REPUBLIC OF THE PHILIPPINES vs.

JUDGE VICENTE
A. HIDALGO
FACTS: Tarcila Laperal Mendoza filed an action for the
annulment or declaration of nullity of the title and deed
of sale, reconveyance and/or recovery of ownership and
possession a property against the Republic of the
Philippines in the RTC of Manila. It is also known as the
Arlegui Residence which housed two Philippine presidents
and which now holds the Office of the Press Secretary
and the News Information Bureau. The case was initially
dismissed by the presiding Judge of the Manila RTC
(Branch 35)on the ground of state immunity. The case
was re-raffled to the Manila RTC (Branch 37), with
respondent Vicente A. Hidalgo as presiding Judge. In an
Order, Judge Hidalgo declared the Republic in default for
failure of Solicitor Gabriel Francisco Ramirez, the handling
solicitor, to file the required Answer within the period
prayed for in his motion for extension. It is contended
that the respondent Judge violated the Constitution and
the fundamental rule that government funds are exempt
from execution or garnishment when he caused the
issuance of the writ of execution against the Republic.
ISSUE: WON the Republic can invoke immunity from suit.
HELD: It is settled that when the State gives its consent
to be sued, it does not there by necessarily consent to an
unrestrained execution against it. Tersely put, when the
State waives its immunity, all it does, in effect, is to give
the other party an opportunity to prove, if it can, that the
state has a liability. The functions and public services
rendered by the State cannot be allowed to paralyzed or
disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.
MUNICIPALITY OF MAKATI vs. THE HONORABLE
COURT OFAPPEALS

FACTS: The present petition for review is an off-shoot of

expropriation proceedings initiated by petitioner
Municipality of Makati against private respondent Admiral
Finance Creditors Consortium, Inc., Home Building
System & Realty Corporation and one Arceli P. Jo ,
involving a parcel of land and improvements and
registered in the name of the latter. It was certified that a
bank account had been opened with the PNB Buendia
Branch under petitioner's name made pursuant to the
provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal
reports regarding the value of the property, respondent
RTC judge rendered a decision fixing the appraised value
of the property at P5,291,666.00, and ordering petitioner
to pay this amount minus the advanced payment which
was earlier released to private respondent. Petitioner
however refused to comply with the garnishment despite
its having two bank accounts in PNB. The first one was
dedicated for expropriation proceedings while the other
was for public funds. The first bank account cannot cover
the remaining amount due, while the other account had
more than enough to satisfy the amount due. Petitioner
reasoned out that its funds at the PNB Buendia Branch
could neither be garnished nor levied upon execution, for
to do so would result in the disbursement of public funds
without the proper appropriation required under the law.
ISSUE: WON the Municipality of Makati is exempt from
paying just compensation.
HELD: NO. For three years now, petitioner has enjoyed
possession and use of the subject property
notwithstanding its inexcusable failure to comply with its
legal obligation to pay just compensation. Just
compensation means not only the correct determination
of the amount to be paid to the owner of the land but
also the payment of the land within a reasonable time
from its taking. Without prompt payment, compensation

cannot be considered "just" for the property owner is

made to suffer the consequence of being immediately
deprived of his land while being made to wait for a long
period. The State's power of eminent domain should be
exercised within the bounds of fair play and justice. In the
case at bar, considering that valuable property has been
taken, the compensation to be paid fixed and the
municipality is in full possession and utilizing the property
for public purpose, for three (3) years, the Court finds
that the municipality has had more than reasonable time
to pay full compensation.

On appeal, both the CA and the High Court denied UPs

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

University of the Philippines v. Dizon

Aggrieved, UP elevated the matter to the CA. The CA

sustained the RTC. Hence, this petition.

FACTS: University of the Philippines (UP) entered into a

General Construction Agreement with respondent Stern
Builders Corporation (Stern Builders) for the construction
and renovation of the buildings in the campus of the UP
in Los Bas. UP was able to pay its first and second billing.
However, the third billing worth P273,729.47 was not
paid due to its disallowance by the Commission on Audit
(COA). Thus, Stern Builders sued the UP to collect the
unpaid balance.
On November 28, 2001, the RTC rendered its decision
ordering UP to pay Stern Builders. Then on January 16,
2002, the UP filed its motion for reconsideration. The RTC
denied the motion. The denial of the said motion was
served upon Atty. Felimon Nolasco (Atty. Nolasco) of the
UPLB Legal Office on May 17, 2002. Notably, Atty.
Nolasco was not the counsel of record of the UP but the
OLS in Diliman, Quezon City.
Thereafter, the UP filed a notice of appeal on June 3,
2002. However, the RTC denied due course to the notice
of appeal for having been filed out of time. On October 4,
2002, upon motion of Stern Builders, the RTC issued the
writ of execution.

ISSUES:
I. Whether or not the UPs funds can be validly garnished?
II. Whether or not the UPs appeal dated June 3, 2002 has
been filed out of time?
HELD: The petition for review is meritorious.
FIRST ISSUE: UPs funds, being government funds, are not
subject to garnishment.
POLITICAL LAW: garnishment of public funds; suability vs.
liability of the State
Despite its establishment as a body corporate, the UP
remains to be a "chartered institution" performing a
legitimate government function. Irrefragably, the UP is a
government instrumentality, performing the States
constitutional mandate of promoting quality and
accessible education. As a government instrumentality,
the UP administers special funds sourced from the fees
and income enumerated under Act No. 1870 and Section
1 of Executive Order No. 714, and from the yearly

appropriations, to achieve the purposes laid down by

Section 2 of Act 1870, as expanded in Republic Act No.
9500. All the funds going into the possession of the UP,
including any interest accruing from the deposit of such
funds in any banking institution, constitute a "special
trust fund," the disbursement of which should always be
aligned with the UPs mission and purpose, and should
always be subject to auditing by the COA. The funds of
the UP are government funds that are public in character.
They include the income accruing from the use of real
property ceded to the UP that may be spent only for the
attainment of its institutional objectives.
A marked distinction exists between suability of the State
and its liability. As the Court succinctly stated in
Municipality of San Fernando, La Union v. Firme: A
distinction should first be made between suability and
liability. "Suability depends on the consent of the state to
be sued, liability on the applicable law and the
established facts. The circumstance that a state is suable
does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first
consent to be sued. Liability is not conceded by the mere
fact that the state has allowed itself to be sued. When
the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the
defendant is liable.
The Constitution strictly mandated that "no money shall
be paid out of the Treasury except in pursuance of an
appropriation made by law." The execution of the
monetary judgment against the UP was within the
primary jurisdiction of the COA. It was of no moment that
a final and executory decision already validated the claim
against the UP.
SECOND ISSUE: Period of appeal did not start without
effective service of decision upon counsel of record.

REMEDIAL LAW: doctrine of immutability of a final

judgment; service of judgments; fresh-period rule;
computation of time
At stake in the UPs plea for equity was the return of the
amount of P16,370,191.74 illegally garnished from its
trust funds. Obstructing the plea is the finality of the
judgment based on the supposed tardiness of UPs
appeal, which the RTC declared on September 26, 2002.
It is true that a decision that has attained finality
becomes immutable and unalterable, and cannot be
modified in any respect, even if the modification is meant
to correct erroneous conclusions of fact and law, and
whether the modification is made by the court that
rendered it or by this Court as the highest court of the
land. But the doctrine of immutability of a final judgment
has not been absolute, and has admitted several
exceptions, among them: (a) the correction of clerical
errors; (b) the so-called nunc pro tunc entries that cause
no prejudice to any party; (c) void judgments; and (d)
whenever circumstances transpire after the finality of the
decision that render its execution unjust and inequitable.
We rule that the UPs plea for equity warrants the Courts
exercise of the exceptional power to disregard the
declaration of finality of the judgment of the RTC for
being in clear violation of the UPs right to due process.
Firstly, the service of the denial of the motion for
reconsideration upon Atty. Nolasco of the UPLB Legal
Office was invalid and ineffectual because he was
admittedly not the counsel of record of the UP. Verily, the
service of the denial of the motion for reconsideration
could only be validly made upon the OLS in Diliman, and
no other. It is settled that where a party has appeared by
counsel, service must be made upon such counsel. This is
clear enough from Section 2, second paragraph, of Rule
13, Rules of Court, which explicitly states that: "If any
party has appeared by counsel, service upon him shall be

made upon his counsel or one of them, unless service

upon the party himself is ordered by the court. Where
one counsel appears for several parties, he shall only be
entitled to one copy of any paper served upon him by the
opposite side."
Secondly, even assuming that the service upon Atty.
Nolasco was valid and effective, such that the remaining
period for the UP to take a timely appeal would end by
May 23, 2002, it would still not be correct to find that the
judgment of the RTC became final and immutable
thereafter due to the notice of appeal being filed too late
on June 3, 2002. In so declaring the judgment of the RTC
as final against the UP, the CA and the RTC applied the
rule contained in the second paragraph of Section 3, Rule
41 of the Rules of Court to the effect that the filing of a
motion for reconsideration interrupted the running of the
period for filing the appeal; and that the period resumed
upon notice of the denial of the motion for
reconsideration. For that reason, the CA and the RTC
might not be taken to task for strictly adhering to the rule
then prevailing.
However, equity calls for the retroactive application in
the UPs favor of the fresh-period rule that the Court first
announced in mid-September of 2005 through its ruling
in Neypes v. Court of Appeals, viz: "to standardize the
appeal periods provided in the Rules and to afford
litigants fair opportunity to appeal their cases, the Court
deems it practical to allow a fresh period of 15 days
within which to file the notice of appeal in the Regional
Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration." The
retroactive application of the fresh-period rule, a
procedural law that aims "to regiment or make the
appeal period uniform, to be counted from receipt of the
order denying the motion for new trial, motion for
reconsideration (whether full or partial) or any final order

or resolution," is impervious to any serious challenge.

This is because there are no vested rights in rules of
procedure.
Consequently, even if the reckoning started from May 17,
2002, when Atty. Nolasco received the denial, the UPs
filing on June 3, 2002 of the notice of appeal was not
tardy within the context of the fresh-period rule. For the
UP, the fresh period of 15-days counted from service of
the denial of the motion for reconsideration would end on
June 1, 2002, which was a Saturday. Hence, the UP had
until the next working day, or June 3, 2002, a Monday,
within which to appeal, conformably with Section 1 of
Rule 22, Rules of Court, which holds that: "If the last day
of the period, as thus computed, falls on a Saturday, a
Sunday, or a legal holiday in the place where the court
sits, the time shall not run until the next working day."
Cosculluela v. Court of Appeals
FACTS: The Republic of the Philippines filed a complaint
with the Court of First Instance of Iloilo to expropriate two
parcels of land in the municipality of Barotac, Iloilo owned
by petitioner Sebastian Cosculluela and one Mita
Lumampao, for the construction of the canal network of
the Barotac Irrigation Project. The trial court rendered a
decision granting the expropriation and ordered thepublic
respondent to pay Lumampao, the sum of P20,000 and
Cosculluela, the sum of P200,000.00.The Republic
contends that the funds of the National Irrigation
Authority (NIA) are government funds and therefore,
cannot be disbursed without a government appropriation.
ISSUE: WON the Republic is exempt from paying the just
compensation demanded by the petitioner in view of nondisbursement of funds without prior public appropriation.
HELD: NO. One of the basic principles enshrined in our
Constitution is that no person shall be deprived of his

private property without due process of law; and in

expropriation cases, an essential element of due process
is that there must be just compensation whenever
private property is taken for public use. Just
compensation means not only the correct determination
of the amount to be paid to the owner of the land but
also the payment of the land within a reasonable time
from its taking.

Holy See v. Rosario Jr.

FACTS: Petition arose from a controversy over a parcel of
land. Lot 5-A, registered under the name Holy See, was
contiguous to Lot 5-B and 5-D under the name of
Philippine Realty Corporation (PRC). The land was
donated by the Archdiocese of Manila to the Papal
Nuncio, which represents the Holy See, who exercises
sovereignty over the Vatican City, Rome, Italy, for his
residence.
Said lots were sold through an agent to Ramon Licup who
assigned his rights to respondents Starbright Sales
Enterprises, Inc.
When the squatters refuse to vacate the lots, a dispute
arose between the two parties because both were unsure
whose responsibility was it to evict the squatters from
said lots. Respondent Starbright Sales Enterprises Inc.
insists that Holy See should clear the property while Holy
See says that respondent corporation should do it or the
earnest money will be returned. With this, Msgr. Cirilios,
the agent, subsequently returned the P100,000 earnest
money.
The same lots were then sold to Tropicana Properties and
Development Corporation.

Starbright Sales Enterprises, Inc. filed a suit for

annulment of the sale, specific performance and
damages against Msgr. Cirilios, PRC as well as Tropicana
Properties and Development Corporation. The Holy See
and Msgr. Cirilos moved to dismiss the petition for lack of
jurisdiction based on sovereign immunity from suit. RTC
denied the motion on ground that petitioner already
"shed off" its sovereign immunity by entering into a
business contract. The subsequent Motion for
Reconsideration was also denied hence this special civil
action for certiorari was forwarded to the Supreme Court.
ISSUE: Whether or not Holy See can invoke sovereign
immunity.
HELD: The Court held that Holy See may properly invoke
sovereign immunity for its non-suability. As expressed in
Sec. 2 Art II of the 1987 Constitution, generally accepted
principles of International Law are adopted by our Courts
and thus shall form part of the laws of the land as a
condition and consequence of our admission in the
society of nations.
It was noted in Article 31(A) of the 1961 Vienna
Convention on Diplomatic Relations that diplomatic
envoy shall be granted immunity from civil and
administrative jurisdiction of the receiving state over any
real action relating to private immovable property. The
Department of Foreign Affairs (DFA) certified that the
Embassy of the Holy See is a duly accredited diplomatic
missionary to the Republic of the Philippines and is thus
exempted from local jurisdiction and is entitled to the
immunity rights of a diplomatic mission or embassy in
this Court.
Furthermore, it shall be understood that in the case at
bar, the petitioner has bought and sold lands in the
ordinary course of 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 the lot were made for profit but
claimed that it acquired said property for the site of its
mission or the Apostolic Nunciature in the Philippines.
The Holy See is immune from suit because the act of
selling the lot of concern is non-propriety in nature. The
lot was acquired through a donation from the Archdiocese
of Manila, not for a commercial purpose, but for the use
of petitioner to construct the official place of residence of
the Papal Nuncio thereof. The transfer of the property and
its subsequent disposal are likewise clothed with a
governmental (non-proprietal) character as petitioner
sold the lot not for profit or gain rather because it merely
cannot evict the squatters living in said property.
In view of the foregoing, the petition is hereby GRANTED
and the complaints were dismissed accordingly.
Minucher v. Court of Appeals
Facts: 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. 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 08January 1988, Presiding Judge Eutropio
Migrino rendered a decision acquitting the two accused.
ISSUE: WON respondent Scalzo can invoke immunity from
suit.

HELD: YES. 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 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. 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.
Arigo v. Swift
Facts: 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 eastsoutheast of Palawan. No one was injured in the incident,
and there have been no reports of leaking fuel or oil.

Petitioners claim that the grounding, salvaging and postsalvaging 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 TawiTawi, which events violate their constitutional rights to a
balanced and healthful ecology.
ISSUES:
Whether or not petitioners have legal standing.
Whether or not US respondents may be held liable for
damages caused by USS Guardian.
Whether or not the waiver of immunity from suit under
VFA applies in this case.
Petitioners have legal standing
Locus standi is a right of appearance in a court of
justice on a given question. Specifically, it is a partys
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. However, the rule on standing is
a procedural matter which this Court has relaxed for nontraditional 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.
In the landmark case of Oposa v. Factoran, Jr., 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. Such
right carries with it the correlative duty to refrain from
impairing the environment.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.
Second issue: YES.
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 were 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.
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 latters internal
waters and the territorial sea.

In the case of warships, 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 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.
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. A foreign warships unauthorized entry
into our internal waters with resulting damage to
marine resources is one situation in which the
above provisions may apply.
The Court also fully concurred with Justice Carpios 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 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 countrys 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 of UNCLOS
Third issue: NO.
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.
The Court considered a view that a ruling on the
application or non-application of criminal jurisdiction
provisions of the VFA 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.
The Court also found 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.

The contract price for the Northrail Project was pegged

at USD 421,050,000. On 26 February 2004, the Philippine
government and EXIM

China National Machinery & Equipment Corp.

(Group) v. Santamaria

Bank entered into a counterpart financial agreement

Buyer Credit Loan Agreement No. BLA 04055 (the Loan
Agreement). In the Loan Agreement, EXIM Bank agreed to
extend Preferential Buyers Credit in the amount of USD
400,000,000 in favor of the Philippine government in
order to finance the construction of Phase I of the
Northrail Project. On 13 February 2006, respondents filed
a Complaint for Annulment of Contract and Injunction
with Urgent Motion for Summary Hearing to Determine
the Existence of Facts and Circumstances Justifying the
Issuance of Writs of Preliminary Prohibitory and
Mandatory Injunction and/or TRO against CNMEG, the
Office of the Executive Secretary, the DOF, the
Department of Budget and Management, the National
Economic Development Authority and Northrail.

Facts: On 14 September 2002, petitioner China National

Machinery & Equipment Corp. (Group) (CNMEG),
represented by its chairperson, Ren Hongbin, entered into
a Memorandum of Understanding with the North Luzon
Railways Corporation (Northrail), represented by its
president, Jose L. Cortes, Jr. for the conduct of a feasibility
study on a possible railway line from Manila to San
Fernando, La Union (the Northrail Project).
On 30 August 2003, the Export Import Bank of China
(EXIM Bank) and the Department of Finance of the
Philippines (DOF) entered into a Memorandum of
Understanding (Aug 30 MOU), wherein China agreed to
extend Preferential Buyers Credit to the Philippine
government to finance the Northrail Project. The Chinese
government designated EXIM Bank as the lender, while
the Philippine government named the DOF as the
borrower. Under the Aug 30 MOU, EXIM Bank agreed to
extend an amount not exceeding USD 400,000,000 in
favor of the DOF, payable in 20 years, with a 5-year grace
period, and at the rate of 3% per annum. On 1 October
2003, the Chinese Ambassador to the Philippines, Wang
Chungui (Amb. Wang), wrote a letter to DOF Secretary
Jose Isidro Camacho (Sec. Camacho) informing him of
CNMEGs designation as the Prime Contractor for the
Northrail Project. On 30 December 2003, Northrail and
CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon
Railway System from Caloocan to Malolos on a turnkey
basis (the Contract Agreement).

The case was filed before the Regional Trial Court,

National Capital Judicial Region, Makati City, Branch 145
(RTC Br. 145). In the Complaint, respondents alleged that
the Contract Agreement and the Loan Agreement were
void for being contrary to (a) the Constitution; (b)
Republic Act No. 9184 (R.A. No. 9184), otherwise known
as the Government Procurement Reform Act; (c)
Presidential Decree No. 1445, otherwise known as the
Government Auditing Code; and (d) Executive Order No.
292, otherwise known as the Administrative Code.
On 15 May 2007, RTC Br. 145 issued an Omnibus Order
denying CNMEGs Motion to Dismiss and setting the case
for summary hearing to determine whether the injunctive
reliefs prayed for should be issued.

CNMEG then filed a Motion for Reconsideration, which

was denied by the trial court in an Order dated 10 March
2008.
Thus, CNMEG filed before the CA a Petition for Certiorari
with Prayer for the Issuance of TRO and/or Writ of
Preliminary Injunction dated 4 April 2008. the appellate
court dismissed the Petition for Certiorari.

Subsequently, CNMEG filed a Motion for Reconsideration,

which was denied by the CA in a Resolution dated 5
December 2008.
Petitioners Argument: Petitioner claims that the EXIM
Bank extended financial assistance to Northrail because
the bank was mandated by the Chinese government, and
not because of any motivation to do business in the
Philippines, it is clear from the foregoing provisions that
the Northrail Project was a purely commercial
transaction.
Respondents Argument: respondents alleged that the
Contract Agreement and the Loan Agreement were void
for being contrary to (a) the Constitution; (b) Republic Act
No. 9184 (R.A. No. 9184), otherwise known as the
Government Procurement Reform Act; (c) Presidential
Decree No. 1445, otherwise known as the Government
Auditing Code; and (d) Executive Order No. 292,
otherwise known as the Administrative Code.
Issues: Whether or not petitioner CNMEG is an agent of
the sovereign Peoples Republic of China.
Whether or not the Northrail contracts are products of an
executive agreement between two sovereign states.

Ruling: The instant Petition is DENIED. Petitioner China

National Machinery & Equipment Corp. (Group) is not
entitled to immunity from suit, and the Contract
Agreement is not an executive agreement.
CNMEGs prayer for the issuance of a TRO and/or Writ of
Preliminary Injunction is DENIED for being moot and
academic.
The Court explained the doctrine of sovereign immunity
in Holy See v. Rosario, to wit: 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.
(Emphasis supplied; citations omitted.) As it stands now,
the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities
(jure imperii ).
The mantle of state immunity cannot be extended to
commercial, private and proprietary acts ( jure gestionis).
Since the Philippines adheres to the restrictive theory, it
is crucial to ascertain the legal nature of the act involved
whether the entity claiming immunity performs
governmental, as opposed to proprietary, functions. As
held in United States of America v. Ruiz Admittedly, the
Loan Agreement was entered into between EXIM Bank
and the Philippine government, while the Contract
Agreement was between Northrail and CNMEG. Although
the Contract Agreement is silent on the classification of
the legal nature of the transaction, the foregoing

provisions of the Loan Agreement, which is an

inextricable part of the entire undertaking, nonetheless
reveal the intention of the parties to the Northrail Project
to classify the whole venture as commercial or
proprietary in character. Thus, piecing together the
content and tenor of the Contract Agreement, the
Memorandum of Understanding dated 14 September
2002, Amb. Wangs letter dated 1 October 2003, and the
Loan Agreement would reveal the desire of CNMEG to
construct the Luzon Railways in pursuit of a purely
commercial activity performed in the ordinary course of
its business.
Liang v. People
FACTS: Petitioner is an economist working with the Asian
Development Bank (ADB). Sometime in 1994, for
allegedly uttering defamatory words against fellow ADB
worker Joyce Cabal, he was charged before the
Metropolitan Trial Court (MeTC) of Mandaluyong City with
two counts of grave oral defamation. Petitioner was
arrested by virtue of a warrant issued by the MeTC. After
fixing petitioners bail, the MeTC released him to the
custody of the Security Officer of ADB. The next day, the
MeTC judge received an "office of protocol" from the DFA
stating that petitioner is covered by immunity from legal
process under Section 45 of the Agreement between the
ADB and the Philippine Government regarding the
Headquarters of the ADB(hereinafter Agreement) in the
country. Based on the said protocol communication that
petitioner is immune from suit, the MeTC judge without
notice to the prosecution dismissed the two criminal
cases.
ISSUE: WON petitioner Liang is immune from suit.
HELD: NO. Slandering a person could not possibly be
covered by the immunity agreement because our laws do

not allow the commission of a crime, such as defamation,

in the name of official duty. It is 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 or in bad faith or
beyond the scope of his authority or jurisdiction .

SEPARATE CONCURRING OPINION OF JUSTICEPUNO:

The Charter of the ADB provides under Article55(i) that
officers and employees of the bank shall be immune from
legal process with respect to acts performed by them in
their official capacity except when the Bank waives
immunity. Section 45 (a) of the ADB Headquarters
Agreement accords the same immunity to the officers
and staff of the bank.
There can be no dispute that international officials are
entitled to immunity only with respect to acts performed
in their official capacity, unlike international organizations
which enjoy absolute immunity
Clearly, the most important immunity to an
international official, in the discharge of his international
functions, is immunity from local jurisdiction. There is no
argument in doctrine or practice with the principle that
an international official is independent of the jurisdiction
of the local authorities for his official acts. Those acts are
no this, but are imputed to the organization, and without
waiver the local courts cannot hold him liable for them.
In strict law, it would seem that even the organization
itself could have no right to waive an officials immunity
for his official acts. This permits local authorities to
assume jurisdiction over and individual for an act which is
not, in the wider sense of the term, his act at all. It is the
organization itself, as a juristic person, which should

waive its own immunity and appear in court, not the

individual, except in so far as he appears in the name of
the organization.
Historically, international officials were granted
diplomatic privileges and immunities and were thus
considered immune for both private and official acts. In
practice, this wide grant of diplomatic prerogatives was
curtailed because of practical necessity and because the
proper functioning of the organization did not require
such extensive immunity for its officials.
Thus, the current status of the law does not maintain that
states grant jurisdictional immunity to international
officials for acts of their private lives.
Under the Vienna Convention on Diplomatic Relations, a
diplomatic envoy is immune from criminal jurisdiction of
the receiving State for all acts, whether private or official,
and hence he cannot be arrested, prosecuted and
punished for any offense he may commit, unless his
diplomatic immunity is waived.
On the other hand, officials of international organizations
enjoy functional immunities, that is, only those
necessary for the exercise of the functions of the

organization and the fulfillment of its purposes. This is

the reason why the ADB Charter and Headquarters
Agreement explicitly grant immunity from legal process
to bank officers and employees only with respect to acts
performed by them in their official lcapacity, except when
the Bank waives immunity.
In other words, officials and employees of the ADB are
subject to the jurisdiction of the local courts for their
private acts, notwithstanding the absence of a waiver of
immunity.
Considering that bank officials and employees are
covered by immunity only for their official acts, the
necessary inference is that the authority of the
Department of Affairs, or even of the ADB for that matter,
to certify that they are entitled to immunity is limited
only to acts done in their official capacity. Stated
otherwise, it is not within the power of the DFA, as the
agency in charge of the executive departments foreign
relations, nor the ADB, as the international organization
vested with the right to waive immunity, to invoke
immunity for private acts of bank official and employees,
since no such prerogative exists in the first place. If the
immunity does not exist, there is nothing to certify.