Republic of the Philippines Officer, was addressed to the Singkier Motor Service. ...
ed to the Singkier Motor Service. ... In due course the Voucher No.
SUPREME COURT
Manila
G.R. No. L-30044 December 19, 1973
LORENZO SAYSON, as Highway Auditor, Bureau of Public Highways, Cebu First
Engineering District; CORNELIO FORNIER, as Regional Supervising Auditor,
Eastern Visayas Region; ASTERIO, BUQUERON, ADVENTOR FERNANDEZ,
MANUEL S. LEPATAN, RAMON QUIRANTE, and TEODULFO
REGIS, petitioners,
vs.
FELIPE SINGSON, as sole owner and proprietor of Singkier Motor
Service, respondent.
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for
petitioners.
Teodoro Almase and Casiano U. Laput for respondent.
FERNANDO, J.:
The real party in interest before this Court in this certiorari proceeding to review a
decision of the Court of First Instance of Cebu is the Republic of the Philippines,
although the petitioners are the public officials who were named as respondents 1 in
a mandamus suit below. Such is the contention of the then Solicitor General, now
Associate Justice, Felix V. Makasiar, 2 for as he did point out, what is involved is a
money claim against the government, predicated on a contract. The basic doctrine of non-
suability of the government without its consent is thus decisive of the controversy. There
is a governing statute that is controlling. 3 Respondent Felipe Singson, the claimant, for
reasons known to him, did not choose to abide by its terms. That was a fatal misstep. The
lower court, however, did not see it that way. We cannot affirm its decision.
As found by the lower court, the facts are the following: "In January, 1967, the Office of
the District Engineer requisitioned various items of spare parts for the repair of a D-8
bulldozer, ... . The requisition (RIV No. 67/0331) was signed by the District Engineer,
Adventor Fernandez, and the Requisitioning Officer (civil engineer), Manuel S. Lepatan.
... It was approved by the Secretary of Public Works and Communications, Antonio V.
Raquiza. It is noted in the approval of the said requisition that "This is an exception to the
telegram dated Feb. 21, 1967 of the Secretary of Public Works and Communications." ...
So, a canvass or public bidding was conducted on May 5, 1967 ... . The committee on
award accepted the bid of the Singkier Motor Service [owned by respondent Felipe
Singson] for the sum of P43,530.00. ... Subsequently, it was approved by the Secretary of
Public Works and Communications; and on May 16, 1967 the Secretary sent a letter-
order to the Singkier Motor Service, Mandaue, Cebu requesting it to immediately deliver
the items listed therein for the lot price of P43,530.00. ... It would appear that a purchase
order signed by the District Engineer, the Requisitioning Officer and the Procurement
07806 reached the hands of Highway Auditor Sayson for pre-audit. He then made
inquiries about the reasonableness of the price. ... Thus, after finding from the
indorsements of the Division Engineer and the Commissioner of Public Highways that
the prices of the various spare parts are just and reasonable and that the requisition was
also approved by no less than the Secretary of Public Works and Communications with
the verification of V.M. Secarro a representative of the Bureau of Supply Coordination,
Manila, he approved it for payment in the sum of P34,824.00, with the retention of 20%
equivalent to P8,706.00. ... His reason for withholding the 20% equivalent to P8,706.00
was to submit the voucher with the supporting papers to the Supervising Auditor, which
he did. ... The voucher ... was paid on June 9, 1967 in the amount of P34,824.00 to the
petitioner [respondent Singson]. On June 10,1967, Highway Auditor Sayson received a
telegram from Supervising Auditor Fornier quoting a telegraphic message of the General
Auditing Office which states: "In view of excessive prices charge for purchase of spare
parts and equipment shown by vouchers already submitted this Office direct all highway
auditors refer General Office payment similar nature for appropriate action." ... In
the interim it would appear that when the voucher and the supporting papers reached the
GAO, a canvass was made of the spare parts among the suppliers in Manila, particularly,
the USI (Phil.), which is the exclusive dealer of the spare parts of the caterpillar tractors
in the Philippines. Said firm thus submitted its quotations at P2,529.64 only which is
P40,000.00 less than the price of the Singkier. ... In view of the overpricing the GAO
took up the matter with the Secretary of Public Works in a third indorsement of July 18,
1967. ... The Secretary then circularized a telegram holding the district engineer
responsible for overpricing." 4 What is more, charges for malversation were filed against
the district engineer and the civil engineer involved. It was the failure of the Highways
Auditor, one of the petitioners before us, that led to the filing of the mandamus suit
below, with now respondent Singson as sole proprietor of Singkier Motor Service, being
adjudged as entitled to collect the balance of P8,706.00, the contract in question having
been upheld. Hence this appeal by certiorari.
1. To state the facts is to make clear the solidity of the stand taken by the Republic. The
lower court was unmindful of the fundamental doctrine of non-suability. So it was
stressed in the petition of the then Solicitor General Makasiar. Thus: "It is apparent that
respondent Singson's cause of action is a money claim against the government, for the
payment of the alleged balance of the cost of spare parts supplied by him to the Bureau of
Public Highways. Assuming momentarily the validity of such claim, although as will be
shown hereunder, the claim is void for the cause or consideration is contrary to law,
morals or public policy, mandamus is not the remedy to enforce the collection of such
claim against the State but a ordinary action for specific performance ... . Actually, the
suit disguised as one for mandamus to compel the Auditors to approve the vouchers for
payment, is a suit against the State, which cannot prosper or be entertained by the Court
except with the consent of the State ... . In other words, the respondent should have filed
his claim with the General Auditing Office, under the provisions of Com. Act 327 ...
which prescribe the conditions under which money claim against the government may be
filed ...." 5 Commonwealth Act No. 327 is quite explicit. It is therein provided: "In all
cases involving the settlement of accounts or claims, other than those of accountable
1
officers, the Auditor General shall act and decide the same within sixty days, exclusive of
Sundays and holidays, after their presentation. If said accounts or claims need reference
to other persons, office or offices, or to a party interested, the period aforesaid shall be
counted from the time the last comment necessary to a proper decision is received
by him." 6 Thereafter, the procedure for appeal is indicated: "The party aggrieved by the
final decision of the Auditor General in the settlement of an account or claim may, within
thirty days from receipt of the decision, take an appeal in writing: (a) To the President of
the United States, pending the final and complete withdrawal of her sovereignty over the
Philippines, or (b) To the President of the Philippines, or (c) To the Supreme Court of the
Philippines if the appellant is a private person or entity." 7
2. With the facts undisputed and the statute far from indefinite or ambiguous, the
appealed decision defies explanation. It would be to disregard a basic corollary of the
cardinal postulate of non-suability. It is true that once consent is secured, an action may
be filed. There is nothing to prevent the State, however, in such statutory grant, to require
that certain administrative proceedings be had and be exhausted. Also, the proper forum
in the judicial hierarchy can be specified if thereafter an appeal would be taken by the
party aggrieved. Here, there was no ruling of the Auditor General. Even had there been
such, the court to which the matter should have been elevated is this Tribunal; the lower
court could not legally act on the matter. What transpired was anything but that. It is quite
obvious then that it does not have the imprint of validity.
WHEREFORE, the decision of the Court of First Instance of Cebu of September 4, 1968
is reversed and set aside, and the suit for mandamus filed against petitioners,
respondents below, is dismissed. With costs against respondent Felipe Singson.
G.R. No. L-36084 August 31, 1977
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the court of first
Instance of Manila (Branch VII), and YELLOW BALL FREIGHT LINES,
INC., respondents.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan,
Solicitor Oscar C. Fernandez and Special Attorney Renato P. Mabugat for petitioner.
Jose Q. Calingo for private respondent.
FERNANDO, Acting C.J.:
The jurisdictional issued raised by Solicitor General Estelito P. Mendoza on behalf of the
Republic of the Philippines in this certiorari and prohibition proceeding arose from the
failure of respondent Judge Amante P. Purisima of the Court of First Instance of Manila
to apply the well-known and of-reiterated doctrine of the non-suability of a State,
including its offices and agencies, from suit without its consent. it was so alleged in a
motion to dismiss filed by defendant Rice and Corn Administration in a pending civil suit
in the sala of respondent Judge for the collection of a money claim arising from an
alleged breach of contract, the plaintiff being private respondent Yellow Ball Freight
Lines, Inc. 1 Such a motion to dismiss was filed on September 7, 1972. At that time, the
leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 2 were
Justice Bengzon stressed the lack of jurisdiction of a court to pass on the merits of a
claim against any office or entity acting as part of the machinery of the national
government unless consent be shown, had been applied in 53 other decisions. 3 There is
thus more than sufficient basis for an allegation of jurisdiction infirmity against the order
of respondent Judge denying the motion to dismiss dated October 4, 1972. 4 What is
more, the position of the Republic has been fortified with the explicit affirmation found
in this provision of the present Constitution: "The State may not be sued without its
consent." 5
The merit of the petition for certiorari and prohibition is thus obvious.
1. There is pertinence to this excerpt from Switzerland General Insurance Co., Ltd. v.
Republic of the Philippines:6 "The doctrine of non-suability recognized in this jurisdiction
even prior to the effectivity of the [1935] Constitution is a logical corollary of the
positivist concept of law which, to para-phrase Holmes, negates the assertion of any legal
right as against the state, in itself the source of the law on which such a right may be
predicated. Nor is this all.lwphl@itç Even if such a principle does give rise to problems,
considering the vastly expanded role of government enabling it to engage in business
pursuits to promote the general welfare, it is not obeisance to the analytical school of
thought alone that calls for its continued applicability. Why it must continue to be so,
even if the matter be viewed sociologically, was set forth inProvidence Washington
Insurance Co. v. Republic thus: "Nonetheless, 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 the 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." 7 It
only remains to be added that under the present Constitution which, as noted, expressly
reaffirmed such a doctrine, the following decisions had been rendered: Del mar v. The
Philippine veterans Administration; 8 Republic v. Villasor; 9 Sayson v.
Singson; 10 and Director of the Bureau of Printing v. Francisco. 11
2. Equally so, the next paragraph in the above opinion from the Switzerland General
Insurance Company decision is likewise relevant: "Nor is injustice thereby cause private
parties. They could still proceed to seek collection of their money claims by pursuing the
statutory remedy of having the Auditor General pass upon them subject to appeal to
judicial tribunals for final adjudication. We could thus correctly conclude as we did in the
2
cited Provindence Washington Insurance decision: "Thus the doctrine of non-suability of
the government without its consent, as it has operated in practice, hardly lends itself to
the charge that it could be the fruitful parent of injustice, considering the vast and ever-
widening scope of state activities at present being undertaken. Whatever difficulties for
private claimants may still exist, is, from an objective appraisal of all factors, minimal. In
the balancing of interests, so unavoidable in the determination of what principles must
prevail if government is to satisfy the public weal, the verdict must be, as it has been
these so many years, for its continuing recognition as a fundamental postulate of
constitutional law." 12
3. Apparently respondent Judge was misled by the terms of the contract between the
private respondent, plaintiff in his sala, and defendant Rice and Corn Administration
which, according to him, anticipated the case of a breach of contract within the parties
and the suits that may thereafter arise. 13 The consent, to be effective though, must come
from the State acting through a duly enacted statute as pointed out by Justice Bengzon in
Mobil. Thus, whatever counsel for defendant Rice and Corn Administration agreed to had
no binding force on the government. That was clearly beyond the scope of his authority.
At any rate, Justice Sanchez, in Ramos v. Court of Industrial Relations, 14 was quite
categorical as to its "not [being] possessed of a separate and distinct corporate existence.
On the contrary, by the law of its creation, it is an office directly 'under the Office of the
President of the Philippines." 15
WHEREFORE, the petitioner for certiorari is granted and the resolution of October 4,
1972 denying the motion to dismiss filed by the Rice and Corn Administration nullified
and set aside and the petitioner for prohibition is likewise granted restraining
respondent Judge from acting on civil Case No. 79082 pending in his sala except for the
purpose of ordering its dismissal for lack of jurisdiction. The temporary restraining order
issued on February 8, 1973 by this Court is made permanent terminating this case. Costs
against Yellow Ball Freight Lines, Inc.
G.R. No. L-32667 January 31, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, GABRIEL V. MANANSALA and
GILBERT P. LORENZO, in his official capacity as authorized Deputy
sheriff, respondents.
Conrado E. Medina for petitioner.
Gabriel V. Manansala in his own behalf.
Jose K. Manguiat, Jr. for respondent Court.
FERNANDO, J.:
The issue raised in this certiorari proceeding is whether or not an order of the now
defunct respondent Court of Industrial Relations denying for lack of merit petitioner's
motion to quash a notice of garnishment can be stigmatized as a grave abuse of
discretion. What was sought to be garnished was the money of the People's Homesite and
Housing Corporation deposited at petitioner's branch in Quezon City, to satisfy a decision
of respondent Court which had become final and executory. 1 A writ of execution in favor
of private respondent Gabriel V. Manansala had previously been issued. 2 He was the
counsel of the prevailing party, the United Homesite Employees and Laborers
Association, in the aforementioned case. The validity of the order assailed is challenged
on two grounds: (1) that the appointment of respondent Gilbert P. Lorenzo as authorized
deputy sheriff to serve the writ of execution was contrary to law and (2) that the funds
subject of the garnishment "may be public in character." 3 In thus denying the motion to
quash, petitioner contended that there was on the part of respondent Court a failure to
abide by authoritative doctrines amounting to a grave abuse of discretion. After a careful
consideration of the matter, it is the conclusion of this Tribunal that while the
authorization of respondent Lorenzo to act as special deputy sheriff to serve the notice of
garnishment may be open to objection, the more basic ground that could have been relied
upon — not even categorically raised, petitioner limiting itself to the assertion that the
funds "could be public" in character, thus giving rise to the applicability of the
fundamental concept of non-suability — is hardly persuasive. The People's Homesite and
Housing Corporation had a juridical existence enabling it sue and be sued. 4 Whatever
defect could be attributed therefore to the order denying the motion to quash could not be
characterized as a grave abuse of discretion. Moreover, with the lapse of time during
which private respondent had been unable to execute a judgment in his favor, the equities
are on his side. Accordingly, this petition must be dismissed.
The order of August 26, 1970 of respondent Court denying the motion to quash, subject
of this certiorari proceeding, reads as follows: "The Philippine National Bank moves to
quash the notice of garnishment served upon its branch in Quezon City by the authorized
deputy sheriff of this Court. It contends that the service of the notice by the authorized
deputy sheriff of the court contravenes Section 11 of Commonwealth Act No. 105, as
amended which reads:" 'All writs and processes issued by the Court shall be served and
executed free of charge by provincial or city sheriffs, or by any person authorized by this
Court, in the same manner as writs and processes of Courts of First Instance.' Following
the law, the Bank argues that it is the Sheriff of Quezon City, and not the Clerk of this
Court who is its Ex-Officio Sheriff, that has the authority to serve the notice of
garnishment, and that the actual service by the latter officer of said notice is therefore not
in order. The Court finds no merit in this argument. Republic Act No. 4201 has, since
June 19, 1965, already repealed Commonwealth Act No. 103, and under this law, it is
now the Clerk of this Court that is at the same time the Ex-Officio Sheriff. As such Ex-
Officio Sheriff, the Clerk of this Court has therefore the authority to issue writs of
execution and notices of garnishment in an area encompassing the whole of the country,
including Quezon City, since his area of authority is coterminous with that of the Court
itself, which is national in nature. ... At this stage, the Court notes from the record that the
appeal to the Supreme Court by individual employees of PHHC which questions the
award of attorney's fees to Atty. Gabriel V.
Manansala, has already been dismissed and that the same became final and executory on
August 9, 1970. There is no longer any reason, therefore, for withholding action in this
3
case. [Wherefore], the motion to quash filed by the Philippine National Bank is denied
for lack of merit. The said Bank is therefore ordered to comply within five days from
receipt with the 'notice of Garnishment' dated May 6, 1970." 5 There was a motion for
reconsideration filed by petitioner, but in a resolution dated September 22, 1970, it was
denied. Hence, this certiorari petition.
As noted at the outset, the petition lacks merit.
1. The plea for setting aside the notice of garnishment was promised on the funds of the
People's homesite and Housing Corporation deposited with petitioner being "public in
character." There was not even a categorical assertion to that effect. It is only the
possibility of its being "public in character." The tone was thus irresolute,the approach
difficult The premise that the funds could be spoken of as public in character may be
accepted in the sense that the People's Homesite and Housing Corporation was a
government-owned entity It does not follow though that they were exempt from
garnishment. National Shipyard and Steel Corporation v. court of Industrial
Relations 6 is squarely in point. As was explicitly stated in the opinion of the then Justice,
later Chief Justice, Concepcion: "The allegation to the effect that the funds of the
NASSCO are public funds of the government, and that, as such, the same may not be
garnished, attached or levied upon, is untenable for, as a government owned and
controlled corporation. the NASSCO has a personality of its own, distinct and separate
from that of the Government. It has pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 ..., pursuant to which the NASSCO has been established — 'all
the powers of a corporation under the Corporation Law ...' Accordingly, it may sue and
be sued and may be subjected to court processes just like any other corporation (Section
13, Act No. 1459), as amended." 7 The similarities between the aforesaid case and the
present litigation are patent. Petitioner was similarly a government-owned corporation.
The principal respondent was the Court of Industrial Relations. The prevailing parties
were the employees of petitioner. There was likewise a writ of execution and thereafter
notices of garnishment served on several banks. There was an objection to such a move
and the ruling was adverse to the National Shipyard and Steel Corporation. Hence the
filing of a petition for certiorari. To repeat, the ruling was quite categorical Garnishment
was the appropriate remedy for the prevailing party which could proceed against the
funds of a corporate entity even if owned or controlled by the government. In a 1941
decision, Manila Hotel Employees Association v. Manila Hotel Company, 8 this Court,
through Justice Ozaeta, held: "On the other hand, it is well settled that when the
government enters into commercial business, it abandons its sovereign capacity and is to
be treated like any other corporation. (Bank of the United States v. Planters'
Bank, 9 Wheat, 904, 6 L.ed. 244). By engaging in a particular business thru the
instrumentality of a corporation, the governmnent divests itself pro hac vice of its
sovereign character, so as to render the corporation subject to the rules of law governing
private corporations."
2. It is worth noting that the decision referred to, the Bank of the United States v.
Planters' Bank, 10 was promulgated by the American Supreme Court as early as 1824, the
opinion being penned by the great Chief Justice Marshall. As was pointed out by him: "It
is, we think, a sound principle, that when a government becomes a partner in any trading
company, it divests itself, so far as concerns the transactions of that company, of its
sovereign character, and takes that of a private citizen. Instead of communicating to the
company its privileges and its prerogatives, it descends to a level with those with whom it
associates itself, and takes the character which belongs to its associates, and to the
business which is to be transacted. Thus, many states of this Union who have an interest
in banks, are not suable even in their own courts; yet they never exempt the corporation
from being sued. The state of Georgia, by giving to the bank the capacity to sue and be
sued, voluntarily strips itself of its sovereign character, so far as respects the transactions
of the bank, and waives an the privileges of that character. As a member of a corporation,
a government never exercises its sovereignty. It acts merely as a corporator, and exercises
no other power in the management of the affairs of the corporation, that are expressly
given by the incorporating act." 11 The National Shipyard and Steel Corporation case,
therefore, merely reaffirmed one of the oldest and soundest doctrines in this branch of the
law.
3. The invocation of Republic v. Palacio, 12 as well as Commissioner of Public Highways
v. San Diego, 13 did not help the cause of petitioner at all The decisions are not
applicable. If properly understood they can easily be distinguished. As is clear in the
opinion of Justice J.B.L. Reyes in Republic v. Palacio, the Irrigation Service Unit which
was sued was an office and agency under the Department of Public Works and
Communications. The Republic of the Philippines, through the then Solicitor General,
moved for the dismissal of such complaint, alleging that it "has no juridical personality to
sue and be sued." 14 Such a motion to dismiss was denied. The case was tried and plaintiff
Ildefonso Ortiz, included as private respondent in the Supreme Court proceeding,
obtained a favorable money judgment. It became final and executory. Thereafter, it
appeared that the Solicitor General was served with a copy of the writ of execution issued
by the lower court followed by an order of garnishment 15 Again, there was an urgent
motion to lift such order, but it was denied. A certiorariand prohibition proceeding was
then filed with the Court of Appeals. The legality of the issuance of such execution and
punishment was upheld, and the matter was elevated to this Tribunal The Republic was
sustained. The infirmity of the decision reached by the Court of Appeals, according to the
opinion, could be traced to the belief that there was a waiver of "governmental immunity
and, by implication, consent to the suit." 16 There was no such waiver. Even if there were,
it was stressed by justice J.B.L. Reyes: "It is apparent that this decision of the Court of
Appeals suffers from the erroneous assumption that because the State has waived its
immunity, its property and funds become liable to seizure under the legal process. This
emphatically is not the law. (Merritt v. Insular Government, 34 Phil 311)." 17 To levy the
execution of such funds, according to him, would thus "amount to a disbursement without
any proper appropriation as required by law " 18 InCommissioner of Public Highways v.
San Diego, the opening paragraph of Justice Teehankee was quite specific as to why
there could be neither execution nor garnishment of the money of petitioner Bureau of
Public Highways: "In this special civil action for certiorari and prohibition, the Court
declares null and void the two questioned orders of respondent Court levying upon funds
of petitioner Bureau of Public Highways on deposit with the Philippine National Bank,
by virtue of the fundamental precept that government funds are not subject to execution
4
or garnishment." 19 The funds appertained to a governmental office, not to a government-
owned or controlled corporation with a separate juridical personality. In neither case
therefore was there an entity with the capacity to sue and be sued, the funds of which
could thereafter be held liable to execution and garnishment in the event of an adverse
judgment.
4. Both the Palacio and the Commissioner of Public Highways decisions, insofar as they
reiterate the doctrine that one of the coronaries of the fundamental concept of non-
suability is that governmental funds are immune from garnishment, refer to Merritt v.
Insular Government, a 1916 decision 20 Since then such a principle has been followed
with undeviating rigidity, the latest case in point being Republic v.
Villasor, 21 promulgated in 1973. It is an entirely different matter if, according to
Justice Sanchez in Ramos v. Court of Industrial Relations, 22 the office or entity is
"possessed of a separate and distinct corporate existence." 23 Then it can sue and be sued.
Thereafter, its funds may be levied upon or garnished. That is what happened in this case.
5. With the crucial issue thus resolved in favor of the correctness of the order assailed, the
other objection raised, namely that respondent Court acted erroneously in having a
special sheriff serve to the writ of execution, hardly needs any extensive decision. It is
true that in the aforesaid Commissioner of Public Highways opinion, this Court held that
there is no authorization in law for the appointment of special sheriffs for the service of
writs of execution. 24 In the order sought to be nullified, the then Judge Joaquin M.
Salvador of respondent Court pointed out that under a later Act, 25 the Court of Industrial
Relations Act was amended with the proviso that its Clerk of Court was the ex-
oficio sheriff. The point raised in the petition that it should be the sheriff of Quezon City
that ought to have served the writ of execution would thus clearly appear to be
inconclusive. There is to be sure no thought of deviating from the principle announced in
the Commissioner of Public Highways case. That is as it ought to be. Even if, however,
there is sufficient justification for the infirmity attributed to respondent Court by virtue of
such a ruling, still considering all the circumstances of this case, it clearly does not call
for the nullification of the order in question. What cannot be denied is that the writ of
execution was issued as far back as May 5, 1970 by the then Clerk of Court of respondent
Tribunal as the authorized sheriff. It would be, to say the least, unfair and unequitable if,
on the assumption that such Clerk of Court lacked such competence, a new writ of
execution had to be issued by the proper official At any rate, what is important is that the
judgment be executed. That is to achieve justice according to law. It would be to carry
technicality, therefore, to an absurd length if just because of such a mistake, assuming
that it is, but undoubtedly one committed in good faith, further delay would get be
imposed on private respondent by characterizing the order sought to be nullified
amounting to a grave abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed. No costs.
. mortgage. (Exhibit "C ")
G.R. No. L-41299 February 21, 1983
SOCIAL SECURITY SYSTEM, petitioner,
vs.
COURT OF APPEALS, DAVID B. CRUZ, SOCORRO CONCIO CRUZ, and
LORNA C. CRUZ, respondents.
The Solicitor General for petitioner.
Eribert D. Ignacio for respondents David Cruz, Socorro Concio Cruz and Lorna Cruz.
MELENCIO-HERRERA, J.:
This Petition for Review on certiorari of the Decision of the Court of Appeals 1 stems
from the following facts, as narrated by the Trial Court, adopted by the Court of Appeals,
and quoted by both petitioner 2 and private respondents 3:
Sometime in March, 1963 the spouses David B. Cruz and Socorro Concio Cruz
applied for and were granted a real estate loan by the SSS with their residential
lot located at Lozada Street, Sto. Rosario, Pateros, Rizal covered by Transfer
Certificate of Title No. 2000 of the Register of Deeds of Rizal as collateral.
Pursuant to this real estate ban said spouses executed on March 26, 1963 the
corresponding real estate mortgage originally in the amount of P39,500.00
which was later increased to P48,000.00 covering the aforementioned property
as shown in their mortgage contract, Exhibit A and 1. From the proceeds of the
real estate loan the mortgagors constructed their residential house on the
mortgaged property and were furnished by the SSS with a passbook to record
the monthly payments of their amortizations (Exhibits B and B-1). The
mortgagors, plaintiffs herein, complied with their monthly payments although
there were times when delays were incurred in their monthly payments which
were due every first five (5) days of the month (Exhibits 3-A to 3-N). On July 9,
1968, defendant SSS filed an application with the Provincial Sheriff of Rizal for
the foreclosure of the real estate mortgage executed by the plaintiffs on the
ground, among others:
That the conditions of the mortgage have been broken since October,
1967 with the default on the part of the mortgagor to pay in full the
installments then due and payable on the principal debt and the interest
thereon, and, all of the monthly installments due and payable
thereafter up to the present date; ...
That by the terms of the contract herein above referred to, the
indebtedness to the mortgagee as of June, 1968 amounts to Ten
Thousand Seven Hundred Two Pesos & 58/100 (P10,702.58),
Philippine Currency, excluding interests thereon, plus 20% of the total
amount of the indebtedness as attorney's fees, also secured by the said
Pursuant to this application for foreclosure, the notice of the Sheriff's Sale of the
mortgaged property was initially published in the Sunday Chronicle in its issue
5
 of July 14, 1968 announcing the sale at public auction of the said mortgaged
property. After this first publication of the notice, and before the second
publication of the notice, plaintiff herein thru counsel formally wrote defendant
SSS, a letter dated July 19, 1968 and received on the same date by said entity
demanding, among others, for said defendant SSS to withdraw the foreclosure
and discontinue the publication of the notice of sale of their property claiming
that plaintiffs were up-to-date in the payment of their monthly amortizations
(Exhibits "E" and "E-1"). In answer to this letter defendant SSS sent a telegram
to Atty. Eriberto Ignacio requesting him to come to their office for a conference.
This telegram was received by said counsel on July 23, 1968 (Exhibit "G " and
"G-1 "). To this telegraphic answer, Atty. Ignacio sent a telegraphic reply
suggesting instead that a representative of the SSS be sent to him because his
clients were the aggrieved parties (Exhibit-. "G-2"). Nothing came out of the
telegraphic communications between the parties and the second and third
publications of the notice of foreclosure were published successively in the
Sunday Chronicle in its issues of July 21 and 28, 1968 (Exhibits "N-1 " and "O-
1"). 4
On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz,
instituted before the Court of First Instance of Rizal an action for damages and attorney's
fees against the Social Security System (SSS) and the Provincial Sheriff of Rizal alleging,
among other things, that they had fully and religiously paid their monthly amortizations
and had not defaulted in any payment.
In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage
executed in its favor by private respondents by virtue of the automatic acceleration clause
provided in the mortgage contract, even after private respondents had paid their
amortization installments. In its counterclaim, the SSS prayed for actual and other
damages, as well as attorney's fees, for malicious and baseless statements made by
private respondents and published in the Manila Chronicle.
On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at public
auction of private respondent's property upon their posting of a P2,000.00 bond executed
in favor of the SSS.
The Trial Court rendered judgment on March 5, 1971, the dispositive portion of which
reads:
WHEREFORE, judgment is rendered against defendant SSS, directing it to pay
plaintiffs the following amounts:
(a) P2,500.00 as actual damage;
(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages; and
(d) P5,000.00 as attorney's fees.
Defendant SSS shall further pay the costs. 5
In respect of the moral and temperate damages awarded, the Trial Court stated:
With respect to moral and temperate damages, the Court holds that the first
publication of the notice was made in good faith but committed by defendant
SSS in gross negligence considering the personnel at its command and the ease
with which verifications of the actual defaulting mortgagors may be made. On
this initial publication of the notice of foreclosure (Exhibits "M" and "M-1"),
the Court believes plaintiffs are entitled to the amount of P5,000.00. The second
publication of the notice of foreclosure is another matter. There was already
notice by plaintiffs to defendant SSS that there was no reason for the
foreclosure of their mortgaged property as they were never in default. Instead of
taking any corrective measure to rectify its error, defendant SSS adopted a
position of righteousness and followed the same course of action contending
that no error has open committed. This act of defendant indeed was deliberate,
calculated to cow plaintiffs into submission, and made obviously with malice.
On this score, the Court believes defendant SSS should pay and indemnify
plaintiffs jointly in the sum of P10,000.00. Lastly, on the third publication of the
notice of foreclosure, the Court finds this continued publication an outright
disregard for the reputation and standing of plaintiffs. The publication having
reached a bigger segment of society and also done with malice and callous
disregard for the rights of its clients, defendant SSS should compensate
plaintiffs jointly in the sum of P20,000.00. All in all, plaintiffs are entitled to
P35,000.00 by way of moral damages. 6
On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision
promulgated on March 14, 1975, but upon SSS's Motion for Reconsideration, modified
the judgment by the elimination of the P5,000.00 moral damages awarded on account of
the initial publication of the foreclosure notice. To quote:
xxx xxx xxx
After a re-examination of the evidence, we find that the negligence of the
appellant is not so gross as to warrant moral and temperate damages. The
amount of P5,000.00 should be deducted from the total damages awarded to the
plaintiffs.
WHEREFORE, the decision promulgated on March 14, 1975 is hereby
maintained with the sole modification that the amount of P5,000.00 awarded on
account of the initial publication is eliminated so that the said amount should be
deducted from the total damages awarded to the plaintiffs.
SO ORDERED. 7
In so far as exemplary and corrective damages are concerned, the Court of Appeals had
this to say.
6

The Court finds no extenuating circumstances to mitigate the irresponsible
action of defendant SSS and for this reason, said defendant should pay
exemplary and corrective damages in the sum of P10,000.00 ...
Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this
Petition alleging —.
I. Respondent Court of Appeals erred in not finding that under Condition No. 10
of the Mortgage contract, which is a self-executing, automatic acceleration
clause, all amortizations and obligations of the mortgagors become ipso
jure due and demandable if they at any time fail to pay any of the amortizations
or interest when due;
II. Respondent Court of Appeals erred in holding that a previous notice to the
mortgagor was necessary before the mortgage could be foreclosed;
III. Respondent Court of Appeals erred in not holding that, assuming that there
was negligence committed by subordinate employees of the SSS in staking
'Socorro C. Cruz' for 'Socorro J. Cruz' as the defaulting borrower, the fault
cannot be attributed to the SSS, much less should the SSS be made liable for
their acts done without its knowledge and authority;
IV. Respondent Court of Appeals erred in holding that there is no extenuating
circumstance to mitigate the liability of petitioner;
V. Respondent Court of Appeals erred in not holding that petitioner is not liable
for damages not being a profit-oriented governmental institution but one
performing governmental functions petitions.8
For failure of the First Division to obtain concurrence of the five remaining members
(Justices Plana and Gutierrez, Jr. could take no part), the case was referred to the
Court en banc.
The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real
estate mortgage contract with the SSS as would have warranted the publications of the
notices of foreclosure; and (2) whether or not the SSS can be held liable for damages.
The first issue revolves around the question of appreciation of the evidence by the lower
Court as concurred in by the Court of Appeals. The appraisal should be left undisturbed
following the general rule that factual findings of the Court of Appeals are not subject to
review by this Court, the present case not being one of the recognized exceptions to that
rule. 9 Accordingly, we are upholding the finding of the Court of Appeals that the SSS
application for foreclosure was not justified, particularly considering that the real estate
loan of P48,000.00 obtained by the Cruzes in March, 1963, was payable in 15 years with
a monthly amortization of P425.18, and that as of July 14, 1968, the date of the first
notice of foreclosure and sale, the outstanding obligation was still P38,875.06 and not
P10,701.58, as published.
The appellant was not justified in applying for the extrajudicial foreclosure of
the mortgage contract executed in its favor by the spouses, David B. Cruz and
Socorro Concio-Cruz, Exh. 'A'. While it is true that the payments of the monthly
installments were previously not regular, it is a fact that as of June 30, 1968 the
appellee, David B. Cruz and Socorro Concio-Cruz were up-to-date and current
in the payment of their monthly installments. Having accepted the prior late
payments of the monthly installments, the appellant could no longer suddenly
and without prior notice to the mortgagors apply for the extra-judicial
foreclosure of the mortgage in July 1968. 10
A similar conclusion was reached by the trial Court.
Defendant's contention that there was clerical error in the amount of the
mortgage loan due as of June, 1968 as per their application for foreclosure of
real estate mortgage is a naive attempt to justify an untenable position. As a
matter of fact plaintiffs were able to establish that the mortgagor who actually
committed the violation of her mortgage loan was a certain 'Socorro J. Cruz'
who was in arrears in the amount of P10,702.58 at the time the application for
foreclosure of real estate mortgage was filed Exhibits "BB" and "EE").
Defendant mortgagee must have committed an error in picking the record of
plaintiff 'Socorro C. Cruz' instead of the record of 'Socorro J. Cruz'. Defendant
SSS, however, denied having committed any error and insists that their motion
for foreclosure covers the real estate mortgage of spouses David E. Cruz and
Socorro C. Cruz. This Court is nonetheless convinced that the foreclosure
proceedings should have been on the real estate mortgage of 'Socorro J. Cruz'
who was in arrears as of June, 1968 in the amount of P10,701.58, the exact
amount mentioned in the application for foreclosure of real estate mortgage by
defendant SSS. 11
We come now to the amendability of the SSS to judicial action and legal responsibility
for its acts. To our minds, there should be no question on this score considering that the
SSS is a juridical entity with a personality of its own.12 It has corporate powers separate
and distinct from the Government. 13 SSS' own organic act specifically provides that it
can sue and be sued in Court. 14 These words "sue and be sued" embrace all civil process
incident to a legal action. 15 So that, even assuming that the SSS, as it claims, enjoys
immunity from suit as an entity performing governmental functions, by virtue of the
explicit provision of the aforecited enabling law, the Government must be deemed to
have waived immunity in respect of the SSS, although it does not thereby concede its
liability. That statutoy law has given to the private-citizen a remedy for the enforcement
and protection of his rights. The SSS thereby has been required to submit to the
jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the
SSS performs governmental or proprietary functions thus becomes unnecessary to
belabor. For by that waiver, a private citizen may bring a suit against it for varied
7
objectives, such as, in this case, to obtain compensation in damages arising from
contract 16 and even for tort.
A recent case squarely in point anent the principle, involving the National Power
Corporation, is that of Rayo vs. Court of First Instance of Bulacan, 110 SCRA 457
(1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
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 snowed 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 78 1). Moreover, the charter
provision that the NPC can 'sue and be sued in any court' is without
qualification on the cause of action and accordingly it can include a tort claim
such as the one instituted by the petitioners.
The proposition that the SSS is not profit-oriented was rejected in the case of SSS
Employees' Association vs. Hon. Soriano. 17 But even conceding that the SSS is not, in
the main, operated for profit, it cannot be denied that, in so far as contractual loan
agreements with private parties are concerned, the SSS enters into them for profit
considering that the borrowers pay interest, which is money paid for the use of money,
plus other charges.
In so far as it is argued that to hold the SSS liable for damages would be to deplete the
benefit funds available for its covered members, suffice it to say, that expenditures of the
System are not confined to the payment of social security benefits. For example, the
System also has to pay the salaries of its personnel. Moreover, drawing a parallel with the
NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of
public funds, it has been held that those funds may even be made the object of a notice of
garnishment. 18
What is of paramount importance in this controversy is that an injustice is not perpetrated
and that when damage is caused a citizen, the latter should have a right of redress
particularly when it arises from a purely private and contractual relationship between said
individual and the System.
We find, however, that under the circumstances of the case, the SSS cannot be held liable
for the damages as awarded by the Trial Court and the Appellate Tribunal.
As basis for the award of actual damages, the Trial Court relied on the alleged expenses
incurred by private respondents for the wardrobe they were supposed to use during their
trip abroad, which was allegedly aborted because of the filing of the foreclosure
application by the SSS. We find the foregoing too speculative. There could have been
other reasons why the trip did not materialize. Moreover, it appears that private
respondents' passports had already expired but that they made no effort to secure new
passports. 19 Nor did they secure the necessary visas from the local consulates of foreign
countries they intended to visit for their trip abroad. 20
Nor can the SSS be held liable for moral and temperate damages. As concluded by the
Court of Appeals "the negligence of the appellant is not so gross as to warrant moral and
temperate damages", 21 except that, said Court reduced those damages by only P5,000.00
instead of eliminating them. Neither can we agree with the findings of both the Trial
Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS
was of the belief that it was acting in the legitimate exercise of its right under the
mortgage contract in the face of irregular payments made by private respondents, and
placed reliance on the automatic acceleration clause in the contract. The filing alone of
the foreclosure application should not be a ground for an award of moral damages in the
same way that a clearly unfounded civil action is not among the grounds for moral
damages. 22
With the ruling out of compensatory, moral and temperate damages, the grant of
exemplary or corrective damages should also be set aside. 23 Moreover, no proof has been
submitted that the SSS had acted in a wanton, reckless and oppressive manner. 24
However, as found by both the Trial and Appellate Courts, there was clear negligence on
the part of SSS when they mistook the loan account of Socorro J. Cruz for that of private
respondent Socorro C. Cruz. Its attention was called to the error, but it adamantly refused
to acknowledge its mistake. The SSS can be held liable for nominal damages. This type
of damages is not for the purpose of indemnifying private respondents for any loss
suffered by them but to vindicate or recognize their rights which have been violated or
invaded by petitioner SSS. 25
The circumstances of the case also justify the award of attorney's fees, as granted by the
Trial and Appellate Courts, particularly considering that private respondents were
compelled to litigate for the prosecution of their interests. 26
WHEREFORE, the judgment sought to be reviewed is hereby modified in that petitioner
SSS shall pay private respondents: P3,000.00 as nominal damages; and P5,000.00 as
attorney's fees.
Costs against petitioner Social Security System. SO ORDERED.
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
8
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 wrongs upon individuals. To sue said defendant
for tort may require the express consent of the State.
WHEREFORE, the cases against defendant NPC are hereby dismissed. (Rollo,
p. 60.)
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. 74.)
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 only on
April 13, 1981, after a number of extensions, that the Solicitor General filed the required
comment. (Rollo, pp. 107-114.)
9
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 "sue and be sued in any court" is without qualification
on the cause of action and accordingly it can include a tort claim such as the one
instituted by the petitioners.
WHEREFORE, the petition is hereby granted; the Orders of the respondent court 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.
SO ORDERED.
G.R. No. L-6060 September 30, 1954
FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.
Quisumbing, Sycip, Quisumbing and Salazar, for appellant.
Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.
PARAS, C.J.:
The factual antecedents of this case are sufficiently recited in the brief filed by the
intervenor-appellee as follows:
1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a
complaint against the defendant-appellant, Pan Oriental Shipping Co., alleging
that he purchased from the Shipping Commission the vessel FS-197 for
P200,000, paying P50,000 down and agreeing to pay the balance in
installments; that to secure the payment of the balance of the purchase price, he
executed a chattel mortgage of said vessel in favor of the Shipping
Commission; that for various reason, among them the non-payment of the
installments, the Shipping Commission took possession of said vessel and
considered the contract of sale cancelled; that the Shipping Commission
chartered and delivered said vessel to the defendant-appellant Pan Oriental
Shipping Co. subject to the approval of the President of the Philippines; that he
appealed the action of the Shipping Commission to the President of the
Philippines and, in its meeting on August 25, 1950, the Cabinet restored him to
all his rights under his original contract with the Shipping Commission; that he
had repeatedly demanded from the Pan Oriental Shipping Co. the possession of
the vessel in question but the latter refused to do so. He, therefore, prayed that,
upon the approval of the bond accompanying his complaint, a writ of replevin
be issued for the seizure of said vessel with all its equipment and appurtenances,
and that after hearing, he be adjudged to have the rightful possession thereof
(Rec. on App. pp. 2-8).
2. On February 3, 1951, the lower court issued the writ of replevin prayed for
by Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested of
its possession of said vessel (Rec. on App. p. 47).
3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the
right of Froilan to the possession of the said vessel; it alleged that the action of
the Cabinet on August 25, 1950, restoring Froilan to his rights under his original
contract with the Shipping Commission was null and void; that, in any event,
Froilan had not complied with the conditions precedent imposed by the Cabinet
for the restoration of his rights to the vessel under the original contract; that it
suffered damages in the amount of P22,764.59 for wrongful replevin in the
month of February, 1951, and the sum of P17,651.84 a month as damages
suffered for wrongful replevin from March 1, 1951; it alleged that it had
incurred necessary and useful expenses on the vessel amounting to P127,057.31
and claimed the right to retain said vessel until its useful and necessary
expenses had been reimbursed (Rec. on App. pp. 8-53).
4. On November 10, 1951, after the leave of the lower court had been obtained,
the intervenor-appellee, Government of the Republic of the Philippines, filed a
complaint in intervention alleging that Froilan had failed to pay to the Shipping
10
Commission (which name was later changed to Shipping Administration) the
balance due on the purchase price of the vessel in question, the interest thereon,
and its advances on insurance premium totalling P162,142.95, excluding the
dry-docking expenses incurred on said vessel by the Pan Oriental Shipping Co.;
that intervenor was entitled to the possession of the said vessel either under the
terms of the original contract as supplemented by Froilan's letter dated January
28, 1949, or in order that it may cause the extrajudicial sale thereof under the
Chattel Mortgage Law. It, therefore, prayed that Froilan be ordered to deliver
the vessel in question to its authorized representative, the Board of Liquidators;
that Froilan be declared to be without any rights on said vessel and the amounts
he paid thereon forfeited or alternately, that the said vessel be delivered to the
Board of Liquidators in order that the intervenor may have its chattel mortgage
extrajudicially foreclosed in accordance with the provisions of the Chattel
Mortgage Law; and that pending the hearing on the merits, the said vessel be
delivered to it (Rec. on App. pp. 54-66).
5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the
complaint in intervention alleging that the Government of the Republic of the
Philippines was obligated to deliver the vessel in question to it by virtue of a
contract of bare-boat charter with option to purchase executed on June 16, 1949,
by the latter in favor of the former; it also alleged that it had made necessary
and useful expenses on the vessel and claimed the right of retention of the
vessel. It, therefore, prayed that, if the Republic of the Philippines succeeded in
obtaining possession of the said vessel, to comply with its obligations of
delivering to it (Pan Oriental Shipping co.) or causing its delivery by recovering
it from Froilan (Rec. on App. pp. 69-81).
6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which
was liquidating the affairs of the Shipping Administration, a check in the
amount of P162,576.96 in payment of his obligation to the Shipping
Administration for the said vessel as claimed in the complaint in intervention of
the Government of the Republic of the Philippines. The Board of Liquidators
issued an official report therefor stating that it was a 'deposit pending the
issuance of an order of the Court of First Instance of Manila' (Rec. on App. pp.
92-93).
7. On December 7, 1951, the Government of the Republic of the Philippines
brought the matter of said payment and the circumstance surrounding it to the
attention of the lower court "in order that they may be taken into account by this
Honorable Court in connection with the questions that are not pending before it
for determination" (Rec. on App. pp. 82-86).
8. On February 3, 1952, the lower court held that the payment by Froilan of the
amount of P162,576.96 on November 29, 1951, to the Board of Liquidators
constituted a payment and a discharge of Froilan's obligation to the Government
of the Republic of the Philippines and ordered the dismissal of the latter's
complaint in intervention. In the same order, the lower court made it very clear
that said order did not pre-judge the question involved between Froilan and the
Oriental Shipping Co. which was also pending determination in said court (Rec.
on App. pp. 92-93). This order dismissing the complaint in intervention, but
reserving for future adjudication the controversy between Froilan and the Pan
Oriental Shipping Co. has already become final since neither the Government of
the Republic of the Philippines nor the Pan Oriental Shipping Co. had appealed
therefrom.
9. On May 10, 1952, the Government of the Republic of the Philippines filed a
motion to dismiss the counterclaim of the Pan Oriental Shipping Co. against it
on the ground that the purpose of said counterclaim was to compel the
Government of the Republic of the Philippines to deliver the vessel to it (Pan
Oriental Shipping Co.) in the event that the Government of the Republic of the
Philippines recovers the vessel in question from Froilan. In view, however, of
the order of the lower court dated February 3, holding that the payment made by
Froilan to the Board of Liquidators constituted full payment of Froilan's
obligation to the Shipping Administration, which order had already become
final, the claim of the Pan Oriental Shipping Co. against the Republic of the
Philippines was no longer feasible, said counterclaim was barred by prior
judgment and stated no cause of action. It was also alleged that movant was not
subject to the jurisdiction of the court in connection with the counterclaim.
(Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental
Shipping Co. in its written opposition dated June 4, 1952 (Rec. on app. pp. 19-
104).
10. In an order dated July 1, 1952, the lower court dismissed the counterclaim
of the Pan Oriental Shipping Co. as prayed for by the Republic of the
Philippines (Rec. on App. pp. 104-106).
11. It if from this order of the lower court dismissing its counterclaim against
the Government of the Republic of the Philippines that Pan Oriental Shipping
Co. has perfected the present appeal (Rec. on App. p. 107).
The order of the Court of First Instance of Manila, dismissing the counterclaim of the
defendant Pan Oriental Shipping Co., from which the latter has appealed, reads as
follows:
This is a motion to dismiss the counterclaim interposed by the defendant in its
answer to the complaint in intervention.
"The counterclaim states as follows:
"COUNTERCLAIM
"As counterclaim against the intervenor Republic of the Philippines, the
defendant alleges:
11
 "1. That the defendant reproduces herein all the pertinent allegations of the
foregoing answer to the complaint in intervention
"2. That, as shown by the allegations of the foregoing answer to the complaint
in intervention, the defendant Pan Oriental Shipping Company is entitled to the
possession of the vessel and the intervenor Republic of the Philippines is bound
under the contract of charter with option to purchase it entered into with the
defendant to deliver that possession to the defendant — whether it actually has
the said possession or it does not have that possession from the plaintiff
Fernando A. Froilan and deliver the same to the defendant;
"3. That, notwithstanding demand, the intervenor Republic of the Philippines
has not to date complied with its obligation of delivering or causing the delivery
of the vessel to the defendant Pan Oriental Shipping Company.1âwphïl.nêt
"RELIEF
"WHEREFORE, the defendant respectfully prays that judgment be rendered
ordering the intervenor Republic of the Philippines alternatively to deliver to the
defendants the possession of the said vessel, or to comply with its obligation to
the defendant or causing the delivery to the latter of the said vessel by
recovering the same from plaintiff, with costs.
"The defendant prays for such other remedy as the Court may deem
just and equitable in the premises."
The ground of the motion to dismiss are (a) That the cause of action is barred
by prior judgment; (b) That the counterclaim states no cause of action; and (c)
That this Honorable Court has no jurisdiction over the intervenor government of
the Republic of the Philippines in connection with the counterclaim of the
defendant Pan Oriental Shipping Co.
The intervenor contends that the complaint in intervention having been
dismissed and no appeal having been taken, the dismissal of said complaint is
tantamount to a judgment.
The complaint in intervention did not contain any claim whatsoever against the
defendant Pan Oriental Shipping Co.; hence, the counterclaim has no
foundation.
The question as to whether the Court has jurisdiction over the intervenor with
regard to the counterclaim, the Court is of the opinion that it has no jurisdiction
over said intervenor.
It appearing, therefore, that the grounds of the motion to dismiss are well taken,
the counterclaim of the defendant is dismissed, without pronouncement as to
costs.
The defendant's appeal is predicated upon the following assignments of error:
I. The lower court erred in dismissing the counterclaim on the ground of prior
judgment.
II. The lower court erred in dismissing the counterclaim on the ground that the
counterclaim had no foundation because made to a complaint in intervention
that contained no claim against the defendant.
III. The lower court erred in dismissing the counterclaim on the ground of
alleged lack of jurisdiction over the intervenor Republic of the Philippines.
We agree with appellant's contention that its counterclaim is not barred by prior judgment
(order of February 8, 1952, dismissing the complaint in intervention), first, because said
counterclaim was filed on November 29, 1951, before the issuance of the order invoked;
and, secondly, because in said order of February 8, the court dismissed the complaint in
intervention, "without, of course, precluding the determination of the right of the
defendant in the instant case," and subject to the condition that the "release and
cancellation of the chattel mortgage does not, however, prejudge the question involved
between the plaintiff and the defendant which is still the subject of determination in this
case." It is to be noted that the first condition referred to the right of the defendant, as
distinguished from the second condition that expressly specified the controversy between
the plaintiff and the defendant. That the first condition reserved the right of the defendant
as against the intervenor, is clearly to be deduced from the fact that the order of February
8 mentioned the circumstance that "the question of the expenses of drydockingincurred
by the defendant has been included in its counterclaim against the plaintiff," apparently
as one of the grounds for granting the motion to dismiss the complaint in intervention.
The defendant's failure to appeal from the order of February 8 cannot, therefore, be held
as barring the defendant from proceeding with its counterclaim, since, as already stated,
said order preserved its right as against the intervenor. Indeed, the maintenance of said
right is in consonance with Rule 30, section 2, of the Rules of Court providing that "if a
counterclaim has been pleaded by a defendant prior to the service upon him of the
plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's
objection unless the counterclaim can remain pending for independent adjudication by
the court."
The lower court also erred in holding that, as the intervenor had not made any claim
against the defendant, the latter's counterclaim had no foundation. The complaint in
intervention sought to recover possession of the vessel in question from the plaintiff, and
this claim is logically adverse to the position assumed by the defendant that it has a better
right to said possession than the plaintiff who alleges in his complaint that he is entitled
to recover the vessel from the defendant. At any rate a counterclaim should be judged by
its own allegations, and not by the averments of the adverse party. It should be recalled
that the defendant's theory is that the plaintiff had already lost his rights under the
contract with the Shipping Administration and that, on the other hand, the defendant is
relying on the charter contract executed in its favor by the intervenor which is bound to
protect the defendant in its possession of the vessel. In other words, the counterclaim
12
calls for specific performance on the part of the intervenor. As to whether this
counterclaim is meritorious is another question which is not now before us.
The other ground for dismissing the defendant's counterclaim is that the State is immune
from suit. This is untenable, because by filing its complaint in intervention the
Government in effect waived its right of nonsuability.
The immunity of the state from suits does not deprive it of the right to sue
private parties in its own courts. The state as plaintiff may avail itself of the
different forms of actions open to private litigants. In short, by taking the
initiative in an action against a private party, the state surrenders its privileged
position and comes down to the level of the defendant. The latter automatically
acquires, within certain limits, the right to set up whatever claims and other
defenses he might have against the state. The United States Supreme Court thus
explains:
"No direct suit can be maintained against the United States. But when
an action is brought by the United States to recover money in the
hands of a party who has a legal claim against them, it would be a very
rigid principle to deny to him the right of setting up such claim in a
court of justice, and turn him around to an application to Congress."
(Sinco, Philippine Political Law, Tenth Ed., pp. 36-37, citing U. S. vs.
Ringgold, 8 Pet. 150, 8 L. ed. 899.)
It is however, contended for the intervenor that, if there was at all any waiver, it was in
favor of the plaintiff against whom the complaint in intervention was directed. This
contention is untenable. As already stated, the complaint in intervention was in a sense in
derogation of the defendant's claim over the possession of the vessel in question.
Wherefore, the appealed order is hereby reversed and set aside and the case remanded
to the lower court for further proceedings. So ordered, without costs.
G.R. No. L-8587 March 24, 1960
BENITO E. LIM, as administrator of the Intestate Estate of Arsenia
Enriquez, plaintiff-appellant,
vs.
HERBERT BROWNELL, JR., Attorney General of the United States, and
ASAICHI KAGAWA, defendants-appellee, REPUBLIC OF THE PHILIPPINES,
intervenor-appellee.
Angel S. Gamboa for appellant.
Townsend, Gilbert, Santos and Patajo for appellee.
Alfredo Catolico for intervenor.
GUTIERREZ DAVID, J.:
This is an appeal from an order of the Court of First Instance of Manila, dismissing
plaintiff's action for the recovery of real property for lack of jurisdiction over the subject
matter.
The property in dispute consists of four parcels of land situated in Tondo, City of Manila,
with a total area of 29,151 square meters. The lands were, after the last world war, found
by the Alien Property Custodian of the United States to be registered in the name of
Asaichi Kagawa, national of an enemy country, Japan, as evidenced by Transfer
Certificates of Title Nos. 64904 to 65140, inclusive, for which reason the said Alien
Property Custodian, on March 14, 1946, issued a vesting order on the authority of the
Trading with the Enemy Act of the United States, as amended, vesting in himself the
ownership over two of the said lots, Lots Nos. 1 and 2. On July, 6, 1948, the Philippine
Alien Property Administrator (successor of the Alien Property Custodian) under the
authority of the same statute, issued a supplemental vesting order, vesting in himself title
to the remaining Lots Nos. 3 and 4. On August 3, 1948, the Philippine Alien Property
Administrator (acting on behalf of the President of the United States) and the President of
the Philippines, executed two formal agreements, one referring to Lots 1 and 2 and the
other to Lots 3 and 4, whereby the said Administrator transferred all the said four lots to
the Republic of the Philippines upon the latter's undertaking fully to indemnify the United
States for all claims in relation to the property transferred, which claims are payable by
the United States of America or the Philippine Alien Property Administrator of the
United States under the Trading with the Enemy Act, as amended, and for all such costs
and expenses of administration as may by law be charged against the property or
proceeds thereof hereby transferred." The transfer agreements were executed pursuant to
section 3 of the Philippine Property Act of 1946 and Executive Order No. 9921, dated
January 10, 1948, of the President of the United States.
On the theory that the lots in question still belonged to Arsenia Enriquez, the latter's son
Benito E. Lim filed on November 15, 1948 a formal notice of claim to the property with
the Philippine Alien Property Administrator. The notice was subsequently amended to
permit Lim to prosecute the claim as administrator of the intestate estate of the deceased
Arsenia Enriquez, thus, in effect, substituting the intestate estate as the claimant, it being
alleged that the lots were once the property of Arsenia Enriquez; that they were
mortgaged by her to the Mercantile Bank of China; that the mortgage having been
foreclosed, the property was sold at public auction during the war to the Japanese Asaichi
Kagawa, who, by means of threat and intimidation succeeded in preventing Arsenia
Enriquez from exercising her right of redemption; and that Kagawa never acquired any
valid title to the property because he was ineligible under the Constitution to acquire
residential land in the Philippines by reason of alien age.
On March 7, 1950, the claim was disallowed by the Vested Property Claims Committee
of the Philippine Alien Property Administrator, and copy of the decision disallowing the
claim was received by claimant's counsel on the 15th of that month. The claimant,
however, took no appeal to the Philippine Alien Property Administrator, so that pursuant
to the rules of procedure governing claims before the Philippine Alien Property
13
Administrator, the decision of the committee became final on April 15, 1950, that is,
twenty days after receipt of the decision by claimant's counsel.
On November 13, 1950, the claimant Benito E. Lim, as administrator of the intestate
estate of Arsenia Enriquez, filed a complaint in the Court of First Instance of Manila
against the Philippine Alien Property Administrator (later substituted by the Attorney
General of the United States) for the recovery of the property in question with back rents.
The complaint was later amended to include Asaichi Kagawa as defendant. As amended,
it alleged that the lands in question formerly belonged to Arsenia Enriquez and were
mortgaged by her to the Mercantile Bank of China; that the mortgage having been
foreclosed, she was sentenced to pay the mortgage debt within 3 months; that within
those 3 months the bank commissioner, who had been appointed liquidator of said bank,
assured her that she could pay her mortgage debt little by little in monthly installments,
and pursuant to that arrangement the income derived from the mortgaged property were
thereafter applied to her indebtedness, that such payment of the mortgage debt continued
until a few months after the occupation of the City of Manila by the Japanese forces,
when the Bank of Taiwan, having taken over the administration and control of all banks
in the Philippines, including the Mercantile Bank of China, had the properties sold at
public auction on October 26, 1942 by the sheriff of the city; that the properties were
awarded to Asaichi Kagawa and the sale was subsequently confirmed by the court; that if
Arsenia Enriquez failed to redeem the properties before the confirmation of the sale, it
was because of the financial depression and also because she was prevented from doing
so by Kagawa through threats and intimidation; that the auction sale was irregular and
illegal because it was made without publication or notice and because though the land
was subdivided into lots, the same was sold as a whole; that because of the irregularities
mentioned, competitive bidding was prevented or stifled with the result that the lands,
which could have been easily sold for P300,000 at then prevailing prices, were awarded
to Kagawa whose bid was only P54,460.40, a price that was "grossly inadequate and
shocking to the conscience;" that the titles to the lands having been subsequently
transferred to Kagawa, the latter in June, 1943 illegally dispossessed Arsenia Enriquez
and kept possession of the properties until the liberation of the City of Manila; that as
Arsenia Enriquez was still the owner of the properties, the seizure thereof by the United
States Attorney General's predecessors on the assumption that they belong to Kagawa, as
well as their decision disallowing her claim, was contrary to law. Plaintiff, therefore,
prayed that the sheriff's sale to Kagawa and the vesting of the properties in the Philippine
Alien Property Administrator and the transfer thereof by the United States to the
Republic of the Philippines be declared null and void; that Arsenia Enriquez be adjudged
owner of the said properties and the Register of Deeds of Manila be ordered to issue the
corresponding transfer certificates of title to her; and that the defendant Attorney General
of the United States be required to pay rental from March 14, 1946, and the Government
of the Philippines from August 3, 1948, at the rate of P30,000 per annum with legal
interest.The defendant Attorney General of the United States and the defendant-
intervenor Republic of the Philippines each filed an answer, alleging by way of
affirmative defenses (1) that the action with respect to Lots 1 and 2 had already
prescribed, the same not having been brought within the period prescribed in section 33
of the Trading with the Enemy Act, as amended, and (2) that the lower court had no
jurisdiction over the claim for rentals since the action in that regard constituted a suit
against the United States to which it had not given its consent.
The defendant Asaichi Kagawa was summoned by publication, but having failed to file
an answer to the complaint, he was declared in default. Thereafter, a preliminary hearing
on the affirmative defenses was held at the instance of the United States Attorney General
pursuant to Section 5, Rule 8 of the Rules of Court. After said hearing, the court ordered
the complaint dismissed on the ground — as stated in the dispositive part of the order —
that the "court has no jurisdiction over the subject matter of this action, taking into
consideration the provisions of Sec. 34 (must be 33) of the Trading with the Enemy Act,
as the requirements needed by the above-mentioned Act have not been fulfilled by the
herein plaintiff." From that order, plaintiff has taken the present appeal.
Judging from the context of the order complained of, it would appear that the dismissal of
plaintiff's action was actually based upon the principle that a foreign state or its
government cannot be sued without its consent. Considering, however, the law
applicable, we do not think the order of dismissal can be sustained in its entirety. There is
no denying that an action against the Alien Property Custodian, or the Attorney General
of the United States as his successor, involving vested property under the Trading with
the Enemy Act located in the Philippines, is in substance an action against the United
States. The immunity of the state from suit, however, cannot be invoked where the action,
as in the present case, is instituted by a person who is neither an enemy or ally of an
enemy for the purpose of establishing his right, title or interest in vested property, and of
recovering his ownership and possession. Congressional consent to such suit has
expressly been given by the United States. (Sec. 3, Philippine Property Act of 1946;
Philippine Alien Property Administration vs. Castelo, et al., 89 Phil., 568.)
The order of dismissal, however, with respect to plaintiff's claim for damages against the
defendant Attorney General of the United States must be upheld. The relief available to a
person claiming enemy property which has been vested by the Philippines Alien Property
Custodian is limited to those expressly provided for in the Trading with the Enemy Act,
which does not include a suit for damages for the use of such vested property. That
action, as held by this Court in the Castelo case just cited, is not one of those authorized
under the Act which may be instituted in the appropriate courts of the Philippines under
the provisions of section 3 of the Philippine Property Act of 1946. Congressional consent
to such suit has not been granted.
The claim for damages for the use of the property against the intervenor defendant
Republic of the Philippines to which is was transferred, likewise, cannot be maintained
because of the immunity of the state from suit. The claim obviously constitutes a charge
against, or financial liability to, the Government and consequently cannot be entertained
by the courts except with the consent of said government. (Syquia vs. Almeda Lopez, 84
Phil., 312; 47 Off. Gaz., 665; Compañia General de Tabacos vs. Gov't of PI, 45 Phil.,
663.) Plaintiff argues that by its intervention, the Republic of the Philippines, in effect,
waived its right of non-suability, but it will be remembered that the Republic intervened
in the case merely to unite with the defendant Attorney General of the United States in
14
resisting plaintiff's claims, and for that reason asked no affirmative relief against any
party in the answer in intervention it filed. On the other hand, plaintiff in his original
complaint made no claim against the Republic and only asked for damages against it for
the use of the property when the complaint was amended. In its answer to the amended
complaint, the Republic "reproduced and incorporated by reference" all the affirmative
defenses contained in the answer of the defendant Attorney General, one of which, as
already stated, is that the lower court had no jurisdiction over the claim for rentals
because of lack of consent to be sued. Clearly, this is not a case where the state takes the
initiative in an action against a private party by filing a complaint in intervention, thereby
surrendering its privileged position and coming down to the level of the defendant — as
what happened in the case of Froilan vs. Pan Oriental Shipping Co., et al. 95 Phil., 905
cited by plaintiff — but one where the state, as one of the defendants merely resisted a
claim against it precisely on the ground, among others, of its privileged position which
exempts it from suit..
With respect to the recovery or return of the properties vested, section 33 of the Trading
with the Enemy Act, as amended, provides:
SEC. 33. Return of property; notice; institution of suits, computation of time. —
No return may be made pursuant to section 9 or 32 unless notice of claim has
been filed: (a) in the case of any property or interest acquired by the United
States prior to December 18, 1941, by August 9, 1948; or (b) in the case of any
property or interest acquired by the United States on or after December 18,
1941, by April 30, 1949, or two years from the vesting of the property or
interest in respect of which the claim is made, whichever is later. No suit
pursuant to section 9 may be instituted after April 30, 1949, or after the
expiration of two years from the date of the seizure by or vesting in the Alien
Property Custodian, as the case may be, of the property or interest in respect of
which relief is sought, whichever is later, but in computing such two years there
shall be excluded any period during which there was pending a suit or claim for
return pursuant to section 9 or 32(a) hereof. (USCA, Tit. 50, App., p. 216.)
From the above provisions, it is evident that a condition precedent to a suit for the return
of property vested under the Trading with the Enemy Act is that it should be filed not
later than April 30, 1949, or within two years from the date of vesting, whichever is later,
but in computing such two years, the period during which there was pending a suit or
claim for the return of the said property pursuant to secs. 9 or 32(a) of the Act shall be
excluded. That limitation, as held in a case, is jurisdictional. (See Cisatlantic Corporation,
et al. vs. Brownell, Jr., Civil Code No. 8-221, U.S. District Court, Southern District, New
York, affirmed by the United States Court of Appeals, 2nd Circuit, May 11, 1955
(Docket No. 23499), annexed as appendices "D" and "E" in appellees' brief.) Such being
the case, it is evident that the court below erred in dismissing the complaint, at least
insofar as lots 3 and 4 of the land in dispute are concerned. These lots were vested only
on July 6, 1948 and consequently the two-year period within which to file the action for
their recovery expired on July 7, 1950. But in computing that the two-year period, the
time during which plaintiff's claim with the Philippine Alien Property Administration was
pending — from November 16, 1948 when the claim was filed to March 7, 1950 when it
was dissallowed — should be excluded. The complaint thereof filed on November 13,
1950 is well within the prescribed period. As a matter of fact, the Attorney General of the
United States concedes that the dismissal of the complaint with respect to these lots was
erroneous. Indeed, he states that he had never asked for the dismissal of the complaint
with respect to them because the complaint insofar as those properties were concerned
was filed within the period provided for in the law.
On the other hand, lots 1 and 2 were vested by the Alien Property Custodian on March
14, 1946. The two-year period, therefore, within which to file a suit for their return
expired on March 14, 1948. As no suit or claim for the return of said properties pursuant
to sections 9 or 32(a) of the Trading with the Enemy Act was filed by plaintiff within two
years from the date of vesting, the "later" date and the last on which suit could be brought
was April 30, 1949. The claim filed by plaintiff with the Philippine Alien Property
Administration on November 15, 1948 obviously could not toll the two-year period that
had already expired on March 14, 1948. And the complaint in the present case having
been filed only on November 13, 1950, the same is already barred. (Pass vs. McGrath,
192 F. 2d 415; Kroll vs. McGrath, 91 F. Supp. 173.) The lower court, therefore, had no
jurisdiction to entertain the action insofar as these lots are concerned.
Plaintiff contends that section 33 of the Trading with the Enemy Act cannot prevail over
section 40 of the Code of Civil Procedure, which provides that an action to recover real
property prescribes after 10 years, on the theory that under international law questions
relating to real property are governed by the law of the place where the property is
located and that prescription, being remedial, is likewise governed by the laws of the
forum. But the trading with the Enemy Act, by consent of the Philippine Government,
continued to be in force in the Philippines even after July 4, 1946 (Brownell, Jr., vs. Sun
Life Assurance Co. of Canada,* 50 Off. Gaz., 4814; Brownell, Jr. vs.Bautista, 95 Phil.,
853) and consequently, is as much part of the law of the land as section 40 of the Code of
Civil Procedure. Contrary to plaintiff's claim, therefore, there is here no conflict of laws
involved. It should be stated that in an action under the Trading with the Enemy Act for
the recovery of property vested thereunder, the rights of the parties must necessarily be
governed by the terms of that Act. Indeed, section 7 (c) thereof explicitly provides that
the relief available to a claimant of vested property is limited to those expressly provided
for by its terms.
Needless to say, the defense of limitation as contained in section 33 of Trading with the
Enemy Act, as amended, may be invoked not only by the defendant Attorney General of
the United States but also by the intervenor Republic of the Philippines to which the
lands in question were transferred. To sustain plaintiff's claim and preclude the Republic
from putting up that defense would render nugatory the provisions of the Act. For in such
case, a claimant who has failed to file his claim or suit within the period provided for in
section 33 of the Act and consequently has forfeited whatever right she may have therein,
could easily circumvent the law. It would also mean that the transfer of vested property to
the Republic would have the effect of permitting re-examination of the title to such
vested property which has already become absolute in the name of the United States, the
15
transferor, for failure of the claimant to assert his claim within the prescribed time. This
absurdity, to say the least, cannot be countenanced.
In view of the foregoing, the order appealed from insofar as it dismisses the complaint
with respect to Lots 1 and 2 and the claim for damages against the Attorney General of
the United States and the Republic of the Philippines, is affirmed, but revoked insofar as
it dismisses the complaint with respect to Lots 3 and 4, as to which the case is hereby
remanded to the court below for further proceedings. Without costs.
G.R. No. L-29993 October 23, 1978
LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN,
ALFONSO R. MAGSANOC, JESUS MACARANAS, MAXIMO MANANGAN,
FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all Members
of the Municipal Council of Malasiqui in 1959, Malasiqui, Pangasinan, petitioners,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA,
ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all
surnamed FONTANILLA, and THE HONORABLE COURT OF
APPEALS, respondents.
G.R. No. L-30183 October 23, 1978
MUNICIPALITY OF MALASIQUI, petitioner,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA,
ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all
surnamed FONTANILLA, and the Honorable COURT OF APPEALS, respondents.
Julian M. Armas, Assistant Provincial Fiscal for petitioners.
Isidro L. Padilla for respondents.
MUÑOZ PALMA, J.:
These Petitions for review present the issue of whether or not the celebration of a town
fiesta authorized by a municipal council under Sec. 2282 of the Municipal Law as
embodied in the Revised Administrative Code is a governmental or a corporate or
proprietary function of the municipality.
A resolution of that issue will lead to another, viz the civil liability for damages of the
Municipality of Malasiqui, and the members of the Municipal Council of Malasiqui,
province of Pangasinan, for a death which occurred during the celebration of the town
fiesta on January 22, 1959, and which was attributed to the negligence of the municipality
and its council members.
The following facts are not in dispute:
On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed
Resolution No. 159 whereby "it resolved to manage the 1959 Malasiqui town fiesta
celebration on January 21, 22, and 23, 1959." Resolution No. 182 was also passed
creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn
organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman.
the council appropriated the amount of P100.00 for the construction of 2 stages, one for
the "zarzuela" and another for the cancionan Jose Macaraeg supervised the construction
of the stage and as constructed the stage for the "zarzuela" was "5-½ meters by 8 meters
in size, had a wooden floor high at the rear and was supported by 24 bamboo posts — 4
in a row in front, 4 in the rear and 5 on each side — with bamboo braces." 1
The "zarzuela" entitled "Midas Extravaganza" was donated by an association of
Malasiqui employees of the Manila Railroad Company in Caloocan, Rizal. The troupe
arrived in the evening of January 22 for the performance and one of the members of the
group was Vicente Fontanilla. The program started at about 10:15 o'clock that evening
with some speeches, and many persons went up the stage. The "zarzuela" then began but
before the dramatic part of the play was reached, the stage collapsed and Vicente
Fontanilla who was at the rear of the stage was pinned underneath. Fontanilia was taken
to tile San Carlos General Hospital where he died in the afternoon of the following day.
The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of
Manila on September 11, 1959 to recover damages. Named party-defendants were the
Municipality of Malasiqui, the Municipal Council of Malasiqui and all the individual
members of the Municipal Council in 1959.
Answering the complaint defendant municipality invoked inter alia the principal defense
that as a legally and duly organized public corporation it performs sovereign functions
and the holding of a town fiesta was an exercise of its governmental functions from
which no liability can arise to answer for the negligence of any of its agents.
The defendant councilorsinturn maintained that they merely acted as agents of the
municipality in carrying out the municipal ordinance providing for the management of
the town fiesta celebration and as such they are likewise not liable for damages as the
undertaking was not one for profit; furthermore, they had exercised due care and
diligence in implementing the municipal ordinance. 2
After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or
not the defendants exercised due diligence 'm the construction of the stage. From his
findings he arrived at the conclusion that the Executive Committee appointed by the
municipal council had exercised due diligence and care like a good father of the family in
selecting a competent man to construct a stage strong enough for the occasion and that if
it collapsed that was due to forces beyond the control of the committee on entertainment,
consequently, the defendants were not liable for damages for the death of Vicente
Fontanilla. The complaint was accordingly dismissed in a decision dated July 10, 1962. 3
The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October
31, 1968, the Court of Appeals through its Fourth Division composed at the time of
16
Justices Salvador V. Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial
court's decision and ordered all the defendants-appellees to pay jointly and severally the
heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual damages:
P1200.00 its attorney's fees; and the costs. 4
The case is now before Us on various assignments of errors all of which center on the
proposition stated at the sentence of this Opinion and which We repeat:
Is the celebration of a town fiesta an undertaking in the excercise of a municipality's
governmental or public function or is it or a private or proprietary character?
1. Under Philippine laws municipalities are political bodies corporate and as such ag
endowed with the faculties of municipal corporations to be exercised by and through their
respective municipal governments in conformity with law, and in their proper corporate
name, they may inter alia sue and be sued, and contract and be contracted with. 5
The powers of a municipality are twofold in character public, governmental or political
on the one hand, and corporate, private, or proprietary on the other. Governmental
powers are those exercised by the corporation in administering the powers of the state
and promoting the public welfare and they include the legislative, judicial public, and
political Municipal powers on the other hand are exercised for the special benefit and
advantage of the community and include those which are ministerial private and
corporate. 6
As to when a certain activity is governmental and when proprietary or private, that is
generally a difficult matter to determine. The evolution of the municipal law in American
Jurisprudence, for instance, has shown that; none of the tests which have evolved and are
stated in textbooks have set down a conclusive principle or rule, so that each case will
have to be determined on the basis of attending circumstances.
In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal
corporation proper has ... a public character as regards the state at large insofar as it is its
agent in government, and private (so-called) insofar as it is to promote local necessities
and conveniences for its own community. 7
Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme
Court of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity, and their functions are two fold.
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 the 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 in. individual capacity, and not for the
state or sovereign power. (112 N. E 994-995)
In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through
Justice Grant T. Trent, relying mainly on American Jurisprudence classified certain
activities of the municipality as governmental, e.g.: regulations against fire, disease,
preservation of public peace, maintenance of municipal prisons, establishment of schools,
post-offices, etc. while the following are corporate or proprietary in character, viz:
municipal waterwork, slaughter houses, markets, stables, bathing establishments,
wharves, ferries, and fisheries. 8 Maintenance of parks, golf courses, cemeteries and
airports among others, are also recognized as municipal or city activities of a proprietary
character. 9
2. This distinction of powers becomes important for purposes of determining the liability
of the municipality for the acts of its agents which result in an injury to third persons.
If the injury is caused in the course of the performance of a governmental function or
duty no recovery, as a rule, can be. had from the municipality unless there is an existing
statute on the matter, 10 nor from its officers, so long as they performed their duties
honestly and in good faith or that they did not act wantonly and
maliciously. 11 In Palafox, et al., v. Province of IlocosNorte, et al., 1958, a truck driver
employed by the provincial government of IlocosNorte ran over ProcetoPalafox in the
course of his work at the construction of a road. The Supreme Court in affirming the trial
court's dismissal of the complaint for damages held that the province could not be made
liable because its employee was in the performance of a governmental function — the
construction and maintenance of roads — and however tragic and deplorable it may be,
the death of Palafox imposed on the province no duty to pay monetary consideration. 12
With respect to proprietary functions, the settled rule is that a municipal corporation can
be held liable to third persons ex contract 13 or ex delicto. 14
Municipal corporations are subject to be sued upon contracts and in tort. ...
xxxxxxxxx
The rule of law is a general one, that the superior or employer must answer
civilly for the negligence or want of skill of its agent or servant in the course or
fine of his employment, by which another, who is free from contributory fault,
is injured. Municipal corporations under the conditions herein stated, fall within
the operation of this rule of law, and are liable, accordingly, to civil actions for
damages when the requisite elements of liability co-exist. ... (Dillon on
Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de
Leon, supra. 514)
17
3. Coming to the cam before Us, and applying the general tests given above, We hold that
the ho of the town fiesta in 1959 by the municipality of MalsiquiPangasinan was an
exercise of a private or proprietary function of the municipality.
Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code
provides:
Section 2282. Celebration of fiesta. — fiesta may be held in each municipality
not oftener than once a year upon a date fixed by the municipal council A fiesta
s not be held upon any other date than that lawfully fixed therefor, except when,
for weighty reasons, such as typhoons, foundations, earthquakes, epidemics, or
other public ties, the fiesta cannot be hold in the date fixed in which case it may
be held at a later date in the same year, by resolution of the council.
This provision simply gives authority to the municipality to accelebrate a yearly fiesta but
it does not impose upon it a duty to observe one. Holding a fiesta even if the purpose is to
commemorate a religious or historical event of the town is in essence an act for the
special benefit of the community and not for the general welfare of the public performed
in pursuance of a policy of the state. The mere fact that the celebration, as claimed was
not to secure profit or gain but merely to provide entertainment to the town inhabitants is
not a conclusive test. For instance, the maintenance of parks is not a source of income for
the nonetheless it is private undertaking as distinguished from the maintenance of public
schools, jails, and the like which are for public service.
As stated earlier, there can be no hard and fast rule for purposes of determining the true
nature of an undertaking or function of a municipality; the surrounding circumstances of
a particular case are to be considered and will be decisive. The basic element, however
beneficial to the public the undertaking may be, is that it is governmental in essence,
otherwise. the function becomes private or proprietary in character. Easily, no
overnmental or public policy of the state is involved in the celebration of a town fiesta. 15
4. It follows that under the doctrine of respondent superior, petitioner-municipality is to
be held liable for damages for the death of Vicente Fontanilia if that was at- tributable to
the negligence of the municipality's officers, employees, or agents.
Art. 2176, Civil Code: Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done. . .
Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable
not only for one's own acts or omission, but also for those of persons for whom
one is responsible. . .
On this point, the Court of Appeals found and held that there was negligence.
The trial court gave credence to the testimony of Angel Novado, a witness of the
defendants (now petitioners), that a member of the "extravaganza troupe removed two
principal braces located on the front portion of the stage and u them to hang the screen or
"telon", and that when many people went up the stage the latter collapsed. This testimony
was not believed however by respondent appellate court, and rightly so. According to
said defendants, those two braces were "mother" or "principal" braces located semi-
diagonally from the front ends of the stage to the front posts of the ticket booth located at
the rear of the stage and were fastened with a bamboo twine. 16 That being the case, it
becomes incredible that any person in his right mind would remove those principal braces
and leave the front portion of the stage practically unsuported Moreover, if that did
happen, there was indeed negligence as there was lack of suspension over the use of the
stage to prevent such an occurrence.
At any rate, the guitarist who was pointed to by Novado as the person who removed the
two bamboo braces denied having done go. The Court of Appeals said "Amor by himself
alone could not have removed the two braces which must be about ten meters long and
fastened them on top of the stags for the curtain. The stage was only five and a half
meters wide. Surely, it, would be impractical and unwieldy to use a ten meter bamboo
pole, much more two poles for the stage curtain. 17
The appellate court also found that the stage was not strong enough considering that only
P100.00 was appropriate for the construction of two stages and while the floor of the
"zarzuela" stage was of wooden planks, the Post and braces used were of bamboo
material We likewise observe that although the stage was described by the Petitioners as
being supported by "24" posts, nevertheless there were only 4 in front, 4 at the rear, and 5
on each side. Where were the rest?
The Court of Appeals thus concluded
The court a quo itself attributed the collapse of the stage to the great number of
onlookers who mounted the stage. The municipality and/or its agents had the
necessary means within its command to prevent such an occurrence. Having
filed to take the necessary steps to maintain the safety of the stage for the use of
the participants in the stage presentation prepared in connection with the
celebration of the town fiesta, particularly, in preventing non participants or
spectators from mounting and accumulating on the stage which was not
constructed to meet the additional weight- the defendant-appellees were
negligent and are liable for the death of Vicente Fontanilla . (pp. 30-31, rollo, L-
29993)
The findings of the respondent appellate court that the facts as presented to it establish
negligence as a matter of law and that the Municipality failed to exercise the due
diligence of a good father of the family, will not disturbed by Us in the absence of a clear
showing of an abuse of discretion or a gross misapprehension of facts." 18
Liability rests on negligence which is "the want of such care as a person of ordinary
prudence would exercise under the circumstances of the case." 19
Thus, private respondents argue that the "Midas Extravaganza" which was to be
performed during the town fiesta was a "donation" offered by an association of Malasiqui
18
employees of the Manila Railroad Co. in Caloocan, and that when the Municipality of
Malasiqui accepted the donation of services and constructed precisely a "zarzuela stage"
for the purpose, the participants in the stage show had the right to expect that the
Municipality through its "Committee on entertainment and stage" would build or put up a
stage or platform strong enough to sustain the weight or burden of the performance and
take the necessary measures to insure the personal safety of the participants. 20 We agree.
Quite relevant to that argument is the American case of Sanders v. City of Long Beach,
1942, which was an action against the city for injuries sustained from a fall when plaintiff
was descending the steps of the city auditorium. The city was conducting a "Know your
City Week" and one of the features was the showing of a motion picture in the city
auditorium to which the general public was invited and plaintiff Sanders was one of those
who attended. In sustaining the award for Damages in favor of plaintiff, the District Court
of Appeal, Second district, California, heldinter alia that the "Know your City Week"
was a "proprietary activity" and not a "governmental one" of the city, that defendant
owed to plaintiff, an invitee the duty of exercising ordinary care for her safety, and
plaintiff was entitled to assume that she would not be exposed to a danger (which in this
case consisted of lack of sufficient illumination of the premises) that would come to her
through a violation of defendant duty. 21
We can say that the deceased Vicente Fontanilla was similarly situated as Sander The
Municipality of Malasiqui resolved to celebrate the town fiesta in January of 1959; it
created a committee in charge of the entertainment and stage; an association of Malasiqui
residents responded to the call for the festivities and volunteered to present a stage show;
Vicente Fontanilla was one of the participants who like Sanders had the right to expect
that he would be exposed to danger on that occasion.
Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the
c that it was Jose Macaraeg who constructed the stage. The municipality acting through
its municipal council appointed Macaraeg as chairman of the sub-committee on
entertainment and in charge of the construction of the "zarzuela" stage. Macaraeg acted
merely as an agent of the Municipality. Under the doctrine of respondent superior
mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting
within his assigned tasks. 22
... when it is sought to render a municipal corporation liable for the act of servants or
agents, a cardinal inquiry is, whether they are the servants or agents of the corporation. If
the corporation appoints or elects them, can control them in the discharge of their duties,
can continue or remove the can hold them responsible for the manner in which they
discharge their trust, and if those duties relate to the exercise of corporate powers, and are
for the benefit of the corporation in its local or special interest, they may justly be
regarded as its agents or servants, and the maxim of respondent superior applies." ...
(Dillon on Municipal Corporations, 5th Ed., Vol IV, p. 2879)
5. The remaining question to be resolved centers on the liability of the municipal
councilors who enacted the ordinance and created the fiesta committee.
The Court of Appeals held the councilors jointly and solidarity liable with the
municipality for damages under Article 27 of the Civil Code which provides that d any
person suffering ing material or moral loss because a public servant or employee refuses
or neglects, without just cause to perform his official duty may file an action for damages
and other relief at the latter. 23
In their Petition for review the municipal councilors allege that the Court of Appeals
erred in ruling that the holding of a town fiesta is not a governmental function and that
there was negligence on their part for not maintaining and supervising the safe use of the
stage, in applying Article 27 of the Civil Code against them and in not holding Jose
Macaraeg liable for the collapse of the stage and the consequent death of Vicente
Fontanilla. 24
We agree with petitioners that the Court of Appeals erred in applying Article 27 of the
Civil Code against the for this particular article covers a case of nonfeasance or non-
performance by a public officer of his official duty; it does not apply to a case of
negligence or misfeasance in carrying out an official duty.
If We are led to set aside the decision of the Court of Appeals insofar as these petitioners
are concerned, it is because of a plain error committed by respondent court which
however is not invoked in petitioners' brief.
In Miguel v.The Court of appeal. et al., the Court, through Justice, now Chief Justice,
Fred Ruiz Castro, held that the Supreme Court is vested with ample authority to review
matters not assigned as errors in an appeal if it finds that their consideration and
resolution are indispensable or necessary in arriving at a just decision in a given case, and
that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We believe that this
pronouncement can well be applied in the instant case.
The Court of Appeals in its decision now under review held that the celebration of a town
fiesta by the Municipality of Malasiqui was not a governmental function. We upheld that
ruling. The legal consequence thereof is that the Municipality stands on the same footing
as an ordinary private corporation with the municipal council acting as its board of
directors. It is an elementary principle that a corporation has a personality, separate and
distinct from its officers, directors, or persons composing it 26 and the latter are not as a
rule co-responsible in an action for damages for tort or negligence culpa aquilla
committed by the corporation's employees or agents unless there is a showing of bad faith
or gross or wanton negligence on their part. 27
xxxxxxxxx
The ordinary doctrine is that a director, merely by reason of his office, is not
personally Stable for the torts of his corporation; he Must be shown to have
personally voted for or otherwise participated in them ... Fletcher Encyclopedia
Corporations, Vol 3A Chapt 11, p. 207)
19

Officers of a corporation 'are not held liable for the negligence of the
corporation merely because of their official relation to it, but because of some
wrongful or negligent act by such officer amounting to a breach of duty which
resulted in an injury ... To make an officer of a corporation liable for the
negligence of the corporation there must have been upon his part such a breach
of duty as contributed to, or helped to bring about, the injury; that is to say, he
must be a participant in the wrongful act. ... (pp. 207-208, Ibid.)
xxxxxxxxx
Directors who merely employ one to give a fireworks Ambition on the
corporate are not personally liable for the negligent acts of the exhibitor. (p.
211, Ibid.)
On these people We absolve Use municipal councilors from any liability for the death of
Vicente Fontanilla. The records do not show that said petitioners directly participated in
the defective construction of the "zarzuela" stage or that they personally permitted
spectators to go up the platform.
6. One last point We have to resolve is on the award of attorney's fees by respondent
court. Petitioner-municipality assails the award.
Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation
may be granted when the court deems it just and equitable. In this case of Vicente
Fontanilla, although respondent appellate court failed to state the grounds for awarding
attorney's fees, the records show however that attempts were made by plaintiffs, now
private respondents, to secure an extrajudicial compensation from the municipality: that
the latter gave prorases and assurances of assistance but failed to comply; and it was only
eight month after the incident that the bereaved family of Vicente Fontanilla was
compelled to seek relief from the courts to ventilate what was believed to be a just
cause. 28
We hold, therefore, that there is no error committed in the grant of attorney's fees which
after all is a matter of judicial discretion. The amount of P1,200.00 is fair and reasonable.
PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals
insofar as the Municipality of Malasiqui is concerned (L-30183), and We absolve the
municipal councilors from liability and SET ASIDE the judgment against them (L-9993).
Without pronouncement as to costs.
SO ORDERED,
G.R. No. 206510 September 16, 2014
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST
REV. DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus of Caloocan, FRANCES
Q. QUIMPO, CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE, MARIA
CAROLINA P. ARAULLO, RENATO M. REYES, JR., Bagong Alyansang
Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna Partylist,
ROLAND G. SIMBULAN, PH.D., Junk VF A Movement, TERESITA R. PEREZ,
PH.D., HON. RAYMOND V. PALATINO, Kabataan Party-list, PETER SJ.
GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D., Agham, ELMER C.
LABOG, Kilusang Mayo Uno, JOAN MAY E. SALVADOR, Gabriela, JOSE
ENRIQUE A. AFRICA, THERESA A. CONCEPCION, MARY JOAN A. GUAN,
NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A.
RICE in his capacity as Commanding Officer of the USS Guardian, PRESIDENT
BENIGNO S. AQUINO III in his capacity as Commander-in-Chief of the Armed
Forces of the Philippines, HON. ALBERT F. DEL ROSARIO, Secretary,
pepartment of Foreign Affair.s, HON. PAQUITO OCHOA, JR.,
Executiv~.:Secretary, Office of the President, . HON. VOLTAIRE T. GAZMIN,
Secretary, Department of National Defense, HON. RAMON JESUS P. P AJE,
Secretary, Department of Environment and Natural Resoz!rces, VICE ADMIRAL
JOSE LUIS M. ALANO, Philippine Navy Flag Officer in Command, Armed Forces
of the Philippines, ADMIRAL RODOLFO D. ISO RENA, Commandant, Philippine
Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA, Philippine
Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of
Armed Forces of the Philippines Command and LT. GEN. TERRY G. ROBLING,
US Marine Corps Forces. Pacific and Balikatan 2013 Exercise Co-
Director, Respondents.
DECISION
VILLARAMA, JR, J.:
Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the issuance
of a Temporary Environmental Protection Order (TEPO) under Rule 7 of A.M. No. 09-6-
8-SC, otherwise known as the Rules of Procedure for Environmental Cases (Rules),
involving violations of environmental laws and regulations in relation to the grounding of
the US military ship USS Guardian over the Tubbataha Reefs.
Factual Background
The name "Tubbataha" came from the Samal (seafaring people of southern Philippines)
language which means "long reef exposed at low tide." Tubbataha is composed of two
huge coral atolls - the north atoll and the south atoll - and the Jessie Beazley Reef, a
smaller coral structure about 20 kilometers north of the atolls. The reefs of Tubbataha and
20
Jessie Beazley are considered part of Cagayancillo, a remote island municipality of
Palawan.1
In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation No.
306 issued by President Corazon C. Aquino on August 11, 1988. Located in the middle of
Central Sulu Sea, 150 kilometers southeast of Puerto Princesa City, Tubbataha lies at the
heart of the Coral Triangle, the global center of marine biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and
Cultural Organization (UNESCO) as a World Heritage Site. It was recognized as one of
the Philippines' oldest ecosystems, containing excellent examples of pristine reefs and a
high diversity of marine life. The 97,030-hectare protected marine park is also an
important habitat for internationally threatened and endangered marine species. UNESCO
cited Tubbataha's outstanding universal value as an important and significant natural
habitat for in situ conservation of biological diversity; an example representing
significant on-going ecological and biological processes; and an area of exceptional
natural beauty and aesthetic importance.2
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,3 otherwise known as
the "Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure the protection and
conservation of the globally significant economic, biological, sociocultural, educational
and scientific values of the Tubbataha Reefs into perpetuity for the enjoyment of present
and future generations." Under the "no-take" policy, entry into the waters of TRNP is
strictly regulated and many human activities are prohibited and penalized or fined,
including fishing, gathering, destroying and disturbing the resources within the TRNP.
The law likewise created the Tubbataha Protected Area Management Board (TPAMB)
which shall be the sole policy-making and permit-granting body of the TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In
December 2012, the US Embassy in the Philippines requested diplomatic clearance for
the said vessel "to enter and exit the territorial waters of the Philippines and to arrive at
the port of Subic Bay for the purpose of routine ship replenishment, maintenance, and
crew liberty."4 On January 6, 2013, the ship left Sasebo, Japan for Subic Bay, arriving on
January 13, 2013 after a brief stop for fuel in Okinawa, Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in
Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea, the
ship ran aground on the northwest side of South Shoal of the Tubbataha Reefs, about 80
miles east-southeast of Palawan. No cine was injured in the incident, and there have been
no reports of leaking fuel or oil.
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed
regret for the incident in a press statement.5 Likewise, US Ambassador to the Philippines
Harry K. Thomas, Jr., in a meeting at the Department of Foreign Affairs (DFA) on
February 4, "reiterated his regrets over the grounding incident and assured Foreign
Affairs Secretazy Albert F. del Rosario that the United States will provide appropriate
compensation for damage to the reef caused by the ship."6 By March 30, 2013, the US
Navy-led salvage team had finished removing the last piece of the grounded ship from
the coral reef.
On April 1 7, 2013, the above-named petitioners on their behalf and in representation of
their respective sector/organization and others, including minors or generations yet
unborn, filed the present petition agairtst Scott H. Swift in his capacity as Commander of
the US 7th Fleet, Mark A. Rice in his capacity as Commanding Officer of the USS
Guardian and Lt. Gen. Terry G. Robling, US Marine Corps Forces, Pacific and Balikatan
2013 Exercises Co-Director ("US respondents"); President Benigno S. Aquino III in his
capacity as Commander-in-Chief of the Armed Forces of the Philippines (AFP), DF A
Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa, Jr., Secretary
Voltaire T. Gazmin (Department of National Defense), Secretary Jesus P. Paje
(Department of Environment and Natural Resources), Vice-Admiral Jose Luis M. Alano
(Philippine Navy Flag Officer in Command, AFP), Admiral Rodolfo D. Isorena
(Philippine Coast Guard Commandant), Commodore Enrico Efren Evangelista
(Philippine Coast Guard-Palawan), and Major General Virgilio 0. Domingo (AFP
Commandant), collectively the "Philippine respondents."
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations of the USS
Guardian cause and continue to cause environmental damage of such magnitude as to
affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo, Negros Occidental,
Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-Tawi, which events
violate their constitutional rights to a balanced and healthful ecology. They also seek a
directive from this Court for the institution of civil, administrative and criminal suits for
acts committed in violation of environmental laws and regulations in connection with the
grounding incident.
Specifically, petitioners cite the following violations committed by US respondents under
R.A. No. 10067: unauthorized entry (Section 19); non-payment of conservation fees
(Section 21 ); obstruction of law enforcement officer (Section 30); damages to the reef
(Section 20); and destroying and disturbing resources (Section 26[g]). Furthermore,
petitioners assail certain provisions of the Visiting Forces Agreement (VFA) which they
want this Court to nullify for being unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the petition, to
wit: WHEREFORE, in view of the foregoing, Petitioners respectfully pray that the
Honorable Court: 1. Immediately issue upon the filing of this petition a Temporary
Environmental Protection Order (TEPO) and/or a Writ of Kalikasan, which shall, in
particular,
21
a. Order Respondents and any person acting on their behalf, to cease and desist
all operations over the Guardian grounding incident;
b. Initially demarcating the metes and bounds of the damaged area as well as an
additional buffer zone;
c. Order Respondents to stop all port calls and war games under 'Balikatan'
because of the absence of clear guidelines, duties, and liability schemes for
breaches of those duties, and require Respondents to assume responsibility for
prior and future environmental damage in general, and environmental damage
under the Visiting Forces Agreement in particular.
d. Temporarily define and describe allowable activities of ecotourism, diving,
recreation, and limited commercial activities by fisherfolk and indigenous
communities near or around the TRNP but away from the damaged site and an
additional buffer zone;
2. After summary hearing, issue a Resolution extending the TEPO until further
orders of the Court;
3. After due proceedings, render a Decision which shall include, without
limitation:
a. Order Respondents Secretary of Foreign Affairs, following the dispositive
portion of Nicolas v. Romulo, "to forthwith negotiate with the United States
representatives for the appropriate agreement on [environmental guidelines and
environmental accountability] under Philippine authorities as provided in Art.
V[] of the VFA ... "
b. Direct Respondents and appropriate agencies to commence administrative,
civil, and criminal proceedings against erring officers and individuals to the full
extent of the law, and to make such proceedings public;
c. Declare that Philippine authorities may exercise primary and exclusive
criminal jurisdiction over erring U.S. personnel under the circumstances of this
case;
d. Require Respondents to pay just and reasonable compensation in the
settlement of all meritorious claims for damages caused to the Tubbataha Reef
on terms and conditions no less severe than those applicable to other States, and
damages for personal injury or death, if such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of witnesses
and in the collection and production of evidence, including seizure and delivery
of objects connected with the offenses related to the grounding of the Guardian;
f. Require the authorities of the Philippines and the United States to notify each
other of the disposition of all cases, wherever heard, related to the grounding of
the Guardian;
g. Restrain Respondents from proceeding with any purported restoration, repair,
salvage or post salvage plan or plans, including cleanup plans covering the
damaged area of the Tubbataha Reef absent a just settlement approved by the
Honorable Court;
h. Require Respondents to engage in stakeholder and LOU consultations in
accordance with the Local Government Code and R.A. 10067;
i. Require Respondent US officials and their representatives to place a deposit
to the TRNP Trust Fund defined under Section 17 of RA 10067 as a bona .fide
gesture towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas affected by
the grounding of the Guardian in light of Respondents' experience in the Port
Royale grounding in 2009, among other similar grounding incidents;
k. Require Respondents to regularly publish on a quarterly basis and in the
name of transparency and accountability such environmental damage
assessment, valuation, and valuation methods, in all stages of negotiation;
l. Convene a multisectoral technical working group to provide scientific and
technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National Defense,
and the Department of Environment and Natural Resources to review the
Visiting Forces Agreement and the Mutual Defense Treaty to consider whether
their provisions allow for the exercise of erga omnes rights to a balanced and
healthful ecology and for damages which follow from any violation of those
rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for purposes
of protecting the damaged areas of TRNP;
o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction")
and Article VI of the Visiting Forces Agreement unconstitutional for violating
equal protection and/or for violating the preemptory norm of nondiscrimination
22
 incorporated as part of the law of the land under Section 2, Article II, of the
Philippine Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other
respects; and
4. Provide just and equitable environmental rehabilitation measures and such
other reliefs as are just and equitable under the premises. 7 (Underscoring
supplied.)
Since only the Philippine respondents filed their comment8 to the petition, petitioners also
filed a motion for early resolution and motion to proceed ex parte against the US
respondents.9
Respondents' Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO and ocular
inspection and production orders, respondents assert that: ( 1) the grounds relied upon for
the issuance of a TEPO or writ of Kalikasan have become fait accompli as the salvage
operations on the USS Guardian were already completed; (2) the petition is defective in
form and substance; (3) the petition improperly raises issues involving the VFA between
the Republic of the Philippines and the United States of America; and ( 4) the
determination of the extent of responsibility of the US Government as regards the
damage to the Tubbataha Reefs rests exdusively with the executive branch.
The Court's Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners to file the
present petition.
Locus standi is "a right of appearance in a court of justice on a given
question."10 Specifically, it is "a party's personal and substantial interest in a case where
he has sustained or will sustain direct injury as a result" of the act being challenged, and
"calls for more than just a generalized grievance."11 However, the rule on standing is a
procedural matter which this Court has relaxed for non-traditional plaintiffs like ordinary
citizens, taxpayers and legislators when the public interest so requires, such as when the
subject matter of the controversy is of transcendental importance, of overreaching
significance to society, or of paramount public interest. 12
In the landmark case of Oposa v. Factoran, Jr., 13 we recognized the "public right" of
citizens to "a balanced and healthful ecology which, for the first time in our constitutional
history, is solemnly incorporated in the fundamental law." We declared that the right to a
balanced and healthful ecology need not be written in the Constitution for it is assumed,
like other civil and polittcal rights guaranteed in the Bill of Rights, to exist from the
inception of mankind and it is an issue of transcendental importance with
intergenerational implications.1âwphi1 Such right carries with it the correlative duty to
refrain from impairing the environment.14
On the novel element in the class suit filed by the petitioners minors in Oposa, this Court
ruled that not only do ordinary citizens have legal standing to sue for the enforcement of
environmental rights, they can do so in representation of their own and future
generations. Thus:
Petitioners minors assert that they represent their generation as well as generations yet
unborn. We find no difficulty in ruling that they can, for themselves, for others of their
generation and for the succeeding generations, file a class suit. Their personality to sue in
behalf of the succeeding generations can only be based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful ecology is
concerned. Such a right, as hereinafter expounded, considers the "rhythm and harmony of
nature." Nature means the created world in its entirety. Such rhythm and harmony
indispensably include, inter alia, the judicious disposition, utilization, management,
renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife,
off-shore areas and other natural resources to the end that their exploration, development
and utilization be equitably accessible to the present a:: well as future generations.
Needless to say, every generation has a responsibility to the next to preserve that rhythm
and harmony for the full 1:njoyment of a balanced and healthful ecology. Put a little
differently, the minors' assertion of their right to a sound environment constitutes, at the
same time, the performance of their obligation to ensure the protection of that right for
the generations to come.15 (Emphasis supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to minors and
generations yet unborn, is now enshrined in the Rules which allows the filing of a citizen
suit in environmental cases. The provision on citizen suits in the Rules "collapses the
traditional rule on personal and direct interest, on the principle that humans are stewards
of nature."16
Having settled the issue of locus standi, we shall address the more fundamental question
of whether this Court has jurisdiction over the US respondents who did not submit any
pleading or manifestation in this case.
23
The immunity of the State from suit, known also as the doctrine of sovereign immunity or
non-suability of the State,17is expressly provided in Article XVI of the 1987 Constitution
which states:
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto,18 we discussed the principle of state
immunity from suit, as follows:
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. x x x.
Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this doctrine, as
accepted by the majority of states, such principles are deemed incorporated in the law of
every civilized state as a condition and consequence of its membership in the society of
nations. Upon its admission to such society, the state is automatically obligated to comply
with these principles in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the justification
given by Justice Holmes that ''there can be no legal right against the authority which
makes the law on which the right depends." [Kawanakoa v. Polybank, 205 U.S. 349]
There are other practical reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction, the added inhibition is
expressed in the maxim par in parem, non habet imperium. All states are sovereign equals
and cannot assert jurisdiction over one another. A contrary disposition would, in the
language of a celebrated case, "unduly vex the peace of nations." [De Haber v. Queen of
Portugal, 17 Q. B. 171]
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 not been
formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a situation, the state
may move to dismiss the comp.taint on the ground that it has been filed without its
consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh Amendment
which reads:
The Judicial power of the United States shall not be construed to extend to any suit in law
or equity, commenced or prosecuted against one of the United States by Citizens of
another State, or by Citizens or Subjects of any Foreign State.
In the case of Minucher v. Court of Appeals, 20 we further expounded on the immunity of
foreign states from the jurisdiction of local courts, as follows:
The precept that a State cannot be sued in the courts of a foreign state is a long-standing
rule of customary international law then closely identified with the personal immunity of
a foreign sovereign from suit and, with the emergence of democratic states, made to
attach not just to the person of the head of state, or his representative, but also distinctly
to the state itself in its sovereign capacity. If the acts giving rise to a suit arc those of a
foreign government done by its foreign agent, although not necessarily a diplomatic
personage, but acting in his official capacity, the complaint could be barred by the
immunity of the foreign sovereign from suit without its consent. Suing a representative of
a state is believed to be, in effect, suing the state itself. The proscription is not accorded
for the benefit of an individual but for the State, in whose service he is, under the maxim
-par in parem, non habet imperium -that all states are soverr~ign equals and cannot assert
jurisdiction over one another. The implication, in broad terms, is that if the judgment
against an official would rec 1uire the state itself to perform an affirmative act to satisfy
the award, such as the appropriation of the amount needed to pay the damages decreed
against him, the suit must be regarded as being against the state itself, although it has not
been formally impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity, the privilege
is not an immunity from the observance of the law of the territorial sovereign or from
ensuing legal liability; it is, rather, an immunity from the exercise of territorial
jurisdiction.22
In United States of America v. Judge Guinto,23 one of the consolidated cases therein
involved a Filipino employed at Clark Air Base who was arrested following a buy-bust
operation conducted by two officers of the US Air Force, and was eventually dismissed
from his employment when he was charged in court for violation of R.A. No. 6425. In a
complaint for damages filed by the said employee against the military officers, the latter
moved to dismiss the case on the ground that the suit was against the US Government
which had not given its consent. The RTC denied the motion but on a petition for
certiorari and prohibition filed before this Court, we reversed the RTC and dismissed the
complaint. We held that petitioners US military officers were acting in the exercise of
their official functions when they conducted the buy-bust operation against the
complainant and thereafter testified against him at his trial. It follows that for discharging
their duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued.
This traditional rule of State immunity which exempts a State from being sued in the
courts of another State without the former's consent or waiver has evolved into a
24
restrictive doctrine which distinguishes sovereign and governmental acts (Jure imperil")
from private, commercial and proprietary acts (Jure gestionis). Under the restrictive rule
of State immunity, State immunity extends only to acts Jure imperii. The restrictive
application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic
affairs.24
In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity
principle, thus:
It is a different matter where the public official is made to account in his capacity as such
for acts contrary to law and injurious to the rights of plaintiff. As was clearly set forth by
JustiGe Zaldivar in Director of the Bureau of Telecommunications, et al. vs. Aligaen,
etc., et al. : "Inasmuch as the State authorizes only legal acts by its officers, unauthorized
acts of government officials or officers are not acts of the State, and an action against the
officials or officers by one whose rights have been invaded or violated by such acts, for
the protection of his rights, is not a suit against the State within the rule of immunity of
the State from suit. In the same tenor, it has been said that an action at law or suit in
equity against a State officer or the director of a State department on the ground that,
while claiming to act for the State, he violates or invades the personal and property rights
of the plaintiff, under an unconstitutional act or under an assumption of authority which
he does not have, is not a suit against the State within the constitutional provision that the
State may not be sued without its consent." The rationale for this ruling is that the
doctrine of state immunity cannot be used as an instrument for perpetrating an injustice.
xxxx
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. 26 (Emphasis supplied.) In this case, the
US respondents were sued in their official capacity as commanding officers of the US
Navy who had control and supervision over the USS Guardian and its crew. The alleged
act or omission resulting in the unfortunate grounding of the USS Guardian on the TRNP
was committed while they we:re performing official military duties. Considering that the
satisfaction of a judgment against said officials will require remedial actions and
appropriation of funds by the US government, the suit is deemed to be one against the US
itself. The principle of State immunity therefore bars the exercise of jurisdiction by this
Court over the persons of respondents Swift, Rice and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the position
that the conduct of the US in this case, when its warship entered a restricted area in
violation of R.A. No. 10067 and caused damage to the TRNP reef system, brings the
matter within the ambit of Article 31 of the United Nations Convention on the Law of the
Sea (UNCLOS). He explained that while historically, warships enjoy sovereign immunity
from suit as extensions of their flag State, Art. 31 of the UNCLOS creates an exception to
this rule in cases where they fail to comply with the rules and regulations of the coastal
State regarding passage through the latter's internal waters and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the UNCLOS, as a
matter of long-standing policy the US considers itself bound by customary international
rules on the "traditional uses of the oceans" as codified in UNCLOS, as can be gleaned
from previous declarations by former Presidents Reagan and Clinton, and the US
judiciary in the case of United States v. Royal Caribbean Cruise Lines, Ltd. 27
The international law of the sea is generally defined as "a body of treaty rules arid
customary norms governing the uses of the sea, the exploitation of its resources, and the
exercise of jurisdiction over maritime regimes. It is a branch of public international law,
regulating the relations of states with respect to the uses of the oceans."28 The UNCLOS
is a multilateral treaty which was opened for signature on December 10, 1982 at Montego
Bay, Jamaica. It was ratified by the Philippines in 1984 but came into force on November
16, 1994 upon the submission of the 60th ratification.
The UNCLOS is a product of international negotiation that seeks to balance State
sovereignty (mare clausum) and the principle of freedom of the high seas (mare
liberum).29 The freedom to use the world's marine waters is one of the oldest customary
principles of international law.30 The UNCLOS gives to the coastal State sovereign rights
in varying degrees over the different zones of the sea which are: 1) internal waters, 2)
territorial sea, 3) contiguous zone, 4) exclusive economic zone, and 5) the high seas. It
also gives coastal States more or less jurisdiction over foreign vessels depending on
where the vessel is located.31
Insofar as the internal waters and territorial sea is concerned, the Coastal State exercises
sovereignty, subject to the UNCLOS and other rules of international law. Such
sovereignty extends to the air space over the territorial sea as well as to its bed and
subsoil.32
In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy
sovereign immunity subject to the following exceptions:
Article 30
Non-compliance by warships with the laws and regulations of the coastal State
If any warship does not comply with the laws and regulations of the coastal State
concerning passage through the territorial sea and disregards any request for compliance
25
therewith which is made to it, the coastal State may require it to leave the territorial sea
immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
The flag State shall bear international responsibility for any loss or damage to the coastal
State resulting from the non-compliance by a warship or other government ship operated
for non-commercial purposes with the laws and regulations of the coastal State
concerning passage through the territorial sea or with the provisions of this Convention or
other rules of international law.
Article 32
Immunities of warships and other government ships operated for non-commercial
purposes
With such exceptions as are contained in subsection A and in articles 30 and 31, nothing
in this Convention affects the immunities of warships and other government ships
operated for non-commercial purposes. (Emphasis supplied.) A foreign warship's
unauthorized entry into our internal waters with resulting damage to marine resources is
one situation in which the above provisions may apply. But what if the offending warship
is a non-party to the UNCLOS, as in this case, the US?
An overwhelming majority - over 80% -- of nation states are now members of UNCLOS,
but despite this the US, the world's leading maritime power, has not ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and drafting,
the U.S. delegation ultimately voted against and refrained from signing it due to concerns
over deep seabed mining technology transfer provisions contained in Part XI. In a
remarkable, multilateral effort to induce U.S. membership, the bulk of UNCLOS member
states cooperated over the succeeding decade to revise the objection.able provisions. The
revisions satisfied the Clinton administration, which signed the revised Part XI
implementing agreement in 1994. In the fall of 1994, President Clinton transmitted
UNCLOS and the Part XI implementing agreement to the Senate requesting its advice
and consent. Despite consistent support from President Clinton, each of his successors,
and an ideologically diverse array of stakeholders, the Senate has since withheld the
consent required for the President to internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the
108th and 110th Congresses, its progress continues to be hamstrung by significant
pockets of political ambivalence over U.S. participation in international institutions. Most
recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting out"
UNCLOS for full Senate consideration among his highest priorities. This did not occur,
and no Senate action has been taken on UNCLOS by the 112th Congress. 34
Justice Carpio invited our attention to the policy statement given by President Reagan on
March 10, 1983 that the US will "recognize the rights of the other , states in the waters
off their coasts, as reflected in the convention [UNCLOS], so long as the rights and
freedom of the United States and others under international law are recognized by such
coastal states", and President Clinton's reiteration of the US policy "to act in a manner
consistent with its [UNCLOS] provisions relating to traditional uses of the oceans and to
encourage other countries to do likewise." Since Article 31 relates to the "traditional uses
of the oceans," and "if under its policy, the US 'recognize[s] the rights of the other states
in the waters off their coasts,"' Justice Carpio postulates that "there is more reason to
expect it to recognize the rights of other states in their internal waters, such as the Sulu
Sea in this case."
As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal to
join the UN CLOS was centered on its disagreement with UN CLOS' regime of deep
seabed mining (Part XI) which considers the oceans and deep seabed commonly owned
by mankind," pointing out that such "has nothing to do with its [the US'] acceptance of
customary international rules on navigation."
It may be mentioned that even the US Navy Judge Advocate General's Corps publicly
endorses the ratification of the UNCLOS, as shown by the following statement posted on
its official website:
The Convention is in the national interest of the United States because it establishes
stable maritime zones, including a maximum outer limit for territorial seas; codifies
innocent passage, transit passage, and archipelagic sea lanes passage rights; works
against "jurisdictiomtl creep" by preventing coastal nations from expanding their own
maritime zones; and reaffirms sovereign immunity of warships, auxiliaries anJ
government aircraft.
xxxx
Economically, accession to the Convention would support our national interests by
enhancing the ability of the US to assert its sovereign rights over the resources of one of
the largest continental shelves in the world. Further, it is the Law of the Sea Convention
that first established the concept of a maritime Exclusive Economic Zone out to 200
nautical miles, and recognized the rights of coastal states to conserve and manage the
natural resources in this Zone.35
We fully concur with Justice Carpio's view that non-membership in the UNCLOS does
not mean that the US will disregard the rights of the Philippines as a Coastal State over
its internal waters and territorial sea. We thus expect the US to bear "international
responsibility" under Art. 31 in connection with the USS Guardian grounding which
26
adversely affected the Tubbataha reefs. Indeed, it is difficult to imagine that our long-
time ally and trading partner, which has been actively supporting the country's efforts to
preserve our vital marine resources, would shirk from its obligation to compensate the
damage caused by its warship while transiting our internal waters. Much less can we
comprehend a Government exercising leadership in international affairs, unwilling to
comply with the UNCLOS directive for all nations to cooperate in the global task to
protect and preserve the marine environment as provided in Article 197, viz:
Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional basis, directly
or through competent international organizations, in formulating and elaborating
international rules, standards and recommended practices and procedures consistent with
this Convention, for the protection and preservation of the marine environment, taking
into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is beyond
dispute. Although the said treaty upholds the immunity of warships from the jurisdiction
of Coastal States while navigating the.latter's territorial sea, the flag States shall be
required to leave the territorial '::;ea immediately if they flout the laws and regulations of
the Coastal State, and they will be liable for damages caused by their warships or any
other government vessel operated for non-commercial purposes under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the US have
statutorily waived their immunity to any action. Even under the common law tort claims,
petitioners asseverate that the US respondents are liable for negligence, trespass and
nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops and
personnel visiting the Philippines to promote "common security interests" between the
US and the Philippines in the region. It provides for the guidelines to govern such visits
of military personnel, and further defines the rights of the United States and the
Philippine government in the matter of criminal jurisdiction, movement of vessel and
aircraft, importation and exportation of equipment, materials and supplies. 36 The
invocation of US federal tort laws and even common law is thus improper considering
that it is the VF A which governs disputes involving US military ships and crew
navigating Philippine waters in pursuance of the objectives of the agreement.
As it is, the waiver of State immunity under the VF A pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for issuance of a
writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of the Rules that a
criminal case against a person charged with a violation of an environmental law is to be
filed separately:
SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the
writ of kalikasan shall not preclude the filing of separate civil, criminal or administrative
actions.
In any case, it is our considered view that a ruling on the application or non-application
of criminal jurisdiction provisions of the VF A to US personnel who may be found
responsible for the grounding of the USS Guardian, would be premature and beyond the
province of a petition for a writ of Kalikasan. We also find it unnecessary at this point to
determine whether such waiver of State immunity is indeed absolute. In the same vein,
we cannot grant damages which have resulted from the violation of environmental laws.
The Rules allows the recovery of damages, including the collection of administrative
fines under R.A. No. 10067, in a separate civil suit or that deemed instituted with the
criminal action charging the same violation of an environmental law.37
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for issuance
of a writ of Kalikasan, to wit:
SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for
decision, the court shall render judgment granting or denying the privilege of the writ of
kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing acts
or neglecting the performance of a duty in violation of environmental laws
resulting in environmental destruction or damage;
(b) Directing the respondent public official, govemment agency, private person
or entity to protect, preserve, rehabilitate or restore the environment;
(c) Directing the respondent public official, government agency, private person
or entity to monitor strict compliance with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private
person or entity to make periodic reports on the execution of the final judgment;
and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection, preservation, rehabilitation or restoration
of the environment, except the award of damages to individual petitioners.
(Emphasis supplied.)
27
We agree with respondents (Philippine officials) in asserting that this petition has become
moot in the sense that the salvage operation sought to be enjoined or restrained had
already been accomplished when petitioners sought recourse from this Court. But insofar
as the directives to Philippine respondents to protect and rehabilitate the coral reef stn
icture and marine habitat adversely affected by the grounding incident are concerned,
petitioners are entitled to these reliefs notwithstanding the completion of the removal of
the USS Guardian from the coral reef. However, we are mindful of the fact that the US
and Philippine governments both expressed readiness to negotiate and discuss the matter
of compensation for the damage caused by the USS Guardian. The US Embassy has also
declared it is closely coordinating with local scientists and experts in assessing the extent
of the damage and appropriate methods of rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by the Rules.
As can be gleaned from the following provisions, mediation and settlement are available
for the consideration of the parties, and which dispute resolution methods are encouraged
by the court, to wit:
RULE3 x x x x
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall
inquire from the parties if they have settled the dispute; otherwise, the court shall
immediately refer the parties or their counsel, if authorized by their clients, to the
Philippine Mediation Center (PMC) unit for purposes of mediation. If not available, the
court shall refer the case to the clerk of court or legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days from
receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the expiration of the
30-day period.
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the court may
refer the case to the branch clerk of court for a preliminary conference for the following
purposes:
(a) To assist the parties in reaching a settlement;
xxxx
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their
counsels under oath, and they shall remain under oath in all pre-trial conferences.
The judge shall exert best efforts to persuade the parties to arrive at a settlement of the
dispute. The judge may issue a consent decree approving the agreement between the
parties in accordance with law, morals, public order and public policy to protect the right
of the people to a balanced and healthful ecology.
xxxx
SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to
compromise or settle in accordance with law at any stage of the proceedings before
rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guided-missile
cruiser, the USS Port Royal, ran aground about half a mile off the Honolulu Airport Reef
Runway and remained stuck for four days. After spending $6.5 million restoring the coral
reef, the US government was reported to have paid the State of Hawaii $8.5 million in
settlement over coral reef damage caused by the grounding. 38
To underscore that the US government is prepared to pay appropriate compensation for
the damage caused by the USS Guardian grounding, the US Embassy in the Philippines
has announced the formation of a US interdisciplinary scientific team which will "initiate
discussions with the Government of the Philippines to review coral reef rehabilitation
options in Tubbataha, based on assessments by Philippine-based marine scientists." The
US team intends to "help assess damage and remediation options, in coordination with
the Tubbataha Management Office, appropriate Philippine government entities, non-
governmental organizations, and scientific experts from Philippine universities." 39
A rehabilitation or restoration program to be implemented at the cost of the violator is
also a major relief that may be obtained under a judgment rendered in a citizens' suit
under the Rules, viz:
RULES
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of the
environment and the payment of attorney's fees, costs of suit and other litigation
expenses. It may also require the violator to submit a program of rehabilitation or
restoration of the environment, the costs of which shall be borne by the violator, or to
contribute to a special trust fund for that purpose subject to the control of the
court.1âwphi1
In the light of the foregoing, the Court defers to the Executive Branch on the matter of
compensation and rehabilitation measures through diplomatic channels. Resolution of
these issues impinges on our relations with another State in the context of common
security interests under the VFA. It is settled that "[t]he conduct of the foreign relations
28
of our government is committed by the Constitution to the executive and legislative-"the
political" --departments of the government, and the propriety of what may be done in the
exercise of this political power is not subject to judicial inquiry or decision." 40
On the other hand, we cannot grant the additional reliefs prayed for in the petition to
order a review of the VFA and to nullify certain immunity provisions thereof.
As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora, 41 the VFA
was duly concurred in by the Philippine Senate and has been recognized as a treaty by the
United States as attested and certified by the duly authorized representative of the United
States government. The VF A being a valid and binding agreement, the parties are
required as a matter of international law to abide by its terms and provisions. 42 The
present petition under the Rules is not the proper remedy to assail the constitutionality of
its provisions. WHEREFORE, the petition for the issuance of the privilege of the Writ of
Kalikasan is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 101949 December 1, 1994
THE HOLY SEE, petitioner,
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional
Trial Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES,
INC., respondents.
Padilla Law Office for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse
and set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional
Trial Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint
in Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion
for reconsideration of the June 20,1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome,
Italy, and is represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged
in the real estate business.
This petition arose from a controversy over a parcel of land consisting of 6,000 square
meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of
Parañaque, Metro Manila and registered in the name of petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer
Certificates of Title Nos. 271108 and 265388 respectively and registered in the name of
the Philippine Realty Corporation (PRC).
The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting
as agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent, a
dispute arose as to who of the parties has the responsibility of evicting and clearing the
land of squatters. Complicating the relations of the parties was the sale by petitioner of
Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).
I
On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land,
and specific performance and damages against petitioner, represented by the Papal
Nuncio, and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and
Tropicana (Civil Case No.
90-183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of
petitioner and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price
of P1,240.00 per square meters; (2) the agreement to sell was made on the condition that
earnest money of P100,000.00 be paid by Licup to the sellers, and that the sellers clear
the said lots of squatters who were then occupying the same; (3) Licup paid the earnest
money to Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the
property to private respondent and informed the sellers of the said assignment; (5)
thereafter, private respondent demanded from Msgr. Cirilos that the sellers fulfill their
undertaking and clear the property of squatters; however, Msgr. Cirilos informed private
respondent of the squatters' refusal to vacate the lots, proposing instead either that private
respondent undertake the eviction or that the earnest money be returned to the latter; (6)
private respondent counterproposed that if it would undertake the eviction of the
squatters, the purchase price of the lots should be reduced from P1,240.00 to P1,150.00
29
per square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote
private respondent giving it seven days from receipt of the letter to pay the original
purchase price in cash; (8) private respondent sent the earnest money back to the sellers,
but later discovered that on March 30, 1989, petitioner and the PRC, without notice to
private respondent, sold the lots to Tropicana, as evidenced by two separate Deeds of
Sale, one over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer
certificate of title over the lots were cancelled, transferred and registered in the name of
Tropicana; (9) Tropicana induced petitioner and the PRC to sell the lots to it and thus
enriched itself at the expense of private respondent; (10) private respondent demanded
the rescission of the sale to Tropicana and the reconveyance of the lots, to no avail; and
(11) private respondent is willing and able to comply with the terms of the contract to sell
and has actually made plans to develop the lots into a townhouse project, but in view of
the sellers' breach, it lost profits of not less than P30,000.000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between
petitioner and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance
of the lots in question; (3) specific performance of the agreement to sell between it and
the owners of the lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint
— petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr.
Cirilos for being an improper party. An opposition to the motion was filed by private
respondent.
On June 20, 1991, the trial court issued an order denying, among others, petitioner's
motion to dismiss after finding that petitioner "shed off [its] sovereign immunity by
entering into the business contract in question" (Rollo, pp. 20-21).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual
Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate the
determination of its defense of sovereign immunity, petitioner prayed that a hearing be
conducted to allow it to establish certain facts upon which the said defense is based.
Private respondent opposed this motion as well as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the motion
for reconsideration until after trial on the merits and directing petitioner to file its answer
(Rollo, p. 22).
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the
privilege of sovereign immunity only on its own behalf and on behalf of its official
representative, the Papal Nuncio.
On December 9, 1991, a Motion for Intervention was filed before us by the Department
of Foreign Affairs, claiming that it has a legal interest in the outcome of the case as
regards the diplomatic immunity of petitioner, and that it "adopts by reference, the
allegations contained in the petition of the Holy See insofar as they refer to arguments
relative to its claim of sovereign immunity from suit" (Rollo, p. 87).
Private respondent opposed the intervention of the Department of Foreign Affairs. In
compliance with the resolution of this Court, both parties and the Department of Foreign
Affairs submitted their respective memoranda.
II
A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question
the order denying petitioner's motion to dismiss. The general rule is that an order denying
a motion to dismiss is not reviewable by the appellate courts, the remedy of the movant
being to file his answer and to proceed with the hearing before the trial court. But the
general rule admits of exceptions, and one of these is when it is very clear in the records
that the trial court has no alternative but to dismiss the complaint (Philippine National
Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216
SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to require
the parties to undergo the rigors of a trial.
The other procedural question raised by private respondent is the personality or legal
interest of the Department of Foreign Affairs to intervene in the case in behalf of the
Holy See (Rollo, pp. 186-190).
In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the
state where it is sued to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If the
Secretary of State finds that the defendant is immune from suit, he, in turn, asks the
Attorney General to submit to the court a "suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the Foreign Office issues a
certification to that effect instead of submitting a "suggestion" (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to
the courts varies. In International Catholic Migration Commission v. Calleja, 190 SCRA
130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of
Labor and Employment, informing the latter that the respondent-employer could not be
30
sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino,
48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to
that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of
Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of
the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent
Judge. The Solicitor General embodied the "suggestion" in a Manifestation and
Memorandum as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal
Affairs moved with this Court to be allowed to intervene on the side of petitioner. The
Court allowed the said Department to file its memorandum in support of petitioner's
claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50
[1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States
of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the
foreign states bypass the Foreign Office, the courts can inquire into the facts and make
their own determination as to the nature of the acts and transactions involved.
III
The burden of the petition is that respondent trial court has no jurisdiction over petitioner,
being a foreign state enjoying sovereign immunity. On the other hand, private respondent
insists that the doctrine of non-suability is not anymore absolute and that petitioner has
divested itself of such a cloak when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and
he, as the Holy See, was considered a subject of International Law. With the loss of the
Papal States and the limitation of the territory under the Holy See to an area of 108.7
acres, the position of the Holy See in International Law became controversial (Salonga
and Yap, Public International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized
the exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City.
It also recognized the right of the Holy See to receive foreign diplomats, to send its own
diplomats to foreign countries, and to enter into treaties according to International Law
(Garcia, Questions and Problems In International Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations" (O'Connell, I
International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested
that the treaty created two international persons — the Holy See and Vatican City
(Salonga and Yap, supra, 37).
The Vatican City fits into none of the established categories of states, and the attribution
to it of "sovereignty" must be made in a sense different from that in which it is applied to
other states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37
[1991]). In a community of national states, the Vatican City represents an entity
organized not for political but for ecclesiastical purposes and international objects.
Despite its size and object, the Vatican City has an independent government of its own,
with the Pope, who is also head of the Roman Catholic Church, as the Holy See or Head
of State, in conformity with its traditions, and the demands of its mission in the world.
Indeed, the world-wide interests and activities of the Vatican City are such as to make it
in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of
International Law 160 [1956]).
One authority wrote that the recognition of the Vatican City as a state has significant
implication — that it is possible for any entity pursuing objects essentially different from
those pursued by states to be invested with international personality (Kunz, The Status of
the Holy See in International Law, 46 The American Journal of International Law 308
[1952]).
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as
the Holy See and not in the name of the Vatican City, one can conclude that in the Pope's
own view, it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See the status of a foreign
sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic
representations with the Philippine government since 1957 (Rollo, p. 87). This appears to
be the universal practice in international relations.
B. Sovereign Immunity
31
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the
generally accepted principles of International Law. Even without this affirmation, such
principles of International Law are deemed incorporated as part of the law of the land as a
condition and consequence of our admission in the society of nations (United States of
America v. Guinto, 182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another sovereign. According to the newer
or restrictive theory, the immunity of the sovereign is recognized only with regard to
public acts or acts jure imperii of a state, but not with regard to private acts or acts jure
gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-
Santiago, Public International Law 194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States passed
the Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as
"either a regular course of commercial conduct or a particular commercial transaction or
act." Furthermore, the law declared that the "commercial character of the activity shall be
determined by reference to the nature of the course of conduct or particular transaction or
act, rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an
Act to Provide For State Immunity in Canadian Courts. The Act defines a "commercial
activity" as any particular transaction, act or conduct or any regular course of conduct
that by reason of its nature, is of a "commercial character."
The restrictive theory, which is intended to be a solution to the host of problems
involving the issue of sovereign immunity, has created problems of its own. Legal
treatises and the decisions in countries which follow the restrictive theory have difficulty
in characterizing whether a contract of a sovereign state with a private party is an act jure
gestionis or an act jure imperii.
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions.
This is particularly true with respect to the Communist states which took control of
nationalized business activities and international trading.
This Court has considered the following transactions by a foreign state with private
parties as acts jure imperii: (1) the lease by a foreign government of apartment buildings
for use of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of
public bidding for the repair of a wharf at a United States Naval Station (United States of
America v. Ruiz, supra.); and (3) the change of employment status of base employees
(Sanders v. Veridiano, 162 SCRA 88 [1988]).
On the other hand, this Court has considered the following transactions by a foreign state
with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop
at the John Hay Air Station in Baguio City, to cater to American servicemen and the
general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the
bidding for the operation of barber shops in Clark Air Base in Angeles City (United
States of America v. Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and
other facilities open to the general public is undoubtedly for profit as a commercial and
not a governmental activity. By entering into the employment contract with the cook in
the discharge of its proprietary function, the United States government impliedly divested
itself of its sovereign immunity from suit.
In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own
guidelines, tentative they may be.
Certainly, the mere entering into a contract by a foreign state with a private party cannot
be the ultimate test. Such an act can only be the start of the inquiry. The logical question
is whether the foreign state is engaged in the activity in the regular course of business. If
the foreign state is not engaged regularly in a business or trade, the particular act or
transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity,
or an incident thereof, then it is an act jure imperii, especially when it is not undertaken
for gain or profit.
As held in United States of America v. Guinto, (supra):
There is no question that the United States of America, like any other
state, will be deemed to have impliedly waived its non-suability if it
has entered into a contract in its proprietary or private capacity. It is
only when the contract involves its sovereign or governmental
capacity that no such waiver may be implied.
In the case at bench, if petitioner has bought and sold lands in the ordinary course of a
real estate business, surely the said transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A
were made for profit but claimed that it acquired said property for the site of its mission
or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said
claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The right of a foreign
sovereign to acquire property, real or personal, in a receiving state, necessary for the
creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna
32
Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the
Philippine Senate and entered into force in the Philippines on November 15, 1965.
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil
and administrative jurisdiction of the receiving state over any real action relating to
private immovable property situated in the territory of the receiving state which the
envoy holds on behalf of the sending state for the purposes of the mission. If this
immunity is provided for a diplomatic envoy, with all the more reason should immunity
be recognized as regards the sovereign itself, which in this case is the Holy See.
The decision to transfer the property and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters
living thereon made it almost impossible for petitioner to use it for the purpose of the
donation. The fact that squatters have occupied and are still occupying the lot, and that
they stubbornly refuse to leave the premises, has been admitted by private respondent in
its complaint (Rollo, pp. 26, 27).
The issue of petitioner's non-suability can be determined by the trial court without going
to trial in the light of the pleadings, particularly the admission of private respondent.
Besides, the privilege of sovereign immunity in this case was sufficiently established by
the Memorandum and Certification of the Department of Foreign Affairs. As the
department tasked with the conduct of the Philippines' foreign relations (Administrative
Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally
intervened in this case and officially certified that the Embassy of the Holy See is a duly
accredited diplomatic mission to the Republic of the Philippines exempt from local
jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic
mission or embassy in this country (Rollo, pp. 156-157). The determination of the
executive arm of government that a state or instrumentality is entitled to sovereign or
diplomatic immunity is a political question that is conclusive upon the courts
(International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where
the plea of immunity is recognized and affirmed by the executive branch, it is the duty of
the courts to accept this claim so as not to embarrass the executive arm of the government
in conducting the country's foreign relations (World Health Organization v. Aquino, 48
SCRA 242 [1972]). As in International Catholic Migration Commission and in World
Health Organization, we abide by the certification of the Department of Foreign Affairs.
Ordinarily, the procedure would be to remand the case and order the trial court to conduct
a hearing to establish the facts alleged by petitioner in its motion. In view of said
certification, such procedure would however be pointless and unduly circuitous (Ortigas
& Co. Ltd. Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).
IV
Private respondent is not left without any legal remedy for the redress of its grievances.
Under both Public International Law and Transnational Law, a person who feels
aggrieved by the acts of a foreign sovereign can ask his own government to espouse his
cause through diplomatic channels.
Private respondent can ask the Philippine government, through the Foreign Office, to
espouse its claims against the Holy See. Its first task is to persuade the Philippine
government to take up with the Holy See the validity of its claims. Of course, the Foreign
Office shall first make a determination of the impact of its espousal on the relations
between the Philippine government and the Holy See (Young, Remedies of Private
Claimants Against Foreign States, Selected Readings on Protection by Law of Private
Foreign Investments 905, 919 [1964]). Once the Philippine government decides to
espouse the claim, the latter ceases to be a private cause.
According to the Permanent Court of International Justice, the forerunner of the
International Court of Justice:
By taking up the case of one of its subjects and by reporting to
diplomatic action or international judicial proceedings on his behalf, a
State is in reality asserting its own rights — its right to ensure, in the
person of its subjects, respect for the rules of international law (The
Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports
293, 302 [1924]).
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case
No. 90-183 against petitioner is DISMISSED.
SO ORDERED.
G.R. No. L-35645 May 22, 1985
UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I.
COLLINS and ROBERT GOHIER, petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal
and ELIGIO DE GUZMAN & CO., INC., respondents.
Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.
Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.
33
ABAD SANTOS, J.:
This is a petition to review, set aside certain orders and restrain the respondent judge
from trying Civil Case No. 779M of the defunct Court of First Instance of Rizal.
The factual background is as follows:
At times material to this case, the United States of America had a naval base in Subic,
Zambales. The base was one of those provided in the Military Bases Agreement between
the Philippines and the United States.
Sometime in May, 1972, the United States invited the submission of bids for the
following projects
1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.
2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline
revetment, NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic
Bay, Philippines.
Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent
thereto, the company received from the United States two telegrams requesting it to
confirm its price proposals and for the name of its bonding company. The company
complied with the requests. [In its complaint, the company alleges that the United States
had accepted its bids because "A request to confirm a price proposal confirms the
acceptance of a bid pursuant to defendant United States' bidding practices." (Rollo, p.
30.) The truth of this allegation has not been tested because the case has not reached the
trial stage.]
In June, 1972, the company received a letter which was signed by Wilham I. Collins,
Director, Contracts Division, Naval Facilities Engineering Command, Southwest Pacific,
Department of the Navy of the United States, who is one of the petitioners herein. The
letter said that the company did not qualify to receive an award for the projects because
of its previous unsatisfactory performance rating on a repair contract for the sea wall at
the boat landings of the U.S. Naval Station in Subic Bay. The letter further said that the
projects had been awarded to third parties. In the abovementioned Civil Case No. 779-M,
the company sued the United States of America and Messrs. James E. Galloway, William
I. Collins and Robert Gohier all members of the Engineering Command of the U.S. Navy.
The complaint is to order the defendants to allow the plaintiff to perform the work on the
projects and, in the event that specific performance was no longer possible, to order the
defendants to pay damages. The company also asked for the issuance of a writ of
preliminary injunction to restrain the defendants from entering into contracts with third
parties for work on the projects.
The defendants entered their special appearance for the purpose only of questioning the
jurisdiction of this court over the subject matter of the complaint and the persons of
defendants, the subject matter of the complaint being acts and omissions of the individual
defendants as agents of defendant United States of America, a foreign sovereign which
has not given her consent to this suit or any other suit for the causes of action asserted in
the complaint." (Rollo, p. 50.)
Subsequently the defendants filed a motion to dismiss the complaint which included an
opposition to the issuance of the writ of preliminary injunction. The company opposed
the motion. The trial court denied the motion and issued the writ. The defendants moved
twice to reconsider but to no avail. Hence the instant petition which seeks to restrain
perpetually the proceedings in Civil Case No. 779-M for lack of jurisdiction on the part
of the trial court.
The petition is highly impressed with merit.
The traditional rule of State immunity exempts a State from being sued in the courts of
another State without its consent or waiver. This rule is a necessary consequence of the
principles of independence and equality of States. However, the rules of International
Law are not petrified; they are constantly developing and evolving. And because the
activities of states have multiplied, it has been necessary to distinguish them-between
sovereign and governmental acts (jure imperii) and private, commercial and proprietary
acts (jure gestionis). The result is that State immunity now extends only to acts jure
imperil The restrictive application of State immunity is now the rule in the United States,
the United Kingdom and other states in western Europe. (See Coquia and Defensor
Santiago, Public International Law, pp. 207-209 [1984].)
The respondent judge recognized the restrictive doctrine of State immunity when he said
in his Order denying the defendants' (now petitioners) motion: " A distinction should be
made between a strictly governmental function of the sovereign state from its private,
proprietary or non- governmental acts (Rollo, p. 20.) However, the respondent judge also
said: "It is the Court's considered opinion that entering into a contract for the repair of
wharves or shoreline is certainly not a governmental function altho it may partake of a
public nature or character. As aptly pointed out by plaintiff's counsel in his reply citing
the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes
with approval, viz.:
It is however contended that when a sovereign state enters into a
contract with a private person, the state can be sued upon the theory
that it has descended to the level of an individual from which it can be
implied that it has given its consent to be sued under the contract. ...
xxx xxx xxx
34
 We agree to the above contention, and considering that the United
States government, through its agency at Subic Bay, entered into a
contract with appellant for stevedoring and miscellaneous labor
services within the Subic Bay Area, a U.S. Naval Reservation, it is
evident that it can bring an action before our courts for any contractual
liability that that political entity may assume under the contract. The
trial court, therefore, has jurisdiction to entertain this case ... (Rollo,
pp. 20-21.)
The reliance placed on Lyons by the respondent judge is misplaced for the following
reasons:
In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the
Court of First Instance of Manila to collect several sums of money on account of a
contract between plaintiff and defendant. The defendant filed a motion to dismiss on the
ground that the court had no jurisdiction over defendant and over the subject matter of the
action. The court granted the motion on the grounds that: (a) it had no jurisdiction over
the defendant who did not give its consent to the suit; and (b) plaintiff failed to exhaust
the administrative remedies provided in the contract. The order of dismissal was elevated
to this Court for review.
In sustaining the action of the lower court, this Court said:
It appearing in the complaint that appellant has not complied with the
procedure laid down in Article XXI of the contract regarding the
prosecution of its claim against the United States Government, or,
stated differently, it has failed to first exhaust its administrative
remedies against said Government, the lower court acted properly in
dismissing this case.(At p. 598.)
It can thus be seen that the statement in respect of the waiver of State immunity from suit
was purely gratuitous and, therefore, obiter so that it has no value as an imperative
authority.
The restrictive application of State immunity is proper only when the proceedings arise
out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have descended to the level of
an individual and can thus be deemed to have tacitly given its consent to be sued only
when it enters into business contracts. It does not apply where the contract relates to the
exercise of its sovereign functions. In this case the projects are an integral part of the
naval base which is devoted to the defense of both the United States and the Philippines,
indisputably a function of the government of the highest order; they are not utilized for
nor dedicated to commercial or business purposes.
That the correct test for the application of State immunity is not the conclusion of a
contract by a State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil.
312 (1949). In that case the plaintiffs leased three apartment buildings to the United
States of America for the use of its military officials. The plaintiffs sued to recover
possession of the premises on the ground that the term of the leases had expired. They
also asked for increased rentals until the apartments shall have been vacated.
The defendants who were armed forces officers of the United States moved to dismiss the
suit for lack of jurisdiction in the part of the court. The Municipal Court of Manila
granted the motion to dismiss; sustained by the Court of First Instance, the plaintiffs went
to this Court for review on certiorari. In denying the petition, this Court said:
On the basis of the foregoing considerations we are of the belief and
we hold that the real party defendant in interest is the Government of
the United States of America; that any judgment for back or Increased
rentals or damages will have to be paid not by defendants Moore and
Tillman and their 64 co-defendants but by the said U.S. Government.
On the basis of the ruling in the case of Land vs. Dollar already cited,
and on what we have already stated, the present action must be
considered as one against the U.S. Government. It is clear hat the
courts of the Philippines including the Municipal Court of Manila
have no jurisdiction over the present case for unlawful detainer. The
question of lack of jurisdiction was raised and interposed at the very
beginning of the action. The U.S. Government has not , given its
consent to the filing of this suit which is essentially against her, though
not in name. Moreover, this is not only a case of a citizen filing a suit
against his own Government without the latter's consent but it is of a
citizen filing an action against a foreign government without said
government's consent, which renders more obvious the lack of
jurisdiction of the courts of his country. The principles of law behind
this rule are so elementary and of such general acceptance that we
deem it unnecessary to cite authorities in support thereof. (At p. 323.)
In Syquia,the United States concluded contracts with private individuals but the contracts
notwithstanding the States was not deemed to have given or waived its consent to be sued
for the reason that the contracts were for jure imperii and not for jure gestionis.
WHEREFORE, the petition is granted; the questioned orders of the respondent judge are
set aside and Civil Case No. is dismissed. Costs against the private respondent.
35

G.R. No. 142396. February 11, 2003
KHOSROW MINUCHER, petitioner,
vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.
DECISION
VITUG, J.:
Sometime in May 1986, an Information for violation of Section 4 of Republic Act
No. 6425, otherwise also known as the Dangerous Drugs Act of 1972, was filed against
petitioner Khosrow Minucher and one Abbas Torabian with the Regional Trial Court,
Branch 151, of Pasig City. The criminal charge followed a buy-bust operation conducted
by the Philippine police narcotic agents in the house of Minucher, an Iranian national,
where a quantity of heroin, a prohibited drug, was said to have been seized. The narcotic
agents were accompanied by private respondent Arthur Scalzo who would, in due time,
become one of the principal witnesses for the prosecution. On 08 January 1988, Presiding
Judge Eutropio Migrino rendered a decision acquitting the two accused.
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional
Trial Court (RTC), Branch 19, of Manila for damages on account of what he claimed to
have been trumped-up charges of drug trafficking made by Arthur Scalzo. The Manila
RTC detailed what it had found to be the facts and circumstances surrounding the case.
"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the
Philippines to study in the University of the Philippines in 1974. In 1976, under the
regime of the Shah of Iran, he was appointed Labor Attach for the Iranian Embassies in
Tokyo, Japan and Manila, Philippines. When the Shah of Iran was deposed by Ayatollah
Khomeini, plaintiff became a refugee of the United Nations and continued to stay in the
Philippines. He headed the Iranian National Resistance Movement in the Philippines.
He came to know the defendant on May 13, 1986, when the latter was brought to his
house and introduced to him by a certain Jose Iigo, an informer of the Intelligence Unit of
the military. Jose Iigo, on the other hand, was met by plaintiff at the office of Atty.
Crisanto Saruca, a lawyer for several Iranians whom plaintiff assisted as head of the anti-
Khomeini movement in the Philippines.
During his first meeting with the defendant on May 13, 1986, upon the introduction of
Jose Iigo, the defendant expressed his interest in buying caviar. As a matter of fact, he
bought two kilos of caviar from plaintiff and paid P10,000.00 for it.Selling caviar, aside
from that of Persian carpets, pistachio nuts and other Iranian products was his business
after the Khomeini government cut his pension of over $3,000.00 per month. During their
introduction in that meeting, the defendant gave the plaintiff his calling card, which
showed that he is working at the US Embassy in the Philippines, as a special agent of the
Drug Enforcement Administration, Department of Justice, of the United States, and gave
his address as US Embassy, Manila. At the back of the card appears a telephone number
in defendants own handwriting, the number of which he can also be contacted.
It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa
for his wife and the wife of a countryman named Abbas Torabian. The defendant told
him that he [could] help plaintiff for a fee of $2,000.00 per visa. Their conversation,
however, was more concentrated on politics, carpets and caviar. Thereafter, the defendant
promised to see plaintiff again.
On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at
Mario's Restaurant at Makati. He wanted to buy 200 grams of caviar. Plaintiff brought
the merchandize but for the reason that the defendant was not yet there, he requested the
restaurant people to x x x place the same in the refrigerator. Defendant, however, came
and plaintiff gave him the caviar for which he was paid. Then their conversation was
again focused on politics and business.
On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at
Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which plaintiff valued at
$27,900.00. After some haggling, they agreed at $24,000.00. For the reason that
defendant did not yet have the money, they agreed that defendant would come back the
next day. The following day, at 1:00 p.m., he came back with his $24,000.00, which he
gave to the plaintiff, and the latter, in turn, gave him the pair of carpets.
At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to
plaintiff's house and directly proceeded to the latter's bedroom, where the latter and his
countryman, Abbas Torabian, were playing chess. Plaintiff opened his safe in the
bedroom and obtained $2,000.00 from it, gave it to the defendant for the latter's fee in
obtaining a visa for plaintiff's wife. The defendant told him that he would be leaving the
Philippines very soon and requested him to come out of the house for a while so that he
can introduce him to his cousin waiting in a cab. Without much ado, and without putting
on his shirt as he was only in his pajama pants, he followed the defendant where he saw a
parked cab opposite the street. To his complete surprise, an American jumped out of the
cab with a drawn high-powered gun. He was in the company of about 30 to 40 Filipino
soldiers with 6 Americans, all armed. He was handcuffed and after about 20 minutes in
the street, he was brought inside the house by the defendant. He was made to sit down
while in handcuffs while the defendant was inside his bedroom. The defendant came out
of the bedroom and out from defendant's attach case, he took something and placed it on
36
the table in front of the plaintiff. They also took plaintiff's wife who was at that time at
the boutique near his house and likewise arrested Torabian, who was playing chess with
him in the bedroom and both were handcuffed together.Plaintiff was not told why he was
being handcuffed and why the privacy of his house, especially his bedroom was invaded
by defendant. He was not allowed to use the telephone. In fact, his telephone was
unplugged. He asked for any warrant, but the defendant told him to `shut up. He was
nevertheless told that he would be able to call for his lawyer who can defend him.
The plaintiff took note of the fact that when the defendant invited him to come out to
meet his cousin, his safe was opened where he kept the $24,000.00 the defendant paid for
the carpets and another $8,000.00 which he also placed in the safe together with a
bracelet worth $15,000.00 and a pair of earrings worth $10,000.00. He also discovered
missing upon his release his 8 pieces hand-made Persian carpets, valued at $65,000.00, a
painting he bought for P30,000.00 together with his TV and betamax sets. He claimed
that when he was handcuffed, the defendant took his keys from his wallet. There was,
therefore, nothing left in his house.
That his arrest as a heroin trafficker x x x had been well publicized throughout the world,
in various newspapers, particularly in Australia, America, Central Asia and in the
Philippines. He was identified in the papers as an international drug trafficker. x x x
In fact, the arrest of defendant and Torabian was likewise on television, not only in the
Philippines, but also in America and in Germany. His friends in said places informed him
that they saw him on TV with said news.
After the arrest made on plaintiff and Torabian, they were brought to Camp Crame
handcuffed together, where they were detained for three days without food and water." [1]
During the trial, the law firm of Luna, Sison and Manas, filed a special appearance
for Scalzo and moved for extension of time to file an answer pending a supposed advice
from the United States Department of State and Department of Justice on the defenses to
be raised. The trial court granted the motion. On 27 October 1988, Scalzo filed another
special appearance to quash the summons on the ground that he, not being a resident of
the Philippines and the action being one in personam, was beyond the processes of the
court. The motion was denied by the court, in its order of 13 December 1988, holding
that the filing by Scalzo of a motion for extension of time to file an answer to the
complaint was a voluntary appearance equivalent to service of summons which could
likewise be construed a waiver of the requirement of formal notice. Scalzo filed a motion
for reconsideration of the court order, contending that a motion for an extension of time
to file an answer was not a voluntary appearance equivalent to service of summons since
it did not seek an affirmative relief. Scalzo argued that in cases involving the United
States government, as well as its agencies and officials, a motion for extension was
peculiarly unavoidable due to the need (1) for both the Department of State and the
Department of Justice to agree on the defenses to be raised and (2) to refer the case to a
Philippine lawyer who would be expected to first review the case. The court a quo denied
the motion for reconsideration in its order of 15 October 1989.
Scalzo filed a petition for review with the Court of Appeals, there docketed CA-
G.R. No. 17023, assailing the denial. In a decision, dated 06 October 1989, the appellate
court denied the petition and affirmed the ruling of the trial court. Scalzo then elevated
the incident in a petition for review on certiorari, docketed G.R. No. 91173, to this
Court. The petition, however, was denied for its failure to comply with SC Circular No.
1-88; in any event, the Court added, Scalzo had failed to show that the appellate court
was in error in its questioned judgment.
Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a)
declaring Scalzo in default for his failure to file a responsive pleading (answer) and (b)
setting the case for the reception of evidence. On 12 March 1990, Scalzo filed a motion to
set aside the order of default and to admit his answer to the complaint. Granting the
motion, the trial court set the case for pre-trial. In his answer, Scalzo denied the material
allegations of the complaint and raised the affirmative defenses (a) of Minuchers failure
to state a cause of action in his complaint and (b) that Scalzo had acted in the discharge of
his official duties as being merely an agent of the Drug Enforcement Administration of
the United States Department of Justice. Scalzo interposed a counterclaim of P100,000.00
to answer for attorneys' fees and expenses of litigation.
Then, on 14 June 1990, after almost two years since the institution of the civil case,
Scalzo filed a motion to dismiss the complaint on the ground that, being a special agent
of the United States Drug Enforcement Administration, he was entitled to diplomatic
immunity. He attached to his motion Diplomatic Note No. 414 of the United States
Embassy, dated 29 May 1990, addressed to the Department of Foreign Affairs of the
Philippines and a Certification, dated 11 June 1990, of Vice Consul Donna Woodward,
certifying that the note is a true and faithful copy of its original. In an order of 25 June
1990, the trial court denied the motion to dismiss.
On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this
Court, docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao
Polo, et al.," asking that the complaint in Civil Case No. 88-45691 be ordered
dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R. SP
No. 22505, per this Courts resolution of 07 August 1990. On 31 October 1990, the Court
of Appeals promulgated its decision sustaining the diplomatic immunity of Scalzo and
ordering the dismissal of the complaint against him. Minucher filed a petition for review
with this Court, docketed G.R. No. 97765 and entitled "Khosrow Minucher vs. the
Honorable Court of Appeals, et. al. (cited in 214 SCRA 242), appealing the judgment of
the Court of Appeals. In a decision, dated 24 September 1992, penned by Justice (now
Chief Justice) Hilario Davide, Jr., this Court reversed the decision of the appellate court
and remanded the case to the lower court for trial. The remand was ordered on the theses
(a) that the Court of Appeals erred in granting the motion to dismiss of Scalzo for lack of
jurisdiction over his person without even considering the issue of the authenticity of
Diplomatic Note No. 414 and (b) that the complaint contained sufficient allegations to the
effect that Scalzo committed the imputed acts in his personal capacity and outside the
37
scope of his official duties and, absent any evidence to the contrary, the issue on Scalzos
diplomatic immunity could not be taken up.
The Manila RTC thus continued with its hearings on the case. On 17 November
1995, the trial court reached a decision; it adjudged:
WHEREFORE, and in view of all the foregoing considerations, judgment is hereby
rendered for the plaintiff, who successfully established his claim by sufficient evidence,
against the defendant in the manner following:
"`Adjudging defendant liable to plaintiff in actual and compensatory damages of
P520,000.00; moral damages in the sum of P10 million; exemplary damages in the sum
of P100,000.00; attorney's fees in the sum of P200,000.00 plus costs.
`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of the
Court on this judgment to answer for the unpaid docket fees considering that the plaintiff
in this case instituted this action as a pauper litigant."[2]
While the trial court gave credence to the claim of Scalzo and the evidence
presented by him that he was a diplomatic agent entitled to immunity as such, it ruled that
he, nevertheless, should be held accountable for the acts complained of committed
outside his official duties. On appeal, the Court of Appeals reversed the decision of the
trial court and sustained the defense of Scalzo that he was sufficiently clothed with
diplomatic immunity during his term of duty and thereby immune from the criminal and
civil jurisdiction of the Receiving State pursuant to the terms of the Vienna Convention.
Hence, this recourse by Minucher. The instant petition for review raises a two-fold
issue: (1) whether or not the doctrine of conclusiveness of judgment, following the
decision rendered by this Court in G.R. No. 97765, should have precluded the Court of
Appeals from resolving the appeal to it in an entirely different manner, and (2) whether or
not Arthur Scalzo is indeed entitled to diplomatic immunity.
The doctrine of conclusiveness of judgment, or its kindred rule of res
judicata, would require 1) the finality of the prior judgment, 2) a valid jurisdiction over
the subject matter and the parties on the part of the court that renders it, 3) a judgment on
the merits, and 4) an identity of the parties, subject matter and causes of action. [3] Even
while one of the issues submitted in G.R. No. 97765 - "whether or not public respondent
Court of Appeals erred in ruling that private respondent Scalzo is a diplomat immune
from civil suit conformably with the Vienna Convention on Diplomatic Relations" - is
also a pivotal question raised in the instant petition, the ruling in G.R. No. 97765,
however, has not resolved that point with finality. Indeed, the Court there has made this
observation -
"It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief
filed on 13 June 1990, unequivocally states that he would present documentary evidence
consisting of DEA records on his investigation and surveillance of plaintiff and on his
position and duties as DEA special agent in Manila. Having thus reserved his right to
present evidence in support of his position, which is the basis for the alleged diplomatic
immunity, the barren self-serving claim in the belated motion to dismiss cannot be relied
upon for a reasonable, intelligent and fair resolution of the issue of diplomatic
immunity."[4]
Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the
Philippines is a signatory, grants him absolute immunity from suit, describing his
functions as an agent of the United States Drugs Enforcement Agency as conducting
surveillance operations on suspected drug dealers in the Philippines believed to be the
source of prohibited drugs being shipped to the U.S., (and) having ascertained the target,
(he then) would inform the Philippine narcotic agents (to) make the actual arrest." Scalzo
has submitted to the trial court a number of documents -
1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;
2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;
3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;
4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and
5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.
6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department of
Foreign Affairs, dated 27 June 1990 forwarding Embassy Note No. 414 to the Clerk of
Court of RTC Manila, Branch 19 (the trial court);
7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3'); and
8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol, Department
of Foreign Affairs, through Asst. Sec. Emmanuel Fernandez, addressed to the Chief
Justice of this Court.[5]
The documents, according to Scalzo, would show that: (1) the United States
Embassy accordingly advised the Executive Department of the Philippine Government
that Scalzo was a member of the diplomatic staff of the United States diplomatic mission
from his arrival in the Philippines on 14 October 1985 until his departure on 10 August
1988; (2) that the United States Government was firm from the very beginning in
asserting the diplomatic immunity of Scalzo with respect to the case pursuant to the
provisions of the Vienna Convention on Diplomatic Relations; and (3) that the United
States Embassy repeatedly urged the Department of Foreign Affairs to take appropriate
action to inform the trial court of Scalzos diplomatic immunity. The other documentary
exhibits were presented to indicate that: (1) the Philippine government itself, through its
38
Executive Department, recognizing and respecting the diplomatic status of Scalzo,
formally advised the Judicial Department of his diplomatic status and his entitlement to
all diplomatic privileges and immunities under the Vienna Convention; and (2) the
Department of Foreign Affairs itself authenticated Diplomatic Note No. 414. Scalzo
additionally presented Exhibits "9" to "13" consisting of his reports of investigation on
the surveillance and subsequent arrest of Minucher, the certification of the Drug
Enforcement Administration of the United States Department of Justice that Scalzo was a
special agent assigned to the Philippines at all times relevant to the complaint, and the
special power of attorney executed by him in favor of his previous counsel [6] to show (a)
that the United States Embassy, affirmed by its Vice Consul, acknowledged Scalzo to be
a member of the diplomatic staff of the United States diplomatic mission from his arrival
in the Philippines on 14 October 1985 until his departure on 10 August 1988, (b) that, on
May 1986, with the cooperation of the Philippine law enforcement officials and in the
exercise of his functions as member of the mission, he investigated Minucher for alleged
trafficking in a prohibited drug, and (c) that the Philippine Department of Foreign Affairs
itself recognized that Scalzo during his tour of duty in the Philippines (14 October 1985
up to 10 August 1988) was listed as being an Assistant Attach of the United States
diplomatic mission and accredited with diplomatic status by the Government of the
Philippines. In his Exhibit 12, Scalzo described the functions of the overseas office of the
United States Drugs Enforcement Agency, i.e., (1) to provide criminal investigative
expertise and assistance to foreign law enforcement agencies on narcotic and drug control
programs upon the request of the host country, 2) to establish and maintain liaison with
the host country and counterpart foreign law enforcement officials, and 3) to conduct
complex criminal investigations involving international criminal conspiracies which
affect the interests of the United States.
The Vienna Convention on Diplomatic Relations was a codification of centuries-old
customary law and, by the time of its ratification on 18 April 1961, its rules of law had
long become stable. Among the city states of ancient Greece, among the peoples of the
Mediterranean before the establishment of the Roman Empire, and among the states of
India, the person of the herald in time of war and the person of the diplomatic envoy in
time of peace were universally held sacrosanct.[7] By the end of the 16th century, when
the earliest treatises on diplomatic law were published, the inviolability of ambassadors
was firmly established as a rule of customary international law.[8] Traditionally, the
exercise of diplomatic intercourse among states was undertaken by the head of state
himself, as being the preeminent embodiment of the state he represented, and the foreign
secretary, the official usually entrusted with the external affairs of the state. Where a state
would wish to have a more prominent diplomatic presence in the receiving state, it would
then send to the latter a diplomatic mission. Conformably with the Vienna Convention,
the functions of the diplomatic mission involve, by and large, the representation of the
interests of the sending state and promoting friendly relations with the receiving state.[9]
The Convention lists the classes of heads of diplomatic missions to include (a)
ambassadors or nuncios accredited to the heads of state,[10] (b) envoys,[11] ministers
or internuncios accredited to the heads of states; and (c) charges d' affairs[12] accredited
to the ministers of foreign affairs.[13] Comprising the "staff of the (diplomatic) mission"
are the diplomatic staff, the administrative staff and the technical and service staff. Only
the heads of missions, as well as members of the diplomatic staff, excluding the members
of the administrative, technical and service staff of the mission, are accorded diplomatic
rank. Even while the Vienna Convention on Diplomatic Relations provides for immunity
to the members of diplomatic missions, it does so, nevertheless, with an understanding
that the same be restrictively applied. Only "diplomatic agents," under the terms of the
Convention, are vested with blanket diplomatic immunity from civil and criminal
suits. The Convention defines "diplomatic agents" as the heads of missions or members
of the diplomatic staff, thus impliedly withholding the same privileges from all others. It
might bear stressing that even consuls, who represent their respective states in concerns
of commerce and navigation and perform certain administrative and notarial duties, such
as the issuance of passports and visas, authentication of documents, and administration of
oaths, do not ordinarily enjoy the traditional diplomatic immunities and privileges
accorded diplomats, mainly for the reason that they are not charged with the duty of
representing their states in political matters. Indeed, the main yardstick in ascertaining
whether a person is a diplomat entitled to immunity is the determination of whether or
not he performs duties of diplomatic nature.
Scalzo asserted, particularly in his Exhibits 9 to 13, that he was an Assistant Attach
of the United States diplomatic mission and was accredited as such by the Philippine
Government. An attach belongs to a category of officers in the diplomatic establishment
who may be in charge of its cultural, press, administrative or financial affairs. There
could also be a class of attaches belonging to certain ministries or departments of the
government, other than the foreign ministry or department, who are detailed by their
respective ministries or departments with the embassies such as the military, naval, air,
commercial, agricultural, labor, science, and customs attaches, or the like. Attaches assist
a chief of mission in his duties and are administratively under him, but their main
function is to observe, analyze and interpret trends and developments in their respective
fields in the host country and submit reports to their own ministries or departments in the
home government.[14] These officials are not generally regarded as members of the
diplomatic mission, nor are they normally designated as having diplomatic rank.
In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes
Nos. 414, 757 and 791, all issued post litem motam, respectively, on 29 May 1990, 25
October 1991 and 17 November 1992. The presentation did nothing much to alleviate the
Court's initial reservations in G.R. No. 97765, viz:
"While the trial court denied the motion to dismiss, the public respondent gravely abused
its discretion in dismissing Civil Case No. 88-45691 on the basis of an erroneous
assumption that simply because of the diplomatic note, the private respondent is clothed
with diplomatic immunity, thereby divesting the trial court of jurisdiction over his person.
xxxxxxxxx
And now, to the core issue - the alleged diplomatic immunity of the private
respondent. Setting aside for the moment the issue of authenticity raised by the petitioner
and the doubts that surround such claim, in view of the fact that it took private respondent
39
one (1) year, eight (8) months and seventeen (17) days from the time his counsel filed on
12 September 1988 a Special Appearance and Motion asking for a first extension of time
to file the Answer because the Departments of State and Justice of the United States of
America were studying the case for the purpose of determining his defenses, before he
could secure the Diplomatic Note from the US Embassy in Manila, and even granting for
the sake of argument that such note is authentic, the complaint for damages filed by
petitioner cannot be peremptorily dismissed.
xxxxxxxxx
"There is of course the claim of private respondent that the acts imputed to him were
done in his official capacity. Nothing supports this self-serving claim other than the so-
called Diplomatic Note. x x x. The public respondent then should have sustained the trial
court's denial of the motion to dismiss. Verily, it should have been the most proper and
appropriate recourse. It should not have been overwhelmed by the self-serving
Diplomatic Note whose belated issuance is even suspect and whose authenticity has not
yet been proved. The undue haste with which respondent Court yielded to the private
respondent's claim is arbitrary."
A significant document would appear to be Exhibit No. 08, dated 08 November
1992, issued by the Office of Protocol of the Department of Foreign Affairs and signed
by Emmanuel C. Fernandez, Assistant Secretary, certifying that "the records of the
Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office in the
Philippines (from 14 October 1985 up to 10 August 1988) was listed as an Assistant
Attach of the United States diplomatic mission and was, therefore, accredited diplomatic
status by the Government of the Philippines." No certified true copy of such "records,"
the supposed bases for the belated issuance, was presented in evidence.
Concededly, vesting a person with diplomatic immunity is a prerogative of the
executive branch of the government. In World Health Organization vs. Aquino,[15] the
Court has recognized that, in such matters, the hands of the courts are virtually
tied. Amidst apprehensions of indiscriminate and incautious grant of immunity, designed
to gain exemption from the jurisdiction of courts, it should behoove the Philippine
government, specifically its Department of Foreign Affairs, to be most circumspect, that
should particularly be no less than compelling, in its post litem motam issuances. It might
be recalled that the privilege is not an immunity from the observance of the law of the
territorial sovereign or from ensuing legal liability; it is, rather, an immunity from the
exercise of territorial jurisdiction.[16] The government of the United States itself, which
Scalzo claims to be acting for, has formulated its standards for recognition of a
diplomatic agent. The State Department policy is to only concede diplomatic status to a
person who possesses an acknowledged diplomatic title and performs duties of
diplomatic nature.[17] Supplementary criteria for accreditation are the possession of a
valid diplomatic passport or, from States which do not issue such passports, a diplomatic
note formally representing the intention to assign the person to diplomatic duties, the
holding of a non-immigrant visa, being over twenty-one years of age, and performing
diplomatic functions on an essentially full-time basis.[18] Diplomatic missions are
requested to provide the most accurate and descriptive job title to that which currently
applies to the duties performed. The Office of the Protocol would then assign each
individual to the appropriate functional category.[19]
But while the diplomatic immunity of Scalzo might thus remain contentious, it was
sufficiently established that, indeed, he worked for the United States Drug Enforcement
Agency and was tasked to conduct surveillance of suspected drug activities within the
country on the dates pertinent to this case. If it should be ascertained that Arthur Scalzo
was acting well within his assigned functions when he committed the acts alleged in the
complaint, the present controversy could then be resolved under the related doctrine
of State Immunity from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a long-
standing rule of customary international law then closely identified with the personal
immunity of a foreign sovereign from suit[20]and, with the emergence of democratic
states, made to attach not just to the person of the head of state, or his representative, but
also distinctly to the state itself in its sovereign capacity.[21] If the acts giving rise to a suit
are those of a foreign government done by its foreign agent, although not necessarily a
diplomatic personage, but acting in his official capacity, the complaint could be barred by
the immunity of the foreign sovereign from suit without its consent. Suing a
representative of a state is believed to be, in effect, suing the state itself. The proscription
is not accorded for the benefit of an individual but for the State, in whose service he is,
under the maxim - par in parem, non habet imperium - that all states are sovereign equals
and cannot assert jurisdiction over one another.[22] The implication, in broad terms, is that
if the judgment against an official would require the state itself to perform an affirmative
act to satisfy the award, such as the appropriation of the amount needed to pay the
damages decreed against him, the suit must be regarded as being against the state itself,
although it has not been formally impleaded.[23]
In United States of America vs. Guinto,[24] involving officers of the United States
Air Force and special officers of the Air Force Office of Special Investigators charged
with the duty of preventing the distribution, possession and use of prohibited drugs, this
Court has ruled -
"While the doctrine (of state immunity) appears to prohibit only suits against the state
without its consent, it is also applicable to complaints filed against officials of the state
for acts allegedly performed by them in the discharge of their duties. x x x. It cannot for a
moment be imagined that they were acting in their private or unofficial capacity when
they apprehended and later testified against the complainant. It follows that for
discharging their duties as agents of the United States, they cannot be directly impleaded
for acts imputable to their principal, which has not given its consent to be sued. x x x As
they have acted on behalf of the government, and within the scope of their authority, it is
that government, and not the petitioners personally, [who were] responsible for their
acts."[25]
This immunity principle, however, has its limitations. Thus, Shauf vs. Court of
Appeals[26] elaborates:
40
It is a different matter where the public official is made to account in his capacity as such
for acts contrary to law and injurious to the rights of the plaintiff. As was clearly set forth
by Justice Zaldivar in Director of the Bureau of Telecommunications, et al., vs. Aligaen,
et al. (33 SCRA 368): `Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an
action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State within
the rule of immunity of the State from suit. In the same tenor, it has been said that an
action at law or suit in equity against a State officer or the director of a State department
on the ground that, while claiming to act for the State, he violates or invades the personal
and property rights of the plaintiff, under an unconstitutional act or under an assumption
of authority which he does not have, is not a suit against the State within the
constitutional provision that the State may not be sued without its consent. The rationale
for this ruling is that the doctrine of state immunity cannot be used as an instrument for
perpetrating an injustice.
xxxxxxxxx
(T)he doctrine of immunity from suit will not apply and may not be invoked where the
public official is being sued in his private and personal capacity as an ordinary
citizen. The cloak of protection afforded the officers and agents of the government is
removed the moment they are sued in their individual capacity. This situation usually
arises where the public official acts without authority or in excess of the powers vested in
him. It is a well-settled principle of law that a public official may be liable in his personal
private capacity for whatever damage he may have caused by his act done with malice
and in bad faith or beyond the scope of his authority and jurisdiction. [27]
A foreign agent, operating within a territory, can be cloaked with immunity from
suit but only as long as it can be established that he is acting within the directives of the
sending state. The consent of the host state is an indispensable requirement of basic
courtesy between the two sovereigns. Guinto and Shauf both involve officers and
personnel of the United States, stationed within Philippine territory, under the RP-US
Military Bases Agreement. While evidence is wanting to show any similar agreement
between the governments of the Philippines and of the United States (for the latter to
send its agents and to conduct surveillance and related activities of suspected drug dealers
in the Philippines), the consent or imprimatur of the Philippine government to the
activities of the United States Drug Enforcement Agency, however, can be gleaned from
the facts heretofore elsewhere mentioned. The official exchanges of communication
between agencies of the government of the two countries, certifications from officials of
both the Philippine Department of Foreign Affairs and the United States Embassy, as
well as the participation of members of the Philippine Narcotics Command in the buy-
bust operation conducted at the residence of Minucher at the behest of Scalzo, may be
inadequate to support the "diplomatic status" of the latter but they give enough indication
that the Philippine government has given its imprimatur, if not consent, to the activities
within Philippine territory of agent Scalzo of the United States Drug Enforcement
Agency. The job description of Scalzo has tasked him to conduct surveillance on
suspected drug suppliers and, after having ascertained the target, to inform local law
enforcers who would then be expected to make the arrest. In conducting surveillance
activities on Minucher, later acting as the poseur-buyer during the buy-bust operation,
and then becoming a principal witness in the criminal case against Minucher, Scalzo
hardly can be said to have acted beyond the scope of his official function or duties.
All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of
the United States Drug Enforcement Agency allowed by the Philippine government to
conduct activities in the country to help contain the problem on the drug traffic, is entitled
to the defense of state immunity from suit.
WHEREFORE, on the foregoing premises, the petition is DENIED. No costs.
SO ORDERED.
G.R. No. 154705. June 26, 2003
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR
SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners,
vs.
JAMES VINZON, doing business under the name and style of VINZON TRADE
AND SERVICES, respondent.
DECISION
AZCUNA, J:
This is a petition for review on certiorari to set aside the Decision of the Court of
Appeals dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP
No. 66894 entitled The Republic of Indonesia, His Excellency Ambassador Soeratmin
and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC
Branch 145, Makati City, and James Vinzon, doing business under the name and style of
Vinzon Trade and Services.
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah,
entered into a Maintenance Agreement in August 1995 with respondent James Vinzon,
sole proprietor of Vinzon Trade and Services. The Maintenance Agreement stated that
respondent shall, for a consideration, maintain specified equipment at the Embassy Main
Building, Embassy Annex Building and the Wisma Duta, the official residence of
41
petitioner Ambassador Soeratmin. The equipment covered by the Maintenance
Agreement are air conditioning units, generator sets, electrical facilities, water heaters,
and water motor pumps. It is likewise stated therein that the agreement shall be effective
for a period of four years and will renew itself automatically unless cancelled by either
party by giving thirty days prior written notice from the date of expiry. [1]
Petitioners claim that sometime prior to the date of expiration of the said agreement,
or before August 1999, they informed respondent that the renewal of the agreement shall
be at the discretion of the incoming Chief of Administration, Minister Counsellor Azhari
Kasim, who was expected to arrive in February 2000. When Minister Counsellor Kasim
assumed the position of Chief of Administration in March 2000, he allegedly found
respondents work and services unsatisfactory and not in compliance with the standards
set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated the
agreement in a letter dated August 31, 2000.[2]Petitioners claim, moreover, that they had
earlier verbally informed respondent of their decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary
and unlawful. Respondent cites various circumstances which purportedly negated
petitioners alleged dissatisfaction over respondents services: (a) in July 2000, Minister
Counsellor Kasim still requested respondent to assign to the embassy an additional full-
time worker to assist one of his other workers; (b) in August 2000, Minister Counsellor
Kasim asked respondent to donate a prize, which the latter did, on the occasion of the
Indonesian Independence Day golf tournament; and (c) in a letter dated August 22, 2000,
petitioner Ambassador Soeratmin thanked respondent for sponsoring a prize and
expressed his hope that the cordial relations happily existing between them will continue
to prosper and be strengthened in the coming years.
Hence, on December 15, 2000, respondent filed a complaint[3] against petitioners
docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch
145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the
Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit
and cannot be sued as a party-defendant in the Philippines. The said motion further
alleged that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic agents
as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy
diplomatic immunity.[4] In turn, respondent filed on March 20, 2001, an Opposition to the
said motion alleging that the Republic of Indonesia has expressly waived its immunity
from suit. He based this claim upon the following provision in the Maintenance
Agreement:
Any legal action arising out of this Maintenance Agreement shall be settled according to
the laws of the Philippines and by the proper court of Makati City, Philippines.
Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister
Counsellor Kasim can be sued and held liable in their private capacities for tortious acts
done with malice and bad faith.[5]
On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It
likewise denied the Motion for Reconsideration subsequently filed.
The trial courts denial of the Motion to Dismiss was brought up to the Court of
Appeals by herein petitioners in a petition for certiorari and prohibition. Said petition,
docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely abused its
discretion in ruling that the Republic of Indonesia gave its consent to be sued and
voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that
petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived their
immunity from suit.
On May 30, 2002, the Court of Appeals rendered its assailed decision denying the
petition for lack of merit.[6] On August 16, 2002, it denied herein petitioners motion for
reconsideration.[7]
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of
Appeals erred in sustaining the trial courts decision that petitioners have waived their
immunity from suit by using as its basis the abovementioned provision in the
Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our land
under Article II, Section 2 of the 1987 Constitution. [8]The rule that a State may not be
sued without its consent is a necessary consequence of the principles of independence
and equality of States.[9] As enunciated in Sanders v. Veridiano II,[10] the practical
justification for the doctrine of sovereign immunity is that there can be no legal right
against the authority that makes the law on which the right depends. In the case of foreign
States, the rule is derived from the principle of the sovereign equality of States, as
expressed in the maxim par in parem non habet imperium. All states are sovereign equals
and cannot assert jurisdiction over one another. [11] A contrary attitude would unduly vex
the peace of nations.[12]
The rules of International Law, however, are neither unyielding nor impervious to
change. The increasing need of sovereign States to enter into purely commercial activities
remotely connected with the discharge of their governmental functions brought about a
new concept of sovereign immunity. This concept, the restrictive theory, holds that the
immunity of the sovereign is recognized only with regard to public acts or acts jure
imperii, but not with regard to private acts or acts jure gestionis.[13]
In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding
for the repair of a wharf at a United States Naval Station is an act jure imperii. On the
other hand, we considered as an act jure gestionis the hiring of a cook in the recreation
center catering to American servicemen and the general public at the John Hay Air
Station in Baguio City,[15] as well as the bidding for the operation of barber shops in
Clark Air Base in Angeles City.[16]
42
 Apropos the present case, the mere entering into a contract by a foreign State with a
private party cannot be construed as the ultimate test of whether or not it is an act jure
imperii or jure gestionis. Such act is only the start of the inquiry. Is the foreign State
engaged in the regular conduct of a business? If the foreign State is not engaged regularly
in a business or commercial activity, and in this case it has not been shown to be so
engaged, the particular act or transaction must then be tested by its nature. If the act is in
pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii.[17]
Hence, the existence alone of a paragraph in a contract stating that any legal action
arising out of the agreement shall be settled according to the laws of the Philippines and
by a specified court of the Philippines is not necessarily a waiver of sovereign immunity
from suit. The aforesaid provision contains language not necessarily inconsistent with
sovereign immunity. On the other hand, such provision may also be meant to apply where
the sovereign party elects to sue in the local courts, or otherwise waives its immunity by
any subsequent act. The applicability of Philippine laws must be deemed to include
Philippine laws in its totality, including the principle recognizing sovereign
immunity. Hence, the proper court may have no proper action, by way of settling the
case, except to dismiss it.
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It
must be given explicitly or by necessary implication. We find no such waiver in this case.
Respondent concedes that the establishment of a diplomatic mission is a sovereign
function. On the other hand, he argues that the actual physical maintenance of the
premises of the diplomatic mission, such as the upkeep of its furnishings and equipment,
is no longer a sovereign function of the State.[18]
We disagree. There is no dispute that the establishment of a diplomatic mission is
an act jure imperii. A sovereign State does not merely establish a diplomatic mission and
leave it at that; the establishment of a diplomatic mission encompasses its maintenance
and upkeep. Hence, the State may enter into contracts with private entities to maintain the
premises, furnishings and equipment of the embassy and the living quarters of its agents
and officials. It is therefore clear that petitioner Republic of Indonesia was acting in
pursuit of a sovereign activity when it entered into a contract with respondent for the
upkeep or maintenance of the air conditioning units, generator sets, electrical facilities,
water heaters, and water motor pumps of the Indonesian Embassy and the official
residence of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, the Maintenance
Agreement was entered into by the Republic of Indonesia in the discharge of its
governmental functions. In such a case, it cannot be deemed to have waived its immunity
from suit. As to the paragraph in the agreement relied upon by respondent, the Solicitor
General states that it was not a waiver of their immunity from suit but a mere stipulation
that in the event they do waive their immunity, Philippine laws shall govern the
resolution of any legal action arising out of the agreement and the proper court in Makati
City shall be the agreed venue thereof.[19]
On the matter of whether or not petitioners Ambassador Soeratmin and Minister
Counsellor Kasim may be sued herein in their private capacities, Article 31 of the Vienna
Convention on Diplomatic Relations provides:
xxx
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the
receiving State. He shall also enjoy immunity from its civil and administrative
jurisdiction, except in the case of:
(a) a real action relating to private immovable property situated in the territory of the
receiving State, unless he holds it on behalf of the sending State for the purposes of the
mission;
(b) an action relating to succession in which the diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and not on behalf of the sending State;
(c) an action relating to any professional or commercial activity exercised by the
diplomatic agent in the receiving State outside his official functions.
xxx
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in
terminating the Maintenance Agreement is not covered by the exceptions provided in the
abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c)
thereof,[20] but said provision clearly applies only to a situation where the diplomatic
agent engages in any professional or commercial activityoutside official functions, which
is not the case herein.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of
the Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the
complaint in Civil Case No. 18203 against petitioners is DISMISSED.
No costs.
SO ORDERED.
G.R. No. L-35131 November 29, 1972
THE WORLD HEALTH ORGANIZATION and DR. LEONCE
VERSTUYFT, petitioners,
vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of Branch VIII, Court of First
43
Instance of Rizal, MAJOR WILFREDO CRUZ, MAJOR ANTONIO G. RELLEVE,
and CAPTAIN PEDRO S. NAVARRO of the Constabulary Offshore Action Center
(COSAC), respondents.
Sycip, Salazar, Luna, Manalo and Feliciano for petitioners.
Emilio L. Baldia for respondents.
TEEHANKEE, J.:p
An original action for certiorari and prohibition to set aside respondent judge's refusal to
quash a search warrant issued by him at the instance of respondents COSAC
(Constabulary Offshore Action Center) officers for the search and seizure of the personal
effects of petitioner official of the WHO (World Health Organization) notwithstanding
his being entitled to diplomatic immunity, as duly recognized by the executive branch of
the Philippine Government and to prohibit respondent judge from further proceedings in
the matter.
Upon filing of the petition, the Court issued on June 6, 1972 a restraining order enjoining
respondents from executing the search warrant in question.
Respondents COSAC officers filed their answer joining issue against petitioners and
seeking to justify their act of applying for and securing from respondent judge the
warrant for the search and seizure of ten crates consigned to petitioner Verstuyft and
stored at the Eternit Corporation warehouse on the ground that they "contain large
quantities of highly dutiable goods" beyond the official needs of said petitioner "and the
only lawful way to reach these articles and effects for purposes of taxation is through a
search warrant." 1
The Court thereafter called for the parties' memoranda in lieu of oral argument, which
were filed on August 3, 1972 by respondents and on August 21, 1972 by petitioners, and
the case was thereafter deemed submitted for decision.
It is undisputed in the record that petitioner Dr. Leonce Verstuyft, who was assigned on
December 6, 1971 by the WHO from his last station in Taipei to the Regional Office in
Manila as Acting Assistant Director of Health Services, is entitled to diplomatic
immunity, pursuant to the Host Agreement executed on July 22, 1951 between the
Philippine Government and the World Health Organization.
Such diplomatic immunity carries with it, among other diplomatic privileges and
immunities, personal inviolability, inviolability of the official's properties, exemption
from local jurisdiction, and exemption from taxation and customs duties.
When petitioner Verstuyft's personal effects contained in twelve (12) crates entered the
Philippines as unaccompanied baggage on January 10, 1972, they were accordingly
allowed free entry from duties and taxes. The crates were directly stored at the Eternit
Corporation's warehouse at Mandaluyong, Rizal, "pending his relocation into permanent
quarters upon the offer of Mr. Berg, Vice President of Eternit who was once a patient of
Dr. Verstuyft in the Congo." 2
Nevertheless, as above stated, respondent judge issued on March 3, 1972 upon
application on the same date of respondents COSAC officers search warrant No. 72-138
for alleged violation of Republic Act 4712 amending section 3601 of the Tariff and
Customs Code 3 directing the search and seizure of the dutiable items in said crates.
Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO Regional Director for the
Western Pacific with station in Manila, Secretary of Foreign Affairs Carlos P. Romulo,
personally wired on the same date respondent Judge advising that "Dr. Verstuyft is
entitled to immunity from search in respect of his personal baggage as accorded to
members of diplomatic missions" pursuant to the Host Agreement and requesting
suspension of the search warrant order "pending clarification of the matter from the
ASAC."
Respondent judge set the Foreign Secretary's request for hearing and heard the same on
March 16, 1972, but notwithstanding the official plea of diplomatic immunity interposed
by a duly authorized representative of the Department of Foreign Affairs who furnished
the respondent judge with a list of the articles brought in by petitioner Verstuyft,
respondent judge issued his order of the same date maintaining the effectivity of the
search warrant issued by him, unless restrained by a higher court. 4
Petitioner Verstuyft's special appearance on March 24, 1972 for the limited purpose of
pleading his diplomatic immunity and motion to quash search warrant of April 12, 1972
failed to move respondent judge.
At the hearing thereof held on May 8, 1972, the Office of the Solicitor General appeared
and filed an extended comment stating the official position of the executive branch of the
Philippine Government that petitioner Verstuyft is entitled to diplomatic immunity, he
did not abuse his diplomatic immunity, 5 and that court proceedings in the receiving or
host State are not the proper remedy in the case of abuse of diplomatic immunity. 6
The Solicitor General accordingly joined petitioner Verstuyft's prayer for the quashal of
the search warrant. Respondent judge nevertheless summarily denied quashal of the
search warrant per his order of May 9, 1972 "for the same reasons already stated in (his)
aforesaid order of March 16, 1972" disregarding Foreign Secretary Romulo's plea of
diplomatic immunity on behalf of Dr. Verstuyft.
Hence, the petition at bar. Petitioner Verstuyft has in this Court been joined by the World
Health Organization (WHO) itself in full assertion of petitioner Verstuyft's being entitled
44
"to all privileges and immunities, exemptions and facilities accorded to diplomatic
envoys in accordance with international law" under section 24 of the Host Agreement.
The writs of certiorari and prohibition should issue as prayed for.
1. The executive branch of the Philippine Government has expressly recognized that
petitioner Verstuyft is entitled to diplomatic immunity, pursuant to the provisions of the
Host Agreement. The Department of Foreign Affairs formally advised respondent judge
of the Philippine Government's official position that accordingly "Dr. Verstuyft cannot be
the subject of a Philippine court summons without violating an obligation in international
law of the Philippine Government" and asked for the quashal of the search warrant, since
his personal effects and baggages after having been allowed free entry from all customs
duties and taxes, may not be baselessly claimed to have been "unlawfully imported" in
violation of the tariff and customs code as claimed by respondents COSAC officers. The
Solicitor-General, as principal law officer of the Government, 7 likewise expressly
affirmed said petitioner's right to diplomatic immunity and asked for the quashal of the
search warrant.
It is a recognized principle of international law and under our system of separation of
powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government, 8 and
where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law officer of the
government, the Solicitor General in this case, or other officer acting under his
direction.9 Hence, in adherence to the settled principle that courts may not so exercise
their jurisdiction by seizure and detention of property, as to embarrass the executive arm
of the government in conducting foreign relations, it is accepted doctrine that "in such
cases the judicial department of (this) government follows the action of the political
branch and will not embarrass the latter by assuming an antagonistic jurisdiction." 10
2. The unfortunate fact that respondent judge chose to rely on the suspicion of
respondents COSAC officers "that the other remaining crates unopened contain
contraband items" 11 rather than on the categorical assurance of the Solicitor-General that
petitioner Verstuyft did not abuse his diplomatic immunity, 12 which was based in turn on
the official positions taken by the highest executive officials with competence and
authority to act on the matter, namely, the Secretaries of Foreign Affairs and of Finance,
could not justify respondent judge's denial of the quashal of the search warrant.
As already stated above, and brought to respondent court's attention, 13 the Philippine
Government is bound by the procedure laid down in Article VII of the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations 14 for
consultations between the Host State and the United Nations agency concerned to
determine, in the first instance the fact of occurrence of the abuse alleged, and if so, to
ensure that no repetition occurs and for other recourses. This is a treaty commitment
voluntarily assumed by the Philippine Government and as such, has the force and effect
of law.
Hence, even assuming arguendo as against the categorical assurance of the executive
branch of government that respondent judge had some ground to prefer respondents
COSAC officers' suspicion that there had been an abuse of diplomatic immunity, the
continuation of the search warrant proceedings before him was not the proper remedy. He
should, nevertheless, in deference to the exclusive competence and jurisdiction of the
executive branch of government to act on the matter, have acceded to the quashal of the
search warrant, and forwarded his findings or grounds to believe that there had been such
abuse of diplomatic immunity to the Department of Foreign Affairs for it to deal with, in
accordance with the aforementioned Convention, if so warranted.
3. Finally, the Court has noted with concern the apparent lack of coordination between
the various departments involved in the subject-matter of the case at bar, which made it
possible for a small unit, the COSAC, to which respondents officers belong, seemingly to
disregard and go against the authoritative determination and pronouncements of both the
Secretaries of Foreign Affairs and of Finance that petitioner Verstuyft is entitled to
diplomatic immunity, as confirmed by the Solicitor-General as the principal law officer
of the Government. Such executive determination properly implemented should have
normally constrained respondents officers themselves to obtain the quashal of the search
warrant secured by them rather than oppose such quashal up to this Court, to the
embarrassment of said department heads, if not of the Philippine Government itself vis a
vis the petitioners. 15
The seriousness of the matter is underscored when the provisions of Republic Act 75
enacted since October 21, 1946 to safeguard the jurisdictional immunity of diplomatic
officials in the Philippines are taken into account. Said Act declares as null and void writs
or processes sued out or prosecuted whereby inter alia the person of an ambassador or
public minister is arrested or imprisoned or his goods or chattels are seized or attached
and makes it a penal offense for "every person by whom the same is obtained or
prosecuted, whether as party or as attorney, and every officer concerned in executing it"
to obtain or enforce such writ or process. 16
The Court, therefore, holds that respondent judge acted without jurisdiction and with
grave abuse of discretion in not ordering the quashal of the search warrant issued by him
in disregard of the diplomatic immunity of petitioner Verstuyft.
ACCORDINGLY, the writs of certiorari and prohibition prayed for are hereby granted,
and the temporary restraining order heretofore issued against execution or enforcement of
the questioned search warrant, which is hereby declared null and void, is hereby made
permanent. The respondent court is hereby commanded to desist from further
proceedings in the matter. No costs, none having been prayed for.
45
The clerk of court is hereby directed to furnish a copy of this decision to the Secretary of Pursuant to the above provision, Animos filed with the Philippine
Justice for such action as he may find appropriate with regard to the matters mentioned in Veterans Board (now Philippine Veterans Affairs Office, or PVAO for
paragraph 3 hereof. So ordered. short) a claim for disability pension benefit. Upon medical
examination, Animos was found to have incurred partial physical
disability due to a gunshot wound, and was awarded 25% pension
G.R. No. 79156 June 22, 1989
benefit effective November 18, 1947, in the amount of P12.50 a
month.
ISIDRO, ZENAIDA, IRWIN, ZENDA and DORNET, all surnamed
ANIMOS, petitioners,
On June 21, 1957, Republic Act No. 1920 was approved amending
vs.
Sec. 9 of Rep. Act No. 65, which increased the life pension from
PHILIPPINE VETERANS AFFAIRS OFFICE, its Administrator, JUAN L.
GACAD and THE COURT OF APPEALS, respondents. P50.00 to P100.00, plus P10.00 a month for each unmarried minor
child below 18 years of age. Subsequently, on June 22, 1969, Rep. Act
No. 5373 took effect which further amended said Sec. 9 and increased
Duran and Associates for petitioners. the basic monthly pension from P100.00 to P200.00, plus P30.00 a
month for the wife and P30.00 a month for each unmarried child
SARMIENTO, J.: below 18 years.

The Court grants this petition assailing the decision of the Court of Appeals. * It appears that on September 27, 1955, Animos filed an application for
dependents' pension benefits. The application was however
The case originated from a suit for mandamus commenced by the petitioners against the disapproved on September 4, 1956, on the ground that Animos was
respondent, the Philippine Veterans Affairs Office, to compel payment by the said not totally incapacitated.
respondent of full pension benefits, retroactive to 1947, under Republic Act No. 65 as
amended. The Regional Trial Court ** dismissed the case on the ground of lack of Upon the required re-evaluation of his partial physical disability,
jurisdiction. The petitioners then appealed to the respondent, the Court of Appeals, which Animos was re-rated to be 30% disabled on November 25, 1964 and
however rendered an affirmance. was correspondingly granted a P30.00 monthly pension. Again, on
August 4, 1970, Animos was re-rated to be 50% disabled and was
The antecedent facts are stated by the Solicitor General. We quote: granted a P50.00 monthly pension. Reassessments made on April 22,
1975 and June 11, 1982 showed that Animos' partial disability
remained unchanged at 50%.
Isidro Animos is a veteran of World War II, having been a member of
the USAFFE and later of the guerilla forces during the war.
Animos' numerous written requests to be granted the maximum
pension benefit as well as dependents' pension benefits were all
On October 18, 1946, Republic Act No. 65 was approved, providing
disapproved. Thus, on November 23, 1982, Animos, his wife and
for a Bill of Rights for Officers and Enlisted Men of the Philippine
children filed a petition for mandamus with the then Court of First
Army, Recognized and Deserving Guerilla Organizations, and
Instance of Albay against the PVAO to compel that office to increase
Veterans of the Philippine Revolution. Section 9 thereof provides:
his monthly pension, alleging that since the rules on disability rating
of the latter are contrary to law, Animos, who was granted a lifetime
SEC. 9. The persons mentioned in sections one and pension for his disability should be paid the maximum pension
two hereof who are permanently incapacitated from benefits, including pension for his wife and minor children. 1
work owing to sickness, disease, or injuries
sustained in line of duty, shall be given a life
In dismissing the petition, the trial court held that "should petitioner's claim be upheld for
pension of fifty pesos a month unless they are
the satisfaction of veteran's benefits for the years up to the present, or a period of about
actually receiving a similar pension from other
40 years, the defendant may not be in a position, legally and budgetary wise, to comply
Government funds, and shall receive, in addition,
with the court's award as sufficient treasury funds therefor could only be appropriated for
the necessary hospitalization and medical care.
that purpose by the legislature," 2 and ruled that the petition was "in effect a money claim
46
against the government" 3 over which it did not have jurisdiction. In sustaining the trial
court, the Court of Appeals added that mandamus does not lie to interfere with discretion,
and that the petitioner had failed to exhaust administrative remedies.
On the question of procedure, the controlling precedents are Begoso v. Chairman,
Philippine Veterans Administration 4 and Teoxon v. Members of the Board of
Administrators, Philippine Veterans Administration, 5 in which we held:
1. The fourth assignment of error assails what it considers to be the
failing of the lower court in not holding that the complaint in this case
is in effect a suit against the State which has not given its consent
thereto. We have recently had occasion to reaffirm the force and
primacy of the doctrine of non-suability. It does not admit of doubt,
then, that if the suit were in fact against the State, the lower court
should have dismissed the complaint. Nor is it to be doubted that while
ostensibly an action may be against a public official, the defendant
may in reality be the government. As a result, 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. Such is the present case.
The doctrine announced by us in Ruiz v. Cabahug finds relevance:
"We hold that under the facts and circumstances alleged in the
amended complaint, which should be taken on its face value, the suit
is not one against the Government, or a claim against it, but one
against the officials to compel them to act in accordance with the
rights to be established by the contending architects, or to prevent
them from making payment and recognition until the contending
architects have established their respective rights and interests in the
funds retained and in the credit for the work done." As a matter of fact,
in an earlier case where we sustained the power of a private citizen
claiming title to and right of possession of a certain property to sue an
officer or agent of the government alleged to be illegally withholding
the same, we likewise expressed this caveat: "However, and this is
important, where the judgment in such a case would result not only in
the recovery of possession of the property in favor of said citizen but
also in a charge against or financial liability to the Government, then
the suit should be regarded as one against the government itself, and,
consequently, it cannot prosper or be validly entertained by the courts
except with the consent of said Government.
2. Nor is the third assignment of error to the effect that the lower court
did not require appellee to exhaust his administrative remedies before
coming to court any more persuasive. An excerpt from the leading
case of Gonzales v. Hechanova, the opinion being penned by the
present Chief Justice, clearly demonstrates why appellants' argument
in this respect is unavailing: "Respondents assail petitioner's right to
the reliefs prayed for because he 'has not exhausted all administrative
remedies available to him before coming to court. We have already
held, however, that the principle requiring the previous exhaustion of
administrative remedies is not applicable 'where the question in
dispute is purely a legal one', or where the controverted act is patently
illegal or was performed without jurisdiction or in excess of
jurisdiction, or where the respondent is a department secretary, whose
acts as an alter-ego of the President bear the implied or assumed
approval of the latter, unless actually disapproved by him, or where
there are circumstances indicating the urgency of judicial
intervention." The Gonzales doctrine, it is to be noted, summarized the
views announced in earlier cases. The list of subsequent cases
reiterating such a doctrine is quite impressive. To be more specific,
where there is a stipulation of facts, as in this case, the question before
the lower court being solely one of law and on the face of the decision,
the actuation of appellants being patently illegal, the doctrine of
exhaustion of administrative remedies certainly does not come into
play. 6
Mandamus therefore lies, and failure to exhaust remedies is no defense against payment.
We come to the merits.
The denial of the petitioner's claim was predicated on the finding that his disabilities
were, based on the respondent's "Rules on Disability Ratings", partial rather than total, a
condition that precludes payment of maximum pension benefits. The petitioner submits
that the very rating system adopted by the respondent veterans' office is null and void.
The applicable provision is Section 9 of Republic Act No. 65, as amended, as follows:
SEC. 9. The persons mentioned in sections one and two hereof who
are permanently incapacitated from work owing to sickness, disease,
or injuries sustained in line of duty, shall be given a life pension
of two hundred pesos a month, and thirty pesos a month for his
wife and each of his unmarried minor children below eighteen years of
age, unless they are actually receiving a similar pension from other
Government funds, and shall receive, in addition, the necessary
hospitalization and medical care. 7
47
In Begoso, supra, as well as Teoxon, supra, this Court held that bare rules promulgated
by the Philippine Veterans Administration, now the Philippine Veterans' Affairs Office,
cannot overrule the mandate of statute, on the fundamental principle that "an
administrative agency 'cannot amend an act of Congress.' "8 In the case at bar, there is no
gainsaying the fact that the petitioner had been enjoying pension benefits, albeit partial,
pursuant to the provisions of Section 9, supra, upon the premise that he was qualified
thereto. Hence, the Government must pay him maximum pension benefits. The fact that
his injuries, based on the respondent's ratings, have been classified as "partial" cannot
erase the equal fact that he is "permanently incapacitated" under the law. Section 9 refers
simply to "permanent incapacity" and makes no distinctions as a condition sine qua
non to compensability. It does not require such an incapacity to be total or partial and
neither does it authorize the PVAO to make a gradation of injuries. It is axiomatic that
where the law does not distinguish, let no one distinguish. The classifications or ratings
formulated by the respondent body amount to an amendment of the law at the
administrative level, and to that extent, they are null and void.
9 bombing in Atimonan, Quezon (where elements of the Japanese Imperial Army landed,
The case of Board of administrators, PVA v. Agcaoili, which the Solicitor General
invokes does not apply. In that case, we denied pension for the plain reason that the
applicant was not permanently incapacitated. But we did not, consequently, uphold,
expressly or by implication, the PVAO's rules in said case, the applicant being
disqualified in any event. If we did, it was because their validity was not specifically
challenged. Needless to state, we did not abandon either Begoso or Teoxon therein.
It is pure conjecture to say that the petitioner "had no more service-connected disability
to hang on and should not have been denied continued disability pension were it not for
the compassionate regard by respondents to the veterans of World War II." 10 The fact of
the matter is that the respondent had consistently paid the petitioner pension benefits for
the past forty years, meaning to say that he was (is) entitled thereto. It would be an act of
injustice to deny him now what, by strong constitutional presumptions, is due him.
Neither is it a matter of charity or compassion. The PVAO is vested with no discretion to
deny payment where payment is due and conversely, to pay when payment is not due.
"The State," declares the Constitution (1973), "shall establish, maintain, and ensure
adequate social services in the field of education, health, housing, employment, welfare,
and social security to guarantee the enjoyment by the people of a decent standard of
living." 11 Under the present Constitution, the State's concern for war veterans finds an
even more emphatic expression:
SEC. 9. The State shall promote a just and dynamic social order that
will ensure the prosperity and independence of the nation and free the
people from poverty through policies that provides adequate social
services, promote full employment, a rising standard of living, and an
improved quality of life for all . 12
xxx xxx xxx
SEC. 7. The State shall provide immediate and adequate care, benefits,
and other forms of assistance to war veterans and veterans of military
campaigns, their surviving spouses and orphans. Funds shall be
provided therefor and due consideration shall be given them in the
disposition of agricultural lands of the public domain and, in
appropriate cases, in the utilization of natural resources. 13
In the face of clear State policy, the burden is consequently on the Government to show
that the applicant is not qualified for pension. The applicant enjoys a presumed
qualification upon a simple demonstration that he had fought in the war and had suffered
a permanent incapacity as a result thereof .
The records show that the petitioner suffered various injuries, in his ear arising from a
after they had established a beachhead at Vigan, Ilocos Sur, two days after the Pearl
Harbor bombing which commenced World War II in the Pacific area), and other parts of
his body due to bullets and bayonets. 14 There is no showing that his wounds have since
healed. Hence, they are "permanent" within the intendment of the veterans' Bill of Rights.
As we said, the fact that they are partial rather than total is of no moment. "Permanent
incapacity", under Republic Act No. 65, contemplates an injury or ailment sustained in
battle, permanent or incurable in character, and such that it impedes nominal work. But
the statute does not require that the veteran be utterly unable to work by reason of the
injury or ailment, or otherwise, "totally disabled". To say that it does is to reduce the law
into a simple social security measure, similar to workmen's compensation, rather than an
act of gratitude by the State to the brave veterans of the last two wars in the country.
Further, to say that Republic Act No. 26 applies only to veterans totally disabled for work
is to make the Act the veterans' sole source of income (by virtue of the prohibition
against multiple compensations under Sections 9 and 10). Certainly, P230.00 a
month 15 — the amount of pension under the Act — is hardly "compensation" for any
common tao, let alone a totally disabled citizen. This could not have been the intent of
the legislature.
The clear implication is that the PVAO may not rate disabilities in the same manner they
are evaluated under our laws on employees' compensation. So long as a veteran's
incapacity is permanent, the veteran is entitled to payment.
Alleged budgetary constraints or lack of appropriation are no obstacles to payment.
In Español v. Chairman, Philippine Veterans Administration, 16 we ordered "the
restoration of [the petitioner's] monthly pension and her children's monthly dependent's
pension provided for by R.A. No. 65, as amended, the coverage of which Congress had
already appropriated funds [for]." 17 The instant case presents a similar situation. In
asking for retroactive pension, what the petitioner in reality seeks is the "restoration" of
48
full pension benefits long denied him on account of the PVAO's improper application of
Republic Act No. 65, and the funds for which have been undoubtedly appropriated.
To the extent that this decision is incompatible with our decision in PVAO vs. Asterio Q.
Tamayo, promulgated on July 29, 1988, G.R. No. 74322, the latter is therefore considered
changed.
The war veterans loom as the forgotten heroes of this generation. This is the reality both
unfortunate and tragic. What has been lost on many is the fact that it was because of their
bravery and sacrifice that we are a free people today.
They stand as shining mementos of our struggle for emancipation from the colonial yoke
With crude boloes and primitive spears but with abundant courage in their hearts they
fought the white man's arsenal of rifles and cannons, overcame it, and finished a
revolution. They fought with no anticipation of a prize, reward, or medal, but in obedient
and unquestioning response to duty to country.
It was they who, four decades later, would lead the resistance against the Japanese
invaders. Poorly trained, fed, and equipped but encouraged by a firmness of will, they
offered their lives and many forfeited theirs — amid superior firepower from the enemy.
Like the revolutionaries, they were not conscripts but volunteers. And like them, they
fought without any expectation of laurels or citations but in order that liberty shall dawn
upon the land.
The Court strongly stresses that Republic Act No. 65, the veterans' Bill of Rights, was not
meant to compensate alone veterans for the wounds of war. It is, above all, a gesture of
gratitude on the part of the State and a tribute to their gallantry and selfless love of
country. Though valor cannot be measured in terms of money, money is the best we can
offer for the moment. And if we cannot do more, let us do no less. This case should not
have indeed reached this Court had not insensitivity gotten the better of Government
functionaries.
WHEREFORE, the petition is GRANTED.
The respondent, the Philippine Veterans Affairs Office, is ORDERED to pay the
petitioner, his spouse, and qualified children, full pension benefits plus such other and
further increments as may be provided for by law, effective November 18, 1947. No
costs.
SO ORDERED.
G.R. No. 79253 March 1, 1993
UNITED STATES OF AMERICA and MAXINE BRADFORD, petitioners,
vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22, Regional Trial Court of
Cavite, and NELIA T. MONTOYA, respondents.
Luna, Sison & Manas for petitioners.
Evelyn R. Dominguez for private respondent.
DAVIDE, JR., J.:
This is a petition for certiorari and prohibition under Rule 65 of the Rules of Court.
Petitioners would have Us annul and set aside, for having been issued with grave abuse of
discretion amounting to lack of jurisdiction, the Resolution of 17 July 1987 of Branch 22
of the Regional Trial Court (RTC) of Cavite in Civil Case No. 224-87. The said
resolution denied, for lack of merit, petitioners' motion to dismiss the said case and
granted the private respondent's motion for the issuance of a writ of preliminary
attachment. Likewise sought to be set aside is the writ of attachment subsequently issued
by the RTC on 28 July 1987.
The doctrine of state immunity is at the core of this controversy.
The readings disclose the following material operative facts:
Private respondent, hereinafter referred to as Montoya, is an American citizen who, at the
time material to this case, was employed as an identification (I.D.) checker at the U.S.
Navy Exchange (NEX) at the Joint United States Military Assistance Group (JUSMAG)
headquarters in Quezon City. She is married to one Edgardo H. Montoya, a Filipino-
American serviceman employed by the U.S. Navy and stationed in San Francisco,
California. Petitioner Maxine Bradford, hereinafter referred to as Bradford, is likewise an
American citizen who was the activity exchange manager at the said JUSMAG
Headquarters.
As a consequence of an incident which occurred on 22 January 1987 whereby her body
and belongings were searched after she had bought some items from the retail store of the
NEX JUSMAG, where she had purchasing privileges, and while she was already at the
parking area, Montoya filed on
7 May 1987 a complaint1 with the Regional Trial Court of her place of residence —
Cavite — against Bradford for damages due to the oppressive and discriminatory acts
committed by the latter in excess of her authority as store manager of the NEX JUSMAG.
The complaint, docketed as Civil Case No. 224-87 and subsequently raffled off to Branch
22 at Imus, Cavite, alleges the following, material operative facts:
xxx xxx xxx
49
3. That on January 22, 1987, after working as the duty ID checker
from 7:45 to 11:45 a.m., plaintiff went shopping and left the store at
l2:00 noon of that day;
4. That on the way to her car while already outside the store, Mrs.
Yong Kennedy, also an ID checker, upon the instruction of the store
manager, Ms. Maxine Bradford, approached plaintiff and informed her
that she needed to search her bags;
5. That plaintiff went to defendant, who was then outside the store
talking to some men, to protest the search but she was informed by the
defendant that the search is to be made on all Jusmag employees that
day;
6. That the search was thereafter made on the person, car and bags of
the plaintiff by Mrs. Yong Kennedy in the presence of the defendant
and numerous curious onlookers;
7. That having found nothing irregular on her person and belongings,
plaintiff was allowed to leave the premises;
8. That feeling aggrieved, plaintiff checked the records and discovered
that she was the only one whose person and belonging was (sic)
searched that day contrary to defendant's allegation as set forth in par.
5 hereof and as evidenced by the memorandum dated January 30,
1987 made by other Filipino Jusmag employees, a photocopy of which
is hereto attached as ANNEX "A" and made integral (sic) part hereof:
9. That moreover, a check with Navy Exchange Security Manager,
R.L. Roynon on January 27, 1987 was made and she was informed by
Mr. Roynon that it is a matter of policy that customers and employees
of NEX Jusmag are not searched outside the store unless there is a
very strong evidence of a wrongdoing;
10. That plaintiff knows of no circumstances sufficient to trigger
suspicion of a wrongdoing on her part but on the other hand, is aware
of the propensity of defendant to lay suspicion on Filipinos for theft
and/or shoplifting;
11. That plaintiff formally protested the illegal search on February 14,
1987 in a letter addressed to Mr. R.L. Roynon, a photocopy of which
is hereto attached as ANNEX "B" and made integral (sic) part hereof;
but no action was undertaken by the said officer;
12. That the illegal search on the person and belongings of the plaintiff
in front of many people has subjected the plaintiff to speculations of
theft, shoplifting and such other wrongdoings and has exposed her to
contempt and ridicule which was caused her undue embarrassment and
indignity;
13. That since the act could not have been motivated by other (sic)
reason than racial discrimination in our own land, the act constitute
(sic) a blow to our national pride and dignity which has caused the
plaintiff a feeling of anger for which she suffers sleepless nights and
wounded feelings;
14. That considering the above, plaintiff is entitled to be compensated
by way of moral damages in the amount of P500,000.00;
15. That to serve as a deterrent to those inclined to follow the
oppressive act of the defendant, exemplary damages in the amount of
P100,000.00 should also be awarded.2
She then prayed for judgment ordering Bradford to pay her P500,000.00 as moral
damages, P100,000.00 as exemplary damages and reasonable attorney's fees plus the
costs of the suit.3
Summons and a copy of the complaint were served on Bradford on 13 May 1987. In
response thereto, she filed two (2) motions for extension of time to file her Answer which
were both granted by the trial court. The first was filed through Atty. Miguel
Famularcano, Jr., who asked for a 20-day extension from 28 May 1987. The second, filed
through the law firm of Luna, Sison and Manas, sought a 15-day extension from 17 June
1987.4 Thus, Bradford had up to 1 July 1987 to file her Answer. Instead of doing so,
however, she, together with the government of the United States of America (hereinafter
referred to as the public petitioner), filed on 25 June 1987, also through the law firm of
Luna, Sison and Manas, a Motion to Dismiss5 based on the following grounds:
1) (This) action is in effect a suit against the United States of America,
a foreign sovereign immune from suit without its consent for the cause
of action pleaded in the complaint; and
2) Defendant, Maxine Bradford, as manager of the US Navy Exchange
Branch at JUSMAG, Quezon City, is immune from suit for act(s) done
by her in the performance of her official functions under the
Philippines-United States Military Assistance Agreement of 1947 and
Military Bases Agreement of 1947, as amended.6
50
In support of the motion, the petitioners claimed that JUSMAG, composed of an Army,
Navy and Air Group, had been established under the Philippine-United States Military
Assistance Agreement entered into on 21 March 1947 to implement the United States'
program of rendering military assistance to the Philippines. Its headquarters in Quezon
City is considered a temporary installation under the provisions of Article XXI of the
Military Bases Agreement of 1947. Thereunder, "it is mutually agreed that the United
States shall have the rights, power and authority within the bases which are necessary for
the establishment, use and operation and defense thereof or appropriate for the control
thereof." The 1979 amendment of the Military Bases Agreement made it clear that the
United States shall have "the use of certain facilities and areas within the bases and shall
have effective command and control over such facilities and over United States
personnel, employees, equipment and material." JUSMAG maintains, at its Quezon City
headquarters, a Navy Exchange referred to as the NEX-JUSMAG. Checking of purchases
at the NEX is a routine procedure observed at base retail outlets to protect and safeguard
merchandise, cash and equipment pursuant to paragraphs 2 and 4(b) of
NAVRESALEACT SUBIC INST. 5500.1.7 Thus, Bradford's order to have purchases of
all employees checked on 22 January 1987 was made in the exercise of her duties as
Manager of the NEX-JUSMAG.
They further claimed that the Navy Exchange (NAVEX), an instrumentality of the U.S.
Government, is considered essential for the performance of governmental functions. Its
mission is to provide a convenient and reliable source, at the lowest practicable cost, of
articles and services required for the well-being of Navy personnel, and of funds to be
used for the latter's welfare and recreation. Montoya's complaint, relating as it does to the
mission, functions and responsibilities of a unit of the United States Navy, cannot then be
allowed. To do so would constitute a violation of the military bases agreement.
Moreover, the rights, powers and authority granted by the Philippine government to the
United States within the U.S. installations would be illusory and academic unless the
latter has effective command and control over such facilities and over American
personnel, employees, equipment and material. Such rights, power and authority within
the bases can only be exercised by the United States through the officers and officials of
its armed forces, such as Bradford. Baer vs. Tizon8 and United States of America vs.
Ruiz9 were invoked to support these claims.
On 6 July 1987, Montoya filed a motion for preliminary attachment 10 on the ground that
Bradford was about to depart from the country and was in the process of removing and/or
disposing of her properties with intent to defraud her creditors. On 14 July 1987,
Montoya filed her opposition to the motion to dismiss 11 alleging therein that the grounds
proffered in the latter are bereft of merit because (a) Bradford, in ordering the search
upon her person and belongings outside the NEX JUSMAG store in the presence of
onlookers, had committed an improper, unlawful and highly discriminatory act against a
Filipino employee and had exceeded the scope of her authority; (b) having exceeded her
authority, Bradford cannot rely on the sovereign immunity of the public petitioner
because her liability is personal; (c) Philippine courts are vested with jurisdiction over the
case because Bradford is a civilian employee who had committed the challenged act
outside the U.S. Military Bases; such act is not one of those exempted from the
jurisdiction of Philippine courts; and (d) Philippine courts can inquire into the factual
circumstances of the case to determine whether or not Bradford had acted within or
outside the scope of her authority.
On 16 July 1987, public petitioner and Bradford filed a reply to Montoya's opposition and
an opposition to the motion for preliminary attachment. 12
On 17 July 1987, 13 the trial court 14 resolved both the motion to dismiss and the motion
for preliminary attachment in this wise:
On the motion to dismiss, the grounds and arguments interposed for
the dismissal of this case are determined to be not indubitable. Hence,
the motion is denied for lack of merit.
The motion for preliminary attachment is granted in the interest of
justice, upon the plaintiff's filing of a bond in the sum of P50,000.00.
Upon Montoya's filing of the required bond, the trial court issued on 28 July 1987 an
Order 15 decreeing the issuance of a writ of attachment and directing the sheriff to serve
the writ immediately at the expense of the private respondent. The writ of attachment was
issued on that same date. 16
Instead of filing a motion to reconsider the last two (2) orders, or an answer — insofar as
Bradford is concerned — both the latter and the public petitioner filed on 6 August 1987
the instant petition to annul and set aside the above Resolution of 17 July 1987 and the
writ of attachment issued pursuant thereto. As grounds therefor, they allege that:
10. The respondent judge committed a grave abuse of discretion
amounting to lack of jurisdiction in denying the motion to dismiss the
complaint in Civil Case No. 224-87 "for lack of merit." For the action
was in effect a suit against the United States of America, a foreign
sovereign immune from suit without its consent for the cause of action
pleaded in the complaint, while its co-petitioner was immune from suit
for act(s) done by her in the performance of her official functions as
manager of the US Navy Exchange Branch at the Headquarters of
JUSMAG, under the Philippines-United States Military Assistance
Agreement of 1947 and Military Bases Agreement of 1947, as
amended. 17
On 5 August 1987, the trial court set Civil Case No. 224-87 for pre-trial and trial on 27
August 1987 at 9:30 a.m. 18
On 12 August 1987, this Court resolved to require the respondents to comment on the
petition. 19
51
On 19 August 1987, petitioners filed with the trial court a Motion
to Suspend Proceedings 20 which the latter denied in its Order of 21 August 1987. 21
In the meantime, however, for failure to file an answer, Bradford was declared in default
in Civil Case No. 224-87 and Montoya was allowed to present her evidence ex-
parte. 22 She thus took the witness stand and presented Mrs. Nam Thi Moore and Mrs.
Miss Yu as her witnesses.
On 10 September 1987, the trial court rendered its decision 23 in Civil Case No. 224-87,
the dispositive portion of which reads:
Prescinding from the foregoing, it is hereby determined that the
unreasonable search on the plaintiff's person and bag caused (sic) done
recklessly and oppressively by the defendant, violated, impaired and
undermined the plaintiff's liberty guaranteed by the Constitution,
entitling her to moral and exemplary damages against the defendant.
The search has unduly subjected the plaintiff to intense humiliation
and indignities and had consequently ridiculed and embarrassed
publicly said plaintiff so gravely and immeasurably.
WHEREFORE, judgment is hereby rendered for the plaintiff and
against the defendant Maxine Bradford assessing the latter to pay unto
the former the sums of P300,000.00 for moral damages, P100,000.00
for exemplary damages and P50,000.00 for actual expenses and
attorney's fees.
No costs.
SO ORDERED. 24
Bradford received a copy of the decision on 21 September 1987. On that same date, she
and the public petitioner filed with this Court a Petition for Restraining Order 25 which
sought to have the trial court's decision vacated and to prevent the execution of the same;
it was also prayed that the trial court be enjoined from continuing with Civil Case No.
224-87. We noted this pleading in the Resolution of 23 September 1987. 26
In the meantime, since no motion for reconsideration or appeal had been interposed by
Bradford challenging the 10 September 1987 Decision which she had received on 21
September 1987, respondent Judge issued on 14 October 1987 an order directing that an
entry of final judgment be made. A copy thereof was received by Bradford on 21
October, 1987. 27
Also on 14 October 1987, Montoya filed her Comment with Opposition to the Petition
for Restraining Order. 28Respondent Judge had earlier filed his own Comment to the
petition on 14 September 1987. 29
On 27 October 1987, Montoya filed before the trial court a motion for the execution of
the Decision of 10 September 1987 which petitioners opposed on the ground that
although this Court had not yet issued in this case a temporary restraining order, it had
nevertheless resolved to require the respondents to comment on the petition. It was
further averred that execution thereof would cause Bradford grave injury; moreover,
enforcement of a writ of execution may lead to regrettable incidents and unnecessarily
complicate the situation in view of the public petitioner's position on the issue of the
immunity of its employees. In its Resolution of 11 November 1987, the trial court
directed the issuance of a writ of execution. 30
Consequently, the petitioners filed on 4 December 1987, a Manifestation and Motion
reciting the foregoing incidents obtaining before the trial court and praying that their
petition for a restraining order be resolved. 31
On 7 December 1987, this Court issued a Temporary Restraining Order "ENJOINING
the respondents and the Provincial Sheriff of Pasig, Metro Manila, from enforcing the
Decision dated September 10, 1987, and the Writs of Attachment and Execution issued in
Civil Case No. 224-87." 32
On 28 November 1988, after the private respondent filed a Rejoinder to the Consolidated
Reply to the Comments filed by the petitioners, this Court gave due course to the petition
and required the parties to submit their respective memoranda-Petitioners filed their
Memorandum on 8 February
1989 33 while private respondent filed her Memorandum on 14 November
1990. 34
The kernel issue presented in this case is whether or not the trial court committed grave
abuse of discretion in denying the motion to dismiss based on the following grounds: (a)
the complaint in Civil Case No. 224-87 is in effect a suit against the public petitioner, a
foreign sovereign immune from suit which has not given consent to such suit and (b)
Bradford is immune from suit for acts done by her in the performance of her official
functions as manager of the U.S. Navy Exchange of JUSMAG pursuant to the
Philippines-United States Military Assistance Agreement of 1947 and the Military Bases
Agreement of 1947, as amended.
Aside from maintaining the affirmative view, the public petitioner and Bradford even go
further by asserting that even if the latter's act were ultra vires she would still be immune
from suit for the rule that public officers or employees may be sued in their personal
capacity for ultra vires and tortious acts is "domestic law" and not applicable in
International Law. It is claimed that the application of the immunity doctrine does not
turn upon the lawlessness of the act or omission attributable to the foreign national for if
52
this were the case, the concept of immunity would be meaningless as inquiry into the
lawlessness or illegality of the act or omission would first have to be made before
considering the question of immunity; in other words, immunity will lie only if such act
or omission is found to be lawful.
On the other hand, Montoya submits that Bradford is not covered by the protective
mantle of the doctrine of sovereign immunity from suit as the latter is a mere civilian
employee of JUSMAG performing non-governmental and proprietary functions. And
even assuming arguendo that Bradford is performing governmental functions, she would
still remain outside the coverage of the doctrine of state immunity since the act
complained of is ultra vires or outside the scope of her authority. What is being
questioned is not the fact of search alone, but also the manner in which the same was
conducted as well as the fact of discrimination against Filipino employees. Bradford's
authority to order a search, it is asserted, should have been exercised with restraint and
should have been in accordance with the guidelines and procedures laid down by the
cited "NAVRESALEACT, Subic Inst." Moreover, ultra vires acts of a public officer or
employee, especially tortious and criminal acts, are his private acts and may not be
considered as acts of the State. Such officer or employee alone is answerable for any
liability arising therefrom and may thus be proceeded against in his personal capacity.
Montoya further argues that both the acts and person of Bradford are not exempt from the
Philippine courts' jurisdiction because (a) the search was conducted in a parking lot at
Scout Borromeo, Quezon City, outside the JUSMAG store and, therefore, outside the
territorial control of the U.S. Military Bases in the Philippines; (b) Bradford does not
possess diplomatic immunity under Article 16(b) of the 1953 Military Assistance
Agreement creating the JUSMAG which provides that only the Chief of the Military
Advisory Group and not more than six (6) other senior members thereof designated by
him will be accorded diplomatic immunity; 35 and (c) the acts complained of do not fall
under those offenses where the U.S. has been given the right to exercise its jurisdiction
(per Article 13 of the 1947 Military Bases Agreement, as amended by the, Mendez-Blair
Notes of 10 August 1965). 36
Finally, Montoya maintains that at the very least, Philippine courts may inquire into the
factual circumstances of the case to determine whether petitioner Bradford is immune
from suit or exempt from Philippine jurisdiction. To rule otherwise would render the
Philippine courts powerless as they may be easily divested of their jurisdiction upon the
mere invocation of this principle of immunity from suit.
A careful review of the records of this case and a judicious scrutiny of the arguments of
both parties yield nothing but the weakness of the petitioners' stand. While this can be
easily demonstrated, We shall first consider some procedural matters.
Despite the fact that public petitioner was not impleaded as a defendant in Civil Case No.
224-87, it nevertheless joined Bradford in the motion to dismiss — on the theory that the
suit was in effect against it — without, however, first having obtained leave of court to
intervene therein. This was a procedural lapse, if not a downright improper legal tack.
Since it was not impleaded as an original party, the public petitioner could, on its own
volition, join in the case only by intervening therein; such intervention, the grant of which
is discretionary upon the court, 37 may be allowed only upon a prior motion for leave with
notice to all the parties in the action. Of course, Montoya could have also impleaded the
public petitioner as an additional defendant by amending the complaint if she so believed
that the latter is an indispensible or necessary party.
Since the trial court entertained the motion to dismiss and the subsequent pleadings filed
by the public petitioner and Bradford, it may be deemed to have allowed the public
petitioner to intervene. Corollarily, because of its voluntary appearance, the public
petitioner must be deemed to have submitted itself to the jurisdiction of the trial court.
Moreover, the said motion does not specify any of the grounds for a motion to dismiss
enumerated in Section 1, Rule 16 of the Rules of Court. It merely recites state immunity
on the part of the public petitioner and immunity on the part of Bradford for the reason
that the act imputed to her was done in the performance of her official functions. The
upshot of this contention is actually lack of cause of action — a specific ground for
dismissal under the aforesaid Rule — because assuming arguendo that Montoya's rights
had been violated by the public petitioner and Bradford, resulting in damage or injury to
the former, both would not be liable therefor, and no action may be maintained thereon,
because of the principle of state immunity.
The test of the sufficiency of the facts to constitute a cause of action is whether or not,
admitting the facts alleged in the complaint, the court could render a valid judgment upon
the same, in accordance with the prayer in the complaint. 38
A motion to dismiss on the ground of failure to state a cause of action hypothetically
admits the truth of the allegations in the complaint.
In deciding a motion to dismiss, a court may grant, deny, allow amendments to the
pleadings or defer the hearing and determination of the same if the ground alleged does
not appear to be indubitable. 39 In the instant case, while the trial court concluded that
"the grounds and arguments interposed for the dismissal" are not "indubitable," it denied
the motion for lack of merit. What the trial court should have done was to defer there
solution on the motion instead of denying it for lack of merit.
In any event, whatever may or should have been done, the public petitioner and Bradford
were not expected to accept the verdict, making their recourse to this Court via the instant
petition inevitable. Thus, whether the trial court should have deferred resolution on or
denied outright the motion to dismiss for lack of merit is no longer pertinent or relevant.
The complaint in Civil Case No. 224-87 is for damages arising from what Montoya
describes as an "illegal search" on her "person and belongings" conducted outside the
JUSMAG premises in front of many people and upon the orders of Bradford, who has the
53
propensity for laying suspicion on Filipinos for theft or shoplifting. It is averred that the
said search was directed only against Montoya.
Howsoever viewed, it is beyond doubt that Montoya's cause of action is premised on the
theory that the acts complained of were committed by Bradford not only outside the
scope of her authority — or more specifically, in her private capacity — but also outside
the territory where she exercises such authority, that is, outside the NEX-JUSMAG —
particularly, at the parking area which has not been shown to form part of the facility of
which she was the manager. By their motion to dismiss, public petitioner and Bradford
are deemed to have hypothetically admitted the truth of the allegation in the complaint
which support this theory.
The doctrine of state immunity and the exceptions thereto are summarized in Shauf
vs. Court of Appeals, 40 thus:
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. 41
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 not been formally
impleaded. 42 It must be noted, however, that the rule is not so 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 was clearly set forth by Justice Zaldivar in Director of
the Bureau of Telecommunications, et al. vs. Aligaen, etc., et
al. 43 "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 or 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." 44 The rationale for this ruling is that the doctrinaire of state
immunity cannot be used as an instrument for perpetrating an
injustice. 45
In the case of Baer, etc. vs. Tizon, etc., et al., 46 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., 47 we held that:
. . . 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. . . . .
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
54
 with malice and in bad faith, or beyond the scope of his authority or
jurisdiction. 48
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, 49 we declared:
It bears stressing at this point that the above
observations 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.
Since it is apparent from the complaint that Bradford was sued in her private or personal
capacity for acts allegedly done beyond the scope and even beyond her place of official
functions, said complaint is not then vulnerable to a motion to dismiss based on the
grounds relied upon by the petitioners because as a consequence of the hypothetical
admission of the truth of the allegations therein, the case falls within the exception to the
doctrine of state immunity.
In the recent cases of Williams vs. Rarang 50 and Minucher vs. Court of Appeals, 51 this
Court reiterated this exception. In the former, this Court observed:
There is no question, therefore, that the two (2) petitioners actively
participated in screening the features and articles in the POD as part of
their official functions. Under the rule that U.S. officials in the
performance of their official functions are immune from suit, then it
should follow that petitioners may not be held liable for the questioned
publication.
It is to be noted, however, that the petitioners were sued in their
personal capacities for their alleged tortious acts in publishing a
libelous article.
The question, therefore, arises — are American naval officers who
commit a crime or tortious act while discharging official functions still
covered by the principle of state immunity from suit? Pursuing the
question further, does the grant of rights, power, and authority to the
United States under the RP-US Bases Treaty cover immunity of its
officers from crimes and torts? Our answer is No.
In the latter, even on the claim of diplomatic immunity — which Bradford does not in
fact pretend to have in the instant case as she is not among those granted diplomatic
immunity under Article 16(b) of the 1953 Military Assistance Agreement creating the
JUSMAG 52 — this Court ruled:
Even Article 31 of the Vienna Convention on Diplomatic Relations
admits of exceptions. It reads:
1. A diplomatic agent shall enjoy immunity from
the criminal jurisdiction of the receiving State. He
shall also enjoy immunity from its civil and
administrative jurisdiction except in the case of:
xxx xxx xxx
(c) an action relating to any
professional or commercial
activity exercised by the
diplomatic agent in the receiving
State outside his official
functions (Emphasis supplied).
There can be no doubt that on the basis of the allegations in the complaint, Montoya has a
sufficient and viable cause of action. Bradford's purported non-suability on the ground of
state immunity is then a defense which may be pleaded in the answer and proven at the
trial.
Since Bradford did not file her Answer within the reglementary period, the trial court
correctly declared her in default upon motion of the private respondent. The judgment
then rendered against her on 10 September 1987 after the ex parte reception of the
evidence for the private respondent and before this Court issued the Temporary
Restraining Order on 7 December 1987 cannot be impugned. The filing of the instant
petition and the knowledge thereof by the trial court did not prevent the latter from
proceeding with Civil Case No.
224-87. "It is elementary that the mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a lower Court, does not interrupt the
course of the latter when there is no writ of injunction restraining it." 53
WHEREFORE, the instant petition is DENIED for lack of merit. The Temporary
Restraining Order of 7 December 1987 is hereby LIFTED.
Costs against petitioner Bradford.
SO ORDERED.
55

G.R. No. 102918. March 30, 1993.
JOSE V. NESSIA, petitioner,
vs.
JESUS M. FERMIN and MUNICIPALITY OF VICTORIAS, NEGROS
OCCIDENTAL, respondents.
Christine V . Nessia in for petitioner.
Rolando Magbanua Antiquiera for Jesus Fermin.
DECISION
BELLOSILLO, J.:
Article 27 of the Civil Code accords judicial relief to "[a]ny person suffering material or
moral loss because a public servant or employee refuses or neglects, without just cause,
to perform his official duty." This the trial court 1 applied in finding respondent Jesus M.
Fermin, Mayor of Victorias, Negros Occidental, liable for damages for maliciously
refusing to act on the vouchers of petitioner Jose V. Nessia covering the latter's claim for
reim-bursement of travel expense allowances. The Court of Appeals 2 however ruled that
evidence as well as the complaint itself did not establish unjust inaction, hence, it
reversed the court a quo and dismissed the case for lack of cause of action. Considering
the disparity in the findings and conclusions of the lower courts, the version of the
appellate court cannot readily be accepted, hence, We are constrained to scrutinize them
more judiciously.
This recourse originated from the complaint filed against respondents Jesus M. Fermin
and the Municipality of Victorias, Negros Occidental, by petitioner Jose V. Nessia for
recovery of damages and reimbursement of expenses incurred in the performance of his
official duties as the then Deputy Municipal Assessor of Victorias. The complaint
theorized that Fermin deliberately ignored and caused the non-payment of the vouchers in
question because Nessia defied the former's request to all municipal officials to register
and vote in Victorias in the 1980 local elections.
In his answer with counterclaim, Fermin disputed the allegations in the complaint and
countered that the claims of Nessia could not be approved because they exceeded the
budgetary appropriations therefor.
On its part, Victorias concurred with the arguments of Fermin, and added that plaintiff
Nessia was blamable for his predicament because he neither gave Fermin the justification
for drawing funds in excess of the budgetary appropriations nor amended his vouchers to
conform thereto.
Issues having been joined, the parties presented their evidence, except for Victorias
which was declared in default for non-appearance at the pre-trial conference. 3 On 24
April 1987, judgment was rendered by the trial court in favor of Nessia. 4 On the basis of
the evidence, the trial court found that Fermin maliciously refused to act on plaintiffs
vouchers, bolstered by his inaction on Nessia's follow-up letters inquiring on the status
thereof.
The court ruled that the vouchers were received by the secretary of Fermin thereby
negating his contention that the vouchers were not received by him. But even if the
vouchers never reached him, the trial court nevertheless held Mayor Fermin answerable
because he should have made inquiries into their whereabouts upon receipt of Nessia's
follow-up letters. In view of the foregoing, and the admission of Fermin at the trial that
he did nothing on the vouchers, the court of origin awarded damages to Nessia, although
less than what he prayed for.
Both Nessia and Fermin elevated the case to the Court of Appeals, Nessia praying for an
increase in the award of moral and exemplary damages, and Fermin seeking exoneration
from liability.
The Municipality of Victorias did not appeal.
On 19 July 1991, respondent appellate court dismissed Nessia's complaint on the ground
of lack of cause of action because the complaint itself as well as Nessia's own testimony
admitted that Fermin acted on the vouchers as may be drawn from the allegations that
Fermin denied/refused the claims.
On the basis of its own findings, the Court of Appeals held that the real "situation before
us is one in which plaintiff-appellant accuses defendant-appellant of failing to act on
vouchers which are not shown to have been received by the latter; and even if received,
could not be approved for payment because they were submitted late and were not
supported by an appropriation."
Nessia now comes to Us on appeal under Rule 45 of the Rules of Court raising four (4)
issues, namely: (1) whether respondent court may reverse the decision of the trial court
which has become final and executory as against Victorias for failure to appeal
therefrom; (2) whether respondent appellate court may grant affirmative relief to
Victorias which did not appeal the trial court's decision; (3) whether respondent court
erred in exonerating Fermin from malicious refusal to act on petitioner's claims; and, (4)
whether respondent court erred in exonerating Fermin and Victorias from liabilities,
which may be summarized into whether Fermin maliciously refused to act on the
vouchers, hence, liable under Art. 27, and whether the dismissal of the complaint by
56
respondent court absolved Victorias from liability, even though it did not appeal the
decision of the trial court.
Before disposing of the merits of the case, We first resolve the issue raised by the Office
of the Solicitor General that the assailed decision attached to the petition is not a certified
true copy as required in Circular 1-88, par. 3, hence, the petition should have been
dismissed. The allegation is erroneous because the challenged decision, Annex "A" of the
petition, 5 is actually certified by Atty. Leandro D. Rebong, a Division Clerk of Court of
respondent Court of Appeals.
On the first question, We are inclined to sustain the trial court primarily because its
appraisal of conflicting testimonies is afforded greater weight and respect. Likewise,
finding no error in its appreciation of the contradictory testimonies relating to the dispute
on the receipt of the vouchers, the determination of the trial court that they were actually
received should be followed. Consequently, as between the findings of the Court of
Appeals drawn simply from the reading of the records and the transcript of stenographic
notes, and the determination of the trial court which heard the case, the opinion of the
latter deserves greater acceptance, even if both conclusions are supported by evidence.
The claim that the name inscribed on the lower left portion of the transmittal letter does
not appear to be the customary signature of the Mayor's secretary does not convincingly
show that she did not receive the vouchers, nor was it convincingly shown that the
signature purportedly hers was not actually her handwriting. Since proof of the receipt of
the vouchers has not been confuted, the secretary should have indicated on the letter she
received that the enclosures therein were not so enclosed or attached, otherwise, it could
be presumed that they were actually enclosed or attached thereto, and properly received
by the addressee. Moreover, the version favoring receipt of the vouchers carries the
presumption of regularity in official acts, more so that the handwritten name of the
secretary, which closely resembles her signature, immediately follows the list of
enclosures.
As regards the alleged response of Fermin to Nessia, i.e., 'Basta indi lang ako 'mag-
approve sang vouchers mo", the same should have been interpreted in Ilonggo as "refusal
to approve or disapprove" considering that Nessia testified on it to clarify an earlier
statement that "I presented him my vouchers but he did not act on it (sic)." 6
In Roque v. Baun We held 7 —
"If the decision of the Court of Appeals on the controversial matter suffers, as it does,
from some ambiguity, the doubt should be resolved to sustain the trial court in the light of
the familiar and accepted rule that 'the judge who tries a case in the court below, has
vastly superior advantage for the ascertainment of truth and the detection of falsehood
over an appellate court sitting as a court of review. The appellate court can merely follow
with the eye, the cold words of the witness as transcribed upon the record, knowing at the
same time, from actual experience, that more or less, of what the witness actually did say,
is always lost in the process of transcribing. But the main difficulty does not lie here.
There is an inherent impossibility of determining with any degree of accuracy what credit
is justly due to a witness from merely reading the words spoken by him, even if there was
no doubt as to the identity of the words' (Moran, Comments on the Rules of Court)."
It is further contended that Nessia may not claim relief under Art. 27 because his theory
of unjust inaction is incompatible with his allegations in the complaint that Fermin
denied/refused the vouchers. In support of this view, the cases of Sta. Ana v. Maliwa 8
and Cunanan v. Amparo 9 were cited, where We ruled that a pleader is not allowed to
contradict his own pleading.
We do not agree, however, that the allegations in the complaint alluded to, i.e., "plaintiff
presented the said claims to the defendant Mayor Jesus Fermin, but refused and continued
to refuse the payments thereof' and "defendants refused and continue to refuse to pay,"
should be construed as admission of the act of disapproval of the claims. Refusal to pay is
not inferred solely from disapproval of claims but from inaction thereon as well.
Accordingly, the said allegations cannot be considered as contradictory to Nessia's theory
of unjust inaction.
On the defense of lack of appropriation, while it is true that Fermin may not be compelled
by mandamus to approve vouchers because they exceeded the budgetary appropriations,
he may, nevertheless, be held liable for damages under Art. 27 for malicious inaction
because he did not act on the vouchers. This provision against official inaction finds its
ally in Sec. 3, par. (f), of R.A. 3019, as amended, otherwise known as the "Anti-Graft and
Corrupt Practices Act," which criminalizes "[n]eglecting or refusing, after due demand or
request, without sufficient justification, to act within a reasonable time on any matter
pending before him for the purpose of . . . discriminating against any interested party."
It is apparent that public officials are called upon to act expeditiously on matters pending
before them. For only in acting thereon either by signifying approval or disapproval may
the plaintiff continue on to the next step of the bureaucratic process. On the other hand,
official inaction brings to a standstill the administrative process and the plaintiff is left in
the darkness of uncertainty. In this regard, official "inaction" cannot be equated with
"disapproval."
In Baldivia v. Lota, We dismissed on appeal the petition to compel by mandamus
approval of certain vouchers, even though the disapproval was politically motivated, on
the basis that respondent Mayor was bound to disapprove vouchers not supported by
appropriations. 10 In the penultimate paragraph, We made the following pronouncement:
"Indeed, respondent could have, and should have, either included the claim of petitioners
herein in the general budget he is bound to submit, pursuant to section 2295 of the
Revised Administrative Code, or prepared a special budget for said claim, and urged the
municipal council to appropriate the sum necessary therefor. In any event, if the
municipal mayor fails or refuses to make the necessary appropriation, petitioners may
57
bring an action against the municipality for the recovery of what is due them and after
securing a judgment therefor, seek a writ of mandamus against the municipal council and
the municipal mayor to compel the enactment and approval of the appropriation
ordinance necessary therefor (19 R.C.L. 1951-1052; 34 Am. Jur., 950-951; 35 Am. Jur.,
21)."
This is precisely what the petitioner did; he filed a collection case to establish his claim
against Fermin and the Municipality of Victorias, which Nessia satisfactorily proved.
As regards the second question, it is settled that a non-appellant cannot, on appeal, seek
an affirmative relief. We ruled in Medida v. Court of Appeals 11 that —
"[A]n appellee who has not himself appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the decision of the court below (Alba vs.
Santander, et al. 160 SCRA 8[1988]). He cannot impugn the correctness of a judgment
not appealed from by him. He cannot assign such errors as are designed to have the
judgment modified. All that said appellee can do is to make a counter-assignment of
errors or to argue on issues raised at the trial only for the purpose of sustaining the
judgment in his favor, even on grounds not included in the decision of the court a quo nor
raised in the appellant's assignment of errors or arguments (Aparri vs. Court of Appeals,
et al., 13 SCRA 611 [1965]; Carbonel vs. Court of Appeals, et al., 147 SCRA 565 [1987];
Dizon, Jr. vs. National Labor Relations Commission, et al., 181 SCRA 472 [1990])."
That the decision of respondent court essentially exonerated the Municipality of Victorias
from liability is a mere consequence of the dismissal of the case for lack of cause of
action, although erroneously. In any case, this matter has become irrelevant considering
the conclusion herein reached.
Incidentally, in his memorandum, counsel for private respondent insinuates that the lower
courts may have overlooked that 6 April 1980, the alleged date when Nessia supposedly
went to Fermin's office and told the latter to go to court instead, was a Sunday. This is not
correct, for it is apparent from the transcript of stenographic notes that the date is actually
16 April 1980, a Wednesday. Indeed, such allusion that is intended merely to gain undue
advantage over the opponent does not square well with the sporting tenets of fair play.
WHEREFORE, the petition is GRANTED and the assailed decision of 19 July 1991 of
respondent Court of Appeals as well as its 19 November 1991 Resolution denying
Nessia's motion for reconsideration are SET ASIDE, and the decision of 24 April 1987
of the Regional Trial Court, Branch LXI, Kabankalan, Negros Occidental, 12 is
REINSTATED and AFFIRMED.
SO ORDERED.
G.R. No. 107271. September 10, 2003
CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners,
vs.
HON. MAURO T. ALLARDE, Presiding Judge of Branch 123, RTC of Caloocan
City, ALBERTO A. CASTILLO, Deputy Sheriff of Branch 123, RTC of Caloocan
City, and DELFINA HERNANDEZ SANTIAGO and PHILIPPINE NATIONAL
BANK (PNB), respondents.
DECISION
CORONA, J.:
Assailed in this petition for certiorari is the decision[1] dated August 31, 1992, of
the Court of Appeals in CA G.R. SP No. 27423, ordering the Regional Trial Court of
Caloocan City, Branch 123, to implement an alias writ of execution dated January 16,
1992. The dispositive portion read as follows:
WHEREFORE the petition is hereby granted ordering the Regional Trial Court of
Kaloocan City, Branch 123, to immediately effect the alias writ of execution dated
January 16, 1992 without further delay.
Counsel for the respondents are warned that a repetition of their contemptuous act to
delay the execution of a final and executory judgment will be dealt with more severely.
SO ORDERED.[2]
It is important to state at the outset that the dispute between petitioner and private
respondent has been litigated thrice before this Court: first, in G.R. No. L-39288-89,
entitled Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al., decided on
January 31, 1985; second, in G.R. No. 98366, entitled City Government of Caloocan vs.
Court of Appeals, et al., resolved on May 16, 1991, and third, in G.R. No. 102625,
entitledSantiago vs. Sto. Tomas, et al., decided on August 1, 1995. This is not to mention
the numerous concurrent efforts by the City Government of Caloocan to seek relief from
other judicial and quasi-judicial bodies. The present petition for certiorari is
the fourth time we are called upon to resolve the dispute.
The factual and procedural antecedents follow.
Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through
Ordinance No. 1749, abolished the position of Assistant City Administrator and 17 other
positions from the plantilla of the local government of Caloocan. Then Assistant City
Administrator Delfina Hernandez Santiago and the 17 affected employees of the City
58
Government assailed the legality of the abolition before the then Court of First Instance
(CFI) of Caloocan City, Branch 33.
In 1973, the CFI declared the abolition illegal and ordered the reinstatement of all
the dismissed employees and the payment of their back salaries and other emoluments.
The City Government of Caloocan appealed to the Court of Appeals. Respondent
Santiago and her co-parties moved for the dismissal of the appeal for being dilatory and
frivolous but the appellate court denied their motion. Thus, they elevated the case on
certiorari before this Court, docketed as G.R. No. L-39288-89, Heirs of Abelardo
Palomique, et al. vs. Marcial Samson, et al. In our Resolution dated January 31, 1985, we
held that the appellate court erred in not dismissing the appeal, and that the appeal of the
City Government of Caloocan was frivolous and dilatory. In due time, the
resolution lapsed into finality and entry of judgment was made on February 27, 1985.
In 1986, the City Government of Caloocan paid respondent Santiago P75,083.37 in
partial payment of her backwages, thereby leaving a balance of P530,761.91. Her co-
parties were paid in full.[3] In 1987, the City of Caloocan appropriated funds for her
unpaid back salaries. This was included in Supplemental Budget No. 3 for the fiscal year
1987. Surprisingly, however, the City later refused to release the money to respondent
Santiago.
Respondent Santiago exerted effort for the execution of the remainder of the money
judgment but she met stiff opposition from the City Government of Caloocan. On
February 12, 1991, Judge Mauro T. Allarde, RTC of Caloocan City, Branch 123, issued a
writ of execution for the payment of the remainder of respondent Santiagos back salaries
and other emoluments.[4]
For the second time, the City Government of Caloocan went up to the Court of
Appeals and filed a petition for certiorari, prohibition and injunction to stop the trial court
from enforcing the writ of execution. The CA dismissed the petition and affirmed the
order of issuance of the writ of execution.[5] One of the issues raised and resolved therein
was the extent to which back salaries and emoluments were due to respondent Santiago.
The appellate court held that she was entitled to her salaries from October, 1983 to
December, 1986.
And for the second time, the City Government of Caloocan appealed to this Court
in G.R. No. 98366, City Government of Caloocan vs. Court of Appeals, et al. The petition
was dismissed, through our Resolution of May 16, 1991, for having been filed late and
for failure to show any reversible error on the part of the Court of Appeals. The
resolution subsequently attained finality and the corresponding entry of judgment was
made on July 29, 1991.
On motion of private respondent Santiago, Judge Mauro T. Allarde ordered the
issuance of an alias writ of execution on March 3, 1992. The City Government of
Caloocan moved to reconsider the order, insisting in the main that respondent Santiago
was not entitled to backwages from 1983 to 1986. The court a quo denied the motion and
forthwith issued the alias writ of execution. Unfazed, the City Government of Caloocan
filed a motion to quash the writ, maintaining that the money judgment sought to be
enforced should not have included salaries and allowances for the years 1983-1986. The
trial court likewise denied the motion.
On July 27, 1992, Sheriff Alberto A. Castillo levied and sold at public auction one
of the motor vehicles of the City Government of Caloocan, with plate no. SBH-165,
for P100,000. The proceeds of the sale were turned over to respondent Santiago in partial
satisfaction of her claim, thereby leaving a balance of P439,377.14, inclusive of interest.
Petitioners filed a motion questioning the validity of the auction sale of the vehicle with
plate no. SBH-165, and a supplemental motion maintaining that the properties of the
municipality were exempt from execution. In his Order dated October 1, 1992, Judge
Allarde denied both motions and directed the sheriff to levy and schedule at public
auction three more vehicles of the City of Caloocan - [6]
ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor No. C-240-199629; Chassis
No. MBB-910369C;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB1-174328,
Chassis No. MBB-910345C; Plate No. SDL-653;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB-165196;
Chassis No. MBB 910349C.
All the vehicles, including that previously sold in the auction sale, were owned by
the City and assigned for the use of herein petitioner Norma Abracia, Division
Superintendent of Caloocan City, and other officials of the Division of City Schools.
Meanwhile, the City Government of Caloocan sought clarification from the Civil
Service Commission (CSC) on whether respondent Santiago was considered to have
rendered services from 1983-1986 as to be entitled to backwages for that period. In its
Resolution No. 91-1124, the CSC ruled in the negative.
On November 22, 1991, private respondent Santiago challenged the CSC resolution
before this Court in G.R. No. 102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we
initially dismissed the petition for lack of merit; however, we reconsidered the dismissal
of the petition in our Resolution dated August 1, 1995, this time ruling in favor of
respondent Santiago:
The issue of petitioner Santiagos right to back salaries for the period from October 1983
to December 1986 having been resolved in G.R. No. 98366 on 16 May 1991, CSC
Resolution No. 91-1124 promulgated later on 24 September 1991 in particular, its ruling
on the extent of backwages due petitioner Santiago was in fact moot and academic at the
time of its promulgation. CSC Resolution No. 91-1124 could not, of course, set aside
what had been judicially decided with finality x x x x the court considers that resort by
the City Government of Caloocan to respondent CSC was but another attempt to deprive
petitioner Santiago of her claim to back salaries x x x and a continuation of the Citys
abuse and misuse of the rules of judicial procedure. The Citys acts have resulted in
59
wasting the precious time and resources of the courts and respondent CSC. (Underscoring
supplied).
On October 5, 1992, the City Council of Caloocan passed Ordinance No. 0134,
Series of 1992, which included the amount of P439,377.14 claimed by respondent
Santiago as back salaries, plus interest.[7] Pursuant to the subject ordinance, Judge Allarde
issued an order dated November 10, 1992, decreeing that:
WHEREFORE, the City Treasurer (of Caloocan), Norberto Azarcon is hereby ordered to
deliver to this Court within five (5) days from receipt hereof, (a) managers check
covering the amount of P439,378.00 representing the back salaries of petitioner Delfina
H. Santiago in accordance with Ordinance No. 0134 S. 1992 and pursuant to the final and
executory decision in these cases.
Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check
intended as payment for respondent Santiagos claims. This, despite the fact that he was
one of the signatories of the ordinance authorizing such payment. On April 29, 1993,
Judge Allarde issued another order directing the Acting City Mayor of Caloocan,
Reynaldo O. Malonzo, to sign the check which had been pending before the Office of the
Mayor since December 11, 1992. Acting City Mayor Malonzo informed the trial court
that he could not comply with the order since the subject check was not formally turned
over to him by the City Mayor who went on official leave of absence on April 15, 1993,
and that he doubted whether he had authority to sign the same.[8]
Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A.
Castillo to immediately garnish the funds of the City Government of Caloocan
corresponding to the claim of respondent Santiago.[9] On the same day, Sheriff Alberto A.
Castillo served a copy of the Notice of Garnishment on the Philippine National Bank
(PNB), Sangandaan Branch, Caloocan City. When PNB immediately notified the City of
Caloocan of the Notice of Garnishment, the City Treasurer sent a letter-advice informing
PNB that the order of garnishment was illegal, with a warning that it would hold PNB
liable for any damages which may be caused by the withholding of the funds of the
city. PNB opted to comply with the order of Judge Allarde and released to the Sheriff a
managers check amounting to P439,378. After 21 long years, the claim of private
respondent Santiago was finally settled in full.
On June 4, 1993, however, while the instant petition was pending, the City
Government of Caloocan filed yet another motion with this Court, a Motion to Declare in
Contempt of Court; to Set Aside the Garnishment and Administrative Complaint against
Judge Allarde, respondent Santiago and PNB. Subsequently, the City Government of
Caloocan filed a Supplemental Petition formally impleading PNB as a party-respondent
in this case.
The instant petition for certiorari is directed this time against the validity of the
garnishment of the funds of the City of Caloocan, as well as the validity of the levy and
sale of the motor vehicles belonging to the City of Caloocan. More specifically,
petitioners insist that Judge Allarde gravely abused his discretion in:
(a) ordering the garnishment of the funds of the City of Caloocan deposited with the
PNB, since it is settled that public funds are beyond the reach of garnishment and even
with the appropriation passed by the City Council, the authority of the Mayor is still
needed for the release of the appropriation;
(b) ordering the levy and sale at public auction of three (3) motor vehicles owned by the
City of Caloocan, which vehicles are necessary for public use and cannot be attached nor
sold in an execution sale to satisfy a money judgment against the City of Caloocan;
(c) peremptorily denying petitioner City of Caloocans urgent motions to vacate and set
aside the auction sale of the motor vehicle with PLATE NO. SBH-165, notwithstanding
that the auction sale by the Sheriff was tainted with serious irregularities, more
particularly:
i. non-compliance with the mandatory posting of the notice of sale;
ii. non-observance of the procedure that a sale through public auction has to be made and
consummated at the time of the auction, at the designated place and upon actual payment
of the purchase price by the winning bidder;
iii. violation of Sec. 21, Rule 39 of the Rules of Court to the effect that sale of personal
property capable of manual delivery must be sold within the view of those attending the
sale; and,
iv. the Sheriffs Certificate of Sale contained false narration of facts respecting the actual
time of the public auction;
(d) the enforcement of the levy made by the Sheriff covering the three (3) motor vehicles
based on an alias writ that has long expired.
The petition has absolutely no merit. The trial court committed no grave abuse of
discretion in implementing the alias writ of execution to settle the claim of respondent
Santiago, the satisfaction of which petitioner had been maliciously evading for 21 years.
Petitioner argues that the garnishment of its funds in PNB was invalid inasmuch as
these were public funds and thus exempt from execution. Garnishment is considered a
specie of attachment by means of which the plaintiff seeks to subject to his claim
property of the defendant in the hands of a third person, or money owed by such third
person or garnishee to the defendant.[10]
The rule is and has always been that all government funds deposited in the PNB or
any other official depositary of the Philippine Government by any of its agencies or
instrumentalities, whether by general or special deposit, remain government funds and
may not be subject to garnishment or levy, in the absence of a corresponding
appropriation as required by law:[11]
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Even though the rule as to immunity of a state from suit is relaxed, the power of the
courts ends when the judgment is rendered. Although the liability of the state has been
judicially ascertained, the state is at liberty to determine for itself whether to pay the
judgment or not, and execution cannot issue on a judgment against the state. Such statutes
do not authorize a seizure of state property to satisfy judgments recovered, and only
convey an implication that the legislature will recognize such judgment as final and make
provision for the satisfaction thereof.[12]
The rule is based on obvious considerations of public policy. 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.[13]
However, the rule is not absolute and admits of a well-defined exception, that is,
when there is a corresponding appropriation as required by law. Otherwise stated, the rule
on the immunity of public funds from seizure or garnishment does not apply where the
funds sought to be levied under execution are already allocated by law specifically for the
satisfaction of the money judgment against the government. In such a case, the monetary
judgment may be legally enforced by judicial processes.
Thus, in the similar case of Pasay City Government, et al. vs. CFI of Manila, Br. X,
et al.,[14] where petitioners challenged the trial courts order garnishing its funds in
payment of the contract price for the construction of the City Hall, we ruled that, while
government funds deposited in the PNB are exempt from execution or garnishment, this
rule does not apply if an ordinance has already been enacted for the payment of the Citys
obligations
Upon the issuance of the writ of execution, the petitioner-appellants moved for its
quashal alleging among other things the exemption of the government from execution.
This move on the part of petitioner-appellants is at first glance laudable for all
government funds deposited with the Philippine National Bank by any agency or
instrumentality of the government, whether by way of general or special deposit, remain
government funds and may not be subject to garnishment or levy. But inasmuch as an
ordinance has already been enacted expressly appropriating the amount of P613,096.00
as payment to the respondent-appellee, then the herein case is covered by the exception to
the general rule x x x x
In the instant case, the City Council of Caloocan already approved and passed
Ordinance No. 0134, Series of 1992, allocating the amount of P439,377.14 for
respondent Santiagos back salaries plus interest. Thus this case fell squarely within the
exception. For all intents and purposes, Ordinance No. 0134, Series of 1992, was the
corresponding appropriation as required by law. The sum indicated in the ordinance for
Santiago were deemed automatically segregated from the other budgetary allocations of
the City of Caloocan and earmarked solely for the Citys monetary obligation to her. The
judgment of the trial court could then be validly enforced against such funds.
Indeed, this conclusion is further buttressed by the Certification issued on
December 23, 1992 by Norberto C. Azarcon, City Treasurer of Caloocan:
CERTIFICATION
This is to certify that according to the records available in this Office the claim for
backwages of the HON. JUDGE DELFINA H. SANTIAGO has been properly obligated
and can be collected in accordance with existing accounting and auditing rules and
regulations.
This is to certify further that in case the claim is not collected within the present fiscal
year, such claim shall be entered in the books of Accounts Payable and can still be
collected in the next fiscal year x x x x (Underscoring supplied)
Petitioners reliance on Municipality of Makati vs. Court of Appeals, et
al.,[15] and Commissioner of Public Highways vs. San Diego,[16] does not help their
cause.[17] Both cases implicitly affirmed that public funds may be garnished if there is a
statute which appropriated the amount so garnished. Thus, in Municipality of Makati,
citing San Diego, we unequivocally held that:
In this jurisdiction, well-settled is the rule that public funds are not subject to levy and
execution, unless otherwise provided by statute x x x x
Similarly, we cannot agree with petitioners argument that the appropriation
ordinance of the City Council did not authorize PNB to release the funds because only
the City Mayor could authorize the release thereof. A valid appropriation of public funds
lifts its exemption from execution. Here, the appropriation passed by the City Council of
Caloocan providing for the payment of backwages to respondent was duly approved and
signed by both the council and then Mayor Macario Asistio, Jr. The mayors signature
approving the budget ordinance was his assent to the appropriation of funds for
respondent Santiagos backwages. If he did not agree with such allocation, he could have
vetoed the item pursuant to Section 55 of the Local Government Code.[18] There was no
such veto.
In view of the foregoing discourse, we dismiss petitioners unfounded assertion,
probably made more out of sheer ignorance of prevailing jurisprudence than a deliberate
attempt to mislead us, that the rule that public funds (are) beyond the reach of levy and
garnishment is not qualified by any condition.[19]
We now come to the issue of the legality of the levy on the three motor vehicles
belonging to the City of Caloocan which petitioners claimed to be exempt from
execution, and which levy was based on an alias writ that had purportedly expired.
Suffice it to say that Judge Allarde, in his Order dated November 10, 1992, [20] already
lifted the levy on the three vehicles, thereby formally discharging them from the
jurisdiction of the court and turning them over to the City Government of Caloocan:
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x x x x the levy of the three (3) vehicles made by Sheriff Alberto Castillo pursuant to the
Orders of this Court dated October 1 and 8, 1992 is hereby lifted and the said Sheriff is
hereby ordered to return the same to the City Government in view of the satisfaction of
the decision in these cases x x x x
It is thus unnecessary for us to discuss a moot issue.
We turn to the third issue raised by petitioners that the auction sale by Sheriff
Alberto A. Castillo of the motor vehicle with plate no. SBH-165 was tainted with serious
irregularities. We need not emphasize that the sheriff enjoys the presumption of
regularity in the performance of the functions of his office. This presumption prevails in
the absence of substantial evidence to the contrary and cannot be overcome by bare and
self-serving allegations. The petitioners failed to convince us that the auction sale
conducted by the sheriff indeed suffered from fatal flaws. No evidence was adduced to
prove that the sheriff had been remiss in the performance of his duties during the public
auction sale. Indeed it would be injudicious for us to assume, as petitioners want us to do,
that the sheriff failed to follow the established procedures governing public auctions.
On the contrary, a review of the records shows that the sheriff complied with the
rules on public auction. The sale of the Citys vehicle was made publicly in front of the
Caloocan City Hall on the date fixed in the notice July 27, 1992. In fact, petitioners in
their Motion to Declare in Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint admitted as much:
On July 27, 1992, by virtue of an alias writ of execution issued by the respondent court, a
vehicle owned by the petitioner xxx was levied and sold at public auction for the amount
of P100,000.00 and which amount was immediately delivered to the private respondent x
x x x[21]
Hence, petitioners cannot now be heard to impugn the validity of the auction sale.
Petitioners, in desperation, likewise make much of the proceedings before the trial
court on October 8, 1992, wherein petitioner Norma Abracia, Superintendent of the
Division of City Schools of Caloocan, was commanded to appear and show cause why
she should not be cited in contempt for delaying the execution of judgment. This was in
connection with her failure (or refusal) to surrender the three motor vehicles assigned to
the Division of City Schools to the custody of the sheriff. Petitioner Abracia, assisted by
Mr. Ricardo Nagpacan of the Division of City Schools, appeared during the hearing but
requested a ten-day period within which to refer the matter of contempt to a counsel of
her choice. The request was denied by Judge Allarde in his assailed order dated October
8, 1992. Thus petitioner Abracia claimed, inter alia, that: (a) she was denied due process;
(b) the silence of the order of Judge Allarde on her request for time violated an orderly
and faithful recording of the proceedings, and (c) she was coerced into agreeing to
surrender the vehicles.
We do not think so. What violates due process is the absolute lack of opportunity to
be heard. That opportunity, the Court is convinced, was sufficiently accorded to
petitioner Abracia. She was notified of the contempt charge against her; she was
effectively assisted by counsel when she appeared during the hearing on October 8, 1992;
and she was afforded ample opportunity to answer and refute the charge against her. The
circumstance that she opted not to avail of her chance to be heard on that occasion by
asking for an extension of time within which to hire a counsel of her choice, a request
denied by the trial court, did not transgress nor deprive her of her right to due process.
Significantly, during the hearing on October 8, 1992, Mr. Nagpacan manifested in
open court that, after conferring with petitioner Abracia, the latter was willing to
surrender these vehicles into the custody of the sheriff on the condition that the standing
motion (for contempt) be withdrawn.[22] Her decision was made freely and voluntarily,
and after conferring with her counsel. Moreover, it was petitioner Abracia herself who
imposed the condition that respondent Santiago should withdraw her motion for contempt
in exchange for her promise to surrender the subject vehicles. Thus, petitioner Abracias
claim that she was coerced into surrendering the vehicles had no basis.
Even assuming ex gratia argumenti that there indeed existed certain legal
infirmities in connection with the assailed orders of Judge Allarde, still, considering the
totality of circumstances of this case, the nullification of the contested orders would be
way out of line. For 21 long years, starting 1972 when this controversy started up to 1993
when her claim was fully paid out of the garnished funds of the City of Caloocan,
respondent Santiago was cruelly and unjustly deprived of what was due her. It would be,
at the very least, merciless and unchristian to make private respondent refund the City of
Caloocan the amount already paid to her, only to force her to go through the same
nightmare all over again.
At any rate, of paramount importance to us is that justice has been served. No right
of the public was violated and public interest was preserved.
Finally, we cannot simply pass over in silence the deplorable act of the former
Mayor of Caloocan City in refusing to sign the check in payment of the Citys obligation
to private respondent. It was an open defiance of judicial processes, smacking of political
arrogance, and a direct violation of the very ordinance he himself approved. Our
Resolution in G.R. No. 98366, City Government of Caloocan vs. Court of Appeals, et al.,
dated May 16, 1991, dismissing the petition of the City of Caloocan assailing the
issuance of a writ of execution by the trial court, already resolved with finality all
impediments to the execution of judgment in this case. Yet, the City Government of
Caloocan, in a blatant display of malice and bad faith, refused to comply with the
decision. Now, it has the temerity to come to this Court once more and continue inflicting
injustice on a hapless citizen, as if all the harm and prejudice it has already heaped upon
respondent Santiago are still not enough.
This Court will not condone the repudiation of just obligations contracted by
municipal corporations. On the contrary, we will extend our aid and every judicial facility
to any citizen in the enforcement of just and valid claims against abusive local
government units.
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 WHEREFORE, the petition is hereby DISMISSED for utter lack of merit. The
assailed orders of the trial court dated October 1, 1992, October 8, 1992 and May 7,
1993, respectively, are AFFIRMED.
Petitioners and their counsels are hereby warned against filing any more pleadings
in connection with the issues already resolved with finality herein and in related cases.
Costs against petitioners.
SO ORDERED.

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