DEUTSCHE GESELLSCHAFT TECHNISCHE ZUSAMMENARBEIT (GTZ) v. HON.

COURT OF
APPEALS
G.R. No. 152318, April 16, 2009

FACTS
The Federal Republic of Germany and the Republic of the Philippines ratified and agreement which lead to
the Social Health InsuranceNetworking and Empowerment (SHINE) program wherein the program seeks to
provide health care to Filipino families, especially the poor. The Republic of Germany assigned the GTZ as the
implementing corporation for the program, while the Philippines designated the Department of Health and the
Philippine Health Insurance Corporation. Private respondents, as employed by GTZ for the implementation of the
SHINE, had a misunderstanding with the Project Manager of SHINE. This lead to an exchange of letters which was
interpreted to be the resignation of the private respondents. Private respondents then filed a complaint for illegal
dismissal to the labor arbiter. GTZ contends that it is immune from suit as it is the accredited agency of the Federal
Republic of Germany.

ISSUE
Whether or not the GTZ is immune from suit.

HELD
A state may waive its immunity through a general or specific law. The special law can take the form of the
original charter of the incorporated government agency. In this case however, GTZ presented any evidence to
support their claim that they are immune from suit, and has failed to obtain a certification of immunity from suit
from the Department of Foreign Affairs. If GTZ has done so, then there would be no ambiguity in their claim that
they are immune from suit.

VERSION 2

FACTS

On 1971, the governments of the Federal Republic of Germany and the Republic of the Philippines ratified
an Agreement concerning Technical Co-operation (Agreement) in Bonn, capital of what was then West
Germany.
The Agreement affirmed the countries common interest in promoting the technical and economic
development of their States, and recognized the benefits to be derived by both States from closer technical
co-operation, and allowed for the conclusion of arrangements concerning individual projects of technical
co-operation.
Pursuant to such Agreement, both governments affirmed their common commitment to promote jointly a
project called, Social Health InsuranceNetworking and Empowerment (SHINE), which was designed to
enable Philippine familiesespecially poor onesto maintain their health and secure health care of
sustainable quality.
In the arraignment, both governments likewise named their respective implementing organizations for
SHINE. The Philippines designated the DOH and Philhealth with the implementation of SHINE. For their
part, the German government charged the Deustche Gesellschaft fr Technische Zusammenarbeit (GTZ)
with the implementation of its contributions.
Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various dates
between December of 1998 to September of 1999.
In September of 1999, Nicolay, a Belgian national, assumed the post of SHINE Project Manager.
Disagreements eventually arose between Nicolay and private respondents in matters such as proposed
salary adjustments, and the course Nicolay was taking in the implementation of SHINE different from her
predecessors.
It was claimed that SHINE under Nicolay had veered away from its original purpose to facilitate the
development of social health insurance by shoring up the national health insurance program and
strengthening local initiatives, as Nicolay had refused to support local partners and new initiatives on the
premise that community and local government unit schemes were not sustainablea philosophy that
supposedly betrayed Nicolays lack of understanding of the purpose of the project.

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 The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very crucial to us in working for
the project. We could no longer find any reason to stay with the project unless ALL of these
issues be addressed immediately and appropriately

In response, Nicolay wrote each of the private respondents a letter:

You have firmly and unequivocally stated in the last paragraph of your 8 th June 2000
letter that you and the five other staff could no longer find any reason to stay with the
project unless ALL of these issues be addressed immediately and appropriately.
Under the foregoing premises and circumstances, it is now imperative that I am to
accept your resignation, which I expect to receive as soon as possible.

Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was not
intended as a resignation letter, but one that merely intended to raise attention to what they perceived as vital
issues.
Each of the private respondents received a letter from Nicolay dated 11 July 2000, informing them of the pre-
termination of their contracts of employment on the grounds of serious and gross insubordination, among
others, resulting to loss of confidence and trust.
On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC.
GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no jurisdiction
over the case, as its acts were undertaken in the discharge of the governmental functions and sovereign
acts of the Government of the Federal Republic of Germany.
This was opposed by private respondents with the arguments that GTZ had failed to secure a certification
that it was immune from suit from the Department of Foreign Affairs, and that it was GTZ and not the
German government which had implemented the SHINE Project and entered into the contracts of
employment.
On 27 November 2000, the Labor Arbiter issued an Order denying the Motion to Dismiss. The Order cited,
among others, that GTZ was a private corporation which entered into an employment contract; and that
GTZ had failed to secure from the DFA a certification as to its diplomatic status.
The Labor Arbiter rendered a Decision granting the complaint for illegal dismissal. The Decision concluded that
respondents were dismissed without lawful cause, there being a total lack of due process both substantive and
procedural.GTZ was faulted for failing to observe the notice requirements in the labor law.
The Decision proceeded to discuss the jurisdictional aspect, in this wise:
It imperative to be immune from suit, respondents should have secured from the Department
of Foreign Affairs a certification of respondents diplomatic status and entitlement to
diplomatic privileges including immunity from suits. Having failed in this regard, respondents
cannot escape liability from the shelter of sovereign immunity.
GTZ opted to assail the decision by way of a special civil action for certiorari filed with the Court of Appeals.

Issue: W/N GTZ enjoys immunity from suit

Held: No.

The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its
Comment, the OSG took the side of GTZ, with the prayer that the petition be granted on the ground that GTZ
was immune from suit, citing in particular its assigned functions in implementing the SHINE programa
joint undertaking of the Philippine and German governments which was neither proprietary nor commercial in
nature.
On the other hand, Counsel for GTZ characterizes GTZ as the implementing agency of the Government of
the Federal Republic of Germany, a depiction similarly adopted by the OSG. Assuming that
characterization is correct, it does not automatically invest GTZ with the ability to invoke State
immunity from suit. The distinction lies in whether the agency is incorporated or unincorporated. The

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 following lucid discussion from Justice Isagani Cruz is pertinent:

Where suit is filed not against the government itself or its officials but against one
of its entities, it must be ascertained whether or not the State, as the principal that may
ultimately be held liable, has given its consent to be sued. This ascertainment will depend
in the first instance on whether the government agency impleaded is incorporated or
unincorporated.

An incorporated agency has a charter of its own that invests it with a

separate juridical personality, like the Social Security System, the University of the
Philippines, and the City of Manila. By contrast, the unincorporated agency is so called
because it has no separate juridical personality but is merged in the general machinery of the
government, like the Department of Justice, the Bureau of Mines and the Government
Printing Office.

If the agency is incorporated, the test of its suability is found in its charter.
The simple rule is that it is suable if its charter says so, and this is true regardless of the
functions it is performing. Municipal corporations, for example, like provinces and
cities, are agencies of the State when they are engaged in governmental functions and
therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject
to suit even in the performance of such functions because their charter provides that
they can sue and be sued.

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.
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.
There is no doubt that the 1991 Agreement designated GTZ as the implementing agency in behalf of the
German government.
GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website. In the
Corporate Profile GTZ describes itself as a federally owned, a federal enterprise, and founded in
1975 as a company under private law.
GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which apparently
owns it. At the same time, it appears that GTZ was actually organized not through a legislative public
charter, but under private law, in the same way that Philippine corporations can be organized under the
Corporation Code even if fully owned by the Philippine government.
This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners
argument that GTZ is entitled to immunity from suit because it is an implementing agency.
The above-quoted statement does not dispute the characterization of GTZ as an implementing agency of the
Federal Republic of Germany, yet it bolsters the notion that as a company organized under private law,
it has a legal personality independent of that of the Federal Republic of Germany.
The Federal Republic of Germany, in its own official website, also makes reference to GTZ and describes it
as a private company owned by the Federal Republic of Germany.
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

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 states that every 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.

In Holy See v. Del Rosario provided a template on how a foreign entity desiring to invoke State immunity
from suit could duly prove such immunity before our local courts. The principles enunciated in that case were
derived from public international law. We stated then:
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 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.

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.
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, the Comment filed by
the OSG does not inspire the same degree of confidence as a certification from the DFA would have
elicited.
The Court thus holds and so rules that GTZ consistently has been unable to establish with satisfaction
that it enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of
Germany.

SANDERS VS VERIDIANO

SANDERS VS. VERIDIANO II

Justice Cruz 1998

FACTS:

Petitioner:

Sanders Special Services Director of NAVSTA (Naval Station)

Moreau Commanding Officer of the Subic Naval Base

Respondents:

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 Rossi and Wyer American Citizen employed as game room attendants in the special
services department of NAVSTA

Events:

Private Respondents employment had been converted from permanent full-time to

part-time
Respondents filed protest and a recommendation report was made by the hearing
officer stipulating the reinstatement of both respondents plus back wages. Report on
hearing contained the observation that Special Services Management practices an
autocratic form of supervision.
Sanders disagreed with recommendation report with the later containing statements
that:
Mr. Rossi tends to alienate most co-workers and supervisors
Mr. Rossi and Wyers have proven, according to their immediate supervisors, to
be difficult employees to supervise.
Grievants placed the records in public places where other not involved in the
case could hear.
Moreau sent a letter to the Chief of Naval Personnel explaining the change of the
private respondents employment status and requesting concurrence therewith.

Filling of Case:

Respondents filed a case in Court of First Instance of Olongapo City a complaint for
damages against petitioners; plaintiffs claimed that letters contained libelous
imputations.
Petitioners filed a motion to dismiss on grounds that acts complained of were
performed by them in their discharge of official duties; consequently, court has no
jurisdiction over them under the doctrine of state immunity.
Petitioners motion was denied on ground that petitioners had not presented any
evidence that their acts were official in nature and not personal torts.
An order issued a writ of preliminary attachment, conditioned upon the filling of a
P10,000 bond on plaintiffs, against properties of Moreau, who allegedly was then
about to leave the Philippines.
Moreau was declared in default.
Petitioners Motion to lift the default order was dismissed on ground that Moreaus
failure to appear at the pre-trial conference was the result of some understanding.
Motion for reconsideration of the denial motion was also dismissed.

ISSUES:

Petition for Certiorari, Prohibition, and Preliminary Injunction was thereafter filed
before this court.
W/N petitioners were performing their official duties when they did acts for which
they have been sued for damages by the private respondent.

RULING:

Petition was granted. Challenged Orders were set aside. Respondent Court is directed
to dismiss the case.
Court held that he acts for which the petitioner are being called to account were
performed by them in the discharge of their official duties.

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 Sanders wrote the letter as a reply from Moreau for more information regarding the
case of the private respondents. Even without such request, he has the rights in
reacting to the hearing officers criticism.
Moreaus letter is clearly official in nature as the Commanding Chief of the Naval
Base answerable to the naval personnel in matters involving the special services
department of NAVSTA.
Court concludes that petitioners acted behalf of the government, within the scope of
their authority making the action a suit against the government without its consent.

VERSION 2

Sanders v. Veridiano

FACTS:
Petitioner Dale Sanders was the special services of the US Naval Station (NAVSTA) in Olongapo city.
Private respondents Anthony Rossi and Ralph Wyers are American citizens permanently residing in the
Philippines and who were employed as gameroom attendants in the special services department of
NAVSTA. On October 3, 1975, the respondents were advised that their employment had been converted
from permanent full-time to permanent part-time. In a letter addressed to petitioner Moreau, Sanders
disagreed with the hearing officers report of the reinstatement of private respondents to permanent full-
time status plus backwages. Respondents allege that the letters contained libellous imputations which
caused them to be ridiculed and thus filed for damages against petitioners.

ISSUE:
1) Were the petitioners acting officially or only in their private capacities when they did the acts for which
the private respondents sued them for damages?
2) Does the court have jurisdiction over the case?

HELD:
It is abundantly clear in the present case that the acts for which the petitioner are being called to account
were performed by them in the discharge of their official duties. Given the official character of the letters,
the petioners were, legally speaking, being sued as officers of the United States government. As such, the
complaint cannot prosper unless the government sought to be held ultimately liable has given its consent
to be sued. The private respondents must pursue their claim against the petitioners in accordance with
the laws of the Unites States of which they are all citizens and under whose jurisdiction the alleged
offenses were committed for the Philippine courts have no jurisdiction over the case.

UP vs. Dizon

G.R. No. 171182 : August 23, 2012

UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN P.

ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and
JOSEFINA R. LICUANAN, Petitioners,

v.

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HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial
Court of Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA
CRUZ, Respondents.

FACTS:

University of the Philippines (UP) entered into a General Construction Agreement with
respondent Stern Builders Corporation (Stern Builders) for the construction and renovation of
the buildings in the campus of the UP in Los Bas. UP was able to pay its first and second
billing. However, the third billing worth P273,729.47 was not paid due to its disallowance by
the Commission on Audit (COA). Thus, Stern Builders sued the UP to collect the unpaid
balance.

On November 28, 2001, the RTC rendered its decision ordering UP to pay Stern Builders.
Then on January 16, 2002, the UP filed its motion for reconsideration. The RTC denied the
motion. The denial of the said motion was served upon Atty. Felimon Nolasco (Atty.Nolasco)
of the UPLB Legal Office on May 17, 2002. Notably, Atty. Nolasco was not the counsel of
record of the UP but the OLS inDiliman, Quezon City.

Thereafter, the UP filed a notice of appeal on June 3, 2002. However, the RTC denied due
course to the notice of appeal for having been filed out of time. On October 4, 2002, upon
motion of Stern Builders, the RTC issued the writ of execution.

On appeal, both the CA and the High Court denied UPs petition. The denial became final
and executory. Hence, Stern Builders filed in the RTC its motion for execution despite their
previous motion having already been granted and despite the writ of execution having
already issued. On June 11, 2003, the RTC granted another motion for execution filed on May
9, 2003 (although the RTC had already issued the writ of execution on October 4, 2002).
Consequently, the sheriff served notices of garnishment to the UPs depositary banks and the
RTC ordered the release of the funds.

Aggrieved, UP elevated the matter to the CA. The CA sustained the RTC. Hence, this petition.

ISSUES:

I. Whether or not the UPs funds can be validly garnished?

II. Whether or not the UPs appeal dated June 3, 2002 has been filed out of time?

HELD: The petition for review is meritorious.

FIRST ISSUE: UPs funds, being government funds, are not subject to garnishment.

POLITICAL LAW: garnishment of public funds; suability vs. liability of the State

Despite its establishment as a body corporate, the UP remains to be a "chartered institution"

performing a legitimate government function. Irrefragably, the UP is a government
instrumentality, performing the States constitutional mandate of promoting quality and
accessible education. As a government instrumentality, the UP administers special funds
sourced from the fees and income enumerated under Act No. 1870 and Section 1 of
Executive Order No. 714, and from the yearly appropriations, to achieve the purposes laid
down by Section 2 of Act 1870, as expanded in Republic Act No. 9500. All the funds going
into the possession of the UP, including any interest accruing from the deposit of such funds
in any banking institution, constitute a "special trust fund," the disbursement of which
should always be aligned with the UPs mission and purpose, and should always be subject to
auditing by the COA. The funds of the UP are government funds that are public in character.

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They include the income accruing from the use of real property ceded to the UP that may be
spent only for the attainment of its institutional objectives.

A marked distinction exists between suability of the State and its liability. As the Court
succinctly stated in Municipality of San Fernando, La Union v. Firme: 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.

The Constitution strictly mandated that "no money shall be paid out of the Treasury except
in pursuance of an appropriation made by law." The execution of the monetary judgment
against the UP was within the primary jurisdiction of the COA. It was of no moment that a
final and executory decision already validated the claim against the UP.

SECOND ISSUE: Period of appeal did not start without effective service of decision upon
counsel of record.

REMEDIAL LAW: doctrine of immutability of a final judgment; service of judgments; fresh-

period rule; computation of time

At stake in the UPs plea for equity was the return of the amount of P16,370,191.74 illegally
garnished from its trust funds. Obstructing the plea is the finality of the judgment based on
the supposed tardiness of UPs appeal, which the RTC declared on September 26, 2002. It is
true that a decision that has attained finality becomes immutable and unalterable, and
cannot be modified in any respect, even if the modification is meant to correct erroneous
conclusions of fact and law, and whether the modification is made by the court that
rendered it or by this Court as the highest court of the land. But the doctrine of immutability
of a final judgment has not been absolute, and has admitted several exceptions, among
them: (a) the correction of clerical errors; (b) the so-called nunc pro tunc entries that cause
no prejudice to any party; (c) void judgments; and (d) whenever circumstances transpire
after the finality of the decision that render its execution unjust and inequitable. We rule that
the UPs plea for equity warrants the Courts exercise of the exceptional power to disregard
the declaration of finality of the judgment of the RTC for being in clear violation of the UPs
right to due process.

Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the
UPLB Legal Office was invalid and ineffectual because he was admittedly not the counsel of
record of the UP. Verily, the service of the denial of the motion for reconsideration could only
be validly made upon the OLS in Diliman, and no other. It is settled that where a party has
appeared by counsel, service must be made upon such counsel. This is clear enough from
Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any
party has appeared by counsel, service upon him shall be made upon his counsel or one of
them, unless service upon the party himself is ordered by the court. Where one counsel
appears for several parties, he shall only be entitled to one copy of any paper served upon
him by the opposite side."

Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such
that the remaining period for the UP to take a timely appeal would end by May 23, 2002, it
would still not be correct to find that the judgment of the RTC became final and immutable
thereafter due to the notice of appeal being filed too late on June 3, 2002. In so declaring the
judgment of the RTC as final against the UP, the CA and the RTC applied the rule contained
in the second paragraph of Section 3, Rule 41 of the Rules of Court to the effect that the

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filing of a motion for reconsideration interrupted the running of the period for filing the
appeal; and that the period resumed upon notice of the denial of the motion for
reconsideration. For that reason, the CA and the RTC might not be taken to task for strictly
adhering to the rule then prevailing.

However, equity calls for the retroactive application in the UPs favor of the fresh-period rule
that the Court first announced in mid-September of 2005 through its ruling in Neypes v.
Court of Appeals, viz: "to standardize the appeal periods provided in the Rules and to afford
litigants fair opportunity to appeal their cases, the Court deems it practical to allow a fresh
period of 15 days within which to file the notice of appeal in the Regional Trial Court, counted
from receipt of the order dismissing a motion for a new trial or motion for reconsideration."
The retroactive application of the fresh-period rule, a procedural law that aims "to regiment
or make the appeal period uniform, to be counted from receipt of the order denying the
motion for new trial, motion for reconsideration (whether full or partial) or any final order or
resolution," is impervious to any serious challenge. This is because there are no vested
rights in rules of procedure.

Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received
the denial, the UPs filing on June 3, 2002 of the notice of appeal was not tardy within the
context of the fresh-period rule. For the UP, the fresh period of 15-days counted from service
of the denial of the motion for reconsideration would end on June 1, 2002, which was a
Saturday. Hence, the UP had until the next working day, or June 3, 2002, a Monday, within
which to appeal, conformably with Section 1 of Rule 22, Rules of Court, which holds that: "If
the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal
holiday in the place where the court sits, the time shall not run until the next working day."

Petition for review is GRANTED. The CA is REVERSED and SET ASIDE.

REPUBLIC VS SANDOVAL

Republic vs. Sandoval (Consti1)

(Two petitions consolidated.)

En Banc

Campos, Jr., March 19, 1993

Topic: Sovereignty - Suit not against the State - Beyond the Scope of Authority

Facts:

The heirs of the deceased of the January 22, 1987 Mendiola massacre (background: Wiki),
together with those injured (Caylao group), instituted the petition, seeking the reversal and
setting aside of the orders of respondent Judge Sandoval (May 31 and Aug 8, 1988) in
"Erlinda Caylao, et al. vs. Republic of the Philippines, et al." which dismissed the case
against the Republic of the Philippines

May 31 order: Because the impleaded military officers are being charged in their personal
and official capacity, holding them liable, if at all, would not result in financial responsibility
of the government

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Aug 8 order: denied the motions filed by both parties for reconsideration

In January 1987, farmers and their sympathizers presented their demands for what they
called "genuine agrarian reform"

The Kilusang Magbubukid ng Pilipinas (KMP), led by Jaime Tadeo, presented their problems
and demands such as:

giving lands for free to farmers

zero retention of lands by landlords

stop amortizations of land payments

Dialogue between the farmers and then Ministry of Agrarian Reform (MAR) began on January
15, 1987

On January 20, 1987, Tadeo met with MAR Minister Heherson Alvarez

Alvarez was only able to promise to do his best to bring the matter to the attention of then
President Cory Aquino during the January 21 Cabinet meeting

Tension mounted the next day

The farmers, on their 7th day of encampment, barricaded the MAR premises and prevented
the employees from going inside their offices

On January 22, 1987, following a heated discussion between Alvarez and Tadeo, Tadeo's
group decided to march to Malacanang to air their demands

On their march to Malacanang, they were joined by Kilusang Mayo Uno (KMU), Bagong
Alyansang Makabayan (BAYAN), League of Filipino Students (LFS), and Kongreso ng
Pagkakaisa ng Maralitang Lungsod (KPML)

Government intelligent reports were also received that the KMP was heavily infliltrated by
CPP/NPA elements, and that an insurrection was impending

Government anti-riot forces assembled at Mendiola

The marchers numbered about 10,000 to 15,000 at around 4:30 pm

From CM Recto, they proceeded toward the police lines. No dialogue took place;
"pandemonium broke loose"

After the clash, 12 marchers were officially confirmed dead (13 according to Tadeo)

39 were wounded by gunshots and 12 sustained minor injuries, all belonging to the group of
marchers

Of the police and military, 3 sustained gunshot wounds and 20 suffered minor physical
injuries

The "Citizens' Mendiola Commission" submitted its report on the incident on February 27,
1987 as follows

The march did not have any permit

The police and military were armed with handguns prohibited by law

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The security men assigned to protect the government units were in civilian attire (prohibited
by law)

There was unnecessary firing by the police and military

The weapons carried by the marchers are prohibited by law

It is not clear who started the firing

The water cannons and tear gas were not put into effective use to disperse the crowd; the
water cannons and fire trucks were not put into operation because:

there was no order to use them

they were incorrectly prepositioned

they were out of range of the marchers

The Commission recommended the criminal prosecution of four unidentified, uniformed

individuals shown either on tape or in pictures, firing at the direction of the marchers

The Commission also recommended that all the commissioned officers of both the Western
Police District (WPD) and Integrated National Police (INP) who were armed be prosecuted for
violation of par. 4(g) of the Public Assembly Act of 1985

Prosecution of the marchers was also recommended

It was also recommended that Tadeo be prosecuted both for holding the rally without permit
and for inciting sedition

Administrative sanctions were recommended for the following officers for their failure to
make effective use of their skill and experience in directing the dispersal operations in
Mendiola:

Gen. Ramon E. Montao

Police Gen. Alfredo S. Lim

Police Gen. Edgar Dula Torres

Police Maj. Demetrio dela Cruz

Col. Cezar Nazareno

Maj. Filemon Gasmin

Last and most important recommendation: for the deceased and wounded victims to be
compensated by the government

It was this portion that petitioners (Caylao group) invoke in their claim for damages from the
government

No concrete form of compensation was received by the victims

On January, 1988, petitioners instituted an action for damages against the Republic of the
Philippines, together with the military officers, and personnel involved in the Mendiola
incident

Solicitor general filed a Motion to Dismiss on the ground that the State cannot be sued
without its consent

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Petitioners said that the State has waived its immunity from suit

Judge Sandoval dismissed the case on the ground that there was no such waiver

Motion for Reconsideration was also denied

Issues:

Whether or not the State has waived its immunity from suit (i.e. Whether or not this is a suit
against the State with its consent)

Petitioners argue that by the recommendation made by the Commission for the government
to indemnify the heirs and victims, and by public addresses made by President Aquino, the
State has consented to be sued

Whether or not the case qualifies as a suit against the State

Holding:

No.

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

No.

Ratio:

Art. XIV, Sec. 3, 1987 Constitution: The State may not be sued without its consent

The recommendations by the Commission does not in any way mean that liability
automatically attaches to the State

The Commission was simply a fact-finding body; its findings shall serve only as cause of
action for litigation; it does not bind the State immediately

President Aquino's speeches are likewise not binding on the State; they are not tantamount
to a waiver by the State

Some instances when a suit against the State is proper:

When the Republic is sued by name;

When the suit is against an unincorporated government agency

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

Although the military officers and personnel were discharging their official functions during
the incident, their functions ceased to be official the moment they exceeded their authority

There was lack of justification by the government forces in the use of firearms.

Their main purpose in the rally was to ensure peace and order, but they fired at the crowd
instead

No reversible error by the respondent Judge found. Petitions dismissed.

Festejo v. Fernando

12 | P a g e
 Festejo v. Fernando

GR No. L-5156 March 11, 1954

Diokno, J.

Facts:

Carmen Festejo, owner of sugar lands, a total of about 9 acres of surface, sued Isaiah Fernando
Director, Bureau of Public Works, as such Director of Public Works is responsible for systems and
irrigation projects and is the official responsible for the construction of irrigation systems in the country,
claiming that the defendant, as Director of the Bureau of Public Works, without Authority Obtained from
the first Court of First Instance of Ilocos Sur, without first Obtaining a right of way, and without the consent
and Knowledge of the plaintiff, and Against her express objection unlawfully Took possession of portions
of the three parcels of land Described Above, an irrigation canal and Caused to be Constructed on the
Portion of the three parcels of land on or about the month of February 1951 Being the aggregate area
24.179 square meters to the damage and prejudice of the plaintiff varied causing her damages.

Issue:

whether the court has no jurisdiction to render judgment against valid, since the claim is in court
against the Republic of the Philippines, and it has not submitted its consent to the application

Held:

No. The motion against Isaias Fernando, Director of Public Works in charge and responsible for
the construction of irrigation systems in the Philippines is a directed personally against him, for acts which
he assumed to run on your official concept. The law does not excuse you from responsibility for the
abuses to commit or have committed in the performance of their official duties.

Merritt vs Government of the Philippine Islands

Political Law Non-Suability of the State Waiver of Non-Suability is Not Admission of Liability

The facts of the case took place in the 1910s. E. Merritt was a constructor who was excellent at his work.
One day, while he was riding his motorcycle along Calle Padre Faura, he was bumped by a government
ambulance. The driver of the ambulance was proven to have been negligent. Because of the incident,
Merritt was hospitalized and he was severely injured beyond rehabilitation so much so that he could never
perform his job the way he used to and that he cannot even earn at least half of what he used to earn.

In order for Merritt to recover damages, he sought to sue the government which later authorized Merritt to
sue the government by virtue of Act 2457 enacted by the legislature (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). The lower court then determined the amount of damages and ordered the
government to pay the same.

ISSUE: Whether or not the government is liable for the negligent act of the driver of the ambulance.

HELD: No. 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. It follows therefrom that the
state, by virtue of such provisions of law, is not responsible for the damages suffered by private

13 | P a g e
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. The State can only be
liable if 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.

In the case at bar, the ambulance driver was not a special agent nor was a government officer acting as a
special agent hence, there can be no liability from the government. The Government 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.

AMIGABLE VS CUENCA

VICTORIA AMIGABLE vs. NICOLAS CUENCA G.R. No. L-26400 February 29, 1972
FACTS: Victoria Amigable is the is the registered owner of a lot which, without prior expropriation
proceedings or negotiated sale, was used by the government. Amigable's counsel wrote the President of
the Philippines requesting payment of the portion of her lot which had been expropriated by the
government.

Amigable later filed a case against Cuenca, the Commissioner of Public Highways, for recovery of
ownership and possession of the said lot. She also sought payment for comlensatory damages, moral
damages and attorney's fees.

The defendant said that the case was premature, barred by prescription, and the government did not give
its consent to be sued.

ISSUE: W/N the appellant may properly sue the government.

HELD: Where the government takes away property from a private landowner for public use without going
through the legal process of expropriation or negotiated sale, the aggrieved party may properly maintain a
suit against the government without violating the doctrine of governmental immunity from suit.

The doctrine of immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen.
The only relief available is for the government to make due compensation which it could and should have
done years ago. To determine just compensation of the land, the basis should be the price or value at the
time of the taking.

VERSION 2 AMICABLE VS CUENCA

Facts:

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No.
R-5977, dismissing the plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad
Estate in Cebu City

At the back of her Transfer Certificate of Title (1924), there was no annotation in favor of the
government of any right or interest in the property.

14 | P a g e
Without prior expropriation or negotiated sale, the government used a portion of said lot,
with an area of 6,167 square meters, for the construction of the Mango and Gorordo
Avenues.

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting
payment of the portion of her lot which had been appropriated by the government. The
claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated
December 9, 1958. A copy of said indorsement was transmitted to Amigable's counsel by
the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended
on April 17, 1959 upon motion of the defendants, against the Republic of the Philippines and
Nicolas Cuenca, in his capacity as Commissioner of Public Highways for the recovery of
ownership and possession of the 6,167 square meters of land traversed by the Mango and
Gorordo Avenues. She also sought the payment of compensatory damages in the sum of
P50,000.00 for the illegal occupation of her land, moral damages in the sum of P25,000.00,
attorney's fees in the sum of P5,000.00 and the costs of the suit.

On July 29, 1959 said court rendered its decision holding that it had no jurisdiction over the
plaintiff's cause of action for the recovery of possession and ownership of the portion of her
lot in question on the ground that the government cannot be sued without its consent; that
it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for
compensatory damages in the sum of P50,000.00, the same being a money claim against
the government; and that the claim for moral damages had long prescribed, nor did it have
jurisdiction over said claim because the government had not given its consent to be sued.
Accordingly, the complaint was dismissed.

Unable to secure a reconsideration, the Amigable appealed to the Court of Appeals, which
subsequently certified the case to Us, there being no question of fact involved.

Issue/s:

WON the Amigable may properly sue the government under the facts of the case

Held: the government is NOT immune to the suit.

WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the
court a quo for the determination of compensation, including attorney's fees, to which the
appellant is entitled as above indicated. No pronouncement as to costs.

Ratio:

Ministerio vs. Court of First Instance of Cebu: where the government takes away property
from a private landowner for public use without going through the legal process of
expropriation or negotiated sale, the aggrieved party may properly maintain a suit against
the government without thereby violating the doctrine of governmental immunity from suit
without its consent

Considering that no annotation in favor of the government appears at the back of her
certificate of title and that she has not executed any deed of conveyance of any portion of
her lot to the government, the appellant remains the owner of the whole lot.

As registered owner, she could bring an action to recover possession of the portion of land in
question at any time because possession is one of the attributes of ownership.

15 | P a g e
However, since restoration of possession of said portion by the government is neither
convenient nor feasible at this time because it is now and has been used for road purposes,
the only relief available is for the government to make due compensation which it could and
should have done years ago. To determine the due compensation for the land, the basis
should be the price or value thereof at the time of the taking

the plaintiff is entitled thereto in the form of legal interest on the price of the land from the
time it was taken up to the time that payment is made by the government.

the government should pay for attorney's fees, the amount of which should be fixed by the
trial court after hearing.

US v. Ruiz

Facts:

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.

US invited the submission of bids for Repair offender system and Repair typhoon damages.
Eligio de Guzman & Co., Inc. responded to the invitation, submitted bids and complied with
the requests based on the letters received from the US.

In June 1972, a letter was received by the Eligio De Guzman & Co indicating 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 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.

Issue/s:

16 | P a g e
WON the US naval base in bidding for said contracts exercise governmental
functions to be able to invoke state immunity

Held:

WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set
aside and Civil Case No. is dismissed. Costs against the private respondent.

Ratio:

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

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.

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

REPUBLIC VS. VILLASOR, ET AL.

REPUBLIC VS. VILLASOR, ET AL.

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

Facts: On July 7, 1969, a decision was rendered in Special Proceedings No. 2156-R in favor
of respondents P.J. Kiener Co., Ltd., Gavino Unchuan, and International Construction
Corporation and against petitioner confirming the arbitration award in the amount of
P1,712,396.40.The award is for the satisfaction of a judgment against the Phlippine
Government. On June 24, 1969, respondent Honorable Guillermo Villasor issued an Order
declaring the decision final and executory. Villasor directed the Sheriffs of Riza lProvince,
Quezon City as well as Manila to execute said decision. The Provincial Sheriff of Rizal served
Notices of Garnishment with several Banks, specially on Philippine Veterans Bank and PNB.
The funds of the Armed Forces of the Philippines on deposit with Philippine Veterans Bank
andPNB are public funds duly appropriated and allocated for the payment of pensions of
retirees, pay and allowances of military and civilian personnel and for maintenance and
operations of the AFP. Petitioner, on certiorari, filed prohibition proceedings against
respondent Judge Villasor for acting in excess of jurisdiction with grave abuse of discretion

17 | P a g e
amounting to lack of jurisdiction in granting the issuance of a Writ of Execution against the
properties of the AFP, hence the notices and garnishment are null and void.

Issue: Is the Writ of Execution issued by Judge Villasor valid?

Held: What was done by respondent Judge is not in conformity with the dictates of the
Constitution. It is a fundamental postulate of constitutionalism flowing from the juristic
concept of sovereignty that the state as well as its government is immune from
suit unless it gives its consent. A sovereign is exempt from suit, not because of
any formal conception or obsolete theory, but on the logical and practical ground
that there can be no legal right as against the authority that makes the law on
which the right depends. The State may not be sued without its consent. A corollary, both
dictated by logic and sound sense from a basic concept is that public funds cannot be the
object of a garnishment proceeding even if the consent to be sued had been previously
granted and the state liability adjudged. The universal rule that where the State gives its
consent to be sued by private parties either by general or special law, it may limit claimants
action only up to the completion of proceedings anterior to the stage of execution and that
the power of the Courts ends when the judgment is rendered, since the government funds
and properties may not be seized under writs of execution or garnishment to satisfy such
judgments, is based on obvious sconsiderations of public policy. Disbursements of public
funds must be covered by the corresponding appropriation as required by law. The functions
and public services rendered by the State cannot be allowed to be paralyzed or disrupted by
the diversion of public funds from their legitimate and specific objects, as appropriated by
law.

Department of Agriculture vs. NLRC G.R. No. 104269, November 11, 1993

Facts: Petitioner Department of Agriculture (DA) and Sultan Security Agency entered into a
contract for security services to be provided by the latter to the said governmental entity.
Pursuant to their arrangements, guards were deployed by Sultan Security Agency in the
various premises of the DA. Thereafter, several guards filed a complaint for underpayment
of wages, nonpayment of 13th month pay, uniform allowances, night shift differential pay,
holiday pay, and overtime pay, as well as for damages against the DA and the security
agency.

The Labor Arbiter rendered a decision finding the DA jointly and severally liable with the
security agency for the payment of money claims of the complainant security guards. The
DA and the security agency did not appeal the decision. Thus, the decision became final and
executory. The Labor Arbiter issued a writ of execution to enforce and execute the judgment
against the property of the DA and the security agency. Thereafter, the City Sheriff levied on
execution the motor vehicles of the DA.

Issue: Whether or not the doctrine of non-suability of the State applies in the case

Held: The basic postulate enshrined in the Constitution that the State may not be sued
without its consent reflects nothing less than a recognition of the sovereign character of the
State and an express affirmation of the unwritten rule effectively insulating it from the
jurisdiction of courts. It is based on the very essence of sovereignty. A sovereign is exempt
from suit based on the logical and practical ground that there can be no legal right as
against the authority that makes the law on which the right depends.

18 | P a g e
The rule is not really absolute for it does not say that the State may not be sued under any
circumstances. The State may at times be sued. The States consent may be given expressly
or impliedly. Express consent may be made through a general law or a special law. Implied
consent, on the other hand, is conceded when the State itself commences litigation, thus
opening itself to a counterclaim, or when it enters into a contract. In this situation, the
government is deemed to have descended to the level of the other contracting party and to
have divested itself of its sovereign immunity.

But not all contracts entered into by the government operate as a waiver of its non-
suability; distinction must still be made between one which is executed in the exercise of its
sovereign function and another which is done in its proprietary capacity. A State may be
said to have descended to the level of an individual and can this be deemed to have actually
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 the case, the DA has not pretended to have assumed a capacity apart from its being a
governmental entity when it entered into the questioned contract; nor that it could have, in
fact, performed any act proprietary in character.

But, be that as it may, the claims of the complainant security guards clearly constitute
money claims. Act No. 3083 gives the consent of the State to be sued upon any moneyed
claim involving liability arising from contract, express or implied. Pursuant, however, to
Commonwealth Act 327, as amended by PD 1145, the money claim must first be brought to
the Commission on Audit.

Philippine National Bank vs Judge Javier Pabalan

FACTS: On December 17, 1970, Judge Javier Pabalan issued a writ of execution followed thereafter by a
notice of garnishment on the funds of Philippine Virginia Tobacco Administration (PVTA) in the sum of
P12,724.66 deposited with the Philippine National Bank in La Union. PNB La Union filed an administrative
complaint against Pabalan for grave abuse of discretion, alleging that the latter failed to recognize that the
questioned funds are of public character and therefore may not be garnished, attached, nor may be levied
upon. The PNB La Union Branch invoked the doctrine of non suability, putting a bar on the notice of
garnishment.

ISSUE: Whether or not PNB may be sued.

HELD: Yes. Funds of public corporations which can sue and be sued are not exempt from garnishment.
PVTA is also a public corporation with the same attributes, a similar outcome is attributed. The
government has entered with them into a commercial business hence it has abandoned its sovereign
capacity and has stepped down to the level of a corporation. Therefore, it is subject to rules governing
ordinary corporations and in effect can be sued. Therefore, the petition of PNB La Union is denied.

VERSION 2

PNB vs Pabalan
Facts:
Judge Javier Pabalan issued a writ of execution on December 17, 1970. It was followed
thereafter by a notice of garnishment on the funds of respondent Philippine Virginia Tobacco
Administration for the sum of P12,724.66. This amount was said to belong to Philippine

19 | P a g e
Virginia Tobacco Administration and was deposited with the Philippine National Bank (PNB)
La Union branch. On January 25, 1971, it is ordered that Philippine Virginia Tobacco
Administration funds deposited with PNB 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. PNB invoked the doctrine of non-suability in behalf of
Philippine Virginia Tobacco Administration. PNB claims that since fund is public in character,
a prohibition must be issued against Pabalans order.

Issue:
Whether or not funds are public in character, thus immune from suit.

Held:
No. Petition dismissed. 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.

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. 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.

GAUDENCIO RAYO vs. COURT OF FIRST INSTANCE OF BULACAN G.R. No. L-55273-83 December
19, 1981
FACTS: At the height of the infamous typhoon "Kading", the respondent opened simultaneously all the
three floodgates of the Angat Dam which resulted in a sudden, precipitate and simultaneous opening of
said floodgates several towns in Bulacan were inundated. The petitioners filed for damages against the
respondent corporation.

Petitioners opposed the prayer of the respondents forn dismissal of the case and contended that the
respondent corporation is merely performing a propriety functions and that under its own organic act, it
can sue and be sued in court.

ISSUE: W/N the respondent performs governmental functions with respect to the management and
operation of the Angat Dam.

W/N the power of the respondent to sue and be sued under its organic charter includes the power to be
sued for tort.

HELD: The government has organized a private corporation, put money in it and has allowed it to sue
and be sued in any court under its charter.

As a government owned and controlled corporation, it has a personality of its own, distinct and separate
from that of the government. Moreover, the charter provision that it can sue and be sued in any court.

VERSION 2 RAYO VS CFI

RAYO vs. CFI of BULACAN

Facts:

1. During the height of typhoon Kading, the National Power Corporations plant superintendent
Chavez opened simultaneously all the three floodgates of the Angat Dam.

20 | P a g e
 2. As a direct and immediate result, several towns in Bulacan were flooded (particularly
Norzagaray). About a hundred of its residents died and properties worth million of pesos were
destroyed.
3. The petitioners, who are among the unfortunate victims of the man-caused flood, filed several
complaints for damages against NPC and the plant superintendent.
4. NPC claimed, as its defense, that in the operation of the Angat Dam, it is performing a purely
governmental function. Thus, it cannot be sued without the express consent of the State.
5. The petitioners opposed the claim of NPC and claimed that it is performing not governmental but
merely proprietary functions and that based on the organic charter (charter - a legal document
that provides for the creation of a corporate entity) of NPC, it can be sued and be sued in any
court.
Issue: Whether or not the power of NPC to sue and be sued under its organic charter includes the power
to be sued for tort.

Held: The government has organized a private corporation, put money in it and has allowed it to sue and
be sued in any court under its charter. NPC, as a government owned and controlled corporation, has a
personality of its own, distinct and separate from that of the Government. In any court, NPC can sue and
be sued for tort. The petition of the petitioners was granted.

Notes:

Government-owned and controlled corporations have a personality of their own, separate and distinct
from the government. Therefore, although they are considered to be public in character, they are not
exempt from garnishment (legal proceedings).

Sps. Ramos discovered that a portion of their land (somewhere in Baguio) was being used as part of the
runway and running shoulder of the Loakan Airport which is operated by ATO. Sometime in 1995,
respondents agreed to convey the subject portion by deed of sale to ATO in consideration of the amount
of Php778,150.00. However, ATO failed to pay despite repeated verbal and written demands. Thus, an
action for collection against ATO was filed by the respondents before the RTC. ATOs primary contention
was that the deed of sale was entered into the performance of governmental functions. RTC ruled in favor
of the respondents. CA affirmed RTC. Hence, the petition.

Issue/s
Whether ATO could be sued without the States consent.
Ruling/s

SC dismissed the petition for lack of merit.

The States immunity from suit does not extend to the petitioner (ATO) because it is an agency of the
State engaged in an enterprise that is far from being the States exclusive prerogative. The CA thereby
correctly appreciated the juridical character of the ATO as an agency of the Government not
performing a purely governmental or sovereign function, but was instead involved in the
management and maintenance of the Loakan Airport, an activity that was not the exclusive
prerogative of the State in its sovereign capacity. Hence, the ATO had no claim to the States
immunity from suit. The SC further observes that the doctrine of sovereign immunity cannot be
successfully invoked to defeat a valid claim for compensation arising from the taking without just
compensation and without the proper expropriation proceedings being first resorted to of the plaintiffs
property.

21 | P a g e
Lastly, the issue of whether or not the ATO could be sued without the States consent has been
rendered moot by the passage of Republic Act No. 9497, otherwise known as the Civil Aviation
Authority Act of 2008. R.A. No. 9497 abolished the ATO and u nder its Transitory Provisions, R.A.
No. 9497 established in place of the ATO the Civil Aviation Authority of the Philippines (CAAP),
which thereby assumed all of the ATOs powers, duties and rights, assets, real and personal
properties, funds, and revenues. Section 23 of R.A. No. 9497 enumerates the corporate powers
vested in the CAAP, including the power to sue and be sued, to enter into contracts of every class,
kind and description, to construct, acquire, own, hold, operate, maintain, administer and lease
personal and real properties, and to settle, under such terms and conditions most advantageous
to it, any claim by or against it. With the CAAP having legally succeeded the ATO pursuant to R.A.
No. 9497, the obligations that the ATO had incurred by virtue of the deed of sale with the Ramos
spouses might now be enforced against the CAAP.

NHMFC VS ABAYARI

Clearly, the matter of allowing or disallowing a money claim against petitioner is within the primary power
of the COA to decide. This no doubt includes money claims arising from the implementation of R.A. No.
6758. Respondents claim against petitioner, although it has already been validated by the trial courts
final decision, likewise belongs to that class of claims; hence, it must first be filed with the COA before
execution could proceed. And from the decision therein, the aggrieved party is afforded a remedy by
elevating the matter to this Court via a petition for certiorari in accordance with Section 1 Rule XI, of the
COA Rules of Procedure.

NHMFC v ABAYARI

Petitioner, the National Home Mortgage Finance Corporation (NHMFC), is a government-owned and
controlled corporation created under the authority of Presidential Decree No. 1267 for the primary
purpose of developing and providing a secondary market for home mortgages granted by public and/or
private home-financing institutions. 6 In its employ were respondents,7 mostly rank-and-file employees,
who all profess as having been hired after June 30, 1989. 8

On July 1, 1989, Republic Act No. 6758, otherwise known as The Compensation and Position
Classification Act of 1989, was enacted and was subsequently approved on August 21, 1989. Section 12
thereof directed that all allowances namely representation and transportation allowance, clothing and
laundry allowance, subsistence allowance, hazard pay and other allowances as may be determined by
the budget department enjoyed by covered employees should be deemed included in the standardized
salary rates prescribed therein, and that the other additional compensation being received by incumbents
only as of July 1, 1989 not integrated into the standardized salary rates should continue to be authorized.
To implement the law, the Department of Budget and Management (DBM) issued Corporate
Compensation Circular No. 10.9 Section 5.510 thereof excluded certain allowances and benefits from
integration into the standardized basic salary but continued their grant to those who were incumbents as
of June 30, 1989 and who were actually receiving the benefits as of said date. These are the allowances
involved in this case.

Respondents filed a petition for mandamus with the RTC of Makati City, Branch 138 11 to compel petitioner
to pay them meal, rice, medical, dental, optical and childrens allowances, as well as longevity pay, which
allegedly were already being enjoyed by other NHMFC employees as early as July 1, 1989. In its April 27,

22 | P a g e
2001 Decision, the trial court ruled favorably and ordered petitioner to pay respondents the allowances
prayed for, retroactive to the respective dates of appointment.

Conflict arose when the DBM sent a letter 20 dated July 15, 2003 to NHMFC President Angelico Salud
disallowing the payment of certain allowances, including those awarded by the trial court to respondents.
A reading of the letter reveals that the disallowance was made in accordance with the 2002 NHMFC
Corporate Operating Budget previously issued by the DBM.

To abide by the DBMs directive, petitioner then issued a memorandum stating that effective August 2003,
the grant of benefits to its covered employees, including those awarded to respondents, would be
curtailed pursuant to the DBM letter.21 This eventuality compelled respondents to file for the second time a
motion for a writ of execution of the trial courts April 27, 2001 decision. 22

In its October 14, 2003 Order,23 the trial court found merit in respondents motion; hence, it directed the
execution of the judgment. Petitioner moved for reconsideration 24 but it was denied.25 On February 16,
2004, the trial court issued a Writ of Execution/Garnishment with a directive to the sheriff to tender to
respondents the amount of their collective claim equivalent to P4,806,530.00 to be satisfied out of
petitioners goods and chattels and if the same be not sufficient, out of its existing real
property.26 Respondents then sought the garnishment of its funds under the custody of the Land Bank of
the Philippines.27

Bent on preventing execution, petitioner filed a petition for certiorari with the Court of Appeals, In it,
petitioner ascribed grave abuse of discretion to the trial court in ordering the execution of the judgment. It
pointed out that the trial court disregarded the fact that the DBMs issuance amounted to a supervening
event, or an occurrence that changed the situation of the parties that would make the continued payment
of allowances to respondents impossible and illegal, and disregarded the DBMs exclusive authority to
allow or disallow the payment of the benefits in question. 29 It likewise faulted the trial court in ordering
the garnishment of its funds despite the settled rule that government funds may not be garnished
in the absence of an appropriation made by law.301avvphi1

The Court of Appeals, however, found no grave abuse of discretion on the part of the trial court; hence, in
its August 20, 2004 Decision, it dismissed the petition for lack of merit. 31

SC:

Be that as it may, assuming for the sake of argument that execution by garnishment could proceed in this
case against the funds of petitioner, it must bear stress that the latter is a government-owned or
controlled corporation with a charter of its own. Its juridical personality is separate and distinct
from the government and it can sue and be sued in its name. 41 As such, while indeed it cannot
evade the effects of the execution of an adverse judgment and may not ordinarily place its funds
beyond an order of garnishment issued in ordinary cases,42 it is imperative in order for execution
to ensue that a claim for the payment of the judgment award be first filed with the Commission on
Audit (COA).43

Under Commonwealth Act No. 327,44 as amended by P.D. No. 1445,45 the COA, as one of the three
independent constitutional commissions, is specifically vested with the power, authority and duty to
examine, audit and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses
of funds and property owned or held in trust by the government, or any of its subdivisions, agencies or
instrumentalities, including government-owned and controlled corporations. 46 To ensure the effective
discharge of its functions, it is vested with ample powers, subject to constitutional limitations, to define the
scope of its audit and examination and establish the techniques and methods required therefor, to
promulgate accounting and auditing rules and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures or uses of

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government funds and properties.47 Section 1,48 Rule II of the COA Rules of Procedure materially
provides:

Section 1. General Jurisdiction.The Commission on Audit shall have the power, authority and
duty to examine, audit and settle all accounts pertaining to the revenue and receipts of, and expenditures
or uses of funds and property, owned or held in trust by, or pertaining to the Government, or any of its
subdivisions, agencies or instrumentalities, including government owned and controlled corporations with
original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have
been granted fiscal autonomy under the Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity directly or indirectly, from or through the government,
which are required by law or the granting institution to submit to such audit as a condition of subsidy or
equity. However, where the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special pre-audit, as are necessary or
appropriate to correct the deficiencies. It shall keep the general accounts of the Government, and for such
period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.

the matter of allowing or disallowing a money claim against petitioner is within the primary power of the
COA to decide. This no doubt includes money claims arising from the implementation of R.A. No.
6758.50Respondents claim against petitioner, although it has already been validated by the trial courts
final decision, likewise belongs to that class of claims; hence, it must first be filed with the COA before
execution could proceed. And from the decision therein, the aggrieved party is afforded a remedy by
elevating the matter to this Court via a petition for certiorari 51 in accordance with Section 1 Rule XI, of the
COA Rules of Procedure. It states:

MOBIL PHILIPPINES EXPLORATION VS. CUSTOMS ARRASTRE SERVICE

18 SCRA 1120

FACTS: Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville",
consigned to Mobil Philippines Exploration, Inc., Manila. The shipment 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.

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.

Defendants filed a motion to dismiss the complaint on the ground that not being persons
under the law, defendants cannot be sued.

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.

ISSUE: Whether or not the defendants can invoke state immunity.

HELD: 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.

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The Bureau of Customs, to repeat, is part of the Department of Finance, 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.

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.

GSIS vs GROUP MANAGEMENT CORP. et. al. (JUNE 8, 2011)

FACTS: This case revolves around the petitions of the Lapu-Lapu Development & Housing Corporation
(LLDHC), Group Management Corporation (GMC) and the Government Service Insurance System (GSIS).
The three entities consistently filed cases for the same subject lots from April 30, 1980, until this case.
The cases were filed before both the RTC of Lapu-Lapu City, where the subject lots are situated in, and
the RTC of Manila.

LLDHC entered into a Project and Loan Agreement with GSIS on February 4, 1974, involving seventy-
eight lots situated in Barrio, Marigondon, Lapu-Lapu City. GSIS agreed to a 25 million peso loan with
LLDHC, the owner of the lots. LLDHC failed to fulfill all of its obligations regarding the lots, which
included the real estate mortgage in favor of GSIS, and so, GSIS closed the mortgage. Being the only
bidder in the public auction sale, GSIS won over the subject lots, and in time secured its ownership over
the lots with the transfer certificate of titles issued to its name. GMC offered to purchase on installment
the subject lots with a collective area specified as 423,177 square meters from GSIS, with the amount of
1,100,000 pesos. GSIS accepted the offer through a Deed of Conditional Sale on February 26, 1980. GMC
then learned that the subject lots was only 298,504 square meters and requested GSIS to reduce the
price according to the actual proportion of the land. This proposal was approved with an Amendment to
the Deed of Conditional Sale, which reflected the agreement of GSIS and GMC. LLDHC filed a complaint
against GSIS before the RTC of Manila on April 23, 1980 for Foreclosure with Writ of Mandatory
Injunction, known as Civil Case No. R-82-3429. GMC filed a complaint also against GSIS on November 3,
1989, known as Civil Case No. 2203-L, for Specific Performance with Damages before the RTC of Lapu-
Lapu City. GSIS, in its defense, submitted a COA Memorandum dated April 3, 1989 disallowing in audit
the sale of the subject to the court, stating that there were apparent inherent irregularities, and that
GMC bought the property at a value much lower than GSIS purchasing price.

On February 24, 1992, with regard to Civil Case No. 2203-L, the RTC of Lapu-Lapu City decided in favor
of GMC, and that GSIS was to execute order of the court pertaining to damages, and actions needed to
finalize the deed of absolute sale with GMC. On May 10, 1994, the RTC of Manila also rendered its
judgment that, aside from court orders, all claims and counterclaims by the parties against each other
are dismissed in Civil Case No. R-82-3429. LLDHC now used the Manila RTC decision as a means to file a
Petition for Annulment of Judgment of the Lapu-Lapu RTC Decision in Civil Case No. 2203-L, named CA-
GR SP No. 34696, which was dismissed by the Court of Appeals. After this was a series of filing petitions
to appeal the judgment. Throughout the years, eventually, the three parties approached the Supreme
Court, where, in G.R. No. 167000, GSIS seeks to reverse and set aside the decision made on November
25, 2004 and January 20, 2005, and to annul and set aside the March 1, 2004 and May 7 2004 orders
from the Lapu-Lapu RTC in Civil Case No. 2203-L. And in G.R. No. 169971, GMC seeks to reverse and set

25 | P a g e
aside the Decision made in September 23, 2005 and to annul and set aside the March 11, 2004 Lapu-
Lapu RTC decision.

Issues: Whether or not the decisions of the Manila RTC in Civil Case No. R-82-3429 shall be executory,
despite the decision of Lapu-Lapu RTC in Civil Case No. 2203-L. Whether or not the decision in CA GR SP
No. 84382 and GSIS Petition in 167000 are barred by Res Judicata. Whether or not due process was
given to the parties/entities involved in the case. Whether or not GSIS can be immune to acting out the
orders of the court.

Ruling: The petition in G.R. No. 167000 was denied by the court, and the petition in G.R. No. 169971 is
granted.

Ratio Decidendi: The decision of the Lapu-Lapu RTC in Civil Case No. 2203-L does not in any way affect
the orders from the Manila RTC in Civil Case No. R-82-3429, since the former has been finalized on
January 28, 1995, while the latter became final on May 30, 1997. Procedural due process was extended
to all parties, that there was no immediate dismissal of their cases before they were heard by the
respective courts, even if they have already had a rendered decision. However, the Supreme Court also
recognized the doctrine of Finality of Judgment, where the decisions, once final and executed cannot
be appealed, unless of circumstances that happen after the finalization, void judgments, correction of
clerical errors and nunc pro tunc entries. The decision in CA GR SP No. 84382 and GSIS Petition in
167000 are barred by Res Judicata, which is one of the reasons why G.R. No. 167000 was denied. GSIS
acted jure gestonis, entering into a contract, and being solely liable for their irresponsibility. They are
not immune from acting out the orders of the court.

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