons acting for and in their behalves are permanently
enjoined from enforcing said writ of execution.
However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru the
Office of the President, is hereby strongly enjoined to take the necessary steps, and, with reasonable
dispatch, make the appropriate budgetary arrangements to pay private respondent Tarcila L. Mendoza
or her assigns the amount adjudged due her under this disposition.
Page 12 of the Decision of the RTC of Manila, Br. 37; rollo, p. 59.
Annex "I," Petition; id. at 77 et seq.
[3]
Annex "J," Petition, id. at 93.
[4]
Annex "K," Petition; id. at 94 et seq.
[5]
Annex "M," Petition; id. at 108.
[6]
Annex "A,' Petition; id. at 47.
[7]
Id. at 105.
[8]
Id. at 106.
[9]
Engr. Hernando Gozon, Jr. of the Cuervo Appraisers, Inc.; Mr. Renato Chico of the Land Bank;
and Engr. Israel Soguilon.
[10]
Per Judge Vicente A. Hidalgo; Annex "B," Petition; rollo, pp. 48 et seq.
[11]
Annex "C," Petition; id. at 62 et seq.
[12]
Annex "D," Petition; id. at 70.
[13]
Annex "E," Petition; id. at 71.
[14]
Annex "F," Petition; id. at 72 et seq.
[15]
Annex "G," Petition; id. at 75.
[16]
Annex "H," Petition; id. at 76.
[17]
Rollo, p. 341.
[18]
Roces v. Aportadera, Adm. Case No. 2936, March 31, 1995, 243 SCRA 108, citing cases.
[19]
First par. of Sec. 3
[20]
Citibank, N.A. v. Chua, G.R. No. 102300, March 17, 1993, 220 SCRA 75.
[21]
Lesaca v. Court of Appeals, G.R. No. 96432, October 21, 1992, 215 SCRA 17, citing Coombs v.
Santos, 24 Phil 446 (1913).
[22]
Regalado, Remedial Law Compendium, Vol. 1, 8th Revised Edition, p. 718, citing Benito v.
COMELEC, G.R. No. 134913, Jan. 19, 2001, 349 SCRA 705.
[23]
Olanolan v. COMELEC, G.R. No. 165491, March 31, 2005, 454 SCRA 807, citing cases.
[24]
Section. 1. Grounds of and period for filing motion for new trial or reconsideration. - xxx (a)
Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded
against and by reason of which such aggrieved party has probably been impaired in his right; or
(b) Newly discovered evidence ....
[1]
[2]

Supra note 14.

Rollo, pp. 72-73.
[27]
Art. 1410, Civil Code.
[25]
[26]

Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV, 1991 ed., p. 632.
Republic v. Court of Appeals, G.R. No. 60169, March 23, 1990, 183 SCRA 1990, citing Acot v.
Kempis, 55 O.G. 2907.
[30]
(d) Extent of relief to be awarded. - A judgment rendered against a party in default shall not
exceed the amount or different in kind from that prayed for nor award unliquidated damages.
[31]
Regalado, Remedial Law Compendium, Vol. 1, 8th ed., p. 173, citing Pascua v. Florendo, L38047, April 30, 1985, 136 SCRA 208.
[32]
Lim Tanhu v. Remolete, No. L-40098, August 29, 1975, 66 SCRA 452.
[33]
106 Phil. 1017 (1960).
[34]
102 Phil. 875 (1958).
[35]
Sec. 1, Rule 142 of the Rules of Court.
[36]
Supra note 16.
[37]
Commissioner of Public Highways v. San Diego, No. L-30098, February 18, 1970, 31 SCRA
616.
[38]
No. L-20322, May 29, 1968, 23 SCRA 899, citing Merritt v. Insular Government, 34 Phil. 311
(1916).
[39]
See Motion for the Issuance of the Writ of Execution, Annex "Q," Petition; rollo, pp. 134 et seq.
[28]
[29]

11. Municipality of Makati v. Court of Appeals, 190 SCRA 206 (1990)

[ G.R. Nos. 89898-99, October 01, 1990 ]
MUNICIPALITY OF MAKATI, PETITIONER, VS. THE HONORABLE COURT OF APPEALS,
HON. SALVADOR P. DE GUZMAN, JR., AS JUDGE RTC OF MAKATI, BRANCH CXLII,
ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., AND SHERIFF SILVINO R.
PASTRANA, RESPONDENTS.
The present petition for review is an off-shoot of expropriation proceedings initiated by
petitioner Municipality of Makati against private respondent Admiral Finance Creditors Consortium,
Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land
and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in
the name of Arceli P. Jo under TCT No. S-5499.
It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil
Case No. 13699.

Attached to petitioner's complaint was a certification that a bank account

(Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under
petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of Pres.
Decree No. 42. After due hearing where the parties presented their respective appraisal reports
regarding the value of the property, respondent RTC judge rendered a decision on June 4, 1987,
fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this
amount minus the advanced payment of P338,160.00 which was earlier released to private
respondent.
After this decision became final and executory, private respondent moved for the issuance of
a writ of execution. This motion was granted by respondent RTC judge. After issuance of the writ

of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff
Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff
was informed that a "hold code" was placed on the account of petitioner.

As a result of this,

private respondent filed a motion dated January 27, 1988 praying that an order be issued
directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance
due under the RTC decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of
the expropriation amount should be done in installments which the respondent RTC judge failed to
state in his decision. Private respondent filed its opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation"
informing the court that private respondent was no longer the true and lawful owner of the
subject property because a new title over the property had been registered in the name of
Philippine Savings Bank, Inc. (PSB).

Respondent RTC judge issued an order requiring PSB to

make available the documents pertaining to its transactions over the subject property, and the
PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by
respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court
that it had consolidated its ownership over the property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987.

After several conferences, PSB and private

respondent entered into a compromise agreement whereby they agreed to divide between
themselves the compensation due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1)
approved the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to
PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of the
subject property under the RTC decision dated June 4, 1987, from the garnished account of
petitioner; and, (3) ordered PSB and private respondent to execute the necessary deed of
conveyance over the subject property in favor of petitioner.

Petitioner's motion to lift the

garnishment was denied.

Petitioner filed a motion for reconsideration, which was duly opposed by private respondent.
On the other hand, for failure of the manager of the PNB Buendia Branch to comply with the order
dated September 8, 1988, private respondent filed two succeeding motions to require the bank
manager to show cause why he should not be held in contempt of court.

During the hearings

conducted for the above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio
Bautista, informed the court that he was still waiting for proper authorization from the PNB head

office enabling him to make a disbursement for the amount so ordered. For its part, petitioner
contended that its funds at the PNB Buendia Branch could neither be garnished nor levied upon
execution, for to do so would result in the disbursement of public funds without the proper
appropriation required under the law, citing the case of Republic of the Philippines v. Palacio [G.R.
No. L-20322, May 29,1968, 23 SCRA 899.]
Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion
for reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply
to the case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically
opened for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42.
Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and
detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions for
certiorari with the Court of Appeals, which were eventually consolidated.

In a decision

promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB
Account No. 265-537154-3, and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals, petitioner now
files the present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or
carrying out the RTC order dated December 21, 1988 and the writ of garnishment issued pursuant
thereto. Private respondent then filed its comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court of
Appeals, but also alleges for the first time that it has actually two accounts with the PNB Buendia
Branch, to wit:
*

(1)

Account No. S/A 265-537154-3 - exclusively for the expropriation of the subject property,

with an outstanding balance of P99,743.94.

(2)

Account No. S/A 263-530850-7 - for statutory obligations and other purposes of the

municipal government, with a balance of P170,098,421.72, as of July 12, 1989.

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank
accounts, it may fairly be asked whether the second account was opened only for the purpose of
undermining the legal basis of the assailed orders of respondent RTC judge and the decision of the
Court of Appeals, and strengthening its reliance on the doctrine that public funds are exempted
from garnishment or execution as enunciated in Republic v. Palacio [supra.] At any rate, the Court
will give petitioner the benefit of the doubt, and proceed to resolve the principal issues presented
based on the factual circumstances thus alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for
expropriation proceedings it had initiated over the subject property, petitioner poses no objection
to the garnishment or the levy under execution of the funds deposited therein amounting to
P99,743.94. However, it is petitioner's main contention that inasmuch as the assailed orders of
respondent RTC judge involved the net amount of P4,965,506.45, the funds garnished by
respondent sheriff in excess of P99,743.94, which are public funds earmarked for the municipal
government's other statutory obligations are exempted from execution without the proper
appropriation required under the law.
There is merit in this contention. The funds deposited in the second PNB Account No. S/A
263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is
the rule that public funds are not subject to levy and execution, unless otherwise provided for by
statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No.
L-30098, February 18, 1970, 31 SCRA 616.] More particularly, the properties of a municipality,
whether real or personal, which are necessary for public use cannot be attached and sold at
execution sale to satisfy a money judgment against the municipality. Municipal revenues derived
from taxes, licenses and market fees, and which are intended primarily and exclusively for the
purpose of financing the governmental activities and functions of the municipality, are exempt
from execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926); The
Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel,
Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56.] The foregoing rule finds
application in the case at bar. Absent a showing that the municipal council of Makati has passed
an ordinance appropriating from its public funds an amount corresponding to the balance due
under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No.
S/A 265-537154-3, no levy under execution may be validly effected on the public funds of
petitioner deposited in Account No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment of a
final money judgment rendered against it, the claimant may avail of the remedy of mandamus in
order to compel the enactment and approval of the necessary appropriation ordinance, and the
corresponding disbursement of municipal funds therefor [See Viuda De Tan Toco v. The Municipal
Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil.
247 (1960).]
In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by
petitioner.

No appeal was taken therefrom.

For three years now, petitioner has enjoyed

possession and use of the subject property notwithstanding its inexcusable failure to comply with
its legal obligation to pay just compensation. Petitioner has benefited from its possession of the
property since the same has been the site of Makati West High School since the school year 19861987. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising
from expropriation proceedings it had in fact initiated. It cannot be over-emphasized that, within
the context of the State's inherent power of eminent domain.
. . . [j]ust compensation means not only the correct determination of the amount to be paid to the
owner of the land but also the payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered "just" for the property owner is
made to suffer the consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to cope with his loss
[Cosculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393,
400. See also Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August
27, 1987, 153 SCRA 291.]
The State's power of eminent domain should be exercised within the bounds of fair play and
justice. In the case at bar, considering that valuable property has been taken, the compensation
to be paid fixed and the municipality is in full possession and utilizing the property for public
purpose, for three (3) years, the Court finds that the municipality has had more than reasonable
time to pay full compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately
pay Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45.
Petitioner is hereby required to submit to this Court a report of its compliance with the foregoing
order without non-extendible period of SIXTY (60) DAYS from the date of receipt of this
resolution.

The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil
Case No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on
November 20, 1989 is MADE PERMANENT.
SO ORDERED.

12. Lockheed Detective and Watchman Agency, Inc. v. University of the Philippines, 670 SCRA 206
(2012)
[ G.R. No. 185918, April 18, 2012 ]
LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC., PETITIONER, VS. UNIVERSITY
OF THE PHILIPPINES, RESPONDENT.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the August 20, 2008 Amended Decision[1] and December 23, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 91281.
The antecedent facts of the case are as follows:
Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered into a contract for
security services with respondent University of the Philippines (UP).
In 1998, several security guards assigned to UP filed separate complaints against Lockheed and
UP for payment of underpaid wages, 25% overtime pay, premium pay for rest days and special
holidays, holiday pay, service incentive leave pay, night shift differentials, 13th month pay, refund
of cash bond, refund of deductions for the Mutual Benefits Aids System (MBAS), unpaid wages
from December 16-31, 1998, and attorneys fees.
On February 16, 2000, the Labor Arbiter rendered a decision as follows:
WHEREFORE, premises considered, respondents Lockheed Detective and Watchman Agency, Inc.
and UP as job contractor and principal, respectively, are hereby declared to be solidarily liable to
complainants for the following claims of the latter which are found meritorious.
Underpaid wages/salaries, premium pay for work on rest day and special holiday, holiday pay, 5
days service incentive leave pay, 13th month pay for 1998, refund of cash bond (deducted at

P50.00 per month from January to May 1996, P100.00 per month from June 1996 and P200.00
from November 1997), refund of deduction for Mutual Benefits Aids System at the rate of P50.00
a month, and attorneys fees; in the total amount of P1,184,763.12 broken down as follows per
attached computation of the Computation and [E]xamination Unit of this Commission, which
computation forms part of this Decision:
1. JOSE SABALAS P77,983.62 2.TIRSO DOMASIAN76,262.70 3. JUAN TAPEL80,546.03 4. DINDO
MURING80,546.03 5. ALEXANDER ALLORDE80,471.78 6. WILFREDO
ESCOBAR80,160.63 7. FERDINAND VELASQUEZ 78,595.53 8. ANTHONY GONZALES76,869.97 9.
SAMUEL ESCARIO 80,509.78 10. PEDRO FAILORINA80,350.87 11. MATEO TANELA 70,590.58 12.
JOB SABALAS 59,362.40 13. ANDRES DACANAYAN77,403.73 14. EDDIE
OLIVAR____77,403.73 P1,077,057.38 plus 10% attorneys fees107,705.74 GRAND TOTAL AWARD
P1,184,763.12
Third party respondent University of the Philippines is hereby declared to be liable to Third Party
Complainant and cross claimant Lockheed Detective and Watchman Agency for the unpaid
legislated salary increases of the latters security guards for the years 1996 to 1998, in the total
amount of P13,066,794.14, out of which amount the amounts due complainants here shall be
paid.
The other claims are hereby DISMISSED for lack of merit (night shift differential and 13th month
pay) or for having been paid in the course of this proceedings (salaries for December 15-31, 1997
in the amount of P40,140.44).
The claims of Erlindo Collado, Rogelio Banjao and Amor Banjao are hereby DISMISSED as
amicably settled for and in consideration of the amounts of P12,315.72, P12,271.77 and
P12,819.33, respectively.
SO ORDERED.[3]
Both Lockheed and UP appealed the Labor Arbiters decision. By Decision[4] dated April 12, 2002,
the NLRC modified the Labor Arbiters decision. The NLRC held:
WHEREFORE, the decision appealed from is hereby modified as follows:
1. Complainants claims for premium pay for work on rest day and special holiday, and 5 days
service incentive leave pay, are hereby dismissed for lack of basis.

2. The respondent University of the Philippines is still solidarily liable with Lockheed in the
payment of the rest of the claims covering the period of their service contract.
The Financial Analyst is hereby ordered to recompute the awards of the complainants in
accordance with the foregoing modifications.
SO ORDERED.[5]
The complaining security guards and UP filed their respective motions for reconsideration. On
August 14, 2002, however, the NLRC denied said motions.
As the parties did not appeal the NLRC decision, the same became final and executory on October
26, 2002.[6]

A writ of execution was then issued but later quashed by the Labor Arbiter on

November 23, 2003 on motion of UP due to disputes regarding the amount of the award.

Later,

however, said order quashing the writ was reversed by the NLRC by Resolution[7] dated June 8,
2004, disposing as follows:
WHEREFORE, premises considered, we grant this instant appeal. The Order dated 23 November
2003 is hereby reversed and set aside. The Labor Arbiter is directed to issue a Writ of Execution
for the satisfaction of the judgment award in favor of Third-Party complainants.
SO ORDERED.[8]
UP moved to reconsider the NLRC resolution. On December 28, 2004, the NLRC upheld its
resolution but with modification that the satisfaction of the judgment award in favor of Lockheed
will be only against the funds of UP which are not identified as public funds.
The NLRC order and resolution having become final, Lockheed filed a motion for the issuance of an
alias writ of execution. The same was granted on May 23, 2005.[9]
On July 25, 2005, a Notice of Garnishment[10] was issued to Philippine National Bank (PNB) UP
Diliman Branch for the satisfaction of the award of P12,142,522.69 (inclusive of execution fee).
In a letter[11] dated August 9, 2005, PNB informed UP that it has received an order of release
dated August 8, 2005 issued by the Labor Arbiter directing PNB UP Diliman Branch to release to
the NLRC Cashier, through the assigned NLRC Sheriff Max L. Lago, the judgment award/amount of
P12,142,522.69. PNB likewise reminded UP that the bank only has 10 working days from receipt
of the order to deliver the garnished funds and unless it receives a notice from UP or the NLRC

before the expiry of the 10-day period regarding the issuance of a court order or writ of injunction
discharging or enjoining the implementation and execution of the Notice of Garnishment and Writ
of Execution, the bank shall be constrained to cause the release of the garnished funds in favor of
the NLRC.
On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment.[12] UP contended that the
funds being subjected to garnishment at PNB are government/public funds. As certified by the
University Accountant, the subject funds are covered by Savings Account No. 275-529999-8,
under the name of UP System Trust Receipts, earmarked for Student Guaranty Deposit,
Scholarship Fund, Student Fund, Publications, Research Grants, and Miscellaneous Trust Account.
UP argued that as public funds, the subject PNB account cannot be disbursed except pursuant to
an appropriation required by law. The Labor Arbiter, however, dismissed the urgent motion for
lack of merit on August 30, 2005.[13]
On September 2, 2005, the amount of P12,062,398.71 was withdrawn by the sheriff from UPs
PNB account.[14]
On September 12, 2005, UP filed a petition for certiorari before the CA based on the following
grounds:
I.
The concept of solidary liability by an indirect employer notwithstanding, respondent NLRC
gravely abused its discretion in a manner amounting to lack or excess of jurisdiction by misusing
such concept to justify the garnishment by the executing Sheriff of public/government funds
belonging to UP.
II.
Respondents NLRC and Arbiter LORA acted without jurisdiction or gravely abused their discretion
in a manner amounting to lack or excess of jurisdiction when, by means of an Alias Writ of
Execution against petitioner UP, they authorized respondent Sheriff to garnish UPs public funds.
Similarly, respondent LORA gravely abused her discretion when she resolved petitioners Motion to
Quash Notice of Garnishment addressed to, and intended for, the NLRC, and when she unilaterally
and arbitrarily disregarded an official Certification that the funds garnished are public/government
funds, and thereby allowed respondent Sheriff to withdraw the same from PNB.
III.
Respondents gravely abused their discretion in a manner amounting to lack or excess of
jurisdiction when they, despite prior knowledge, effected the execution that caused paralyzation

and dislocation to petitioners governmental functions. [15]

On March 12, 2008, the CA rendered a decision[16] dismissing UPs petition for certiorari. Citing
Republic v. COCOFED,[17] which defines public funds as moneys belonging to the State or to any
political subdivisions of the State, more specifically taxes, customs, duties and moneys raised by
operation of law for the support of the government or the discharge of its obligations, the
appellate court ruled that the funds sought to be garnished do not seem to fall within the stated
definition.
On reconsideration, however, the CA issued the assailed Amended Decision. It held that without
departing from its findings that the funds covered in the savings account sought to be garnished
do not fall within the classification of public funds, it reconsiders the dismissal of the petition in
light of the ruling in the case of National Electrification Administration v. Morales[18] which
mandates that all money claims against the government must first be filed with the Commission
on Audit (COA).
Lockheed moved to reconsider the amended decision but the same was denied in the assailed CA
Resolution dated December 23, 2008. The CA cited Manila International Airport Authority v. Court
of Appeals[19] which held that UP ranks with MIAA, a government instrumentality exercising
corporate powers but not organized as a stock or non-stock corporation. While said corporations
are government instrumentalities, they are loosely called government corporate entities but not
government-owned and controlled corporations in the strict sense.
Hence this petition by Lockheed raising the following arguments:
1. RESPONDENT UP IS A GOVERNMENT ENTITY WITH A SEPARATE AND DISTINCT
PERSONALITY FROM THE NATIONAL GOVERNMENT AND HAS ITS OWN CHARTER
GRANTING IT THE RIGHT TO SUE AND BE SUED. IT THEREFORE CANNOT AVAIL OF THE
IMMUNITY FROM SUIT OF THE GOVERNMENT. NOT HAVING IMMUNITY FROM SUIT,
RESPONDENT UP CAN BE HELD LIABLE AND EXECUTION CAN THUS ENSUE.
2. MOREOVER, IF THE COURT LENDS IT ASSENT TO THE INVOCATION OF THE DOCTRINE OF
STATE IMMUNITY, THIS WILL RESULT [IN] GRAVE INJUSTICE.
3. FURTHERMORE, THE PROTESTATIONS OF THE RESPONDENT ARE TOO LATE IN THE DAY,
AS THE EXECUTION PROCEEDINGS HAVE ALREADY BEEN TERMINATED.[20]

Lockheed contends that UP has its own separate and distinct juridical entity from the national
government and has its own charter.

Thus, it can be sued and be held liable. Moreover, Executive

Order No. 714 entitled Fiscal Control and Management of the Funds of UP recognizes that as an
institution of higher learning, UP has always granted full management and control of its affairs
including its financial affairs.[21] Therefore, it cannot shield itself from its private contractual
liabilities by simply invoking the public character of its funds. Lockheed also cites several cases
wherein it was ruled that funds of public corporations which can sue and be sued were not exempt
from

garnishment.

Lockheed likewise argues that the rulings in the NEA and MIAA cases are inapplicable. It contends
that UP is not similarly situated with NEA because the jurisdiction of COA over the accounts of UP
is only on a post-audit basis. As to the MIAA case, the liability of MIAA pertains to the real estate
taxes imposed by the City of Paranaque while the obligation of UP in this case involves a private
contractual obligation. Lockheed also argues that the declaration in MIAA specifically citing UP
was

mere

obiter

dictum.

Lockheed moreover submits that UP cannot invoke state immunity to justify and perpetrate an
injustice.

UP itself admitted its liability and thus it should not be allowed to renege on its

contractual obligations. Lockheed contends that this might create a ruinous precedent that would
likely affect the relationship between the public and private sectors.
Lastly, Lockheed contends that UP cannot anymore seek the quashal of the writ of execution and
notice of garnishment as they are already fait accompli.
For its part, UP contends that it did not invoke the doctrine of state immunity from suit in the
proceedings a quo and in fact, it did not object to being sued before the labor department. It
maintains, however, that suability does not necessarily mean liability. UP argues that the CA
correctly applied the NEA ruling when it held that all money claims must be filed with the COA.
As to alleged injustice that may result for invocation of state immunity from suit, UP reiterates
that it consented to be sued and even participated in the proceedings below. Lockheed cannot
now claim that invocation of state immunity, which UP did not invoke in the first place, can result
in

injustice.

On the fait accompli argument, UP argues that Lockheed cannot wash its hands from liability for
the

consummated

garnishment

and

execution

of

UPs

trust

fund

in

the

amount

of

P12,062,398.71. UP cites that damage was done to UP and the beneficiaries of the fund when

said funds, which were earmarked for specific educational purposes, were misapplied, for
instance, to answer for the execution fee of P120,123.98 unilaterally stipulated by the sheriff.
Lockheed, being the party which procured the illegal garnishment, should be held primarily liable.
The mere fact that the CA set aside the writ of garnishment confirms the liability of Lockheed to
reimburse

and

indemnify

in

accordance

with

law.

The petition has no merit.

We agree with UP that there was no point for Lockheed in discussing the doctrine of state
immunity from suit as this was never an issue in this case. Clearly, UP consented to be sued when
it participated in the proceedings below. What UP questions is the hasty garnishment of its funds
in

its

PNB

account.

This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a juridical personality
separate and distinct from the government and has the capacity to sue and be sued. Thus, also
like NEA, it cannot evade execution, and its funds may be subject to garnishment or levy.
However, before execution may be had, a claim for payment of the judgment award must first be
filed with the COA. Under Commonwealth Act No. 327,[22] as amended by Section 26 of P.D. No.
1445,[23] it is the COA which has primary jurisdiction to examine, audit and settle all debts and
claims of any sort due from or owing the Government or any of its subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their subsidiaries.
With respect to money claims arising from the implementation of Republic Act No. 6758, [24] their
allowance or disallowance is for COA to decide, subject only to the remedy of appeal by petition
for certiorari to this Court.

[25]

We cannot subscribe to Lockheeds argument that NEA is not similarly situated with UP because
the COAs jurisdiction over the latter is only on post-audit basis.

A reading of the pertinent

Commonwealth Act provision clearly shows that it does not make any distinction as to which of
the government subdivisions, agencies and instrumentalities, including government-owned or
controlled corporations and their subsidiaries whose debts should be filed before the COA.
As to the fait accompli argument of Lockheed, contrary to its claim that there is nothing that can
be done since the funds of UP had already been garnished, since the garnishment was erroneously
carried out and did not go through the proper procedure (the filing of a claim with the COA), UP is
entitled to reimbursement of the garnished funds plus interest of 6% per annum, to be computed
from the time of judicial demand to be reckoned from the time UP filed a petition for certiorari
before the CA which occurred right after the withdrawal of the garnished funds from PNB.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.

Petitioner

Lockheed Detective and Watchman Agency, Inc. is ordered to REIMBURSE respondent University
of the Philippines the amount of P12,062,398.71 plus interest of 6% per annum, to be computed
from September 12, 2005 up to the finality of this Decision, and 12% interest on the entire
amount from date of finality of this Decision until fully paid.
No pronouncement as to costs.
SO ORDERED.
Designated additional member per Raffle dated April 2, 2012.
Designated additional member per Raffle dated April 16, 2012.
[1]
Rollo, pp. 47-50. Penned by Associate Justice Arcangelita M. Romilla-Lontok with Associate
Justices Mariano C. Del Castillo (now a member of this Court) and Romeo F. Barza concurring.
[2]
Id. at 52-53.
[3]
CA rollo, pp. 23-24.
[4]
Id. at 22-38.
[5]
Id. at 37.
[6]
Id. at 44, citing NLRC records, p. 868.
[7]
Id. at 39-56.
[8]
Id. at 55.
[9]
Id. at 57-64.
[10]
Id. at 65.
[11]
Id. at 74.
[12]
Id. at 66-73.
[13]
Id. at 79-81.
[14]
Id. at 10.
[15]
Id.
[16]
Id. at 122-134.
[17]
G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 481.
[18]
G.R. No. 154200, June 24, 2007, 528 SCRA 79, 90-91.
[19]
G.R. No. 155650, July 20, 2006, 495 SCRA 591, 618-619.
[20]
Rollo, p. 17.
[21]
Id. at 24-25.
[22]
AN ACT FIXING THE TIME WITHIN WHICH THE AUDITOR GENERAL SHALL RENDER HIS
DECISIONS AND PRESCRIBING THE MANNER OF APPEAL THEREFROM.
[23]
ORDAINING AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES.
Section 26 thereof provides:
*

**

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to
and comprehend all 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 relating to
those accounts; and the audit and settlement of the accounts 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 all debts and claims of any sort due from or owing to the Government or any of
its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all governmentowned or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including nongovernmental entities subsidized by the government, those funded by donations through the

government, those required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the government.
[24]
[25]

Compensation and Position Classification Act of 1989.

National Electrification Administration v. Morales, supra note 18, at 89-91.

13. Cosculluela v. Court of Appeals, 164 SCRA 393 (1988).

Cosculluela v. The Hon. Court of Appeals, 164 SCRA 393, 400, No. L-77765 (1988),
August 15, 1988

SEBASTIAN COSCULLUELA, petitioner,

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

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

as those of the respondent NIA cannot be disbursed without the proper appropriation.
We rule for the petitioner.
One of the basic principles enshrined in our Constitution is that no person shall be deprived
of his private property without due process of law; and in expropriation cases, an essential
element of due process is that there must be just compensation whenever private property is
taken for public use. Thus, in the case of Province of Pangasinan v. CFI Judge of Pangasinan,
Branch VIII (80 SCRA 117, 120-121), this Court speaking through then Chief Justice Fernando
ruled:

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

The property of the petitioner was taken by the government in 1975. The following year,
respondent NIA made the required deposit of P2,097.30 with the Philippine National Bank and
within the same year, the Barotac Viejo Irrigation Project was finished. Since then, for more than
a period of ten (10) years, the project has been of service to the farmers nearby in the province of
Iloilo. It is, thus, inconceivable how this project could have been started without the necessary
appropriation for just compensation. Needless to state, no government instrumentality, agency, or
subdivision has any business initiating expropriation proceedings unless it has adequate funds,
supported by proper appropriation acts, to pay for the property to be seized from the owner. Not
only was the government able to make an initial deposit of P2,097.30 but the project was finished
in only a year's time. We agree with the petitioner that before the respondent NIA undertook the
construction of the Barotac Viejo Irrigation Project, the same was duly authorized, with the
corresponding funds appropriated for the payment of expropriated land and to pay for equipment,
salaries of personnel, and other expenses incidental to the project. The NIA officials responsible
for the project have to do plenty of explaining as to where they misdirected the funds intended for
the expropriated property.
The present case must be distinguished from earlier cases where payment for property
expropriated by the National Government may not be realized upon execution. As a rule, the
legislature must first appropriate the additional amount to pay the award. (See Commissioner of
Public Highways v. San Diego, 31 SCRA 616 and Visayan Refining Co. v. Camus & Paredes, 40 Phil.
550).
In the present case, the Barotac Viejo Project was a package project of government. Money was
allocated for an entire project. Before bulldozers and ditch diggers tore up the place and before
millions of pesos were put into the development of the project, the basic responsibility of paying
the owners for property seized from them should have been met.
Another distinction lies in the fact that the NIA collects fees for the use of the irrigation
system constructed on the petitioner's land. It does not have to await an express act of Congress
to locate funds for this specific purpose. The rule in earlier precedents that the functions and
public services rendered by the state cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific objects (Commissioner of Public
Highways v. San Diego, supra, at p. 625) is not applicable here. There is no showing of any public
service to be disrupted if the fees collected from the farmers of Iloilo for the use of irrigation water
from the disrupted property were utilized to pay for that property.
We must emphasize that nowhere in any expropriation case has there been a deviation
from the rule that the Government must pay for expropriated property. In the Commissioner of
Public Highways case, the Court stressed that it is incumbent upon the legislature to appropriate

the necessary amount because it cannot keep the land and dishonor the judgment.
This case illustrates the expanded meaning of "public use" in the eminent domain clause.
(Constitution, Article III, Section 9.) The petitioner's land was not taken for the construction of a
road, bridge, school, public buildings, or other traditional objects of expropriation. When the
National Housing Authority expropriates raw land to convert into housing projects for rent or sale
to private persons or the NIA expropriates land to construct irrigation systems and sells water
rights to farmers, it would be the height of abuse and ignominy for the agencies to start earning
from those properties while ignoring final judgments ordering the payment of just compensation
to the former owners.
Just compensation means not only the correct determination of the amount to be paid to
the owner of the land but also the payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered "just" for the property owner is
made to suffer the consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to cope with his loss.
Thus, in the case of Provincial Government of Sorsogon v. Rosa E. Vda. de Villaroyo (153 SCRA
291), we ruled:

The petitioners have been waiting for more than thirty years to be paid for their
land which was taken for use as a public high school. As a matter of fair procedure, it is
the duty of the Government whenever it takes property from private persons against their
will to supply all required documentation and facilitate payment of just compensation . The
imposition of unreasonable requirements and vexatious delays before effecting payment is
not only galling and arbitrary but a rich source of discontent with government. There
should be some kind of swift and effective recourse against unfeeling and uncaring acts of
middle or lower level bureaucrats.

Under ordinary circumstances, immediate return to the owners of the unpaid property is
the obvious remedy. ln cases where land is taken for public use, public interest, however, must, be
considered. The children of Gubat, Sorsogon have been using the disputed land as their high
school athletic grounds for thirty years. (Emphasis supplied)

In the present case, the irrigation project was completed and has been in operation since
1976. The project is benefitting the farmers specifically and the community in general. Obviously,
the petitioner's land cannot be returned to him. However, it is high time that the petitioner be paid

what was due him eleven years ago. It is arbitrary and capricious for a government agency to
initiate expropriation proceedings, seize a person's property, allow the judgment of the court to
become final and executory and then refuse to pay on the ground that there are no appropriations
for the property earlier taken and profitably used. We condemn in the strongest possible terms the
cavalier attitude of government officials who adopt such a despotic and irresponsible stance.

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

14. Holy See v. Rosario, Jr., 238 SCRA 524 (1994)

EN BANC
[ G.R. No. 101949, December 01, 1994 ]
THE HOLY SEE, PETITIONER, VS. THE HON. ERIBERTO U. ROSARIO, JR., AS PRESIDING JUDGE OF
THE REGIONAL TRIAL COURT OF MAKATI, BRANCH 61 AND STARBRIGHT SALES ENTERPRISES,
INC., RESPONDENTS.

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and
set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court,
Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in
Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion for
reconsideration of the June 20, 1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy,
and is represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in
the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square
meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Paranaque,
Metro Manila and registered in the name of petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of
Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine Realty
Corporation (PRC).
The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as
agent of the sellers. Later, Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent, a
dispute arose as to who of the parties has the responsibility of evicting and clearing the land of
squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to
Tropicana Properties and Development Corporation (Tropicana).
I
On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and
specific performance and damages against petitioner, represented by the Papal Nuncio, and three
other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No. 90183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner
and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per
square meter; (2) the agreement to sell was made on the condition that earnest money of
P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of squatters
who were then occupying the same; (3) Licup paid the earnest money to Msgr. Cirilos; (4) in the
same month, Licup assigned his rights over the property to private respondent and informed the
sellers of the said assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that
the sellers fulfill their undertaking and clear the property of squatters; however, Msgr. Cirilos
informed private respondent of the squatters' refusal to vacate the lots, proposing instead either
that private respondent undertake the eviction or that the earnest money be returned to the
latter; (6) private respondent counterproposed that if it would undertake the eviction of the
squatters, the purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per
square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private
respondent giving it seven days from receipt of the letter to pay the original purchase price in

cash; (8) private respondent sent the earnest money back to the sellers, but later discovered that
on March 30, 1989, petitioner and the PRC, without notice to private respondent, sold the lots to
Tropicana, as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another over Lots
5-B and 5-D; and that the sellers' transfer certificate of title over the lots were cancelled,
transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner and the PRC
to sell the lots to it and thus enriched itself at the expense of private respondent; (10) private
respondent demanded the rescission of the sale to Tropicana and the reconveyance of the lots, to
no avail; and (11) private respondent is willing and able to comply with the terms of the contract
to sell and has actually made plans to develop the lots into a townhouse project, but in view of the
sellers' breach, it lost profits of not less than P30,000,000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between
petitioner and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the
lots in question; (3) specific performance of the agreement to sell between it and the owners of
the lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for
being an improper party. An opposition to the motion was filed by private respondent.
On June 20, 1991, the trial court issued an order denying, among others, petitioner's
motion to dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into
the business contract in question" (Rollo, pp. 20-21).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for
Claim of Immunity as a Jurisdictional Defense." So as to facilitate the determination of its defense
of sovereign immunity, petitioner prayed that a hearing be conducted to allow it to establish
certain facts upon which the said defense is based. Private respondent opposed this motion as well
as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the motion
for reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo, p.
22).
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the
privilege of sovereign immunity only on its own behalf and on behalf of its official representative,
the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the
diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained in
the petition of the Holy See insofar as they refer to arguments relative to its claim of sovereign
immunity from suit" (Rollo, p. 87).
Private respondent opposed the intervention of the Department of Foreign Affairs. In
compliance with the resolution of this Court, both parties and the Department of Foreign Affairs
submitted their respective memoranda.
II
A preliminary matter to be threshed out is the procedural issue of whether the petition for
certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the order
denying petitioner's motion to dismiss. The general rule is that an order denying a motion to
dismiss is not reviewable by the appellate courts, the remedy of the movant being to file his
answer and to proceed with the hearing before the trial court. But the general rule admits of
exceptions, and one of these is when it is very clear in the records that the trial court has no
alternative but to dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582
[1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]). In such a case, it would be a
sheer waste of time and energy to require the parties to undergo the rigors of a trial.
The other procedural question raised by private respondent is the personality or legal
interest of the Department of Foreign Affairs to intervene in the case in behalf of the Holy See
(Rollo, pp. 186-190).
In Public International Law, when a state or international agency wishes to plead sovereign
or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is
sued to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the
foreign state or the international organization sued in an American court requests the Secretary of
State to make a determination as to whether it is entitled to immunity. If the Secretary of State
finds that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to
the court a "suggestion" that the defendant is entitled to immunity. In England, a similar
procedure is followed, only the Foreign Office issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit
of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or diplomatic
immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In
International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of
Foreign Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the
latter that the respondent-employer could not be sued because it enjoyed diplomatic immunity. In
World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy
asked the Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to
respondent Judge. The Solicitor General embodied the "suggestion" in a Manifestation and
Memorandum as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed the
said Department to file its memorandum in support of petitioner's claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass
the Foreign Office, the courts can inquire into the facts and make their own determination as to
the nature of the acts and transactions involved.
III
The burden of the petition is that respondent trial court has no jurisdiction over petitioner,
being a foreign state enjoying sovereign immunity. On the other hand, private respondent insists
that the doctrine of non-suability is not anymore absolute and that petitioner has divested itself of
such a cloak when, of its own free will, it entered into a commercial transaction for the sale of a
parcel of land located in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and
he, as the Holy See, was considered a subject of International Law. With the loss of the Papal
States and the limitation of the territory under the Holy See to an area of 108.7 acres, the
position of the Holy See in International Law became controversial (Salonga and Yap, Public
International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to International Law. (Garcia, Questions and
Problems In International Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to it indisputable
sovereignty also in the field of international relations" (O'Connell, I International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested that the
treaty created two international persons - the Holy See and Vatican City (Salonga and Yap, supra.,
37).
The Vatican City fits into none of the established categories of states, and the attribution to
it of "sovereignty" must be made in a sense different from that in which it is applied to other
states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a
community of national states, the Vatican City represents an entity organized not for political but
for ecclesiastical purposes and international objects. Despite its size and object, the Vatican City
has an independent government of its own, with the Pope, who is also head of the Roman Catholic
Church, as the Holy See or Head of State, in conformity with its traditions, and the demands of its
mission in the world. Indeed, the world-wide interests and activities of the Vatican City are such
as to make it in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of
International Law 160 [1956]).
One authority wrote that the recognition of the Vatican City as a state has significant
implication - that it is possible for any entity pursuing objects essentially different from those
pursued by states to be invested with international personality (Kunz, The Status of the Holy See
in International Law, 46 The American Journal of International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as
the Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own
view, it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign.
The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with
the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal practice in
international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the
generally accepted principles of International Law. Even without this affirmation, such principles of
International Law are deemed incorporated as part of the law of the land as a condition and
consequence of our admission in the society of nations (United States of America v. Guinto, 182
SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its consent,
be made a respondent in the courts of another sovereign. According to the newer or restrictive
theory, the immunity of the sovereign is recognized only with regard to public acts or acts jure
imperii of a state, but not with regard to private acts or acts jure gestionis (United States of
America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International Law
194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States passed the
Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as "either a
regular course of commercial conduct or a particular commercial transaction or act." Furthermore,
the law declared that the "commercial character of the activity shall be determined by reference to
the nature of the course of conduct or particular transaction or act, rather than by reference to its
purpose." The Canadian Parliament enacted in 1982 an Act to Provide For State Immunity In
Canadian Courts. The Act defines a "commercial activity" as any particular transaction, act or
conduct or any regular course of conduct that by reason of its nature, is of a "commercial
character."
The restrictive theory, which is intended to be a solution to the host of problems involving
the issue of sovereign immunity, has created problems of its own. Legal treatises and the

decisions in countries which follow the restrictive theory have difficulty in characterizing whether a
contract of a sovereign state with a private party is an act jure gestionis or an act jure imperii.
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions. This is
particularly true with respect to the Communist states which took control of nationalized business
activities and international trading.
This Court has considered the following transactions by a foreign state with private parties
as acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its
military officers (Syquia v. Lopez, 84 Phil. 312 [1949]); (2) the conduct of public bidding for the
repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and
(3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88
[1988]).
On the other hand, this Court has considered the following transactions by a foreign state
with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the
John Hay Air Station in Baguio City, to cater to American servicemen and the general public
(United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the
operation of barber shops in Clark Air Base in Angeles City (United States of America v. Guinto,
182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general
public is undoubtedly for profit as a commercial and not a governmental activity. By entering into
the employment contract with the cook in the discharge of its proprietary function, the United
States government impliedly divested itself of its sovereign immunity from suit.
In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own
guidelines, tentative they may be.
Certainly, the mere entering into a contract by a foreign state with a private party cannot
be the ultimate test. Such an act can only be the start of the inquiry. The logical question is
whether the foreign state is engaged in the activity in the regular course of business. If the
foreign state is not engaged regularly in a business or trade, the particular act or transaction must
then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof,
then it is an act jure imperii, especially when it is not undertaken for gain or profit.
As held in United States of America v. Guinto, (supra):

"There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in its
proprietary or private capacity. It is only when the contract involves its sovereign or governmental
capacity that no such waiver may be implied."
In the case at bench, if petitioner has bought and sold lands in the ordinary course of a
real estate business, surely the said transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were made
for profit but claimed that it acquired said property for the site of its mission or the Apostolic
Nunciature in the Philippines. Private respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct thereon
the official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire
property, real or personal, in a receiving state, necessary for the creation and maintenance of its
diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts.
20-22). This treaty was concurred in by the Philippine Senate and entered into force in the
Philippines on November 15, 1965.
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil
and administrative jurisdiction of the receiving state over any real action relating to private
immovable property situated in the territory of the receiving state which the envoy holds on behalf
of the sending state for the purposes of the mission. If this immunity is provided for a diplomatic
envoy, with all the more reason should immunity be recognized as regards the sovereign itself,
which in this case is the Holy See.
The decision to transfer the property and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did not sell Lot 5-A for profit or gain. It merely
wanted to dispose off the same because the squatters living thereon made it almost impossible for
petitioner to use it for the purpose of the donation. The fact that squatters have occupied and are
still occupying the lot, and that they stubbornly refuse to leave the premises, has been admitted
by private respondent in its complaint (Rollo, pp. 26, 27).
The issue of petitioner's non-suability can be determined by the trial court without going to
trial in the light of the pleadings, particularly the admission of private respondent. Besides, the
privilege of sovereign immunity in this case was sufficiently established by the Memorandum and
Certification of the Department of Foreign Affairs. As the department tasked with the conduct of
the Philippines' foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the

Department of Foreign Affairs has formally intervened in this case and officially certified that the
Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the Philippines
exempt from local jurisdiction and entitled to all the rights, privileges and immunities of a
diplomatic mission or embassy in this country (Rollo, pp. 156-157). The determination of the
executive arm of government that a state or instrumentality is entitled to sovereign or diplomatic
immunity is a political question that is conclusive upon the courts (International Catholic Migration
Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is recognized and
affirmed by the executive branch, it is the duty of the courts to accept this claim so as not to
embarrass the executive arm of the government in conducting the country's foreign relations
(World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration
Commission and in World Health Organization, we abide by the certification of the Department of
Foreign Affairs.
Ordinarily, the procedure would be to remand the case and order the trial court to conduct
a hearing to establish the facts alleged by petitioner in its motion. In view of said certification,
such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership
v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).
IV
Private respondent is not left without any legal remedy for the redress of its grievances.
Under both Public International Law and Transnational Law, a person who feels aggrieved by the
acts of a foreign sovereign can ask his own government to espouse his cause through diplomatic
channels.
Private respondent can ask the Philippine government, through the Foreign Office, to
espouse its claims against the Holy See. Its first task is to persuade the Philippine government to
take up with the Holy See the validity of its claims. Of course, the Foreign Office shall first make a
determination of the impact of its espousal on the relations between the Philippine government
and the Holy See (Young, Remedies of Private Claimants Against Foreign States, Selected
Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]). Once the
Philippine government decides to espouse the claim, the latter ceases to be a private cause.
According to the Permanent Court of International Justice, the forerunner of the
International Court of Justice:
"By taking up the case of one of its subjects and by resorting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own rights - its

right to ensure, in the person of its subjects, respect for the rules of international law" (The
Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No.
90-183 against petitioner is DISMISSED.
SO ORDERED.
15. Minucher v. Court of Appeals, 397 SCRA 244 (2003)
[ G.R. No. 142396, February 11, 2003 ]
KHOSROW MINUCHER, PETITIONER, VS. HON. COURT OF APPEALS AND ARTHUR
SCALZO, RESPONDENTS.
Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425,
otherwise also known as the Dangerous Drugs Act of 1972, was filed against petitioner Khosrow
Minucher and one Abbas Torabian with the Regional Trial Court, Branch 151, of Pasig City. The
criminal charge followed a buy-bust operation conducted by the Philippine police narcotic agents
in the house of Minucher, an Iranian national, where a quantity of heroin, a prohibited drug, was
said to have been seized. The narcotic agents were accompanied by private respondent Arthur
Scalzo who would, in due time, become one of the principal witnesses for the prosecution. On 08
January 1988, Presiding Judge Eutropio Migrino rendered a decision acquitting the two accused.
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court
(RTC), Branch 19, of Manila for damages on account of what he claimed to have been trumped-up
charges of drug trafficking made by Arthur Scalzo. The Manila RTC detailed what it had found to
be the facts and circumstances surrounding the case.
"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the Philippines
to study in the University of the Philippines in 1974. In 1976, under the regime of the Shah of
Iran, he was appointed Labor Attach for the Iranian Embassies in Tokyo, Japan and Manila,
Philippines. When the Shah of Iran was deposed by Ayatollah Khomeini, plaintiff became a refugee
of the United Nations and continued to stay in the Philippines. He headed the Iranian National
Resistance

Movement

in

the

Philippines.

He came to know the defendant on May 13, 1986, when the latter was brought to his house and
introduced to him by a certain Jose Iigo, an informer of the Intelligence Unit of the military. Jose
Iigo, on the other hand, was met by plaintiff at the office of Atty. Crisanto Saruca, a lawyer for

several Iranians whom plaintiff assisted as head of the anti-Khomeini movement in the Philippines.
During his first meeting with the defendant on May 13, 1986, upon the introduction of Jose Iigo,
the defendant expressed his interest in buying caviar. As a matter of fact, he bought two kilos of
caviar from plaintiff and paid P10,000.00 for it. Selling caviar, aside from that of Persian carpets,
pistachio nuts and other Iranian products was his business after the Khomeini government cut his
pension of over $3,000.00 per month. During their introduction in that meeting, the defendant
gave the plaintiff his calling card, which showed that he is working at the US Embassy in the
Philippines, as a special agent of the Drug Enforcement Administration, Department of Justice, of
the United States, and gave his address as US Embassy, Manila. At the back of the card appears a
telephone number in defendants own handwriting, the number of which he can also be contacted.
It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa for his
wife and the wife of a countryman named Abbas Torabian. The defendant told him that he [could]
help plaintiff for a fee of $2,000.00 per visa. Their conversation, however, was more concentrated
on politics, carpets and caviar. Thereafter, the defendant promised to see plaintiff again.
On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at Mario's
Restaurant at Makati. He wanted to buy 200 grams of caviar. Plaintiff brought the merchandize but
for the reason that the defendant was not yet there, he requested the restaurant people to x x x
place the same in the refrigerator. Defendant, however, came and plaintiff gave him the caviar for
which he was paid. Then their conversation was again focused on politics and business.
On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at
Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which plaintiff valued at
$27,900.00. After some haggling, they agreed at $24,000.00. For the reason that defendant did
not yet have the money, they agreed that defendant would come back the next day. The following
day, at 1:00 p.m., he came back with his $24,000.00, which he gave to the plaintiff, and the
latter,

in

turn,

gave

him

the

pair

of

carpets.

At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to plaintiff's
house and directly proceeded to the latter's bedroom, where the latter and his countryman, Abbas
Torabian, were playing chess. Plaintiff opened his safe in the bedroom and obtained $2,000.00
from it, gave it to the defendant for the latter's fee in obtaining a visa for plaintiff's wife. The
defendant told him that he would be leaving the Philippines very soon and requested him to come
out of the house for a while so that he can introduce him to his cousin waiting in a cab. Without
much ado, and without putting on his shirt as he was only in his pajama pants, he followed the

defendant where he saw a parked cab opposite the street. To his complete surprise, an American
jumped out of the cab with a drawn high-powered gun. He was in the company of about 30 to 40
Filipino soldiers with 6 Americans, all armed. He was handcuffed and after about 20 minutes in the
street, he was brought inside the house by the defendant. He was made to sit down while in
handcuffs while the defendant was inside his bedroom. The defendant came out of the bedroom
and out from defendant's attach case, he took something and placed it on the table in front of
the plaintiff. They also took plaintiff's wife who was at that time at the boutique near his house
and likewise arrested Torabian, who was playing chess with him in the bedroom and both were
handcuffed together. Plaintiff was not told why he was being handcuffed and why the privacy of
his house, especially his bedroom was invaded by defendant. He was not allowed to use the
telephone. In fact, his telephone was unplugged. He asked for any warrant, but the defendant told
him to `shut up. He was nevertheless told that he would be able to call for his lawyer who can
defend him.
The plaintiff took note of the fact that when the defendant invited him to come out to meet his
cousin, his safe was opened where he kept the $24,000.00 the defendant paid for the carpets and
another $8,000.00 which he also placed in the safe together with a bracelet worth $15,000.00 and
a pair of earrings worth $10,000.00. He also discovered missing upon his release his 8 pieces
hand-made Persian carpets, valued at $65,000.00, a painting he bought for P30,000.00 together
with his TV and betamax sets. He claimed that when he was handcuffed, the defendant took his
keys from his wallet. There was, therefore, nothing left in his house.
That his arrest as a heroin trafficker x x x had been well publicized throughout the world, in
various newspapers, particularly in Australia, America, Central Asia and in the Philippines. He was
identified in the papers as an international drug trafficker. x x x
In fact, the arrest of defendant and Torabian was likewise on television, not only in the
Philippines, but also in America and in Germany. His friends in said places informed him that they
saw him on TV with said news.
After the arrest made on plaintiff and Torabian, they were brought to Camp Crame
handcuffed together, where they were detained for three days without food and water." [1]
During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for Scalzo and
moved for extension of time to file an answer pending a supposed advice from the United States
Department of State and Department of Justice on the defenses to be raised. The trial court
granted the motion. On 27 October 1988, Scalzo filed another special appearance to quash the
summons on the ground that he, not being a resident of the Philippines and the action being one

in personam, was beyond the processes of the court. The motion was denied by the court, in its
order of 13 December 1988, holding that the filing by Scalzo of a motion for extension of time to
file an answer to the complaint was a voluntary appearance equivalent to service of summons
which could likewise be construed a waiver of the requirement of formal notice. Scalzo filed a
motion for reconsideration of the court order, contending that a motion for an extension of time to
file an answer was not a voluntary appearance equivalent to service of summons since it did not
seek an affirmative relief. Scalzo argued that in cases involving the United States government, as
well as its agencies and officials, a motion for extension was peculiarly unavoidable due to the
need (1) for both the Department of State and the Department of Justice to agree on the defenses
to be raised and (2) to refer the case to a Philippine lawyer who would be expected to first review
the case. The court a quo denied the motion for reconsideration in its order of 15 October 1989.

Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R. No.
17023, assailing the denial. In a decision, dated 06 October 1989, the appellate court denied the
petition and affirmed the ruling of the trial court. Scalzo then elevated the incident in a petition for
review on certiorari, docketed G.R. No. 91173, to this Court. The petition, however, was denied for
its failure to comply with SC Circular No. 1-88; in any event, the Court added, Scalzo had failed to
show that the appellate court was in error in its questioned judgment.
Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a) declaring
Scalzo in default for his failure to file a responsive pleading (answer) and (b) setting the case for
the reception of evidence. On 12 March 1990, Scalzo filed a motion to set aside the order of
default and to admit his answer to the complaint. Granting the motion, the trial court set the case
for pre-trial. In his answer, Scalzo denied the material allegations of the complaint and raised the
affirmative defenses (a) of Minuchers failure to state a cause of action in his complaint and (b)
that Scalzo had acted in the discharge of his official duties as being merely an agent of the Drug
Enforcement Administration of the United States Department of Justice. Scalzo interposed a
counterclaim of P100,000.00 to answer for attorneys' fees and expenses of litigation.
Then, on 14 June 1990, after almost two years since the institution of the civil case, Scalzo
filed a motion to dismiss the complaint on the ground that, being a special agent of the United
States Drug Enforcement Administration, he was entitled to diplomatic immunity. He attached to
his motion Diplomatic Note No. 414 of the United States Embassy, dated 29 May 1990, addressed
to the Department of Foreign Affairs of the Philippines and a Certification, dated 11 June 1990, of
Vice Consul Donna Woodward, certifying that the note is a true and faithful copy of its original. In
an order of 25 June 1990, the trial court denied the motion to dismiss.

On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court,
docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao Polo, et al.,"
asking that the complaint in Civil Case No. 88-45691 be ordered dismissed. The case was referred
to the Court of Appeals, there docketed CA-G.R. SP No. 22505, per this Courts resolution of 07
August 1990. On 31 October 1990, the Court of Appeals promulgated its decision sustaining the
diplomatic immunity of Scalzo and ordering the dismissal of the complaint against him. Minucher
filed a petition for review with this Court, docketed G.R. No. 97765 and entitled "Khosrow
Minucher vs. the Honorable Court of Appeals, et. al. (cited in 214 SCRA 242), appealing the
judgment of the Court of Appeals. In a decision, dated 24 September 1992, penned by Justice
(now Chief Justice) Hilario Davide, Jr., this Court reversed the decision of the appellate court and
remanded the case to the lower court for trial. The remand was ordered on the theses (a) that the
Court of Appeals erred in granting the motion to dismiss of Scalzo for lack of jurisdiction over his
person without even considering the issue of the authenticity of Diplomatic Note No. 414 and (b)
that the complaint contained sufficient allegations to the effect that Scalzo committed the imputed
acts in his personal capacity and outside the scope of his official duties and, absent any evidence
to the contrary, the issue on Scalzos diplomatic immunity could not be taken up.
The Manila RTC thus continued with its hearings on the case. On 17 November 1995, the
trial court reached a decision; it adjudged:
WHEREFORE, and in view of all the foregoing considerations, judgment is hereby rendered
for the plaintiff, who successfully established his claim by sufficient evidence, against the
defendant in the manner following:
"`Adjudging defendant liable to plaintiff in actual and compensatory
damages of P520,000.00; moral damages in the sum of P10 million; exemplary
damages in the sum of P100,000.00; attorney's fees in the sum of P200,000.00
plus

costs.

`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the
lien of the Court on this judgment to answer for the unpaid docket fees considering
that the plaintiff in this case instituted this action as a pauper litigant."[2]
While the trial court gave credence to the claim of Scalzo and the evidence presented by
him that he was a diplomatic agent entitled to immunity as such, it ruled that he, nevertheless,
should be held accountable for the acts complained of committed outside his official duties. On
appeal, the Court of Appeals reversed the decision of the trial court and sustained the defense of
Scalzo that he was sufficiently clothed with diplomatic immunity during his term of duty and

thereby immune from the criminal and civil jurisdiction of the Receiving State pursuant to the
terms

of

the

Vienna

Convention.

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

diplomatic

immunity.

The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would
require 1) the finality of the prior judgment, 2) a valid jurisdiction over the subject matter and the
parties on the part of the court that renders it, 3) a judgment on the merits, and 4) an identity of
the parties, subject matter and causes of action. [3] Even while one of the issues submitted in G.R.
No. 97765 - "whether or not public respondent Court of Appeals erred in ruling that private
respondent Scalzo is a diplomat immune from civil suit conformably with the Vienna Convention
on Diplomatic Relations" - is also a pivotal question raised in the instant petition, the ruling in G.R.
No. 97765, however, has not resolved that point with finality. Indeed, the Court there has made
this observation "It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief filed on
13 June 1990, unequivocally states that he would present documentary evidence consisting of
DEA records on his investigation and surveillance of plaintiff and on his position and duties as DEA
special agent in Manila. Having thus reserved his right to present evidence in support of his
position, which is the basis for the alleged diplomatic immunity, the barren self-serving claim in
the belated motion to dismiss cannot be relied upon for a reasonable, intelligent and fair
resolution of the issue of diplomatic immunity."[4]
Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the Philippines is a
signatory, grants him absolute immunity from suit, describing his functions as an agent of the
United States Drugs Enforcement Agency as conducting surveillance operations on suspected
drug dealers in the Philippines believed to be the source of prohibited drugs being shipped to the
U.S., (and) having ascertained the target, (he then) would inform the Philippine narcotic agents
(to) make the actual arrest." Scalzo has submitted to the trial court a number of documents 1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;
2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;
3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;

4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and
5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.
6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department of
Foreign Affairs, dated 27 June 1990 forwarding Embassy Note No. 414 to the Clerk of Court
of RTC Manila, Branch 19 (the trial court);
7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3'); and
8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol, Department of
Foreign Affairs, through Asst. Sec. Emmanuel Fernandez, addressed to the Chief Justice of
this Court.[5]
The documents, according to Scalzo, would show that: (1) the United States Embassy
accordingly advised the Executive Department of the Philippine Government that Scalzo was a
member of the diplomatic staff of the United States diplomatic mission from his arrival in the
Philippines on 14 October 1985 until his departure on 10 August 1988; (2) that the United States
Government was firm from the very beginning in asserting the diplomatic immunity of Scalzo with
respect to the case pursuant to the provisions of the Vienna Convention on Diplomatic Relations;
and (3) that the United States Embassy repeatedly urged the Department of Foreign Affairs to
take appropriate action to inform the trial court of Scalzos diplomatic immunity. The other
documentary exhibits were presented to indicate that: (1) the Philippine government itself,
through its Executive Department, recognizing and respecting the diplomatic status of Scalzo,
formally advised the Judicial Department of his diplomatic status and his entitlement to all
diplomatic privileges and immunities under the Vienna Convention; and (2) the Department of
Foreign Affairs itself authenticated Diplomatic Note No. 414. Scalzo additionally presented Exhibits
"9" to "13" consisting of his reports of investigation on the surveillance and subsequent arrest of
Minucher, the certification of the Drug Enforcement Administration of the United States
Department of Justice that Scalzo was a special agent assigned to the Philippines at all times
relevant to the complaint, and the special power of attorney executed by him in favor of his
previous counsel[6] to show (a) that the United States Embassy, affirmed by its Vice Consul,
acknowledged Scalzo to be a member of the diplomatic staff of the United States diplomatic
mission from his arrival in the Philippines on 14 October 1985 until his departure on 10 August
1988, (b) that, on May 1986, with the cooperation of the Philippine law enforcement officials and
in the exercise of his functions as member of the mission, he investigated Minucher for alleged
trafficking in a prohibited drug, and (c) that the Philippine Department of Foreign Affairs itself
recognized that Scalzo during his tour of duty in the Philippines (14 October 1985 up to 10 August
1988) was listed as being an Assistant Attach of the United States diplomatic mission and

accredited with diplomatic status by the Government of the Philippines. In his Exhibit 12, Scalzo
described the functions of the overseas office of the United States Drugs Enforcement Agency, i.e.,
(1) to provide criminal investigative expertise and assistance to foreign law enforcement agencies
on narcotic and drug control programs upon the request of the host country, 2) to establish and
maintain liaison with the host country and counterpart foreign law enforcement officials, and 3) to
conduct complex criminal investigations involving international criminal conspiracies which affect
the

interests

of

the

United

States.

The Vienna Convention on Diplomatic Relations was a codification of centuries-old customary

law and, by the time of its ratification on 18 April 1961, its rules of law had long become stable.
Among the city states of ancient Greece, among the peoples of the Mediterranean before the
establishment of the Roman Empire, and among the states of India, the person of the herald in
time of war and the person of the diplomatic envoy in time of peace were universally held
sacrosanct.[7] By the end of the 16th century, when the earliest treatises on diplomatic law were
published, the inviolability of ambassadors was firmly established as a rule of customary
international law.[8] Traditionally, the exercise of diplomatic intercourse among states was
undertaken by the head of state himself, as being the preeminent embodiment of the state he
represented, and the foreign secretary, the official usually entrusted with the external affairs of
the state. Where a state would wish to have a more prominent diplomatic presence in the
receiving state, it would then send to the latter a diplomatic mission. Conformably with the Vienna
Convention, the functions of the diplomatic mission involve, by and large, the representation of
the interests of the sending state and promoting friendly relations with the receiving state. [9]
The Convention lists the classes of heads of diplomatic missions to include (a) ambassadors or
nuncios accredited to the heads of state,[10] (b) envoys,[11] ministers or internuncios accredited to
the heads of states; and (c) charges d' affairs[12] accredited to the ministers of foreign affairs.[13]
Comprising the "staff of the (diplomatic) mission" are the diplomatic staff, the administrative staff
and the technical and service staff. Only the heads of missions, as well as members of the
diplomatic staff, excluding the members of the administrative, technical and service staff of the
mission, are accorded diplomatic rank. Even while the Vienna Convention on Diplomatic Relations
provides for immunity to the members of diplomatic missions, it does so, nevertheless, with an
understanding that the same be restrictively applied. Only "diplomatic agents," under the terms of
the Convention, are vested with blanket diplomatic immunity from civil and criminal suits. The
Convention defines "diplomatic agents" as the heads of missions or members of the diplomatic
staff, thus impliedly withholding the same privileges from all others. It might bear stressing that
even consuls, who represent their respective states in concerns of commerce and navigation and
perform certain administrative and notarial duties, such as the issuance of passports and visas,

authentication of documents, and administration of oaths, do not ordinarily enjoy the traditional
diplomatic immunities and privileges accorded diplomats, mainly for the reason that they are not
charged with the duty of representing their states in political matters. Indeed, the main
yardstick in ascertaining whether a person is a diplomat entitled to immunity is the
determination of whether or not he performs duties of diplomatic nature.
Scalzo asserted, particularly in his Exhibits 9 to 13, that he was an Assistant Attach of the
United States diplomatic mission and was accredited as such by the Philippine Government. An
attach belongs to a category of officers in the diplomatic establishment who may be in charge of
its cultural, press, administrative or financial affairs. There could also be a class of attaches
belonging to certain ministries or departments of the government, other than the foreign ministry
or department, who are detailed by their respective ministries or departments with the embassies
such as the military, naval, air, commercial, agricultural, labor, science, and customs attaches, or
the like. Attaches assist a chief of mission in his duties and are administratively under him, but
their main function is to observe, analyze and interpret trends and developments in their
respective fields in the host country and submit reports to their own ministries or departments in
the home government.[14] These officials are not generally regarded as members of the diplomatic
mission,

nor

are

they

normally

designated

as

having

diplomatic

rank.

In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos. 414, 757
and 791, all issued post litem motam, respectively, on 29 May 1990, 25 October 1991 and 17
November 1992. The presentation did nothing much to alleviate the Court's initial reservations in
G.R. No. 97765, viz:
"While the trial court denied the motion to dismiss, the public respondent gravely abused its
discretion in dismissing Civil Case No. 88-45691 on the basis of an erroneous assumption that
simply because of the diplomatic note, the private respondent is clothed with diplomatic immunity,
thereby divesting the trial court of jurisdiction over his person.
x x x

xxx

xxx

And now, to the core issue - the alleged diplomatic immunity of the private respondent. Setting
aside for the moment the issue of authenticity raised by the petitioner and the doubts that
surround such claim, in view of the fact that it took private respondent one (1) year, eight (8)
months and seventeen (17) days from the time his counsel filed on 12 September 1988 a Special
Appearance and Motion asking for a first extension of time to file the Answer because the
Departments of State and Justice of the United States of America were studying the case for the
purpose of determining his defenses, before he could secure the Diplomatic Note from the US

Embassy in Manila, and even granting for the sake of argument that such note is authentic, the
complaint for damages filed by petitioner cannot be peremptorily dismissed.
x x x

xxx

xxx

"There is of course the claim of private respondent that the acts imputed to him were done in his
official capacity. Nothing supports this self-serving claim other than the so-called Diplomatic Note.
x x x. The public respondent then should have sustained the trial court's denial of the motion to
dismiss. Verily, it should have been the most proper and appropriate recourse. It should not have
been overwhelmed by the self-serving Diplomatic Note whose belated issuance is even suspect
and whose authenticity has not yet been proved. The undue haste with which respondent Court
yielded to the private respondent's claim is arbitrary."
A significant document would appear to be Exhibit No. 08, dated 08 November 1992,
issued by the Office of Protocol of the Department of Foreign Affairs and signed by Emmanuel C.
Fernandez, Assistant Secretary, certifying that "the records of the Department (would) show that
Mr. Arthur W. Scalzo, Jr., during his term of office in the Philippines (from 14 October 1985 up to
10 August 1988) was listed as an Assistant Attach of the United States diplomatic mission and
was, therefore, accredited diplomatic status by the Government of the Philippines." No certified
true copy of such "records," the supposed bases for the belated issuance, was presented in
evidence.
Concededly, vesting a person with diplomatic immunity is a prerogative of the executive
branch of the government. In World Health Organization vs. Aquino,[15] the Court has recognized
that, in such matters, the hands of the courts are virtually tied. Amidst apprehensions of
indiscriminate and incautious grant of immunity, designed to gain exemption from the jurisdiction
of courts, it should behoove the Philippine government, specifically its Department of Foreign
Affairs, to be most circumspect, that should particularly be no less than compelling, in its post
litem motam issuances. It might be recalled that the privilege is not an immunity from the
observance of the law of the territorial sovereign or from ensuing legal liability; it is, rather, an
immunity from the exercise of territorial jurisdiction. [16] The government of the United States itself,
which Scalzo claims to be acting for, has formulated its standards for recognition of a diplomatic
agent. The State Department policy is to only concede diplomatic status to a person who
possesses an acknowledged diplomatic title and performs duties of diplomatic
nature.[17] Supplementary criteria for accreditation are the possession of a valid diplomatic
passport or, from States which do not issue such passports, a diplomatic note formally
representing the intention to assign the person to diplomatic duties, the holding of a nonimmigrant visa, being over twenty-one years of age, and performing diplomatic functions on an

essentially full-time basis.[18] Diplomatic missions are requested to provide the most accurate and
descriptive job title to that which currently applies to the duties performed. The Office of the
Protocol

would

then

assign

each

individual

to

the

appropriate

functional

category.[19]

But while the diplomatic immunity of Scalzo might thus remain contentious, it was
sufficiently established that, indeed, he worked for the United States Drug Enforcement Agency
and was tasked to conduct surveillance of suspected drug activities within the country on the
dates pertinent to this case. If it should be ascertained that Arthur Scalzo was acting well within
his assigned functions when he committed the acts alleged in the complaint, the present
controversy could then be resolved under the related doctrine of State Immunit from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a longstanding rule of customary international law then closely identified with the personal immunity of
a foreign sovereign from suit[20] and, with the emergence of democratic states, made to attach not
just to the person of the head of state, or his representative, but also distinctly to the state itself
in its sovereign capacity.[21] If the acts giving rise to a suit are those of a foreign government done
by its foreign agent, although not necessarily a diplomatic personage, but acting in his official
capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without
its consent. Suing a representative of a state is believed to be, in effect, suing the state itself. The
proscription is not accorded for the benefit of an individual but for the State, in whose service he
is, under the maxim - par in parem, non habet imperium - that all states are sovereign equals and
cannot assert jurisdiction over one another.[22] The implication, in broad terms, is that if the
judgment against an official would require the state itself to perform an affirmative act to satisfy
the award, such as the appropriation of the amount needed to pay the damages decreed against
him, the suit must be regarded as being against the state itself, although it has not been formally
impleaded.

[23]

In United States of America vs. Guinto,[24] involving officers of the United States Air Force
and special officers of the Air Force Office of Special Investigators charged with the duty of
preventing the distribution, possession and use of prohibited drugs, this Court has ruled "While the doctrine (of state immunity) appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. x x x. It cannot for a moment be imagined
that they were acting in their private or unofficial capacity when they apprehended and later
testified against the complainant. It follows that for discharging their duties as agents of the
United States, they cannot be directly impleaded for acts imputable to their principal, which has

not given its consent to be sued. x x x As they have acted on behalf of the government, and
within the scope of their authority, it is that government, and not the petitioners personally, [who
were] responsible for their acts."[25]
This immunity principle, however, has its limitations. Thus, Shauf vs. Court of Appeals[26]
elaborates:

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

xxx

xxx

(T)he doctrine of immunity from suit will not apply and may not be invoked where the public
official is being sued in his private and personal capacity as an ordinary citizen. The cloak of
protection afforded the officers and agents of the government is removed the moment they are
sued in their individual capacity. This situation usually arises where the public official acts without
authority or in excess of the powers vested in him. It is a well-settled principle of law that a public
official may be liable in his personal private capacity for whatever damage he may have caused by
his act done with malice and in bad faith or beyond the scope of his authority and jurisdiction.[27]
A foreign agent, operating within a territory, can be cloaked with immunity from suit but
only as long as it can be established that he is acting within the directives of the sending state.
The consent of the host state is an indispensable requirement of basic courtesy between the two
sovereigns. Guinto and Shauf both involve officers and personnel of the United States, stationed
within Philippine territory, under the RP-US Military Bases Agreement. While evidence is wanting

to show any similar agreement between the governments of the Philippines and of the United
States (for the latter to send its agents and to conduct surveillance and related activities of
suspected drug dealers in the Philippines), the consent or imprimatur of the Philippine government
to the activities of the United States Drug Enforcement Agency, however, can be gleaned from the
facts heretofore elsewhere mentioned. The official exchanges of communication between agencies
of the government of the two countries, certifications from officials of both the Philippine
Department of Foreign Affairs and the United States Embassy, as well as the participation of
members of the Philippine Narcotics Command in the buy-bust operation conducted at the
residence of Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic
status" of the latter but they give enough indication that the Philippine government has given its
imprimatur, if not consent, to the activities within Philippine territory of agent Scalzo of the United
States Drug Enforcement Agency. The job description of Scalzo has tasked him to conduct
surveillance on suspected drug suppliers and, after having ascertained the target, to inform local
law enforcers who would then be expected to make the arrest. In conducting surveillance
activities on Minucher, later acting as the poseur-buyer during the buy-bust operation, and then
becoming a principal witness in the criminal case against Minucher, Scalzo hardly can be said to
have

acted

beyond

the

scope

of

his

official

function

or

duties.

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

state
WHEREFORE,

on

immunity
the

foregoing

premises,

from
the

petition

is

suit.
DENIED.

No

costs.

SO ORDERED.
16. China National Machinery & Equipment Corp. (Group) v. Santamaria, 665 SCRA 189 (2012)
EN BANC
[ 665 SCRA 189, February 07, 2012 ]
CHINA NATIONAL MACHINERY & EQUIPMENT CORP. (GROUP), PETITIONER, VS. HON. CESAR D.
SANTAMARIA, IN HIS OFFICIAL CAPACITY AS PRESIDING JUDGE OF BRANCH 145, REGIONAL
TRIAL COURT OF MAKATI CITY, HERMINIO HARRY L. ROQUE, JR., JOEL R. BUTUYAN, ROGER R.
RAYEL, ROMEL R. BAGARES, CHRISTOPHER FRANCISCO C. BOLASTIG, LEAGUE OF URBAN POOR
FOR ACTION (LUPA), KILUSAN NG MARALITA SA MEYCAUAYAN (KMM-LUPA CHAPTER), DANILO M.
CALDERON, VICENTE C. ALBAN, MERLYN M. VAAL, LOLITA S. QUINONES, RICARDO D. LANOZO,

JR., CONCHITA G. GOZO, MA. TERESA D. ZEPEDA, JOSEFINA A. LANOZO, AND SERGIO C.
LEGASPI, JR., KALIPUNAN NG DAMAYANG MAHIHIRAP (KADAMAY), EDY CLERIGO, RAMMIL
DINGAL, NELSON B. TERRADO, CARMEN DEUNIDA, AND EDUARDO LEGSON, RESPONDENTS.
This is a Petition for Review on Certiorari with Prayer for the Issuance of a Temporary
Restraining Order (TRO) and/or Preliminary Injunction assailing the 30 September 2008 Decision
and 5 December 2008 Resolution of the Court of Appeals (CA) in CAG.R. SP No. 103351.[1]
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).

[2]

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.[4] 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.

[5]

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.

[6]

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.[8]

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).[9] 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.[10]

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. [11] The case
was docketed as Civil Case No. 06-203 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.[12]
RTC Br. 145 issued an Order dated 17 March 2006 setting the case for hearing on the
issuance of injunctive reliefs.[13] On 29 March 2006, CNMEG filed an Urgent Motion for
Reconsideration of this Order.[14] Before RTC Br. 145 could rule thereon, CNMEG filed a Motion to
Dismiss dated 12 April 2006, arguing that the trial court did not have jurisdiction over (a) its
person, as it was an agent of the Chinese government, making it immune from suit, and (b) the
subject matter, as the Northrail Project was a product of an executive agreement.

[15]

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.[16] CNMEG then filed a Motion for Reconsideration, [17] which was
denied by the trial court in an Order dated 10 March 2008. [18] 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.[19]
In the assailed Decision dated 30 September 2008, the appellate court dismissed the
Petition for Certiorari.[20] Subsequently, CNMEG filed a Motion for Reconsideration, [21] which was
denied by the CA in a Resolution dated 5 December 2008. [22] Thus, CNMEG filed the instant
Petition for Review on Certiorari dated 21 January 2009, raising the following issues:

[23]

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.

Whether or not the certification from the Department of Foreign Affairs is necessary under
the

foregoing

circumstances.

Whether or not the act being undertaken by petitioner CNMEG is an act jure imperii.
Whether or not the Court of Appeals failed to avoid a procedural limbo in the lower court.
Whether

or

not

the

Northrail

Project

is

subject

to

competitive

public

bidding.

Whether or not the Court of Appeals ignored the ruling of this Honorable Court in the Neri
case.
CNMEG prays for the dismissal of Civil Case No. 06-203 before RTC Br. 145 for lack of
jurisdiction. It likewise requests this Court for the issuance of a TRO and, later on, a writ of
preliminary injunction to restrain public respondent from proceeding with the disposition of Civil
Case

No.

06-203.

The crux of this case boils down to two main issues, namely:
1. Whether CNMEG is entitled to immunity, precluding it from being sued before a local court.
2. Whether the Contract Agreement is an executive agreement, such that it cannot be
questioned by or before a local court.
First issue: Whether CNMEG is entitled to immunity
This Court explained the doctrine of sovereign immunity in Holy See v. Rosario,[24] 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.)
xxx

xxx

xxx

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

In JUSMAG v. National Labor Relations Commission,[25] this Court affirmed the Philippines
adherence to the restrictive theory as follows:
The doctrine of state immunity from suit has undergone further metamorphosis.
The view evolved that the existence of a contract does not, per se, mean that sovereign
states may, at all times, be sued in local courts. The complexity of relationships between
sovereign states, brought about by their increasing commercial activities, mothered a more
restrictive application of the doctrine.
xxx

xxx

xxx

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). [26]
(Emphasis supplied.)
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 [27]
The restrictive application of State immunity is proper only when the proceedings arise out
of commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level of an individual and can
thus be deemed to have tacitly given its consent to be sued only when it enters into business
contracts. It does not apply where the contract relates to the exercise of its sovereign functions. [28]
A. CNMEG is engaged in a propriety activity.
A threshold question that must be answered is whether CNMEG performs governmental or
proprietary functions. A thorough examination of the basic facts of the case would show that
CNMEG is engaged in a proprietary activity.
The parties executed the Contract Agreement for the purpose of constructing the Luzon Railways,
viz:[29]
WHEREAS the Employer (Northrail) desired to construct the railways form Caloocan to
Malolos, section I, Phase I of Philippine North Luzon Railways Project (hereinafter referred to as
THE

PROJECT);

AND WHEREAS the Contractor has offered to provide the Project on Turnkey basis,
including design, manufacturing, supply, construction, commissioning, and training of the
Employers

personnel;

AND WHEREAS the Loan Agreement of the Preferential Buyers Credit between ExportImport Bank of China and Department of Finance of Republic of the Philippines;
NOW, THEREFORE, the parties agree to sign this Contract for the Implementation of the
Project.
The above-cited portion of the Contract Agreement, however, does not on its own reveal
whether the construction of the Luzon railways was meant to be a proprietary endeavor. In order
to fully understand the intention behind and the purpose of the entire undertaking, the Contract
Agreement must not be read in isolation. Instead, it must be construed in conjunction with three
other documents executed in relation to the Northrail Project, namely: (a) the Memorandum of
Understanding dated 14 September 2002 between Northrail and CNMEG; [30] (b) the letter of Amb.
Wang dated 1 October 2003 addressed to Sec. Camacho;

[31]

and (c) the Loan Agreement.

[32]

1. Memorandum of Understanding dated 14 September 2002

The Memorandum of Understanding dated 14 September 2002 shows that CNMEG sought
the construction of the Luzon Railways as a proprietary venture. The relevant parts thereof read:
WHEREAS, CNMEG has the financial capability, professional competence and
technical expertise to assess the state of the [Main Line North (MLN)] and recommend
implementation plans as well as undertake its rehabilitation and/or modernization;
WHEREAS, CNMEG has expressed interest in the rehabilitation and/or
modernization of the MLN from Metro Manila to San Fernando, La Union passing through
the provinces of Bulacan, Pampanga, Tarlac, Pangasinan and La Union (the Project);

WHEREAS, the NORTHRAIL CORP. welcomes CNMEGs proposal to undertake a

Feasibility Study (the Study) at no cost to NORTHRAIL CORP.;
WHEREAS, the NORTHRAIL CORP. also welcomes CNMEGs interest in
undertaking the Project with Suppliers Credit and intends to employ CNMEG as
the Contractor for the Project subject to compliance with Philippine and Chinese

laws, rules and regulations for the selection of a contractor;

WHEREAS, the NORTHRAIL CORP. considers CNMEGs proposal advantageous to the
Government of the Republic of the Philippines and has therefore agreed to assist CNMEG in
the conduct of the aforesaid Study;
xxx

xxx

xxx

II. APPROVAL PROCESS

2.1 As soon as possible after completion and presentation of the Study in accordance with
Paragraphs 1.3 and 1.4 above and in compliance with necessary governmental laws, rules,
regulations and procedures required from both parties, the parties shall commence the
preparation and negotiation of the terms and conditions of the Contract (the Contract) to be
entered into between them on the implementation of the Project. The parties shall use their
best endeavors to formulate and finalize a Contract with a view to signing the Contract
within one hundred twenty (120) days from CNMEGs presentation of the Study.[33]
(Emphasis supplied)
Clearly, it was CNMEG that initiated the undertaking, and not the Chinese government. The
Feasibility Study was conducted not because of any diplomatic gratuity from or exercise of
sovereign functions by the Chinese government, but was plainly a business strategy employed by
CNMEG with a view to securing this commercial enterprise.
2. Letter dated 1 October 2003
That CNMEG, and not the Chinese government, initiated the Northrail Project was
confirmed by Amb. Wang in his letter dated 1 October 2003, thus:
1.

CNMEG has the proven competence and capability to undertake the Project as

evidenced by the ranking of 42 given by the ENR among 225 global construction
companies.
2.

CNMEG already signed an MOU with the North Luzon Railways Corporation last

September 14, 2000 during the visit of Chairman Li Peng. Such being the case, they have
already established an initial working relationship with your North Luzon Railways
Corporation. This would categorize CNMEG as the state corporation within the
Peoples Republic of China which initiated our Governments involvement in the
Project.

3. Among the various state corporations of the Peoples Republic of China, only CNMEG
has the advantage of being fully familiar with the current requirements of the Northrail
Project having already accomplished a Feasibility Study which was used as inputs by the
North Luzon Railways Corporation in the approvals (sic) process required by the Republic of
the Philippines.[34] (Emphasis supplied.)
Thus, the desire of CNMEG to secure the Northrail Project was in the ordinary or regular
course of its business as a global construction company. The implementation of the Northrail
Project was intended to generate profit for CNMEG, with the Contract Agreement placing a
contract price of USD 421,050,000 for the venture. [35] The use of the term state corporation to
refer to CNMEG was only descriptive of its nature as a government-owned and/or -controlled
corporation, and its assignment as the Primary Contractor did not imply that it was acting on
behalf of China in the performance of the latters sovereign functions. To imply otherwise would
result in an absurd situation, in which all Chinese corporations owned by the state would be
automatically considered as performing governmental activities, even if they are clearly engaged
in commercial or proprietary pursuits.
3. The Loan Agreement
CNMEG claims immunity on the ground that the Aug 30 MOU on the financing of the
Northrail Project was signed by the Philippine and Chinese governments, and its assignment as
the Primary Contractor meant that it was bound to perform a governmental function on behalf of
China. However, the Loan Agreement, which originated from the same Aug 30 MOU, belies this
reasoning, viz:
Article 11. xxx (j) Commercial Activity The execution and delivery of this Agreement by the
Borrower constitute, and the Borrowers performance of and compliance with its obligations
under this Agreement will constitute, private and commercial acts done and
performed for commercial purposes under the laws of the Republic of the
Philippines and neither the Borrower nor any of its assets is entitled to any
immunity or privilege (sovereign or otherwise) from suit, execution or any other
legal process with respect to its obligations under this Agreement, as the case
may be, in any jurisdiction. Notwithstanding the foregoing, the Borrower does not waive
any immunity with respect of its assets which are (i) used by a diplomatic or consular
mission of the Borrower and (ii) assets of a military character and under control of a
military authority or defense agency and (iii) located in the Philippines and dedicated to
public or governmental use (as distinguished from patrimonial assets or assets dedicated

to commercial use). (Emphasis supplied.)

(k) Proceedings to Enforce Agreement In any proceeding in the Republic of the Philippines
to enforce this Agreement, the choice of the laws of the Peoples Republic of China as the
governing law hereof will be recognized and such law will be applied. The waiver of
immunity by the Borrower, the irrevocable submissions of the Borrower to the nonexclusive jurisdiction of the courts of the Peoples Republic of China and the appointment of
the Borrowers Chinese Process Agent is legal, valid, binding and enforceable and any
judgment obtained in the Peoples Republic of China will be if introduced, evidence for
enforcement in any proceedings against the Borrower and its assets in the Republic of the
Philippines provided that (a) the court rendering judgment had jurisdiction over the subject
matter of the action in accordance with its jurisdictional rules, (b) the Republic had notice
of the proceedings, (c) the judgment of the court was not obtained through collusion or
fraud, and (d) such judgment was not based on a clear mistake of fact or law.[36]
Further, the Loan Agreement likewise contains this express waiver of immunity:
15.5 Waiver of Immunity

The Borrower irrevocably and unconditionally waives, any

immunity to which it or its property may at any time be or become entitled, whether
characterized as sovereign immunity or otherwise, from any suit, judgment, service of
process upon it or any agent, execution on judgment, set-off, attachment prior to
judgment, attachment in aid of execution to which it or its assets may be entitled in any
legal action or proceedings with respect to this Agreement or any of the transactions
contemplated hereby or hereunder. Notwithstanding the foregoing, the Borrower does not
waive any immunity in respect of its assets which are (i) used by a diplomatic or consular
mission of the Borrower, (ii) assets of a military character and under control of a military
authority or defense agency and (iii) located in the Philippines and dedicated to a public or
governmental use (as distinguished from patrimonial assets or assets dedicated to
commercial use).[37]
Thus, despite petitioners claim 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, [38] it is clear from the foregoing provisions that the
Northrail Project was a purely commercial transaction.
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.
B. CNMEG failed to adduce evidence that it is immune from suit uder Chinese law.
Even assuming arguendo that CNMEG performs governmental functions, such claim does
not automatically vest it with immunity. This view finds support in Malong v. Philippine National
Railways, in which this Court held that (i)mmunity from suit is determined by the character of the
objects for which the entity was organized.

[39]

In this regard, this Courts ruling in Deutsche Gesellschaft Fr Technische Zusammenarbeit

(GTZ) v. CA[40] must be examined. In Deutsche Gesellschaft, Germany and the Philippines entered
into a Technical Cooperation Agreement, pursuant to which both signed an arrangement
promoting the Social Health InsuranceNetworking and Empowerment (SHINE) project. The two
governments named their respective implementing organizations: the Department of Health
(DOH) and the Philippine Health Insurance Corporation (PHIC) for the Philippines, and GTZ for the
implementation of Germanys contributions. In ruling that GTZ was not immune from suit, this
Court held:
The arguments raised by GTZ and the [Office of the Solicitor General (OSG)] are
rooted in several indisputable facts. The SHINE project was implemented pursuant to
the bilateral agreements between the Philippine and German governments. GTZ
was tasked, under the 1991 agreement, with the implementation of the
contributions of the German government. The activities performed by GTZ
pertaining to the SHINE project are governmental in nature, related as they are to
the promotion of health insurance in the Philippines. The fact that GTZ entered into
employment contracts with the private respondents did not disqualify it from invoking
immunity from suit, as held in cases such as Holy See v. Rosario, Jr., which set forth what
remains valid doctrine:

Certainly, the mere entering into a contract by a foreign state with a private
party cannot be the ultimate test. Such an act can only be the start of the inquiry.
The logical question is whether the foreign state is engaged in the activity in the
regular course of business. If the foreign state is not engaged regularly in a
business or trade, the particular act or transaction must then be tested by its
nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it
is an act jure imperii, especially when it is not undertaken for gain or profit.
Beyond dispute is the tenability of the comment points (sic) raised by GTZ and the OSG
that GTZ was not performing proprietary functions notwithstanding its entry into the
particular employment contracts. Yet there is an equally fundamental premise which GTZ and the
OSG fail to address, namely: Is GTZ, by conception, able to enjoy the Federal Republics immunity
from suit?
The principle of state immunity from suit, whether a local state or a foreign state, is
reflected in Section 9, Article XVI of the Constitution, which states that the State may not be
sued without its consent. Who or what consists of the State? For one, the doctrine is available
to foreign States insofar as they are sought to be sued in the courts of the local State, necessary
as it is to avoid unduly vexing the peace of nations.
If the instant suit had been brought directly against the Federal Republic of Germany, there
would be no doubt that it is a suit brought against a State, and the only necessary inquiry is
whether said State had consented to be sued. However, the present suit was brought against GTZ.
It is necessary for us to understand what precisely are the parameters of the legal personality of
GTZ.
Counsel

for

GTZ characterizes

GTZ as the implementing

agency of the

Government of the Federal Republic of Germany, a depiction similarly adopted by the OSG.
Assuming that the characterization is correct, it does not automatically invest GTZ with the
ability to invoke State immunity from suit. The distinction lies in whether the agency is
incorporated or unincorporated.
xxx

xxx

xxx

State immunity from suit may be waived by general or special law. The special law can
take the form of the original charter of the incorporated government agency. Jurisprudence is
replete with examples of incorporated government agencies which were ruled not entitled to
invoke immunity from suit, owing to provisions in their charters manifesting their consent to be

sued.
xxx

xxx

xxx

It is useful to note that on the part of the Philippine government, it had designated two
entities, the Department of Health and the Philippine Health Insurance Corporation (PHIC), as the
implementing agencies in behalf of the Philippines. The PHIC was established under Republic Act
No. 7875, Section 16 (g) of which grants the corporation the power to sue and be sued in court.
Applying the previously cited jurisprudence, PHIC would not enjoy immunity from suit even in the
performance of its functions connected with SHINE, however, (sic) governmental in nature as (sic)
they may be.
Is GTZ an incorporated agency of the German government? There is some
mystery surrounding that question. Neither GTZ nor the OSG go beyond the claim that
petitioner is the implementing agency of the Government of the Federal Republic of
Germany. On the other hand, private respondents asserted before the Labor Arbiter that GTZ
was a private corporation engaged in the implementation of development projects. The Labor
Arbiter accepted that claim in his Order denying the Motion to Dismiss, though he was silent on
that point in his Decision. Nevertheless, private respondents argue in their Comment that the
finding that GTZ was a private corporation was never controverted, and is therefore deemed
admitted. In its Reply, GTZ controverts that finding, saying that it is a matter of public knowledge
that the status of petitioner GTZ is that of the implementing agency, and not that of a private
corporation.
In truth, private respondents were unable to adduce any evidence to substantiate their
claim that GTZ was a private corporation, and the Labor Arbiter acted rashly in accepting such
claim without explanation. But neither has GTZ supplied any evidence defining its legal
nature beyond that of the bare descriptive implementing agency. There is no doubt
that the 1991 Agreement designated GTZ as the implementing agency in behalf of the
German government. Yet the catch is that such term has no precise definition that is
responsive to our concerns. Inherently, an agent acts in behalf of a principal, and the
GTZ can be said to act in behalf of the German state. But that is as far as implementing
agency could take us. The term by itself does not supply whether GTZ is incorporated
or unincorporated, whether it is owned by the German state or by private interests,
whether it has juridical personality independent of the German government or none at
all.
xxx

xxx

xxx

Again, we are uncertain of the corresponding legal implications under German

law surrounding a private company owned by the Federal Republic of Germany. Yet
taking the description on face value, the apparent equivalent under Philippine law is
that of a corporation organized under the Corporation Code but owned by the Philippine
government, or a government-owned or controlled corporation without original charter.
And it bears notice that Section 36 of the Corporate Code states that [e]very
corporation incorporated under this Code has the power and capacity x x x to sue and
be

sued

in

its

corporate

name.

It is entirely possible that under German law, an entity such as GTZ or particularly GTZ
itself has not been vested or has been specifically deprived the power and capacity to sue and/or
be sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that
under German law, it has not consented to be sued despite it being owned by the
Federal Republic of Germany. We adhere to the rule that in the absence of evidence to
the contrary, foreign laws on a particular subject are presumed to be the same as those
of the Philippines, and following the most intelligent assumption we can gather, GTZ is
akin to a governmental owned or controlled corporation without original charter which,
by virtue of the Corporation Code, has expressly consented to be sued. At the very least,
like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or
presume that GTZ enjoys immunity from suit.[41] (Emphasis supplied.)
Applying the foregoing ruling to the case at bar, it is readily apparent that CNMEG cannot
claim immunity from suit, even if it contends that it performs governmental functions. Its
designation as the Primary Contractor does not automatically grant it immunity, just as the term
implementing agency has no precise definition for purposes of ascertaining whether GTZ was
immune from suit. Although CNMEG claims to be a government-owned corporation, it failed to
adduce evidence that it has not consented to be sued under Chinese law. Thus, following this
Courts ruling in Deutsche Gesellschaft, in the absence of evidence to the contrary, CNMEG is to be
presumed to be a government-owned and -controlled corporation without an original charter. As a
result, it has the capacity to sue and be sued under Section 36 of the Corporation Code.
C. CNMEG failed to present a certification from the Department of Foreign Affairs.
In Holy See,[42] this Court reiterated the oft-cited doctrine that the determination by the
Executive that an entity is entitled to sovereign or diplomatic immunity is a political question
conclusive upon the courts, to wit:

In Public International Law, when a state or international agency wishes to plead

sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of
the state where it is sued to convey to the court that said defendant is entitled to
immunity.
xxx

xxx

xxx

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

Manifestation

and

Memorandum

as

amicus

curiae.

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

In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass
the Foreign Office, the courts can inquire into the facts and make their own determination as to
the nature of the acts and transactions involved.[43] (Emphasis supplied.)
The question now is whether any agency of the Executive Branch can make a
determination of immunity from suit, which may be considered as conclusive upon the courts. This
Court, in Department of Foreign Affairs (DFA) v. National Labor Relations Commission (NLRC),[44]
emphasized the DFAs competence and authority to provide such necessary determination, to wit:

The DFAs function includes, among its other mandates, the determination
of persons and institutions covered by diplomatic immunities, a determination
which, when challenge, (sic) entitles it to seek relief from the court so as not to
seriously impair the conduct of the country's foreign relations. The DFA must be
allowed to plead its case whenever necessary or advisable to enable it to help keep the
credibility of the Philippine government before the international community. When
international agreements are concluded, the parties thereto are deemed to have
likewise accepted the responsibility of seeing to it that their agreements are duly
regarded. In our country, this task falls principally of (sic) the DFA as being the
highest executive department with the competence and authority to so act in this
aspect of the international arena.[45] (Emphasis supplied.)

Further, the fact that this authority is exclusive to the DFA was also emphasized in this
Courts ruling in Deutsche Gesellschaft:
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was
imperative for petitioners to secure from the Department of Foreign Affairs a certification
of respondents diplomatic status and entitlement to diplomatic privileges including
immunity from suits. The requirement might not necessarily be imperative. However, had
GTZ obtained such certification from the DFA, it would have provided factual
basis for its claim of immunity that would, at the very least, establish a
disputable evidentiary presumption that the foreign party is indeed immune
which the opposing party will have to overcome with its own factual evidence.
We do not see why GTZ could not have secured such certification or endorsement
from the DFA for purposes of this case. Certainly, it would have been highly prudential
for GTZ to obtain the same after the Labor Arbiter had denied the motion to dismiss. Still,
even at this juncture, we do not see any evidence that the DFA, the office of the
executive branch in charge of our diplomatic relations, has indeed endorsed GTZs
claim of immunity. It may be possible that GTZ tried, but failed to secure such
certification, due to the same concerns that we have discussed herein.
Would the fact that the Solicitor General has endorsed GTZs claim of
States immunity from suit before this Court sufficiently substitute for the DFA
certification? Note that the rule in public international law quoted in Holy See
referred to endorsement by the Foreign Office of the State where the suit is filed,
such foreign office in the Philippines being the Department of Foreign Affairs.
Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed

GTZs claim, or that the OSG had solicited the DFAs views on the issue. The
arguments raised by the OSG are virtually the same as the arguments raised by GTZ
without any indication of any special and distinct perspective maintained by the Philippine
government on the issue. The Comment filed by the OSG does not inspire the same
degree of confidence as a certification from the DFA would have elicited.[46]
(Emphasis supplied.)

In the case at bar, CNMEG offers the Certification executed by the Economic and
Commercial Office of the Embassy of the Peoples Republic of China, stating that the Northrail
Project is in pursuit of a sovereign activity.[47] Surely, this is not the kind of certification that can
establish CNMEGs entitlement to immunity from suit, as Holy See unequivocally refers to the
determination of the Foreign Office of the state where it is sued.
Further, CNMEG also claims that its immunity from suit has the executive endorsement of
both the OSG and the Office of the Government Corporate Counsel (OGCC), which must be
respected by the courts. However, as expressly enunciated in Deutsche Gesellschaft, this
determination by the OSG, or by the OGCC for that matter, does not inspire the same degree of
confidence as a DFA certification. Even with a DFA certification, however, it must be remembered
that this Court is not precluded from making an inquiry into the intrinsic correctness of such
certification.
D. An agreement to submit any dispute to arbitration may be construed as an implicit waiver of
immunity from suit.
In the United States, the Foreign Sovereign Immunities Act of 1976 provides for a waiver
by implication of state immunity. In the said law, the agreement to submit disputes to arbitration
in a foreign country is construed as an implicit waiver of immunity from suit. Although there is no
similar law in the Philippines, there is reason to apply the legal reasoning behind the waiver in this
case.
The Conditions of Contract,[48] which is an integral part of the Contract Agreement,[49] states:
33. SETTLEMENT OF DISPUTES AND ARBITRATION
33.1. Amicable Settlement
Both parties shall attempt to amicably settle all disputes or controversies arising from this
Contract before the commencement of arbitration.

33.2. Arbitration
All disputes or controversies arising from this Contract which cannot be settled between the
Employer and the Contractor shall be submitted to arbitration in accordance with the UNCITRAL
Arbitration Rules at present in force and as may be amended by the rest of this Clause. The
appointing authority shall be Hong Kong International Arbitration Center. The place of arbitration
shall be in Hong Kong at Hong Kong International Arbitration Center (HKIAC).

Under the above provisions, if any dispute arises between Northrail and CNMEG, both
parties are bound to submit the matter to the HKIAC for arbitration. In case the HKIAC makes an
arbitral award in favor of Northrail, its enforcement in the Philippines would be subject to the
Special Rules on Alternative Dispute Resolution (Special Rules). Rule 13 thereof provides for the
Recognition and Enforcement of a Foreign Arbitral Award. Under Rules 13.2 and 13.3 of the
Special Rules, the party to arbitration wishing to have an arbitral award recognized and enforced
in the Philippines must petition the proper regional trial court (a) where the assets to be attached
or levied upon is located; (b) where the acts to be enjoined are being performed; (c) in the
principal place of business in the Philippines of any of the parties; (d) if any of the parties is an
individual, where any of those individuals resides; or (e) in the National Capital Judicial Region.
From all the foregoing, it is clear that CNMEG has agreed that it will not be afforded
immunity from suit. Thus, the courts have the competence and jurisdiction to ascertain the
validity

of

the

Contract

Agreement.

Second issue: Whether the Contract Agreement is an executive agreement

Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna Convention) defines a treaty
as follows:
[A]n international agreement concluded between States in written form and
governed by international law, whether embodied in a single instrument or in two or more
related instruments and whatever its particular designation.
In Bayan Muna v. Romulo, this Court held that an executive agreement is similar to a
treaty, except that the former (a) does not require legislative concurrence; (b) is usually less
formal; and (c) deals with a narrower range of subject matters.

[50]

Despite these differences, to be considered an executive agreement, the following three

requisites provided under the Vienna Convention must nevertheless concur: (a) the agreement
must be between states; (b) it must be written; and (c) it must governed by international law.
The first and the third requisites do not obtain in the case at bar.
A. CNMEG is neither a government nor a government agency.
The Contract Agreement was not concluded between the Philippines and China, but
between Northrail and CNMEG.[51] By the terms of the Contract Agreement, Northrail is a
government-owned or -controlled corporation, while CNMEG is a corporation duly organized and
created under the laws of the Peoples Republic of China. [52] Thus, both Northrail and CNMEG
entered into the Contract Agreement as entities with personalities distinct and separate from the
Philippine

and

Chinese

governments,

respectively.

Neither can it be said that CNMEG acted as agent of the Chinese government. As
previously discussed, the fact that Amb. Wang, in his letter dated 1 October 2003, [53] described
CNMEG as a state corporation and declared its designation as the Primary Contractor in the
Northrail Project did not mean it was to perform sovereign functions on behalf of China. That label
was only descriptive of its nature as a state-owned corporation, and did not preclude it from
engaging

in

purely

commercial

or

proprietary

ventures.

B. The Contract Agreement is to be governed by Philippine law.

Article 2 of the Conditions of Contract, [54] which under Article 1.1 of the Contract Agreement is an
integral part of the latter, states:
APPLICABLE LAW AND GOVERNING LANGUAGE
The contract shall in all respects be read and construed in accordance with the laws of the
Philippines.

The contract shall be written in English language. All correspondence and other documents
pertaining to the Contract which are exchanged by the parties shall be written in English
language.
Since the Contract Agreement explicitly provides that Philippine law shall be applicable, the parties
have effectively conceded that their rights and obligations thereunder are not governed by

international

law.

It is therefore clear from the foregoing reasons that the Contract Agreement does not partake of
the nature of an executive agreement. It is merely an ordinary commercial contract that can be
questioned before the local courts.
WHEREFORE, 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. This case is REMANDED to the Regional
Trial Court of Makati, Branch 145, for further proceedings as regards the validity of the contracts
subject

of

Civil

Case

No.

06-203.

No pronouncement on costs of suit.

SO ORDERED.
China National Machinery & Equipment Corporation (Group) v. Hon. Cesar D. Santamaria, et al.
Petition, rollo, Vol. I, p. 25; Memorandum of Understanding dated 14 September 2002, rollo,
Vol. I, pp. 400-406.
[3]
Petition, rollo, Vol. I, pp. 25-26; Memorandum of Understanding dated 30 August 2003, rollo,
Vol. I, pp. 308-310, 407-409.
[4]
Id.
[5]
Memorandum of Understanding dated 30 August 2003, rollo, Vol. I, pp. 308-310, 407-409.
[6]
Petition, rollo, Vol. I, p. 26; Letter dated 1 October 2003, rollo, Vol. I, pp. 311-312.
[7]
Contract Agreement, rollo, Vol. I, pp. 126-130, 412-414.
[8]
Memorandum of Agreement dated December 2003, rollo, Vol. I, pp. 198-201.
[9]
Loan Agreement, rollo, Vol. I, pp. 242-282.
[10]
Id.
[11]
Complaint, rollo, Vol. I, pp. 102-125.
[12]
Id.
[13]
Order dated 17 March 2006, rollo, Vol. I, pp. 290-291.
[14]
Urgent Motion for Reconsideration, rollo, Vol. I, pp. 292-307
[15]
Motion to Dismiss, rollo, Vol. I, pp. 324-369.
[16]
Omnibus Order dated 15 May 2007, rollo, Vol. I, pp. 648-658.
[17]
Motion for Reconsideration, rollo, Vol. I, pp. 663-695.
[18]
Order dated 10 March 2008, rollo, Vol. I, p. 737.
[19]
Petition for Certiorari, rollo, Vol. I, pp. 738-792.
[20]
CA Decision, rollo, Vol. I, pp. 81-99.
[21]
Motion for Reconsideration, rollo, Vol. I, pp. 971-1001.
[22]
CA Resolution, rollo, Vol. I, pp. 100-102.
[23]
Petition, rollo, Vol. I, pp. 27-28.
[24]
G.R. No. 101949, 1 December 1994, 238 SCRA 524, 535.
[25]
G.R. No. 108813, 15 December 1994, 239 SCRA 224.
[26]
Id. at 231-232.
[27]
221 Phil. 179 (1985).
[28]
Id. at 184.
[29]
Contract Agreement, rollo, Vol. I, pp. 127, 413.
[1]
[2]

[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]
[41]
[42]
[43]
[44]
[45]
[46]
[47]
[48]
[49]

Supra note 2.
Supra note 6.
Supra note 9.
Supra note 2, at 400-402.
Supra note 6.
Supra note 8.
Supra note 9, at 260-261.
Id. at 268-269.
Petition, rollo, Vol. I, p. 47.
222 Phil 381, 384 (1985).
G.R. No. 152318, 16 April 2009, 585 SCRA 150.
Id. at 165-173.
Supra note 24.
Id. at 531-533.
330 Phil 573 (1996).
Id. at 587-588.
Supra note 40, at 174-175.
Petition, rollo, Vol. I, p. 30.
Conditions of Contract, rollo, Vol. I, pp. 202-241, 415-455.
Supra note 7. Clause 1.1 of the Contract Agreement provides:

The following documents shall constitute the Contract between the Employer and the Contractor,
and each shall be read and construed as an integral part of the Contract:
(1)
(2)
(3)
(4)
(5)
(6)
[50]
[51]
[52]
[53]
[54]

Contract Agreement
Amendments, if any to the Contract documents agreed by the Parties
Conditions of Contract
Technical Documents
Preliminary Engineering Design including Bill of Quantities
Technical Specification
G.R. No. 159618, 1 February 2011, 641 SCRA 244, 258-259.
Supra note 7.
Id.
Supra note 6.
Supra note 48.

17. Liang v. People, 323 SCRA 692 (2000) 355 SCRA 125 (2001) {Read Separate Opinion of
Justice Puno}
[ G.R. No. 125865, January 28, 2000 ]
JEFFREY LIANG (HUEFENG), PETITIONER, VS. PEOPLE OF THE PHILIPPINES,
RESPONDENT.
Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in
1994, for allegedly uttering defamatory words against fellow ADB worker Joyce Cabal, he was
charged before the Metropolitan Trial Court (MeTC) of Mandaluyong City with two counts of grave
oral defamation docketed as Criminal Cases Nos. 53170 and 53171. Petitioner was arrested by
virtue of a warrant issued by the MeTC. After fixing petitioners bail at P2,400.00 per criminal

charge, the MeTC released him to the custody of the Security Officer of ADB. The next day, the
MeTC judge received an "office of protocol" from the Department of Foreign Affairs (DFA) stating
that petitioner is covered by immunity from legal process under Section 45 of the Agreement
between the ADB and the Philippine Government regarding the Headquarters of the ADB
(hereinafter Agreement) in the country. Based on the said protocol communication that petitioner
is immune from suit, the MeTC judge without notice to the prosecution dismissed the two criminal
cases. The latter filed a motion for reconsideration which was opposed by the DFA. When its
motion was denied, the prosecution filed a petition for certiorari and mandamus with the Regional
Trial Court (RTC) of Pasig City which set aside the MeTC rulings and ordered the latter court to
enforce the warrant of arrest it earlier issued. After the motion for reconsideration was denied,
petitioner elevated the case to this Court via a petition for review arguing that he is covered by
immunity under the Agreement and that no preliminary investigation was held before the criminal
cases

were

filed

in

court.

The petition is not impressed with merit.

First, courts cannot blindly adhere and take on its face the communication from the DFA
that petitioner is covered by any immunity. The DFAs determination that a certain person is
covered by immunity is only preliminary which has no binding effect in courts. In receiving exparte the DFAs advice and in motu proprio dismissing the two criminal cases without notice to the
prosecution, the latters right to due process was violated. It should be noted that due process is a
right of the accused as much as it is of the prosecution. The needed inquiry in what capacity
petitioner was acting at the time of the alleged utterances requires for its resolution evidentiary
basis that has yet to be presented at the proper time. [1] At any rate, it has been ruled that the
mere invocation of the immunity clause does not ipso facto result in the dropping of the charges.
[2]

Second, under Section 45 of the Agreement which provides:

"Officers and staff of the Bank including for the purpose of this Article experts and consultants
performing missions for the Bank shall enjoy the following privileges and immunities:
a.) immunity from legal process with respect to acts performed by them in their official capacity
except when the Bank waives the immunity." the immunity mentioned therein is not absolute, but
subject to the exception that the act was done in "official capacity." It is therefore necessary to
determine if petitioners case falls within the ambit of Section 45(a). Thus, the prosecution should
have been given the chance to rebut the DFA protocol and it must be accorded the opportunity to
present its controverting evidence, should it so desire.

Third, slandering a person could not possibly be covered by the immunity agreement
because our laws do not allow the commission of a crime, such as defamation, in the name of
official duty.[3] The imputation of theft is ultra vires and cannot be part of official functions. It is
well-settled principle of law that a public official may be liable in his personal private capacity for
whatever damage he may have caused by his act done with malice or in bad faith or beyond the
scope of his authority or jurisdiction. [4] It appears that even the governments chief legal counsel,
the Solicitor General, does not support the stand taken by petitioner and that of the DFA.
Fourth, under the Vienna Convention on Diplomatic Relations, a diplomatic agent,
assuming petitioner is such, enjoys immunity from criminal jurisdiction of the receiving state
except in the case of an action relating to any professional or commercial activity exercised by the
diplomatic agent in the receiving state outside his official functions. [5] As already mentioned
above, the commission of a crime is not part of official duty.
Finally, on the contention that there was no preliminary investigation conducted, suffice it
to say that preliminary investigation is not a matter of right in cases cognizable by the MeTC such
as the one at bar.[6] Being purely a statutory right, preliminary investigation may be invoked only
when specifically granted by law.[7] The rule on criminal procedure is clear that no preliminary
investigation is required in cases falling within the jurisdiction of the MeTC. [8] Besides, the absence
of preliminary investigation does not affect the courts jurisdiction nor does it impair the validity of
the information or otherwise render it defective.[9]
WHEREFORE, the petition is DENIED.
SO ORDERED.
See United States v. Guinto, 182 SCRA 644 (1990)
Chavez v. Sandiganbayan, 193 SCRA 282 (1991)
[3]
M.H. Wylie v. Rarang, 209 SCRA 357, 368 (1992)
[4]
Shauf v. CA, 191 SCRA 713 (1990); Animos v. Phil. Veterans Affairs Office, 174 SCRA 214
(1989); Dumlao v. CA, 114 SCRA 247 (1982)
[5]
Section 31, 1 (c); See also Minucher v. CA, 214 SCRA 242 (1992)
[6]
See Del Rosario, Jr. v. Bartolome, 270 SCRA 645 (1997)
[7]
People v. Abejuela, 38 SCRA 324 (1971)
[8]
Section 1, Rule 112, Rules of Criminal Procedure.
[9]
People v. Gomez, 117 SCRA 72 (1982); People v. Casiano, 1 SCRA 478 (1961)
[1]

[2]

[ G.R. No. 125865, March 26, 2001 ]

JEFFREY LIANG (HUEFENG), PETITIONER, VS. PEOPLE OF THE PHILIPPINES,
RESPONDENT.

This resolves petitioner's Motion for Reconsideration of our Decision dated January 28, 2000,
denying the petition for review.
The Motion is anchored on the following arguments:
1)THE DFA'S DETERMINATION OF IMMUNITY IS A POLITICAL QUESTION TO BE MADE BY THE
EXECUTIVE BRANCH OF THE GOVERNMENT AND IS CONCLUSIVE UPON THE COURTS.2)THE
IMMUNITY OF INTERNATIONAL ORGANIZATIONS IS ABSOLUTE.3)THE IMMUNITY EXTENDS TO
ALL STAFF OF THE ASIAN DEVELOPMENT BANK (ADB).4)DUE PROCESS WAS FULLY AFFORDED
THE COMPLAINANT TO REBUT THE DFA PROTOCOL.5)THE DECISION OF JANUARY 28, 2000
ERRONEOUSLY MADE A FINDING OF FACT ON THE MERITS, NAMELY, THE SLANDERING OF A
PERSON WHICH PREJUDGED PETITIONER'S CASE BEFORE THE METROPOLITAN TRIAL COURT
(MTC)-MANDALUYONG.6)THE

VIENNA

CONVENTION

ON

DIPLOMATIC

RELATIONS

IS

NOT

APPLICABLE TO THIS CASE.

This case has its origin in two criminal Informations [1] for grave oral defamation filed
against petitioner, a Chinese national who was employed as an Economist by the Asian
Development Bank (ADB), alleging that on separate occasions on January 28 and January 31,
1994, petitioner allegedly uttered defamatory words to Joyce V. Cabal, a member of the clerical
staff of ADB. On April 13, 1994, the Metropolitan Trial Court of Mandaluyong City, acting pursuant
to an advice from the Department of Foreign Affairs that petitioner enjoyed immunity from legal
processes, dismissed the criminal Informations against him. On a petition for certiorari and
mandamus filed by the People, the Regional Trial Court of Pasig City, Branch 160, annulled and set
aside the order of the Metropolitan Trial Court dismissing the criminal cases.

[2]

Petitioner, thus, brought a petition for review with this Court. On January 28, 2000, we
rendered the assailed Decision denying the petition for review. We ruled, in essence, that the
immunity granted to officers and staff of the ADB is not absolute; it is limited to acts performed in
an official capacity. Furthermore, we held that the immunity cannot cover the commission of a
crime such as slander or oral defamation in the name of official duty.
On October 18, 2000, the oral arguments of the parties were heard. This Court also
granted the Motion for Intervention of the Department of Foreign Affairs. Thereafter, the parties
were directed to submit their respective memorandum.
For the most part, petitioner's Motion for Reconsideration deals with the diplomatic
immunity of the ADB, its officials and staff, from legal and judicial processes in the Philippines, as
well as the constitutional and political bases thereof. It should be made clear that nowhere in the
assailed Decision is diplomatic immunity denied, even remotely. The issue in this case, rather,

boils down to whether or not the statements allegedly made by petitioner were uttered while in
the performance of his official functions, in order for this case to fall squarely under the provisions
of Section 45 (a) of the "Agreement Between the Asian Development Bank and the Government of
the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank," to
wit:
Officers ands staff of the Bank, including for the purpose of this Article experts and
consultants performing missions for the Bank, shall enjoy the following privileges and
immunities:
(a) Immunity from legal process with respect to acts performed by them in their
official capacity except when the Bank waives the immunity.
After a careful deliberation of the arguments raised in petitioner's and intervenor's Motions
for Reconsideration, we find no cogent reason to disturb our Decision of January 28, 2000. As we
have stated therein, the slander of a person, by any stretch, cannot be considered as falling within
the purview of the immunity granted to ADB officers and personnel. Petitioner argues that the
Decision had the effect of prejudging the criminal case for oral defamation against him. We wish
to stress that it did not. What we merely stated therein is that slander, in general, cannot be
considered as an act performed in an official capacity. The issue of whether or not petitioner's
utterances constituted oral defamation is still for the trial court to determine.
WHEREFORE, in view of the foregoing, the Motions for Reconsideration filed by petitioner
and intervenor Department of Foreign Affairs are DENIED with FINALITY.
SO ORDERED.
Davide, Jr., C.J., join the concurring opinion of Mr. Justice Puno.
Kapunan, and Pardo, JJ., concur.
Puno, J., Pls. See concurring opinion.
Criminal Cases Nos. 53170 & 53171 of the Metropolitan Trial Court of Mandaluyong City, Branch
60, presided by Hon. Ma. Luisa Quijano- Padilla.
[2]
SCA Case No. 743 of the Regional Trial Court of Pasig City, Branch 160, presided by Hon.
Mariano M. Umali.
[1]

CONCURRING OPINION
PUNO, J.:
For resolution is the Motion for Reconsideration filed by petitioner Jeffrey Liang of this Court's
decision dated January 28, 2000 which denied the petition for review. We there held that: the

protocol communication of the Department of Foreign Affairs to the effect that petitioner Liang is
covered by immunity is only preliminary and has no binding effect in courts; the immunity
provided for under Section 45(a) of the Headquarters Agreement is subject to the condition that
the act be done in an "official capacity"; that slandering a person cannot be said to have been
done in an "official capacity" and, hence, it is not covered by the immunity agreement; under the
Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming petitioner is such,
enjoys immunity from criminal jurisdiction of the receiving state except in the case of an action
relating to any professional or commercial activity exercised by the diplomatic agent in the
receiving state outside his official functions; the commission of a crime is not part of official duty;
and that a preliminary investigation is not a matter of right in cases cognizable by the
Metropolitan Trial Court.
Petitioner's motion for reconsideration is anchored on the following arguments:
1. The DFA's determination of immunity is a political question to be made by the executive
branch of the government and is conclusive upon the courts;
2. The immunity of international organizations is absolute;
3. The immunity extends to all staff of the Asian Development Bank (ADB);
4. Due process was fully accorded the complainant to rebut the DFA protocol;
5. The decision of January 28, 2000 erroneously made a finding of fact on the merits,
namely, the slandering of a person which prejudged petitioner's case before the
Metropolitan Trial Court (MTC)-Mandaluyong; and
6. The Vienna Convention on diplomatic relations is not applicable to this case.
Petitioner contends that a determination of a person's diplomatic immunity by the
Department of Foreign Affairs is a political question. It is solely within the prerogative of the
executive department and is conclusive upon the courts. In support of his submission, petitioner
cites the following cases: WHO vs. Aquino;[1] International Catholic Migration Commission
vs. Calleja;[2] The Holy See vs. Rosario, Jr.;[3] Lasco vs. United Nations; [4] and DFA vs.
NLRC.[5]
It is further contended that the immunity conferred under the ADB Charter and the
Headquarters Agreement is absolute. It is designed to safeguard the autonomy and
independence of international organizations against interference from any authority external to
the organizations. It is necessary to allow such organizations to discharge their entrusted

functions effectively. The only exceptions to this immunity is when there is an implied or express
waiver or when the immunity is expressly limited by statute. The exception allegedly has no
application

to

the

case

at

bar.

Petitioner likewise urges that the international organization's immunity from local
jurisdiction empowers the ADB alone to determine what constitutes "official acts" and the
same cannot be subject to different interpretations by the member states. It asserts that
the Headquarters Agreement provides for remedies to check abuses against the exercise of the
immunity. Thus, Section 49 states that the "Bank shall waive the immunity accorded to any
person if, in its opinion, such immunity would impede the course of justice and the waiver would
not prejudice the purposes for which the immunities are accorded." Section 51 allows for
consultation between the government and the Bank should the government consider that an
abuse has occurred. The same section provides the mechanism for a dispute settlement
regarding,

among

others,

issues

of

interpretation

or

application

of

the

agreement.

Petitioner's argument that a determination by the Department of Foreign Affairs that he is

entitled to diplomatic immunity is a political question binding on the courts, is anchored on the
ruling enunciated in the case of WHO, et al. vs. Aquino, et al.,[6] viz:
"It is a recognized principle of international law and under our system of separation of
powers that diplomatic immunity is essentially a political question and courts should refuse
to look beyond a determination by the executive branch of the government, and where the
plea of diplomatic immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of the government, the
Solicitor General in this case, or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction by
seizure and detention of property, as to embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine that in such cases the judicial
department of the government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic jurisdiction."
This ruling was reiterated in the subsequent cases of International Catholic Migration
Commission vs. Calleja;[7] The Holy See vs. Rosario, Jr;[8] Lasco vs. UN;[9] and DFA vs.
NLRC.[10]

The case of WHO vs. Aquino involved the search and seizure of personal effects of
petitioner Leonce Verstuyft, an official of the WHO. Verstyft was certified to be entitled to
diplomatic immunity pursuant to the Host Agreement executed between the Philippines and the
WHO.

ICMC vs. Calleja concerned a petition for certification election filed against ICMC and
IRRI. As international organizations, ICMC and IRRI were declared to possess diplomatic
immunity. It was held that they are not subject to local jurisdictions. It was ruled that the exercise
of jurisdiction by the Department of Labor over the case would defeat the very purpose of
immunity, which is to shield the affairs of international organizations from political pressure or
control by the host country and to ensure the unhampered performance of their functions.
In Holy See v. Rosario, Jr. involved an action for annulment of sale of land against the
Holy See, as represented by the Papal Nuncio. The Court upheld the petitioner's defense of
sovereign immunity. It ruled that where a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private immovable
property situated in the territory of the receiving state, which the envoy holds on behalf of the
sending state for the purposes of the mission, with all the more reason should immunity be
recognized as regards the sovereign itself, which in that case is the Holy See.
In Lasco vs. United Nations, the United Nations Revolving Fund for Natural Resources
Exploration was sued before the NLRC for illegal dismissal. The Court again upheld the doctrine of
diplomatic immunity invoked by the Fund.
Finally, DFA v. NLRC involved an illegal dismissal case filed against the Asian Development
Bank. Pursuant to its Charter and the Headquarters Agreement, the diplomatic immunity of the
Asian Development Bank was recognized by the Court.
It bears to stress that all of these cases pertain to the diplomatic immunity
enjoyed by international organizations. Petitioner asserts that he is entitled to the same
diplomatic immunity and he cannot be prosecuted for acts allegedly done in the
exercise

of

his

official

functions.

The term "international organizations" - "is generally used to describe an organization set up by
agreement between two or more states. Under contemporary international law, such organizations
are endowed with some degree of international legal personality such that they are capable of
exercising specific rights, duties and powers. They are organized mainly as a means for

conducting general international business in which the member states have an interest." [11]
International public officials have been defined as:
"x x x persons who, on the basis of an international treaty constituting a particular
international community, are appointed by this international community, or by an organ of
it, and are under its control to exercise, in a continuous way, functions in the interest of
this particular international community, and who are subject to a particular personal
status."[12]
"Specialized agencies" are international organizations having functions in particular fields, such as
posts, telecommunications, railways, canals, rivers, sea transport, civil aviation, meteorology,
atomic energy, finance, trade, education and culture, health and refugees.[13]
Issues
1. Whether petitioner Liang, as an official of an international organization, is entitled to
diplomatic immunity
2. Whether an international official is immune from criminal jurisdiction for all acts,
whether private or official;
3. Whether the authority to determine if an act is official or private is lodged in the
courts;
4. Whether the certification by the Department of Foreign Affairs that petitioner is
covered by immunity is a political question that is binding and conclusive on the
courts.
Discussion
I
A perusal of the immunities provisions in various international conventions and agreements will
show that the nature and degree of immunities vary depending on who the recipient is.
Thus:
1. Charter of the United Nations
"Article 105 (1): The Organization shall enjoy in the territory of each of its Members such
privileges and immunities as are necessary for the fulfillment of its purposes.

Article 105(2): Representatives of the Members of the United Nations and officials of the
Organization shall similarly enjoy such privileges and immunities as are necessary for the
independent exercise of their functions in connection with the Organization."
2. Convention on the Privileges and Immunities of the United Nations
"Section 2: The United Nations, its property and assets wherever located and by whomsoever
held, shall enjoy immunity from every form of legal process except insofar as in any particular
case it has expressly waived its immunity. It is, however, understood that no waiver of immunity
shall extend to any measure of execution.
xxx
Section 11 (a): Representatives of Members to the principal and subsidiary organs of the United
Nations x x shall x x x enjoy x x x immunity from personal arrest or detention and from seizure of
their personal baggage, and, in respect of words spoken or written and all acts done by them in
their capacity as representatives, immunity from legal process of every kind.
xxx
Section 14: Privileges and immunities are accorded to the representatives of Members not for the
personal benefit of the individuals themselves, but in order to safeguard the independent exercise
of their functions in connection with the United Nations. Consequently, a Member not only has the
right but is under a duty to waive the immunity of its representative in any case where in the
opinion of the Member the immunity would impede the course of justice, and it can be waived
without prejudice to the purpose for which the immunity is accorded.
xxx
Section 18 (a): Officials of the United Nations shall be immune from legal process in respect of
words spoken or written and all acts performed by them in their official capacity.
xxx
Section 19: In addition to the immunities and privileges specified in Section 18, the SecretaryGeneral and all Assistant Secretaries-General shall be accorded in respect of themselves, their
spouses and minor children, the privileges and immunities, exemptions and facilities accorded to
diplomatic envoys, in accordance with international law.

Section 20: Privileges and immunities are granted to officials in the interest of the United Nations
and not for the personal benefit of the individuals themselves. The Secretary-General shall have
the right and the duty to waive the immunity of any official in any case where, in his opinion, the
immunity would impede the course of justice and can be waived without prejudice to the interests
of the United Nations.
xxx
Section 22: Experts x x x performing missions for the United Nations x x x shall be accorded: (a)
immunity from personal arrest or detention and from seizure of their personal baggage; (b) in
respect of words spoken or written and acts done by them in the course of the performance of
their mission, immunity from legal process of every kind."
3. Vienna Convention on Diplomatic Relations
"Article 29: The person of a diplomatic agent shall be inviolable. He shall not be liable to any form
of arrest or detention. The receiving State shall treat him with due respect and shall take all
appropriate steps to prevent any attack on his person, freedom, or dignity.
xxx
Article 31(1): A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the
receiving State. He shall also enjoy immunity from its civil and administrative jurisdiction, except
in certain cases.
xxx
Article 38 (1): Except in so far as additional privileges and immunities may be granted by the
receiving State, a diplomatic agent who is a national of or permanently a resident in that State
shall enjoy only immunity from jurisdiction, and inviolability, in respect of official acts performed in
the exercise of his functions."
4. Vienna Convention on Consular Relations
"Article 41(1): Consular officials shall not be liable to arrest or detention pending trial, except in
the case of a grave crime and pursuant to a decision by the competent judicial authority.
xxx
Article 43(1): Consular officers and consular employees shall not be amenable to the jurisdiction
of the judicial or administrative authorities of the receiving State in respect of acts performed in

the exercise of consular functions.

Article 43(2): The provisions of paragraph 1 of this Article shall not, however, apply in respect of a
civil action either: (a) arising out of a contract concluded by a consular officer or a consular
employee in which he did not contract expressly or impliedly as an agent of the sending State; or
(b) by a third party for damage arising from an accident in the receiving State caused by a
vehicle, vessel or aircraft."
5. Convention on the Privileges and Immunities of the Specialized Agencies
"Section 4: The specialized agencies, their property and assets, wherever located and by
whomsoever held, shall enjoy immunity from every form of legal process except in so far as in any
particular case they have expressly waived their immunity. It is, however, understood that no
waiver of immunity shall extend to any measure of execution.
Section 13(a): Representatives of members at meetings convened by a specialized agency shall,
while exercising their functions and during their journeys to and from the place of meeting, enjoy
immunity from personal arrest or detention and from seizure of their personal baggage, and in
respect of words spoken or written and all acts done by them in their official capacity, immunity
from legal process of every kind.
xxx
Section 19(a): Officials of the specialized agencies shall be immune from legal process in respect
of words spoken or written and all acts performed by them in their official capacity.
xxx
Section 21: In addition to the immunities and privileges specified in sections 19 and 20, the
executive head of each specialized agency, including any official acting on his behalf during his
absence from duty, shall be accorded in respect of himself, his spouse and minor children, the
privileges and immunities, exemptions and facilities accorded to diplomatic envoys, in accordance
with international law."
6. Charter of the ADB
"Article 50(1): The Bank shall enjoy immunity from every form of legal process, except in cases
arising out of or in connection with the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities, in which cases actions may be
brought against the Bank in a court of competent jurisdiction in the territory of a country in which
the Bank has its principal or a branch office, or has appointed an agent for the purpose of

accepting service or notice of process, or has issued or guaranteed securities.

xxx
Article 55(i): All Governors, Directors, alternates, officers and employees of the Bank, including
experts performing missions for the Bank shall be immune from legal process with respect to acts
performed by them in their official capacity, except when the Bank waives the immunity."
7. ADB Headquarters Agreement
"Section 5: The Bank shall enjoy immunity from every form of legal process, except in cases
arising out of or in connection with the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities, in which cases actions may be
brought against the Bank in a court of competent jurisdiction in the Republic of the Philippines.
xxx
Section 44: Governors, other representatives of Members, Directors, the President, Vice-President
and executive officers as may be agreed upon between the Government and the Bank shall enjoy,
during their stay in the Republic of the Philippines in connection with their official duties with the
Bank: (a) immunity from personal arrest or detention and from seizure of their personal baggage;
(b) immunity from legal process of every kind in respect of words spoken or written and all acts
done by them in their official capacity; and (c) in respect of other matters not covered in (a) and
(b) above, such other immunities, exemptions, privileges and facilities as are enjoyed by members
of diplomatic missions of comparable rank, subject to corresponding conditions and obligations.
Section 45(a): Officers and staff of the Bank, including for the purposes of this Article experts and
consultants performing missions for the Bank, shall enjoy x x x immunity from legal process with
respect to acts performed by them in their official capacity, except when the Bank waives the
immunity."
II
There

are

three

major

differences

between

diplomatic

and

international

immunities Firstly, one of the recognized limitations of diplomatic immunity is that members of
the diplomatic staff of a mission may be appointed from among the nationals of the receiving
State only with the express consent of that State; apart from inviolability and immunity from
jurisdiction in respect of official acts performed in the exercise of their functions, nationals enjoy
only such privileges and immunities as may be granted by the receiving State. International
immunities may be specially important in relation to the State of which the official is a national.

Secondly, the immunity of a diplomatic agent from the jurisdiction of the receiving State does
not exempt him from the jurisdiction of the sending State; in the case of international immunities
there is no sending State and an equivalent for the jurisdiction of the Sending State therefore has
to be found either in waiver of immunity or in some international disciplinary or judicial procedure.
Thirdly, the effective sanctions which secure respect for diplomatic immunity are the principle of
reciprocity and the danger of retaliation by the aggrieved State; international immunities enjoy no
similar protection.

[14]

The generally accepted principles which are now regarded as the foundation of
international immunities are contained in the ILO Memorandum, which reduced them in
three basic propositions, namely: (1) that international institutions should have a status which
protects them against control or interference by any one government in the performance of
functions for the effective discharge of which they are responsible to democratically constituted
international bodies in which all the nations concerned are represented; (2) that no country
should derive any financial advantage by levying fiscal charges on common international funds;
and (3) that the international organization should, as a collectivity of States Members, be
accorded the facilities for the conduct of its official business customarily extended to each other by
its individual member States. The thinking underlying these propositions is essentially
institutional in character. It is not concerned with the status, dignity or privileges of
individuals, but with the elements of functional independence necessary to free
international institutions from national control and to enable them to discharge their
responsibilities impartially on behalf of all their members. [15]
III
Positive international law has devised three methods of granting privileges and immunities
to the personnel of international organizations. The first is by simple conventional
stipulation, as was the case in the Hague Conventions of 1899 and 1907. The second is by
internal legislation whereby the government of a state, upon whose territory the international
organization is to carry out its functions, recognizes the international character of the organization
and grants, by unilateral measures, certain privileges and immunities to better assure the
successful functioning of the organization and its personnel. In this situation, treaty obligation for
the state in question to grant concessions is lacking. Such was the case with the Central
Commission of the Rhine at Strasbourg and the International Institute of Agriculture at Rome. The
third is a combination of the first two. In this third method, one finds a conventional obligation to
recognize a certain status of an international organization and its personnel, but the status is
described in broad and general terms. The specific definition and application of those general
terms are determined by an accord between the organization itself and the state wherein it is

located. This is the case with the League of Nations, the Permanent Court of Justice, and the
United

Nations.[16]

The Asian Development Bank and its Personnel fall under this third category.

There is connection between diplomatic privileges and immunities and those extended to
international officials. The connection consists in the granting, by contractual provisions, of the
relatively

well-established

body

of

diplomatic

privileges

and

immunities

to

international

functionaries. This connection is purely historical. Both types of officials find the basis of their
special status in the necessity of retaining functional independence and freedom from interference
by the state of residence. However, the legal relationship between an ambassador and the state to
which he is accredited is entirely different from the relationship between the international official
and those states upon whose territory he might carry out his functions.

[17]

The privileges and immunities of diplomats and those of international officials

rest upon different legal foundations. Whereas those immunities awarded to diplomatic
agents are a right of the sending stated based on customary international law, those granted to
international officials are based on treaty or conventional law. Customary international law places
no obligation on a state to recognize a special status of an international official or to grant him
jurisdictional immunities. Such an obligation can only result from specific treaty provisions.

[18]

The special status of the diplomatic envoy is regulated by the principle of reciprocity by
which a state is free to treat the envoy of another state as its envoys are treated by that state.
The juridical basis of the diplomat's position is firmly established in customary international law.
The diplomatic envoy is appointed by the sending State but it has to make certain that the
agreement of the receiving State has been given for the person it proposes to accredit as head of
the

mission

to

that

State.[19]

The staff personnel of an international organization - the international officials assume a different position as regards their special status. They are appointed or elected to
their position by the organization itself, or by a competent organ of it; they are responsible to the
organization and their official acts are imputed to it. The juridical basis of their special position is
found in conventional law,[20] since there is no established basis of usage or custom in the case of
the international official. Moreover, the relationship between an international organization and a
member-state does not admit of the principle of reciprocity,[21] for it is contradictory to the basic
principle of equality of states. An international organization carries out functions in the interest of
every member state equally. The international official does not carry out his functions in the

interest of any state, but in serving the organization he serves, indirectly, each state equally. He
cannot be, legally, the object of the operation of the principle of reciprocity between states under
such circumstances. It is contrary to the principle of equality of states for one state member of an
international organization to assert a capacity to extract special privileges for its nationals from
other member states on the basis of a status awarded by it to an international organization. It is
upon

this

principle

of

sovereign

equality

that

international

organizations

are

built.

It follows from this same legal circumstance that a state called upon to admit an official of
an international organization does not have a capacity to declare him persona non grata.
The functions of the diplomat and those of the international official are quite different.
Those of the diplomat are functions in the national interest. The task of the ambassador is to
represent his state, and its specific interest, at the capital of another state. The functions of the
international official are carried out in the international interest. He does not represent a state or
the interest of any specific state. He does not usually "represent" the organization in the true
sense of that term. His functions normally are administrative, although they may be judicial or
executive, but they are rarely political or functions of representation, such as those of the
diplomat.
There is a difference of degree as well as of kind. The interruption of the activities of a diplomatic
agent is likely to produce serious harm to the purposes for which his immunities were granted.
But the interruption of the activities of the international official does not, usually, cause serious
dislocation of the functions of an international secretariat.

[22]

On the other hand, they are similar in the sense that acts performed in an official capacity
by either a diplomatic envoy or an international official are not attributable to him as an individual
but are imputed to the entity he represents, the state in the case of the diplomat, and the
organization in the case of the international official. [23]
IV
Looking back over 150 years of privileges and immunities granted to the personnel of
international organizations, it is clear that they were accorded a wide scope of protection in the
exercise of their functions - the Rhine Treaty of 1804 between the German Empire and France
which provided "all the rights of neutrality" to persons employed in regulating navigation in the
international interest; The Treaty of Berlin of 1878 which granted the European Commission of the
Danube "complete independence of territorial authorities" in the exercise of its functions; The
Covenant of the League which granted "diplomatic immunities and privileges." Today, the age of

the United Nations finds the scope of protection narrowed. The current tendency is to reduce
privileges and immunities of personnel of international organizations to a minimum. The
tendency cannot be considered as a lowering of the standard but rather as a recognition that the
problem on the privileges and immunities of international officials is new. The solution to the
problem presented by the extension of diplomatic prerogatives to international functionaries lies in
the general reduction of the special position of both types of agents in that the special status of
each agent is granted in the interest of function. The wide grant of diplomatic prerogatives
was curtailed because of practical necessity and because the proper functioning of the
organization did not require such extensive immunity for its officials. While the current
direction of the law seems to be to narrow the prerogatives of the personnel of international
organizations, the reverse is true with respect to the prerogatives of the organizations
themselves, considered as legal entities. Historically, states have been more generous in
granting privileges and immunities to organizations than they have to personnel of
these organizations.

[24]

Thus, Section 2 of the General Convention on the Privileges and Immunities of the United
Nations states that the UN shall enjoy immunity from every form of legal process except insofar as
in any particular case it has expressly waived its immunity. Section 4 of the Convention on the
Privileges and Immunities of the Specialized Agencies likewise provides that the specialized
agencies shall enjoy immunity from every form of legal process subject to the same exception.
Finally, Article 50(1) of the ADB Charter and Section 5 of the Headquarters Agreement similarly
provide that the bank shall enjoy immunity from every form of legal process, except in cases
arising out of or in connection with the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of securities.
The phrase "immunity from every form of legal process" as used in the UN General
Convention has been interpreted to mean absolute immunity from a state's jurisdiction to
adjudicate or enforce its law by legal process, and it is said that states have not sought to restrict
that immunity of the United Nations by interpretation or amendment. Similar provisions are
contained in the Special Agencies Convention as well as in the ADB Charter and Headquarters
Agreement. These organizations were accorded privileges and immunities in their charters by
language similar to that applicable to the United Nations. It is clear therefore that these
organizations were intended to have similar privileges and immunities. [25] From this, it can be
easily deduced that international organizations enjoy absolute immunity similar to the diplomatic
prerogatives granted to diplomatic envoys.
Even in the United States this theory seems to be the prevailing rule. The Foreign Sovereign

Immunities Act was passed adopting the "restrictive theory" limiting the immunity of states
under international law essentially to activities of a kind not carried on by private persons. Then
the International Organizations Immunities Act came into effect which gives to designated
international organizations the same immunity from suit and every form of judicial process as is
enjoyed by foreign governments. This gives the impression that the Foreign Sovereign Immunities
Act has the effect of applying the restrictive theory also to international organizations generally.
However, aside from the fact that there was no indication in its legislative history that Congress
contemplated that result, and considering that the Convention on Privileges and Immunities of the
United Nations exempts the United Nations "from every form of legal process," conflict with the
United States obligations under the Convention was sought to be avoided by interpreting the
Foreign Sovereign Immunities Act, and the restrictive theory, as not applying to suits against the
United Nations.

[26]

On the other hand, international officials are governed by a different rule. Section
18(a) of the General Convention on Privileges and Immunities of the United Nations states that
officials of the United Nations shall be immune from legal process in respect of words spoken or
written and all acts performed by them in their official capacity. The Convention on Specialized
Agencies carries exactly the same provision. The Charter of the ADB provides under Article 55(i)
that officers and employees of the bank shall be immune from legal process with respect to acts
performed by them in their official capacity except when the Bank waives immunity. Section 45
(a) of the ADB Headquarters Agreement accords the same immunity to the officers and staff of
the bank. There can be no dispute that international officials are entitled to immunity
only with respect to acts performed in their official capacity, unlike international
organizations which enjoy absolute immunity.
Clearly, the most important immunity to an international official, in the discharge of his
international functions, is immunity from local jurisdiction. There is no argument in doctrine or
practice with the principle that an international official is independent of the jurisdiction of the
local authorities for his official acts. Those acts are not his, but are imputed to the organization,
and without waiver the local courts cannot hold him liable for them. In strict law, it would
seem that even the organization itself could have no right to waive an official's
immunity for his official acts. This permits local authorities to assume jurisdiction over
and individual for an act which is not, in the wider sense of the term, his act at all. It is
the organization itself, as a juristic person, which should waive its own immunity and
appear in court, not the individual, except insofar as he appears in the name of the
organization. Provisions for immunity from jurisdiction for official acts appear, aside
from the aforementioned treatises, in the constitution of most modern international

organizations. The acceptance of the principle is sufficiently widespread to be regarded

as declaratory of international law.[27]
V
What then is the status of the international official with respect to his private acts?
Section 18 (a) of the General Convention has been interpreted to mean that officials of the
specified categories are denied immunity from local jurisdiction for acts of their private life
and empowers local courts to assume jurisdiction in such cases without the necessity of waiver. [28]
It has earlier been mentioned that historically, international officials were granted diplomatic
privileges and immunities and were thus considered immune for both private and official acts. In
practice, this wide grant of diplomatic prerogatives was curtailed because of practical necessity
and because the proper functioning of the organization did not require such extensive immunity
for its officials. Thus, the current status of the law does not maintain that states grant
jurisdictional immunity to international officials for acts of their private lives. [29] This
much is explicit from the Charter and Headquarters Agreement of the ADB which
contain substantially similar provisions to that of the General Convention.
VI
Who is competent to determine whether a given act is private or official?
This is an entirely different question. In connection with this question, the current tendency to
narrow the scope of privileges and immunities of international officials and representatives is
most apparent. Prior to the regime of the United Nations, the determination of this question
rested with the organization and its decision was final. By the new formula, the state itself tends
to assume this competence. If the organization is dissatisfied with the decision, under the
provisions of the General Convention of the United States, or the Special Convention for
Specialized Agencies, the Swiss Arrangement, and other current dominant instruments, it may
appeal to an international tribunal by procedures outlined in those instruments. Thus, the state
assumes this competence in the first instance. It means that, if a local court assumes jurisdiction
over an act without the necessity of waiver from the organization, the determination of the nature
of the act is made at the national level.

[30]

It appears that the inclination is to place the competence to determine the nature
of an act as private or official in the courts of the state concerned. That the prevalent
notion seems to be to leave to the local courts determination of whether or not a given act is
official or private does not necessarily mean that such determination is final. If the United Nations

questions the decision of the Court, it may invoke proceedings for settlement of disputes between
the organization and the member states as provided in Section 30 of the General Convention.
Thus, the decision as to whether a given act is official or private is made by the national courts in
the first instance, but it may be subjected to review in the the international level if questioned by
the United Nations.

[31]

A similar view is taken by Kunz, who writes that the "jurisdiction of local courts without
waiver for acts of private life empowers the local courts to determine whether a certain act is an
official act or an act of private life," on the rationale that since the determination of such question,
if left in the hands of the organization, would consist in the execution, or non-execution, of waiver,
and since waiver is not mentioned in connection with the provision granting immunities to
international officials, then the decision must rest with local courts.

[32]

Under the Third Restatement of the Law, it is suggested that since an international official
does not enjoy personal inviolability from arrest or detention and has immunity only with respect
to official acts, he is subject to judicial or administrative process and must claim his immunity in
the proceedings by showing that the act in question was an official act. Whether an act was
performed in the individual's official capacity is a question for the court in which a proceeding is
brought, but if the international organization disputes the court's finding, the dispute between the
organization and the state of the forum is to be resolved by negotiation, by an agreed mode of
settlement or by advisory opinion of the International Court of Justice.

[33]

Recognizing the difficulty that by reason of the right of a national court to assume
jurisdiction over private acts without a waiver of immunity, the determination of the official or
private character of a particular act may pass from international to national control, Jenks
proposes three ways of avoiding difficulty in the matter. The first would be for a municipal court
before which a question of the official or private character of a particular act arose to accept as
conclusive in the matter any claim by the international organization that the act was official in
character, such a claim being regarded as equivalent to a governmental claim that a particular act
is an act of State. Such a claim would be in effect a claim by the organization that the proceedings
against the official were a violation of the jurisdictional immunity of the organization itself which is
unqualified and therefore not subject to delimitation in the discretion of the municipal court. The
second would be for a court to accept as conclusive in the matter a statement by the executive
government of the country where the matter arises certifying the official character of the act. The
third would be to have recourse to the procedure of international arbitration. Jenks opines that it
is possible that none of these three solutions would be applicable in all cases; the first might be
readily acceptable only in the clearest cases and the second is available only if the executive
government of the country where the matter arises concurs in the view of the international

organization concerning the official character of the act. However, he surmises that taken in
combination, these various possibilities may afford the elements of a solution to the problem.

[34]

One final point. The international official's immunity for official acts may be likened to a
consular official's immunity from arrest, detention, and criminal or civil process which is not
absolute but applies only to acts or omissions in the performance of his official functions, in the
absence of special agreement. Since a consular officer is not immune from all legal process, he
must respond to any process and plead and prove immunity on the ground that the act or
omission underlying the process was in the performance of his official functions. The issue has not
been authoritatively determined, but apparently the burden is on the consular officer to prove his
status as well as his exemption in the circumstances. In the United States, the US Department of
State generally has left it to the courts to determine whether a particular act was within a consular
officer's official duties.[35]
Submissions
On

the

bases

of

the

foregoing

disquisitions,

submit

the

following

conclusions:

First, petitioner Liang, a bank official of ADB, is not entitled to diplomatic immunity and hence his
immunity is not absolute.
Under the Vienna Convention on Diplomatic Relations, a diplomatic envoy is immune from
criminal jurisdiction of the receiving State for all acts, whether private or official, and hence he
cannot be arrested, prosecuted and punished for any offense he may commit, unless his
diplomatic immunity is waived.[36] On the other hand, officials of international organizations
enjoy "functional" immunities, that is, only those necessary for the exercise of the
functions of the organization and the fulfillment of its purposes.[37] This is the reason why
the ADB Charter and Headquarters Agreement explicitly grant immunity from legal process to
bank officers and employees only with respect to acts performed by them in their official capacity,
except when the Bank waives immunity. In other words, officials and employees of the ADB
are subject to the jurisdiction of the local courts for their private acts, notwithstanding
the absence of a waiver of immunity.
Petitioner cannot also seek relief under the mantle of "immunity from every form
of legal process" accorded to ADB as an international organization. The immunity of
ADB is absolute whereas the immunity of its officials and employees is restricted only to
official acts. This is in consonance with the current trend in international law which seeks to
narrow the scope of protection and reduce the privileges and immunities granted to personnel of
international organizations, while at the same time aims to increase the prerogatives of

international organizations.
Second, considering that bank officials and employees are covered by immunity only for their
official acts, the necessary inference is that the authority of the Department of Affairs, or
even of the ADB for that matter, to certify that they are entitled to immunity is limited
only to acts done in their official capacity. Stated otherwise, it is not within the power of the
DFA, as the agency in charge of the executive department's foreign relations, nor the ADB, as the
international organization vested with the right to waive immunity, to invoke immunity for private
acts of bank official and employees, since no such prerogative exists in the first place. If the
immunity

does

not

exist,

there

is

nothing

to

certify.

As an aside, ADB cannot even claim to have the right to waive immunity for private acts of
its officials and employees. The Charter and the Headquarters Agreement are clear that the
immunity can be waived only with respect to official acts because this is only the extent to which
the privilege has been granted. One cannot waive the right to a privilege which has never been
granted

or

acquired.

Third, I choose to adopt the view that it is the local courts which have jurisdiction to determine
whether or not a given act is official or private. While there is a dearth of cases on the matter
under Philippine jurisprudence, the issue is not entirely novel.
The case of M.H. Wylie, et al. vs. Rarang, et al.[38] concerns the extent of immunity from
suit of the officials of a United States Naval Base inside the Philippine territory. Although a motion
to dismiss was filed by the defendants therein invoking their immunity from suit pursuant to the
RP-US Military Bases Agreement, the trial court denied the same and, after trial, rendered a
decision declaring that the defendants are not entitled to immunity because the latter acted
beyond the scope of their official duties. The Court likewise applied the ruling enunciated in the
case of Chavez vs. Sandiganbayan[39] to the effect that a mere invocation of the immunity
clause does not ipso facto result in the charges being automatically dropped. While it is true that
the Chavez case involved a public official, the Court did not find any substantial reason why the
same rule cannot be made to apply to a US official assigned at the US Naval Station located in the
Philippines. In this case, it was the local courts which ascertained whether the acts complained of
were done in an official or personal capacity.
In the case of The Holy See vs. Rosario, Jr.,[40] a complaint for annulment of contract of
sale, reconveyance, specific performance and damages was filed against petitioner. Petitioner
moved to dismiss on the ground of, among others, lack of jurisdiction based on sovereign

immunity from suit, which was denied by the trial court. A motion for reconsideration, and
subsequently, a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for
Claim of Immunity as a Jurisdictional Defense" were filed by petitioner. The trial court deferred
resolution of said motions until after trial on the merits. On certiorari, the Court there ruled on the
issue of petitioner's non-suability on the basis of the allegations made in the pleadings filed by the
parties. This is an implicit recognition of the court's jurisdiction to ascertain the suability or nonsuability of the sovereign by assessing the facts of the case. The Court hastened to add that when
a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign
court, in some cases, the defense of sovereign immunity was submitted directly to the local courts
by the respondents through their private counsels, or where the foreign states bypass the Foreign
Office, the courts can inquire into the facts and make their own determination as to the nature of
the acts and transactions involved.
Finally, it appears from the records of this case that petitioner is a senior economist at ADB
and as such he makes country project profiles which will help the bank in deciding whether to lend
money or support a particular project to a particular country.[41] Petitioner stands charged of grave
slander for allegedly uttering defamatory remarks against his secretary, the private complainant
herein. Considering that the immunity accorded to petitioner is limited only to acts performed in
his official capacity, it becomes necessary to make a factual determination of whether or not the
defamatory utterances were made pursuant and in relation to his official functions as a senior
economist.
I vote to deny the motion for reconsideration.

48 SCRA 242 (1972).

190 SCRA 130 (1990).
[3]
238 SCRA 524 (1994).
[4]
241 SCRA 681 (1995).
[5]
262 SCRA 38 (1996).
[6]
Supra note 1.
[7]
Supra note 2.
[8]
Supra note 3.
[9]
Supra note 4.
[10]
Supra note 5.
[11]
ICMC vs. Calleja, supra note 2.
[12]
John Kerry King, The Privileges and Immunities of the Personnel of International Organizations
xiii (1949), citing: Suzanne Basdevant, Les Fonctionnaires Internationaux (Paris: 1931), Chapter
1.
[13]
ICMC vs. Calleja, et al., supra, citing Articles 57 and 63 of the United Nations Charter.
[14]
C. Wilfred Jenks, Contemporary Development in International Immunities xxxvii (1961).
[15]
Id. at 17.
[16]
J.K. King, supra note 12, at 81.
[17]
See id. at 255.
[1]
[2]

Id. at 25-26.
Article 4, Vienna Convention on Diplomatic Relations.
[20]
J.K. King, supra note 12, at xiii.
[21]
Id. at 27.
[22]
Id. at 254-257.
[23]
Id. at 103.
[24]
J.K. King, supra note 12, at 253-268.
[25]
1 Restatement of the Law Third 498-501.
[26]
Ibid.
[27]
J.K. King, supra note 12, at 258-259.
[28]
Id. at 186.
[29]
But see id. at 259. It is important to note that the submission of international officials to local
jurisdiction for private act is not completely accepted in doctrine and theory. Jenks, in particular,
has argued for complete jurisdictional immunity, as has Hammarskjold.
[18]
[19]

Id. at 260-261.
Id. at 189.
[32]
Joseph L. Kunz, Privileges and Immunities of International Organizations 862 (1947), cited in
J.K. King, id. at 254.
[30]
[31]

[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]
[41]

1 Restatement of the Law Third 512.

Jenks, supra note 14, at 117-118.
1 Restatement of the Law Third 475-477.
Salonga & Yap, Public International Law 108 (5th ed., 1992).
1 id. at 511.
209 SCRA 357 (1992).
193 SCRA 282 (1991).
Supra note 3.
TSN, G.R. No. 125865, October 18, 2000, p. 11; Rollo, p. 393.