DOH v Phil Pharmawealth GR No.

182358
Department of Health, Secretary Alfredo Romualdez, USec. Margarita Galon, petitioner;
Philippine Pharmawealth, Inc, respondent;
February 20, 2013
Second Division
Del Castillo, J.
FACTS:
1. On December 22, 1998, Administrative Order (AO) No. 27 series of 1995 was
issued by then Department of Health Secretary Alfredo G. Romualdez. AO 27
sets the guidelines and procedure for accreditation of government suppliers of
pharmaceutical products for sale or distribution to the public, such accreditation
to be valid for three years but subject to annual review.
2. On January 25, 2000, Secretary Romualdez issued AO 10 series of 2006 which
amended AO 27. Under Sec 7 of AO 10, accreditation period for government
suppliers of pharmaceutical products was reduced to 2 years. Also, accreditation
of Pharmaceutical companies may be recalled, suspended or revoked after due
deliberation and proper notice by the DOH Accreditation Committee, through its
Chairman.
3. Sec 7 of AO 10 was later amended AO 66 series of 2008 which stated that the 2
year accreditation may be recalled, suspended or revoked only after due
deliberation, hearing and notice by the DOH Accreditation Committee, through its
Chairman.
4. On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided
for a list and category of sanctions to be imposed on accredited government
suppliers. In line with Memorandum No. 171-C, the DOH, through former
Undersecretary Ma. Margarita M. Galon, issued Memorandum No. 209 series of
2000 inviting representatives of 24 accredited drug companies, including herein
respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000.
5. During the meeting, Undersecretary Galon handed them copies of a document
entitled Report on Violative Products issued by the Bureau of Food and Drugs
(BFAD), which detailed violations or adverse findings relative to these accredited
drug companies products. PPIs products were included as BFAD found that
PPIs products sold to the public were unfit for human consumption.
6. The companies were directed to submit their respective explanations on the
findings within 10 days. PPI did not submit its reply on time. Instead, it submitted
a letter stating that it is referring the matter to its lawyers for preparation of a
reply but with no indicated date of compliance, which DOH Usec Galon found
untenable, thus she informed PPI thru letter that its accreditation had been
suspended for two years in accordance with AO 10 and Memorandum No. 171-

C. PPI thru letter, demanded that Usec Galon cease and desist from enforcing
the suspension under pain of legal redress.
7. PPI then filed a complaint to declare certain DOH issuances (Memorandum No.
171-C, AO 10, Series 2000, Usec Galons suspension order; and AO 14, Series
2001) null and void for being in violation of Section 26, Republic Act 3720, with
prayer for injunction and damages against Usec Galon and later DOH Secretary
Dayrit. It claimed that its accreditation was suspended without due notice and
hearing. It prayed that it be awarded moral damages, attorneys fees and costs of
suit.
8. The respondent DOH officials filed a motion to dismiss, alleging that it gave PPI
the opportunity to explain but it did not do so in a timely manner. The suspension
was necessary to stop the distribution and sale of substandard products. In a
Manifestation and Motion, the DOH officials further moved to dismiss the case as
it was a suit against the State; the complaint was improperly verified; and the
corporate officer lacked the authority to file the suit. The Regional Trial Court
dismissed the case, holding that the suit is against the State, thus the principle of
immunity form suit is applicable.
9. On appeal to the CA, however, the latter reversed and set aside the RTC
decision. According to the CA, it was premature for the RTC to have dismissed
the case, as the cause of actions were sufficiently alleged in the complaint.
Further, by filing a complaint, the DOH officials hypothetically admitted the
allegations in the complaint-that they were being sued in their official and private
capacities. Thus the DOH officials, herein petitioners, elevated the case to the
Supreme Court, arguing that PPIs prayer for damages should be considered a
suit against the State for it would require the needed appropriation to satisfy
PPIs claim for damages should it win. In issuing the assailed DOH issuances,
they acted within the scope of their authority, hence should not be made to
account individually. Petition was granted.
ISSUE:
Whether or not DOH, in this circumstance, is under the mantle of state immunity.
HELD:
As a general rule, a state may not be sued. However, if it consents, either expressly or
impliedly, then it may be the subject of a suit. There is express consent when a law,
either special or general, so provides. On the other hand, there is implied consent when
the state enters into a contract or it itself commences litigation. However, it must be
clarified that when a state enters into a contract, it does not automatically mean that it
has waived its nonsuability. The State will be deemed to have impliedly waived its nonsuability [only] if it has entered into a contract in its proprietary or private capacity.
[However,] when the contract involves its sovereign or governmental capacity, x x x no
such waiver may be implied. Statutory provisions waiving state immunity are
construed in strictissimi juris. For, waiver of immunity is in derogation of sovereignty.