Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30671 November 28, 1973
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of
Cebu, Branch I, THE PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF
OF QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE
CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO.,
LTD., GAVINO UNCHUAN, AND INTERNATIONAL CONSTRUCTION
CORPORATION, respondents.
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo
for petitioner.
Andres T. Velarde and Marcelo B. Fernan for respondents.
FERNANDO, J.:
The Republic of the Philippines in this certiorari and prohibition proceeding
challenges the validity of an order issued by respondent Judge Guillermo P. Villasor,
then of the Court of First Instance of Cebu, Branch I, 1 declaring a decision final and
executory and of an alias writ of execution directed against the funds of the Armed
Forces of the Philippines subsequently issued in pursuance thereof, the alleged
ground being excess of jurisdiction, or at the very least, grave abuse of discretion. As
thus simply and tersely put, with the facts being undisputed and the principle of law
that calls for application indisputable, the outcome is predictable. The Republic of
the Philippines is entitled to the writs prayed for. Respondent Judge ought not to
have acted thus. The order thus impugned and the alias writ of execution must be
nullified.
In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of
facts was set forth thus: "7. On July 3, 1961, 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 the petitioner
herein, confirming the arbitration award in the amount of P1,712,396.40, subject of
Special Proceedings. 8. On June 24, 1969, respondent Honorable Guillermo P.
Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and
executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila
to execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the
corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On
the strength of the afore-mentioned Alias Writ of Execution dated June 26, 1969, the
Provincial Sheriff of Rizal (respondent herein) 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 .... 11. 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, as per Certification dated July 3, 1969 by the
AFP Controller,..." 2. The paragraph immediately succeeding in such petition then
alleged: "12. 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." 3 In the answer filed by
respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set
forth were admitted with the only qualification being that the total award was in the
amount of P2,372,331.40. 4
The Republic of the Philippines, as mentioned at the outset, did right in filing
this certiorari and prohibition proceeding. 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. It is readily understandable why it must be so. 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." 5 Sociological jurisprudence supplies an answer not dissimilar. So it was
indicated in a recent decision, Providence Washington Insurance Co. v. Republic of
the Philippines, 6 with its affirmation that "a continued adherence to the doctrine of
non-suability is not to be deplored for as against the inconvenience that may be
caused private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental
principle were abandoned and the availability of judicial remedy were not thus
restricted. With the well known propensity on the part of our people to go to court, at
the least provocation, the loss of time and energy required to defend against law
1
suits, in the absence of such a basic principle that constitutes such an effective Barredo, J, took no part.
obstacle, could very well be imagined." 7

This fundamental postulate underlying the 1935 Constitution is now made explicit in
the revised charter. It is therein expressly provided: "The State may not be sued
without its consent." 8 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. Thus in the recent case of Commissioner of Public Highways v. San
Diego, 9 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." 10 Such a principle applies even to an
attempted garnishment of a salary that had accrued in favor of an employee. Director
of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as
ponente left no doubt on that score. Thus: "A rule which has never been seriously
questioned, is that money in the hands of public officers, although it may be due
government employees, is not liable to the creditors of these employees in the
process of garnishment. One reason is, that the State, by virtue of its sovereignty,
may not be sued in its own courts except by express authorization by the Legislature,
and to subject its officers to garnishment would be to permit indirectly what is
prohibited directly. Another reason is that moneys sought to be garnished, as long as
they remain in the hands of the disbursing officer of the Government, belong to the
latter, although the defendant in garnishment may be entitled to a specific portion
thereof. And still another reason which covers both of the foregoing is that every
consideration of public policy forbids it." 12

In the light of the above, it is made abundantly clear why the Republic of the
Philippines could rightfully allege a legitimate grievance.

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and
setting aside both the order of June 24, 1969 declaring executory the decision of July
3, 1961 as well as the alias writ of execution issued thereunder. The preliminary
injunction issued by this Court on July 12, 1969 is hereby made permanent.

Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.

2
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 70853 March 12, 1987
REPUBLIC OF THE PHILIPPINES, petitioner-appellee,
vs.
PABLO FELICIANO and INTERMEDIATE APPELLATE
COURT, respondents-appellants.
YAP, J.:
Petitioner seeks the review of the decision of the Intermediate Appellate Court dated
April 30, 1985 reversing the order of the Court of First Instance of Camarines Sur,
Branch VI, dated August 21, 1980, which dismissed the complaint of respondent
Pablo Feliciano for recovery of ownership and possession of a parcel of land on the
ground of non-suability of the State.
The background of the present controversy may be briefly summarized as follows:
On January 22, 1970, respondent Feliciano filed a complaint with the then Court of
First Instance of Camarines Sur 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 (4) lots with an aggregate area of 1,364.4177 hectares,
situated in the Barrio of Salvacion, Municipality of Tinambac, Camarines Sur.
Plaintiff alleged that he bought the property in question from Victor Gardiola by
virtue of a Contract of Sale dated May 31, 1952, followed by a Deed of Absolute
Sale on October 30, 1954; that Gardiola had acquired the property by purchase from
the heirs of Francisco Abrazado whose title to the said property was evidenced by
an informacion posesoria that upon plaintiff's purchase of the property, he took
actual possession of the same, introduced various improvements therein and caused
it to be surveyed in July 1952, which survey was approved by the Director of Lands
on October 24, 1954; that on November 1, 1954, President Ramon Magsaysay issued
Proclamation No. 90 reserving for settlement purposes, under the administration of
the National Resettlement and Rehabilitation Administration (NARRA), a tract of
land situated in the Municipalities of Tinambac and Siruma, Camarines Sur, after
which the NARRA and its successor agency, the Land Authority, started sub-
dividing and distributing the land to the settlers; that the property in question, while
located within the reservation established under Proclamation No. 90, was the private
property of plaintiff and should therefore be excluded therefrom. Plaintiff prayed that
he be declared the rightful and true owner of the property in question consisting of
1,364.4177 hectares; that his title of ownership based on informacion posesoria of
his predecessor-in-interest be declared legal valid and subsisting and that defendant
be ordered to cancel and nullify all awards to the settlers.
The defendant, represented by the Land Authority, filed an answer, raising by way of
affirmative defenses lack of sufficient cause of action and prescription.
On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a
decision declaring Lot No. 1, with an area of 701.9064 hectares, to be the private
property of the plaintiff, "being covered by a possessory information title in the name
of his predecessor-in-interest" and declaring said lot excluded from the NARRA
settlement reservation. The court declared the rest of the property claimed by
plaintiff, i.e. Lots 2, 3 and 4, reverted to the public domain.
A motion to intervene and to set aside the decision of August 29, 1970 was filed by
eighty-six (86) settlers, together with the barrio council of Pag-asay, alleging among
other things that intervenors had been in possession of the land in question for more
than twenty (20) years under claim of ownership.
On January 25, 1971, the court a quo reconsidered its decision, reopened the case
and directed the intervenors to file their corresponding pleadings and present their
evidence; all evidence already presented were to remain but plaintiff, as well as the
Republic of the Philippines, could present additional evidence if they so desire. The
plaintiff presented additional evidence on July 30, 1971, and the case was set for
hearing for the reception of intervenors' evidence on August 30 and August 31, 1971.
On August 30, 1971, the date set for the presentation of the evidence for intervenors,
the latter did not appear but submitted a motion for postponement and resetting of
the hearing on the next day, August 31, 1971. The trial court denied the motion for
postponement and allowed plaintiff to offer his evidence "en ausencia," after which
the case would be deemed submitted for decision. On the following day, August 31,
1971, Judge Sison rendered a decision reiterating his decision of August 29, 1970.
A motion for reconsideration was immediately filed by the intervenors. But before
this motion was acted upon, plaintiff filed a motion for execution, dated November
18, 1971. On December 10, 1971, the lower court, this time through Judge Miguel
Navarro, issued an order denying the motion for execution and setting aside the order
denying intervenors' motion for postponement. The case was reopened to allow
intervenors to present their evidence. Unable to secure a reconsideration of Judge
Navarro's order, the plaintiff went to the Intermediate Appellate Court on a petition
for certiorari. Said petition was, however, denied by the Intermediate Appellate
Court, and petitioners brought the matter to this Court in G.R. No. 36163, which was
3
denied on May 3, 1973 Consequently, the case was remanded to the court a quo for
further proceedings.
On August 31, 1970, intervenors filed a motion to dismiss, principally 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 the plaintiff.
On August 21, 1980, the trial court, through Judge Esteban Lising, issued the
questioned order dismissing the case for lack of jurisdiction. Respondent moved for
reconsideration, while the Solicitor General, on behalf of the Republic of the
Philippines filed its opposition thereto, maintaining that the dismissal was proper on
the ground of non-suability of the State and also on the ground that the existence
and/or authenticity of the purported possessory information title of the respondents'
predecessor-in-interest had not been demonstrated and that at any rate, the same is
not evidence of title, or if it is, its efficacy has been lost by prescription and laches.
Upon denial of the motion for reconsideration, plaintiff again went to the
Intermediate Appellate Court on petition for certiorari. On April 30, 1985, the
respondent appellate court rendered its decision reversing the order of Judge Lising
and remanding the case to the court a quo for further proceedings. Hence this
petition.
We find the petition meritorious. 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.1 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.
By its caption and its allegation and prayer, the complaint is clearly a suit against the
State, which 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. 2 There is no such showing in the
instant case. Worse, the complaint itself fails to allege the existence of such consent.
This is a fatal defect, 3 and on this basis alone, the complaint should have been
dismissed.
The failure of the petitioner to assert the defense of immunity from suit when the
case was tried before the court a quo, as alleged by private respondent, is not fatal. It
is now settled that such defense "may be invoked by the courts sua sponte at any
stage of the proceedings." 4
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. " We do not agree. No such consent can be drawn from the language of
the Proclamation. The exclusion of existing private rights from the reservation
established by Proclamation No. 90 can not be construed as a waiver of the immunity
of the State from suit. Waiver of immunity, being a derogation of sovereignty, will
not be inferred lightly. but must be construed instrictissimi juris. 5 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.
Neither is there merit in respondent's submission, which the respondent appellate
court sustained, on the basis of our decision in the Begosa case, 6 that the present
action is not a suit against the State within the rule of State immunity from suit,
because plaintiff does not seek to divest the Government of any of its lands or its
funds. It is contended that the complaint involves land not owned by the State, but
private land belonging to the plaintiff, hence the Government is not being divested of
any of its properties. There is some sophistry involved in this argument, since the
character of the land sought to be recovered still remains to be established, and the
plaintiff's action is directed against the State precisely to compel the latter to litigate
the ownership and possession of the property. In other words, the plaintiff is out to
establish that he is the owner of the land in question based, incidentally, on
an informacion posesoria of dubious value, and he seeks to establish his claim of
ownership by suing the Republic of the Philippines in an action in personam.
The inscription in the property registry of an informacion posesoria under the
Spanish Mortgage Law was a means provided by the law then in force in the
Philippines prior to the transfer of sovereignty from Spain to the United States of
America, to record a claimant's actual possession of a piece of land, established
through an ex parte proceeding conducted in accordance with prescribed
rules. 7 Such inscription merely furnishes, at best, prima facie evidence of the fact
that at the time the proceeding was held, the claimant was in possession of the land
under a claim of right as set forth in his application. 8 The possessory information
could ripen into a record of ownership after the lapse of 20 years (later reduced to 10
years), upon the fulfillment of the requisites prescribed in Article 393 of the Spanish
Mortgage Law.
There is no showing in the case at bar that the informacion posesoria held by the
respondent had been converted into a record of ownership. Such possessory
information, therefore, remained at best mere prima facie evidence of possession.
4
Using this possessory information, the respondent could have applied for judicial
confirmation of imperfect title under the Public Land Act, which is an action in
rem. However, having failed to do so, it is rather late for him to pursue this avenue at
this time. Respondent must also contend, as the records disclose, with the fact
admitted by him and stated in the decision of the Court a quo that settlers have been
occupying and cultivating the land in question since even before the outbreak of the
war, which puts in grave doubt his own claim of possession.

Worthy of note is the fact, as pointed out by the Solicitor General, that
the informacion posesoria registered in the Office of the Register of Deed of
Camarines Sur on September 23, 1952 was a "reconstituted" possessory information;
it was "reconstituted from the duplicate presented to this office (Register of Deeds)
by Dr. Pablo Feliciano," without the submission of proof that the alleged duplicate
was authentic or that the original thereof was lost. Reconstitution can be validly
made only in case of loss of the original. 10 These circumstances raise grave doubts
as to the authenticity and validity of the "informacion posesoria" relied upon by
respondent Feliciano. Adding to the dubiousness of said document is the fact that
"possessory information calls for an area of only 100 hectares," 11 whereas the land
claimed by respondent Feliciano comprises 1,364.4177 hectares, later reduced to
701-9064 hectares. Courts should be wary in accepting "possessory information
documents, as well as other purportedly old Spanish titles, as proof of alleged
ownership of lands.

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed
decision of the Intermediate Appellate Court, dated April 30, 1985, and affirming the
order of the court a quo, dated August 21, 1980, dismissing the complaint filed by
respondent Pablo Feliciano against the Republic of the Philippines. No costs.

SO ORDERED.

Narvasa, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Melencio-Herrera, J., is on leave.

5
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-46930 June 10, 1988
DALE SANDERS, AND A.S. MOREAU, JR, petitioners,
vs.
HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I, Court of
First Instance of Zambales, Olongapo City, ANTHONY M. ROSSI and RALPH
L. WYERS, respondents.
CRUZ, J.:
The basic issue to be resolved in this case is whether or not the petitioners were
performing their official duties when they did the acts for which they have been sued
for damages by the private respondents. Once this question is decided, the other
answers will fall into place and this petition need not detain us any longer than it
already has.
Petitioner Sanders was, at the time the incident in question occurred, the special
services director of the U.S. Naval Station (NAVSTA) in Olongapo City. 1 Petitioner
Moreau was the commanding officer of the Subic Naval Base, which includes the
said station. 2 Private respondent Rossi is an American citizen with permanent
residence in the Philippines, 3 as so was private respondent Wyer, who died two
years ago. 4 They were both employed as gameroom attendants in the special
services department of the NAVSTA, the former having been hired in 1971 and the
latter in 1969. 5
On October 3, 1975, the private respondents were advised that their employment had
been converted from permanent full-time to permanent part-time, effective October
18, 1975. 6 Their reaction was to protest this conversion and to institute grievance
proceedings conformably to the pertinent rules and regulations of the U.S.
Department of Defense. The result was a recommendation from the hearing officer
who conducted the proceedings for the reinstatement of the private respondents to
permanent full-time status plus backwages. The report on the hearing contained the
observation that "Special Services management practices an autocratic form of
supervision." 7
In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the
complaint), Sanders disagreed with the hearing officer's report and asked for the
rejection of the abovestated recommendation. The letter contained the statements
that: a ) "Mr. Rossi tends to alienate most co-workers and supervisors;" b) "Messrs.
Rossi and Wyers have proven, according to their immediate supervisors, to be
difficult employees to supervise;" and c) "even though the grievants were under oath
not to discuss the case with anyone, (they) placed the records in public places where
others not involved in the case could hear."
On November 7, 1975, before the start of the grievance hearings, a-letter (Annex "B"
of the complaint) purportedly corning from petitioner Moreau as the commanding
general of the U.S. Naval Station in Subic Bay was sent to the Chief of Naval
Personnel explaining the change of the private respondent's employment status and
requesting concurrence therewith. The letter did not carry his signature but was
signed by W.B. Moore, Jr. "by direction," presumably of Moreau.
On the basis of these antecedent facts, the private respondent filed in the Court of
First Instance of Olongapo City a for damages against the herein petitioners on
November 8, 1976. 8 The plaintiffs claimed that the letters contained libelous
imputations that had exposed them to ridicule and caused them mental anguish and
that the prejudgment of the grievance proceedings was an invasion of their personal
and proprietary rights.
The private respondents made it clear that the petitioners were being sued in their
private or personal capacity. However, in a motion to dismiss filed under a special
appearance, the petitioners argued that the acts complained of were performed by
them in the discharge of their official duties and that, consequently, the court had no
jurisdiction over them under the doctrine of state immunity.
After extensive written arguments between the parties, the motion was denied in an
order dated March 8, 1977, 9on the main ground that the petitioners had not
presented any evidence that their acts were official in nature and not personal torts,
moreover, the allegation in the complaint was that the defendants had acted
maliciously and in bad faith. The same order issued a writ of preliminary attachment,
conditioned upon the filing of a P10,000.00 bond by the plaintiffs, against the
properties of petitioner Moreau, who allegedly was then about to leave the
Philippines. Subsequently, to make matters worse for the defendants, petitioner
Moreau was declared in a default by the trial court in its order dated August 9, 1977.
The motion to lift the default order on the ground that Moreau's failure to appear at
the pre-trial conference was the result of some misunderstanding, and the motion for
reconsideration of the denial of the motion to dismiss, which was filed by the
petitioner's new lawyers, were denied by the respondent court on September 7, 1977.
This petition for certiorari, prohibition and preliminary injunction was thereafter
filed before this Court, on the contention that the above-narrated acts of the
respondent court are tainted with grave abuse of discretion amounting to lack of
jurisdiction.
6
We return now to the basic question of whether the petitioners were acting officially
or only in their private capacities when they did the acts for which the private
respondents have sued them for damages.
It is stressed at the outset that the mere allegation that a government functionary is
being sued in his personal capacity will not automatically remove him from the
protection of the law of public officers and, if appropriate, the doctrine of state
immunity. By the same token, the mere invocation of official character will not
suffice to insulate him from suability and liability for an act imputed to him as a
personal tort committed without or in excess of his authority. These well-settled
principles are applicable not only to the officers of the local state but also where the
person sued in its courts pertains to the government of a foreign state, as in the
present case.
The respondent judge, apparently finding that the complained acts
were prima facie personal and tortious, decided to proceed to trial to determine inter
alia their precise character on the strength of the evidence to be submitted by the
parties. The petitioners have objected, arguing that no such evidence was needed to
substantiate their claim of jurisdictional immunity. Pending resolution of this
question, we issued a temporary restraining order on September 26, 1977, that has
since then suspended the proceedings in this case in the courta quo.
In past cases, this Court has held that where the character of the act complained of
can be determined from the pleadings exchanged between the parties before the trial,
it is not necessary for the court to require them to belabor the point at a trial still to
be conducted. Such a proceeding would be superfluous, not to say unfair to the
defendant who is subjected to unnecessary and avoidable inconvenience.
Thus, in Baer v. Tizon, 10 we held that a motion to dismiss a complaint against the
commanding general of the Olongapo Naval Base should not have been denied
because it had been sufficiently shown that the act for which he was being sued was
done in his official capacity on behalf of the American government. The United
States had not given its consent to be sued. It was the reverse situation in Syquia v.
Almeda Lopez," where we sustained the order of the lower court granting a where we
motion to dismiss a complaint against certain officers of the U.S. armed forces also
shown to be acting officially in the name of the American government. The United
States had also not waived its immunity from suit. Only three years ago, in United
States of America v. Ruiz, 12 we set aside the denial by the lower court of a motion to
dismiss a complaint for damages filed against the United States and several of its
officials, it appearing that the act complained of was governmental rather than
proprietary, and certainly not personal. In these and several other cases 13 the Court
found it redundant to prolong the other case proceedings after it had become clear
that the suit could not prosper because the acts complained of were covered by the
doctrine of state immunity.
It is abundantly clear in the present case that the acts for which the petitioners are
being called to account were performed by them in the discharge of their official
duties. Sanders, as director of the special services department of NAVSTA,
undoubtedly had supervision over its personnel, including the private respondents,
and had a hand in their employment, work assignments, discipline, dismissal and
other related matters. It is not disputed that the letter he had written was in fact a
reply to a request from his superior, the other petitioner, for more information
regarding the case of the private respondents. 14 Moreover, even in the absence of
such request, he still was within his rights in reacting to the hearing officer's
criticism—in effect a direct attack against him—-that Special Services was
practicing "an autocratic form of supervision."
As for Moreau,what he is claimed to have done was write the Chief of Naval
Personnel for concurrence with the conversion of the private respondents' type of
employment even before the grievance proceedings had even commenced.
Disregarding for the nonce the question of its timeliness, this act is clearly official in
nature, performed by Moreau as the immediate superior of Sanders and directly
answerable to Naval Personnel in matters involving the special services department
of NAVSTA In fact, the letter dealt with the financial and budgetary problems of the
department and contained recommendations for their solution, including the re-
designation of the private respondents. There was nothing personal or private about
it.
Given the official character of the above-described letters, we have to conclude that
the petitioners were, legally speaking, being sued as officers of the United States
government. As they have acted on behalf of that government, and within the scope
of their authority, it is that government, and not the petitioners personally, that is
responsible for their acts. Assuming that the trial can proceed and it is proved that
the claimants have a right to the payment of damages, such award will have to be
satisfied not by the petitioners in their personal capacities but by the United States
government as their principal. This will require that government to perform an
affirmative act to satisfy the judgment, viz, the appropriation of the necessary amount
to cover the damages awarded, thus making the action a suit against that government
without its consent.
There should be no question by now that such complaint cannot prosper unless the
government sought to be held ultimately liable has given its consent to' be sued. So
we have ruled not only in Baer but in many other decisions where we upheld the
doctrine of state immunity as applicable not only to our own government but also to
foreign states sought to be subjected to the jurisdiction of our courts. 15
The practical justification for the doctrine, as Holmes put it, is that "there can be no
legal right against the authority which makes the law on which the right
depends. 16 In the case of foreign states, the rule is derived from the principle of the
sovereign equality of states which wisely admonishes that par in parem non habet
7
imperium and that a contrary attitude would "unduly vex the peace of
nations." 17 Our adherence to this precept is formally expressed in Article II, Section
2, of our Constitution, where we reiterate from our previous charters that the
Philippines "adopts the generally accepted principles of international law as part of
the law of the land.
All this is not to say that in no case may a public officer be sued as such without the
previous consent of the state. To be sure, there are a number of well-recognized
exceptions. It is clear that a public officer may be sued as such to compel him to do
an act required by law, as where, say, a register of deeds refuses to record a deed of
sale; 18or to restrain a Cabinet member, for example, from enforcing a law claimed to
be unconstitutional; 19 or to compel the national treasurer to pay damages from an
already appropriated assurance fund; 20 or the commissioner of internal revenue to
refund tax over-payments from a fund already available for the purpose; 21 or, in
general, to secure a judgment that the officer impleaded may satisfy by himself
without the government itself having to do a positive act to assist him. We have also
held that where the government itself has violated its own laws, the aggrieved party
may directly implead the government even without first filing his claim with the
Commission on Audit as normally required, as the doctrine of state immunity
"cannot be used as an instrument for perpetrating an injustice." 22
This case must also be distinguished from such decisions as Festejo v.
Fernando, 23 where the Court held that a bureau director could be sued for damages
on a personal tort committed by him when he acted without or in excess of authority
in forcibly taking private property without paying just compensation therefor
although he did convert it into a public irrigation canal. It was not necessary to
secure the previous consent of the state, nor could it be validly impleaded as a party
defendant, as it was not responsible for the defendant's unauthorized act.
The case at bar, to repeat, comes under the rule and not under any of the recognized
exceptions. The government of the United States has not given its consent to be sued
for the official acts of the petitioners, who cannot satisfy any judgment that may be
rendered against them. As it is the American government itself that will have to
perform the affirmative act of appropriating the amount that may be adjudged for the
private respondents, the complaint must be dismissed for lack of jurisdiction.
The Court finds that, even under the law of public officers, the acts of the petitioners
are protected by the presumption of good faith, which has not been overturned by the
private respondents. Even mistakes concededly committed by such public officers
are not actionable as long as it is not shown that they were motivated by malice or
gross negligence amounting to bad faith. 24 This, to, is well settled . 25 Furthermore,
applying now our own penal laws, the letters come under the concept of privileged
communications and are not punishable, 26 let alone the fact that the resented remarks
are not defamatory by our standards. It seems the private respondents have
overstated their case.
A final consideration is that since the questioned acts were done in the Olongapo
Naval Base by the petitioners in the performance of their official duties and the
private respondents are themselves American citizens, it would seem only proper for
the courts of this country to refrain from taking cognizance of this matter and to treat
it as coming under the internal administration of the said base.
The petitioners' counsel have submitted a memorandum replete with citations of
American cases, as if they were arguing before a court of the United States. The
Court is bemused by such attitude. While these decisions do have persuasive effect
upon us, they can at best be invoked only to support our own jurisprudence, which
we have developed and enriched on the basis of our own persuasions as a people,
particularly since we became independent in 1946.
We appreciate the assistance foreign decisions offer us, and not only from the United
States but also from Spain and other countries from which we have derived some if
not most of our own laws. But we should not place undue and fawning reliance upon
them and regard them as indispensable mental crutches without which we cannot
come to our own decisions through the employment of our own endowments We live
in a different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a people, and
always with our own concept of law and justice.
The private respondents must, if they are still sominded, pursue their claim against
the petitioners in accordance with the laws of the United States, of which they are all
citizens and under whose jurisdiction the alleged offenses were committed. Even
assuming that our own laws are applicable, the United States government has not
decided to give its consent to be sued in our courts, which therefore has not acquired
the competence to act on the said claim,.
WHEREFORE, the petition is GRANTED. The challenged orders dated March
8,1977, August 9,1977, and September 7, 1977, are SET ASIDE. The respondent
court is directed to DISMISS Civil Case No. 2077-O. Our Temporary restraining
order of September 26,1977, is made PERMANENT. No costs.
SO ORDERED.
Narvasa, Gancayco, Grino-Aquiño and Medialdea, JJ., Concur.
8
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L- 24548 October 27, 1983
WENCESLAO VlNZONS TAN, THE DIRECTOR OF FORESTRY,
APOLONIO THE SECRETARY OF AGRICULTURE AND NATURAL
RESOURCES JOSE Y. FELICIANO, respondents-appelllees,
vs.
THE DIRECTOR OF FORESTRY, APOLONIO RIVERA, THE
SECRETARY OF AGRICULTURE AND N ATURAL RESOURCES JOSE Y.
FELICIANO, respon dents-appellees,RAVAGO COMMERCIAL CO., JORGE
LAO HAPPICK and ATANACIO MALLARI, intervenors,
Camito V Pelianco Jr. for petitioner-appellant.
Solicitor General for respondent Director.
Estelito P. Mendoza for respondent Ravago Comm'l Co.
Anacleto Badoy for respondent Atanacio Mallari.
Mariano de Joya, Jr. for respondent Jorge Lao Happick, Jr.
MAKASIAR, J:
This is an appeal from the order dated January 20, 1965 of the then Court of First
Instance of Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari,
prohibition and mandamus with preliminary prohibitory injunction (p. 2. rec.), which
dismissed the petition of petitioner-appellant Wenceslao Vinzons Tan on the ground
that it does not state a sufficient cause of action, and upon the respondents-appellees'
(Secretary of Agriculture and Natural resources and the Director of Forestry) motion
to dismiss (p. 28, rec.).
Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising
for public bidding a certain tract of public forest land situated in Olongapo,
Zambales, provided tenders were received on or before May 22, 1961 (p. 15, CFI
rec.). This public forest land, consisting of 6,420 hectares, is located within the
former U.S. Naval Reservation comprising 7,252 hectares of timberland, which was
turned over by the United States Government to the Philippine Government (P. 99,
CFI rec.).
On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his
application in due form after paying the necessary fees and posting tile required bond
therefor. Nine other applicants submitted their offers before the deadline (p. 29, rec.).
Thereafter, questions arose as to the wisdom of having the area declared as a forest
reserve or allow the same to be awarded to the most qualified bidder. On June 7,
1961, then President Carlos P. Garcia issued a directive to the Director of the Bureau
of Forestry, which read as follows:
It is desired that the area formerly covered by the Naval Reservation be made a forest
reserve for watershed purposes. Prepare and submit immediately a draft of a
proclamation establishing the said area as a watershed forest reserve for Olongapo,
Zambales. It is also desired that the bids received by the Bureau of Forestry for the
issuance of the timber license in the area during the public bidding conducted last
May 22, 1961 be rejected in order that the area may be reserved as above stated. ...
(SGD.) CARLOS P. GARCIA
(pp. 98, CFI rec.).
On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources
sustained the findings and re comendations of the Director of Forestry who
concluded that "it would be beneficial to the public interest if the area is made
available for exploitation under certain conditions," and
We quote:
Respectfully forwarded to the honorable, the Executive Secretary Malacanang.
Manila inviting particular attention to the comment and recommendation of the
Director of Forestry in the proceeding in indorsement in which this Of fice fully
concurs.
The observations of responsible forest officials are most revealing of their zeal to
promote forest conservation and watershed protection especially in Olongapo,
Zambales area. In convincing fashion, they have demonstrated that to declare the
forest area involved as a forest reserve ratify than open it for timber exploitation
under license and regulation would do more harm than of to the public interest. To
convert the area into a forest reserve without an adequate forest protection force,
would make of it a 'Free Zone and Logging Paradise,' to the ever 'Problem Loggers'
of Dinalupihan, Bataan . . . an open target of timber smugglers, kaingineros and other
forms of forest vandals and despoilers. On the other hand, to award the area, as
planned, to a reputable and responsible licensee who shall conduct logging
operations therein under the selective logging method and who shall be obliged to
employ a sufficient number of forest guards to patrol and protect the forest
consecration and watershed protection.
9
Worthy of mention is the fact that the Bureau of Forestry had already conducted a
public bidding to determine the most qualified bidder to whom the area advertised
should be awarded. Needless to stress, the decision of the Director of Forestry to
dispose of the area thusly was arrived at after much thought and deliberation and
after having been convinced that to do so would not adversely affect the watershed in
that sector. The result of the bidding only have to be announced. To be sure, some of
the participating bidders like Mr. Edgardo Pascual, went to much expense in the
hope of winning a virgin forest concession. To suddenly make a turn about of this
decision without strong justifiable grounds, would cause the Bureau of Forestry and
this Office no end of embarrassment.
In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed
to proceed with the announcement of the results of the bidding for the subject forest
area (p. 13, CFI rec.).
The Office of the President in its 4th Indorsement dated February 2, 1962, signed by
Atty. Juan Cancio, Acting Legal Officer, "respectfully returned to the Honorable
Secretary of the Department of Agriculture and Natural Resources for appropriate
action," the papers subject of Forestry Notice No. 2087 which was referred to the
Bureau of Forestry for decision (p. 14, CFI rec.).
Finally, of the ten persons who submitted proposed the area was awarded to herein
petitioner-appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of
Forestry (p. 17, CFI rec.). Against this award, bidders Ravago Commercial Company
and Jorge Lao Happick filed motions for reconsideration which were denied by the
Director of Forestry on December 6, 1963.
On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M.
Gozon — who succeeded Secretary Cesar M. Fortich in office — issued General
Memorandum Order No. 46, series of 1963, pertinent portions of which state:
xxx xxx xxx
SUBJECT: ... ... ...
(D)elegation of authority to the Director of Forestry to grant ordinary timber
licenses.
1. ... ... ...
2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(be the extension of ordinary timber licenses for areas not exceeding 5,000 hectares
each;
3. This Order shall take effect immediately (p. 267, CFI rec.).
Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and
Natural Resources, replacing secretary Benjamin M. Gozon. Upon assumption of
office he Immediately promulgate on December 19, 19b3 General memorandum
Order No. 60, revoking the authority delegated to the Director of Forestry, under
General Memorandum order No. 46, to grant ordinary timber licenses, which order
took effect on the same day, December 19, 1963. Pertinent portions of the said Order
read as follows:
xxx xxx xxx
SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963
—
1. In order to acquaint the undersigned with the volume and Nature of the work of
the Department, the authority delegated to the Director of forestry under General
Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and (b)
the extension of ordinary timber licenses for areas not exceeding 3,000 hectares each
is hereby revoked. Until further notice, the issuance of' new licenses , including
amendments thereto, shall be signed by the secretary of Agriculture and Natural
Resources.
2. This Order shall take effect immediately and all other previous orders, directives,
circulars, memoranda, rules and regulations inconsistent with this Order are hereby
revoked (p. 268, CFl rec.; Emphasis supplied).
On the same date that the above-quoted memorandum took effect, December 19,
1963, Ordinary Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name
of Wenceslao Vinzons Tan, was signed by then Acting Director of Forestry
Estanislao R. Bernal without the approval of the Secretary of Agriculture and Natural
Resources. On January 6, 1964, the license was released by the Office of the Director
of Forestry (p. 30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of
Agriculture and Natural Resources as required by Order No. 60 aforequoted.
On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary
of Agriculture and Natural Resources shall be considered by tile Natural Resources
praying that, pending resolution of the appeal filed by Ravago Commercial Company
and Jorge Lao Happick from the order of the Director of Forestry denying their
motion for reconsideration, OTI No. 20-'64 in the name of Wenceslao V. Tan be
cancelled or revoked on the ground that the grant thereof was irregular, anomalous
and contrary to existing forestry laws, rules and regulations.
10
On March 9, 1964, acting on the said representation made by Ravago Commercial
Company, the Secretary of Agriculture and Natural Resources promulgated an order
declaring Ordinary Timber License No. 20-'64 issued in the name of Wenceslao
Vinzons Tan, as having been issued by the Director of Forestry without authority,
and is therefore void ab initio. The dispositive portion of said order reads as follows:
WHEREFORE, premises considered, this Office is of the opinion and so holds that
O.T. License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as hereby
it is, REVOKED AND DECLARED without force and effect whatsoever from the
issuance thereof.
The Director of Forestry is hereby directed to stop the logging operations of
Wenceslao Vinzons Tan, if there be any, in the area in question and shall see to it
that the appellee shall not introduce any further improvements thereon pending the
disposition of the appeals filed by Ravago Commercial Company and Jorge lao
Happick in this case" (pp. 30-31, CFI rec.).
Petitioner-appellant moved for a reconsideration of the order, but the Secretary of
Agriculture and Natural Resources denied the motion in an Order dated March 25,
1964, wherein this paragraph appears:
In this connection, it has been observed by the Acting Director of Forestry in his 2nd
indorsement of February 12, 1964, that the area in question composes of water basin
overlooking Olongapo, including the proposed Olongapo watershed Reservation; and
that the United States as well as the Bureau of Forestry has earmarked this entire
watershed for a watershed pilot forest for experiment treatment Concerning erosion
and water conservation and flood control in relation to wise utilization of the forest,
denudation, shifting cultivation, increase or decrease of crop harvest of agricultural
areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.).
On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the
separate appeals filed by Jorge Lao Happick and Ravago Commercial Company,
from the order of the Director of Forestry dated April 15, 1963, awarding to
Wenceslao Vinzons Tan the area under Notive No. 2087, and rejecting the proposals
of the other applicants covering the same area, promulgated an order commenting
that in view of the observations of the Director of Forestry just quoted, "to grant the
area in question to any of the parties herein, would undoubtedly adversely affect
public interest which is paramount to private interests," and concluding that, "for this
reason, this Office is of the opinion and so holds, that without the necessity of
discussing the appeals of the herein appellants, the said appeals should be, as hereby
they are, dismissed and this case is considered a closed matter insofar as this Office
is concerned" (p. 78, rec.).
On April 18, 1964, on the basis of the denial of his motion for reconsideration by the
Secretary of Agriculture and Natural Resources, petitioner-appellant filed the instant
case before tile court a quo (Court of First Instance, Manila), Special Civil Action
No. 56813, a petition for certiorari, prohibition and mandamus with preliminary
prohibitory injunction (pp. 1-12, CFI rec.). Petitioner-appellant claims that the
respondents-appellees "unlawfully, illegally whimsically, capriciously and arbitrarily
acted without or in excess of their jurisdiction, and/or with grave abuse of discretion
by revoking a valid and existing timber license without just cause, by denying
petitioner-appellant of the equal protection of the laws, by depriving him of his
constitutional right to property without due process of law, and in effect, by
impairing the obligation of contracts" (P. 6, CFI rec.). Petitioner-appellant prayed for
judgment making permanent the writ of preliminary injunction against the
respondents- appellees; declaring the orders of the Secretary of Agriculture and
Natural Resources dated March 9, March 25, and April 11, 1964, as well as all his
acts and those of the Director of Forestry implementing said orders, and all the
proceedings in connection therewith, null and void, unlawful and of no force and
effect; ordering the Director of Forestry to renew OTI No. 20-'64 upon expiration,
and sentencing the respondents, jointly and severally, to pay the petitioner-appellant
the sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary
damage, One Hundred Thousand Pesos (P100,000.00) by way of moral and
exemplary damages, and Thirty Thousand Pesos (P30,000-00) as attorney's fees and
costs. The respondents-appellees separately filed oppositions to the issuance of the
writ of preliminary injunction, Ravago Commercial Company, Jorge Lao, Happick
and Atanacio Mallari, presented petitions for intervention which were granted, and
they too opposed the writ.
The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the
following grounds: (1) that the court has no jurisdiction; (2) that the respondents may
not be sued without their consent; (3) that the petitioner has not exhausted all
available administrative remedies; (4) that the petition does not state a cause of
action; and (5) that purely administrative and discretionary functions of
administrative officials may not be interfered with by the courts. The Secretary of
Agriculture and Natural Resources joined the motion to dismiss when in his answer
of May 18, 1964, he avers the following special and affirmative defenses: (1) that the
court has no jurisdiction to entertain the action for certiorari, prohibition and
mandamus; (2) that the petitioner has no cause of action; (3) that venue is improperly
laid; (4) that the State is immune from suit without its consent; (5) that the court has
no power to interfere in purely administrative functions; and (6) that the cancellation
of petitioner's license was dictated by public policy (pp. 172-177, rec.). Intervenors
also filed their respective answers in intervention with special and affirmative
defenses (pp. 78-79, rec.). A hearing was held on the petition for the issuance of writ
of preliminary injunction, wherein evidence was submitted by all the parties
including the intervenors, and extensive discussion was held both orally and in
writing.
11
After the said hearing, on January 20, 1965, the court a quo, from the evidence
received, resolved not only the question on the issuance of a writ of preliminary
injunction but also the motion to dismiss, declared that the petition did not state a
sufficient cause of action, and dismissed the same accordingly. To justify such
action, the trial court, in its order dismissing the petition, stated that "the court feels
that the evidence presented and the extensive discussion on the issuance of the writ
of preliminary mandatory and prohibitory injunction should also be taken into
consideration in resolving not only this question but also the motion to dismiss,
because there is no reason to believe that the parties will change their stand,
arguments and evidence" (p. 478, CFI rec.). His motion for reconsideration having
been denied (p. 488, CFI rec.), petitioner-appellant Wenceslao Vinzons Tan appealed
directly to this Court.
I answer was interposed and no evidence introduced, the only facts which the court
Petitioner-appellant now comes before this Court, claiming that the trial court erred
in:
(1) holding that the petition does not state a sufficient cause of action: and
(2) dismissing the petition [p.27,rec. ].
He argues that the sole issue in the present case is, whether or not the facts in the
petition constitute a sufficient cause of action (p. 31, rec.). Petitioner-appellant, in his
brief, presented a lengthy discussion on the definition of the term cause of action
wherein he contended that the three essential elements thereon, — namely, the legal
right of the plaintiff, the correlative obligation of the defendants and the act or
omission of the defendant in violation of that right — are satisfied in the averments
of this petition (pp. 31-32, rec.). He invoked the rule that when the ground for
dismissal is that the complaint states no cause of action, such fact can be determined
only from the facts alleged in the complaint and from no other, and the court cannot
consider other matters aliunde He further invoked the rule that in a motion to dismiss
based on insufficiency of cause of action, the facts alleged in the complaint are
deemed hypothetically admitted for the purpose of the motion (pp. 32-33, rec.).
A perusal of the records of the case shows that petitioner-appellant's contentions are
untenable. As already observed, this case was presented to the trial court upon a
motion to dismiss for failure of the petition to state a claim upon which relief could
be granted (Rule 16 [g], Revised Rules of Court), on the ground that the timber
license relied upon by the petitioner- appellant in his petition was issued by the
Director of Forestry without authority and is therefore void ab initio. This motion
supplanted the general demurrer in an action at law and, as a rule admits, for the
purpose of the motion, ail facts which are well pleaded however while the court must
accept as true all well pleaded facts, the motion does not admit allegations of which
the court will take judicial notice are not true, nor does the rule apply to legally
impossible facts, nor to facts inadmissible in evidence, nor to facts which appear by
record or document included in the pleadings to be unfounded (Vol. 1, Moran's
Comments on the Rules of Court, 1970 ed., p. 505, citing cases).
It must be noted that there was a hearing held in the instant case wherein answers
were interposed and evidence introduced. In the course of the hearing, petitioner-
appellant had the opportunity to introduce evidence in support of tile allegations iii
his petition, which he readily availed of. Consequently, he is estopped from invoking
the rule that to determine the sufficiency of a cause of action on a motion to dismiss,
only the facts alleged in the complaint must be considered. If there were no hearing
held, as in the case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the
case was presented to District Court upon a motion to dismiss because of alleged
failure of complaint to state a claim upon which relief could be granted, and no
could properly consider in passing upon the motion were those facts appearing in the
complaint, supplemented be such facts as the court judicially knew.
In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru
Justice Conrado V. Sanchez, held that the trial court can properly dismiss a
complaint on a motion to dismiss due to lack of cause of action even without a
hearing, by taking into consideration the discussion in said motion and the opposition
thereto. Pertinent portion of said decision is hereby quoted:
Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court
below granted the motion, dismissed the petition. The motion to reconsider failed.
Offshoot is this appeal.
1. The threshold questions are these: Was the dismissal order issued without any
hearing on the motion to dismiss? Is it void?
WE go to the record. The motion to dismiss was filed on February 1, 1961 and set
for hearing on February 10 following. On February 8, 1961 petitioner's counsel
telegraphed the court, (r)equest postponement motion dismissal till written
opposition filed.' He did not appear at the scheduled hearing. But on March 4, 1961,
he followed up his wire, with his written opposition to the motion to dismiss.
Adverting to the 5-page motion to dismiss and the 6-page opposition thereto, We find
that the arguments pro and con on the question of the board's power to abolish
petitioner's position to discussed the problem said profusely cited authorities. The
May 15, 1961 8-page court order recited at length the said arguments and concluded
that petitioner made no case.
One good reason for the statutory requirement of hearing on a motion as to enable
the suitors to adduce evidence in support of their opposing claims. But here the
motion to dismiss is grounded on lack of cause of action. Existence of a cause of
action or lack of it is determined be a reference to the facts averred in the challenged
12
pleading. The question raised in the motion is purely one of law. This legal issue was
fully discussed in said motion and the opposition thereto. In this posture, oral
arguments on the motion are reduced to an unnecessary ceremony and should be
overlooked. And, correctly so, because the other intendment of the law in requiring
hearing on a motion, i.e., 'to avoid surprises upon the opposite party and to give to
the latter time to study and meet the arguments of the motion,' has been sufficiently
met. And then, courts do not exalt form over substance (Emphasis supplied).
Furthermore even if the complaint stated a valid cause of action, a motion to dismiss
for- insufficiency of cause of action will be granted if documentary evidence
admitted by stipulation disclosing facts sufficient to defeat the claim enabled the
court to go beyond disclosure in the complaint (LOCALS No. 1470, No. 1469, and
No. 1512 of the International Longshoremen's Association vs. Southern Pacific Co.,
6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals, Fifth Circuit, Dec. 7,
1952; 131 F. 2d 605). Thus, although the evidence of the parties were presented on
the question of granting or denying petitioner-appellant's application for a writ of
preliminary injunction, the trial court correctly applied said evidence in the
resolution of the motion to dismiss. Moreover, in applying said evidence in the
resolution of the motion to dismiss, the trial court, in its order dismissing the petition,
pointed out that, "there is no reason to believe that the parties will change their stand,
arguments and evidence" (p. 478, CFI rec.). Petitioner-appellant did not interpose
any objection thereto, nor presented new arguments in his motion for reconsideration
(pp. 482-484, CFI rec.). This omission means conformity to said observation, and a
waiver of his right to object, estopping him from raising this question for the first
time on appeal. " I question not raised in the trial court cannot be raised for the first
time on appeal" (Matienzo vs. Servidad, Sept. 10, 1981, 107 SCRA 276).
Moreover, petitioner-appellant cannot invoke the rule that, when the ground for
asking dismissal is that the complaint states no cause of action, its sufficiency must
be determined only from the allegations in the complaint. "The rules of procedure are
not to be applied in a very rigid, technical sense; rules of procedure are used only to
help secure substantial justice. If a technical and rigid enforcement of the rules is
made, their aim would be defeated. Where the rules are merely secondary in
importance are made to override the ends of justice; the technical rules had been
misapplied to the prejudice of the substantial right of a party, said rigid application
cannot be countenanced" (Vol. 1, Francisco, Civil Procedure, 2 ed., 1973, p. 157,
citing cases).
What more can be of greater importance than the interest of the public at large, more
particularly the welfare of the inhabitants of Olongapo City and Zambales province,
whose lives and properties are directly and immediately imperilled by forest
denudation.
The area covered by petitioner-appellant's timber license practically comprises the
entire Olongapo watershed (p. 265, CFI rec.). It is of public knowledge that
watersheds serves as a defense against soil erosion and guarantees the steady supply
of water. As a matter of general policy, the Philippine Constitution expressly
mandated the conservation and proper utilization of natural resources, which
includes the country's watershed. Watersheds in the Philippines had been subjected
to rampant abusive treatment due to various unscientific and destructive land use
practices. Once lush watersheds were wantonly deforested due to uncontrolled
timber cutting by licensed concessionaries and illegal loggers. This is one reason
why, in paragraph 27.of the rules and regulations included in the ordinary timber
license it is stated:
The terms and conditions of this license are subject to change at the discretion of the
Director of Forestry, and that this license may be made to expire at an earlier date,
when public interests so require (Exh. D, p. 22, CFI rec.).
Considering the overriding public interest involved in the instant case, We therefore
take judicial notice of the fact that, on April 30, 1964, the area covered by petitioner-
appellant's timber license has been established as the Olongapo Watershed Forest
Reserve by virtue of Executive Proclamation No. 238 by then President Diosdado
Macapagal which in parts read as follows:
Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as
amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw
from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve
for watershed, soil protection, and timber production purposes, subject to private
rights, if any there be, under the administration and control of the Director of
Forestry, xx the following parcels of land of the public domain situated in the
municipality of Olongapo, province of Zambales, described in the Bureau of Forestry
map No. FR-132, to wit: ... ... (60 O.G. No. 23, 3198).
Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his
alleged right over the timber concession in question. He argues thus: "The facts
alleged in the petition show: (1) the legal right of the petitioner to log in the area
covered by his timber license; (2) the legal or corresponding obligation on the part of
the respondents to give effect, recognize and respect the very timber license they
issued to the petitioner; and (3) the act of the respondents in arbitrarily revoking the
timber license of the petitioner without giving him his day in court and in preventing
him from using and enjoying the timber license issued to him in the regular course of
official business" (p. 32, rec.).
In the light of petitioner-appellant's arguments, it is readily seen that the whole
controversy hinges on the validity or invalidity of his timber license.
WE fully concur with the findings of the trial court that petitioner- appellant's timber
license was signed and released without authority by then Acting Director Estanislao
R. Bernal of Forestry, and is therefore void ab initio. WE hereby quote such findings:
13
In the first place, in general memorandum order No. 46 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 (Exhs. 2-A and 2-B
Ravago, embodied in Annex B; Exh. B). The petitioner contends that only 1,756
hectares of the said area contain commercial and operable forest; the authority given
to the Director of Forestry to grant a new ordinary timber license of not more than
3,000 hectares does not state that the whole area should be commercial and operable
forest. It should be taken into consideration that the 1,756 hectares containing
commercial and operable forest must have been distributed in the whole area of
6,420 hectares. Besides the license states, 'Please see attached sketch and technical
description,' gives an area of 6,420 hectares and does not state what is the area
covered of commmercial and operable forest (Exh. Ravago Also Annex B of the
petition, which was marked as Exhibit B, states:
Under Notice No. 2087, a tract of public forest containing 6,420 hectares located in
Olongapo, Zambales was declared available for timber utilization and development.
Pursuant to this Notice, there were received bid proposals from the following
persons: ...
Wherefore, confirming the findings of said Committee, the area described in Notice
No. 2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan,
subject to the following conditions: ... ...
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 signed by the
Acting Director of Forestry on December 19, 1963, and released to the petitioner on
January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to
grant a new ordinary timber license was contained in general memorandum order
No. 46 dated May 30, 1963. This was revoked by general memorandum order No.
60, which was promulgated 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 voidab initio (pp. 479480, CFI rec.).
The release of the license on January 6, 1964, gives rise to the impression that it was
ante-dated to December 19, 1963 on which date the authority of the Director of
Forestry was revoked. But, what is of greatest importance is the date of the release or
issuance, and not the date of the signing of the license. While petitioner-appellant's
timber license might have been signed on December 19, 1963 it was released only on
January 6, 1964. Before its release, no right is acquired by the licensee. As pointed
out by the trial court, the Director of Forestry had no longer any authority to release
the license on January 6, 1964. Therefore, petitioner-appellant had not acquired any
legal right under such void license. This is evident on the face of his petition as
supplemented by its annexes which includes Ordinary Timber License No. 20-'64
(NEW). Thus, in the case of World Wide Insurance & Surety Co., Inc. vs. Macrohon,
et al. (105 Phil. 250, Feb. 28, 1959), this Court held that if from the face of the
complaint, as supplemented by its annexes, plaintiff is not the owner, or entitled to
the properties it claims to have been levied upon and sold at public auction by the
defendants and for which it now seeks indemnity, the said complaint does not give
plaintiff any right of action against the defendants. In the same case, this Court
further held that, in acting on a motion to dismiss, the court cannot separate the
complaint from its annexes where it clearly appears that the claim of the plaintiff to
be the A owner of the properties in question is predicated on said annexes.
Accordingly, petitioner-appellant's petition must be dismissed due to lack of cause of
action.
II
Petitioner-appellant, in his petition, alleged that he has exhausted all his
administrative remedies to no avail as respondents-appellees have failed, neglected,
refused and continue to refuse to allow petitioner-appellant to continue operation in
the area covered by his timber license. He further alleged that he has neither recourse
by way of appeal, nor any plain, speedy and adequate remedy in the ordinary course
of law except thru this special civil action, as the last official act of the respondent-
appellee Secretary of Agriculture and Natural Resources in declaring void the timber
license referred to above after denying petitioner-appellant's motion for
reconsideration, is the last administrative act. Petitioner-appellant relies on the case
of Demaisip vs. The Court of Appeals, et al. (106 Phil. 237, Sept. 24, 1959), wherein
it was held that the failure of the plaintiff to appeal from the adverse decision of the
Secretary to the President cannot preclude the plaintiff from taking court action in
view of the theory that the Secretary of a department is merely an alter-ego of the
President. The presumption is that the action of the Secretary bears the implied
sanction of the President unless the same is disapproved by the latter (Villena vs. the
Secretary of Interior, 67 Phil. 451; p. 7, CFI rec.).
To this We cannot agree. Petitioner-appellant did not appeal the order of the
respondent Secretary of Agriculture and Natural Resources to the President of the
Philippines, who issued Executive Proclamation No. 238 withdrawing the area from
private exploitation, and establishing it as the Olongapo Watershed Forest Reserve.
Considering that the President has the power to review on appeal the orders or acts of
the respondents-appellees, the failure of the petitioner-appellant to take that appeal is
failure on his part to exhaust his administrative remedies. Thus, this Court, in the
case of Calo vs. Fuertes (5 SCRA 399, 400, June 29, 1962), held that:
At any rate, the appellant's contention that, as the Secretary of Agriculture and
Natural Resources is the alter ego of the President and his acts or decisions are also
those of the latter, he need not appeal from the decision or opinion of the former to
the latter, and that, such being the case, after he had appealed to the Secretary of
Agriculture and Natural Resources from the decision or opinion of the Director of
Lands he had exhausted the administrative remedies, is untenable.
14
The withdrawal of the appeal taken to the President of the Philippines is tantamount
to not appealing all thereto. Such withdrawal is fatal, because the appeal to the
President is the last step he should take in an administrative case.
In 1912, in the case of Lamb vs. Phipps (22 Phil. 491-92, July 22, 1912), this Court
stressed the doctrine of exhaustion of administrative remedies, thus:
When a plain, adequate and speedy remedy is afforded by and within the executive
department of the government the courts will not interfere until at least that remedy
has been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S.
651; U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs.
U.S., 28 Sup. Ct. Rep. 201). The administrative remedies afforded by law must first
be exhausted before resort can be had to the courts, especially when the
administrative remedies are by law exclusive and final. Some matters and some
questions are by law delegated entirely and absolutely to the discretion of particular
branches of the executive department of the government. When the law confers
exclusive and final jurisdiction upon the executive department of the government to
dispose of particular questions, their judgments or the judgments of that particular
department are no more reviewable by the courts than the final judgment or decisions
of the courts are subject to be reviewed and modified by them" (emphasis supplied).
Moreover, this being a special civil action, petitioner-appellant must allege and prove
that he has no other speedy and adequate remedy (Diego vs. The Court of Appeals, et
al., 54 Off. Gaz., No. 4, 956). In the case at bar, petitioner- appellant's speedy and
adequate remedy is an appeal to the President of the Philippines.
Accordingly, "it is settled to the point of being elementary that the only question
involved n certiorari is jurisdiction, either want of jurisdiction or excess thereof, and
abuse of discretion shall warrant the issuance of the extraordinary remedy of
certiorari when the same is so grave as when the power is exercised in an arbitrary or
despotic manner by reason of passion, prejudice or personal hostility, and it must be
so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal
to perform a duty enjoined, or to act at all in contemplation of law" FS Divinagracia
Agro-Commercial Inc. vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The
foregoing is on the assumption that there is any irregularity, albeit there is none in
the acts or omissions of the respondents-appellees. certiorari is not a substitute for
appeal as held time and again by this Court (People vs. Villanueva, 110 SCRA 465),
"it being a time honored and well known principle that before seeking judicial
redress, a party must first exhaust the administrative remedies available" (Garcia vs.
Teehankee, 27 SCRA 944, April 18, 1969).
Moreover, from the decision of the Secretary of Agriculture and Natural Resources
complained of, petitioners had a plain, speedy and adequate remedy by appealing
therefrom to the Chief Executive. In other words, before filing the present action for
certiorari in the court below, they should have availed of this administrative remedy
and their failure to do so must be deemed fatal to their case [Calo vs. Fuertes, et al.,
G.R. No. L-16537, June 29,1962]. To place petitioners' case beyond the pale of this
rule, they must show that their case falls — which it does not — within the cases
where, in accordance with our decisions, the aggrieved party need not exhaust
administrative remedies within his reach in the ordinary course of the law [Tapales
vs. The President and the Board of Regents of the U.P., G.R. No. L-17532, March
30, 1963; Mangubat vs. Osmena, G.R. No. L- 12837, April 30, 1959; Baguio vs.
Hon. Jose Rodriguez, G. R. No. L-11078, May 27, 1959; Pascual vs. Provincial
Board, G.R. No. L-11959, Oct. 31, 1959; Marinduque Iron Mines, etc. vs. Secretary
of Public Works, G.R. No. L-15982, May 31, 1963; Alzate vs. Aldaba, G.R. No. L-
14407, Feb. 29, 1960 and Demaisip vs. Court of Appeals, G.R. No. L- 13000, Sept.
25, 1959] (Ganob vs. Ramas, 27 SCRA 1178, April 28, 1969).
III
Petitioner-appellant not only failed to exhaust his administrative remedies, but also
failed to note that his action is a suit against the State which, under the doctrine of
State immunity from suit, cannot prosper unless the State gives its consent to be sued
Kawananakoa vs. Polybank, 205 U.S. 349; Siren vs. U.S., 7 Wall. 152; Sec. 16, Art.
XV, 1973 Constitution).
The respondents-appellees, in revoking the petitioner-appellant's timber license, were
acting within the scope of their authority. Petitioner-appellant contends that "this
case is not a suit against the State but an application of a sound principle of law
whereby administrative decisions or actuations may be reviewed by the courts as a
protection afforded the citizens against oppression" (p. 122, CFI rec.). But, piercing
the shard of his contention, We find that petitioner-appellant's action is just an
attempt to circumvent the rule establishing State exemption from suits. He cannot
use that principle of law to profit at the expense and prejudice of the State and its
citizens. The promotion of public welfare and the protection of the inhabitants near
the public forest are property, rights and interest of the State. Accordingly, "the rule
establishing State exeraiption from suits may not be circumvented by directing the
action against the officers of the State instead of against the State itself. In such cases
the State's immunity may be validly invoked against the action as long as it can be
shown that the suit really affects the property, rights, or interests of the State and not
merely those of the officer nominally made party defendant" (SINCO, Phil. Political
Law, 10th ed., p. 35; Salgado vs. Ramos, 64 Phil. 724; see also Angat River
Irrigation System vs. Angat River Workers' Union, G.R. No. L-10943-44, Dec. 28,
1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre Service, 18 SCRA
1120, 1121-1125; Bureau of Printing vs. Bureau of Printing Employees' Association,
1 SCRA 340, 341, 343).
Both the Secretary of Agriculture and Natural Resources and the Director of Forestry
acted in their capacity as officers of the State, representatives of the sovereign
15
authority discharging governmental powers. A private individual cannot issue a
timber license.
Consequently, a favorable judgment for the petitioner-appellant would result in the
government losing a substantial part of its timber resources. This being the case,
petitioner-appellant's action cannot prosper unless the State gives its consent to be
sued.
IV
Granting arguendo, that petitioner-appellant's timber license is valid, still
respondents-appellees can validly revoke his timber license. As pointed out earlier,
paragraph 27 of the rules and regulations included in the ordinary timber license
states: "The terms and conditions of this license are subject to change at the
discretion of the Director of Forestry, and that this license may be made to expire at
an earlier date, when public interests so require" (Exh. D, p. 22, CFI rec.). A timber
license is an instrument by which the State regulates the utilization and disposition of
forest resources to the end that public welfare is promoted. A timber license is not a
contract within the purview of the due process clause; it is only a license or privilege,
which can be validly withdrawn whenever dictated by public interest or public
welfare as in this ceise
"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" (37 C.J. 168). Thus, this Court held
that the granting of license does not create irrevocable rights, neither is it property or
property rights (People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs.
Provincial Board of Rizal (56 Phil. 123), it was held that:
A license authorizing the operation and exploitation of a cockpit is not property of
which the holder may not be deprived without due process of law, but a mere
privilege which may be revoked when public interests so require.
The welfare of the people is the supreme law. Thus, no franchise or right can be
availed of to defeat the proper exercise of police power (Surigao Electric Co., Inc.
vs. Municipality of Surigao, 24 SCRA 898, Aug. 30, 1968). The State has inherent
power enabling it to prohibit all things hurtful to comfort, safety, and welfare of
society (Edu vs. Ericta, 35 SCRA 481, Oct. 24,1970).
As provided in the aforecited provision, timber licenses are subject to the authority
of the Director of Forestry. The utilization and disposition of forest resources is
directly under the control and supervision of the Director of Forestry. However,
"while Section 1831 of the Revised Administrative Code provides that forest
products shall be cut, gathered and removed from any forest only upon license from
the Director of Forestry, it is no less true that as a subordinate officer, the Director of
Forestry is subject to the control of the Department Head or the Secretary of
Agriculture and Natural Resources (See. 79[c], Rev. Adm. Code), who, therefore,
may impose reasonable regulations in the exercise of the powers of the subordinate
officer" (Director of Forestry vs. Benedicto, 104 SCRA 309, May 5, 1981). The
power of control of the Department Head over bureaus and offices includes the
power to modify, reverse or set aside acts of subordinate officials (Province of
Pangasinan vs. Secretary of Public Works and Communications, 30 SCRA 134, Oct.
31, 1969; Montano vs. Silvosa, 97 Phil. 143, 144, 147-148). Accordingly,
respondent-appellee Secretary of Agriculture and Natural Resources has the
authority to revoke, on valid grounds, timber licenses issued by the Director of
Forestry. There being supporting evidence, the revocation of petitioner-appellant's
timber license was a wise exercise of the power of the respondent- appellee
(Secretary of Agriculture and Natural Resources) and therefore, valid.
Thus, "this Court had rigorously adhered to the principle of conserving forest
resources, as corollary to which the alleged right to them of private individuals or
entities was meticulously inquired into and more often than not rejected. We do so
again" (Director of Forestry vs. Benedicto, supra). WE reiterate Our fidelity to the
basic policy of conserving the national patrimony as ordained by the Constitution.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED
FROM IS HEREBY .AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-
APPELLANT.
SO ORDERED,
Concepcion Jr., Guerrero, Abad Santos and Escolin, JJ., concur.
Aquino, J, concurs in the result.
De Castro, JJ., is on leave.
16
SECOND DIVISION
[G.R. No. 132767. January 18, 2000]
PHILIPPINE VETERANS BANK, petitioner, vs. THE HON. COURT OF
APPEALS, HON. SECRETARY OF THE DEPT. OF AGRARIAN REFORM,
DEPT. OF AGRARIAN REFORM ADJUDICATION BOARD, DAVAO CITY
and LAND BANK OF THE PHILIPPINES, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision of the Court of Appeals,[1] dated August
28, 1997, affirming the dismissal by the Regional Trial Court, Branch 2, Tagum,
Davao, of the petition for judicial determination of the just compensation filed by
petitioner for the taking of its property under the Comprehensive Agrarian Reform
Program.
The facts are as follows:
Petitioner Philippine Veterans Bank owned four parcels of land in Tagum, Davao,
which are covered by Transfer Certificates of Title Nos. T-38666, T-38667, T-6236,
and T-27591. The lands were taken by the Department of Agrarian Reform for
distribution to landless farmers pursuant to the Comprehensive Agrarian Reform
Law (R.A. No. 6657). Dissatisfied with the valuation of the land made by
respondents Land Bank of the Philippines and the Department of Agrarian Reform
Adjudication Board (DARAB), petitioner filed a petition for a determination of the
just compensation for its property. The petition was filed on January 26, 1994 with
the Regional Trial Court, Branch 2, Tagum, Davao, which on February 23, 1995,
dismissed the petition on the ground that it was filed beyond the 15-day reglementary
period for filing appeals from the orders of the DARAB. Its order[2] states in
pertinent parts:
Since this case was filed only on January 26, 1994, the fifteen-day period provided
for under Section 51 of Republic Act 6657 which is the Comprehensive Agrarian
Reform Law within which to appeal, already lapsed.
Section 51 of Republic Act No. 6657 provides:
Section 51. Finality of Determination. - Any case or controversy before it (DAR)
shall be decided within thirty (30) days after it is submitted for resolution. Only one
(1) motion for reconsideration shall be allowed. Any order, ruling or decision shall
be final after the lapse of fifteen (15) days from receipt of a copy thereof.
On appeal to the Court of Appeals, the decision was affirmed. It was held that:
Jurisdiction over land valuation cases is lodged in the Department of Agrarian
Reform Adjudication Board, as is plainly provided under Rule II of the DARAB
Revised Rules of Procedure. Jksm
Section 1. Primary and Exclusive Original and Appellate Jurisdiction. The Board
shall have primary and exclusive jurisdiction, both original and appellate, to
determine and adjudicate all agrarian disputes, involving the implementation of the
Comprehensive Agrarian Reform Program (CARP) under Republic Act No. 6657,
Executive Order Nos. 228, 229, and 129-A, Republic Act No. 3844 as amended by
Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their
implementing rules and regulations. Specifically, such jurisdiction shall include but
not be limited to the following:
....
b) The valuation of land, and determination and payment of just compensation,
fixing and collection of lease rentals, disturbance compensation, amortization
payments, and similar disputes concerning the functions of the Land Bank of the
Philippines.
....
The above provision does not negate the original and exclusive jurisdiction vested in
Special Agrarian Court over all petitions for the determination of just compensation
to landowners as provided in Section 51 of R.A. 6657.
Note, however, must be taken of Rule XIII, Section 11 of the DARAB Rules of
Procedure, which specifically states that,
The decision of the Adjudicator on land valuation and preliminary determination and
payment of just compensation shall not be appealable to the Board but shall be
brought directly to the Regional Trial Court designated as Special Agrarian Courts
within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled
to only one motion for reconsideration.
....
In pursuance thereof, it is clear that the right of a landowner who disagrees with the
valuation fixed by the DAR to file a petition for the judicial fixing of just
compensation before special agrarian courts must be exercised within the period
provided in Rule XIII, Section 11.
In this case, appellant neither gives information regarding the date of its receipt of
the questioned Order of the DAR Provincial Adjudicator, nor disputes the conclusion
made by the trial court that, "(s)ince this case was filed only on January 26, 1994, the
17
fifteen-day period provided for under Section 51 of Republic Act 6657 which is the
Comprehensive Agrarian Reform Law within which to appeal already lapsed". The
court a quos conclusion therefore stands. It did not commit an error in dismissing the
petition filed by Philippine Veterans Bank for having been filed out of time. [3] Esmsc
Petitioner filed a motion for reconsideration, but its motion was likewise denied.
Hence, this petition for review. Petitioner raises the following issue:
SHOULD A PETITION FOR THE JUDICIAL FIXING OF JUST
COMPENSATION BEFORE SPECIAL AGRARIAN COURT BE [FILED]
WITHIN THE PERIOD PROVIDED IN RULE XIII, SECTION 11 OF THE
DARAB RULES OF PROCEDURE AND BEFORE THE DECISION OF THE
DAR PROVINCIAL ADJUDICATOR BECOMES FINAL AND EXECUTORY?
Petitioner argues that DAR adjudicators have no jurisdiction to determine the just
compensation for the taking of lands under the Comprehensive Agrarian Reform
Program, because such jurisdiction is vested in Regional Trial Courts designated as
Special Agrarian Courts and, therefore, a petition for the fixing of just compensation
can be filed beyond the 15-day period of appeal provided from the decision of the
DAR adjudicator.
On the other hand, respondents argue that actions for the fixing of just compensation
must be filed in the appropriate courts within 15 days from receipt of the decision of
the DAR adjudicator, otherwise such decision becomes final and executory, pursuant
to 51 of R.A. No. 6657.
Petitioners contention has no merit.
The pertinent provisions of R.A. No. 6657 provides:
Sec. 50. Quasi-Judicial Power of the DAR. - The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have
exclusive original jurisdiction over all matters involving the implementation of
agrarian reform, except those falling under the exclusive jurisdiction of the
Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR) . . . .
Sec. 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and
exclusive jurisdiction over all petitions for the determination of just compensation to
landowners, and the prosecution of all criminal offenses under this Act. The Rules of
Court shall apply to all proceedings before the Special Agrarian Courts, unless
modified by this Act.
The Special Agrarian Courts shall decide all appropriate cases under their special
jurisdiction within thirty (30) days from submission of the case for decision. Esmmis
There is nothing contradictory between the provision of 50 granting the DAR
primary jurisdiction to determine and adjudicate "agrarian reform matters" and
exclusive original jurisdiction over "all matters involving the implementation of
agrarian reform," which includes the determination of questions of just
compensation, and the provision of 57 granting Regional Trial Courts "original and
exclusive jurisdiction" over (1) all petitions for the determination of just
compensation to landowner, and (2) prosecutions of criminal offenses under R.A.
No. 6657.[4] The first refers to administrative proceedings, while the second refers to
judicial proceedings. Under R.A. No. 6657, the Land Bank of the Philippines is
charged with the preliminary determination of the value of lands placed under land
reform program and the compensation to be paid for their taking. It initiates the
acquisition of agricultural lands by notifying the landowner of the governments
intention to acquire his land and the valuation of the same as determined by the Land
Bank.[5] Within 30 days from receipt of notice, the landowner shall inform the DAR
of his acceptance or rejection of the offer.[6] In the event the landowner rejects the
offer, a summary administrative proceeding is held by the provincial (PARAD), the
regional (RARAD) or the central (DARAB) adjudicator, as the case may be,
depending on the value of the land, for the purpose of determining the compensation
for the land. The landowner, the Land Bank, and other interested parties are then
required to submit evidence as to the just compensation for the land. The DAR
adjudicator decides the case within 30 days after it is submitted for decision. [7] If the
landowner finds the price unsatisfactory, he may bring the matter directly to the
appropriate Regional Trial Court.[8]
To implement the provisions of R.A. No. 6657, particularly 50 thereof, Rule XIII, 11
of the DARAB Rules of Procedure provides:
Land Valuation and Preliminary Determination and Payment of Just Compensation. -
The decision of the Adjudicator on land valuation and preliminary determination and
payment of just compensation shall not be appealable to the Board but shall be
brought directly to the Regional Trial Courts designated as Special Agrarian Courts
within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled
to only one motion for reconsideration. Chief
As we held in Republic v. Court of Appeals,[9] this rule is an acknowledgment by the
DARAB that the power to decide just compensation cases for the taking of lands
under R.A. No. 6657 is vested in the courts. It is error to think that, because of Rule
XIII, 11, the original and exclusive jurisdiction given to the courts to decide petitions
for determination of just compensation has thereby been transformed into an
appellate jurisdiction. It only means that, in accordance with settled principles of
administrative law, primary jurisdiction is vested in the DAR as an administrative
agency to determine in a preliminary manner the reasonable compensation to be paid
for the lands taken under the Comprehensive Agrarian Reform Program, but such
determination is subject to challenge in the courts.
18
The jurisdiction of the Regional Trial Courts is not any less "original and exclusive"
because the question is first passed upon by the DAR, as the judicial proceedings are
not a continuation of the administrative determination. For that matter, the law may
provide that the decision of the DAR is final and unappealable. Nevertheless, resort
to the courts cannot be foreclosed on the theory that courts are the guarantors of the
legality of administrative action.[10]

Accordingly, as the petition in the Regional Trial Court was filed beyond the 15-day
period provided in Rule XIII, 11 of the Rules of Procedure of the DARAB, the trial
court correctly dismissed the case and the Court of Appeals correctly affirmed the
order of dismissal.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur. ULANDU

19
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 141309 June 19, 2007
LIWAYWAY VINZONS-CHATO, petitioner,
vs.
FORTUNE TOBACCO CORPORATION, respondent.
DECISION
YNARES-SANTIAGO, J.:
Petitioner assails the May 7, 1999 Decision1 of the Court of Appeals in CA-G.R. SP
No. 47167, which affirmed the September 29, 1997 Order 2 of the Regional Trial
Court (RTC) of Marikina, Branch 272, in Civil Case No. 97-341-MK, denying
petitioner’s motion to dismiss. The complaint filed by respondent sought to recover
damages for the alleged violation of its constitutional rights arising from petitioner’s
issuance of Revenue Memorandum Circular No. 37-93 (RMC 37-93), which the
Court declared invalid in Commissioner of Internal Revenue v. Court of Appeals.3
Petitioner Liwayway Vinzons-Chato was then the Commissioner of Internal Revenue
while respondent Fortune Tobacco Corporation is an entity engaged in the
manufacture of different brands of cigarettes, among which are "Champion,"
"Hope," and "More" cigarettes.
On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA 7654), which
took effect on July 3, 1993. Prior to its effectivity, cigarette brands ‘Champion,"
"Hope," and "More" were considered local brands subjected to an ad valorem tax at
the rate of 20-45%. However, on July 1, 1993, or two days before RA 7654 took
effect, petitioner issued RMC 37-93 reclassifying "Champion," "Hope," and "More"
as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad
valorem tax.4 RMC 37-93 in effect subjected "Hope," "More," and "Champion"
cigarettes to the provisions of RA 7654, specifically, to Sec. 142, 5 (c)(1) on locally
manufactured cigarettes which are currently classified and taxed at 55%, and
which imposes an ad valorem tax of "55% provided that the minimum tax shall not
be less than Five Pesos (P5.00) per pack." 6
On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor A. Deoferio,
Jr. sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to
no one in particular. On July 15, 1993, Fortune Tobacco received, by ordinary mail,
a certified xerox copy of RMC 37-93. On July 20, 1993, respondent filed a motion
for reconsideration requesting the recall of RMC 37-93, but was denied in a letter
dated July 30, 1993.7 The same letter assessed respondent for ad valorem tax
deficiency amounting to P9,598,334.00 (computed on the basis of RMC 37-93) and
demanded payment within 10 days from receipt thereof. 8 On August 3, 1993,
respondent filed a petition for review with the Court of Tax Appeals (CTA), which
on September 30, 1993, issued an injunction enjoining the implementation of RMC
37-93.9 In its decision dated August 10, 1994, the CTA ruled that RMC 37-93 is
defective, invalid, and unenforceable and further enjoined petitioner from collecting
the deficiency tax assessment issued pursuant to RMC No. 37-93. This ruling was
affirmed by the Court of Appeals, and finally by this Court in Commissioner of
Internal Revenue v. Court of Appeals.10 It was held, among others, that RMC 37-93,
has fallen short of the requirements for a valid administrative issuance.
On April 10, 1997, respondent filed before the RTC a complaint 11 for damages
against petitioner in her private capacity. Respondent contended that the latter should
be held liable for damages under Article 32 of the Civil Code considering that the
issuance of RMC 37-93 violated its constitutional right against deprivation of
property without due process of law and the right to equal protection of the laws.
Petitioner filed a motion to dismiss12 contending that: (1) respondent has no cause of
action against her because she issued RMC 37-93 in the performance of her official
function and within the scope of her authority. She claimed that she acted merely as
an agent of the Republic and therefore the latter is the one responsible for her acts;
(2) the complaint states no cause of action for lack of allegation of malice or bad
faith; and (3) the certification against forum shopping was signed by respondent’s
counsel in violation of the rule that it is the plaintiff or the principal party who
should sign the same.
On September 29, 1997, the RTC denied petitioner’s motion to dismiss holding that
to rule on the allegations of petitioner would be to prematurely decide the merits of
the case without allowing the parties to present evidence. It further held that the
defect in the certification against forum shopping was cured by respondent’s
submission of the corporate secretary’s certificate authorizing its counsel to execute
the certification against forum shopping. The dispositive portion thereof, states:
WHEREFORE, foregoing premises considered, the motion to dismiss filed by the
defendant Liwayway Vinzons-Chato and the motion to strike out and expunge from
the record the said motion to dismiss filed by plaintiff Fortune Tobacco Corporation
are both denied on the grounds aforecited. The defendant is ordered to file her
answer to the complaint within ten (10) days from receipt of this Order.
SO ORDERED.13
The case was elevated to the Court of Appeals via a petition for certiorari under Rule
65. However, same was dismissed on the ground that under Article 32 of the Civil
20
Code, liability may arise even if the defendant did not act with malice or bad faith.
The appellate court ratiocinated that Section 38, Book I of the Administrative Code
is the general law on the civil liability of public officers while Article 32 of the Civil
Code is the special law that governs the instant case. Consequently, malice or bad
faith need not be alleged in the complaint for damages. It also sustained the ruling of
the RTC that the defect of the certification against forum shopping was cured by the
submission of the corporate secretary’s certificate giving authority to its counsel to
execute the same.
Undaunted, petitioner filed the instant recourse contending that the suit is grounded
on her acts done in the performance of her functions as a public officer, hence, it is
Section 38, Book I of the Administrative Code which should be applied. Under this
provision, liability will attach only when there is a clear showing of bad faith,
malice, or gross negligence. She further averred that the Civil Code, specifically,
Article 32 which allows recovery of damages for violation of constitutional rights, is
a general law on the liability of public officers; while Section 38, Book I of the
Administrative Code is a special law on the superior public officers’ liability, such
that, if the complaint, as in the instant case, does not allege bad faith, malice, or gross
negligence, the same is dismissible for failure to state a cause of action. As to the
defect of the certification against forum shopping, she urged the Court to strictly
construe the rules and to dismiss the complaint.
Conversely, respondent argued that Section 38 which treats in general the public
officers’ "acts" from which civil liability may arise, is a general law; while Article 32
which deals specifically with the public officers’ violation of constitutional rights, is
a special provision which should determine whether the complaint states a cause of
action or not. Citing the case of Lim v. Ponce de Leon,14 respondent alleged that
under Article 32 of the Civil Code, it is enough that there was a violation of the
constitutional rights of the plaintiff and it is not required that said public officer
should have acted with malice or in bad faith. Hence, it concluded that even granting
that the complaint failed to allege bad faith or malice, the motion to dismiss for
failure to state a cause of action should be denied inasmuch as bad faith or malice are
not necessary to hold petitioner liable.
The issues for resolution are as follows:
(1) May a public officer be validly sued in his/her private capacity for acts done in
connection with the discharge of the functions of his/her office?
(2) Which as between Article 32 of the Civil Code and Section 38, Book I of the
Administrative Code should govern in determining whether the instant complaint
states a cause of action?
(3) Should the complaint be dismissed for failure to comply with the rule on
certification against forum shopping?
(4) May petitioner be held liable for damages?
On the first issue, the general rule is that a public officer is not liable for damages
which a person may suffer arising from the just performance of his official duties
and within the scope of his assigned tasks.15 An officer who acts within his authority
to administer the affairs of the office which he/she heads is not liable for damages
that may have been caused to another, as it would virtually be a charge against the
Republic, which is not amenable to judgment for monetary claims without its
consent.16 However, a public officer is by law not immune from damages in his/her
personal capacity for acts done in bad faith which, being outside the scope of his
authority, are no longer protected by the mantle of immunity for official actions. 17
Specifically, under Section 38, Book I of the Administrative Code, civil liability may
arise where there is bad faith, malice, or gross negligence on the part of a superior
public officer. And, under Section 39 of the same Book, civil liability may arise
where the subordinate public officer’s act is characterized by willfulness or
negligence. Thus –
Sec. 38. Liability of Superior Officers. – (1) A public officer shall not be civilly
liable for acts done in the performance of his official duties, unless there is a clear
showing of bad faith, malice or gross negligence.
xxxx
Section 39. Liability of Subordinate Officers. – No subordinate officer or
employee shall be civilly liable for acts done by him in good faith in the performance
of his duties. However, he shall be liable for willful or negligent acts done by him
which are contrary to law, morals, public policy and good customs even if he acts
under orders or instructions of his superior.
In addition, the Court held in Cojuangco, Jr. v. Court of Appeals,18 that a public
officer who directly or indirectly violates the constitutional rights of another, may be
validly sued for damages under Article 32 of the Civil Code even if his acts were not
so tainted with malice or bad faith.
Thus, the rule in this jurisdiction is that a public officer may be validly sued in
his/her private capacity for acts done in the course of the performance of the
functions of the office, where said public officer: (1) acted with malice, bad faith, or
negligence; or (2) where the public officer violated a constitutional right of the
plaintiff.
Anent the second issue, we hold that the complaint filed by respondent stated a cause
of action and that the decisive provision thereon is Article 32 of the Civil Code.
21
A general statute is one which embraces a class of subjects or places and does not
omit any subject or place naturally belonging to such class. A special statute, as the
term is generally understood, is one which relates to particular persons or things of a
class or to a particular portion or section of the state only. 19
A general law and a special law on the same subject are statutes in pari materia and
should, accordingly, be read together and harmonized, if possible, with a view to
giving effect to both. The rule is that where there are two acts, one of which is
special and particular and the other general which, if standing alone, would include
the same matter and thus conflict with the special act, the special law must prevail
since it evinces the legislative intent more clearly than that of a general statute and
must not be taken as intended to affect the more particular and specific provisions of
the earlier act, unless it is absolutely necessary so to construe it in order to give its
words any meaning at all.20
The circumstance that the special law is passed before or after the general act does
not change the principle. Where the special law is later, it will be regarded as an
exception to, or a qualification of, the prior general act; and where the general act is
later, the special statute will be construed as remaining an exception to its terms,
unless repealed expressly or by necessary implication. 21
Thus, in City of Manila v. Teotico,22 the Court held that Article 2189 of the Civil
Code which holds provinces, cities, and municipalities civilly liable for death or
injuries by reason of defective conditions of roads and other public works, is a
special provision and should prevail over Section 4 of Republic Act No. 409, the
Charter of Manila, in determining the liability for defective street conditions. Under
said Charter, the city shall not be held for damages or injuries arising from the failure
of the local officials to enforce the provision of the charter, law, or ordinance, or
from negligence while enforcing or attempting to enforce the same. As explained by
the Court:
Manila maintains that the former provision should prevail over the latter, because
Republic Act 409 is a special law, intended exclusively for the City of Manila,
whereas the Civil Code is a general law, applicable to the entire Philippines.
The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is
true that, insofar as its territorial application is concerned, Republic Act No. 409 is a
special law and the Civil Code a general legislation; but, as regards the subject
matter of the provisions above quoted, Section 4 of Republic Act 409 establishes a
general rule regulating the liability of the City of Manila for "damages or injury to
persons or property arising from the failure of" city officers "to enforce the
provisions of" said Act "or any other law or ordinance, or from negligence" of the
city "Mayor, Municipal Board, or other officers while enforcing or attempting to
enforce said provisions." Upon the other hand, Article 2189 of the Civil Code
constitutes a particular prescription making "provinces, cities and municipalities . . .
liable for damages for the death of, or injury suffered by, any person by reason" —
specifically — "of the defective condition of roads, streets, bridges, public buildings,
and other public works under their control or supervision." In other words, said
section 4 refers to liability arising from negligence, in general, regardless of the
object thereof, whereas Article 2189 governs liability due to "defective streets,"
in particular. Since the present action is based upon the alleged defective
condition of a road, said Article 2189 is decisive thereon.23
In the case of Bagatsing v. Ramirez,24 the issue was which law should govern the
publication of a tax ordinance, the City Charter of Manila, a special act which treats
ordinances in general and which requires their publication before enactment and after
approval, or the Tax Code, a general law, which deals in particular with "ordinances
levying or imposing taxes, fees or other charges," and which demands publication
only after approval. In holding that it is the Tax Code which should prevail, the
Court elucidated that:
There is no question that the Revised Charter of the City of Manila is a special act
since it relates only to the City of Manila, whereas the Local Tax Code is a general
law because it applies universally to all local governments. Blackstone defines
general law as a universal rule affecting the entire community and special law as one
relating to particular persons or things of a class. And the rule commonly said is that
a prior special law is not ordinarily repealed by a subsequent general law. The fact
that one is special and the other general creates a presumption that the special is to be
considered as remaining an exception of the general, one as a general law of the land,
the other as the law of a particular case. However, the rule readily yields to a
situation where the special statute refers to a subject in general, which the
general statute treats in particular. Th[is] exactly is the circumstance obtaining
in the case at bar. Section 17 of the Revised Charter of the City of Manila
speaks of "ordinance" in general, i.e., irrespective of the nature and scope
thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances
levying or imposing taxes, fees or other charges" in particular. In regard,
therefore, to ordinances in general, the Revised Charter of the City of Manila is
doubtless dominant, but, that dominant force loses its continuity when it
approaches the realm of "ordinances levying or imposing taxes, fees or other
charges" in particular. There, the Local Tax Code controls. Here, as always, a
general provision must give way to a particular provision. Special provision governs.
Let us examine the provisions involved in the case at bar. Article 32 of the Civil
Code provides:
ART. 32. Any public officer or employee, or any private individual, who directly or
indirectly obstructs, defeats, violates, or in any manner impedes or impairs any of the
following rights and liberties of another person shall be liable to the latter for
damages:
22
xxxx
(6) The right against deprivation of property without due process of law;
xxxx
(8) The right to the equal protection of the laws;
xxxx
The rationale for its enactment was explained by Dean Bocobo of the Code
Commission, as follows:
"DEAN BOCOBO. Article 32, regarding individual rights, Attorney Cirilo Paredes
proposes that Article 32 be so amended as to make a public official liable for
violation of another person’s constitutional rights only if the public official acted
maliciously or in bad faith. The Code Commission opposes this suggestion for these
reasons:
"The very nature of Article 32 is that the wrong may be civil or criminal. It is not
necessary therefore that there should be malice or bad faith. To make such a requisite
would defeat the main purpose of Article 32 which is the effective protection of
individual rights. Public officials in the past have abused their powers on the pretext
of justifiable motives or good faith in the performance of their duties. Precisely, the
object of the Article is to put an end to official abuse by the plea of good faith. In the
United States this remedy is in the nature of a tort.
"Mr. Chairman, this article is firmly one of the fundamental articles introduced in the
New Civil Code to implement democracy. There is no real democracy if a public
official is abusing and we made the article so strong and so comprehensive that it
concludes an abuse of individual rights even if done in good faith, that official is
liable. As a matter of fact, we know that there are very few public officials who
openly and definitely abuse the individual rights of the citizens. In most cases, the
abuse is justified on a plea of desire to enforce the law to comply with one’s duty.
And so, if we should limit the scope of this article, that would practically nullify the
object of the article. Precisely, the opening object of the article is to put an end to
abuses which are justified by a plea of good faith, which is in most cases the plea of
officials abusing individual rights." 25
The Code Commission deemed it necessary to hold not only public officers but also
private individuals civilly liable for violation of the rights enumerated in Article 32
of the Civil Code. It is not necessary that the defendant under this Article should
have acted with malice or bad faith, otherwise, it would defeat its main purpose,
which is the effective protection of individual rights. It suffices that there is a
violation of the constitutional right of the plaintiff.26
Article 32 was patterned after the "tort" in American law. 27 A tort is a wrong, a
tortious act which has been defined as the commission or omission of an act by one,
without right, whereby another receives some injury, directly or indirectly, in person,
property, or reputation.28 There are cases in which it has been stated that civil
liability in tort is determined by the conduct and not by the mental state of the
tortfeasor, and there are circumstances under which the motive of the defendant has
been rendered immaterial. The reason sometimes given for the rule is that otherwise,
the mental attitude of the alleged wrongdoer, and not the act itself, would determine
whether the act was wrongful.29 Presence of good motive, or rather, the absence of
an evil motive, does not render lawful an act which is otherwise an invasion of
another’s legal right; that is, liability in tort is not precluded by the fact that
defendant acted without evil intent.30
The clear intention therefore of the legislature was to create a distinct cause of action
in the nature of tort for violation of constitutional rights, irrespective of the motive or
intent of the defendant.31 This is a fundamental innovation in the Civil Code, and in
enacting the Administrative Code pursuant to the exercise of legislative powers, then
President Corazon C. Aquino, could not have intended to obliterate this
constitutional protection on civil liberties.
In Aberca v. Ver,32 it was held that with the enactment of Article 32, the principle of
accountability of public officials under the Constitution acquires added meaning and
assumes a larger dimension. No longer may a superior official relax his vigilance or
abdicate his duty to supervise his subordinates, secure in the thought that he does not
have to answer for the transgressions committed by the latter against the
constitutionally protected rights and liberties of the citizen. Part of the factors that
propelled people power in February 1986 was the widely held perception that the
government was callous or indifferent to, if not actually responsible for, the rampant
violations of human rights. While it would certainly be too naive to expect that
violators of human rights would easily be deterred by the prospect of facing damage
suits, it should nonetheless be made clear in no uncertain terms that Article 32 of the
Civil Code makes the persons who are directly, as well as indirectly, responsible for
the transgression, joint tortfeasors.
On the other hand, Sections 38 and 39, Book I of the Administrative Code, laid down
the rule on the civil liability of superior and subordinate public officers for acts done
in the performance of their duties. For both superior and subordinate public officers,
the presence of bad faith, malice, and negligence are vital elements that will make
them liable for damages. Note that while said provisions deal in particular with the
liability of government officials, the subject thereof is general, i.e., "acts" done in the
performance of official duties, without specifying the action or omission that may
give rise to a civil suit against the official concerned.
Contrarily, Article 32 of the Civil Code specifies in clear and unequivocal terms a
particular specie of an "act" that may give rise to an action for damages against a
23
public officer, and that is, a tort for impairment of rights and liberties. Indeed, Article
32 is the special provision that deals specifically with violation of constitutional
rights by public officers. All other actionable acts of public officers are governed by
Sections 38 and 39 of the Administrative Code. While the Civil Code, specifically,
the Chapter on Human Relations is a general law, Article 32 of the same Chapter is a
special and specific provision that holds a public officer liable for and allows redress
from a particular class of wrongful acts that may be committed by public officers.
Compared thus with Section 38 of the Administrative Code, which broadly deals
with civil liability arising from errors in the performance of duties, Article 32 of the
Civil Code is the specific provision which must be applied in the instant case
precisely filed to seek damages for violation of constitutional rights.

The complaint in the instant case was brought under Article 32 of the Civil Code.
Considering that bad faith and malice are not necessary in an action based on Article
32 of the Civil Code, the failure to specifically allege the same will not amount to
failure to state a cause of action. The courts below therefore correctly denied the
motion to dismiss on the ground of failure to state a cause of action, since it is
enough that the complaint avers a violation of a constitutional right of the plaintiff.

Anent the issue on non-compliance with the rule against forum shopping, the
subsequent submission of the secretary’s certificate authorizing the counsel to sign
and execute the certification against forum shopping cured the defect of respondent’s
complaint. Besides, the merits of the instant case justify the liberal application of the
rules.33

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of

the Court of Appeals dated May 7, 1999 which affirmed the Order of the Regional
Trial Court of Marikina, Branch 272, denying petitioner’s motion to dismiss,
is AFFIRMED. The Presiding Judge, Regional Trial Court of Marikina, Branch 272,
is herebyDIRECTED to continue with the proceedings in Civil Case No. 97-341-
MK with dispatch.

With costs.

SO ORDERED.

Austria-Martinez, Chico-Nazario, Nachura, JJ., concur.

24
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55273-83 December 19, 1981
GAUDENCIO RAYO, BIENVINIDO PASCUAL, TOMAS MANUEL,
MARIANO CRUZ, PEDRO BARTOLOME, BERNARDINO CRUZ JOSE
PALAD , LUCIO FAJARDO, FRANCISCO RAYOS, ANGEL TORRES,
NORBERTO TORRES, RODELIO JOAQUIN, PEDRO AQUINO,
APOLINARIO BARTOLOME, MAMERTO BERNARDO, CIRIACO
CASTILLO, GREGORIO CRUZ, SIMEON ESTRELLA, EPIFANIO
MARCELO, HERMOGENES SAN PEDRO, JUAN SANTOS, ELIZABETH
ABAN, MARCELINA BERNABE, BUENAVENTURA CRUZ, ANTONIO
MENESES, ROMAN SAN PEDRO, LOPEZ ESPINOSA, GODOFREDO
PUNZAL, JULIANA GARCIA, LEBERATO SARMIENTO, INOCENCIO DE
LEON, CARLOS CORREA, REYNALDO CASIMIRO, ANTONIO GENER,
GAUDENCIO CASTILLO, MATIAS PEREZ, CRISPINIANO TORRES,
CRESENCIO CRUZ, PROTACIO BERNABE, MARIANO ANDRES,
CRISOSTOMO CRUZ, MARCOS EUSTAQUIO, PABLO LEGASPI,
VICENTE PASCUAL, ALEJANDRA SISON, EUFRACIO TORRES,
ROGELIO BARTOLOME, RODOLFO BERNARDO, APOLONIO
CASTILLO, MARCELINO DALMACIO, EUTIQUIO LEGASPI, LORENZO
LUCIANO and GREGORIO PALAD, petitioners,
vs.
COURT OF FIRST INSTANCE OF BULACAN, BRANCH V, STA. MARIA,
and NATIONAL POWER CORPORATION, respondents.
ABAD SANTOS, J.:
The relevant antecedents of this case are narrated in the petition and have not been
controverted, namely:
3. At about midnight on October 26, 1978, during the height of that infamous
typhoon "KADING" the respondent corporation, acting through its plant
superintendent, Benjamin Chavez, opened or caused to be opened simultaneously all
the three floodgates of the Angat Dam. And as a direct and immediate result of the
sudden, precipitate and simultaneous opening of said floodgates several towns in
Bulacan were inundated. Hardest-hit was Norzagaray. About a hundred of its
residents died or were reported to have died and properties worth million of pesos
destroyed or washed away. This flood was unprecedented in Norzagaray.
4. Petitioners, who were among the many unfortunate victims of that man-caused
flood, filed with the respondent Court eleven complaints for damages against the
respondent corporation and the plant superintendent of Angat Dam, Benjamin
Chavez, docketed as Civil Cases Nos. SM-950 951, 953, 958, 959, 964, 965, 966,
981, 982 and 983. These complaints though separately filed have a common/similar
cause of action. ...
5. Respondent corporation filed separate answers to each of these eleven complaints.
Apart from traversing the material averments in the complaints and setting forth
counterclaims for damages respondent corporation invoked in each answer a special
and affirmative defense that "in the operation of the Angat Dam," it is "performing a
purely governmental function", hence it "can not be sued without the express consent
of the State." ...
6. On motion of the respondent corporation a preliminary hearing was held on its
affirmative defense as though a motion to dismiss were filed. Petitioners opposed the
prayer for dismissal and contended that respondent corporation is performing not
governmental but merely proprietary functions and that under its own organic act,
Section 3 (d) of Republic Act No. 6395, it can sue and be sued in any court. ...
7. On July 29, 1980 petitioners received a copy of the questioned order of the
respondent Court dated December 21, 1979 dismissing all their complaints as against
the respondent corporation thereby leaving the superintendent of the Angat Dam,
Benjamin Chavez, as the sole party-defendant. ...
8. On August 7, 1980 petitioners filed with the respondent Court a motion for
reconsideration of the questioned order of dismissal. ...
9. The respondent Court denied petitioners' motion for reconsideration in its order
dated October 3, 1980. ... Hence, the present petition for review on certiorari under
Republic Act No. 5440. (Rollo, pp. 3-6.)
The Order of dismissal dated December 12, 1979, reads as follows:
Under consideration is a motion to dismiss embodied as a special affirmative defense
in the answer filed by defendant NPC on the grounds that said defendant performs a
purely governmental function in the operation of the Angat Dam and cannot
therefore be sued for damages in the instant cases in connection therewith.
Plaintiffs' opposition to said motion to discuss, relying on Sec. 3 (d) of Republic Act
6396 which imposes on the NPC the power and liability to sue and be sued in any
court, is not tenable since the same refer to such matters only as are within the scope
of the other corporate powers of said defendant and not matters of tort as in the
instant cases. It being an agency performing a purely governmental function in the
operation of the Angat Dam, said defendant was not given any right to commit
25
wrongs upon individuals. To sue said defendant for tort may require the express "sue and be sued in any court" is without qualification on the cause of action and
consent of the State. accordingly it can include a tort claim such as the one instituted by the petitioners.

WHEREFORE, the cases against defendant NPC are hereby dismissed. (Rollo, p. WHEREFORE, the petition is hereby granted; the Orders of the respondent court
60.) dated December 12, 1979 and October 3, 1980, are set aside; and said court is
ordered to reinstate the complaints of the petitioners. Costs against the NPC.
The Order dated October 3, 1980, denying the motion for reconsideration filed by the
plaintiffs is pro forma; the motion was simply denied for lack of merit. (Rollo, p. SO ORDERED.
74.)
Barredo (Chairman), Aquino, De Castro, Ericta and Escolin JJ., concur.
The petition to review the two orders of the public respondent was filed on October
16, 1980, and on October 27, 1980, We required the respondents to comment. It was Concepcion Jr., J., is on leave.
only on April 13, 1981, after a number of extensions, that the Solicitor General filed
the required comment. (Rollo, pp. 107-114.)

On May 27, 1980, We required the parties to file simultaneous memoranda within
twenty (20) days from notice. (Rollo, p. 115.) Petitioners filed their memorandum on
July 22, 1981. (Rollo, pp. 118-125.) The Solicitor General filed a number of motions
for extension of time to file his memorandum. We granted the seventh extension
with a warning that there would be no further extension. Despite the warning the
Solicitor General moved for an eighth extension which We denied on November 9,
1981. A motion for a ninth extension was similarly denied on November 18, 1981.
The decision in this case is therefore, without the memorandum of the Solicitor
General.

The parties are agreed that the Order dated December 21, 1979, raises the following
issues:

1. Whether respondent National Power Corporation performs a governmental

function with respect to the management and operation of the Angat Dam; and

2. Whether the power of respondent National Power Corporation to sue and be sued
under its organic charter includes the power to be sued for tort.

The petition is highly impressed with merit.

It is not necessary to write an extended dissertation on whether or not the NPC

performs a governmental function with respect to the management and operation of
the Angat Dam. It is sufficient to say that 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. (R.A. No. 6395, Sec. 3 (d).) As a government owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the
Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874,
August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that the NPC can

26
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-52179 April 8, 1991
MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner
vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA,
IAUREANO BANIÑA, JR., SOR MARIETA BANIÑA, MONTANO BANIÑA,
ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents.
Mauro C. Cabading, Jr. for petitioner.
Simeon G. Hipol for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary
mandatory injunction seeking the nullification or modification of the proceedings
and the orders issued by the respondent Judge Romeo N. Firme, in his capacity as the
presiding judge of the Court of First Instance of La Union, Second Judicial District,
Branch IV, Bauang, La Union in Civil Case No. 107-BG, entitled "Juana Rimando
Baniña, et al. vs. Macario Nieveras, et al." dated November 4, 1975; July 13, 1976;
August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10,
1979 ordering defendants Municipality of San Fernando, La Union and Alfredo
Bislig to pay, jointly and severally, the plaintiffs for funeral expenses, actual
damages consisting of the loss of earning capacity of the deceased, attorney's fees
and costs of suit and dismissing the complaint against the Estate of Macario Nieveras
and Bernardo Balagot.
The antecedent facts are as follows:
Petitioner Municipality of San Fernando, La Union is a municipal corporation
existing under and in accordance with the laws of the Republic of the Philippines.
Respondent Honorable Judge Romeo N. Firme is impleaded in his official capacity
as the presiding judge of the Court of First Instance of La Union, Branch IV,
Bauang, La Union. While private respondents Juana Rimando-Baniña, Laureano
Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña
are heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-
Bg before the aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a collision occurred
involving a passenger jeepney driven by Bernardo Balagot and owned by the Estate
of Macario Nieveras, a gravel and sand truck driven by Jose Manandeg and owned
by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La
Union and driven by Alfredo Bislig. Due to the impact, several passengers of the
jeepney including Laureano Baniña Sr. died as a result of the injuries they sustained
and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages
against the Estate of Macario Nieveras and Bernardo Balagot, owner and driver,
respectively, of the passenger jeepney, which was docketed Civil Case No. 2183 in
the Court of First Instance of La Union, Branch I, San Fernando, La Union.
However, the aforesaid defendants filed a Third Party Complaint against the
petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over by
respondent judge and was subsequently docketed as Civil Case No. 107-Bg. By
virtue of a court order dated May 7, 1975, the private respondents amended the
complaint wherein the petitioner and its regular employee, Alfredo Bislig were
impleaded for the first time as defendants. Petitioner filed its answer and raised
affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the
passenger jeepney as the proximate cause of the collision.
In the course of the proceedings, the respondent judge issued the following
questioned orders, to wit:
(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo
Balagot;
(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of
San Fernando, La Union and Bislig and setting the hearing on the affirmative
defenses only with respect to the supposed lack of jurisdiction;
(3) Order dated August 23, 1976 deferring there resolution of the grounds for the
Motion to Dismiss until the trial;
(4) Order dated February 23, 1977 denying the motion for reconsideration of the
order of July 13, 1976 filed by the Municipality and Bislig for having been filed out
of time;
(5) Order dated March 16, 1977 reiterating the denial of the motion for
reconsideration of the order of July 13, 1976;
27
(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it
appearing that parties have not yet submitted their respective memoranda despite the
court's direction; and
(7) Order dated September 7, 1979 denying the petitioner's motion for
reconsideration and/or order to recall prosecution witnesses for cross examination.
On October 10, 1979 the trial court rendered a decision, the dispositive portion is
hereunder quoted as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for
the plaintiffs, and defendants Municipality of San Fernando, La Union and Alfredo
Bislig are ordered to pay jointly and severally, plaintiffs Juana Rimando-Baniña,
Mrs. Priscilla B. Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B.
Soriano, Montano Baniña, Orja Baniña and Lydia B. Baniña the sums of P1,500.00
as funeral expenses and P24,744.24 as the lost expected earnings of the late
Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as attorney's
fees. Costs against said defendants.
The Complaint is dismissed as to defendants Estate of Macario Nieveras and
Bernardo Balagot.
SO ORDERED. (Rollo, p. 30)
Petitioner filed a motion for reconsideration and for a new trial without prejudice to
another motion which was then pending. However, respondent judge issued another
order dated November 7, 1979 denying the motion for reconsideration of the order of
September 7, 1979 for having been filed out of time.
Finally, the respondent judge issued an order dated December 3, 1979 providing that
if defendants municipality and Bislig further wish to pursue the matter disposed of in
the order of July 26, 1979, such should be elevated to a higher court in accordance
with the Rules of Court. Hence, this petition.
Petitioner maintains that the respondent judge committed grave abuse of discretion
amounting to excess of jurisdiction in issuing the aforesaid orders and in rendering a
decision. Furthermore, petitioner asserts that while appeal of the decision maybe
available, the same is not the speedy and adequate remedy in the ordinary course of
law.
On the other hand, private respondents controvert the position of the petitioner and
allege that the petition is devoid of merit, utterly lacking the good faith which is
indispensable in a petition for certiorari and prohibition. (Rollo, p. 42.) In addition,
the private respondents stress that petitioner has not considered that every court,
including respondent court, has the inherent power to amend and control its process
and orders so as to make them conformable to law and justice. (Rollo, p. 43.)
The controversy boils down to the main issue of whether or not the respondent court
committed grave abuse of discretion when it deferred and failed to resolve the
defense of non-suability of the State amounting to lack of jurisdiction in a motion to
dismiss.
In the case at bar, the respondent judge deferred the resolution of the defense of non-
suability of the State amounting to lack of jurisdiction until trial. However, said
respondent judge failed to resolve such defense, proceeded with the trial and
thereafter rendered a decision against the municipality and its driver.
The respondent judge did not commit grave abuse of discretion when in the exercise
of its judgment it arbitrarily failed to resolve the vital issue of non-suability of the
State in the guise of the municipality. However, said judge acted in excess of his
jurisdiction when in his decision dated October 10, 1979 he held the municipality
liable for the quasi-delict committed by its regular employee.
The doctrine of non-suability of the State is expressly provided for in Article XVI,
Section 3 of the Constitution, to wit: "the State may not be sued without its consent."
Stated in simple parlance, the general rule is that the State may not be sued
except when it gives consent to be sued. Consent takes the form of express or implied
consent.
Express consent may be embodied in a general law or a special law. The standing
consent of the State to be sued in case of money claims involving liability arising
from contracts is found in Act No. 3083. A special law may be passed to enable a
person to sue the government for an alleged quasi-delict, as in Merritt v. Government
of the Philippine Islands (34 Phil 311). (see United States of America v. Guinto, G.R.
No. 76607, February 26, 1990, 182 SCRA 644, 654.)
Consent is implied when the government enters into business contracts, thereby
descending to the level of the other contracting party, and also when the State files a
complaint, thus opening itself to a counterclaim. (Ibid)
Municipal corporations, for example, like provinces and cities, are agencies of the
State when they are engaged in governmental functions and therefore should enjoy
the sovereign immunity from suit. Nevertheless, they are subject to suit even in the
performance of such functions because their charter provided that they can sue and
be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)
A distinction should first be made between suability and liability. "Suability depends
on the consent of the state to be sued, liability on the applicable law and the
28
established facts. The circumstance that a state is suable does not necessarily mean
that it is liable; on the other hand, it can never be held liable if it does not first
consent to be sued. Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its sovereign immunity, it is
only giving the plaintiff the chance to prove, if it can, that the defendant is liable."
(United States of America vs. Guinto, supra, p. 659-660)
Anent the issue of whether or not the municipality is liable for the torts committed by
its employee, the test of liability of the municipality depends on whether or not the
driver, acting in behalf of the municipality, is performing governmental or
proprietary functions. As emphasized in the case of Torio vs. Fontanilla (G. R. No.
L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of powers becomes
important for purposes of determining the liability of the municipality for the acts of
its agents which result in an injury to third persons.
Another statement of the test is given in City of Kokomo vs. Loy, decided by the
Supreme Court of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity, and their functions are twofold. In
one they exercise the right springing from sovereignty, and while in the performance
of the duties pertaining thereto, their acts are political and governmental. Their
officers and agents in such capacity, though elected or appointed by them, are
nevertheless public functionaries performing a public service, and as such they are
officers, agents, and servants of the state. In the other capacity the municipalities
exercise a private, proprietary or corporate right, arising from their existence as legal
persons and not as public agencies. Their officers and agents in the performance of
such functions act in behalf of the municipalities in their corporate or individual
capacity, and not for the state or sovereign power." (112 N.E., 994-995) (Ibid, pp.
605-606.)
of Court. Hence, We rule that the driver of the dump truck was performing duties or
tasks pertaining to his office.
We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the
District Engineer, and the Provincial Treasurer (102 Phil 1186) that "the construction
or maintenance of roads in which the truck and the driver worked at the time of the
accident are admittedly governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the
conclusion that the municipality cannot be held liable for the torts committed by its
regular employee, who was then engaged in the discharge of governmental
functions. Hence, the death of the passenger –– tragic and deplorable though it may
be –– imposed on the municipality no duty to pay monetary compensation.
All premises considered, the Court is convinced that the respondent judge's
dereliction in failing to resolve the issue of non-suability did not amount to grave
abuse of discretion. But said judge exceeded his jurisdiction when it ruled on the
issue of liability.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent
court is hereby modified, absolving the petitioner municipality of any liability in
favor of private respondents.
SO ORDERED.
Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

It has already been remarked that municipal corporations are suable because their
charters grant them the competence to sue and be sued. Nevertheless, they are
generally not liable for torts committed by them in the discharge of governmental
functions and can be held answerable only if it can be shown that they were acting in
a proprietary capacity. In permitting such entities to be sued, the State merely gives
the claimant the right to show that the defendant was not acting in its governmental
capacity when the injury was committed or that the case comes under the exceptions
recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he
was on his way to the Naguilian river to get a load of sand and gravel for the repair
of San Fernando's municipal streets." (Rollo, p. 29.)

In the absence of any evidence to the contrary, the regularity of the performance of
official duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules
29
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 159402 February 23, 2011
AIR TRANSPORTATION OFFICE, Petitioner,
vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.
RESOLUTION
BERSAMIN, J.:
The State’s immunity from suit does not extend to the petitioner because it is an
agency of the State engaged in an enterprise that is far from being the State’s
exclusive prerogative.
Under challenge is the decision promulgated on May 14, 2003, 1 by which the Court
of Appeals (CA) affirmed with modification the decision rendered on February 21,
2001 by the Regional Trial Court, Branch 61 (RTC), in Baguio City in favor of the
respondents.2
Antecedents
Spouses David and Elisea Ramos (respondents) discovered that a portion of their
land registered under Transfer Certificate of Title No. T-58894 of the Baguio City
land records with an area of 985 square meters, more or less, was being used as part
of the runway and running shoulder of the Loakan Airport being operated by
petitioner Air Transportation Office (ATO). On August 11, 1995, the respondents
agreed after negotiations to convey the affected portion by deed of sale to the ATO
in consideration of the amount of P778,150.00. However, the ATO failed to pay
despite repeated verbal and written demands.
Thus, on April 29, 1998, the respondents filed an action for collection against the
ATO and some of its officials in the RTC (docketed as Civil Case No. 4017-R and
entitled Spouses David and Elisea Ramos v. Air Transportation Office, Capt. Panfilo
Villaruel, Gen. Carlos Tanega, and Mr. Cesar de Jesus).
In their answer, the ATO and its co-defendants invoked as an affirmative defense the
issuance of Proclamation No. 1358, whereby President Marcos had reserved certain
parcels of land that included the respondents’ affected portion for use of the Loakan
Airport. They asserted that the RTC had no jurisdiction to entertain the action
without the State’s consent considering that the deed of sale had been entered into in
the performance of governmental functions.
On November 10, 1998, the RTC denied the ATO’s motion for a preliminary hearing
of the affirmative defense.
After the RTC likewise denied the ATO’s motion for reconsideration on December
10, 1998, the ATO commenced a special civil action for certiorari in the CA to assail
the RTC’s orders. The CA dismissed the petition for certiorari, however, upon its
finding that the assailed orders were not tainted with grave abuse of discretion. 3
Subsequently, February 21, 2001, the RTC rendered its decision on the
merits,4 disposing:
WHEREFORE, the judgment is rendered ORDERING the defendant Air
Transportation Office to pay the plaintiffs DAVID and ELISEA RAMOS the
following: (1) The amount of P778,150.00 being the value of the parcel of land
appropriated by the defendant ATO as embodied in the Deed of Sale, plus an annual
interest of 12% from August 11, 1995, the date of the Deed of Sale until fully paid;
(2) The amount of P150,000.00 by way of moral damages and P150,000.00 as
exemplary damages; (3) the amount of P50,000.00 by way of attorney’s fees
plusP15,000.00 representing the 10, more or less, court appearances of plaintiff’s
counsel; (4) The costs of this suit.
SO ORDERED.
In due course, the ATO appealed to the CA, which affirmed the RTC’s decision on
May 14, 2003,5 viz:
IN VIEW OF ALL THE FOREGOING, the appealed decision is
hereby AFFIRMED, with MODIFICATION that the awarded cost therein is deleted,
while that of moral and exemplary damages is reduced to P30,000.00 each, and
attorney’s fees is lowered to P10,000.00.
No cost.
SO ORDERED.
Hence, this appeal by petition for review on certiorari.
Issue
The only issue presented for resolution is whether the ATO could be sued without
the State’s consent.
Ruling
30
The petition for review has no merit.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State, is expressly provided in Article XVI of the
1987 Constitution, viz:
Section 3. The State may not be sued without its consent.
The immunity from suit is based on the political truism that the State, as a sovereign,
can do no wrong. Moreover, as the eminent Justice Holmes said in Kawananakoa v.
Polyblank:6
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves,
178 US 436, 44 L ed 1140, 20 Sup. Ct. Rep. 919), and it took no objection to the
proceedings in the cases cited if it could have done so. xxx But in the case at bar it
did object, and the question raised is whether the plaintiffs were bound to yield.
Some doubts have been expressed as to the source of the immunity of a sovereign
power from suit without its own permission, but the answer has been public property
since before the days of Hobbes. Leviathan, chap. 26, 2. 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. "Car on peut bien recevoir loy d'autruy, mais il
est impossible par nature de se donner loy." Bodin, Republique, 1, chap. 8, ed. 1629,
p. 132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur
necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539,
fol. 61.7
Practical considerations dictate the establishment of an immunity from suit in favor
of the State. Otherwise, and the State is suable at the instance of every other
individual, government service may be severely obstructed and public safety
endangered because of the number of suits that the State has to defend
against.8 Several justifications have been offered to support the adoption of the
doctrine in the Philippines, but that offered in Providence Washington Insurance Co.
v. Republic of the Philippines9 is "the most acceptable explanation," according to
Father Bernas, a recognized commentator on Constitutional Law,10 to wit:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as
against the inconvenience that may be caused private parties, the loss of
governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well-known
propensity on the part of our people to go to court, at the least provocation, the loss
of time and energy required to defend against law suits, in the absence of such a
basic principle that constitutes such an effective obstacle, could very well be
imagined.
An unincorporated government agency without any separate juridical personality of
its own enjoys immunity from suit because it is invested with an inherent power of
sovereignty. Accordingly, a claim for damages against the agency cannot prosper;
otherwise, the doctrine of sovereign immunity is violated. 11 However, the need to
distinguish between an unincorporated government agency performing governmental
function and one performing proprietary functions has arisen. The immunity has
been upheld in favor of the former because its function is governmental or incidental
to such function;12 it has not been upheld in favor of the latter whose function was
not in pursuit of a necessary function of government but was essentially a business. 13
Should the doctrine of sovereignty immunity or non-suability of the State be
extended to the ATO?
In its challenged decision,14 the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us that the subject
contract of sale partook of a governmental character. Apropos, the lower court erred
in applying the High Court’s ruling in National Airports Corporation vs.
Teodoro (91 Phil. 203 [1952]), arguing that in Teodoro, the matter involved the
collection of landing and parking fees which is a proprietary function, while the case
at bar involves the maintenance and operation of aircraft and air navigational
facilities and services which are governmental functions.
We are not persuaded.
Contrary to appellants’ conclusions, it was not merely the collection of landing and
parking fees which was declared as proprietary in nature by the High Court
in Teodoro, but management and maintenance of airport operations as a whole, as
well. Thus, in the much later case of Civil Aeronautics Administration vs. Court of
Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the pronouncements
laid down in Teodoro, declared that the CAA (predecessor of ATO) is an agency not
immune from suit, it being engaged in functions pertaining to a private entity. It went
on to explain in this wise:
xxx
The Civil Aeronautics Administration comes under the category of a private entity.
Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of
travel and the convenience of the travelling public. It is engaged in an enterprise
which, far from being the exclusive prerogative of state, may, more than the
construction of public roads, be undertaken by private concerns. [National Airports
Corp. v. Teodoro, supra, p. 207.]
31
xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec.
Order 365 (Reorganizing the Civil Aeronautics Administration and Abolishing the
National Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act of the
Philippines), subsequently enacted on June 20, 1952, did not alter the character of
the CAA’s objectives under Exec. Order 365. The pertinent provisions cited in
the Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which led the Court
to consider the CAA in the category of a private entity were retained substantially in
Republic Act 776, Sec. 32(24) and (25). Said Act provides:
Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and
supervision of the Department Head, the Administrator shall have among others, the
following powers and duties:
xxx
(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government-owned aerodromes except those controlled
or operated by the Armed Forces of the Philippines including such powers and duties
as: (a) to plan, design, construct, equip, expand, improve, repair or alter aerodromes
or such structures, improvement or air navigation facilities; (b) to enter into, make
and execute contracts of any kind with any person, firm, or public or private
corporation or entity; …
(25) To determine, fix, impose, collect and receive landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under its management and
control.
xxx
From the foregoing, it can be seen that the CAA is tasked with private or non-
governmental functions which operate to remove it from the purview of the rule on
State immunity from suit. For the correct rule as set forth in the Teodoro case states:
xxx
Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity from suits is determined by the character of the objects for which the
entity was organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they have assumed to
act in 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 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) [National Airports Corporation v. Teodoro, supra, pp.
206-207; Italics supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine
National Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 63], where it was
held that the Philippine National Railways, although owned and operated by the
government, was not immune from suit as it does not exercise sovereign but purely
proprietary and business functions. Accordingly, as the CAA was created to
undertake the management of airport operations which primarily involve proprietary
functions, it cannot avail of the immunity from suit accorded to government agencies
performing strictly governmental functions.15
In our view, 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 State’s immunity from suit.
We uphold the CA’s aforequoted holding.
We further observe 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.16 Thus, in De los Santos v. Intermediate Appellate
Court,17 the trial court’s dismissal based on the doctrine of non-suability of the State
of two cases (one of which was for damages) filed by owners of property where a
road 9 meters wide and 128.70 meters long occupying a total area of 1,165 square
meters and an artificial creek 23.20 meters wide and 128.69 meters long occupying
an area of 2,906 square meters had been constructed by the provincial engineer of
Rizal and a private contractor without the owners’ knowledge and consent was
reversed and the cases remanded for trial on the merits. The Supreme Court ruled
that the doctrine of sovereign immunity was not an instrument for perpetrating any
injustice on a citizen. In exercising the right of eminent domain, the Court explained,
the State exercised its jus imperii, as distinguished from its proprietary rights, or jus
gestionis; yet, even in that area, where private property had been taken in
expropriation without just compensation being paid, the defense of immunity from
suit could not be set up by the State against an action for payment by the owners.
32
Lastly, the issue of whether or not the ATO could be sued without the State’s With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the
consent has been rendered moot by the passage of Republic Act No. 9497, otherwise obligations that the ATO had incurred by virtue of the deed of sale with the Ramos
known as the Civil Aviation Authority Act of 2008. spouses might now be enforced against the CAAP.

R.A. No. 9497 abolished the ATO, to wit: WHEREFORE, the Court denies the petition for review on certiorari, and affirms the
decision promulgated by the Court of Appeals.
Section 4. Creation of the Authority. – There is hereby created an independent
regulatory body with quasi-judicial and quasi-legislative powers and possessing No pronouncement on costs of suit.
corporate attributes to be known as the Civil Aviation Authority of the Philippines
(CAAP), herein after referred to as the "Authority" attached to the Department of SO ORDERED.
Transportation and Communications (DOTC) for the purpose of policy
coordination. For this purpose, the existing Air transportation Office created
under the provisions of Republic Act No. 776, as amended is hereby abolished.

xxx

Under 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 ATO’s powers, duties and rights, assets, real and personal properties, funds, and
revenues, viz:

CHAPTER XII
TRANSITORTY PROVISIONS

Section 85. Abolition of the Air Transportation Office. – The Air Transportation
Office (ATO) created under Republic Act No. 776, a sectoral office of the
Department of Transportation and Communications (DOTC), is hereby
abolished.1avvphi1

All powers, duties and rights vested by law and exercised by the
ATO is hereby transferred to the Authority.

All assets, real and personal properties, funds and revenues owned by or vested in
the different offices of the ATO are transferred to the Authority. All contracts,
records and documents relating to the operations of the abolished agency and its
offices and branches are likewisetransferred to the Authority. Any real property
owned by the national government or government-owned corporation or
authority which is being used and utilized as office or facilityby the ATO shall
be transferred and titled in favor of the Authority.

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.18

33
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 154200 July 24, 2007
NATIONAL ELECTRIFICATION ADMINISTRATION and its BOARD OF
ADMINISTRATORS, Petitioners,
vs.
DANILO MORALES, Respondent.
DECISION
AUSTRIA-MARTINEZ, J>:
The sole issue for resolution in the Petition for Review on Certiorari1 before us is
whether the Court of Appeals (CA) committed an error of law in its July 4, 2002
Decision2 in CA-G.R. SP No. 62919 in ordering the implementation of a writ of
execution against the funds of the National Electrification Administration (NEA).
There being no dispute as to the facts,3 the following findings of the CA are
adopted:4
Danilo Morales and 105 other employees5 (Morales, et al.) of the NEA filed with the
Regional Trial Court (RTC), Branch 88, Quezon City, a class suit6 against their
employer for payment of rice allowance, meal allowance, medical/dental/optical
allowance, children’s allowance and longevity pay purportedly authorized under
Republic Act (R.A.) No. 6758.7 In its December 16, 1999 Decision,8 the RTC
ordered NEA, thus:
WHEREFORE, foregoing considered, the petition is hereby GRANTED directing
the respondent NEA, its Board of Administrators to forthwith settle the claims of the
petitioners and other employees similarly situated and extend to them the benefits
and allowances to which they are entitled but which until now they have been
deprived of as enumerated under Section 5 of DBM CCC No. 10 and their inclusion
in the Provident Funds Membership, retroactive from the date of their appointments
up to the present or until their separation from the service.
No costs.
SO ORDERED.9
Upon motion of Morales, et al., the RTC issued a Writ of Execution dated February
22, 2000,10 which reads:
NOW, THEREFORE, you are hereby directed to cause respondents National
Electrification Administration (NEA) and its Board of Administrators with principal
office address at 1050 CDC Bldg., Quezon Avenue, Quezon City to forthwith settle
the claims of the petitioners and other employees similarly situated and extend to
them the benefits and allowances to which they are entitled but which until now they
have been deprived of as enumerated under Sec. 5 of DBM CCC No. 10 and you are
further directed to cause their inclusion in the Provident Fund Membership,
retroactive from the date of their appointments up to the present or until their
separation from the service.11
Thereafter, a Notice of Garnishment12 was issued against the funds of NEA with
Development Bank of the Philippines (DBP) to the extent of P16,581,429.00.
NEA filed a Motion to Quash Writs of Execution/Garnishment, 13 claiming that the
garnished public funds are exempt from execution under Section 4 14 of Presidential
Decree (P.D.) No. 1445,15 but manifesting that it is willing to pay the claims of
Morales, et al.,16 only that it has no funds to cover the same, although it already
requested the Department of Budget and Management (DBM) for a supplemental
budget.17
In its Order of May 17, 2000, the RTC denied the Motion to Quash but, at the same
time, held in abeyance the implementation of the Writ of Execution, thus:
WHEREFORE, the motion to quash writs of execution/ garnishment is DENIED but
the implementation of the judgment is placed on hold for ninety (90) days reckoned
from this day. The respondents are directed to formally inform this Court and the
petitioners of the prospect of obtaining funds from Department of Budget and
Management within 30 days from receipt and every 30 days thereafter, until the 90
day period has lapsed.
The motion to direct DBP to release to the petitioners the NEA funds garnished
earlier amounting to P16,591.429 is also DENIED.
SO ORDERED.18 (Emphasis ours)
Morales, et al. filed a Partial Motion for Reconsideration19 but the RTC denied it.20
Meanwhile, in a letter dated June 28, 2000, former DBM Secretary Benjamin E.
Diokno informed NEA Administrator Conrado M. Estrella III of the denial of the
NEA request for a supplemental budget on the ground that the claims under R.A. No.
6758 which the RTC had ordered to be settled cannot be paid because Morales, et al.
are not "incumbents of positions as of July 1, 1989 who are actually receiving and
enjoying such benefits."21
34
Moreover, in an Indorsement dated March 23, 2000, the Commission on Audit
(COA) advised NEA against making further payments in settlement of the claims of
Morales, et al.. Apparently, COA had already passed upon claims similar to those
of Morales, et al. in its earlier "Decision No. 95-074" dated January 25, 1995.
Portions of the Indorsement read as follows:
This Office concurs with the above view. The court may have exceeded its
jurisdiction when it entertained the petition for the entitlement of the after-hired
employees which had already been passed upon by this Commission in COA
Decision No. 95-074 dated January 25, 1995. There, it was held that: "the adverse
action of this Commission sustaining the disallowance made by the Auditor, NEA,
on the payment of fringe benefits granted to NEA employees hired from July 1,
1989 to October 31, 1989 is hereby reconsidered. Accordingly, subject disallowance
is lifted."
Thus, employees hired after the extended date of October 31, 1989, pursuant to the
above COA decision cannot defy that decision by filing a petition for mandamus in
the lower court. Presidential Decree No. 1445 and the 1987 Constitution prescribe
that the only mode for appeal from decisions of this Commission is on certiorari to
the Supreme Court in the manner provided by law and the Rules of Court. Clearly,
the lower court had no jurisdiction when it entertained the subject case of
mandamus. And void decisions of the lower court can never attain finality, much
less be executed. Moreover, COA was not made a party thereto, hence, it cannot be
compelled to allow the payment of claims on the basis of the questioned decision.
PREMISES CONSIDERED, the auditor of NEA should post-audit the disbursement
vouchers on the bases of this Commission's decision particularly the above-cited
COA Decision No. 94-074 [sic] and existing rules and regulations, as if there is no
decision of the court in the subject special civil action for mandamus. At the same
time, management should be informed of the intention of this Office to question the
validity of the court decision before the Supreme Court through the Office of the
Solicitor General.22 (Emphasis ours)
Parenthetically, the records at hand do not indicate when Morales, et al. were
appointed. Even the December 16, 1999 RTC Decision is vague for it merely states
that they were appointed after June 30, 1989, which could mean that they were
appointed either before the cut-off date of October 31, 1989 or after.23 Thus, there is
not enough basis for this Court to determine that the foregoing COA Decision No.
95-074 adversely affects Morales, et al..Moreover, the records do not show whether
COA actually questioned the December 16, 1999 RTC Decision before this Court.
On July 18, 2000, Morales, et al. filed a Motion for an Order to Implement Writ of
Execution, pointing out that the reason cited in the May 17, 2000 RTC Order for
suspension of the implementation of the writ of execution no longer exists given that
DBM already denied NEA’s request for funding.24 They also filed a Petition to Cite
NEA Board of Administrators Mario Tiaoqui, Victoria Batungbacal, Federico Puno
and Remedios Macalingcag in Contempt of Court25 for allegedly withholding
appropriations to cover their claims.
Acting first on the petition for contempt, the RTC issued a Resolution dated
December 11, 2000, to wit:
The court is aware of its order dated May 17, 2000, particularly the directive upon
respondents to inform this court and the petitioners of the prospect of obtaining funds
from the Department of Budget and Management within the period specified. From
the comments of the respondents, it appears they did or are doing their best to
secure the needed funds to satisfy the judgment sought to be enforced. In this
regard, Administrative Circular No. 10-2000 of the Supreme Court provides:
"In order to prevent possible circumvention of the rules and procedures of the
Commission on Audit, judges are hereby enjoined to observe utmost caution,
prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units.
Judges should bear in mind that in Commissioner of Public Highways v. San
Diego (31 SCRA 617, 625 [1970], this Court explicitly stated:
"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 the power of the
court ends when the judgment is rendered, since government funds and properties
may not be seized under writs of execution or garnishment to satisfy such judgment,
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."
Moreover, it is settled jurisprudence that upon determination of State liability, the
prosecution, enforcement or satisfaction thereof must still be pursued in accordance
with the rules and procedures laid down in P.D. No. 1445, otherwise known as the
Government Auditing Code of the Philippines (Department of Agriculture v. NLRC,
227 SCRA 693, 701-02 [1993] citing Republic v. Villasor, 54 SCRA 84 [1973]). All
money claims against the Government must "first be filed with the Commission on
Audit which must act upon it within sixty days. Rejection of the claim will authorize
the claimant to elevate the matter to the Supreme Court on certiorari and in effect sue
the State thereby (P.D. 1445, Sections 49-50)."
WHEREFORE, foregoing considered, petition to cite respondents in contempt of
court is premature, hence the same is hereby DENIED.
35
SO ORDERED.26 (Emphasis ours)
Subsequently, the RTC issued an Order dated January 8, 2001, denying the Motion
for an Order to Implement Writ of Execution, citing the same SC Administrative
Circular No. 10-2000.
Upon a Petition for Certiorari27 filed by Morales, et al., the CA rendered the July 4,
2002 Decision assailed herein, the decretal portion of which reads:
WHEREFORE, the petition is hereby GRANTED. The Order dated January 8, 2001
and the Resolution of December 11, 2000 of the public respondent Judge are
declared NULL and VOID.
Accordingly, the respondent judge is directed to implement the Writ of Execution
relative thereto.
SO ORDERED..28
The CA held that NEA can no longer take shelter under the provisions of P.D. No.
1445 and SC Administrative Circular No. 10-2000 because it is a government-owned
or controlled corporation (GOCC) created under P.D. No. 269, effective August 6,
1973.29 Citing Philippine National Bank v. Court of Industrial Relations,30 the CA
held that, as such GOCC, petitioner NEA may be subjected to court processes just
like any other corporation; specifically, its properties may be proceeded against by
way of garnishment or levy.31
NEA and its Board of Directors (petitioners) immediately filed herein petition for
review. It is their contention that the CA erred in directing implementation of the
writ of execution on two grounds: first, execution is premature as Morales, et al.
(respondents) have yet to file their judgment claim with the COA in accordance with
P.D. No. 1445 and SC Administrative Circular No. 10-2000;32 and second, execution
is not feasible without DBM as an indispensable party to the petition
for certiorari for it is said department which can certify that funds are available to
cover the judgment claim.33
The petition is meritorious.
Indeed, respondents cannot proceed against the funds of petitioners because the
December 16, 1999 RTC Decision sought to be satisfied is not a judgment for a
specific sum of money susceptible of execution by garnishment; it is a special
judgment requiring petitioners to settle the claims of respondents in accordance with
existing regulations of the COA.
In its plain text, the December 16, 1999 RTC Decision merely directs petitioners to
"settle the claims of [respondents] and other employees similarly situated."34 It does
not require petitioners to pay a certain sum of money to respondents. The judgment
is only for the performance of an act other than the payment of money,
implementation of which is governed by Section 11, Rule 39 of the Rules of Court,
which provides:
Section 11. Execution of special judgments. - When a judgment requires the
performance of any act other than those mentioned in the two preceding sections, a
certified copy of the judgment shall be attached to the writ of execution and shall be
served by the officer upon the party against whom the same is rendered, or upon any
other person required thereby, or by law, to obey the same, and such party or person
may be punished for contempt if he disobeys such judgment.
Garnishment cannot be employed to implement such form of judgment. Under
Section 9 of Rule 39, to wit:
Section 9. Execution of judgments for money, how enforced. -
xxxx
(c) Garnishment of debts and credits. - The officer may levy on debts due the
judgment obligor and other credits, including bank deposits, financial interests,
royalties, commissions and other personal property not capable of manual delivery in
the possession or control of third parties. Levy shall be made by serving notice upon
the person owing such debts or having in his possession or control such credits to
which the judgment obligor is entitled. The garnishment shall cover only such
amount as will satisfy the judgment and all lawful fees.
Garnishment is proper only when the judgment to be enforced is one for payment of
a sum of money.
The RTC exceeded the scope of its judgment when, in its February 22, 2000 Writ of
Execution, it directed petitioners to "extend to [respondents] the benefits and
allowances to which they are entitled but which until now they have been deprived
of as enumerated under Sec. 5 of DBM CCC No. 10 and x x x to cause their
inclusion in the Provident Fund Membership." 35 Worse, it countenanced the issuance
of a notice of garnishment against the funds of petitioners with DBP to the extent
of P16,581,429.00 even when no such amount was awarded in its December 16,
1999 Decision.
However, in its subsequent Orders dated May 17, 2000 and January 8, 2001, the
RTC attempted to set matters right by directing the parties to now await the outcome
of the legal processes for the settlement of respondents’ claims.
That is only right.
36
Without question, petitioner NEA is a GOCC36 -- a juridical personality separate and
distinct from the government, with capacity to sue and be sued.37 As such GOCC,
petitioner NEA cannot evade execution; its funds may be garnished or levied upon in
satisfaction of a judgment rendered against it.38 However, before execution may
proceed against it, a claim for payment of the judgment award must first be filed
with the COA.39

Under Commonwealth Act No. 327,40 as amended by Section 26 of P.D. No. 1445, it
is the COA which has primary jurisdiction to examine, audit and settle "all debts and
claims of any sort" due from or owing the Government or any of its subdivisions,
agencies and instrumentalities, including government-owned or controlled
corporations and their subsidiaries.41 With respect to money claims arising from the
implementation of R.A. No. 6758, their allowance or disallowance is for COA to
decide, subject only to the remedy of appeal by petition forcertiorari to this Court.42

All told, the RTC acted prudently in halting implementation of the writ of execution
to allow the parties recourse to the processes of the COA. It may be that the tenor of
the March 23, 2000 Indorsement issued by COA already spells doom for
respondents’ claims; but it is not for this Court to preempt the action of the COA on
the post-audit to be conducted by it per its Indorsement dated March 23,
2000.1avvphi1

In fine, it was grave error for the CA to reverse the RTC and direct immediate
implementation of the writ of execution through garnishment of the funds of
petitioners,

WHEREFORE, the petition is GRANTED. The July 4, 2002 Decision of the Court
of Appeals is REVERSED andSET ASIDE. The Resolution dated December 11,
2000 and Order dated January 8, 2001 of the Regional Trial Court, Branch 88,
Quezon City in Special Civil Action No. Q-99-38275 are REINSTATED.

SO ORDERED.

37
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 129169 November 17, 1999
NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner,
vs.
HONORABLE COURT OF APPEALS (4th Division), CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION, and HYDRO RESOURCES
CONTRACTORS CORPORATION, respondents.
DAVIDE, JR., C.J.:
In this special civil action for certiorari under Rule 65 of the Rules of Court, the
National Irrigation Administration (hereafter NIA), seeks to annul and set aside the
Resolutions 1 of the Court of Appeals in CA-GR. SP No. 37180 dated 28 June 1996
and 24 February 1997, which dismissed respectively NIA's petition for certiorari and
prohibition against the Construction Industry Arbitration Commission (hereafter
CIAC), and the motion for reconsideration thereafter filed.
Records show that in a competitive bidding held by NIA in August 1978, Hydro
Resources Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-
C-2 for the construction of the main civil works of the Magat River Multi-Purpose
Project. The contract provided that HYDRO would be paid partly in Philippine pesos
and partly in U.S. dollars. HYDRO substantially completed the works under the
contract in 1982 and final acceptance by NIA was made in 1984. HYDRO thereafter
determined that it still had an account receivable from NIA representing the dollar
rate differential of the price escalation for the contract. 2
After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994,
filed with the CIAC a Request for Adjudication of the aforesaid claim. HYDRO
nominated six arbitrators for the arbitration panel, from among whom CIAC
appointed Engr. Lauro M. Cruz. On 6 January 1995, NIA filed its Answer wherein it
questioned the jurisdiction of the CIAC alleging lack of cause of action, laches and
estoppel in view of HYDRO's alleged failure to avail of its right to submit the
dispute to arbitration within the prescribed period as provided in the contract. On the
same date, NIA filed a Compliance wherein it nominated six arbitrators, from among
whom CIAC appointed Atty. Custodio O. Parlade, and made a counterclaim for
P1,000,000 as moral damages; at least P100,000 as exemplary damages; P100,000 as
attorney's fees; and the costs of the arbitration. 3
The two designated arbitrators appointed Certified Public Accountant Joven B.
Joaquin as Chairman of the Arbitration Panel. The parties were required to submit
copies of the evidence they intended to present during the proceedings and were
provided the draft Terms of Reference. 4
At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the
Office of the Government Corporate Counsel, manifested that it could not admit the
genuineness of HYDRO's evidence since NIA's records had already been destroyed.
NIA requested an opportunity to examine the originals of the documents which
HYDRO agreed to provide. 5
After reaching an accord on the issues to be considered by the arbitration panel, the
parties scheduled the dates of hearings and of submission of simultaneous
memoranda. 6
On 13 March 1995, NIA filed a Motion to Dismiss 7 alleging lack of jurisdiction
over the disputes. NIA contended that there was no agreement with HYDRO to
submit the dispute to CIAC for arbitration considering that the construction contract
was executed in 1978 and the project completed in 1982, whereas the Construction
Industry Arbitration Law creating CIAC was signed only in 1985; and that while
they have agreed to arbitration as a mode of settlement of disputes, they could not
have contemplated submission of their disputes to CIAC. NIA further argued that
records show that it had not voluntarily submitted itself to arbitration by CIAC
citing TESCO Services, Inc. v. Hon. Abraham Vera, et al., 8 wherein it was ruled:
CIAC did not acquire jurisdiction over the dispute arising from the sub-contract
agreement between petitioner TESCO and private respondent LAROSA. The records
do not show that the parties agreed to submit the disputes to arbitration by the CIAC
. . . . While both parties in the sub-contract had agreed to submit the matter to
arbitration, this was only between themselves, no request having been made by both
with the CIAC. Hence, as already stated, the CIAC, has no jurisdiction over the
dispute. . . . . Nowhere in the said article (sub-contract) does it mention the CIAC,
much less, vest jurisdiction with the CIAC.
On 11 April 1995, the arbitral body issued an order 9 which deferred the
determination of the motion to dismiss and resolved to proceed with the hearing of
the case on the merits as the grounds cited by NIA did not seem to be "indubitable."
NIA filed a motion for reconsideration of the aforesaid Order. CIAC in denying the
motion for reconsideration ruled that it has jurisdiction over the HYDRO's claim
over NIA pursuant to E.O 1008 and that the hearing should proceed as scheduled. 10
On 26 May 1996, NIA filed with the Court of Appeals an original action
of certiorari and prohibition with prayer for restraining order and/or injunction,
seeking to annul the Orders of the CIAC for having been issued without or in excess
of jurisdiction. In support of its petition NIA alleged that:
38
A 1996 and 24 February 1997. In the said special civil action, NIA merely reiterates the
issues it raised before the Court of Appeals. 12
RESPONDENT CIAC HAS NO AUTHORITY OR JURIDICTION TO HEAR
AND TRY THIS DISPUTE BETWEEN THE HEREIN PARTIES AS E.O. NO. We take judicial notice that on 10 June 1997, CIAC rendered a decision in the main
1008 HAD NO RETROACTIVE EFFECT. case in favor of HYDRO. 13NIA assailed the said decision with the Court of Appeals.
In view of the pendency of the present petitions before us the appellate court issued a
B resolution dated 26 March 1998 holding in abeyance the resolution of the same until
after the instant petitions have been finally decided. 14
THE DISPUTE BETWEEN THE PARTIES SHOULD BE SETTLED IN
ACCORDANCE WITH GC NO. 25, ART. 2046 OF THE CIVIL CODE AND R.A. At the outset, we note that the petition suffers from a procedural defect that warrants
NO. 876 THE GOVERNING LAWS AT THE TIME CONTRACT WAS its outright dismissal. The questioned resolutions of the Court of Appeals have
EXECUTED AND TERMINATED. already become final and executory by reason of the failure of NIA to appeal
therefrom. Instead of filing this petition for certiorari under Rule 65 of the Rules of
C Court, NIA should have filed a timely petition for review under Rule 45.
E.O. NO. 1008 IS A SUBSTANTIVE LAW, NOT MERELY PROCEDURAL AS There is no doubt that the Court of Appeals has jurisdiction over the special civil
RULED BY THE CIAC. action for certiorari under Rule 65 filed before it by NIA. The original jurisdiction of
the Court of Appeals over special civil actions for certiorari is vested upon it under
D Section 9(1) of B.P. 129. This jurisdiction is concurrent with the Supreme
Court 15 and with the Regional Trial Court. 16
AN INDORSEMENT OF THE AUDITOR GENERAL DECIDING A
CONTROVERSY IS A DECISION BECAUSE ALL THE ELEMENTS FOR Thus, since the Court of Appeals had jurisdiction over the petition under Rule 65,
JUDGMENT ARE THERE; THE CONTROVERSY, THE AUTHORITY TO any alleged errors committed by it in the exercise of its jurisdiction would be errors
DECIDE AND THE DECISION. IF IT IS NOT APPEALED SEASONABLY, THE of judgment which are reviewable by timely appeal and not by a special civil action
SAME BECOMES FINAL. of certiorari. 17 If the aggrieved party fails to do so within the reglementary period,
and the decision accordingly becomes final and executory, he cannot avail himself of
E
the writ of certiorari, his predicament being the effect of his deliberate inaction. 18
NIA HAS TIMELY RAISED THE ISSUE OF JURISDICTION. IT DID NOT
The appeal from a final disposition of the Court of Appeals is a petition for review
WAIVE NOR IS IT ESTOPPED FROM ASSAILING THE SAME.
under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now
F Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. 19 Rule 45
is clear that decisions, final orders or resolutions of the Court of Appeals in any
THE LEGAL DOCTRINE THAT JURISDICTION IS DETERMINED BY THE case, i.e., regardless of the nature of the action or proceedings involved, may be
STATUTE IN FORCE AT THE TIME OF THE COMMENCEMENT OF THE appealed to this Court by filing a petition for review, which would be but a
ACTION DOES NOT ONLY APPLY TO THE INSTANT CASE. 11 continuation of the appellate process over the original case. 20 Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial
The Court of Appeals, after finding that there was no grave abuse of discretion on of motion for reconsideration. 21
the part of the CIAC in issuing the aforesaid Orders, dismissed the petition in its
Resolution dated 28 June 1996. NIA's motion for reconsideration of the said decision In the instant case the Resolution of the Court of Appeals dated 24 February 1997
was likewise denied by the Court of Appeals on 26 February 1997. denying the motion for reconsideration of its Resolution dated 28 June 1997 was
received by NIA on 4 March 1997. Thus, it had until 19 March 1997 within which to
On 2 June 1997, NIA filed before us an original action for certiorari and prohibition perfect its appeal. NIA did not appeal. What it did was to file an original action
with urgent prayer for temporary restraining order and writ of preliminary injunction, forcertiorari before this Court, reiterating the issues and arguments it raised before
praying for the annulment of the Resolutions of the Court of Appeals dated 28 June the Court of Appeals.

39
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner
must show that he has no plain, speedy and adequate remedy in the ordinary course
of law against its perceived grievance. 22 A remedy is considered "plain, speedy and
adequate" if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency. 23 In this case, appeal was not
only available but also a speedy and adequate remedy.
Obviously, NIA interposed the present special civil action of certiorari not because it
is the speedy and adequate remedy but to make up for the loss, through omission or
oversight, of the right of ordinary appeal. It is elementary that the special civil action
of certiorari is not and cannot be a substitute for an appeal, where the latter remedy
is available, as it was in this case. A special civil action under Rule 65 of the Rules
of Court will not be a cure for failure to timely file a petition for review
on certiorari under Rule 45 of the Rules of Court. 24 Rule 65 is an independent
action that cannot be availed of as a substitute for the lost remedy of an ordinary
appeal, including that under Rule 45, 25 especially if such loss or lapse was
occasioned by one's own neglect or error in the choice of remedies. 26
For obvious reasons the rules forbid recourse to a special civil action for certiorari if
appeal is available, as the remedies of appeal and certiorari are mutually exclusive
and not alternative or successive. 27 Although there are exceptions to the rules, none
is present in the case at bar. NIA failed to show circumstances that will justify a
deviation from the general rule as to make available a petition for certiorari in lieu of
taking an appropriate appeal.
Based on the foregoing, the instant petition should be dismissed.
In any case, even if the issue of technicality is disregarded and recourse under Rule
65 is allowed, the same result would be reached since a review of the questioned
resolutions of the CIAC shows that it committed no grave abuse of discretion.
Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy.
Executive Order No. 1008, otherwise known as the "Construction Industry
Arbitration Law" which was promulgated on 4 February 1985, vests upon CIAC
original and exclusive jurisdiction over disputes arising from, or connected with
contracts entered into by parties involved in construction in the Philippines, whether
the dispute arises before or after the completion of the contract, or after the
abandonment or breach thereof. The disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration. 28
The complaint of HYDRO against NIA on the basis of the contract executed between
them was filed on 7 December 1994, during the effectivity of E.O. No. 1008. Hence,
it is well within the jurisdiction of CIAC. The jurisdiction of a court is determined by
the law in force at the time of the commencement of the action. 29
NIA's argument that CIAC had no jurisdiction to arbitrate on contract which
preceded its existence is untenable. E.O. 1008 is clear that the CIAC has jurisdiction
over all disputes arising from or connected with construction contract whether the
dispute arises before or after the completion of the contract. Thus, the date the parties
entered into a contract and the date of completion of the same, even if these occurred
before the constitution of the CIAC, did not automatically divest the CIAC of
jurisdiction as long as the dispute submitted for arbitration arose after the
constitution of the CIAC. Stated differently, the jurisdiction of CIAC is over the
dispute, not the contract; and the instant dispute having arisen when CIAC was
already constituted, the arbitral board was actually exercising current, not retroactive,
jurisdiction. As such, there is no need to pass upon the issue of whether E.O. No.
1008 is a substantive or procedural statute.
NIA also contended that the CIAC did not acquire jurisdiction over the dispute since
it was only HYDRO that requested for arbitration. It asserts that to acquire
jurisdiction over a case, as provided under E.O. 1008, the request for arbitration filed
with CIAC should be made by both parties, and hence the request by one party is not
enough.
It is undisputed that the contracts between HYDRO and NIA contained an arbitration
clause wherein they agreed to submit to arbitration any dispute between them that
may arise before or after the termination of the agreement. Consequently, the claim
of HYDRO having arisen from the contract is arbitrable. NIA's reliance with the
ruling on the case of Tesco Services Incorporated v. Vera, 30 is misplaced.
The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case
had been duly amended by CIAC Resolutions No. 2-91 and 3-93, Section 1 of
Article III of which read as follows:
Submission to CIAC Jurisdiction — An arbitration clause in a construction contract
or a submission to arbitration of a construction contract or a submission to arbitration
of a construction dispute shall be deemed an agreement to submit an existing or
future controversy to CIAC jurisdiction, notwithstanding the reference to a different
arbitration institution or arbitral body in such contract or submission. When a
contract contains a clause for the submission of a future controversy to arbitration, it
is not necessary for the parties to enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.
Under the present Rules of Procedure, for a particular construction contract to fall
within the jurisdiction of CIAC, it is merely required that the parties agree to submit
the same to voluntary arbitration. Unlike in the original version of Section 1, as
applied in the Tesco case, the law as it now stands does not provide that the parties
should agree to submit disputes arising from their agreement specifically to the
CIAC for the latter to acquire jurisdiction over the same. Rather, it is plain and clear
that as long as the parties agree to submit to voluntary arbitration, regardless of what
40
forum they may choose, their agreement will fall within the jurisdiction of the CIAC,
such that, even if they specifically choose another forum, the parties will not be
precluded from electing to submit their dispute before the CIAC because this right
has been vested upon each party by law, i.e., E.O. No. 1008. 31

Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the
CIAC. NIA through its counsel actively participated in the arbitration proceedings by
filing an answer with counterclaim, as well as its compliance wherein it nominated
arbitrators to the proposed panel, participating in the deliberations on, and the
formulation of, the Terms of Reference of the arbitration proceeding, and examining
the documents submitted by HYDRO after NIA asked for the originals of the said
documents. 32

As to the defenses of laches and prescription, they are evidentiary in nature which
could not be established by mere allegations in the pleadings and must not be
resolved in a motion to dismiss. Those issues must be resolved at the trial of the case
on the merits wherein both parties will be given ample opportunity to prove their
respective claims and defenses. 33 Under the rule 34 the deferment of the resolution of
the said issues was, thus, in order. An allegation of prescription can effectively be
used in a motion to dismiss only when the complaint on its face shows that indeed
the action has already prescribed. 35 In the instant case, the issue of prescription and
laches cannot be resolved on the basis solely of the complaint. It must, however, be
pointed that under the new rules, 36 deferment of the resolution is no longer
permitted. The court may either grant the motion to dismiss, deny it, or order the
amendment of the pleading.

WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of
Appeals is hereby DIRECTED to proceed with reasonable dispatch in the disposition
of C.A. G.R. No. 44527 and include in the resolution thereof the issue of laches and
prescription.

SO ORDERED.

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

41
Republic of the Philippines 7. Ordering the dismissal of the defendants' counterclaim for lack of factual and legal
SUPREME COURT basis. (p. 101, Record on Appeal; p. 103. Rollo.)
Manila
Culled from the text of the assailed disposition are the facts of the case at bar which
THIRD DIVISION are hereunder adoptedverbatim:

G.R. No. 70547 January 22, 1993
PHILIPPINE NATIONAL RAILWAYS and HONORIO
CABARDO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT,
INC., respondents.
The Solicitor General for petitioner.
Leopoldo Sta. Maria for private respondents.
MELO, J.:
The imputation of culpa on the part of herein petitioners as a result of the collision
between its strain, bound for Manila from La Union, with a Baliwag transit bus at the
railroad crossing on the road going to Hagonoy, Bulacan on August l0, 1974, is the
subject of the petition at bar directed against the judgment of affirmance rendered by
respondent court, through the Fourth Civil Cases Division (Sison, Bidin (P), Veloso,
JJ.), vis-a-vis the decretal portion handed down by the court of origin in:
1. Ordering the defendants, jointly and severally to pay the plaintiff the amount of
P179,511.52 as actual damages.
2. Ordering the defendants jointly and severally to pay the plaintiff P436,642.03 as
reimbursement for the damages paid by the plaintiff to death, injury and damage
claimants.
3. Ordering the defendants jointly and severally to pay exemplary damages in the
amount of P50, 000.00 to the plaintiff.
4. Ordering the defendants jointly and severally to pay the plaintiff attorney's fees in
the amount of P5, 000.00.
5. Ordering the defendants, jointly and severally to pay the plaintiff interest at the
legal rate on the above amounts due the plaintiff from August 10, 1974 until fully
paid.
The case arose from a collision of a passenger express train of defendant Philippine
National Railways, (PNR) coming from San Fernando, La Union and bound for
Manila and a passenger bus of Baliwag Transit, Inc. which was on its way to
Hagonoy, Bulacan, from Manila, but upon reaching the railroad crossing at Barrio
Balungao, Calumpit, Bulacan at about 1:30 in the afternoon of August 10, 1974, got
stalled and was hit by defendant's express train causing damages to plaintiff's bus
and its passengers, eighteen (18) of whom died and fifty-three (53) others suffered
physical injuries. Plaintiff alleging that the proximate cause of the collision was the
negligence and imprudence of defendant PNR and its locomotive engineer, Honorio
Cirbado, in operating its passenger train in a busy intersection without any bars,
semaphores, signal lights, flagman or switchman to warn the public of approaching
train that would pass through the crossing, filed the instant action for Damages
against defendants. The defendants, in their Answer traversed the material allegation
of the Complaint and as affirmative defense alleged that the collision was caused by
the negligence, imprudence and lack of foresight of plaintiff's bus driver, Romeo
Hughes.
At the pre-trial conference held on June 23, 1976, the parties agreed on a partial
stipulation of facts and issues which as amplified at the continuation of the pre-trial
conference, on July 12, 1976, are as follows:
1 That plaintiff is a duly constituted corporation registered with the Securities and
Exchange Commission engaged in the business of transportation and operating
public utility buses for the public with lines covering Manila, Caloocan City, Quezon
City, Malabon, Rizal, Bulacan, Pampanga and Nueva Ecija, and particularly from
Manila to Hagonoy, Bulacan and return in the month of August, l974 passing thru
the town of Calumpit Bulacan, temporarily while the bridge at Hagonoy, Bulacan
was under construction;
2 That defendant Philippine National Railways is a purely government owned and
controlled corporation duly registered and existing virtue of Presidential Decree No.
741, with capacity to sue and be sued, and is likewise engaged in transporting
passengers and cargoes by trains and buses and that, it operates a train line between
San Fernando, La Union and Manila particularly Passenger Express Train with Body
No. 73, passing along the intersection of Barrio Balungao, Calumpit, Bulacan, in
going to San Fernando, La Union from Manila and return;

6. Ordering the defendants to pay the cost of this suit. 3. That on August 10, 1974, at about 1:20 o'clock in the afternoon, a Baliuag Transit
Bus with Body No. 1066 and Plate No. XS-929 PUB-Bulacan '74 was driven by its
42
authorized driver Romeo Hughes and PNR Train No. 73 was operated by Train
Engineer Honorio Cabardo alias Honorio Cirbado and at the railroad intersection at
Barrio Balungao, Calumpit, Bulacan, said passenger train No. 73 hit and bumped the
right mid portion of the plaintiff's passenger bus No. 1066, while the rear portion of
said bus was at the railroad track and its direction was towards Hagonoy, Bulacan at
about 1:30 o'clock in the afternoon;
4. That at the time of the collision there was a slight rainfall in the vicinity of the
scene of the accident and that there was at said intersection no bars, semaphores, and
signal lights that would warn the public of the approaching train that was about to
pass through the intersection and likewise there was no warning devices to passing
trains showing that they were about to pass an intersection in going to Manila from
San Fernando, La Union and back;
5. That on account of said collision, the Baliuag Transit Bus with Body No. 1066
driven by Romeo Hughes was damaged and eighteen (18) of its passengers died and
the rest who were more than fifty three (53) passengers suffered physical injuries;
6. That after the investigation the Chief of Police of Calumpit, Bulacan, filed a
criminal case of Reckless Imprudence Causing Multiple Homicide with Multiple
Physical Injuries and Damage to Property against Romeo Hughes y Parfan, driver of
the Baliuag Transit bus docketed under Crim. Case No. 2392; while the train
Engineer Honorio Cabardo alias Honorio Cirbado was not included as an accused in
said case, although his train No. 73 was the one that hit and bumped the right rear
portion of the said bus;
7. That immediately after the said accident Major Manuel A. Macam, Chief of the
Municipal Police of Calumpit, Bulacan, together with some of his policemen
conducted an investigation of the accident;
8. That at the railroad crossing in Calumpit, Bulacan where the accident took place
there is no railroad crossing bar, however, during the pre-war days there was a
railroad crossing bar at said intersection; that, however, there was only one sign of
railroad crossing "Stop, Look and Listen" placed on a concrete slab and attached to a
concrete post existing at the approach of the railroad track from the Highway going
towards Hagonoy, Bulacan and that after the said railroad track there was a
designated jeep parking area at the right side in the direction from the Highway to
Hagonoy Bulacan;
9. That the train No. 73 driven by Train Engineer Honorio Cabardo alias Honorio
Cirbado stopped after passing the railroad crossing at a distance of about 50 meters
from the said intersection after the collision on August, 1974;
10. That the expected time of arrival of said Train No. 73 in Manila was 2:41 P.M.
and its departure time from San Fernando, La Union was 9:00 A.M. and its expected
arrival at Calumpit, Bulacan was 1:41 P.M. with no stop at Calumpit, Bulacan.
SIMPLIFICATION OF ISSUES
11. That the principal issue in the instant case is who between the driver Romeo
Hughes of Baliuag Transit, Incorporated and the train engineer Honorio Cabardo
alias Honorio Cirbado of the Philippine National Railways was negligent or whether
or not both are negligent; that likewise which of said companies was negligent at
said railroad intersection;
12. That another additional issue is whether the Baliuag Transit Incorporated has
exercised the diligence of a good father of the family in the selection and supervision
of its employees. (pp.
85-87, Record on Appeal). ( Annex A, Petition; pp. 79-82, Rollo)
In addition, respondent court deemed it necessary to reflect the salient findings of the
case for damages as formulated by the trial court:
Posed for resolution are the following issues: Who between the driver Romeo
Hughes of the Baliuag Transit Incorporated and Honorio Cabardo, train Engineer of
the Philippine National Railways was negligent in the operation of their respective
vehicles, or whether or both were negligent? Could either of the companies Baliuag
Transit Incorporated and the Philippine National Railways be held accountable for
the collision because of negligence?
The defendants presented several statements or affidavits of alleged witnesses to the
collision, specifically Exhibits 2, 3, 4, 5, 6, 11, 13, 14, 15, 16, 17, 18 and 19; the
Court is at a loss as to why the persons who gave the said statements were not
presented as witnesses during the trial of the
case, as aptly said, the statements are hearsay evidence (Azcueta v. Cabangbang, —
45 O.G. 144); at most they be taken as proof only of the fact that statements of said
persons were taken and that investigation was conducted of the incident; the Court
cannot consider the averments in said statements as testimonies or evidence of truth.
Defendants endeavored to show that the proximate and immediate cause of the
collision was the negligence of the bus driver because the driver did not make a stop
before ascending the railtrack; he did not heed the warning or shoutings of
bystanders and passengers and proceeded in traversing the railtrack at a fast speed;
that the bus driver was in fact violating Section 42(d) of R.A. 4136, otherwise known
as the Land Transportation and Traffic Code for failure to "stop, look, and listen" at
the intersection, before crossing the railtrack; that it is incumbent upon him to take
the necessary precautions at the intersection because the railroad track is in itself a
warning; and the bus driver ignored such a warning and must assume the
43
responsibility for the result of the motion taken by him (U.S. v. Mananquil, 42 Phil.
90)
Except the testimony of the train engineer Cabardo, there is no admissible evidence
to show that indeed, the bus driver did not take the necessary precaution in traversing
the track. Note that he first noticed the bus when it was only 15 meters away from
him; he could not have possibly noticed the position of the bus before negotiating the
track.
On the other hand, it was shown by plaintiff that the bus driver Romeo Hughes took
the necessary precautions in traversing the track.
The bus driver had stopped before traversing the track and in fact asked the
conductor to alight and made a "Look and Listen" before proceeding; the conductor
had done just that and made a signal to proceed when he did not see any oncoming
train. (TSN, October 2l, 1976, p. 4); plaintiff's bus drivers and conductors are
enjoined to observe such a precautionary measure in seminars conducted by the
company. (TSN, September 23, 1976. pp. 26-27).
The evidence disclosed that the train was running fast because by his own testimony,
the train engineer had testified that before reaching the station of Calumpit the terrain
was downgrade and levelled only after passing the Calumpit bridge (TSN, July 28,
1976, p. 14 ); the tendency of the train, coming from a high point is to accelerate as
the gravity will necessarily make it so, especially when it is pulling seven coaches
loaded with goods and passengers.
Moreover, upon impact, the bus loaded with passengers was dragged and thrown into
a ditch several meters away; the train had stopped only after the engine portion was
about 190 meters away from the fallen bus; several passengers were injured and at
least 20 died; such facts conclusively indicate that the train was speeding, because if
it were moving at moderate speed, it would not run some 190 meters after impact
and throw the bus at quite a distance especially so when it is claimed that the train's
emergency brakes were applied.
Further, the train was an express train; its departure was 9:00 A.M. at San Fernando,
La Union and expected in Manila at 2:41 P.M.; the collision occurred at 1:30 P.M. or
4 1/2 hours after it left La Union; surely, the train could have not negotiated such a
distance in so short a time if it were not running at fast speed.
It may be argued that a railroad is not subject to the same restrictions to the speed of
its train as a motorists (Mckelvey v. Delaware L. and W.R. Co. 253 App. D.V. 109,
300 NYS 1263 ); but it does not follow that a train will be permitted to run fast under
all conditions at any rate of speed it may choose. It must regulate its speed with
proper regard for the safety of human life and property (Johnson v. Southern Pacific
Company (Cal. App. 288 p. 81), considering the surrounding circumstances
particularly the nature of the locality (Atchinson, T. and SFR Co. v. Nicks (Arts) 165
p. 2d 167).
Cabardo's route included the passage over the said intersection; he could have
noticed that it is a very busy intersection because the crossroad leads to the Calumpit
Poblacion as well as to the neighboring town of Hagonoy; there was a parking lot by
the side of the track whereat passengers board jeepneys for the neighboring barrios
and towns; stalls abound in the vicinity and bystanders congregate nearby. A prudent
train operator must, under the circumstances, slacken his speed almost for the
protection of motorists and pedestrians, not only when a collision is inevitable but
even if no hindrance is apparent on the way;
Moreover, there was an intermittent rain at the time of the collision (see stipulation
of facts and photographs); the condition of the weather was such that even if for this
reason alone, the train engineer should have foreseen that danger of collision lurked
because of poor visibility of slippery road; he should have taken extra precaution by
considerably slackening its speed. This he failed to do even if the nature of his job
required him to observe care exercised by a prudent man.
Contributory negligence may not be ascribed to the bus driver; it was evident that he
had taken the necessary precautions before passing over the railway track; if the bus
was hit, it was for reasons beyond the control of the bus driver because he had no
place to go; there were vehicles to his left which prevented him in swerving towards
that direction; his bus stalled in view of the obstructions in his front where a sand
and gravel truck stopped because of a jeep maneuvering into a garage up front. All
the wheels at the bus have already passed the rail portion of the track and only the
rear portion of the bus' body occupied or covered the railtrack. This was evident
because the part of the bus hit by the train was the rear since the bus fell on a nearby
ditch. Otherwise, if the bus was really hit in mid-body, the bus could have been
halved into two because of the force of the impact.
The stipulation of facts between the parties show that there was no crossing bar at the
railroad intersection at Calumpit, Bulacan at the time of collision (par. 8, Stipulation
of Facts); the plaintiff contended and the defendants did not deny, that there were no
signal lights, semaphores, flagman or switchman thereat; the absence of such
devices, the plaintiff argues constitute negligence on the part of the Philippine
National Railways.
A railroad is not required to have a gate (crossing bar) or a flagman, or to maintain
signals at every intersection; only at such places reasonably necessary; what is
considered reasonably necessary will depend on the amount of travel upon the road,
the frequency with which trains pass over it and the view which could be obtained of
trains as they approach the crossing, and other conditions (Pari v. Los Angeles, Ry.
Corporation (Cal A2d) 128 p2d 563; Swdyk v. Indiana Harbor Belt R. Co. 148 F. 2d
795, and others).
44
As has been amply discussed, the crossroad at the intersection at Calumpit is one
which is a busy thoroughfare; it leads to the Poblacion at Calumpit and other barrios
as well as the town of Hagonoy; the vicinity is utilized as a parking and waiting area
for passengers of jeepneys that ply between the barrios, clearly, the flow of vehicular
traffic thereat is huge. It can be said also that, since there is no other railtrack going
North except that one passing at Calumpit, trains pass over it frequently;
A portion of the intersection is being used as a parking area with stalls and other
obstructions present making it difficult, if not impossible, to see approaching trains
(see photographs).
The failure of the Philippine National Railways to put a cross bar, or signal light,
flagman or switchman, or semaphores is evidence of negligence and disregard of the
safety of the public, even if there is no law or ordinance requiring it, because public
safety demands that said devices or equipments be installed, in the light of aforesaid
jurisprudence. In the opinion of this Court the X sign or the presence of "STOP,
LOOK, LISTEN" warnings would not be sufficient protection of the motoring public
as well as the pedestrians, in the said intersection;
The parties likewise have stipulated that during the pre-war days, there was a
railroad crossing bar at the said intersection (Par-8, Stipulation of Facts). It appears
that it was a self imposed requirement which has been abandoned. In a case it was
held that where the use of a flagman was self imposed, the abandonment thereof may
constitute negligence. (Fleming v. Missouri and A. Ry. Co. 198 ARDC 290, 128
S.W. 2d 286 and others; cited in Sec. 1082 SCRWARTZ, Vol. 2). Similarly, the
abandonment by the PNR of the use of the crossing bar at the intersection at
Calumpit constitutes negligence, as its installation has become imperative, because
of the prevailing circumstances in the place.
A railroad company has been adjudged guilty of negligence and civilly liable for
damages when it failed to install semaphores, or where it does not see to it that its
flagman or switchman comply with their duties faithfully, to motorist injured by a
crossing train as long as he had crossed without negligence on his part (Lilius vs.
MRR, 39 Phil. 758). (Decision, pages 94-100, R A.; pp. 83-89,Rollo).
On the aspect of whether the Philippine National Railways enjoys immunity from
suit, respondent court initially noted that an exculpation of this nature that was raised
for the first time on appeal may no longer be entertained in view of the proscription
under Section 2, Rule 9 of the Revised Rules of Court, apart from the fact that the
lawyer of petitioner agreed to stipulate inter alia that the railroad company had
capacity to sue and be sued. This being so, respondent court continued, PNR was
perforce estopped from disavowing the prejudicial repercussion of an admission in
judicio. Even as the laws governing the creation and rehabilitation of the PNR were
entirely mute on its power to sue and be sued, respondent court nonetheless opined
that such prerogative was implied from the general power to transact business
pertinent or indispensable to the attainment of the goals of the railroad company
under Section 4 of Republic Act No. 4156 as amended by Republic Act No. 6366:
Sec. 4 General Powers — The Philippine National Railways shall have the following
general powers:
(a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the
corporation; and
(b) Generally, to exercise all powers of a railroad corporation under the Corporation
law.
in conjunction with Section 2(b) of Presidential Decree No. 741:
(b) To own or operate railroad transways, bus lines, trucklines, subways, and other
kinds of land transportation, vessels, and pipelines, for the purpose of transporting
for consideration, passengers, mail and property between any points in the
Philippines;
Thus, respondent court utilized the doctrine of implied powers announced
in National Airports Corporation vs. Teodoro, Sr. and Philippine Airlines, Inc. (91
Phil. 203 [1952]), to the effect that the power to sue and be sued is implicit from the
faculty to transact private business. At any rate, respondent court characterized the
railroad company as a private entity created not to discharge a governmental function
but, among other things, to operate a transport service which is essentially a business
concern, and thus barred from invoking immunity from suit.
In brushing aside petitioners' asseveration that the bus driver outraced the train at the
crossing, respondent court observed that the bus was hit by the train at its rear
portion then protruding over the tracks as the bus could not move because another
truck at its front was equally immobile due to a jeep maneuvering into a nearby
parking area. Under these tight conditions, respondent court blamed the train
engineer who admitted to have seen the maneuvering jeep at a distance (TSN, July
28, 1976, page 18) and had the last clear chance to apply the brakes, knowing fully
well that the vehicles following the jeep could not move away from the path of the
train. Apart from these considerations, it was perceived below that the train was
running fast during the entire trip since the train stopped 190 meters from the point
of impact and arrived at Calumpit, Bulacan earlier than its expected time of arrival
thereat.
Moreover, respondent court agreed with the conclusion reached by the trial court that
the absence of a crossing bar, signal light, flagman or switchman to warn the public
of an approaching train constitutes negligence per the pronouncement of this Court
in Lilius vs. Manila Railroad Company (59 Phil 758 [1934]).
45
Concerning the exercise of diligence normally expected of an employer in the
selection and supervision of its employees, respondent court expressed the view that
PNR was remiss on this score since it allowed Honorio Cabardo, who finished only
primary education and became an engineer only through sheer experience, to operate
the locomotive, not to mention the fact that such plea in avoidance was not asserted
in the answer and was thus belatedly raised on appeal.
Petitioner moved to reconsider, but respondent court was far from persuaded. Hence,
the petition before Us which, in essence, incorporates similar disputations anent
PNR's immunity from suit and the attempt to toss the burden of negligence from the
train engineer to the bus driver of herein private respondent.
The bone of contention for exculpation is premised on the familiar maxim in political
law that the State, by virtue of its sovereign nature and as reaffirmed by
constitutional precept, is insulated from suits without its consent (Article 16, Section
3, 1987 Constitution). However, equally conceded is the legal proposition that the
acquiescence of the State to be sued can be manifested expressly through a general
or special law, or indicated implicitly, as when the State commences litigation for the
purpose of asserting an affirmative relief or when it enters into a contract
(Cruz, Philippine Political Law, 1991 edition, page 33; Sinco, Philippine Political
Law, Eleventh Edition, 1962, page 34). When the State participates in a covenant, it
is deemed to have descended from its superior position to the level of an ordinary
citizen and thus virtually opens itself to judicial process. Of course, We realize that
this Court qualified this form of consent only to those contracts concluded in a
proprietary capacity and therefore immunity will attach for those contracts entered
into in a governmental capacity, following the ruling in the 1985 case ofUnited
States of America vs. Ruiz (136 SCRA 487 [1985]; cited by Cruz, supra at pages 36-
37). But the restrictive interpretation laid down therein is of no practical worth nor
can it give rise to herein petitioner PNR's exoneration since the case of Malong vs.
Philippine National Railways (138 SCRA 63, [1985]); 3 Padilla, 1987 Constitution
with Comments and Cases, 1991 edition, page 644), decided three months
after Ruiz was promulgated, was categorical enough to specify that the Philippine
National Railways "is not performing any governmental function" (supra, at page
68).
In Malong, Justice Aquino, speaking for the Court en banc, declared:
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not
immune from suit under Act No. 1510, its charter.
The PNR Charter, Republic Act No. 4156, as amended by Republic Act No. 6366
and Presidential Decree No. 741, provides that the PNR is a government
instrumentality under government ownership during its 50-year term, 1964 to 2014.
It is under the Office of the President of the Philippines. Republic Act No. 6366
provides:
Sec. 1-a. Statement of policy. — The Philippine National Railways, being a factor
for socio-economic development and growth, shall be a part of the infrastructure
program of the government and as such shall remain in and under government
ownership during its corporate existence. The Philippine National Railways must be
administered with the view of serving the interests of the public by providing them
the maximum of service and, while aiming at its greatest utility by the public, the
economy of operation must be ensured so that service can be rendered at the
minimum passenger and freight prices possible.
The charter also provides:
Sec. 4. General powers. — The Philippine National Railways shall have the
following general powers:
(a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the
corporation; and
(b) Generally, to exercise all powers of a railroad corporation under the Corporation
Law. (This refers to Sections 81 to 102 of the Corporation Law on railroad
corporations, not reproduced in the Corporation Code.)
Section 36 of the Corporation Code provides that every corporation has the power to
sue and be sued in its corporate name. Section 13(2) of the Corporation Law
provides that every corporation has the power to sue and be sued in any court.
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 (Justice Holmes
in Kawananakoa vs. Polyblank, 205 U.S. 353, 51 L. 3d 834).
The public service would be hindered, and public safety endangered, if the supreme
authority could be subjected to suit at the instance of every citizen and, consequently,
controlled in the use and disposition of the means required for the proper
administration of the Government (The Siren vs. U.S., 7 Wall. 152, 19 L. ed. 129).
(at pp.
65-66).
To the pivotal issue of whether the State acted in a sovereign capacity when it
organized the PNR for the purpose of engaging in transportation, Malong continued
to hold that:
. . . in the instant case the State divested itself of its sovereign capacity when it
organized the PNR which is no different from its predecessor, the Manila Railroad
46
Company. The PNR did not become immune from suit. It did not remove itself from
the operation of Articles 1732 to 1766 of the Civil Code on common carriers.
The correct rule is that "not all government entities, whether corporate or
noncorporate, are immune from suits. Immunity from suit is determined by the
character of the objects for which the entity was organized." (Nat. Airports Corp. vs.
Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs. Santos, 92 Phil. 281,
285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).
Suits against State agencies with respect to matters in which they have assumed to
act in a private or nongovernmental capacity are not suits against the State (81 C.J.S.
1319).
Suits against State agencies with relation to matters in which they have assumed to
act in a private or nongovernmental 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 implicating consents to suits
against the corporation. (81 C.J.S. 1319).
The foregoing rule was applied to State Dock Commissions carrying on business
relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs.
U.S., 27 Fed. 2nd 370) and to State Highways Commissions created to build public
roads and given appropriations in advance to discharge obligations incurred in their
behalf (Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State
Highway Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports
case).
The point is that when the government enters into a commercial business it abandons
its sovereign capacity and is to be treated like any other private corporation (Bank of
the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L ed. 244, cited in Manila Hotel
Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The
Manila Hotel case also relied on the following rulings:
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.
When the State acts in its proprietary capacity, it is amenable to all the rules of law
which bind private individuals.
There is not one law for the sovereign and another for the subject, but when the
sovereign engages in business and the conduct of business enterprises, and contracts
with individuals, whenever the contract in any form comes before the courts, the
rights and obligation of the contracting parties must be adjusted upon the same
principles as if both contracting parties were private persons. Both stand upon
equality before the law, and the sovereign is merged in the dealer, contractor and
suitor (People vs. Stephens, 71 N.Y. 549).
It should be noted that in Philippine National Railways vs. Union de Maquinistas,
etc., L-31948, July 25, 1978, 84 SCRA 223, it was held that the PNR funds could be
garnished at the instance of a labor union.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR
employees could not sue the PNR for damages. Like any private common carrier, the
PNR is subject to the obligations of persons engaged in that private enterprise. It is
not performing any governmental function.
Thus, the National Development Company is not immune from suit. It does not
exercise sovereign functions. It is an agency for the performance of purely corporate,
proprietary or business functions (National Development Company vs. Tobias, 117
Phil. 703, 705 and cases cited therein; National Development Company vs. NDC
Employees and Workers' Union, L-32387, August 19, 1975, 66 SCRA 18l, 184).
Other government agencies not enjoying immunity from suit are the Social Security
System (Social Security System vs. Court of Appeals,
L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank
(Republic vs. Philippine National Bank, 121 Phil. 26). (at pp. 66-68).
We come now to the question of whether respondent court properly agreed with the
trial court in imputing negligence on the part of the train engineer and his employer.
It was demonstrated beyond cavil in the course of the pre-trial hearings held for the
purpose of stipulating on crucial facts that the bus was hit on the rear portion thereof
after it crossed the railroad tracks. Then, too the train engineer was frank enough to
say that he saw the jeep maneuvering into a parking area near the crossing which
caused the obstruction in the flow of traffic such that the gravel and sand truck
including the bus of herein private respondent were not able to move forward or to
take the opposite lane due to other vehicles. The unmindful demeanor of the train
engineer in surging forward despite the obstruction before him is definitely anathema
to the conduct of a prudent person placed under the same set of perceived danger.
Indeed:
When it is apparent, or when in the exercise of reasonable diligence commensurate
with the surroundings it should be apparent, to the company that a person on its track
or to get on its track is unaware of his danger or cannot get out of the way, it
47
becomes the duty of the company to use such precautions, by warnings, applying
brakes, or otherwise, as may be reasonably necessary to avoid injury to him. (65 Am.
Jur., Second Edition. p. 649).

Likewise, it was established that the weather condition was characterized with
intermittent rain which should have prompted the train engineer to exercise extra
precaution. Also, the train reached Calumpit, Bulacan ahead of scheduled arrival
thereat, indicating that the train was travelling more than the normal speed of 30
kilometers per hour. If the train were really running at 30 kilometers per hour when it
was approaching the intersection, it would probably not have travelled 190 meters
more from the place of the accident (page 10, Brief for Petitioners). All of these
factors, taken collectively, engendered the concrete and yes, correct conclusion that
the train engineer was negligent who, moreover, despite the last opportunity within
his hands vis-a-vis the weather condition including the presence of people near the
intersection, could have obviated the impending collision had he slackened his speed
and applied the brakes (Picart vs. Smith, 37 Phil. 809 [1918]).Withal, these
considerations were addressed to the trial judge who, unlike appellate magistrates,
was in a better position to assign weight on factual questions. Having resolved the
question of negligence between the train engineer and the bus driver after collating
the mass of evidence, the conclusion reached thereafter thus commands great respect
especially so in this case where respondent court gave its nod of approval to the
findings of the court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206
[1991]); Amigo vs. Teves, 50 O.G. 5799; Regalado, Remedial Law Compendium,
Fifth edition, page 353).

What exacerbates against petitioners' contention is the authority in this jurisdiction to

the effect that the failure of a railroad company to install a semaphore or at the very
least, to post a flagman or watchman to warn the public of the passing train amounts
to negligence (Lilius vs. Manila Railroad Company, 59 Phil. 758 [1934]).

WHEREFORE, the petition is hereby DISMISSED and the decision of respondent

court AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Davide, Jr. and Romero, JJ., concur.

Bidin, J., took no part.

48
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15751 January 28, 1961
BUREAU OF PRINTING, SERAFIN SALVADOR and MARIANO
LEDESMA, petitioners,
vs.
THE BUREAU OF PRINTING EMPLOYEES ASSOCIATION (NLU),
PACIFICO ADVINCULA, ROBERTO MENDOZA, PONCIANO ARGANDA
and TEODULO TOLERAN, respondents.
Office of the Solicitor General for petitioners.
Eulogio R. Lerum for respondents.
GUTIERREZ DAVID, J.:
This is a petition for certiorari and prohibition with preliminary injunction to annul
Certain orders of the respondent Court of Industrial Relations and to restrain it from
further proceeding in the action for unfair labor practice pending before it on the
ground of lack of jurisdiction. Giving due course to the petition, this Court ordered
the issuance of the writ of preliminary injunction prayed for without bond.
The action in question was — upon complaint of the respondents Bureau of Printing
Employees Association (NLU) Pacifico Advincula, Roberto Mendoza, Ponciano
Arganda and Teodulo Toleran — filed by an acting prosecutor of the Industrial Court
against herein petitioner Bureau of Printing, Serafin Salvador, the Acting Secretary
of the Department of General Services, and Mariano Ledesma the Director of the
Bureau of Printing. The complaint alleged that Serafin Salvador and Mariano
Ledesma have been engaging in unfair labor practices by interfering with, or
coercing the employees of the Bureau of Printing particularly the members of the
complaining association petition, in the exercise of their right to self-organization an
discriminating in regard to hire and tenure of their employment in order to
discourage them from pursuing the union activities.
Answering the complaint, the petitioners Bureau of Printing, Serafin Salvador and
Mariano Ledesma denied the charges of unfair labor practices attributed to the and,
by way of affirmative defenses, alleged, among other things, that respondents
Pacifico Advincula, Roberto Mendoza Ponciano Arganda and Teodulo Toleran were
suspended pending result of an administrative investigation against them for breach
of Civil Service rules and regulations petitions; that the Bureau of Printing has no
juridical personality to sue and be sued; that said Bureau of Printing is not an
industrial concern engaged for the purpose of gain but is an agency of the Republic
performing government functions. For relief, they prayed that the case be dismissed
for lack of jurisdiction. Thereafter, before the case could be heard, petitioners filed
an "Omnibus Motion" asking for a preliminary hearing on the question of
jurisdiction raised by them in their answer and for suspension of the trial of the case
on the merits pending the determination of such jurisdictional question. The motion
was granted, but after hearing, the trial judge of the Industrial Court in an order dated
January 27, 1959 sustained the jurisdiction of the court on the theory that the
functions of the Bureau of Printing are "exclusively proprietary in nature," and,
consequently, denied the prayer for dismissal. Reconsideration of this order having
been also denied by the court in banc, the petitioners brought the case to this Court
through the present petition for certiorari and prohibition.
We find the petition to be meritorious.
The Bureau of Printing is an office of the Government created by the Administrative
Code of 1916 (Act No. 2657). As such instrumentality of the Government, it
operates under the direct supervision of the Executive Secretary, Office of the
President, and is "charged with the execution of all printing and binding, including
work incidental to those processes, required by the National Government and such
other work of the same character as said Bureau may, by law or by order of the
(Secretary of Finance) Executive Secretary, be authorized to undertake . . .." (See.
1644, Rev. Adm. Code). It has no corporate existence, and its appropriations are
provided for in the General Appropriations Act. Designed to meet the printing needs
of the Government, it is primarily a service bureau and obviously, not engaged in
business or occupation for pecuniary profit.
It is true, as stated in the order complained of, that the Bureau of Printing receives
outside jobs and that many of its employees are paid for overtime work on regular
working days and on holidays, but these facts do not justify the conclusion that its
functions are "exclusively proprietary in nature." Overtime work in the Bureau of
Printing is done only when the interest of the service so requires (sec. 566, Rev.
Adm. Code). As a matter of administrative policy, the overtime compensation may
be paid, but such payment is discretionary with the head of the Bureau depending
upon its current appropriations, so that it cannot be the basis for holding that the
functions of said Bureau are wholly proprietary in character. Anent the additional
work it executes for private persons, we find that such work is done upon request, as
distinguished from those solicited, and only "as the requirements of Government
work will permit" (sec. 1654, Rev. Adm. Code), and "upon terms fixed by the
Director of Printing, with the approval of the Department Head" (sec. 1655, id.). As
shown by the uncontradicted evidence of the petitioners, most of these works consist
of orders for greeting cards during Christmas from government officials, and for
printing of checks of private banking institutions. On those greeting cards, the
Government seal, of which only the Bureau of Printing is authorized to use, is
embossed, and on the bank cheeks, only the Bureau of Printing can print the
49
reproduction of the official documentary stamps appearing thereon. The volume of petition for a writ of prohibition is granted. The orders complained of are set aside
private jobs done, in comparison with government jobs, is only one-half of 1 per and the complaint for unfair labor practice against the petitioners is dismissed, with
cent, and in computing the costs for work done for private parties, the Bureau does costs against respondents other than the respondent court.
not include profit because it is not allowed to make any. Clearly, while the Bureau of
Printing is allowed to undertake private printing jobs, it cannot be pretended that it is Bengzon, Bautista Angelo, Labrador, Paredes and Dizon, JJ., concur.
thereby an industrial or business concern. The additional work it executes for private Reyes, J.B.L., J., concurs in the result.
parties is merely incidental to its function, and although such work may be deemed
proprietary in character, there is no showing that the employees performing said
proprietary function are separate and distinct from those employed in its general
governmental functions.

From what has been stated, it is obvious that the Court of Industrial Relations did not
acquire jurisdiction over the respondent Bureau of Printing, and is thus devoid of any
authority to take cognizance of the case. This Court has already held in a long line of
decisions that the Industrial Court has no jurisdiction to hear and determine the
complaint for unfair labor practice filed against institutions or corporations not
organized for profit and, consequently, not an industrial or business organization.
This is so because the Industrial Peace Act was intended to apply only to industrial
employment, and to govern the relations between employers engaged in industry and
occupations for purposes of gain, and their industrial employees. (University of the
Philippines, et al. vs. CIR, et al., G.R. No. L-15416, April 28, 1960; University of
Sto. Tomas vs. Villanueva, et al., G.R. No. L-13748, October 30, 1959; La
Consolacion College vs. CIR, G.R. No. L-13282, April 22, 1960; See also the cases
cited therein.) .

Indeed, as an office of the Government, without any corporate or juridical

personality, the Bureau of Printing cannot be sued. (Sec. 1, Rule 3, Rules of Court).
Any suit, action or proceeding against it, if it were to produce any effect, would
actually be a suit, action or proceeding against the Government itself, and the rule is
settled that the Government cannot be sued without its consent, much less over its
objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation
System, et al. vs. Angat River Workers' Union, et. al., G.R. Nos. L-10943-44,
December 28, 1957).

The record also discloses that the instant case arose from the filing of administrative
charges against some officers of the respondent Bureau of Printing Employees'
Association by the Acting Secretary of General Services. Said administrative charges
are for insubordination, grave misconduct and acts prejudicial to public service
committed by inciting the employees, of the Bureau of Printing to walk out of their
jobs against the order of the duly constituted officials. Under the law, the Heads of
Departments and Bureaus are authorized to institute and investigate administrative
charges against erring subordinates. For the Industrial Court now to take cognizance
of the case filed before it, which is in effect a review of the acts of executive officials
having to do with the discipline of government employees under them, would be to
interfere with the discharge of such functions by said officials. WHEREFORE, the
50
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 42204 January 21, 1993
HON. RAMON J. FAROLAN, JR., in his capacity as Commissioner of
Customs, petitioner,
vs.
COURT OF TAX APPEALS and BAGONG BUHAY TRADING, respondents.
The Solicitor General for petitioner.
Jorge G. Macapagal counsel for respondent.
Aurea Aragon-Casiano for Bagong Buhay Trading.
ROMERO, J.:
This is a petition for review on certiorari which seeks to annul and set aside the
decision of the Court of Tax Appeals dated December 27, 1974 (CTA Case No.
2490) reversing the decision of the Commissioner of Customs which affirmed the
decision of the Collector of Customs. 1
The undisputed facts are as follows:
On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at
the Port of Manila carrying, among others, 80 bales of screen net consigned to
Bagong Buhay Trading (Bagong Buhay). Said importation was declared through a
customs broker under Entry No. 8651-72 as 80 bales of screen net of 500 rolls with a
gross weight of 12,777 kilograms valued at $3,750.00 and classified under Tariff
Heading No. 39.06-B of the Tariff and Customs Code 2 at 35% ad valorem. Since the
customs examiner found the subject shipment reflective of the declaration, Bagong
Buhay paid the duties and taxes due in the amount of P11,350.00 which was paid
through the Bank of Asia under Official Receipt No. 042787 dated February 1, 1972.
Thereafter, the customs appraiser made a return of duty.
Acting on the strength of an information that the shipment consisted of "mosquito
net" made of nylon dutiable under Tariff Heading No. 62.02 of the Tariff and
Customs Code, the Office of the Collector of Customs ordered a
re-examination of the shipment. A report on the re-examination revealed that the
shipment consisted of 80 bales of screen net, each bale containing 20 rolls or a total
of 1,600 rolls. 3 Re-appraised, the shipment was valued at $37,560.00 or $10.15 per
yard instead of $.075 per yard as previously declared. Furthermore, the Collector of
Customs determined the subject shipment as made of synthetic (polyethylene) woven
fabric classifiable under Tariff Heading No. 51.04-B at 100% ad valorem. Thus,
Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on the
shipment in question. 4 Since the shipment was also misdeclared as to quantity and
value, the Collector of Customs forfeited the subject shipment in favor of the
government. 5
Private respondent then appealed the decision of the Collector of Customs by filing a
petition for review with the Commissioner of Customs. On November 25, 1972 the
Commissioner affirmed the Collector of Customs. 6 Private respondent moved for
reconsideration but the same was denied on January 22, 1973. 7
From the Commissioner of Customs, private respondent elevated his case before the
Court of Tax Appeals. Upon review, the Court of Tax Appeals reversed the decision
of the Commissioner of Customs. It ruled that the Commissioner erred in imputing
fraud upon private respondent because fraud is never presumed and thus concluded
that the forfeiture of the articles in question was not in accordance with law.
Moreover, the appellate court stated that the imported articles in question should be
classified as "polyethylene plastic" at the rate of 35%ad valorem instead of
"synthetic (polyethylene) woven fabric" at the rate of 100% ad valorem based upon
the results conducted by the Bureau of Customs Laboratory. Consequently, the Court
of Tax Appeals ordered the release of the said article upon payment of the
corresponding duties and taxes. (C.T.A. Case No. 2490). 8
Thereafter, the Commissioner of Customs moved for reconsideration. On November
19, 1975, the Court of Tax Appeals denied said motion for reconsideration. 9
On August 20, 1976, private respondent filed a petition asking for the release of the
questioned goods which this Court denied. After several motions for the early
resolution of this case and for the release of goods and in view of the fact that the
goods were being exposed to the natural elements, we ordered the release of the
goods on June 2, 1986. Consequently, on July 26, 1986, private respondent posted a
cash bond of P149,443.36 to secure the release of 64 bales 10 out of the 80
bales 11 originally delivered on January 30, 1972. Sixteen bales 12 remain missing.
Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong
Buhay, only 116,950 yards were in good condition and the 26,504 yards were in bad
condition. Consequently, private respondent demands that the Bureau of Customs be
ordered to pay for damages for the 43,050 yards 13 it actually lost. 14
Hence, this petition, the issues being; a) whether or not the shipment in question is
subject to forfeiture under Section 2530-M subparagraphs (3), (4) and (5) of the
Tariff and Customs Code; b) whether or not the shipment in question falls under
Tariff Heading No. 39.06-B (should be 39.02-B) of the Tariff and Customs Code
subject to ad valorem duty of 35% instead of Tariff Heading No. 51.04-B with ad
51
valorem of 100% and c) whether or not the Collector of Customs may be held liable
for the 43,050 yards actually lost by private respondent.
Section 2530, paragraph m, subparagraphs (3), (4) and (5) states:
Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. — Any
vehicle, vessel or aircraft, cargo, article and other objects shall, under the following
conditions be subjected to forfeiture:
xxx xxx xxx
m. Any article sought to be imported or exported.
xxx xxx xxx
(3) On the strength of a false declaration or affidavit or affidavit executed by the
owner, importer, exporter or consignee concerning the importation of such article;
(4) On the strength of a false invoice or other document executed by the owner,
importer, exporter or consignee concerning the importation or exportation of such
article; and.
(5) Through any other practice or device contrary
to law by means of which such articles was entered through a custom-house to the
prejudice of government. (Emphasis supplied).
Petitioner contends that there has been a misdeclaration as to the quantity in rolls of
the shipment in question, the undisputed fact being that the said shipment consisted
of 1,600 rolls and not 500 rolls as declared in the import entry. We agree with the
contention of the petitioner. In declaring the weight of its shipment in an import
entry, through its customs broker as 12,777 kilograms when in truth and in fact the
actual weight is 13,600 kilograms, an apparent misdeclaration as to the weight of the
questioned goods was committed by private respondent. Had it not been for a re-
examination and re-appraisal of the shipment by the Collector of Customs which
yielded a difference of 823 kilograms, the government would have lost revenue
derived from customs duties.
Although it is admitted that indeed there was a misdeclaration, such violation,
however, does not warrant forfeiture for such act was not committed directly by the
owner, importer, exporter or consignee as set forth in Section 2530, paragraph m,
subparagraph (3), and/or (4).
In defense of its position denying the commission of misdeclaration, private
respondent contends that its import entry was based solely on the shipping
documents and that it had no knowledge of any flaw in the said documents at the
time the entry was filed. For this reason, private respondent believes that if there was
any discrepancy in the quantity of the goods as declared and as examined, such
discrepancy should not be attributed to Bagong Buhay. 15
Private respondent's argument is persuasive. Under Section 2530, paragraph m,
subparagraphs (3) and (4), the requisites for forfeiture are: (1) the wrongful making
by the owner, importer, exporter or consignees of any declaration or affidavit, or the
wrongful making or delivery by the same persons of any invoice, letter or paper —
all touching on the importation or exportation of merchandise; and (2) that such
declaration, affidavit, invoice, letter or paper is false. 16
In the case at bar, although it cannot be denied that private respondent caused to be
prepared through its customs broker a false import entry or declaration, it cannot be
charged with the wrongful making thereof because such entry or declaration merely
restated faithfully the data found in the corresponding certificate of
origin, 17 certificate of manager of the shipper, 18 the packing lists 19 and the bill of
lading 20 which were all prepared by its
suppliers abroad. If, at all, the wrongful making or falsity of the documents above-
mentioned can only be attributed to Bagong Buhay's foreign suppliers or shippers.
With regard to the second requirement on falsity, it bears mentioning that the
evidence on record, specifically, the decisions of the Collector of Customs and the
Commissioner of Customs, do not reveal that the importer or consignee, Bagong
Buhay Trading had any knowledge of any falsity on the subject importation.
Since private respondent's misdeclaration can be traced directly to its foreign
suppliers, Section 2530, paragraph m, subparagraphs (3) and (4) cannot find
application.
Applying subparagraph (5), fraud must be committed by an importer/consignee to
evade payment of the duties due. 21 We support the stance of the Court of Tax
Appeals that the Commissioner of Customs failed to show that fraud had been
committed by the private respondent. The fraud contemplated by law must be actual
and not constructive. It must be intentional fraud, consisting of deception willfully
and deliberately done or resorted to in order to induce another to give up some
right. 22 As explained earlier, the import entry was prepared on the basis of the
shipping documents provided by the foreign supplier or shipper. Hence, Bagong
Buhay Trading can be considered to have acted in good faith when it relied on these
documents.
Proceeding now to the question of the correct classification of the questioned
shipments, petitioner contends that the same falls under Tariff Heading No. 51.04
being a "synthetic (polyethylene) woven fabric." On the other hand, private
respondent contends that these fall under Tariff Heading No. 39.06 (should be
39.02), having been found to be made of polyethylene plastic.
52
Heading No. 39.02 of the Tariff and Customs Code provides:
39.02 — Polymerisation and copolymerisation products (for example, polyethylene,
polytetrahaloethylene, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl
acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and
polymethacrylic derivatives, coumaroneindene resins).
The principal products included in this heading are:
(1) Polymerization products of ethylene or its substitution derivatives, particularly
the halogen derivatives.
Examples of these are polyethylene, polytetrafluro-ethylene and polychlorotrifluro-
ethylene. Their characteristic is that they are translucent, flexible and light in
weight. They are used largely for insulating electric wire. 23
On the other hand, Tariff Heading No. 51.04 provides:
51.04. — Woven fabrics of man-made fibers (continuous) including woven fabrics
of monofil or strip of heading No. 51.01 or 51.02.
This heading covers woven fabrics (as described in Part [I] [C] of the General
Explanatory Note on Section XI) made of yarns of continuous man-made fibers, or
of monofil or strip of heading 51.01 and 51.02; it includes a very large variety of
dress fabrics, linings, curtain materials, furnishing fabrics, tyre fabrics, tent fabrics,
parachute fabrics, etc. 24 (Emphasis supplied)
To correctly classify the subject importation, we need to refer to chemical analysis
submitted before the Court of Tax Appeals. Mr. Norberto Z. Manuel, an Analytical
Chemist of the Bureau of Customs and an Assistant to the Chief of the Customs
Laboratory, testified that a chemical test was conducted on the sample 25 and "the
result is that the attached sample submitted under Entry No. 8651 was found to be
made wholly of Polyethylene plastic." 26
A similar result conducted by the Adamson University Testing Laboratories provides
as follows:
The submitted sample, being insoluble in 10% sodium carbonate; hydrochloric acid,
glacial acetic acid, toluene, acetone, formic acid, and nitric acid, does not belong to
the man-made fibers, i.e., cellulosic and alginate rayons, poly (vinyl chloride),
polyacrylonitrile, copolymer or polyester silicones including Dolan, Dralon, Orlin,
PAN, Redon, Courtelle, etc., Tarylene, Dacron; but it is a type of plastic not
possessing, the properties of the man-made fibers. 27 (Emphasis supplied)
Consequently, the Court of Tax Appeals, relying on the laboratory findings of the
Bureau of Customs and Adamson University correctly classified the questioned
shipment as polyethylene plastic taxable under Tariff Heading No. 39.02 instead of
synthetic (polyethylene) woven fabric under Tariff Heading 51.04, to wit:
While it is true that the finding and conclusion of the Collector of Customs with
respect to classification of imported articles are presumptively correct, yet as matters
that require laboratory tests or analysis to arrive at the proper classification, the
opinion of the Collector must yield to the finding of an expert whose opinion is
based on such laboratory test or analysis unless such laboratory analysis is shown to
be erroneous. And this is especially so in this case where the test and analysis were
made in the laboratory of the Bureau of Customs itself. It has not been shown why
such laboratory finding was disregarded. There is no claim or pretense that an error
was committed by the laboratory technician. Significantly, the said finding of the
Chief, Customs Laboratory finds support in the "REPORT OF ANALYSIS"
submitted by the Adamson University Testing Laboratories, dated September 21,
1966. 28
On the third issue, we opine that the Bureau of Customs cannot be held liable for
actual damages that the private respondent sustained with regard to its goods.
Otherwise, to permit private respondent's claim to prosper would violate the doctrine
of sovereign immunity. Since it demands that the Commissioner of Customs be
ordered to pay for actual damages it sustained, for which ultimately liability will fall
on the government, it is obvious that this case has been converted technically into a
suit against the state. 29
On this point, the political doctrine that "the state may not be sued without its
consent," categorically applies. 30 As an unincorporated government agency without
any separate juridical personality of its own, the Bureau of Customs enjoys immunity
from suit. Along with the Bureau of Internal Revenue, it is invested with an inherent
power of sovereignty, namely, taxation. As an agency, the Bureau of Customs
performs the governmental function of collecting revenues which is definitely not a
proprietary function. Thus, private respondent's claim for damages against the
Commissioner of Customs must fail.
WHEREFORE, the decision of the respondent Court of Tax Appeals is AFFIRMED.
The Collector of Customs is directed to expeditiously re-compute the customs duties
applying Tariff Heading 39.02 at the rate of 35% ad valorem on the 13,600
kilograms of polyethylene plastic imported by private respondent.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.
53
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23139 December 17, 1966
MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,
vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-
appellees.
Alejandro Basin, Jr. and Associates for plaintiff-appellant.
Felipe T. Cuison for defendants-appellees.
BENGZON, J.P., J.:
Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville"
sometime in November of 1962, consigned to Mobil Philippines Exploration, Inc.,
Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was
discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of
Customs then handling arrastre operations therein. The Customs Arrastre Service
later delivered to the broker of the consignee three cases only of the shipment.
On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First
Instance of Manila against the Customs Arrastre Service and the Bureau of Customs
to recover the value of the undelivered case in the amount of P18,493.37 plus other
damages.
On April 20, 1964 the defendants filed a motion to dismiss the complaint on the
ground that not being persons under the law, defendants cannot be sued.
After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the
complaint on the ground that neither the Customs Arrastre Service nor the Bureau of
Customs is suable. Plaintiff appealed to Us from the order of dismissal.
Raised, therefore, in this appeal is the purely legal question of the defendants'
suability under the facts stated.
Appellant contends that not all government entities are immune from suit; that
defendant Bureau of Customs as operator of the arrastre service at the Port of
Manila, is discharging proprietary functions and as such, can be sued by private
individuals.
The Rules of Court, in Section 1, Rule 3, provide:
SECTION 1. Who may be parties.—Only natural or juridical persons or entities
authorized by law may be parties in a civil action.
Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical
person or (3) an entity authorized by law to be sued. Neither the Bureau of Customs
nor (a fortiori) its function unit, the Customs Arrastre Service, is a person. They are
merely parts of the machinery of Government. The Bureau of Customs is a bureau
under the Department of Finance (Sec. 81, Revised Administrative Code); and as
stated, the Customs Arrastre Service is a unit of the Bureau of Custom, set up under
Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to
Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants
herein cannot he sued under the first two abovementioned categories of natural or
juridical persons.
Nonetheless it is urged that by authorizing the Bureau of Customs to engage in
arrastre service, the law therebyimpliedly authorizes it to be sued as arrastre operator,
for the reason that the nature of this function (arrastre service) is proprietary, not
governmental. Thus, insofar as arrastre operation is concerned, appellant would put
defendants under the third category of "entities authorized by law" to be sued. Stated
differently, it is argued that while there is no law expressly authorizing the Bureau of
Customs to sue or be sued, still its capacity to be sued is implied from its very power
to render arrastre service at the Port of Manila, which it is alleged, amounts to the
transaction of a private business.
The statutory provision on arrastre service is found in Section 1213 of Republic Act
1937 (Tariff and Customs Code, effective June 1, 1957), and it states:
SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.—The Bureau of
Customs shall have exclusive supervision and control over the receiving, handling,
custody and delivery of articles on the wharves and piers at all ports of entry and in
the exercise of its functions it is hereby authorized to acquire, take over, operate and
superintend such plants and facilities as may be necessary for the receiving,
handling, custody and delivery of articles, and the convenience and comfort of
passengers and the handling of baggage; as well as to acquire fire protection
equipment for use in the piers: Provided, That whenever in his judgment the
receiving, handling, custody and delivery of articles can be carried on by private
parties with greater efficiency, the Commissioner may, after public bidding and
subject to the approval of the department head, contract with any private party for the
service of receiving, handling, custody and delivery of articles, and in such event, the
contract may include the sale or lease of government-owned equipment and facilities
used in such service.
In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397,
resolution of August 6, 1963, this Court indeed held "that the foregoing statutory
provisions authorizing the grant by contract to any private party of the right to render
54
said arrastre services necessarily imply that the same is deemed by Congress to be
proprietary or non-governmental function." The issue in said case, however, was
whether laborers engaged in arrastre service fall under the concept of employees in
the Government employed in governmental functions for purposes of the prohibition
in Section 11, Republic Act 875 to the effect that "employees in the Government . . .
shall not strike," but "may belong to any labor organization which does not impose
the obligation to strike or to join in strike," which prohibition "shall apply only to
employees employed in governmental functions of the Government . . . .
Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction
over the subject matter of the case, but not that the Bureau of Customs can be sued.
Said issue of suability was not resolved, the resolution stating only that "the issue on
the personality or lack of personality of the Bureau of Customs to be sued does not
affect the jurisdiction of the lower court over the subject matter of the case, aside
from the fact that amendment may be made in the pleadings by the inclusion as
respondents of the public officers deemed responsible, for the unfair labor practice
acts charged by petitioning Unions".
Now, the fact that a non-corporate government entity performs a function proprietary
in nature does not necessarily result in its being suable. If said non-governmental
function is undertaken as an incident to its governmental function, there is no waiver
thereby of the sovereign immunity from suit extended to such government entity.
This is the doctrine recognized in Bureau of Printing, et al. vs. Bureau of Printing
Employees Association, et al., L-15751, January 28, 1961:
The Bureau of Printing is an office of the Government created by the Administrative
Code of 1916 (Act No. 2657). As such instrumentality of the Government, it
operates under the direct supervision of the Executive Secretary, Office of the
President, and is "charged with the execution of all printing and binding, including
work incidental to those processes, required by the National Government and such
other work of the same character as said Bureau may, by law or by order of the
(Secretary of Finance) Executive Secretary, be authorized to undertake . . . ." (Sec.
1644, Rev. Adm. Code.) It has no corporate existence, and its appropriations are
provided for in the General Appropriations Act. Designed to meet the printing needs
of the Government, it is primarily a service bureau and, obviously, not engaged in
business or occupation for pecuniary profit.
xxx xxx xxx
. . . Clearly, while the Bureau of Printing is allowed to undertake private printing
jobs, it cannot be pretended that it is thereby an industrial or business concern. The
additional work it executes for private parties is merely incidental to its function, and
although such work may be deemed proprietary in character, there is no showing that
the employees performing said proprietary function are separate and distinct from
those emoloyed in its general governmental functions.
xxx xxx xxx
Indeed, as an office of the Government, without any corporate or juridical
personality, the Bureau of Printing cannot be sued (Sec. 1, Rule 3, Rules of Court.)
Any suit, action or proceeding against it, if it were to produce any effect, would
actually be a suit, action or proceeding against the Government itself, and the rule is
settled that the Government cannot be sued without its consent, much less over its
objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation
System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44,
December 28, 1957.)
The situation here is not materially different. The Bureau of Customs, to repeat, is
part of the Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of
its own apart from that of the national government. Its primary function is
governmental, that of assessing and collecting lawful revenues from imported
articles and all other tariff and customs duties, fees, charges, fines and penalties (Sec.
602, R.A. 1937). To this function, arrastre service is a necessary incident. For
practical reasons said revenues and customs duties can not be assessed and collected
by simply receiving the importer's or ship agent's or consignee's declaration of
merchandise being imported and imposing the duty provided in the Tariff law.
Customs authorities and officers must see to it that the declaration tallies with the
merchandise actually landed. And this checking up requires that the landed
merchandise be hauled from the ship's side to a suitable place in the customs
premises to enable said customs officers to make it, that is, it requires arrastre
operations.1
Clearly, therefore, although said arrastre function may be deemed proprietary, it is a
necessary incident of the primary and governmental function of the Bureau of
Customs, so that engaging in the same does not necessarily render said Bureau liable
to suit. For otherwise, it could not perform its governmental function without
necessarily exposing itself to suit. Sovereign immunity, granted as to the end, should
not be denied as to the necessary means to that end.
And herein lies the distinction between the present case and that of National Airports
Corporation vs. Teodoro, 91 Phil. 203, on which appellant would rely. For there, the
Civil Aeronautics Administration was found have for its prime reason for existence
not a governmental but a proprietary function, so that to it the latter was not a mere
incidental function:
Among the general powers of the Civil Aeronautics Administration are, under
Section 3, to execute contracts of any kind, to purchase property, and to grant
concessions 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.
55
These provisions confer upon the Civil Aeronautics Administration, in our opinion,
the power to sue and be sued. The power to sue and be sued is implied from the
power to transact private business. . . .

xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity.
Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of
travel and the convenience of the travelling public. . . .

Regardless of the merits of the claim against it, the State, for obvious reasons of
public policy, cannot be sued without its consent. Plaintiff should have filed its
present claim to the General Auditing Office, it being for money under the
provisions of Commonwealth Act 327, which state the conditions under which
money claims against the Government may be filed.

It must be remembered that statutory provisions waiving State immunity from suit
are strictly construed and that waiver of immunity, being in derogation of
sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and
Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S.
275, 3 L. Ed. 804, 79 S. Ct. 785). From the provision authorizing the Bureau of
Customs to lease arrastre operations to private parties, We see no authority to sue the
said Bureau in the instances where it undertakes to conduct said operation itself. The
Bureau of Customs, acting as part of the machinery of the national government in the
operation of the arrastre service, pursuant to express legislative mandate and as a
necessary incident of its prime governmental function, is immune from suit, there
being no statute to the contrary.

WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs
against appellant. So ordered.

56
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-51806 November 8, 1988
CIVIL AERONAUTICS ADMINISTRATION, petitioner,
vs.
COURT OF APPEALS and ERNEST E. SIMKE, respondents.
The Solicitor General for petitioner.
Ledesma, Guytingco, Veleasco & Associates for respondent Ernest E. Simke.
CORTES, J.:
Assailed in this petition for review on certiorari is the decision of the Court of
Appeals affirming the trial court decision which reads as follows:
WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the
amount of P15,589.55 as full reimbursement of his actual medical and hospital
expenses, with interest at the legal rate from the commencement of the suit; the
amount of P20,200.00 as consequential damages; the amount of P30,000.00 as moral
damages; the amount of P40,000.00 as exemplary damages; the further amount of
P20,000.00 as attorney's fees and the costs [Rollo, p. 24].
The facts of the case are as follows:
Private respondent is a naturalized Filipino citizen and at the time of the incident was
the Honorary Consul Geileral of Israel in the Philippines.
In the afternoon of December 13, 1968, private respondent with several other
persons went to the Manila International Airport to meet his future son-in-law. In
order to get a better view of the incoming passengers, he and his group proceeded to
the viewing deck or terrace of the airport.
While walking on the terrace, then filled with other people, private respondent
slipped over an elevation about four (4) inches high at the far end of the terrace. As a
result, private respondent fell on his back and broke his thigh bone.
The next day, December 14, 1968, private respondent was operated on for about
three hours.
Private respondent then filed an action for damages based on quasi-delict with the
Court of First Instance of Rizal, Branch VII against petitioner Civil Aeronautics
Administration or CAA as the entity empowered "to administer, operate, manage,
control, maintain and develop the Manila International Airport ... ." [Sec. 32 (24),
R.A. 776].
Said claim for damages included, aside from the medical and hospital bills,
consequential damages for the expenses of two lawyers who had to go abroad in
private respondent's stead to finalize certain business transactions and for the
publication of notices announcing the postponement of private respondent's
daughter's wedding which had to be cancelled because of his accident [Record on
Appeal, p. 5].
Judgment was rendered in private respondent's favor prompting petitioner to appeal
to the Court of Appeals. The latter affirmed the trial court's decision. Petitioner then
filed with the same court a Motion for, Reconsideration but this was denied.
Petitioner now comes before this Court raising the following assignment of errors:
1. The Court of Appeals gravely erred in not holding that the present the CAA is
really a suit against the Republic of the Philippines which cannot be sued without its
consent, which was not given in this case.
2. The Court of Appeals gravely erred in finding that the injuries of respondent
Ernest E. Simke were due to petitioner's negligence — although there was no
substantial evidence to support such finding; and that the inference that the hump or
elevation the surface of the floor area of the terrace of the fold) MIA building is
dangerous just because said respondent tripped over it is manifestly mistaken —
circumstances that justify a review by this Honorable Court of the said finding of
fact of respondent appellate court (Garcia v. Court of Appeals, 33 SCRA 622; Ramos
v. CA, 63 SCRA 331.)
3. The Court of Appeals gravely erred in ordering petitioner to pay actual,
consequential, moral and exemplary damages, as well as attorney's fees to
respondent Simke — although there was no substantial and competent proof to
support said awards I Rollo, pp. 93-94 1.
I
Invoking the rule that the State cannot be sued without its consent, petitioner
contends that being an agency of the government, it cannot be made a party-
defendant in this case.
This Court has already held otherwise in the case of National Airports Corporation
v. Teodoro, Sr. [91 Phil. 203 (1952)]. Petitioner contends that the said ruling does not
57
apply in this case because: First, in the Teodoro case, the CAA was sued only in a
substituted capacity, the National Airports Corporation being the original party.
Second, in the Teodoro case, the cause of action was contractual in nature while
here, the cause of action is based on a quasi-delict. Third, there is no specific
provision in Republic Act No. 776, the law governing the CAA, which would justify
the conclusion that petitioner was organized for business and not for governmental
purposes. [Rollo, pp. 94-97].
Such arguments are untenable.
First, the Teodoro case, far from stressing the point that the CAA was only
substituted for the National Airports Corporation, in fact treated the CAA as the real
party in interest when it stated that:
xxx xxx xxx
... To all legal intents and practical purposes, the National Airports 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. The better
practice there should have been to make the Civil Aeronautics Administration the
third party defendant instead of the National Airports Corporation. [National
Airports Corp. v. Teodoro, supra, p. 208.]
xxx xxx xxx
Second, the Teodoro case did not make any qualification or limitation as to whether
or not the CAA's power to sue and be sued applies only to contractual obligations.
The Court in the Teodoro case ruled that Sections 3 and 4 of Executive Order 365
confer upon the CAA, without any qualification, the power to sue and be sued, albeit
only by implication. Accordingly, this Court's pronouncement that where such power
to sue and be sued has been granted without any qualification, it can include a claim
based on tort or quasi-delict [Rayo v. Court of First Instance of Bulacan, G.R. Nos.
55273-83, December 19,1981, 1 1 0 SCRA 4561 finds relevance and applicability to
the present case.
Third, it has already been settled in the Teodoro case that the CAA as an agency is
not immune from suit, it being engaged in functions pertaining to a private entity.
xxx xxx xxx
The Civil Aeronautics Administration comes under the category of a private entity.
Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of
travel and the convenience of the travelling public. It is engaged in an enterprise
which, far from being the exclusive prerogative of state, may, more than the
construction of public roads, be undertaken by private concerns. [National Airports
Corp. v. Teodoro, supra, p. 207.]
xxx xxx xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec.
Order 365 (Reorganizing the Civil Aeronautics Administration and Abolishing the
National Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act of the
Philippines), subsequently enacted on June 20, 1952, did not alter the character of
the CAA's objectives under Exec, Order 365. The pertinent provisions cited in the
Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which led the Court to
consider the CAA in the category of a private entity were retained substantially in
Republic Act 776, Sec. 32 (24) and (25).<äre||anº•1àw> Said Act provides:
Sec. 32. Powers and Duties of the Administrator. Subject to the general — control
and supervision of the Department Head, the Administrator shall have among others,
the following powers and duties:
xxx xxx xxx
(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government-owned aerodromes except those controlled
or operated by the Armed Forces of the Philippines including such powers and duties
as: (a) to plan, design, construct, equip, expand, improve, repair or alter aerodromes
or such structures, improvement or air navigation facilities; (b) to enter into, make
and execute contracts of any kind with any person, firm, or public or private
corporation or entity; ... .
(25) To determine, fix, impose, collect and receive landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under its management and
control.
xxx xxx xxx
From the foregoing, it can be seen that the CAA is tasked with private or non-
governmental functions which operate to remove it from the purview of the rule on
State immunity from suit. For the correct rule as set forth in the Tedoro case states:
xxx xxx xxx
58
Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity functions suits is determined by the character of the objects for
which the entity was organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they have assumed to
act in 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 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) [National Airport Corporation v. Teodoro, supra, pp. 206-
207; Emphasis supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine
National Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 631, where it was
held that the Philippine National Railways, although owned and operated by the
government, was not immune from suit as it does not exercise sovereign but purely
proprietary and business functions. Accordingly, as the CAA was created to
undertake the management of airport operations which primarily involve proprietary
functions, it cannot avail of the immunity from suit accorded to government agencies
performing strictly governmental functions.
II
Petitioner tries to escape liability on the ground that there was no basis for a finding
of negligence. There can be no negligence on its part, it alleged, because the
elevation in question "had a legitimate purpose for being on the terrace and was
never intended to trip down people and injure them. It was there for no other purpose
but to drain water on the floor area of the terrace" [Rollo, P. 99].
To determine whether or not the construction of the elevation was done in a
negligent manner, the trial court conducted an ocular inspection of the premises.
xxx xxx xxx
... This Court after its ocular inspection found the elevation shown in Exhs. A or 6-A
where plaintiff slipped to be a step, a dangerous sliding step, and the proximate cause
of plaintiffs injury...
xxx xxx xxx
This Court during its ocular inspection also observed the dangerous and defective
condition of the open terrace which has remained unrepaired through the years. It has
observed the lack of maintenance and upkeep of the MIA terrace, typical of many
government buildings and offices. Aside from the litter allowed to accumulate in the
terrace, pot holes cause by missing tiles remained unrepaired and unattented. The
several elevations shown in the exhibits presented were verified by this Court during
the ocular inspection it undertook. Among these elevations is the one (Exh. A) where
plaintiff slipped. This Court also observed the other hazard, the slanting or sliding
step (Exh. B) as one passes the entrance door leading to the terrace [Record on
Appeal, U.S., pp. 56 and 59; Emphasis supplied.]
The Court of Appeals further noted that:
The inclination itself is an architectural anomaly for as stated by the said witness, it
is neither a ramp because a ramp is an inclined surface in such a way that it will
prevent people or pedestrians from sliding. But if, it is a step then it will not serve its
purpose, for pedestrian purposes. (tsn, p. 35, Id.) [rollo, p. 29.]
These factual findings are binding and conclusive upon this Court. Hence, the CAA
cannot disclaim its liability for the negligent construction of the elevation since
under Republic Act No. 776, it was charged with the duty of planning, designing,
constructing, equipping, expanding, improving, repairing or altering aerodromes or
such structures, improvements or air navigation facilities [Section 32, supra, R.A.
776]. In the discharge of this obligation, the CAA is duty-bound to exercise due
diligence in overseeing the construction and maintenance of the viewing deck or
terrace of the airport.
It must be borne in mind that pursuant to Article 1173 of the Civil Code, "(t)he fault
or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of
the person, of the time and of the place." Here, the obligation of the CAA in
maintaining the viewing deck, a facility open to the public, requires that CAA insure
the safety of the viewers using it. As these people come to the viewing deck to watch
the planes and passengers, their tendency would be to look to where the planes and
the incoming passengers are and not to look down on the floor or pavement of the
viewing deck. The CAA should have thus made sure that no dangerous obstructions
or elevations exist on the floor of the deck to prevent any undue harm to the public.
The legal foundation of CAA's liability for quasi-delict can be found in Article 2176
of the Civil Code which provides that "(w)hoever by act or omission causes damage
to another, there being fault or negligence, is obliged to pay for the damage done...
As the CAA knew of the existence of the dangerous elevation which it claims
though, was made precisely in accordance with the plans and specifications of the
building for proper drainage of the open terrace [See Record on Appeal, pp. 13 and
57; Rollo, p. 391, its failure to have it repaired or altered in order to eliminate the
existing hazard constitutes such negligence as to warrant a finding of liability based
on quasi-delict upon CAA.
59
The Court finds the contention that private respondent was, at the very least, guilty
of contributory negligence, thus reducing the damages that plaintiff may recover,
unmeritorious. Contributory negligence under Article 2179 of the Civil Code
contemplates a negligent act or omission on the part of the plaintiff, which although
not the proximate cause of his injury, contributed to his own damage, the proximate
cause of the plaintiffs own injury being the defendant's lack of due care. In the
instant case, no contributory negligence can be imputed to the private respondent,
considering the following test formulated in the early case of Picart v. Smith, 37 Phil.
809 (1918):
The test by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent man would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect
adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of the negligence in a given
case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability
by that.
The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculations cannot be
here of much value but this much can be profitably said: Reasonable men-overn their
conduct by the circumstances which are before them or known to them. They are not,
and are not supposed to be omniscient of the future. Hence they can be expected to
take care only when there is something before them to suggest or warn of danger.
Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued' If so, it was the duty of the actor to take precautions to guard
against that harm. Reasonable foresight of harm, followed by the ignoring of the
suggestion born of this prevision, is always necessary before negligence can be held
to exist.... [Picart v. Smith, supra, p. 813; Emphasis supplied.]
The private respondent, who was the plaintiff in the case before the lower court,
could not have reasonably foreseen the harm that would befall him, considering the
attendant factual circumstances. Even if the private respondent had been looking
where he was going, the step in question could not easily be noticed because of its
construction. As the trial court found:
In connection with the incident testified to, a sketch, Exhibit O, shows a section of
the floorings oil which plaintiff had tripped, This sketch reveals two pavements
adjoining each other, one being elevated by four and one-fourth inches than the
other. From the architectural standpoint the higher, pavement is a step. However,
unlike a step commonly seen around, the edge of the elevated pavement slanted
outward as one walks to one interior of the terrace. The length of the inclination
between the edges of the two pavements is three inches. Obviously, plaintiff had
stepped on the inclination because had his foot landed on the lower pavement he
would not have lost his balance. The same sketch shows that both pavements
including the inclined portion are tiled in red cement, and as shown by the
photograph Exhibit A, the lines of the tilings are continuous. It would therefore be
difficult for a pedestrian to see the inclination especially where there are plenty of
persons in the terrace as was the situation when plaintiff fell down. There was no
warning sign to direct one's attention to the change in the elevation of the floorings.
[Rollo, pp. 2829.]
III
Finally, petitioner appeals to this Court the award of damages to private respondent.
The liability of CAA to answer for damages, whether actual, moral or exemplary,
cannot be seriously doubted in view of one conferment of the power to sue and be
sued upon it, which, as held in the case of Rayo v. Court of First Instance, supra,
includes liability on a claim for quasi-dilict. In the aforestated case, the liability of
the National Power Corporation to answer for damages resulting from its act of
sudden, precipitate and simultaneous opening of the Angat Dam, which caused the
death of several residents of the area and the destruction of properties, was upheld
since the o,rant of the power to sue and be sued upon it necessarily implies that it can
be held answerable for its tortious acts or any wrongful act for that matter.
With respect to actual or compensatory damages, the law mandates that the same be
proven.
Art. 2199. Except as provided by law or by stipulation, one are entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual on compensatory damages [New
Civil Code].
Private respondent claims P15,589.55 representing medical and hospitalization bills.
This Court finds the same to have been duly proven through the testimony of Dr.
Ambrosio Tangco, the physician who attended to private respondent (Rollo, p. 26)
and who Identified Exh. "H" which was his bill for professional services [Rollo, p.
31].
Concerning the P20,200.00 alleged to have been spent for other expenses such as the
transportation of the two lawyers who had to represent private respondent abroad and
the publication of the postponement notices of the wedding, the Court holds that the
same had also been duly proven. Private respondent had adequately shown the
existence of such losses and the amount thereof in the testimonies before the trial
court [CA decision, p. 81. At any rate, the findings of the Court of Appeals with
respect to this are findings of facts [One Heart Sporting Club, Inc. v. Court of
60
Appeals, G.R. Nos. 5379053972, Oct. 23, 1981, 108 SCRA 4161 which, as had been Administration (CAA), the liabilities of the CAA have now been transferred to the
held time and again, are, as a general rule, conclusive before this Court [Sese v. MIAA.
Intermediate Appellate Court, G.R. No. 66186, July 31, 1987,152 SCRA 585].
WHEREFORE, finding no reversible error, the Petition for review on certiorari is
With respect to the P30,000.00 awarded as moral damages, the Court holds private DENIED and the decision of the Court of Appeals in CA-G.R. No. 51172-R is
respondent entitled thereto because of the physical suffering and physical injuries AFFIRMED.
caused by the negligence of the CAA [Arts. 2217 and 2219 (2), New Civil Code].
SO ORDERED.
With respect to the award of exemplary damages, the Civil Code explicitly, states:

Art. 2229. Exemplary or corrective damages, are imposed, by way of example or

correction for the public good, in addition to the moral, liquidated or compensatory

Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant

acted with gross negligence.

Gross negligence which, according to the Court, is equivalent to the term "notorious
negligence" and consists in the failure to exercise even slight care [Caunan v.
Compania General de Tabacos, 56 Phil. 542 (1932)] can be attributed to the CAA for
its failure to remedy the dangerous condition of the questioned elevation or to even
post a warning sign directing the attention of the viewers to the change in the
elevation of the floorings notwithstanding its knowledge of the hazard posed by such
elevation [Rollo, pp. 28-29; Record oil Appeal, p. 57]. The wanton disregard by the
CAA of the safety of the people using the viewing deck, who are charged an
admission fee, including the petitioner who paid the entrance fees to get inside the
vantage place [CA decision, p. 2; Rollo, p. 25] and are, therefore, entitled to expect a
facility that is properly and safely maintained — justifies the award of exemplary
damages against the CAA, as a deterrent and by way of example or correction for the
public good. The award of P40,000.00 by the trial court as exemplary damages
appropriately underscores the point that as an entity changed with providing service
to the public, the CAA. like all other entities serving the public. has the obligation to
provide the public with reasonably safe service.

Finally, the award of attorney's fees is also upheld considering that under Art. 2208
(1) of the Civil Code, the same may be awarded whenever exemplary damages are
awarded, as in this case, and,at any rate, under Art. 2208 (11), the Court has the
discretion to grant the same when it is just and equitable.

However, since the Manila International Airport Authority (MIAA) has taken over
the management and operations of the Manila International Airport [renamed Ninoy
Aquino International Airport under Republic Act No. 6639] pursuant to Executive
Order No. 778 as amended by executive Orders Nos. 903 (1983), 909 (1983) and 298
(1987) and under Section 24 of the said Exec. Order 778, the MIAA has assumed all
the debts, liabilities and obligations of the now defunct Civil Aeronautics

61
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 182358 February 20, 2013
DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA.
MARGARITA M. GALON, Petitioners,
vs.
PHIL PHARMA WEALTH, INC., Respondent.
DECISION
DEL CASTILLO, J.:
The state may not be sued without its consent. Likewise, public officials may not be
sued for acts done in the perfom1ance of their official functions or within the scope
of their authority.
This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the
Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008
Reso1ution3 denying petitioners' Motion for Reconsideration.4
Factual Antecedents
On December 22, 1998, Administrative Order (AO) No. 27 series of 1998 5 was
issued by then Department of Health (DOH) Secretary Alfredo G. Romualdez
(Romualdez). AO 27 set the guidelines and procedure for accreditation of
government suppliers of pharmaceutical products for sale or distribution to the
public, such accreditation to be valid for three years but subject to annual review.
On January 25, 2000, Secretary Romualdez issued AO 10 series of 2000 6 which
amended AO 27. Under Section VII7 of AO 10, the accreditation period for
government suppliers of pharmaceutical products was reduced to two years.
Moreover, such accreditation may be recalled, suspended or revoked after due
deliberation and proper notice by the DOH Accreditation Committee, through its
Chairman.
Section VII of AO 10 was later amended by AO 66 series of 2000, 8 which provided
that the two-year accreditation period may be recalled, suspended or revoked only
after due deliberation, hearing and notice by the DOH Accreditation Committee,
through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for
a list and category of sanctions to be imposed on accredited government suppliers of
pharmaceutical products in case of adverse findings regarding their products
(e.g. substandard, fake, or misbranded) or violations committed by them during their
accreditation.
In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma.
Margarita M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting
representatives of 24 accredited drug companies, including herein respondent Phil
Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000. During the meeting,
Undersecretary Galon handed them copies of a document entitled "Report on
Violative Products"11 issued by the Bureau of Food and Drugs12 (BFAD), which
detailed violations or adverse findings relative to these accredited drug companies’
products. Specifically, the BFAD found that PPI’s products which were being sold to
the public were unfit for human consumption.
During the October 27, 2000 meeting, the 24 drug companies were directed to
submit within 10 days, or until November 6, 2000, their respective explanations on
the adverse findings covering their respective products contained in the Report on
Violative Products.
Instead of submitting its written explanation within the 10-day period as required,
PPI belatedly sent a letter13dated November 13, 2000 addressed to Undersecretary
Galon, informing her that PPI has referred the Report on Violative Products to its
lawyers with instructions to prepare the corresponding reply. However, PPI did not
indicate when its reply would be submitted; nor did it seek an extension of the 10-
day period, which had previously expired on November 6, 2000, much less offer any
explanation for its failure to timely submit its reply. PPI’s November 13, 2000 letter
states:
Madam,
This refers to your directive on 27 October 2000, on the occasion of the meeting with
selected accredited suppliers, during which you made known to the attendees of your
requirement for them to submit their individual comments on the Report on Violative
Products (the "Report") compiled by your office and disseminated on that date.
In this connection, we inform you that we have already instructed our lawyers to
prepare on our behalf the appropriate reply to the Report furnished to us. Our
lawyers in time shall revert to you and furnish you the said reply.
Please be guided accordingly.
Very truly yours,
62
(signed)
ATTY. ALAN A.B. ALAMBRA
Vice-President for Legal and Administrative Affairs14
In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable"
PPI’s November 13, 2000 letter and therein informed PPI that, effective
immediately, its accreditation has been suspended for two years pursuant to AO 10
and Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI
through counsel questioned the suspension of its accreditation, saying that the same
was made pursuant to Section VII of AO 10 which it claimed was patently illegal
and null and void because it arrogated unto the DOH Accreditation Committee
powers and functions which were granted to the BFAD under Republic Act (RA)
No. 372017 and Executive Order (EO) No. 175.18 PPI added that its accreditation was
suspended without the benefit of notice and hearing, in violation of its right to
substantive and administrative due process. It thus demanded that the DOH desist
from implementing the suspension of its accreditation, under pain of legal redress.
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a
Complaint19 seeking to declare null and void certain DOH administrative issuances,
with prayer for damages and injunction against the DOH, former Secretary
Romualdez and DOH Undersecretary Galon. Docketed as Civil Case No. 68200, the
case was raffled to Branch 160. On February 8, 2002, PPI filed an Amended and
Supplemental Complaint,20 this time impleading DOH Secretary Manuel Dayrit
(Dayrit). PPI claimed that AO 10, Memorandum No. 171-C, Undersecretary Galon’s
suspension order contained in her November 23, 2000 letter, and AO 14 series of
200121are null and void for being in contravention of Section 26(d) of RA 3720 as
amended by EO 175, which states as follows:
SEC. 26. x x x
(d) When it appears to the Director [of the BFAD] that the report of the Bureau that
any article of food or any drug, device, or cosmetic secured pursuant to Section
twenty-eight of this Act is adulterated, misbranded, or not registered, he shall cause
notice thereof to be given to the person or persons concerned and such person or
persons shall be given an opportunity to be heard before the Bureau and to submit
evidence impeaching the correctness of the finding or charge in question.
For what it claims was an undue suspension of its accreditation, PPI prayed that AO
10, Memorandum No. 171-C, Undersecretary Galon’s suspension order contained in
her November 23, 2000 letter, and AO 14 be declared null and void, and that it be
awarded moral damages of P5 million, exemplary damages of P1 million, attorney’s
fees of P1 million, and costs of suit. PPI likewise prayed for the issuance of
temporary and permanent injunctive relief.
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary
Dayrit, and Undersecretary Galon sought the dismissal of the Complaint, stressing
that PPI’s accreditation was suspended because most of the drugs it was importing
and distributing/selling to the public were found by the BFAD to be substandard for
human consumption. They added that the DOH is primarily responsible for the
formulation, planning, implementation, and coordination of policies and programs in
the field of health; it is vested with the comprehensive power to make essential
health services and goods available to the people, including accreditation of drug
suppliers and regulation of importation and distribution of basic medicines for the
public.
Petitioners added that, contrary to PPI’s claim, it was given the opportunity to
present its side within the 10-day period or until November 6, 2000, but it failed to
submit the required comment/reply. Instead, it belatedly submitted a November 13,
2000 letter which did not even constitute a reply, as it merely informed petitioners
that the matter had been referred by PPI to its lawyer. Petitioners argued that due
process was afforded PPI, but because it did not timely avail of the opportunity to
explain its side, the DOH had to act immediately – by suspending PPI’s accreditation
– to stop the distribution and sale of substandard drug products which posed a
serious health risk to the public. By exercising DOH’s mandate to promote health, it
cannot be said that petitioners committed grave abuse of discretion.
In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a
temporary restraining order, but only covering PPI’s products which were not
included in the list of violative products or drugs as found by the BFAD.
In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the
dismissal of Civil Case No. 68200, claiming that the case was one against the State;
that the Complaint was improperly verified; and lack of authority of the corporate
officer to commence the suit, as the requisite resolution of PPI’s board of directors
granting to the commencing officer – PPI’s Vice President for Legal and
Administrative Affairs, Alan Alambra, – the authority to file Civil Case No. 68200
was lacking. To this, PPI filed its Comment/Opposition.25
Ruling of the Regional Trial Court
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring
the case to be one instituted against the State, in which case the principle of state
immunity from suit is applicable.
PPI moved for reconsideration,27 but the trial court remained steadfast.28
63
PPI appealed to the CA.
Ruling of the Court of Appeals
Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether
it was proper for the trial court to dismiss Civil Case No. 68200.
The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered
the remand of the case for the conduct of further proceedings. The CA concluded
that it was premature for the trial court to have dismissed the Complaint. Examining
the Complaint, the CA found that a cause of action was sufficiently alleged – that
due to defendants’ (petitioners’) acts which were beyond the scope of their authority,
PPI’s accreditation as a government supplier of pharmaceutical products was
suspended without the required notice and hearing as required by Section 26(d) of
RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion to
dismiss, petitioners were deemed to have hypothetically admitted the allegations in
the Complaint – which state that petitioners were being sued in their individual and
personal capacities – thus negating their claim that Civil Case No. 68200 is an
unauthorized suit against the State.
The CA further held that instead of dismissing the case, the trial court should have
deferred the hearing and resolution of the motion to dismiss and proceeded to trial. It
added that it was apparent from the Complaint that petitioners were being sued in
their private and personal capacities for acts done beyond the scope of their official
functions. Thus, the issue of whether the suit is against the State could best be
threshed out during trial on the merits, rather than in proceedings covering a motion
to dismiss.
The dispositive portion of the CA Decision reads:
WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004
of the Regional Trial Court of Pasig City, Branch 160, is
hereby REVERSED and SET-ASIDE. ACCORDINGLY, this case is
REMANDED to the trial court for further proceedings.
SO ORDERED.30
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence,
they filed the present Petition.
Issue
Petitioners now raise the following lone issue for the Court’s resolution:
Should Civil Case No. 68200 be dismissed for being a suit against the State?31
Petitioners’ Arguments
Petitioners submit that because PPI’s Complaint prays for the award of damages
against the DOH, Civil Case No. 68200 should be considered a suit against the State,
for it would require the appropriation of the needed amount to satisfy PPI’s claim,
should it win the case. Since the State did not give its consent to be sued, Civil Case
No. 68200 must be dismissed. They add that in issuing and implementing the
questioned issuances, individual petitioners acted officially and within their
authority, for which reason they should not be held to account individually.
Respondent’s Arguments
Apart from echoing the pronouncement of the CA, respondent insists that Civil Case
No. 68200 is a suit against the petitioners in their personal capacity for acts
committed outside the scope of their authority.
Our Ruling
The Petition is granted.
The doctrine of non-suability.
The discussion of this Court in Department of Agriculture v. National Labor
Relations Commission32 on the doctrine of non-suability is enlightening.
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. x x x [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. 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 nonsuability. We have had
occasion to explain in its defense, however, that a continued adherence to the
doctrine of 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
64
that the State may at times be sued. The State’s consent may be given either
expressly or impliedly. Express consent may be made through a general law or a
special law. x x x 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. This rule, x x x is not, however, without qualification. 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.33
As a general rule, a state may not be sued. However, if it consents, either expressly
or impliedly, then it may be the subject of a suit.34 There is express consent when a
law, either special or general, so provides. On the other hand, there is implied
consent when the state "enters into a contract or it itself commences
litigation."35 However, it must be clarified that when a state enters into a contract, it
does not automatically mean that it has waived its non-suability. 36 The State "will be
deemed to have impliedly waived its non-suability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves
its sovereign or governmental capacity[,] x x x no such waiver may be
implied."37 "Statutory provisions waiving [s]tate immunity are construed in
strictissimi juris. For, waiver of immunity is in derogation of sovereignty." 38
The DOH can validly invoke state immunity.
a) DOH is an unincorporated agency which performs sovereign or governmental
functions.
In this case, the DOH, being an "unincorporated agency of the government" 39 can
validly invoke the defense of immunity from suit because it has not consented, either
expressly or impliedly, to be sued. Significantly, the DOH is an unincorporated
agency which performs functions of governmental character.
The ruling in Air Transportation Office v. Ramos40 is relevant, viz:
An unincorporated government agency without any separate juridical personality of
its own enjoys immunity from suit because it is invested with an inherent power of
sovereignty. Accordingly, a claim for damages against the agency cannot prosper;
otherwise, the doctrine of sovereign immunity is violated. However, the need to
distinguish between an unincorporated government agency performing governmental
function and one performing proprietary functions has arisen. The immunity has
been upheld in favor of the former because its function is governmental or incidental
to such function; it has not been upheld in favor of the latter whose function was not
in pursuit of a necessary function of government but was essentially a business. 41
b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other
defendants for damages which constitutes a charge or financial liability against
the state.
Moreover, it is settled that if a Complaint seeks to "impose a charge or financial
liability against the state,"42 the defense of non-suability may be properly invoked. In
this case, PPI specifically prayed, in its Complaint and Amended and Supplemental
Complaint, for the DOH, together with Secretaries Romualdez and Dayrit as well as
Undersecretary Galon, to be held jointly and severally liable for moral damages,
exemplary damages, attorney’s fees and costs of suit.43 Undoubtedly, in the event
that PPI succeeds in its suit, the government or the state through the DOH would
become vulnerable to an imposition or financial charge in the form of damages. This
would require an appropriation from the national treasury which is precisely the
situation which the doctrine of state immunity aims to protect the state from.
The mantle of non-suability extends to complaints filed against public officials for
acts done in the performance of their official functions.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and
Undersecretary Galon, it must be stressed that the doctrine of state immunity extends
its protective mantle also to complaints filed against state officials for acts done in
the discharge and performance of their duties.44 "The suability of a government
official depends on whether the official concerned was acting within his official or
jurisdictional capacity, and whether the acts done in the performance of official
functions will result in a charge or financial liability against the
government."45 Otherwise stated, "public officials can be held personally
accountable for acts claimed to have been performed in connection with official
duties where they have acted ultra vires or where there is showing of bad
faith."46 Moreover, "[t]he 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
appropriation of the amount needed to pay the damages awarded against them, the
suit must be regarded as against the state x x x. In such a situation, the state may
move to dismiss the [C]omplaint on the ground that it has been filed without its
consent." 47
It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as
well as Undersecretary Galon, were done while in the performance and discharge of
their official functions or in their official capacities, and not in their personal or
individual capacities. Secretaries Romualdez and Dayrit were being charged with the
issuance of the assailed orders. On the other hand, Undersecretary Galon was being
charged with implementing the assailed issuances. By no stretch of imagination
could the same be categorized as ultra vires simply because the said acts are well
within the scope of their authority. Section 4 of RA 3720 specifically provides that
the BFAD is an office under the Office of the Health Secretary. Also, the Health
Secretary is authorized to issue rules and regulations as may be necessary to
65
effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon,
she is authorized by law to supervise the offices under the DOH’s authority, 49 such
as the BFAD. Moreover, there was also no showing of bad faith on their part. The
assailed issuances were not directed only against PPI. The suspension of PPI’s
accreditation only came about after it failed to submit its comment as directed by
Undersecretary Galon. It is also beyond dispute that if found wanting, a financial
charge will be imposed upon them which will require an appropriation from the state
of the needed amount. Thus, based on the foregoing considerations, the Complaint
against them should likewise be dismissed for being a suit against the state which
absolutely did not give its consent to be sued. Based on the foregoing considerations,
and regardless of the merits of PPI’s case, this case deserves a dismissal. Evidently,
the very foundation of Civil Case No. 68200 has crumbled at this initial juncture.
PPI was not denied due process.
to be heard. The Court has repeatedly stressed that parties who chose not to avail
themselves of the opportunity to answer charges against them cannot complain of a
denial of due process."50
Incidentally, we find it inieresting that in the earlier case of Department q( Health v.
Phil Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on
the same issuances which it assails in the present case. In the earlier case
of Department of Health v. Phil Pharmawealth, Jnc., 52 PPI submitted to the DOH a
request for the inclusion of its products in the list of accredited drugs as required by
AO 27 series of 1998 which was later amended by AO 10 series of 2000. In the
instant case, however, PPI interestingly claims that these issuances are null and void.
WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No.
68200 is ordered DISMISSED.

However, we cannot end without a discussion of PPI’s contention that it was denied SO ORDERED.
due process when its accreditation was suspended "without due notice and hearing."
It is undisputed that during the October 27, 2000 meeting, Undersecretary Galon
directed representatives of pharmaceutical companies, PPI included, to submit their
comment and/or reactions to the Report on Violative Products furnished them within
a period of 10 days. PPI, instead of submitting its comment or explanation, wrote a
letter addressed to Undersecretary Galon informing her that the matter had already
been referred to its lawyer for the drafting of an appropriate reply. Aside from the
fact that the said letter was belatedly submitted, it also failed to specifically mention
when such reply would be forthcoming. Finding the foregoing explanation to be
unmeritorious, Undersecretary Galon ordered the suspension of PPI’s accreditation
for two years. Clearly these facts show that PPI was not denied due process. It was
given the opportunity to explain its side. Prior to the suspension of its accreditation,
PPI had the chance to rebut, explain, or comment on the findings contained in the
Report on Violative Products that several of PPI’s products are not fit for human
consumption. However, PPI squandered its opportunity to explain. Instead of
complying with the directive of the DOH Undersecretary within the time allotted, it
instead haughtily informed Undersecretary Galon that the matter had been referred to
its lawyers. Worse, it impliedly told Undersecretary Galon to just wait until its
lawyers shall have prepared the appropriate reply. PPI however failed to mention
when it will submit its "appropriate reply" or how long Undersecretary Galon should
wait. In the meantime, PPI’s drugs which are included in the Report on Violative
Products are out and being sold in the market. Based on the foregoing, we find PPI’s
contention of denial of due process totally unfair and absolutely lacking in basis. At
this juncture, it would be trite to mention that "[t]he essence of due process in
administrative proceedings is the opportunity to explain one’s side or seek a
reconsideration of the action or ruling complained of. As long as the parties are given
the opportunity to be heard before judgment is rendered, the demands of due process
are sufficiently met. What is offensive to due process is the denial of the opportunity

66
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 90314 November 27, 1990
LOIDA Q. SHAUF and JACOB SHAUF, Petitioners,
vs.
HON. COURT OF APPEALS, DON E. DETWILER and ANTHONY
PERSI, Respondents.
REGALADO, J.:
In this petition for review on certiorari, petitioners would have us reverse and set
aside the decision rendered by respondent Court of Appeals on August 22, 1989, in
CA-G.R. CV No. 17932, entitled "Loida Shauf and Jacob Shauf, Plaintiffs-
Appellants, versus Don Detwiler and Anthony Persi, Defendants-
Appellants,"1 dismissing petitioners’ complaint for damages filed before the
Regional Trial Court, Branch LVI, Angeles City, in Civil Case No. 2783 thereof, and
its subsequent resolution denying petitioners’ motion for the reconsideration of its
aforesaid decision.
As found by respondent court,2 Clark Air Base is one of the bases established and
maintained by the United States by authority of the agreement between the
Philippines and the United States concerning military bases which entered into force
on March 26, 1947.
The Third Combat Support Group, a unit of Clark Air Base, maintains a Central
Civilian Personnel Office (CCPO) charged with the responsibility for civilian
personnel management and administration. It is through its civilian personnel officer
that the base commander is responsible for direction and administration of civilian
personnel program, including advising management and operating officials on
civilian personnel matters. Acting for the commander, the civilian personnel officer
is the administrative official in charge of the activities of the CCPO, and the
commander relies on him to carry out all aspects of the civilian personnel program.
The CCPO personnel program encompasses placement and staffing, position
management and classification.
The Third Combat Support Group also maintains an Education Branch, Personnel
Division, which provides an education program for military personnel, U.S. civilian
employees, and adult dependents, assigned or attached to Clark Air Base. Its head,
the education director, is responsible directly to the base director of personnel for
administering the education services program for Clark Air Base. In this capacity,
and within broad agency policies, is delegated to him the full responsibility and
authority for the technical, administrative and management functions of the program.
As part of his duties, the education director provides complete academic and
vocational guidance for military dependents, including counseling, testing and test
interpretation. During the time material to the complaint, private respondent Don
Detwiler was civilian personnel officer, while private respondent Anthony Persi was
education director.3
Petitioner Loida Q. Shauf, a Filipino by origin and married to an American who is a
member of the United States Air Force, applied for the vacant position of Guidance
Counselor, GS17109, in the Base Education Office at Clark Air Base, for which she
is eminently qualified. As found by the trial court, she received a Master of Arts
degree from the University of Sto. Tomas, Manila, in 1971 and has completed 34
semester hours in psychology-guidance and 25 quarter hours in human behavioral
science; she has also completed all course work in human behavior and counseling
psychology for a doctoral degree; she is a civil service eligible; and, more
importantly, she had functioned as a Guidance Counselor at the Clark Air Base at the
GS 1710-9 level for approximately four years at the time she applied for the same
position in 1976.4
By reason of her non-selection to the position, petitioner Loida Q. Shauf filed an
equal employment opportunity complaint against private respondents, for alleged
discrimination against the former by reason of her nationality and sex. The
controversy was investigated by one Rudolph Duncan, an appeals and grievance
examiner assigned to the Office of Civilian Personnel Operations, Appellate
Division, San Antonio, Texas, U.S.A. and what follows are taken from his findings
embodied in a report duly submitted by him to the Equal Opportunity Officer on
February 22, 1977.5
On or about October 1976, the position of Guidance Counselor, GS 1710-9, became
vacant in the Base Education Office, Clark Air Base. A standard Form 52 was
submitted to the Civilian Personnel Office to fill said position. The Civilian
Personnel Division took immediate steps to fill the position by advertisement in the
Clark Air Base Daily Bulletin #205 dated October 21, 1976. As a result of the
advertisement, one application was received by the Civilian Personnel Office and
two applications were retrieved from the applicants supply file in the Civilian
Personnel Office. These applications were that of Mrs. Jean Hollenshead, an
employee of the DOD Schools at Clark Air Base, Mrs. Lydia B. Gaillard, an
unemployed dependent, and Mrs. Loida Q. Shauf. All three applications were
reviewed and their experiences were considered qualifying for the advertised
position.
On November 11, 1976, the application of Loida Q. Shauf was referred to Mr.
Anthony Persi, with the applications of Mrs. Jean Hollenshead and Mrs. Lydia
Gaillard, to be considered for the position of Guidance Counselor, GS 1710-9, Mr.
67
Persi, after review of the applications, stated that upon screening the applications he
concluded that two applicants had what he considered minimum qualifications for
the position. The two applicants were Mrs. Hollenshead and Mrs. Gaillard. In the
case of Loida Q. Shauf, Mr. Persi felt that her application was quite complete except
for a reply to an inquiry form attached to the application. This inquiry form stated
that the National Personnel Records Center, St. Louis, Missouri, was unable to find
an official personnel folder for Loida Q. Shauf. Mr. Persi said that as a result of the
National Personnel Records Center, GSA, not being able to find any records on
Loida Q. Shauf, this raised some questions in his mind as to the validity of her work
experience. As a result of his reservations on Loida Q. Shauf’s work experience and
his conclusions that the two other applications listed minimum qualifications, Mr.
Persi decided to solicit additional names for consideration.
Subsequently in his correspondence dated November 12, 1976, Mr. Persi returned
the three applications to the Civilian Personnel Office without a selection decision.
Mr. Persi also requested in his correspondence that the Civilian Personnel Office
initiate immediate inquiry to the Central Oversea Rotation and Recruiting Office
(CORRO) for the submission of a list of highly qualified candidates. He further
stated in his correspondence that the three applicants who had indicated an interest
would be considered with the CORRO input for selection.
As a result of Mr. Persi’s request, an AF Form 1188 "Oversea Civilian Personnel
Request" was submitted to CORRO on November 12, 1976. This request in fact
asked for one Guidance Counselor, GS 1710-9. The form listed the fact that local
candidates are available. However, instead of getting a list of candidates for
consideration, Mr. Persi was informed by CORRO, through the Civilian Personnel
Office in their December 15, 1976 message that a Mr. Edward B. Isakson from
Loring AFB, Maine, was selected for the position. Mr. Persi stated, when informed
of CORRO’s selection, that he had heard of Mr. Isakson and, from what he had
heard, Mr. Isakson was highly qualified for the position; therefore, he wished to have
the selection stand. This statement was denied by Mr. Persi. Mr. Isakson was placed
on the rolls at Clark Air Base on January 24, 1977. 6
Said examiner, however, also stated in his findings that, by reason of petitioner
Loida Q. Shauf’s credentials which he recited therein, she is and was at the time of
the vacancy,7 highly qualified for the position of Guidance Counselor, GS 1710-9. In
connection with said complaint, a Notice of Proposed Disposition of Discrimination
Complaint, dated May 16, 1977,8 was served upon petitioner Loida Q. Shauf stating
that because the individual selected did not meet the criteria of the qualification
requirements, it was recommended "that an overhire GS 1710-9 Assistant Education
Advisor position be established for a 180 day period. x x x. The position should be
advertised for local procurement on a best qualified basis with the stipulation that if a
vacancy occurs in a permanent GS 1710-9 position the selectee would automatically
be selected to fill the vacancy. If a position is not vacated in the 180 day period the
temporary overhire would be released but would be selected to fill a future vacancy
if the selectee is available."
During that time, private respondents already knew that a permanent GS 1710-9
position would shortly be vacant, that is, the position of Mrs. Mary Abalateo whose
appointment was to expire on August 6, 1977 and this was exactly what private
respondent Detwiler had in mind when he denied on June 27, 1977 Mrs. Abalateo’s
request for extension of March 31, 1977. However, private respondents deny that
Col. Charles J. Corey represented to petitioner Loida Q. Shauf that she would be
appointed to the overhire position and to a permanent GS 1710-9 position as soon as
it became vacant, which allegedly prompted the latter to accept the proposed
disposition.
Contrary to her expectations, petitioner Loida Q. Shauf was never appointed to the
position occupied by Mrs. Abalateo whose appointment was extended indefinitely by
private respondent Detwiler.9
Feeling aggrieved by what she considered a shabby treatment accorded her,
petitioner Loida Q. Shauf wrote the U.S. Civil Service Commission questioning the
qualifications of Edward Isakson. Thereafter, said commission sent a communication
addressed to private respondent Detwiler,10 finding Edward Isakson not qualified to
the position of Guidance Counselor, GS 1710-9, and requesting that action be taken
to remove him from the position and that efforts be made to place him in a position
for which he qualifies. Petitioner Loida Q. Shauf avers that said recommendation
was ignored by private respondent Detwiler and that Isakson continued to occupy
said position of guidance counselor.
Petitioner Loida Q. Shauf likewise wrote the Base Commander of Clark Air Base
requesting a hearing on her complaint for discrimination. Consequently, a hearing
was held on March 29, 1978 before the U.S. Department of Air Force in Clark Air
Base.11
Before the Department of Air Force could render a decision, petitioner Loida Q.
Shauf filed a complaint for damages, dated April 27, 1978, against private
respondents Don Detwiler and Anthony Persi before the Regional Trial Court,
Branch LVI at Angeles City, docketed as Civil Case No. 2783, for the alleged
discriminatory acts of herein private respondents in maliciously denying her
application for the GS 1710-9 position.
Private respondents, as defendants in Civil Case No. 2783, filed a motion to dismiss
on the ground that as officers of the United States Armed Forces performing official
functions in accordance with the powers vested in them under the Philippine-
American Military Bases Agreement, they are immune from suit. The motion to
dismiss was denied by the trial court. A motion for reconsideration was likewise
denied.
68
Consequently, private respondents filed an Answer reiterating the issue of
jurisdiction and alleging, inter alia, that defendant Persi’s request to Central Oversea
Rotation and Recruiting Office (CORRO) was not for appointment of a person to the
position of Guidance Counselor, GS 1710-9, but for referrals whom defendant Persi
would consider together with local candidates for the position; that the extension of
the employment of Mrs. Abalato was in accordance with applicable regulation and
was not related to plaintiff Loida Q. Shauf’s discrimination complaint; that the
decision was a joint decision of management and CCPO reached at a meeting on
June 29, 1977 and based on a letter of the deputy director of civilian personnel,
Headquarters Pacific Air Forces, dated June 15, 1977; and that the ruling was made
known to and amplified by the director and the deputy director of civilian personnel
in letters to petitioner Loida Q. Shauf dated August 30, 1977 and September 19,
1977.
The parties submitted a Partial Stipulation of Facts in the court a quo providing, in
part, as follows:
a) In October 1976, the position of guidance counselor, GS-1710-9, at Clark Air
Base was vacant;
b) Plaintiff Loida Q, Shauf, a qualified dependent locally available, was among those
who applied for said vacant position of guidance counselor, GS-1710-9;
c) Plaintiff Loida Q. Shauf at the time she filed her aforesaid application was
qualified for the position of guidance counselor, GS-1710-9;
d) Civilian Personnel Office accomplished and forwarded to CORRO an AF Form
1188 covering the position of guidance counselor, GS-1710-9, applied for by
plaintiff Loida Q. Shauf;
e) U.S. Department of Defense Instructions (DODI) No. 1400.23 under Policy and
Procedures provides that-
"Where qualified dependents of military or civilian personnel of the Department of
Defense are locally available for appointment to positions in foreign areas which are
designated for U.S. citizen occupancy and for which recruitment outside the current
work force is appropriate, appointment to the position will be limited to such
dependents unless precluded by treaties or other agreements which provide for
preferential treatment for local nationals."
And Air Force Regulation 40-301 dated 12 May 1976 in par. 2 c (1) thereof provides
that-
"c. Selection or Referral of Eligible Applicants From the 50 States:
(1)CORRO makes selection, except as provided in (3) below, for oversea positions
of Grades GS-11 and below (and wage grade equivalents) for which it has received
an AF Form 1188, and for higher grade positions if requested by the oversea
activity."12
Likewise, a Supplement to Partial Stipulation of Facts was filed by the parties on
October 6, 1978, which reads:
1. Under date of 30 September 1978, plaintiff Loida Q. Shauf through her counsel,
Quasha Asperilla Ancheta Valmonte Peña & Marcos, lodged an appeal before the
Civil Service Commission, Appeals Review Board, from the decision of the
Secretary of the Air Force dated 1 September 1978 affirming the EEO Complaints
Examiner’s Findings and Recommended Decision in the Discrimination Complaint
of Mrs. Loida Q. Shauf, No. SF 071380181 dated 3 July 1978, x x x;
2. The aforesaid appeal has not been decided up to now by the Civil Service
Commission, Appeals Review Board; and
3. Plaintiff Loida Q. Shauf has not instituted any action before any federal district
court of the United States impugning the validity of the decision of the Secretary of
the Air Force dated 1 September 1978 affirming the EEO Complaints Examiner’s
Findings and Recommended Decision in the Discrimination Complaint of Mrs.
Loida Q. Shauf, No. SF 071380181 dated 3 July 1978. 13
Thereafter, on March 8, 1988, the trial court rendered judgment in favor of herein
petitioner Loida Q. Shauf, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and
severally to pay the plaintiffs:
1) The amount $39,662.49 as actual damages or its equivalent in Philippine pesos in
October 1976 as reported by the Central Bank of the Philippines or any authorized
agency of the Government;
2) The amount of P100,000.00 as moral and exemplary damages;
3) Twenty (20%) percent of $39,662.49 or its equivalent in Philippine Pesos in
October 1976 as reported by the Central Bank of the Philippines or any authorized
agency of the Government, as attorney’s gees, and;
4) Cost(s) of suit.
SO ORDERED.14
Both parties appealed from the aforecited decision to respondent Court of Appeals.
69
In their appeal, plaintiffs-appellants (herein petitioners) raised the following
assignment of errors:
1. Lower court gravely erred in holding that the actual and exemplary damages and
attorney’s fees may be paid in Philippine Pesos based on the exchange rate
prevailing during October 1976 as determined by the Central Bank;
2. Lower court gravely erred in limiting the amount of moral and exemplary
damages recoverable by plaintiff to P100,000.00 15
On the other hand, defendants-appellants (private respondents herein) argued that:
1. The trial court erred in not dismissing the complaint on the ground that
defendants-appellants, as officers/officials of the United States Armed Forces, are
immune from suit for acts done or statements made by them in the performance of
their official governmental functions in accordance with the powers possessed by
them under the Philippine-American Military Bases Agreement of 1947, as
amended;
2. The trial court erred in not dismissing the complaint for a) non-exhaustion of
administrative remedies; and b) lack of jurisdiction of the trial court over the subject
matter of the case in view of the exclusive jurisdiction of an appropriate U.S. District
Court over an appeal from an agency decision on a complaint of discrimination
under the U.S. Federal Law on Equality of opportunity for civilian employees;
3. The trial court erred in holding that plaintiff-appellant Loida Q. Shauf was refused
appointment as guidance counselor by the defendants-appellants on account of her
six (female), color (brown), and national origin (Filipino by birth) and that the trial
court erred in awarding damages to plaintiffs-appellants.16
As stated at the outset, respondent Court of Appeals reversed the decision of the trial
court, dismissed herein petitioners’complaint and denied their motion for
reconsideration. Hence this petition, on the basis of he following grounds:
The respondent Honorable Court of Appeals has decided a question of substance not
in accord with law and/or with applicable decisions of this Honorable Court.
Respondent court committed grave error in dismissing plaintiffs-appellants’
complaint and-
(a) in holding that private respondents are immune from suit for discriminatory acts
performed without or in excess of, their authority as officers of the U.S. Armed
Forces;
(b) for applying the doctrine of state immunity from suit when it is clear that the suit
is not against the U.S. Government or its Armed Forces; and
(c) for failing to recognize the fact that the instant action is a pure and simple case
for damages based on the discriminatory and malicious acts committed by private
respondents in their individual capacity who by force of circumstance and accident
are officers of the U.S. Armed Forces, against petitioner Loida Shauf solely on
account of the latter’s sex (female), color (brown), and national origin (Filipino). 17
Petitioners aver that private respondents are being sued in their private capacity for
discriminatory acts performed beyond their authority, hence the instant action is not
a suit against the United States Government which would require its consent.
Private respondents, on the other hand, claim that in filing the case, petitioners
sought a judicial review by a Philippine court of the official actuations of
respondents as officials of a military unit of the U.S. Air Force stationed at Clark Air
Base. The acts complained of were done by respondents while administering the civil
service laws of the United States. The acts sued upon being a governmental activity
of respondents, the complaint is barred by the immunity of the United States, as a
foreign sovereign, from suit without its consent and by the immunity of the officials
of the United States armed forces for acts committed in the performance of their
official functions pursuant to the grant to the United States armed forces of rights,
power and authority within the bases under the Military Bases Agreement. It is
further contended that the rule allowing suits against public officers and employees
for unauthorized acts, torts and criminal acts is a rule of domestic law, not of
international law. It applies to cases involving the relations between private suitors
and their government or state, not the relations between one government and another
from which springs the doctrine of immunity of a foreign sovereign.
I. 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. 18
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 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 been formally impleaded.19 It must be noted, however, that the rule is not also
all-encompassing as to be applicable under all circumstances.
It is a different matter where the public official is made to account in his capacity as
such for acts contrary to law and injurious to the rights of plaintiff. As we clearly set
forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al. Vs.
70
Aligaen, etc., et al.:20 "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an
action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates or
invades the personal and property rights of the plaintiff, under an unconstitutional act
or under an assumption of authority which he does not have, is not a suit against the
State within the constitutional provision that the State may not be sued without its
consent."21 The rationale for this ruling is that the doctrine of state immunity cannot
be used as an instrument for perpetrating an injustice.22
In the case of Baer, etc. vs. Tizon, etc., et al.,23 it was ruled that:
There should be no misinterpretation of the scope of the decision reached by this
Court. Petitioner, as the Commander of the United States Naval Base in Olongapo,
does not possess diplomatic immunity. He may therefore be proceeded against in his
personal capacity, or when the action taken by him cannot be imputed to the
government which he represents.
Also, in animos, et al. Vs. Philippine Veterans Affairs Office, et al.,24 we held that:
"x x x it is equally well-settled that where a litigation may have adverse
consequences on the public treasury, whether in the disbursements of funds or loss of
property, the public official proceeded against not being liable in his personal
capacity, then the doctrine of non-suability may appropriately be invoked. It has no
application, however, where the suit against such a functionary had to be instituted
because of his failure to comply with the duty imposed by statute appropriating
public funds for the benefit of plaintiff or petitioner. x x x.
The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public official
is being sued in his private and personal capacity as an ordinary citizen. The cloak of
protection afforded the officers and agents of the government is removed the
moment they are sued in their individual capacity. This situation usually arises where
the public official acts without authority or in excess of the powers vested in him. It
is a well-settled principle of law that a public official may be liable in his personal
private capacity for whatever damage he may have caused by his act done with
malice and in bad faith, or beyond the scope of his authority or jurisdiction. 25
The agents and officials of the United States armed forces stationed in Clark Air
Base are no exception to this rule. In the case of United States of America, et al. Vs.
Guinto, etc., et al., ante,26 we declared:
It bears stressing at this point that the above observation do not confer on the United
States of America blanket immunity for all acts done by it or its agents in the
Philippines. Neither may the other petitioners claim that they are also insulated from
suit in this country merely because they have acted as agents of the United States in
the discharge of their official functions.
II. The court below, in finding that private respondents are guilty of discriminating
against petitioner Loida Q. Shauf on account of her sex, color and origin,
categorically emphasized that:
There is ample evidence to sustain plaintiffs’ complaint that plaintiff Loida Q. Shauf
was refused appointment as Guidance Counselor by the defendants on account of her
sex, color and origin.
She is a female, brown in color and a Filipino by origin, although married to an
American who is a member of the United States Air Force. She is qualified for the
vacant position of Guidance Counselor in the office of the education director at Clark
Air Base. She received a Master of Arts Degree from the University of Santo Tomas,
Manila, in 1971 and has completed 34 semester hours in psychology-guidance and
25 quarter hours in human behavioral science. She has also completed all course
work in human behavior and counseling psychology for a doctoral degree. She is a
civil service eligible. More important, she had functioned as a Guidance Counselor at
the Clark Air Base at the GS-1710-9 level for approximately four years at the time
she applied for the same position in 1976.
In filling the vacant position of Guidance Counselor, defendant Persi did not even
consider the application of plaintiff Loida Q. Shauf, but referred the vacancy to
CORRO which appointed Edward B. Isakson who was not eligible to the position.
In defending his act, defendant Persi gave as his excuse that there was a question in
his mind regarding validity of plaintiff Loida Q. Shauf’s work experience because of
lack of record. But his assertion is belied by the fact that plaintiff Loida Q. Shauf had
previously been employed as Guidance Counselor at the Clark Air Base in 1971 and
this would have come out if defendant Persi had taken the trouble of interviewing
her. Nor can defendant free himself from any blame for the non-appointment of
plaintiff Loida Q. Shauf by claiming that it was CORRO that appointed Edward B.
Isakson. This would not have happened if defendant Persi adhered to the regulation
that limits the appointment to the position of Guidance Counselor, GS-1710-9 to
qualified dependents of military personnel of the Department of Defense who are
locally available like the plaintiff Loida Q. Shauf. He should not have referred the
matter to CORRO. Furthermore, defendant Persi should have protested the
appointment of Edward B. Isakson who was ineligible for the position. He, however,
remained silent because he was satisfied with the appointment.
71
Likewise, the acts of the defendant Detwiler in rejecting the appointment of plaintiff
Loida Q. Shauf were undoubtedly discriminatory.
Plaintiff Loida Q. Shauf twice applied for the position of Guidance Counselor
sometime in 1975 and in October 1978. Although she was qualified for the postision,
her appointment was rejected ny the defendant Detwiler. The two who were
appointed, a certain Petrucci and Edward B. Isakson, were ordered removed by the
U.S. Civil Service Commission. Instead of replacing Petrucci with the plaintiff Loida
Q. Shauf, the defendant Detwiler had the position vacated by Petrucci abolished.
And in the case of Edward Isakson, the defendant Detwiler ignored the order of the
U.S. Civil Service Commission to have him removed according to the testimony of
plaintiff Loida Q. Shauf.
In connection with her complaint against the defendants, plaintiff Loida Q. Shauf
was presented a Notice of Proposed Disposition of her Discrimination Complaint by
Col. Charles J. Corey, Vice Commander, Third Combat Support Group, Clark Air
Base, which would entitle her to a temporary appointment as Guidance Counselor
with the implied assurance that she would be appointed in a permanent capacity in
the event of a vacancy.
At the time of the issuance of said Notice, defendants knew that there would be a
vacancy in a permanent position as Guidance Counselor occupied by Mrs. Mary
Abalateo and it was understood between Col. Corey and plaintiff Loida Q. Shauf that
this position would be reserved for her. Knowing this arrangement, defendant
Detwiler rejected the request for extension of services of Mrs. Mary Abalateo.
However, after plaintiff Loida Q. Shauf consented to the terms of the Notice of
Proposed Disposition of her Discrimination Complaint, defendant Detwiler extended
the services of Mrs. Mary Abalateo indefinitely. This act barred plaintiff Loida Q.
Shauf from applying for the position of Mrs. Mary Abalateo.
To rebut the evidence of the plaintiffs, defendant cited the findings and conclusions
of Mr. Rudolph Duncan, who was appointed to investigate plaintiff Loida Q. Shauf’s
complaint for discrimination and Col. Charles J. Corey, Vice Commander, Third
Combat Support Group that defendants were not guilty of Discrimination.
It is pointed out, however, that Mr. Rudolph Duncan found plaintiff loida Q. Shauf to
be highly qualified for the position of Guidance Counselor at the GS-1710-9 level
and that management should have hired a local applicant. While Col. Corey
characterized the act of defendant Persi as sloppy and recommend that he be
reprimanded. In any event their findings and conclusions are not binding with this
Court.
To blunt the accusation of discrimination against them, defendants maintained that
the extension of the appointment of Mrs. Mary Abalateo was a joint decision of
management and Central Civilian Personnel Office, Clark Air Base. Nonetheless,
having earlier rejected by himself the request for extension of the services of Mrs.
Mary Abalateo, defendant Detwiler should not have concurred to such an extension
as the reversal of his stand gave added substance to the charge of discrimination
against him.
To further disprove the charge that the defendants discriminated against plaintiff
Loida Q. Shauf for her non-appointment as Guidance Counselor on account of her
being a Filipino and a female, counsel for the defendants cited the following: (1) that
Mrs. Mary Abalateo whose appointment was extended by the defendant Detwiler is
likewise a female and a Filipino by origin; (2) that there are Filipinos employed in
the office of the defendant Persi; and (3) that there were two other women who
applied in 1976 with the plaintiff Loida Q. Shauf for the position of Guidance
Counselor.
The contention of the defendants based on the allegations enumerated in Nos. 1 and
2 of the preceding paragraph is without merit as there is no evidence to show that
Mrs. Mary Abalateo and the Filipinos in the office of the defendant Persi were
appointed by the defendants. Moreover, faced with a choice between plaintiff Loida
Q. Shauf or Mrs. Mary Abalateo, it was to be expected that defendant Detwiler chose
to retain Mrs. Mary Abalateo as Guidance Counselor in retaliation for the complaint
of discrimination filed against him by plaintiff Loida Q. Shauf. Finally, as to the
contention based on the allegation in No. 3 of the preceding paragraph that there
were two other women applicants in 1976 with plaintiff Loida Q. Shauf, the record
reveals that they had minimum qualifications unlike plaintiff Loida Q. Shauf who
was highly qualified.27
Elementary is the rule that the conclusions and findings of fact of the trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and
cogent reasons.28 Absent any substancial proof, therefore, that the trial court’s
decision was grounded entirely on speculations, surmises or conjectures, the same
must be accorded full consideration and respect. This should be so because the trial
court is, after all, in a much better position to observe and correctly appreciate the
respective parties’ evidence as they were presented.29
In the case at bar, there is nothing in the record which suggests any arbitrary,
irregular or abusive conduct or motive on the part of the trial judge in ruling that
private respondents committed acts of discrimination for which they should be held
personally liable. His conclusion on the matter is sufficiently borne out by the
evidence on record. We are thus constrained to uphold his findings of fact.
Respondent Court of Appeals, in its questioned decision, states that private
respondents did, in fact, discriminate against petitioner Loida Q. Shauf. However, it
deemed such acts insufficient to prevent an application of the doctrine of state
immunity, contrary to the findings made by the trial court. It reasons out that "the
parties invoked are all American citizens (although plaintiff is a Filipina by origin)
72
and the appointment of personnel inside the base is clearly a sovereign act of the
United States. This is an internal affair in which we cannot interfere without having
to touch some delicate constitutional issues." 30 In other words, it believes that the
alleged discriminatory acts are not so grave in character as would justify the award
of damages.
In view of the apparent discrepancy between the findings of fact of respondent Court
of Appeals and the trial court, we are tasked to review the evidence in order to arrive
at the correct findings based on the record. A consideration of the evidence presented
supports our view that the court a quo was correct in holding herein private
respondents personally liable and in ordering the indemnification of petitioner Loida
Q. Shauf. The records are clear that even prior to the filing of the complaint in this
case, there were various reports and communications issued on the matter which,
while they make no categorical statement of the private respondents’ liability,
nevertheless admit of facts from which the intent of private respondents to
discriminate against Loida Q. Shauf is easily discernible. Witness the following
pertinent excerpts from the documents extant in the folder of Plaintiff’s Exhibits:
1. Notice of Proposed Disposition of Discrimination Complaint, dated May 16, 1977
(Exhibit "G").
B. Mr. Anthony Persi was totally inept in the recruitment practices employed in
attempting on fill the GS 1710-9 Assistant Education applicable DOD regulations. In
addition, he failed to conduct an interview of qualified personnel in the local
environment and when the qualifications of the complainant (sic) were questioned by
Mr. Persi he did not request a review by the CCPO nor request an interview with the
complainant (sic). Mr. Persi failed to follow Department of Defense Instructions
Number 1400.23, under Policy and Procedures which states-"Where qualified
dependents of military or civilian personnel of the Department of Defense are locally
available for appointment to positions in foreign areas which are designated for US
citizen occupancy and for which recruitment outside the current work force is
appropriate, appointment to the positions will be limited to such dependents unless
precluded by treaties or other agreements which provide for preferential treatment
for local nationals." Attachment to Air Force Supplement to FFM 213.2106 (b) (6)
lists the positions of Guidance Counsellor, GS 1710-9, as positions to be filled by
locally available dependents. An added point is the lack of qualifications of the
individual selected for the GS 1710-9 positions as outlined under X-118 Civil
Service Handbook. x x x31
2. Letter of the Director of the U.S. Civil Service Commission, San Francisco
Region, dated October 27, 1977, addressed to Mr. Don Detwiler, concerning Mr.
Edward B. Isakson whose file was reviewed by the Commission (Exhibit "K").
The position of Guidance Counsellor is one for which the Commission has
established a mandatory education requirement that may not be waived. An
individual may not be assigned to such a position without meeting the minimum
qualification requirements. The requirements, as given in Handbook X-118, are
completion of all academic requirements for a bachelor’s degree from an accredited
college or university and successful completion of a teacher education program
under an "approved program" or successful completion of required kinds of courses.
On review of his record, we find that Mr. Isakson has a bachelor’s degree but he
does not show completion of a teacher education program. To qualify for Guidance
Counselor on the basis of coursework and semester hour credit, he would need to
have 24 semester hours in Education and 12 semester hours in a combination of
Psychology and Guidance subjects directly related to education. We do not find that
he meets these requirements.
xxx
We can appreciate the fact that Mr. Isakson may be working toward meeting the
Guidance Counselor requirements. Nonetheless, he does not appear to meet them at
this time. We must, therefore, request that action be taken to remove him from the
position and that efforts be made to place him in a position for which he qualifies. 32
3. Letter of the Staff Judge Advocate of the Department of the Airforce addressed to
Mr. Detwiler, dated January 25, 1977 (Exhibit "L").
1. The attached memo from Captain John Vento of this office is forwarded for your
review and any action you deem appropriate. I concur with his conclusion that there
is no evidence of sex or ethnic bias in this matter. I also concur, however, that there
were certain irregularities in the handling of this selection.
xxx
3. Considering the above, it is most unfortunate that the filing of this latest Guidance
Counselor vacancy was not handled wholly in accordance with prescribed policies
and regulations. This is not to suggest that Mrs. Shauf should necessarily have been
hired. But, she and other qualified candidates should have been given the
consideration to which they were entitled. (At no time now or in the past have Mrs.
Shauf’s qualifications ever been questioned.) Had that happened and management
chose to select some qualified candidate other than Mrs. Shauf, there would be no
basis for her complaint.
4. It is my understanding that Mrs. Shauf has filed a formal EEO complaint. While I
am convinced that there was no discrimination in this case, my experience with EEO
complaints teaches me that, if Civil Service Commission finds that nonselection
resulted from any kind of management malpractice, it is prone to brand it as a
"discriminatory practice." This usually results in a remedial order which can often be
distasteful to management. x x x.33
73
The initial burden is on the plaintiff to establish a prima facie case or discrimination.
Once the discriminatory act is proven, the burden shifts to the defendant to articulate
some legitimate, undiscriminatory reason for the plaintiff’s rejection. 34 Any such
justification is wanting in the case at bar, despite the prima facie case for petitioner
Loida Q. Shauf. Private respondents’ defense is based purely on outright denials
which are insufficient to discharge theonus probandi imposed upon them. They
equally rely on the assertion that they are immune from suit by reason of their
official functions. As correctly pointed out by petitioners in their Memorandum, the
mere invocation by private respondents of the official character of their duties cannot
shield them from liability especially when the same were clearly done beyond the
scope of their authority, again citing the Guinto, case, supra:
The other petitioners in the case 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.
III. Article XIII, Section 3, of the 1987 Constitution provides that the State shall
afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all. This is a
carry-over from Article II, Section 9, of the 1973 Constitution ensuring equal work
opportunities regardless of sex, race, or creed.
Under the Constitution of the United States, the assurance of equality in employment
and work opportunities regardless of sex, race, or creed is also given by the equal
protection clause of the Bill of Rights. The 14th Amendment, in declaring that no
state shall deprive a person of his life, liberty, or property without due process of law
or deny to any person within its jurisdiction the equal protection of the laws,
undoubtedly intended not only that there should be no arbitrary spoliation of
property, but that equal protection and security should be given to all under like
circumstances in the enjoyment of their personal and civil rights, and that all persons
should be equally entitled to pursue their happiness ands acquire and enjoy property.
It extends its protection to all persons without regard to race, color, or class. It means
equality of opportunity to all in like circumstances.35
The words "life, liberty, and property" as used in constitutions are representative
terms and are intended to cover every right to which a member of the body politic in
entitled under the law. These terms include the right of self-defense, freedom of
speech, religious and political freedom, exemption from arbitrary arrests, the right to
freely buy and sell as others may, the right to labor, to contract, to terminate
contracts, to acquire property, and the right to all our liberties, personal, civil and
political-in short, all that makes life worth living.36
There is no doubt that private respondents Persi and Detwiler, in committing the acts
complained of have, in effect, violated the basic constitutional right of petitioner
Loida Q. Shauf to earn a living which is very much an integral aspect of the right to
life. For this, they should be held accountable.
While we recognize petitioner Loida Q. Shauf’s entitlement to an award of moral
damages, we however find no justification for the award of actual or compensatory
damages, based on her supposedly unearned income from March, 1975 up to April,
1978 in the total amount of $39,662.49, as erroneously granted by the trial court.
Evidence that the plaintiff could have bettered her position had it not been for the
defendants’ wrongful act cannot serve as basis for an award of damages, because it is
highly speculative.37 Petitioner Loida Q. Shauf’s claim is merely premised on the
possibility that had she been employed, she would have earned said amount. But, the
undeniable fact remains that she was never so employed. Petitioner never acquired
any vested right to the salaries pertaining to the position of GS 1710-9 to which she
was never appointed. Damages which are merely possible are speculative. 38 In
determining actual damages, the court cannot rely on speculation, conjecture or
guesswork. Without the actual proof of loss, the award of actual damages is
erroneous.39 Consequently, the award of actual damages made by the trial court
should be deleted. Attorney’s fees, however, may be granted and we believe that an
award thereof in the sum of P20,000.00 is reasonable under the
circumstances.1âwphi1
IV. Finally, private respondents postulate that petitioner Loida Q. Shauf failed to
avail herself of her remedy under the United States federal legislation on equality of
opportunity for civilian employees, which is allegedly exclusive of any other remedy
under American law, let alone remedies before a foreign court and under a foreign
law such as the Civil Code of the Philippines.
In a letter of the Department of the Air Force in Washington, D.C., dated September
1, 1978 and addressed to petitioner Loida Q. Shauf, 40 the appeal rights of the latter
from the Air Force decision were enumerated as follows:
-You may appeal to the Civil Service Commission within 15 calendar days of receipt
of the decision. Your appeal should be addressed to the Civil Service Commission,
Appeals Review Board, 1990 E Street, N.Q., Washington, D.C. 20415. The appeal
and any representation in support thereof must be submitted in duplicate.
-In lieu of an appeal to the Commission you may file a civil action in an appropriate
U.S. District Court within 30 days of receipt of the decision.
-If you elect to appeal to the Commission’s Appeals Review Board, you may file a
civil action in a U.S. District Court within 30 days of receipt of the Commission’s
final decision.
74
-A civil action may also be filed anytime after 180 days of the date of initial appeal
to the Commission, if a final decision has not been rendered.

As earlier noted, in a Supplement to Partial Stipulation of Facts filed by the parties

on October 6, 1978, it was manifested to the trial court that an appeal was lodged by
counsel for petitioners on September 30, 1978 before the Civil Service Commission.
Appeals Review Board from the decision of the Secretary of the Air Force in the
discrimination case filed by petitioner Loida Q. Shauf, No. SF 071380181. Said
appeal has not been decided up to now.

Furthermore, it is basic that remedial statutes are to be construed liberally. The term
"may," as used in adjective rules, is only permissive and not mandatory, and we see
no reason why the so-called rules on the above procedural options communicated to
said petitioner should depart from this fundamental . petitioner Loida Q. Shauf is not
limited to these remedies, but is entitled as a matter of plain and simple justice to
choose that remedy, not otherwise proscribed, which will best advance and protect
her interests. There is, thus, nothing to enjoin her from seeking redress in Philippine
courts which should not be ousted of jurisdiction on the dubious and inconclusive
representations of private respondents on that score.

WHEREFORE, the challenged decision and resolution of respondent Court of

Appeals in CA-G.R. CV No. 17932 are hereby ANNULLED and SET ASIDE.
Private respondents are hereby ORDERED, jointly and severally, to pay petitioners
the sum of P100,000.00 as moral damages, P20,000.00 as and for attorney’s fees,
and the costs of suit.

SO ORDERED.

Melencio-Herrera (Chairman), Paras, Padilla and Sarmiento, jj., concur.

Decision and resolution annulled and set aside.

75