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

Page 1 of 3
 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 non-suability [only] if it has entered into a contract in its
proprietary or private capacity. [However,] when the contract involves its sovereign or
governmental capacity, x x x no such waiver may be implied. Statutory provisions waiving
state immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of
sovereignty.

DEPARTMENT OF HEALTH, ET AL. v. PHILIPPINE PHARMA WEALTH, INC., G.R. No. 182358,
February 20, 2013

Political Law; The State may be sued if it consents, either expressly or impliedly.

The rule, in any case, is not really absolute for it does not say that the state may not be sued
under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, the
state may not be sued without its consent; its clear import then is that the State may at times
be sued. The States consent may be given either expressly or impliedly. Express consent may be
made through a general law or a special law. x x x Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a counterclaim or
when it enters into a contract. In this situation, the government is deemed to have descended to
the level of the other contracting party and to have divested itself of its sovereign immunity.
This rule, x x x is not, however, without qualification. Not all contracts entered into by the
government operate as a waiver of its non-suability; distinction must still be made between one
which is executed in the exercise of its sovereign function and another which is done in its
proprietary capacity.

Page 2 of 3
As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly,
then it 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 non-suability. The State will be
deemed to have impliedly waived its non-suability [only] if it has entered into a contract in its
proprietary or private capacity. [However,] when the contract involves its sovereign or
governmental capacity[,] xx x no such waiver may be implied. Statutory provisions waiving
[s]tate immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of
sovereignty.

Page 3 of 3