CHARLENE M.

GALENZOGA

Topic: Basis of Sovereign Immunity

Republic v. Villasor

Facts:
A decision was rendered in favor of respondents P. J. Kiener Co., Ltd., Gavino Unchuan,
and International Construction Corporation, and against the petitioner herein, confirming the
arbitration award in the amount of P1,712,396.40. Respondent Honorable Guillermo P. Villasor,
issued an order declaring the aforestated decision final and executory, directing the Sheriffs of
Rizal Province, Quezon City as well as Manila to execute the said decision. Pursuant to the said
order, the corresponding Alias Writ of Execution was issued. On the strength of the afore-
mentioned Alias Writ of Execution, the Provincial Sheriff of Rizal served notices of garnishment
dated June 28, 1969 with several Banks, specially on the monies due the Armed Forces of the
Philippines in the form of deposits sufficient to cover the amount mentioned in the said Writ of
Execution; the Philippine Veterans Bank received the same notice of garnishment on June 30,
1969. The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly,
with the Philippine Veterans Bank and the Philippine National Bank or their branches are public
funds duly appropriated and allocated for the payment of pensions of retirees, pay and
allowances of military and civilian personnel and for maintenance and operations of the Armed
Forces of the Philippines. It was alleged that respondent Judge, Honorable Guillermo P. Villasor,
acted in excess of jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction
in granting the issuance of an alias writ of execution against the properties of the Armed Forces
of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued
pursuant thereto are null and void.

Issue:
Whether or not the Writ of Execution issued by Judge Villasor for the
garnishment of AFP Funds is valid.
 CHARLENE M. GALENZOGA

Ruling:
No the Writ of Execution was not valid.
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. . In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of
any formal conception or obsolete theory, but on the logical and practical ground that there
can be no legal right as against the authority that makes the law on which the right depends.
In the recent case of Commissioner of Public Highways v. San Diego, such a well-settled
doctrine was restated in the opinion of Justice Teehankee: "The universal rule that where the
State gives its consent to be sued by private parties either by general or special law, it may limit
claimant's action `only up to the completion of proceedings anterior to the stage of execution'
and that the power of the Courts ends when the judgment is rendered, since government funds
and properties may not be seized under writs of execution or garnishment to satisfy such
judgments, is based on obvious considerations of public policy. Disbursements of public funds
must be covered by the corresponding appropriation as required by law. The functions and
public services rendered by the State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific objects, as appropriated by law."
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity

Wenceslao Vinzons Tan vs Director of Forestry G.R. No. L-24548. October 27, 1983.

Facts:
Sometime in April 1961, the Bureau of Forestry issued notice advertising for public
bidding a certain tract of public forest land situated in Olongapo, Zambales consisting of 6,420
hectares, within the former U.S. Naval Reservation comprising 7,252 hectares of timberland,
which was turned over by the US Government to the Philippine Government. Wenceslao Tan
with nine others submitted their application in due form.
The area was granted to the petitioner. On May 30, 1963, Secretary Gozon of Agriculture and
Natural Resources issued a general memorandum order authorizing Dir. Of Forestry to grant
new Ordinary Timber Licenses (OTL) subject to some conditions stated therein (not exceeding
3000 hectares for new OTL and not exceeding 5000 hectares for extension)
Thereafter, Acting Secretary of Agriculture and Natural Resources Feliciano (replacing Gozon)
promulgated on December 19, 1963 a memorandum revoking the authority delegated to the
Director of Forestry to grant ordinary timber licenses. On the same date, OTL in the name of
Tan, was signed by then Acting Director of Forestry, without the approval of the Secretary of
Agriculture and Natural Resources. On January 6, 1964, the license was released by the Director
of Forestry .
Ravago Commercial Company wrote a letter to the Secretary of ANR praying that the OTL of
Tan be revoked. On March 9, 1964, The Secretary of ANR declared Tans OTL null and void (but
the same was not granted to Ravago). Petitioner-appellant moved for a reconsideration of the
order, but the Secretary of Agriculture and Natural Resources denied the motion.

ISSUES:
I. Whether or not petitioners timber license is valid (No)
II. Whether or not petitioner had exhausted administrative remedies available (No)
 CHARLENE M. GALENZOGA

RULING:
I
Petitioners timber license was signed and released without authority and is therefore void ab
initio. In the first place, in the general memorandum dated May 30, 1963, the Director of
Forestry was authorized to grant a new ordinary timber license only where the area covered
thereby was not more than 3,000 hectares; the tract of public forest awarded to the petitioner
contained 6,420 hectares In the second place, at the time it was released to the petitioner, the
Acting Director of Forestry had no more authority to grant any license. (The license was
released to the petitioner on January 6, 1964 while on the other hand, the authority of the
Director of Forestry to issue license was revoked on December 19, 1963). In view thereof, the
Director of Forestry had no longer any authority to release the license on January 6, 1964, and
said license is therefore void ab initio. What is of greatest importance is the date of the release
or issuance. Before its release, no right is acquired by the licensee.

Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-

appellees can validly revoke his timber license. "A license is merely a permit or privilege to do
what otherwise would be unlawful, and is not a contract between the authority, federal, state,
or municipal, granting it and the person to whom it is granted; neither is it property or a
property right, nor does it create a vested right; nor is it taxation

The welfare of the people is thesupreme law. Thus, no franchise or right can be availed of to
defeat the proper exercise of police power.
II

Petitioner did not exhaust administrative remedy in this case. He did not appeal the order of
the respondent Secretary of Agriculture and Natural Resources to the President of the
Philippines. Considering that the President has the power to review on appeal the orders or
acts of the respondents, the failure of the petitioner-appellant to take that appeal is failure on
his part to exhaust his administrative remedies.
 CHARLENE M. GALENZOGA

Topic: Doctrine of Non-Suability; States cannot be sued without its consent

Republic of the Philippines vs Pablo Feliciano G.R. No. 70853. March 12, 1987

Facts:
The appeal was filed by 86 settlers of Barrio of Salvacion, representing the Republic of
the Philippines to dismiss the complaint filed by Feliciano, on the ground that the Republic of
the Philippines cannot be sued without its consent.
Prior to this appeal, respondent Pablo Feliciano filed a complaint with the Court of First
Instance against the Republic of the Philippines, represented by the Land Authority, for the
recovery of ownership and possession of a parcel of land consisting of four lots. The trial court
rendered a decision declaring Lot No. 1 to be the private property of Feliciano and the rest of
the property, Lots 2, 3 and 4, reverted to the public domain.
The trial court reopened the case due to the filing of a motion to intervene and to set
aside the decision of the trial court by 86 settlers, alleging that they had been in possession of
the land for more than 20 years under claim of ownership. The trial court ordered the settlers
to present their evidence but they did not appear at the day of presentation of evidence.
Feliciano, on the other hand, presented additional evidence. Thereafter, the case was
submitted for decision and the trial court ruled in favor of Feliciano.
The settlers immediately filed a motion for reconsideration. The case was reopened to
allow them to present their evidence. But before this motion was acted upon, Feliciano filed a
motion for execution with the Appellate Court but it was denied.
The settlers filed a motion to dismiss on the ground that the Republic of the Philippines
cannot be sued without its consent and hence the action cannot prosper. The motion was
opposed by Feliciano.
Private respondent contends that the consent of petitioner may be read from the
Proclamation itself, when it established the reservation "subject to private rights, if any there
be."
 CHARLENE M. GALENZOGA

Issue:
Whether or not the state can be sued for recovery and possession of a parcel of land.

Ruling:
No.
A suit against the State, under settled jurisprudence is not permitted, except upon a
showing that the State has consented to be sued, either expressly or by implication through the
use of statutory language too plain to be misinterpreted. It may be invoked by the courts sua
sponte at any stage of the proceedings.

Waiver of immunity, being a derogation of sovereignty, will not be inferred lightly. but
must be construed in strictissimi juris (of strictest right). Moreover, the Proclamation is not a
legislative act. The consent of the State to be sued must emanate from statutory authority.
Waiver of State immunity can only be made by an act of the legislative body.
The doctrine of non-suability of the State has proper application in this case. The
plaintiff has impleaded the Republic of the Philippines as defendant in an action for recovery of
ownership and possession of a parcel of land, bringing the State to court just like any private
person who is claimed to be usurping a piece of property. A suit for the recovery of property is
not an action in rem, but an action in personam. It is an action directed against a specific party
or parties, and any judgment therein binds only such party or parties. The complaint filed by
plaintiff, the private respondent herein, is directed against the Republic of the Philippines,
represented by the Land Authority, a governmental agency created by Republic Act No. 3844.
 CHARLENE M. GALENZOGA

Topic: Doctrine of Non-Suability; States cannot be sued without its consent

Philippine National Bank vs Judge Javier Pabalan G.R. No. L-33112. June 15, 1978

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 Philippine National Bank may be sued.

Ruling:
Supreme Court ruled in the affirmative.
The doctrine of non-suability cannot be legally set forth as a bar or impediment to a
notice of garnishment. In National Shipyard and Steel Corporation v. Court of Industrial
Relations, 118 Phil. 782 (1963), it was explicitly stated: "That 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.)"
 CHARLENE M. GALENZOGA

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. (Manila Hotel Employees Association v. Manila Hotel Company, 73 Phil.
374).
 CHARLENE M. GALENZOGA

Topic: Doctrine of Non-Suability; States cannot be sued without its consent.

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.

Ruling:
No. the Doctrine of Non-suability does not apply to this case.
In the instant case, the Department of Agriculture has not pretended to have assumed a
capacity apart from its being a governmental entity when it entered into the contract on
security services; nor that it could have, in fact, performed any act proprietary in character. But,
be that as it may, the claims of private respondents, i.e., for underpayment of wages, holiday
pay, overtime pay and similar other items, arising from the Contract for Security Services,
 CHARLENE M. GALENZOGA

clearly constitute money claims. Act No. 3083, aforecited, gives the consent of the State to be
"sued upon any moneyed claim involving liability arising from contract, express or implied, . . ."
The basic postulate enshrined in the constitution that "(t)he State may not be sued without its
consent," reflects nothing less than a recognition of the sovereign character of the State and an
express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts.
It is based on the very essence of sovereignty. As has been aptly observed, by Justice Holmes, a
sovereign is exempt from suit, not because ofany formal conception or obsolete theory, but on
the logical and practical ground that there can be no legal right as against the authority that
makes the law on which the right depends. True, the doctrine, not too infrequently, is derisively
called "the royal prerogative of dishonesty" because it grants the state the prerogative to
defeat any legitimate claim against it by simply invoking its non-suability. We have had occasion
to explain in its defense, however, that a continued adherence to the doctrineof non-suability
cannot be deplored, for the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions would be far greater in severity than the
inconvenience that may be caused private parties, if such fundamental principle is to be
abandoned and the availability of judicial remedy is not to be accordingly restricted.
The rule, in any case, is not really absolute for it does not say that the state may not be
sued under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys,
"the state may not be sued without its consent"; its clear import then is that the State may at
times be sued. The States' consent may be given either expressly or impliedly. Express consent
may be made through a general law or a special law. In this jurisdiction, the general law waiving
the immunity of the state from suit is found in Act No. 3083, where the Philippine government
"consents and submits to be sued upon any money claim involving liability arising from
contract, express or implied, which could serve as a basis of civil action between private
parties." 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.
 CHARLENE M. GALENZOGA

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. 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 contracts 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. (United
States of America vs. Ruiz, 136 SCRA 487).
When the State gives its consent to be sued, it does not thereby necessarily consent to
an unrestrained execution against it. Tersely put, when the State waives its immunity, all it
does, in effect, is to give the other party an opportunity to prove, if it can, that the State has a
liability. In Republic vs. Villasor this Court, in nullifying the issuance of an alias writ of execution
directed against the funds of the Armed Forces of the Philippines to satisfy a final and
executory judgment, has explained, thus The universal rule that where the State gives its
consent to be sued by private parties either by general or special law, it may limit claimant's
action "only up to the completion of proceedings anterior to the stage of execution" and that
the power of the Courts ends when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or garnishment to satisfy such
judgments, is based on obvious considerations of public policy. Disbursements of public funds
must be covered by the correspondent 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.
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
 CHARLENE M. GALENZOGA

Commonwealth Act 327, as amended by PD 1145, the money claim must first be brought to the
Commission on Audit.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Suit against Unincorporated Government Agency

Mobile Phil. Inc. vs Arrastre Custom Service G.R. No. L-23139. December 17, 1966.

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
CustomsArrastre 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.

Ruling:
Yes, Bureau of Customs is immune from suit.
The Bureau of Customs 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, Republic Act No.
1937). To this function, arrastre service is a necessary incident. For practical reasons said
revenues and customs duties cannot 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
 CHARLENE M. GALENZOGA

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.
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 with the
General Auditing Office, it being for money, under the provisions of Commonwealth Act No.
327, which state the conditions under which money claims against the Government may be
filed.
Statutory provisions waiving State immunity from suit are strictly construed and waiver
of immunity, being in derogation of sovereignty, will not be lightly inferred (49 Am. Jur., States,
Territories and Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com, 359
U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785).
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.
Neither the Bureau of Customs (a fortiori) nor 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, Rev. Adm. Code); and 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. It follows that defendants herein cannot
be sued under the first two above-mentioned categories of natural or juridical persons.
The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937
(Tariff and Customs Code, effective June 1, 1957). The 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 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
 CHARLENE M. GALENZOGA

sovereign immunity from suit extended to such government entity (Bureau of Printing, et al.,
vs. Bureau of Printing Employees Association, et al., G.R. No. L-15751, January 28, 1961).
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.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Suit against GOCC / Incorporated Agency

National Airports Corporation vs. Jose Teodoro Sr., as Judge of the Court of First Instance of
Negros Occidental and Philippine Airlines Inc.
G.R. No. L-5122. April 30, 1952.

Facts:
The National Airports Corporation was organized under Republic Act No. 224,which
expressly made the provisions of the Corporation Law applicable to the said
corporation.
On November 10, 1950, the National Airports Corporation was abolished by
Executive Order No. 365 and to take its place the Civil Aeronautics Administration was created.
Before the abolition, the Philippine Airlines, Inc. paid to the National Airports
Corporation P65, 245 as fees for landing and parking on Bacolod Airport No. 2 for the period up
to and including July 31, 1948. These fees are said to have been due and payable to the Capitol
Subdivision, Inc. which owned the land used by the National Airports Corporation as airport,
and the owner commenced an action in the Court of First Instance of Negros Occidental against
the Philippine Airlines, Inc. In 1951 to recover the above amount, The Philippine Airlines, Inc.
countered with a third-party complaint against the National Airports Corporation, which by that
time had been dissolved, and served summons on the Civil Aeronautics Administration. The
third party plaintiff alleged that it had paid to the National Airports Corporation
the fees claimed by the Capitol Subdivision, Inc. "on the belief and assumption that
the third party defendant was the lessee of the lands subject of the complaint and that the
third party defendant and its predecessors in interest were the operators and maintainers of
said Bacolod Airport No. 2 The Solicitor General, after answering the third party complaint, filed
a motion to dismiss on the ground that the court lacks jurisdiction to entertain the
third- party complaint, first, because the National Airports Corporation "has lost its
juridical personality," and, second, because agency of the Republic of the
Philippines, unincorporated and not possessing juridical personality under the law, is incapable
of suing and being sued."
 CHARLENE M. GALENZOGA

Issue:
Whether or not Civil Aeronautics can be sued.

Ruling:
Supreme Court ruled in the affirmative.
Not all government entities, whether corporate or non-corporate, are immune to suits.
Immunity from suits is determined by the character of the objects for which the entity was
organized. "Suits against state agencies with relation to matters in which they have assumed to
act in a private or non-governmental capacity, and various suits against certain corporations
created by the state for public purposes, but to engage in matters partaking more of the nature
of ordinary business rather than functions of a governmental or political character, are not
regarded as suits against the state. The latter is true, although the state may own the stock or
property of such a corporation, for by engaging in business operations through a corporation
the state divests itself so far of its sovereign character, and by implication consents to suits
against the corporation." (59 C.J., 313.)
Among the general powers of the Civil Aeronautics Administration are, under
section 3 of Executive Order No. 365, 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 the
power to sue and be sued, which is implied from the power to transact private business. And if
it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with
greater reason should have the power to prosecute and defend suits for and against the
National Airports Corporation, having acquired all the properties, funds and choses in action
and assumed all the liabilities of the latter.
The National Airports Corporation is abolished for all purposes; it can not be regarded as
still in existence even for the limited object of winding up its affairs. No trustees, assignees or
receivers have been designated to make a liquidation thereof and, what is more, there is
 CHARLENE M. GALENZOGA

nothing to liquidate, as everything the National Airports Corporation had, has been taken over
by the Civil Aeronautics Administration. To all legal intents and practical purposes, said
corporation is dead and the Civil Aeronautics Administration is its heir or legal representative,
acting by the law of its creation upon its own rights and in its own name.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity

Philippine National Bank vs. Court of Industrial Relations
G.R. No. L-32667. January 31, 1978.

Facts:
Petitioners motion to quash a notice of garnishment was denied for lack of merit. What
was sought to be garnished was the money of the People's Homesite and Housing Corporation
deposited at petitioner's branch in Quezon City, to satisfy a decision of respondent Court which
had become final and executory. A writ of execution in favor of private respondent Gabriel V.
Manansala had previously been issued. He was the counsel of the prevailing party, the United
Homesite Employees and Laborers Association. The validity of the order assailed is challenged
on two grounds: (1) that the appointment of respondent Gilbert P. Lorenzo as authorized
deputy sheriff toserve the writ of execution was contrary to law and (2) that the funds subject
of the garnishment "may be public in character. "The order of August 26, 1970 of respondent
Court denying the motion to quash, subject of this certiorari proceeding, reads as follows:" The
Philippine National Bank moves to quash the notice of garnishment served upon its branch in
Quezon City by the authorized deputy sheriff of this Court. It contends that the service of the
notice by the authorized deputy sheriff of the court contravenes Section11 of Commonwealth
Act No. 105, as amended which reads:" 'All writs and processes issued by the Court shall be
served and executed free of charge by provincial or city sheriffs, or by any person authorized by
this Court, in the same manner as writs and processes of Courts of First Instance.' Following the
law, the Bank argues that it is the Sheriff of Quezon City, and not the Clerk of this Court who is
its Ex-Officio Sheriff, that has the authority to serve the notice of garnishment, and that the
actual service by the latter officer of said notice is therefore not in order. The Court finds no
merit in this argument. Republic Act No. 4201 has, since June 19, 1965, already repealed
Commonwealth Act No. 103, and under this law, it is now the Clerk of this Court that is at the
same time the Ex-Officio Sheriff. As such Ex-Officio Sheriff, the Clerk of this Court has therefore
the authority to issue writs of execution and notices of garnishment in an area encompassing
the whole of the country, including Quezon City, since his area of authority is coterminous with
 CHARLENE M. GALENZOGA

that of the Court itself, which is national in nature. ... At this stage, the Court notes from the
record that the appeal to the Supreme Court by individual employees of PHHC which questions
the award of attorney's fees to Atty. Gabriel V. Manansala, has already been dismissed and that
the same became final and executory on August 9, 1970. There is no longer any reason,
therefore, for withholding action in this case. [Wherefore], the motion to quash filed by the
Philippine National Bank is denied for lack of merit. The said Bank is therefore ordered to
comply within five days from receipt with the 'notice of Garnishment' dated May 6, 1970."
There was a motion for reconsideration filed by petitioner, but in a resolution dated September
22, 1970, it was denied. Hence, this certiorari petition.

Issue:
Whether or not the funds can be garnished.

Ruling:
The Supreme Court ruled in the negative.
The premise that the funds of the People's Homesite and Housing Corporation could be
spoken of as public in character may be accepted in the sense that the said corporation is a
government-owned entity. However, it does not follow that they are exempt from garnishment
because the People's Homesite and Housing Corporation, as a government-owned and
controlled corporation, has a personality distinct and separate from that of the government.
Accordingly, it may sue and be sued and may be subjected to court processes like any other
corporation.
By engaging in a particular business through 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.
Waiver by the State of its right of immunity from suits does not automatically subject its
properties and funds to execution or garnishment because such would amount to a
disbursement without any proper appropriation as required by law.
 CHARLENE M. GALENZOGA

The Industrial Court's order sustaining the authority of its Clerk of Court as special
deputy sheriff to serve notice of garnishment cannot be stigmatized as a grave abuse of
discretion. Under Republic Act 4201, the Clerk of Court of the now defunct Court of Industrial
Relations was the ex-oficio sheriff. It is true that there is no authorization in law for the
appointment of special sheriffs for the service of writs of execution. But even if there is a
sufficient justification for the infirmity attributed to the order of the court, it would be
inequitable to issue a new execution by the proper official considering the lapse of time during
which the judgment creditor had been unable to execute the judgment in his favor. What is
important is that the judgment be executed. It would be carry technicality to an absurd length if
just because of such a mistake, assuming that it is, but undoubtedly committed in good faith,
further delay would still be imposed on the judgment creditor by characterized the order
sought to be nullified as amounting to a grave abuse of discretion.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Local Government Unit is suable

Municipality of San Fernando, La Union vs. Hon. Judge Romeo N. Firme, et. al.
G.R. No. 52179. April 8, 1991

Facts:
At about 7am of December 16, 1965, a collision occurred involving a passenger jeepney
driven by Bernardo Balagot (owned by the Estate of Macario Nieveras), a gravel and sand truck
driven by Jose Manandeg (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 others suffered varying degrees of physical injuries.
The private respondents instituted a complaint for damages against the Estate of
Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney. However, the aforesaid defendants filed a Third Party Complaint against the petitioner
and the driver of a dump truck of petitioner. Petitioner raised as one of its defences the non-
suability of the State.

Issue:
Whether or not the municipality is liable for the torts committed by its employee.

Ruling:
The municipality cannot be held liable for the torts committed by its regular employee,
who was then engaged in the discharge of governmental functions.
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 v. 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.
 CHARLENE M. GALENZOGA

"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.)
 CHARLENE M. GALENZOGA

Topic: LGU is suable ; Exception

Merritt vs.Government of the Philippine Islands G.R. No. 11154. March 21, 1916

Facts:
Counsel for the plaintiff insists that the trial court erred (1) "in limiting the general
damages which the plaintiff suffered to P5,000,instead of P25,000 as claimed in the complaint,"
and (2) "in limiting the time when plaintiff was entirely disabled to two months and twenty-one
days and fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by
plaintiff in his complaint. "The Attorney-General on behalf of the defendant urges that the trial
court erred: (a)in finding that the collision between the plaintiff's motorcycle and the
ambulance of the General Hospital was due to the negligence of the chauffeur, who is an
alleged agent or employee of the Government; (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.Consequently, the
Government issued an act allowing the plaintiff to commence a lawsuit against it.

Issue:
Whether or not the Government conceded its liability to the plaintiff by allowing a
lawsuit to commence against.

Ruling:
The Supreme Court ruled in the negative.
The Government of the Philippine Islands having been "modeled after the federal and state
governments of the United States' the decisions of the high courts of that country may be used
in determining the scope and purpose of a special statute.
The state not being liable to suit except by its express consent, an act abrogating that
immunity will be strictly construed.
 CHARLENE M. GALENZOGA

An act permitting a suit against the state gives rise to no liability not previously existing
unless it is clearly expressed in the act.
The Government of the Philippine Islands in only liable for the negligent acts of its
officers, agents, and employees when they are acting as special agents within the meaning of
paragraph 5 of article 1903 of the Civil code, and a chauffeur of the General Hospital is not such
a special agent.
"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 charge 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, evident 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.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Exceptions

US vs Guinto 182 SCRA 644

Facts:
These cases have been consolidated because they all involve the doctrine of state
immunity. In GR No. 76607, The private respondents are suing several officers of the US Air
Force in Clark Air Base in connection with the bidding conducted by them for contracts for
barber services inthe said base which was won by a certain Dizon. The respondents wanted to
cancel the award to the bid winner because they claimed that Dizon had included in his bid an
area not included in the invitation to bid, and subsequently, to conduct a rebidding. In GR No.
79470, Fabian Genove filed a complaint for damages against petitioners Lamachia, Belsa,
Cartalla and Orascion for his dismissal as cook in the US Air Force Recreation Center at
CampJohn Hay Air Station in BaguioCity. It had been ascertained after investigation, from the
testimony of Belsa, Cartalla and Orascion, that Genove had poured urine into the soup stock
used in cooking the vegetables served to the club customers. Lamachia, as club manager,
suspended him and thereafter referred the case to a board of arbitrators conformably to the
collective bargaining agreement between the center and its employees. The board unanimously
found him guilty and recommended his dismissal. Genoves reaction was to file his complaint
against the individual petitioners. In GR No. 80018, Luis Bautista, who was employed as a
barracks boy in Cano O Donnell, an extension of Clark Air Bas, was arrested following a buy-
bust operation conducted by the individual petitioners who are officers of the US Air Force and
special agents of the Air Force Office of Special Investigators. On the basis of the sworn
statements made by them, an information for violation of R.A. 6425, otherwise known as the
Dangerous Drugs Act, was filed against Bautista in the RTC of Tarlac. Said officers testified
against him at his trial. Bautista was dismissed from his employment. He then filed a complaint
against the individual petitioners claiming that it was because of their acts that he was
removed. In GR No. 80258, a complaint for damages was filed by the private respondents
against the herein petitioners (except the US), for injuries sustained by the plaintiffs as a result
of the acts of the defendants. There is a conflict of factual allegations here. According to the
 CHARLENE M. GALENZOGA

plaintiffs, the defendants beat them up, handcuffed them and unleashed dogs on them which
bit them in several parts of their bodies and caused extensive injuries to them. The defendants
deny this and claim that plaintiffs we rearrested for theft and were bitten by the dogs because
they were struggling and resisting arrest. In a motion to dismiss the complaint, the US and the
individually named defendants argued that the suit was in effect a suit against the US, which
had not given its consent to be sued.

Issue:
Whether the defendants were also immune from suit under the RP-US Bases Treaty for
acts done by them in the performance of their official duties.

Ruling:
The rule that a state may not be sued without its consent, now expressed in Article XVI,
Section 3, of the 1987 Constitution, is one of the generally accepted principles of international
law that we have adopted as part of the law of our land under Article II, Section 2. This latter
provision merely reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and
also intended to manifest our resolve to abide by the rules of the international community.
As applied to the local state, the doctrine of state immunity is based on the justification
given by Justice Holmes that "there can be no legal right against the authority which makes the
law on which the right depends." There are other practical reasons for the enforcement of the
doctrine. In the case of the foreign state sought to be impleaded in the local jurisdiction, the
added inhibition is expressed in the maxim par in parem, non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary disposition would,
in the language of a celebrated case, "unduly vex the peace of nations."
While the doctrine appears to prohibit only suits against the state without its consent, it
is also applicable to complaints filed against officials of the state for acts allegedly performed by
them in the discharge of their duties. The rule is that if the judgment against such officials will
require the state itself to perform an affirmative act to satisfy the same, such as the
 CHARLENE M. GALENZOGA

appropriation of the amount needed to pay the damages awarded against them, the suit must
be regarded as against the state itself although it has not been formally impleaded. In such a
situation, the state may move to dismiss the complaint on the ground that it has been filed
without its consent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty"
because of the privilege it grants the state to defeat any legitimate claim against it by simply
invoking its non-suability. That is hardly fair, at least in democratic societies, for the state is not
an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not
absolute and does not say the state may not be sued under any circumstance. On the contrary,
the rule says that the state may not be sued without its consent, which clearly imports that it
may be sued if it consents.
The general law waiving the immunity of the state from suit is found in Act No. 3083,
under which the Philippine government "consents and submits to be sued upon any moneyed
claim involving liability arising from contract, express or implied, which could serve as a basis of
civil action between private parties." In Merritt v. Government of the Philippine Islands, a
special law was passed to enable a person to sue the government for an alleged tort. When the
government enters into a contract, it is deemed to have descended to the level of the other
contracting party and divested of its sovereign immunity from suit with its implied consent.
Waiver is also implied when the government files a complaint, thus opening itself to a
counterclaim.
The above rules are subject to qualification. Express consent is effected only by the will
of the legislature through the medium of a duly enacted statute. We have held that not all
contracts entered into by the government will operate as a waiver of its non-suability;
distinction must be made between its sovereign and proprietary acts. As for the filing of a
complaint by the government, suability will result only where the government is claiming
affirmative relief from the defendant.
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
 CHARLENE M. GALENZOGA

governmental capacity that no such waiver may be implied. This was our ruling in United States
of America v. Ruiz, where the transaction in question dealt with the improvement of the
wharves in the naval installation at Subic Bay. As this was a clearly governmental function, we
held that the contract did not operate to divest the United States of its sovereign immunity
from suit.
The other petitioners in the cases before us all aver they have acted in the discharge of
their official functions as officers or agents of the United States. However, this is a matter of
evidence. The charges against them may not be summarily dismissed on their mere assertion
that their acts are imputable to the United States of America, which has not given its consent to
be sued. In fact, the defendants are sought to be held answerable for personal torts in which
the United States itself is not involved. If found liable, they and they alone must satisfy the
judgment.
It is clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they conducted
the buy-bust operation against the complainant and thereafter testified against him at his trial.
The said petitioners were in fact connected with the Air Force Office of Special Investigators
and were charged precisely with the function of preventing the distribution, possession and use
of prohibited drugs and prosecuting those guilty of such acts. 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.
There seems to be a failure to distinguish between suability and liability and a
misconception that the two terms are synonymous. 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.
 CHARLENE M. GALENZOGA

The private respondent invokes Article 2180 of the Civil Code which holds the
government liable if it acts through a special agent. The argument, it would seem, is premised
on the ground that since the officers are designated "special agents," the United States
government should be liable for their torts. The said article establishes a rule of liability, not
suability. The government may be held liable under this rule only if it first allows itself to be
sued through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent even if he is
so denominated, as in the case at bar. No less important, the said provision appears to regulate
only the relations of the local state with its inhabitants and, hence, applies only to the
Philippine government and not to foreign governments impleaded in our courts.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Contracts

Republic of Indonesia vs Vinzon

Facts:
Petitioner Vinzon entered into a Maintenance Agreement with respondent. The
maintenance agreement includes the following specific equipments: air conditioning units,
generator sets, electrical facilities, water heaters and water motor pumps. The agreement shall
be effective for 4 years.

The new Minister Counsellor allegedly found respondent's work and services unsatisfactory and
not in compliance with the standards set in the Agreement. The respondent terminated the
agreement with the respondent. The latter claim that it was unlawful and arbitrary. Respondent
filed a Motion to Dismiss alleging that the Republic of Indonesia, as a foreign state, has
sovereign immunity from suit and cannot be sued as party-defendant in the Philippines.

Issue:
Whether or not the CA erred in sustaining the trial court's decision that petitioners have
waived their immunity from suit by using as its basis the provision in the Maintenance
Agreement.

Ruling:
The Supreme Court ruled that Republic of Indonesia did not waive its immunity from
suit.
International law is founded largely upon the principles of reciprocity, comity, independence,
and equality of States which were adopted as part of the law ofour land under Article II, Section
2 of the 1987 Constitution. The rule that a State may not be sued without its consent is a
necessary consequence of the principles ofindependence and equality of States. As enunciated
in Sanders v. Veridiano II, the practical justification for the doctrine of sovereign immunity is
that there can be no legal right against the authority that makes the law on which the right
 CHARLENE M. GALENZOGA

depends. In the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary attitude would
"unduly vex the peace of nations."
The rules of International Law, however, are neither unyielding nor impervious to
change. The increasing need of sovereign States to enter into purely commercial activities
remotely connected with the discharge of their governmental functions brought about a new
concept of sovereign immunity. This concept, the restrictive theory, holds that the immunity of
the sovereign is recognized only with regard to public acts or actsjure imperii, but not with
regard to private acts or acts jure gestionis.
In United States v. Ruiz, for instance, we held that the conduct of public bidding for the
repair of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we
considered as an act jure gestionis the hiring of a cook in the recreation center catering to
American servicemen and the general public at the John Hay Air Station in Baguio City, as well
as the bidding for the operation of barber shops in Clark Air Base in Angeles City. Apropos the
present case, the mere entering into a contract by a foreign State with a private party cannot
be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis.
Such act is only the start of the inquiry. Is the foreign State engaged in the regular conduct of a
business? If the foreign State is not engaged regularly in a business or commercial activity, and
in this case it has not been shown to be so engaged, the particular act or transaction must then
be tested by its nature. If the act is in pursuit ofa sovereign activity, or an incident thereof, then
it is an act jure imperii.
[T]he existence alone of a paragraph in a contract stating that any legal action arising
out of the agreement shall be settled according to the laws of the Philippines and by a specified
court of the Philippines is not necessarily a waiver of sovereign immunity from suit. The
aforesaid provision contains language not necessarily inconsistent with sovereign immunity. On
the other hand, such provision may also be meant to apply where the sovereign party elects to
sue in the local courts, or otherwise waives its immunity by any subsequent act. The
applicability of Philippine laws must be deemed to include Philippine laws in its totality,
 CHARLENE M. GALENZOGA

including the principle recognizing sovereign immunity. Hence, the proper court may have no
proper action, by way of settling the case, except to dismiss it.
 CHARLENE M. GALENZOGA

Topic: Sovereignty Immunity; Contracts entered into by the state

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and ROBERT
GOHIER vs. HON. V. M. RUIZ and ELIGIO DE GUZMAN & CO., INC

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.)
 CHARLENE M. GALENZOGA

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:
Whether or not the US naval base in bidding for said contracts exercise governmental
functions to be able to invoke state immunity.

Ruling:
Supreme Court held in the negative.

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 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
 CHARLENE M. GALENZOGA

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.
 CHARLENE M. GALENZOGA

Topic: Sovereignty Immunity; Commences Litigation

FERNANDO A. FROILAN vs. PAN ORIENTAL SHIPPING CO.
Facts:
Plaintiff, Fernando Froilan filed a complaint against the defendant-appellant, Pan
Oriental Shipping Co., alleging that he purchased from the Shipping Commission the vessel for
P200,000, paying P50,000 down and agreeing to pay the balance in instalments. To secure the
payment of the balance of the purchase price, he executed a chattel mortgage of said vessel in
favor of the Shipping Commission. For various reasons, among them the non-payment of the
installments, the Shipping Commission tool possession of said vessel and considered the
contract of sale cancelled. The Shipping Commission chartered and delivered said vessel to the
defendant-appellant Pan Oriental Shipping Co. subject to the approval of the President of the
Philippines. Plaintiff appealed the action of the Shipping Commission to the President of the
Philippines and, in its meeting the Cabinet restored him to all his rights under his original
contract with the Shipping Commission. Plaintiff had repeatedly demanded from the Pan
Oriental Shipping Co. the possession of the vessel in question but the latter refused to do so.

Plaintiff, prayed that, upon the approval of the bond accompanying his complaint, a writ
of replevin be issued for the seizure of said vessel with all its equipment and appurtenances,
and that after hearing, he be adjudged to have the rightful possession thereof . The lower court
issued the writ of replevin prayed for by Froilan and by virtue thereof the Pan Oriental Shipping
Co. was divested of its possession of said vessel.

Pan Oriental protested to this restoration of Plaintiff s rights under the contract of sale,
for the reason that when the vessel was delivered to it, the Shipping Administration had
authority to dispose of said authority to the property, Plaintiff having already relinquished
whatever rights he may have thereon. Plaintiff paid the required cash of P10,000.00 and as Pan
Oriental refused to surrender possession of the vessel, he filed an action to recover possession
thereof and have him declared the rightful owner of said property. The Republic of the
 CHARLENE M. GALENZOGA

Philippines was allowed to intervene in said civil case praying for the possession of the in order
that the chattel mortgage constituted thereon may be foreclosed.

Issue:
Whether or not the Court has jurisdiction over the intervenor with regard to the
counterclaim.

Ruling:
Yes. The Supreme Court held that the government impliedly allowed itself to be sued
when it filed a complaint in intervention for the purpose of asserting claim for affirmative relief
against the plaintiff to the recovery of the vessel. The immunity of the state from suits does not
deprive it of the right to sue private parties in its own courts. The state as plaintiff may avail
itself of the different forms of actions open to private litigants. In short, by taking the initiative
in an action against a private party, the state surrenders its privileged position and comes down
to the level of the defendant. The latter automatically acquires, within certain limits, the right
to set up whatever claims and other defenses he might have against the state.
When the government enters into a contract, for the State is then deem to have
divested itself of the mantle of sovereign immunity and descended to the level of the ordinary
individual. Having done so, it becomes subject to judicial action and processes.
 CHARLENE M. GALENZOGA

Topic: Sovereign Immunity; Expropriation

VICTORIA AMIGABLE vs. NICOLAS CUENCA, as Commissioner of Public Highways and
REPUBLIC OF THE PHILIPPINES

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:
Whether or not the petitioner can sue the government.
Ruling:
The Supreme Court ruled in the affirmative.
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.
 CHARLENE M. GALENZOGA

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 anytime
because possession is one of the attributes of ownership. However, since restoration of
possession of said portion by the government is neither convenient nor feasible at this time
because it has been and is now being 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.
The owner of the land is entitled to damages 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. In
addition, the government should pay for attorney's fees, the amount of which should be fixed
by the trial court after hearing.
To determine the due compensation for the land appropriated by the Government, the
basis should be the price or value thereof at the time of the taking.