Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee,

vs.
PABLO FELICIANO and INTERMEDIATE APPELLATE COURT, respondents-appellants.

YAP, J.:

Petitioner seeks the review of the decision of the Intermediate Appellate Court dated April 30, 1985
reversing the order of the Court of First Instance of Camarines Sur, Branch VI, dated August 21,
1980, which dismissed the complaint of respondent Pablo Feliciano for recovery of ownership and
possession of a parcel of land on the ground of non-suability of the State.

The background of the present controversy may be briefly summarized as follows:

On January 22, 1970, respondent Feliciano filed a complaint with the then Court of First Instance of
Camarines Sur against the Republic of the Philippines, represented by the Land Authority, for the
recovery of ownership and possession of a parcel of land, consisting of four (4) lots with an
aggregate area of 1,364.4177 hectares, situated in the Barrio of Salvacion, Municipality of
Tinambac, Camarines Sur. Plaintiff alleged that he bought the property in question from Victor
Gardiola by virtue of a Contract of Sale dated May 31, 1952, followed by a Deed of Absolute Sale on
October 30, 1954; that Gardiola had acquired the property by purchase from the heirs of Francisco
Abrazado whose title to the said property was evidenced by an informacion posesoria that upon
plaintiff's purchase of the property, he took actual possession of the same, introduced various
improvements therein and caused it to be surveyed in July 1952, which survey was approved by the
Director of Lands on October 24, 1954; that on November 1, 1954, President Ramon Magsaysay
issued Proclamation No. 90 reserving for settlement purposes, under the administration of the
National Resettlement and Rehabilitation Administration (NARRA), a tract of land situated in the
Municipalities of Tinambac and Siruma, Camarines Sur, after which the NARRA and its successor
agency, the Land Authority, started sub-dividing and distributing the land to the settlers; that the
property in question, while located within the reservation established under Proclamation No. 90,
was the private property of plaintiff and should therefore be excluded therefrom. Plaintiff prayed that
he be declared the rightful and true owner of the property in question consisting of 1,364.4177
hectares; that his title of ownership based on informacion posesoria of his predecessor-in-interest be
declared legal valid and subsisting and that defendant be ordered to cancel and nullify all awards to
the settlers.

The defendant, represented by the Land Authority, filed an answer, raising by way of affirmative
defenses lack of sufficient cause of action and prescription.

On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a decision declaring
Lot No. 1, with an area of 701.9064 hectares, to be the private property of the plaintiff, "being
covered by a possessory information title in the name of his predecessor-in-interest" and declaring
said lot excluded from the NARRA settlement reservation. The court declared the rest of the property
claimed by plaintiff, i.e. Lots 2, 3 and 4, reverted to the public domain.

A motion to intervene and to set aside the decision of August 29, 1970 was filed by eighty-six (86)
settlers, together with the barrio council of Pag-asay, alleging among other things that intervenors
had been in possession of the land in question for more than twenty (20) years under claim of
ownership.

On January 25, 1971, the court a quo reconsidered its decision, reopened the case and directed the
intervenors to file their corresponding pleadings and present their evidence; all evidence already
presented were to remain but plaintiff, as well as the Republic of the Philippines, could present
additional evidence if they so desire. The plaintiff presented additional evidence on July 30, 1971,
and the case was set for hearing for the reception of intervenors' evidence on August 30 and August
31, 1971.

On August 30, 1971, the date set for the presentation of the evidence for intervenors, the latter did
not appear but submitted a motion for postponement and resetting of the hearing on the next day,
August 31, 1971. The trial court denied the motion for postponement and allowed plaintiff to offer his
evidence "en ausencia," after which the case would be deemed submitted for decision. On the
following day, August 31, 1971, Judge Sison rendered a decision reiterating his decision of August
29, 1970.

A motion for reconsideration was immediately filed by the intervenors. But before this motion was
acted upon, plaintiff filed a motion for execution, dated November 18, 1971. On December 10, 1971,
the lower court, this time through Judge Miguel Navarro, issued an order denying the motion for
execution and setting aside the order denying intervenors' motion for postponement. The case was
reopened to allow intervenors to present their evidence. Unable to secure a reconsideration of Judge
Navarro's order, the plaintiff went to the Intermediate Appellate Court on a petition for certiorari. Said
petition was, however, denied by the Intermediate Appellate Court, and petitioners brought the
matter to this Court in G.R. No. 36163, which was denied on May 3, 1973 Consequently, the case
was remanded to the court a quo for further proceedings.

On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground that the
Republic of the Philippines cannot be sued without its consent and hence the action cannot prosper.
The motion was opposed by the plaintiff.

On August 21, 1980, the trial court, through Judge Esteban Lising, issued the questioned order
dismissing the case for lack of jurisdiction. Respondent moved for reconsideration, while the Solicitor
General, on behalf of the Republic of the Philippines filed its opposition thereto, maintaining that the
dismissal was proper on the ground of non-suability of the State and also on the ground that the
existence and/or authenticity of the purported possessory information title of the respondents'
predecessor-in-interest had not been demonstrated and that at any rate, the same is not evidence of
title, or if it is, its efficacy has been lost by prescription and laches.

Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate Appellate
Court on petition for certiorari. On April 30, 1985, the respondent appellate court rendered its
decision reversing the order of Judge Lising and remanding the case to the court a quo for further
proceedings. Hence this petition.

We find the petition meritorious. The doctrine of non-suability of the State has proper application in
this case. The plaintiff has impleaded the Republic of the Philippines as defendant in an action for
recovery of ownership and possession of a parcel of land, bringing the State to court just like any
private person who is claimed to be usurping a piece of property. A suit for the recovery of property
is not an action in rem, but an action in personam. 1 It is an action directed against a specific party or parties, and any
judgment therein binds only such party or parties. The complaint filed by plaintiff, the private respondent herein, is directed against the
Republic of the Philippines, represented by the Land Authority, a governmental agency created by Republic Act No. 3844.

By its caption and its allegation and prayer, the complaint is clearly a suit against the State, which
under settled jurisprudence is not permitted, except upon a showing that the State has consented to
be sued, either expressly or by implication through the use of statutory language too plain to be
misinterpreted.2 There is no such showing in the instant case. Worse, the complaint itself fails to
allege the existence of such consent. This is a fatal defect, 3 and on this basis alone, the complaint
should have been dismissed.

The failure of the petitioner to assert the defense of immunity from suit when the case was tried
before the court a quo, as alleged by private respondent, is not fatal. It is now settled that such
defense "may be invoked by the courts sua sponte at any stage of the proceedings." 4

Private respondent contends that the consent of petitioner may be read from the Proclamation itself,
when it established the reservation " subject to private rights, if any there be. " We do not agree. No
such consent can be drawn from the language of the Proclamation. The exclusion of existing private
rights from the reservation established by Proclamation No. 90 can not be construed as a waiver of
the immunity of the State from suit. Waiver of immunity, being a derogation of sovereignty, will not
be inferred lightly. but must be construed in strictissimi juris. 5Moreover, the Proclamation is not a
legislative act. The consent of the State to be sued must emanate from statutory authority. Waiver of
State immunity can only be made by an act of the legislative body.

Neither is there merit in respondent's submission, which the respondent appellate court sustained,
on the basis of our decision in the Begosa case, 6 that the present action is not a suit against the
State within the rule of State immunity from suit, because plaintiff does not seek to divest the
Government of any of its lands or its funds. It is contended that the complaint involves land not
owned by the State, but private land belonging to the plaintiff, hence the Government is not being
divested of any of its properties. There is some sophistry involved in this argument, since the
character of the land sought to be recovered still remains to be established, and the plaintiff's action
is directed against the State precisely to compel the latter to litigate the ownership and possession of
the property. In other words, the plaintiff is out to establish that he is the owner of the land in
question based, incidentally, on an informacion posesoria of dubious value, and he seeks to
establish his claim of ownership by suing the Republic of the Philippines in an action in personam.

The inscription in the property registry of an informacion posesoria under the Spanish Mortgage Law
was a means provided by the law then in force in the Philippines prior to the transfer of sovereignty
from Spain to the United States of America, to record a claimant's actual possession of a piece of
land, established through an ex parte proceeding conducted in accordance with prescribed
rules. 7 Such inscription merely furnishes, at best, prima facie evidence of the fact that at the time the
proceeding was held, the claimant was in possession of the land under a claim of right as set forth in
his application. 8 The possessory information could ripen into a record of ownership after the lapse of
20 years (later reduced to 10 years), upon the fulfillment of the requisites prescribed in Article 393 of
the Spanish Mortgage Law.

There is no showing in the case at bar that the informacion posesoria held by the respondent had
been converted into a record of ownership. Such possessory information, therefore, remained at
best mere prima facie evidence of possession. Using this possessory information, the respondent
could have applied for judicial confirmation of imperfect title under the Public Land Act, which is an
action in rem. However, having failed to do so, it is rather late for him to pursue this avenue at this
time. Respondent must also contend, as the records disclose, with the fact admitted by him and
stated in the decision of the Court a quo that settlers have been occupying and cultivating the land in
question since even before the outbreak of the war, which puts in grave doubt his own claim of
possession.

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

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

SO ORDERED.

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

Melencio-Herrera, J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L- 24548 October 27, 1983

WENCESLAO VlNZONS TAN, THE DIRECTOR OF FORESTRY, APOLONIO THE SECRETARY

OF AGRICULTURE AND NATURAL RESOURCES JOSE Y. FELICIANO, respondents-appelllees,
vs.
THE DIRECTOR OF FORESTRY, APOLONIO RIVERA, THE SECRETARY OF AGRICULTURE
AND N ATURAL RESOURCES JOSE Y. FELICIANO, respon dents-appellees,RAVAGO
COMMERCIAL CO., JORGE LAO HAPPICK and ATANACIO MALLARI, intervenors,

Camito V Pelianco Jr. for petitioner-appellant.

Solicitor General for respondent Director.

Estelito P. Mendoza for respondent Ravago Comm'l Co.

Anacleto Badoy for respondent Atanacio Mallari.

Mariano de Joya, Jr. for respondent Jorge Lao Happick, Jr.

MAKASIAR, J:

This is an appeal from the order dated January 20, 1965 of the then Court of First Instance of
Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari, prohibition and mandamus with
preliminary prohibitory injunction (p. 2. rec.), which dismissed the petition of petitioner-appellant
Wenceslao Vinzons Tan on the ground that it does not state a sufficient cause of action, and upon
the respondents-appellees' (Secretary of Agriculture and Natural resources and the Director of
Forestry) motion to dismiss (p. 28, rec.).

Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising for public
bidding a certain tract of public forest land situated in Olongapo, Zambales, provided tenders were
received on or before May 22, 1961 (p. 15, CFI rec.). This public forest land, consisting of 6,420
hectares, is located within the former U.S. Naval Reservation comprising 7,252 hectares of
timberland, which was turned over by the United States Government to the Philippine Government
(P. 99, CFI rec.).

On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his application in due form
after paying the necessary fees and posting tile required bond therefor. Nine other applicants
submitted their offers before the deadline (p. 29, rec.).

Thereafter, questions arose as to the wisdom of having the area declared as a forest reserve or
allow the same to be awarded to the most qualified bidder. On June 7, 1961, then President Carlos
P. Garcia issued a directive to the Director of the Bureau of Forestry, which read as follows:
 It is desired that the area formerly covered by the Naval Reservation be made a
forest reserve for watershed purposes. Prepare and submit immediately a draft of a
proclamation establishing the said area as a watershed forest reserve for Olongapo,
Zambales. It is also desired that the bids received by the Bureau of Forestry for the
issuance of the timber license in the area during the public bidding conducted last
May 22, 1961 be rejected in order that the area may be reserved as above stated. ...

(SGD.) CARLOS P. GARCIA

(pp. 98, CFI rec.).

On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources sustained the
findings and re comendations of the Director of Forestry who concluded that "it would be beneficial
to the public interest if the area is made available for exploitation under certain conditions," and

We quote:

Respectfully forwarded to the honorable, the Executive Secretary Malacanang.

Manila inviting particular attention to the comment and recommendation of the
Director of Forestry in the proceeding in indorsement in which this Of fice fully
concurs.

The observations of responsible forest officials are most revealing of their zeal to
promote forest conservation and watershed protection especially in Olongapo,
Zambales area. In convincing fashion, they have demonstrated that to declare the
forest area involved as a forest reserve ratify than open it for timber exploitation
under license and regulation would do more harm than of to the public interest. To
convert the area into a forest reserve without an adequate forest protection force,
would make of it a 'Free Zone and Logging Paradise,' to the ever 'Problem Loggers'
of Dinalupihan, Bataan . . . an open target of timber smugglers, kaingineros and
other forms of forest vandals and despoilers. On the other hand, to award the area,
as planned, to a reputable and responsible licensee who shall conduct logging
operations therein under the selective logging method and who shall be obliged to
employ a sufficient number of forest guards to patrol and protect the forest
consecration and watershed protection.

Worthy of mention is the fact that the Bureau of Forestry had already conducted a
public bidding to determine the most qualified bidder to whom the area advertised
should be awarded. Needless to stress, the decision of the Director of Forestry to
dispose of the area thusly was arrived at after much thought and deliberation and
after having been convinced that to do so would not adversely affect the watershed
in that sector. The result of the bidding only have to be announced. To be sure, some
of the participating bidders like Mr. Edgardo Pascual, went to much expense in the
hope of winning a virgin forest concession. To suddenly make a turn about of this
decision without strong justifiable grounds, would cause the Bureau of Forestry and
this Office no end of embarrassment.

In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed
to proceed with the announcement of the results of the bidding for the subject forest
area (p. 13, CFI rec.).
The Office of the President in its 4th Indorsement dated February 2, 1962, signed by Atty. Juan
Cancio, Acting Legal Officer, "respectfully returned to the Honorable Secretary of the Department of
Agriculture and Natural Resources for appropriate action," the papers subject of Forestry Notice No.
2087 which was referred to the Bureau of Forestry for decision (p. 14, CFI rec.).

Finally, of the ten persons who submitted proposed the area was awarded to herein petitioner-
appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of Forestry (p. 17, CFI rec.).
Against this award, bidders Ravago Commercial Company and Jorge Lao Happick filed motions for
reconsideration which were denied by the Director of Forestry on December 6, 1963.

On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M. Gozon — who
succeeded Secretary Cesar M. Fortich in office — issued General Memorandum Order No. 46,
series of 1963, pertinent portions of which state:

xxx xxx xxx

SUBJECT: ... ... ...

(D)elegation of authority to the Director of Forestry to grant ordinary timber licenses.

1. ... ... ...

2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(be the extension of ordinary timber licenses for areas not exceeding 5,000 hectares
each;

3. This Order shall take effect immediately (p. 267, CFI rec.).

Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and Natural
Resources, replacing secretary Benjamin M. Gozon. Upon assumption of office he Immediately
promulgate on December 19, 19b3 General memorandum Order No. 60, revoking the authority
delegated to the Director of Forestry, under General Memorandum order No. 46, to grant ordinary
timber licenses, which order took effect on the same day, December 19, 1963. Pertinent portions of
the said Order read as follows:

xxx xxx xxx

SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963 —

1. In order to acquaint the undersigned with the volume and Nature of the work of the
Department, the authority delegated to the Director of forestry under General
Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(b) the extension of ordinary timber licenses for areas not exceeding 3,000 hectares
each is hereby revoked. Until further notice, the issuance of' new licenses , including
amendments thereto, shall be signed by the secretary of Agriculture and Natural
Resources.
 2. This Order shall take effect immediately and all other previous orders, directives,
circulars, memoranda, rules and regulations inconsistent with this Order are hereby
revoked (p. 268, CFl rec.; Emphasis supplied).

On the same date that the above-quoted memorandum took effect, December 19, 1963, Ordinary
Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name of Wenceslao Vinzons Tan, was
signed by then Acting Director of Forestry Estanislao R. Bernal without the approval of the Secretary
of Agriculture and Natural Resources. On January 6, 1964, the license was released by the Office of
the Director of Forestry (p. 30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of Agriculture
and Natural Resources as required by Order No. 60 aforequoted.

On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary of Agriculture
and Natural Resources shall be considered by tile Natural Resources praying that, pending
resolution of the appeal filed by Ravago Commercial Company and Jorge Lao Happick from the
order of the Director of Forestry denying their motion for reconsideration, OTI No. 20-'64 in the name
of Wenceslao V. Tan be cancelled or revoked on the ground that the grant thereof was irregular,
anomalous and contrary to existing forestry laws, rules and regulations.

On March 9, 1964, acting on the said representation made by Ravago Commercial Company, the
Secretary of Agriculture and Natural Resources promulgated an order declaring Ordinary Timber
License No. 20-'64 issued in the name of Wenceslao Vinzons Tan, as having been issued by the
Director of Forestry without authority, and is therefore void ab initio. The dispositive portion of said
order reads as follows:

WHEREFORE, premises considered, this Office is of the opinion and so holds that
O.T. License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as
hereby it is, REVOKED AND DECLARED without force and effect whatsoever from
the issuance thereof.

The Director of Forestry is hereby directed to stop the logging operations of

Wenceslao Vinzons Tan, if there be any, in the area in question and shall see to it
that the appellee shall not introduce any further improvements thereon pending the
disposition of the appeals filed by Ravago Commercial Company and Jorge lao
Happick in this case" (pp. 30-31, CFI rec.).

Petitioner-appellant moved for a reconsideration of the order, but the Secretary of Agriculture and
Natural Resources denied the motion in an Order dated March 25, 1964, wherein this paragraph
appears:

In this connection, it has been observed by the Acting Director of Forestry in his 2nd
indorsement of February 12, 1964, that the area in question composes of water basin
overlooking Olongapo, including the proposed Olongapo watershed Reservation; and
that the United States as well as the Bureau of Forestry has earmarked this entire
watershed for a watershed pilot forest for experiment treatment Concerning erosion
and water conservation and flood control in relation to wise utilization of the forest,
denudation, shifting cultivation, increase or decrease of crop harvest of agricultural
areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.).

On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the separate
appeals filed by Jorge Lao Happick and Ravago Commercial Company, from the order of the
Director of Forestry dated April 15, 1963, awarding to Wenceslao Vinzons Tan the area under Notive
No. 2087, and rejecting the proposals of the other applicants covering the same area, promulgated
an order commenting that in view of the observations of the Director of Forestry just quoted, "to grant
the area in question to any of the parties herein, would undoubtedly adversely affect public interest
which is paramount to private interests," and concluding that, "for this reason, this Office is of the
opinion and so holds, that without the necessity of discussing the appeals of the herein appellants,
the said appeals should be, as hereby they are, dismissed and this case is considered a closed
matter insofar as this Office is concerned" (p. 78, rec.).

On April 18, 1964, on the basis of the denial of his motion for reconsideration by the Secretary of
Agriculture and Natural Resources, petitioner-appellant filed the instant case before tile court a
quo (Court of First Instance, Manila), Special Civil Action No. 56813, a petition for certiorari,
prohibition and mandamus with preliminary prohibitory injunction (pp. 1-12, CFI rec.). Petitioner-
appellant claims that the respondents-appellees "unlawfully, illegally whimsically, capriciously and
arbitrarily acted without or in excess of their jurisdiction, and/or with grave abuse of discretion by
revoking a valid and existing timber license without just cause, by denying petitioner-appellant of the
equal protection of the laws, by depriving him of his constitutional right to property without due
process of law, and in effect, by impairing the obligation of contracts" (P. 6, CFI rec.). Petitioner-
appellant prayed for judgment making permanent the writ of preliminary injunction against the
respondents- appellees; declaring the orders of the Secretary of Agriculture and Natural Resources
dated March 9, March 25, and April 11, 1964, as well as all his acts and those of the Director of
Forestry implementing said orders, and all the proceedings in connection therewith, null and void,
unlawful and of no force and effect; ordering the Director of Forestry to renew OTI No. 20-'64 upon
expiration, and sentencing the respondents, jointly and severally, to pay the petitioner-appellant the
sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary damage, One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary damages, and Thirty Thousand
Pesos (P30,000-00) as attorney's fees and costs. The respondents-appellees separately filed
oppositions to the issuance of the writ of preliminary injunction, Ravago Commercial Company,
Jorge Lao, Happick and Atanacio Mallari, presented petitions for intervention which were granted,
and they too opposed the writ.

The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the following grounds:
(1) that the court has no jurisdiction; (2) that the respondents may not be sued without their consent;
(3) that the petitioner has not exhausted all available administrative remedies; (4) that the petition
does not state a cause of action; and (5) that purely administrative and discretionary functions of
administrative officials may not be interfered with by the courts. The Secretary of Agriculture and
Natural Resources joined the motion to dismiss when in his answer of May 18, 1964, he avers the
following special and affirmative defenses: (1) that the court has no jurisdiction to entertain the action
for certiorari, prohibition and mandamus; (2) that the petitioner has no cause of action; (3) that venue
is improperly laid; (4) that the State is immune from suit without its consent; (5) that the court has no
power to interfere in purely administrative functions; and (6) that the cancellation of petitioner's
license was dictated by public policy (pp. 172-177, rec.). Intervenors also filed their respective
answers in intervention with special and affirmative defenses (pp. 78-79, rec.). A hearing was held
on the petition for the issuance of writ of preliminary injunction, wherein evidence was submitted by
all the parties including the intervenors, and extensive discussion was held both orally and in writing.

After the said hearing, on January 20, 1965, the court a quo, from the evidence received, resolved
not only the question on the issuance of a writ of preliminary injunction but also the motion to
dismiss, declared that the petition did not state a sufficient cause of action, and dismissed the same
accordingly. To justify such action, the trial court, in its order dismissing the petition, stated that "the
court feels that the evidence presented and the extensive discussion on the issuance of the writ of
preliminary mandatory and prohibitory injunction should also be taken into consideration in resolving
not only this question but also the motion to dismiss, because there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). His motion for
reconsideration having been denied (p. 488, CFI rec.), petitioner-appellant Wenceslao Vinzons Tan
appealed directly to this Court.

Petitioner-appellant now comes before this Court, claiming that the trial court erred in:

(1) holding that the petition does not state a sufficient cause of action: and

(2) dismissing the petition [p.27,rec. ].

He argues that the sole issue in the present case is, whether or not the facts in the petition constitute
a sufficient cause of action (p. 31, rec.). Petitioner-appellant, in his brief, presented a lengthy
discussion on the definition of the term cause of action wherein he contended that the three
essential elements thereon, — namely, the legal right of the plaintiff, the correlative obligation of the
defendants and the act or omission of the defendant in violation of that right — are satisfied in the
averments of this petition (pp. 31-32, rec.). He invoked the rule that when the ground for dismissal is
that the complaint states no cause of action, such fact can be determined only from the facts alleged
in the complaint and from no other, and the court cannot consider other matters aliunde He further
invoked the rule that in a motion to dismiss based on insufficiency of cause of action, the facts
alleged in the complaint are deemed hypothetically admitted for the purpose of the motion (pp. 32-
33, rec.).

A perusal of the records of the case shows that petitioner-appellant's contentions are untenable. As
already observed, this case was presented to the trial court upon a motion to dismiss for failure of
the petition to state a claim upon which relief could be granted (Rule 16 [g], Revised Rules of Court),
on the ground that the timber license relied upon by the petitioner- appellant in his petition was
issued by the Director of Forestry without authority and is therefore void ab initio. This motion
supplanted the general demurrer in an action at law and, as a rule admits, for the purpose of the
motion, ail facts which are well pleaded however while the court must accept as true all well pleaded
facts, the motion does not admit allegations of which the court will take judicial notice are not true,
nor does the rule apply to legally impossible facts, nor to facts inadmissible in evidence, nor to facts
which appear by record or document included in the pleadings to be unfounded (Vol. 1, Moran's
Comments on the Rules of Court, 1970 ed., p. 505, citing cases).

It must be noted that there was a hearing held in the instant case wherein answers were interposed
and evidence introduced. In the course of the hearing, petitioner-appellant had the opportunity to
introduce evidence in support of tile allegations iii his petition, which he readily availed of.
Consequently, he is estopped from invoking the rule that to determine the sufficiency of a cause of
action on a motion to dismiss, only the facts alleged in the complaint must be considered. If there
were no hearing held, as in the case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the
case was presented to District Court upon a motion to dismiss because of alleged failure of
complaint to state a claim upon which relief could be granted, and no answer was interposed and no
evidence introduced, the only facts which the court could properly consider in passing upon the
motion were those facts appearing in the complaint, supplemented be such facts as the court
judicially knew.

In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru Justice Conrado V.
Sanchez, held that the trial court can properly dismiss a complaint on a motion to dismiss due to lack
of cause of action even without a hearing, by taking into consideration the discussion in said motion
and the opposition thereto. Pertinent portion of said decision is hereby quoted:
 Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court
below granted the motion, dismissed the petition. The motion to reconsider failed.
Offshoot is this appeal.

1. The threshold questions are these: Was the dismissal order issued
without any hearing on the motion to dismiss? Is it void?

WE go to the record. The motion to dismiss was filed on February 1, 1961 and set for
hearing on February 10 following. On February 8, 1961 petitioner's counsel
telegraphed the court, (r)equest postponement motion dismissal till written opposition
filed.' He did not appear at the scheduled hearing. But on March 4, 1961, he followed
up his wire, with his written opposition to the motion to dismiss. Adverting to the 5-
page motion to dismiss and the 6-page opposition thereto, We find that the
arguments pro and con on the question of the board's power to abolish petitioner's
position to discussed the problem said profusely cited authorities. The May 15, 1961
8-page court order recited at length the said arguments and concluded that petitioner
made no case.

One good reason for the statutory requirement of hearing on a motion as to enable
the suitors to adduce evidence in support of their opposing claims. But here the
motion to dismiss is grounded on lack of cause of action. Existence of a cause of
action or lack of it is determined be a reference to the facts averred in the challenged
pleading. The question raised in the motion is purely one of law. This legal issue was
fully discussed in said motion and the opposition thereto. In this posture, oral
arguments on the motion are reduced to an unnecessary ceremony and should be
overlooked. And, correctly so, because the other intendment of the law in requiring
hearing on a motion, i.e., 'to avoid surprises upon the opposite party and to give to
the latter time to study and meet the arguments of the motion,' has been sufficiently
met. And then, courts do not exalt form over substance (Emphasis supplied).

Furthermore even if the complaint stated a valid cause of action, a motion to dismiss for-
insufficiency of cause of action will be granted if documentary evidence admitted by stipulation
disclosing facts sufficient to defeat the claim enabled the court to go beyond disclosure in the
complaint (LOCALS No. 1470, No. 1469, and No. 1512 of the International Longshoremen's
Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals,
Fifth Circuit, Dec. 7, 1952; 131 F. 2d 605). Thus, although the evidence of the parties were
presented on the question of granting or denying petitioner-appellant's application for a writ of
preliminary injunction, the trial court correctly applied said evidence in the resolution of the motion to
dismiss. Moreover, in applying said evidence in the resolution of the motion to dismiss, the trial
court, in its order dismissing the petition, pointed out that, "there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). Petitioner-appellant did
not interpose any objection thereto, nor presented new arguments in his motion for reconsideration
(pp. 482-484, CFI rec.). This omission means conformity to said observation, and a waiver of his
right to object, estopping him from raising this question for the first time on appeal. " I question not
raised in the trial court cannot be raised for the first time on appeal" (Matienzo vs. Servidad, Sept.
10, 1981, 107 SCRA 276).

Moreover, petitioner-appellant cannot invoke the rule that, when the ground for asking dismissal is
that the complaint states no cause of action, its sufficiency must be determined only from the
allegations in the complaint. "The rules of procedure are not to be applied in a very rigid, technical
sense; rules of procedure are used only to help secure substantial justice. If a technical and rigid
enforcement of the rules is made, their aim would be defeated. Where the rules are merely
secondary in importance are made to override the ends of justice; the technical rules had been
misapplied to the prejudice of the substantial right of a party, said rigid application cannot be
countenanced" (Vol. 1, Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases).

What more can be of greater importance than the interest of the public at large, more particularly the
welfare of the inhabitants of Olongapo City and Zambales province, whose lives and properties are
directly and immediately imperilled by forest denudation.

The area covered by petitioner-appellant's timber license practically comprises the entire Olongapo
watershed (p. 265, CFI rec.). It is of public knowledge that watersheds serves as a defense against
soil erosion and guarantees the steady supply of water. As a matter of general policy, the Philippine
Constitution expressly mandated the conservation and proper utilization of natural resources, which
includes the country's watershed. Watersheds in the Philippines had been subjected to rampant
abusive treatment due to various unscientific and destructive land use practices. Once lush
watersheds were wantonly deforested due to uncontrolled timber cutting by licensed
concessionaries and illegal loggers. This is one reason why, in paragraph 27.of the rules and
regulations included in the ordinary timber license it is stated:

The terms and conditions of this license are subject to change at the discretion of the
Director of Forestry, and that this license may be made to expire at an earlier date,
when public interests so require (Exh. D, p. 22, CFI rec.).

Considering the overriding public interest involved in the instant case, We therefore take judicial
notice of the fact that, on April 30, 1964, the area covered by petitioner-appellant's timber license
has been established as the Olongapo Watershed Forest Reserve by virtue of Executive
Proclamation No. 238 by then President Diosdado Macapagal which in parts read as follows:

Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as

amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw
from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve
for watershed, soil protection, and timber production purposes, subject to private
rights, if any there be, under the administration and control of the Director of
Forestry, xx the following parcels of land of the public domain situated in the
municipality of Olongapo, province of Zambales, described in the Bureau of Forestry
map No. FR-132, to wit: ... ... (60 O.G. No. 23, 3198).

Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his alleged right over
the timber concession in question. He argues thus: "The facts alleged in the petition show: (1) the
legal right of the petitioner to log in the area covered by his timber license; (2) the legal or
corresponding obligation on the part of the respondents to give effect, recognize and respect the
very timber license they issued to the petitioner; and (3) the act of the respondents in arbitrarily
revoking the timber license of the petitioner without giving him his day in court and in preventing him
from using and enjoying the timber license issued to him in the regular course of official business" (p.
32, rec.).

In the light of petitioner-appellant's arguments, it is readily seen that the whole controversy hinges on
the validity or invalidity of his timber license.

WE fully concur with the findings of the trial court that petitioner- appellant's timber license was
signed and released without authority by then Acting Director Estanislao R. Bernal of Forestry, and
is therefore void ab initio. WE hereby quote such findings:
 In the first place, in general memorandum order No. 46 dated May 30, 1963, the
Director of Forestry was authorized to grant a new ordinary timber license only where
the area covered thereby was not more than 3,000 hectares; the tract of public forest
awarded to the petitioner contained 6,420 hectares (Exhs. 2-A and 2-B Ravago,
embodied in Annex B; Exh. B). The petitioner contends that only 1,756 hectares of
the said area contain commercial and operable forest; the authority given to the
Director of Forestry to grant a new ordinary timber license of not more than 3,000
hectares does not state that the whole area should be commercial and operable
forest. It should be taken into consideration that the 1,756 hectares containing
commercial and operable forest must have been distributed in the whole area of
6,420 hectares. Besides the license states, 'Please see attached sketch and
technical description,' gives an area of 6,420 hectares and does not state what is the
area covered of commmercial and operable forest (Exh. Ravago Also Annex B of the
petition, which was marked as Exhibit B, states:

Under Notice No. 2087, a tract of public forest containing 6,420

hectares located in Olongapo, Zambales was declared available for
timber utilization and development. Pursuant to this Notice, there
were received bid proposals from the following persons: ...

Wherefore, confirming the findings of said Committee, the area described in Notice
No. 2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan,
subject to the following conditions: ... ...

In the second place, at the time it was released to the petitioner, the Acting Director
of Forestry had no more authority to grant any license. The license was signed by the
Acting Director of Forestry on December 19, 1963, and released to the petitioner on
January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to
grant a new ordinary timber license was contained in general memorandum order
No. 46 dated May 30, 1963. This was revoked by general memorandum order No.
60, which was promulgated on December 19, 1963. In view thereof, the Director of
Forestry had no longer any authority to release the license on January 6, 1964, and
said license is therefore void ab initio (pp. 479480, CFI rec.).

The release of the license on January 6, 1964, gives rise to the impression that it was ante-dated to
December 19, 1963 on which date the authority of the Director of Forestry was revoked. But, what is
of greatest importance is the date of the release or issuance, and not the date of the signing of the
license. While petitioner-appellant's timber license might have been signed on December 19, 1963 it
was released only on January 6, 1964. Before its release, no right is acquired by the licensee. As
pointed out by the trial court, the Director of Forestry had no longer any authority to release the
license on January 6, 1964. Therefore, petitioner-appellant had not acquired any legal right under
such void license. This is evident on the face of his petition as supplemented by its annexes which
includes Ordinary Timber License No. 20-'64 (NEW). Thus, in the case of World Wide Insurance &
Surety Co., Inc. vs. Macrohon, et al. (105 Phil. 250, Feb. 28, 1959), this Court held that if from the
face of the complaint, as supplemented by its annexes, plaintiff is not the owner, or entitled to the
properties it claims to have been levied upon and sold at public auction by the defendants and for
which it now seeks indemnity, the said complaint does not give plaintiff any right of action against the
defendants. In the same case, this Court further held that, in acting on a motion to dismiss, the court
cannot separate the complaint from its annexes where it clearly appears that the claim of the plaintiff
to be the A owner of the properties in question is predicated on said annexes. Accordingly,
petitioner-appellant's petition must be dismissed due to lack of cause of action.
II

Petitioner-appellant, in his petition, alleged that he has exhausted all his administrative remedies to
no avail as respondents-appellees have failed, neglected, refused and continue to refuse to allow
petitioner-appellant to continue operation in the area covered by his timber license. He further
alleged that he has neither recourse by way of appeal, nor any plain, speedy and adequate remedy
in the ordinary course of law except thru this special civil action, as the last official act of the
respondent-appellee Secretary of Agriculture and Natural Resources in declaring void the timber
license referred to above after denying petitioner-appellant's motion for reconsideration, is the last
administrative act. Petitioner-appellant relies on the case of Demaisip vs. The Court of Appeals, et
al. (106 Phil. 237, Sept. 24, 1959), wherein it was held that the failure of the plaintiff to appeal from
the adverse decision of the Secretary to the President cannot preclude the plaintiff from taking court
action in view of the theory that the Secretary of a department is merely an alter-ego of the
President. The presumption is that the action of the Secretary bears the implied sanction of the
President unless the same is disapproved by the latter (Villena vs. the Secretary of Interior, 67 Phil.
451; p. 7, CFI rec.).

To this We cannot agree. Petitioner-appellant did not appeal the order of the respondent Secretary
of Agriculture and Natural Resources to the President of the Philippines, who issued Executive
Proclamation No. 238 withdrawing the area from private exploitation, and establishing it as the
Olongapo Watershed Forest Reserve. Considering that the President has the power to review on
appeal the orders or acts of the respondents-appellees, the failure of the petitioner-appellant to take
that appeal is failure on his part to exhaust his administrative remedies. Thus, this Court, in the case
of Calo vs. Fuertes (5 SCRA 399, 400, June 29, 1962), held that:

At any rate, the appellant's contention that, as the Secretary of Agriculture and
Natural Resources is the alter ego of the President and his acts or decisions are also
those of the latter, he need not appeal from the decision or opinion of the former to
the latter, and that, such being the case, after he had appealed to the Secretary of
Agriculture and Natural Resources from the decision or opinion of the Director of
Lands he had exhausted the administrative remedies, is untenable.

The withdrawal of the appeal taken to the President of the Philippines is tantamount
to not appealing all thereto. Such withdrawal is fatal, because the appeal to the
President is the last step he should take in an administrative case.

In 1912, in the case of Lamb vs. Phipps (22 Phil. 491-92, July 22, 1912), this Court stressed the
doctrine of exhaustion of administrative remedies, thus:

When a plain, adequate and speedy remedy is afforded by and within the executive
department of the government the courts will not interfere until at least that remedy
has been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S.
651; U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs.
U.S., 28 Sup. Ct. Rep. 201). The administrative remedies afforded by law must first
be exhausted before resort can be had to the courts, especially when the
administrative remedies are by law exclusive and final. Some matters and some
questions are by law delegated entirely and absolutely to the discretion of particular
branches of the executive department of the government. When the law confers
exclusive and final jurisdiction upon the executive department of the government to
dispose of particular questions, their judgments or the judgments of that particular
department are no more reviewable by the courts than the final judgment or
 decisions of the courts are subject to be reviewed and modified by them" (emphasis
supplied).

Moreover, this being a special civil action, petitioner-appellant must allege and prove that he has no
other speedy and adequate remedy (Diego vs. The Court of Appeals, et al., 54 Off. Gaz., No. 4,
956). In the case at bar, petitioner- appellant's speedy and adequate remedy is an appeal to the
President of the Philippines.

Accordingly, "it is settled to the point of being elementary that the only question involved n certiorari
is jurisdiction, either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the
issuance of the extraordinary remedy of certiorari when the same is so grave as when the power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal hostility,
and it must be so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal
to perform a duty enjoined, or to act at all in contemplation of law" FS Divinagracia Agro-Commercial
Inc. vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The foregoing is on the assumption that
there is any irregularity, albeit there is none in the acts or omissions of the respondents-appellees.
certiorari is not a substitute for appeal as held time and again by this Court (People vs. Villanueva,
110 SCRA 465), "it being a time honored and well known principle that before seeking judicial
redress, a party must first exhaust the administrative remedies available" (Garcia vs. Teehankee, 27
SCRA 944, April 18, 1969).

Moreover, from the decision of the Secretary of Agriculture and Natural Resources complained of,
petitioners had a plain, speedy and adequate remedy by appealing therefrom to the Chief Executive.
In other words, before filing the present action for certiorari in the court below, they should have
availed of this administrative remedy and their failure to do so must be deemed fatal to their case
[Calo vs. Fuertes, et al., G.R. No. L-16537, June 29,1962]. To place petitioners' case beyond the
pale of this rule, they must show that their case falls — which it does not — within the cases where,
in accordance with our decisions, the aggrieved party need not exhaust administrative remedies
within his reach in the ordinary course of the law [Tapales vs. The President and the Board of
Regents of the U.P., G.R. No. L-17532, March 30, 1963; Mangubat vs. Osmena, G.R. No. L- 12837,
April 30, 1959; Baguio vs. Hon. Jose Rodriguez, G. R. No. L-11078, May 27, 1959; Pascual vs.
Provincial Board, G.R. No. L-11959, Oct. 31, 1959; Marinduque Iron Mines, etc. vs. Secretary of
Public Works, G.R. No. L-15982, May 31, 1963; Alzate vs. Aldaba, G.R. No. L-14407, Feb. 29, 1960
and Demaisip vs. Court of Appeals, G.R. No. L- 13000, Sept. 25, 1959] (Ganob vs. Ramas, 27
SCRA 1178, April 28, 1969).

III

Petitioner-appellant not only failed to exhaust his administrative remedies, but also failed to note that
his action is a suit against the State which, under the doctrine of State immunity from suit, cannot
prosper unless the State gives its consent to be sued Kawananakoa vs. Polybank, 205 U.S. 349;
Siren vs. U.S., 7 Wall. 152; Sec. 16, Art. XV, 1973 Constitution).

The respondents-appellees, in revoking the petitioner-appellant's timber license, were acting within
the scope of their authority. Petitioner-appellant contends that "this case is not a suit against the
State but an application of a sound principle of law whereby administrative decisions or actuations
may be reviewed by the courts as a protection afforded the citizens against oppression" (p. 122, CFI
rec.). But, piercing the shard of his contention, We find that petitioner-appellant's action is just an
attempt to circumvent the rule establishing State exemption from suits. He cannot use that principle
of law to profit at the expense and prejudice of the State and its citizens. The promotion of public
welfare and the protection of the inhabitants near the public forest are property, rights and interest of
the State. Accordingly, "the rule establishing State exeraiption from suits may not be circumvented
by directing the action against the officers of the State instead of against the State itself. In such
cases the State's immunity may be validly invoked against the action as long as it can be shown that
the suit really affects the property, rights, or interests of the State and not merely those of the officer
nominally made party defendant" (SINCO, Phil. Political Law, 10th ed., p. 35; Salgado vs. Ramos, 64
Phil. 724; see also Angat River Irrigation System vs. Angat River Workers' Union, G.R. No. L-10943-
44, Dec. 28, 1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre Service, 18 SCRA 1120,
1121-1125; Bureau of Printing vs. Bureau of Printing Employees' Association, 1 SCRA 340, 341,
343).

Both the Secretary of Agriculture and Natural Resources and the Director of Forestry acted in their
capacity as officers of the State, representatives of the sovereign authority discharging governmental
powers. A private individual cannot issue a timber license.

Consequently, a favorable judgment for the petitioner-appellant would result in the government
losing a substantial part of its timber resources. This being the case, petitioner-appellant's action
cannot prosper unless the State gives its consent to be sued.

IV

Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-appellees can
validly revoke his timber license. As pointed out earlier, paragraph 27 of the rules and regulations
included in the ordinary timber license states: "The terms and conditions of this license are subject to
change at the discretion of the Director of Forestry, and that this license may be made to expire at
an earlier date, when public interests so require" (Exh. D, p. 22, CFI rec.). A timber license is an
instrument by which the State regulates the utilization and disposition of forest resources to the end
that public welfare is promoted. A timber license is not a contract within the purview of the due
process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this ceise

"A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority, federal, state, or municipal, granting it and the person to whom it is
granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation"
(37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights,
neither is it property or property rights (People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs.
Provincial Board of Rizal (56 Phil. 123), it was held that:

A license authorizing the operation and exploitation of a cockpit is not property of

which the holder may not be deprived without due process of law, but a mere
privilege which may be revoked when public interests so require.

The welfare of the people is the supreme law. Thus, no franchise or right can be availed of to defeat
the proper exercise of police power (Surigao Electric Co., Inc. vs. Municipality of Surigao, 24 SCRA
898, Aug. 30, 1968). The State has inherent power enabling it to prohibit all things hurtful to comfort,
safety, and welfare of society (Edu vs. Ericta, 35 SCRA 481, Oct. 24,1970).

As provided in the aforecited provision, timber licenses are subject to the authority of the Director of
Forestry. The utilization and disposition of forest resources is directly under the control and
supervision of the Director of Forestry. However, "while Section 1831 of the Revised Administrative
Code provides that forest products shall be cut, gathered and removed from any forest only upon
license from the Director of Forestry, it is no less true that as a subordinate officer, the Director of
Forestry is subject to the control of the Department Head or the Secretary of Agriculture and Natural
Resources (See. 79[c], Rev. Adm. Code), who, therefore, may impose reasonable regulations in the
exercise of the powers of the subordinate officer" (Director of Forestry vs. Benedicto, 104 SCRA
309, May 5, 1981). The power of control of the Department Head over bureaus and offices includes
the power to modify, reverse or set aside acts of subordinate officials (Province of Pangasinan vs.
Secretary of Public Works and Communications, 30 SCRA 134, Oct. 31, 1969; Montano vs. Silvosa,
97 Phil. 143, 144, 147-148). Accordingly, respondent-appellee Secretary of Agriculture and Natural
Resources has the authority to revoke, on valid grounds, timber licenses issued by the Director of
Forestry. There being supporting evidence, the revocation of petitioner-appellant's timber license
was a wise exercise of the power of the respondent- appellee (Secretary of Agriculture and Natural
Resources) and therefore, valid.

Thus, "this Court had rigorously adhered to the principle of conserving forest resources, as corollary
to which the alleged right to them of private individuals or entities was meticulously inquired into and
more often than not rejected. We do so again" (Director of Forestry vs. Benedicto, supra). WE
reiterate Our fidelity to the basic policy of conserving the national patrimony as ordained by the
Constitution.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED FROM IS HEREBY
.AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-APPELLANT.

SO ORDERED,

Concepcion Jr., Guerrero, Abad Santos and Escolin, JJ., concur.

Aquino, J, concurs in the result.

De Castro, JJ., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

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 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 certiorari and 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 In Commissioner 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 or garnishment." 19The
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.

Barredo, Antonio and Concepcion, Jr., JJ., concur.

Aquino, J., concurs in the result.

Santos J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-55273-83 December 19, 1981

GAUDENCIO RAYO, BIENVINIDO PASCUAL, TOMAS MANUEL, MARIANO CRUZ, PEDRO

BARTOLOME, BERNARDINO CRUZ JOSE PALAD , LUCIO FAJARDO, FRANCISCO RAYOS,
ANGEL TORRES, NORBERTO TORRES, RODELIO JOAQUIN, PEDRO AQUINO, APOLINARIO
BARTOLOME, MAMERTO BERNARDO, CIRIACO CASTILLO, GREGORIO CRUZ, SIMEON
ESTRELLA, EPIFANIO MARCELO, HERMOGENES SAN PEDRO, JUAN SANTOS, ELIZABETH
ABAN, MARCELINA BERNABE, BUENAVENTURA CRUZ, ANTONIO MENESES, ROMAN SAN
PEDRO, LOPEZ ESPINOSA, GODOFREDO PUNZAL, JULIANA GARCIA, LEBERATO
SARMIENTO, INOCENCIO DE LEON, CARLOS CORREA, REYNALDO CASIMIRO, ANTONIO
GENER, GAUDENCIO CASTILLO, MATIAS PEREZ, CRISPINIANO TORRES, CRESENCIO
CRUZ, PROTACIO BERNABE, MARIANO ANDRES, CRISOSTOMO CRUZ, MARCOS
EUSTAQUIO, PABLO LEGASPI, VICENTE PASCUAL, ALEJANDRA SISON, EUFRACIO
TORRES, ROGELIO BARTOLOME, RODOLFO BERNARDO, APOLONIO CASTILLO,
MARCELINO DALMACIO, EUTIQUIO LEGASPI, LORENZO LUCIANO and GREGORIO
PALAD, petitioners,
vs.
COURT OF FIRST INSTANCE OF BULACAN, BRANCH V, STA. MARIA, and NATIONAL
POWER CORPORATION, respondents.

ABAD SANTOS, J.:

The relevant antecedents of this case are narrated in the petition and have not been controverted,
namely:

3. At about midnight on October 26, 1978, during the height of that infamous typhoon
"KADING" the respondent corporation, acting through its plant superintendent,
Benjamin Chavez, opened or caused to be opened simultaneously all the three
floodgates of the Angat Dam. And as a direct and immediate result of the sudden,
precipitate and simultaneous opening of said floodgates several towns in Bulacan
were inundated. Hardest-hit was Norzagaray. About a hundred of its residents died
or were reported to have died and properties worth million of pesos destroyed or
washed away. This flood was unprecedented in Norzagaray.

4. Petitioners, who were among the many unfortunate victims of that man-caused
flood, filed with the respondent Court eleven complaints for damages against the
respondent corporation and the plant superintendent of Angat Dam, Benjamin
Chavez, docketed as Civil Cases Nos. SM-950 951, 953, 958, 959, 964, 965, 966,
981, 982 and 983. These complaints though separately filed have a common/similar
cause of action. ...

5. Respondent corporation filed separate answers to each of these eleven

complaints. Apart from traversing the material averments in the complaints and
setting forth counterclaims for damages respondent corporation invoked in each
 answer a special and affirmative defense that "in the operation of the Angat Dam," it
is "performing a purely governmental function", hence it "can not be sued without the
express consent of the State." ...

6. On motion of the respondent corporation a preliminary hearing was held on its

affirmative defense as though a motion to dismiss were filed. Petitioners opposed the
prayer for dismissal and contended that respondent corporation is performing not
governmental but merely proprietary functions and that under its own organic act,
Section 3 (d) of Republic Act No. 6395, it can sue and be sued in any court. ...

7. On July 29, 1980 petitioners received a copy of the questioned order of the
respondent Court dated December 21, 1979 dismissing all their complaints as
against the respondent corporation thereby leaving the superintendent of the Angat
Dam, Benjamin Chavez, as the sole party-defendant. ...

8. On August 7, 1980 petitioners filed with the respondent Court a motion for
reconsideration of the questioned order of dismissal. ...

9. The respondent Court denied petitioners' motion for reconsideration in its order
dated October 3, 1980. ... Hence, the present petition for review on certiorari under
Republic Act No. 5440. (Rollo, pp. 3-6.)

The Order of dismissal dated December 12, 1979, reads as follows:

Under consideration is a motion to dismiss embodied as a special affirmative

defense in the answer filed by defendant NPC on the grounds that said defendant
performs a purely governmental function in the operation of the Angat Dam and
cannot therefore be sued for damages in the instant cases in connection therewith.

Plaintiffs' opposition to said motion to discuss, relying on Sec. 3 (d) of Republic Act
6396 which imposes on the NPC the power and liability to sue and be sued in any
court, is not tenable since the same refer to such matters only as are within the
scope of the other corporate powers of said defendant and not matters of tort as in
the instant cases. It being an agency performing a purely governmental function in
the operation of the Angat Dam, said defendant was not given any right to commit
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.)

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.

Barredo (Chairman), Aquino, De Castro, Ericta and Escolin JJ., concur.

Concepcion Jr., J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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 mortgage. (Exhibit "C ")

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 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.

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 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.
Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Vasquez and Relova, JJ., concur.

Fernando, C.J., concurs in the result.

Plana, Escolin ** and Gutierrez, Jr., *** JJ., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified under arts. 2219 and 2220 of the Civil Code. I
vote to award the private respondents the additional sum of P2,000 as litigation expenses.

MAKASIAR, J., dissenting:

I dissent.

To begin with, the negligent acts committed by the officers and employees of the petitioner, Social
Security System, amounted to not simply a contractual breach but tort. For the record is clear that
petitioner's officers and employees were grossly negligent bordering on malice or bad faith in
applying for the extrajudicial foreclosure of the mortgage contract executed in its favor by the
spouses David B. Cruz and Socorro Concio-Cruz, and that even after private respondents had
brought to the attention of the petitioner's officers and employees their mistake, they insisted on their
course of action, instead of making the necessary rectifications, which grossly negligent and
oppressive acts caused damage to private respondents. As found by the Court of Appeals:

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 appellees, 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.

It is obvious that the appellant applied for the extra-judicial foreclosure of the
mortgage in question because of the gross negligence of its employees. This
negligence was aggravated when the appellant, after being informed of the error,
insisted on proceeding with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these violations are either too minor to
warrant the drastic step of foreclosure or were deemed condoned when the appellant
 accepted late payments prior to June 30, 1968. Hence the trial court did not err in
concluding that 'the act of defendant indeed was deliberate, calculated to cow
plaintiffs into submission and made obviously with malice (p. 54, rec.; emphasis
supplied).

The circumstance that there was a pre-existing contractual relationship between the herein
contending parties, does not bar the tort liability of the officers and employees of petitioner; because
tort liability may still exist despite presence of contractual relations as the act that breaks the contract
may also be a tort, as in this case (Air France vs. Carrascoso, L-21438, Sept. 28, 1966, 18 SCRA
155, 168-169; Singson & Castillo vs. Bank of the Philippine Islands, L-24837, June 27, 1968, 23
SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the applicable provision of law is Article 2180 in relation
to Article 2176 of the New Civil Code. Under Article 2180, ... The State is responsible in like manner
when it acts through a special agent; but not when the damage has been caused by the official to
whom the task done properly pertains, in which case what is provided in Article 2176 shall be
applicable.

In the case at bar, the petitioner Social Security System as the instrumentality of the State to
implement the social justice guarantee enunciated in the Constitution, did not act through a special
agent. Hence, the Social Security System cannot be liable for the damages caused by the tortious
acts of its officers and employees while in the performance of their regular functions. The remedy
therefore of private respondents is to proceed against the guilty officers and employees of petitioner
Social Security System as mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs. Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article 1903 to the case wherein it acts
through a special agent, ... so that in representation of the state and being bound to
act as an agent thereof, he executes the trust confided to him. This concept does not
apply to any executive agent who is an employee of the active administration and
who on his own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not invoked by the petitioner as a defense, this does
not prevent this Tribunal from taking cognizance of the same. For as stressed in Ortigas, Jr. vs.
Lufthansa German Airlines (June 30, 1975, 64 SCRA 610, 633), failure to assign a defense as an
error on appeal is a pure technicality that should not prevail over the substantial issues in a
controversy as the same would not serve the interest of justice, and "this Court is clothed with ample
authority to review matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura & Export Co., Inc.,
May 31, 1963, 8 SCRA 143). Further, We have, time and again, re-stated the rule that the Supreme
Court can suspend its own rules to serve the ends of justice (Jose vs. C.A., et al., L-38581, March
31, 1976; Phil. Blooming Mills Employees Organization, et al. vs. PBM Co., et al., L-31195, 51 SCRA
189, 215; Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313; Ordoveza vs. Raymundo,
63 Phil. 275).

The principle that a defense not expressly pleaded is deemed waived unless such failure is
satisfactorily explained, is merely a general rule which is subject to exceptions, among which is
when the Court can take judicial notice of such defense. In this case, We can take judicial notice of
the law, like Article 2180 of the New Civil Code. It must be emphasized that the courts have as much
duty as the Commission on August to protect the public treasury from being mulcted or raided
illegally. And this becomes more imperative considering that a substantial portion of the funds of the
petitioner comes from the contributions of- employees and workers in private firms and is therefore
in the nature of a trust fund to be expended only for their welfare and benefit, with the government
merely giving some subsidy. Any amount of damages illegally assessed against the Social Security
System will deplete the benefit funds available to its covered members for the contingencies of
sickness, disability, retirement or death.

It cannot likewise be seriously questioned that the Social Security System is comprehended in the
definition in Section 2 of the Revised Administrative Code of the term "Government of the Republic
of the Philippines ... which refers to the corporate governmental entity through which the functions of
government are exercised throughout the Philippine Islands, including, save as the contrary appears
from the context, the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central Government or to the provincial or municipal branches
or other forms of local government." And the second paragraph of said Section 2 provides that the
term "national government" refers to the central government as distinguished from the different forms
of local government. There is nothing therein nor in the Social Security Act, as amended, intimating
that the national government does not include the Social Security System.

It is true that the Social Security System has a corporate or juridical personality of its own. But this
does not remove it as an integral part of the national or central government. For such corporate or
juridical personality invested in it is more for facility and convenience in the attainment of the
objectives for which it was created by the legislative. Such vesting of corporate or juridical
personality in the Social Security System was never intended to destroy the shield from liability
afforded it as an integral part of the State or Government by Article 2180 of the New Civil Code.
Relatedly, such corporate or juridical personality of the Social Security System and the express
provision of the law creating the same that it can sue and be sued, have the effect of merely waiving
its immunity from suit as an entity performing governmental functions. Such waiver of its immunity
from suit is not an admission of its liability. Such waiver merely allows a private citizen a remedy for
the enforcement and protection of his rights, but always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the New Civil Code as aforestated. In other words,
such waiver of immunity from suit is not equivalent to instant liability. The Social Security System
can only be held liable for damages arising from the tortious acts of its officers and employees only if
it acts through a special agent, which is not true in the case at bar.

II

It must be finally stressed that the Social Security System cannot be liable for damages because it is
an entity of government performing governmental functions; hence, not profit-oriented. The 1963
doctrine in SSSEA vs. Soriano(7 SCRA 1016 [1963]) that the system is exercising proprietary
functions, is no longer controlling.

For in 1969, the distinction between constituent and ministrant functions of the Government as laid
down in the case of Bacani vs. Nacoco (100 Phil. 468 [1956]) has been obliterated. In the case of
Agricultural Credit and Cooperative Financing Administration (ACCFA) vs. Confederation of Unions
in Government Corporations and Offices (CUGCO) [30 SCRA 649 (1969)], this Court in re-
examining the aforesaid Bacani ruling observed that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in governmental functions in favor of the more
responsive postulate that the growing complexities of modern society have rendered the traditional
classification of government functions unrealistic and obsolete.

WE held in the ACCFA case, thus:

 The growing complexities of modern society, however, have rendered this traditional
classification of the functions of government quite unrealistic, not to say obsolete.
The areas which used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only 'because it was better
equipped to administer for the public welfare than is any private individual or groups
of individuals,' continue to lose their well-defined boundaries and to be absorbed
within activities that the government must have undertaken in its sovereign capacity if
it is to meet the increasing social challenges of the times. Here as almost
everywhere, else, the tendency is undoubtedly towards a greater socialization of
economic forces. Here of course, this development was envisioned indeed adopted
as a national policy, by the Constitution itself in its declaration of principle concerning
the promotion of social justice.

Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed that:

The decision reached by this Court so ably given expression in the opinion of Justice
Makalintal, characterized with vigor, clarity and precision, represents what for me is a
clear tendency not to be necessarily bound by our previous pronouncements on what
activities partake of a nature that is governmental. Of even greater significance, there
is a definite rejection of the 'constituent-ministrant' criterion of governmental
functions, followed in Bacani vs. National Coconut Corporation. That indeed is cause
for gratification. For me at least, there is again full adherence to the basic philosophy
of the Constitution as to the extensive and vast power lodged in our government to
cope with the social and economic problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of the court, distinguished by its
high quality of juristic craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the government is freed from the
compulsion exerted by the Bacani doctrine of the 'constituent-ministrant' test as a
criterion for the type of activity in which it may engage. It constricting effect is
consigned to oblivion. No doubts or misgivings need assail us that government
efforts to promote the public wealth whether through regulatory legislation of vast
scope and emplitude or through the undertaking of business activities, would have to
face a searching and rigorous scrutiny. It is clear that their legitimacy cannot be
challenged on the ground alone of their being offensive to the implications of the
laissez- faire concept. Unless there be a repugnancy then to the limitations expressly
set forth in the Constitution to protect individual rights, the government enjoys a
much wider latitude of action as to the means it chooses to cope with grave social
and economic problems that urgently press for solution. For me, at least, that is to
manifest deference to the philosophy of our fundamental law. Hence my full
concurrence, as announced at the outset. (pp- 682-683, emphasis supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the well being and economic security
of all the people should be the concern of the State. (Art. II, Declaration of
Principles).

The present 1973 Constitution provides under its Declaration of Principles and State Policies (Article
11), that
 The State shall promote social justice to ensure the dignity, welfare, and security of
all the people. Towards this end, the State shall regulate the acquisition, ownership,
use, enjoyment, and disposition of private property, and equitably diffuse property
ownership and profits. (Section 6);

and

The State 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. (Section 7).

The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No.
1161 entitled "The Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of the Philippines to develop,

establish gradually and perfect a social security system which shall be suitable to the
needs of the people throughout the Philippines, and shall provide protection against
the hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social Security Act of
1954:

It is a recognized principle in free societies that the State must help its citizens to
make provision for emergencies beyond their control, such as unemployment,
sickness requiring expensive medical treatment, and similar emergencies to a
greater or lesser degree by means of social security legislation in a variety of forms.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 10 [1961]),
declared that "the Social Security Law was enacted pursuant to the 'policy of the Republic to
develop, establish gradually and perfect a social security system which shall be suitable to the needs
of the people throughout the Philippines and provide protection to employees against the hazards of
disability, sickness, old age and death' (Sec. 2, Republic Act No. 1161, as amended). Such
enactment is a legitimate exercise of the police power. It affords protection to labor, especially to
working women and minors, and is in full accord with the constitutional provisions on the 'promotion
of social justice to insure the well being and economic security of all the people.

It is interesting to note that aforesaid pronouncement of this Court was incorporated in the Social
Security Act (R.A. 1161) by Presidential Decree No. 24 issued on October 19, 1972. Thus, as
amended by said Decree, its section 2 now reads: "It is the policy of the Republic of the Philippines
to establish, develop, promote and perfect a sound viable 'tax exempt social security service suitable
to the needs of the people throughout the Philippines, which shall provide to covered employees and
their families protection against the hazards of disability, sickness, old age, and death, with a view to
promoting their well-being in the spirit of social justice" (emphasis supplied). And one of its
whereases expressly states that "the measure is necessary to effect reforms in SSS operations
and to revitalize its structure as an important agency in the promotion of the social and economic
development programs of the Government; ... (emphasis supplied).

Considering therefore that the establishment and maintenance of an adequate social security and
social services, which the Social Security System seeks to perform and achieve are functions
pursuant to the basic constitutional mandate directing the State to promote "social justice to insure
the well-being and economic security of all the people" (1935 Constitution) or "to insure the dignity,
welfare and security of all the people" as well as the police power of the State, the inescapable
conclusion is that the function of the SSS is and has always been governmental.

It thus becomes clear that petitioner Social Security System, under the obtaining facts and
applicable laws in the case, is not liable for the damages caused to private respondents by the
tortious acts of its officers and employees to whom the task done properly pertained.

A contrary rule as that enunciated in the majority opinion invites conspiracy between officials and
employees of the Social Security System and private parties to create financial liabilities against the
System. Its funds are public funds and more importantly trust funds, which must be protected.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified under arts. 2219 and 2220 of the Civil Code. I
vote to award the private respondents the additional sum of P2,000 as litigation expenses.

MAKASIAR, J., dissenting:

I dissent.

To begin with, the negligent acts committed by the officers and employees of the petitioner, Social
Security System, amounted to not simply a contractual breach but tort. For the record is clear that
petitioner's officers and employees were grossly negligent bordering on malice or bad faith in
applying for the extrajudicial foreclosure of the mortgage contract executed in its favor by the
spouses David B. Cruz and Socorro Concio-Cruz, and that even after private respondents had
brought to the attention of the petitioner's officers and employees their mistake, they insisted on their
course of action, instead of making the necessary rectifications, which grossly negligent and
oppressive acts caused damage to private respondents. As found by the Court of Appeals:

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 appellees, 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.
 It is obvious that the appellant applied for the extra-judicial foreclosure of the
mortgage in question because of the gross negligence of its employees. This
negligence was aggravated when the appellant, after being informed of the error,
insisted on proceeding with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these violations are either too minor to
warrant the drastic step of foreclosure or were deemed condoned when the appellant
accepted late payments prior to June 30, 1968. Hence the trial court did not err in
concluding that 'the act of defendant indeed was deliberate, calculated to cow
plaintiffs into submission and made obviously with malice (p. 54, rec.; emphasis
supplied).

The circumstance that there was a pre-existing contractual relationship between the herein
contending parties, does not bar the tort liability of the officers and employees of petitioner; because
tort liability may still exist despite presence of contractual relations as the act that breaks the contract
may also be a tort, as in this case (Air France vs. Carrascoso, L-21438, Sept. 28, 1966, 18 SCRA
155, 168-169; Singson & Castillo vs. Bank of the Philippine Islands, L-24837, June 27, 1968, 23
SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the applicable provision of law is Article 2180 in relation
to Article 2176 of the New Civil Code. Under Article 2180, ... The State is responsible in like manner
when it acts through a special agent; but not when the damage has been caused by the official to
whom the task done properly pertains, in which case what is provided in Article 2176 shall be
applicable.

In the case at bar, the petitioner Social Security System as the instrumentality of the State to
implement the social justice guarantee enunciated in the Constitution, did not act through a special
agent. Hence, the Social Security System cannot be liable for the damages caused by the tortious
acts of its officers and employees while in the performance of their regular functions. The remedy
therefore of private respondents is to proceed against the guilty officers and employees of petitioner
Social Security System as mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs. Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article 1903 to the case wherein it acts
through a special agent, ... so that in representation of the state and being bound to
act as an agent thereof, he executes the trust confided to him. This concept does not
apply to any executive agent who is an employee of the active administration and
who on his own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not invoked by the petitioner as a defense, this does
not prevent this Tribunal from taking cognizance of the same. For as stressed in Ortigas, Jr. vs.
Lufthansa German Airlines (June 30, 1975, 64 SCRA 610, 633), failure to assign a defense as an
error on appeal is a pure technicality that should not prevail over the substantial issues in a
controversy as the same would not serve the interest of justice, and "this Court is clothed with ample
authority to review matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura & Export Co., Inc.,
May 31, 1963, 8 SCRA 143). Further, We have, time and again, re-stated the rule that the Supreme
Court can suspend its own rules to serve the ends of justice (Jose vs. C.A., et al., L-38581, March
31, 1976; Phil. Blooming Mills Employees Organization, et al. vs. PBM Co., et al., L-31195, 51 SCRA
189, 215; Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313; Ordoveza vs. Raymundo,
63 Phil. 275).
The principle that a defense not expressly pleaded is deemed waived unless such failure is
satisfactorily explained, is merely a general rule which is subject to exceptions, among which is
when the Court can take judicial notice of such defense. In this case, We can take judicial notice of
the law, like Article 2180 of the New Civil Code. It must be emphasized that the courts have as much
duty as the Commission on August to protect the public treasury from being mulcted or raided
illegally. And this becomes more imperative considering that a substantial portion of the funds of the
petitioner comes from the contributions of- employees and workers in private firms and is therefore
in the nature of a trust fund to be expended only for their welfare and benefit, with the government
merely giving some subsidy. Any amount of damages illegally assessed against the Social Security
System will deplete the benefit funds available to its covered members for the contingencies of
sickness, disability, retirement or death.

It cannot likewise be seriously questioned that the Social Security System is comprehended in the
definition in Section 2 of the Revised Administrative Code of the term "Government of the Republic
of the Philippines ... which refers to the corporate governmental entity through which the functions of
government are exercised throughout the Philippine Islands, including, save as the contrary appears
from the context, the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central Government or to the provincial or municipal branches
or other forms of local government." And the second paragraph of said Section 2 provides that the
term "national government" refers to the central government as distinguished from the different forms
of local government. There is nothing therein nor in the Social Security Act, as amended, intimating
that the national government does not include the Social Security System.

It is true that the Social Security System has a corporate or juridical personality of its own. But this
does not remove it as an integral part of the national or central government. For such corporate or
juridical personality invested in it is more for facility and convenience in the attainment of the
objectives for which it was created by the legislative. Such vesting of corporate or juridical
personality in the Social Security System was never intended to destroy the shield from liability
afforded it as an integral part of the State or Government by Article 2180 of the New Civil Code.
Relatedly, such corporate or juridical personality of the Social Security System and the express
provision of the law creating the same that it can sue and be sued, have the effect of merely waiving
its immunity from suit as an entity performing governmental functions. Such waiver of its immunity
from suit is not an admission of its liability. Such waiver merely allows a private citizen a remedy for
the enforcement and protection of his rights, but always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the New Civil Code as aforestated. In other words,
such waiver of immunity from suit is not equivalent to instant liability. The Social Security System
can only be held liable for damages arising from the tortious acts of its officers and employees only if
it acts through a special agent, which is not true in the case at bar.

II

It must be finally stressed that the Social Security System cannot be liable for damages because it is
an entity of government performing governmental functions; hence, not profit-oriented. The 1963
doctrine in SSSEA vs. Soriano(7 SCRA 1016 [1963]) that the system is exercising proprietary
functions, is no longer controlling.

For in 1969, the distinction between constituent and ministrant functions of the Government as laid
down in the case of Bacani vs. Nacoco (100 Phil. 468 [1956]) has been obliterated. In the case of
Agricultural Credit and Cooperative Financing Administration (ACCFA) vs. Confederation of Unions
in Government Corporations and Offices (CUGCO) [30 SCRA 649 (1969)], this Court in re-
examining the aforesaid Bacani ruling observed that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in governmental functions in favor of the more
responsive postulate that the growing complexities of modern society have rendered the traditional
classification of government functions unrealistic and obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however, have rendered this traditional
classification of the functions of government quite unrealistic, not to say obsolete.
The areas which used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only 'because it was better
equipped to administer for the public welfare than is any private individual or groups
of individuals,' continue to lose their well-defined boundaries and to be absorbed
within activities that the government must have undertaken in its sovereign capacity if
it is to meet the increasing social challenges of the times. Here as almost
everywhere, else, the tendency is undoubtedly towards a greater socialization of
economic forces. Here of course, this development was envisioned indeed adopted
as a national policy, by the Constitution itself in its declaration of principle concerning
the promotion of social justice.

Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed that:

The decision reached by this Court so ably given expression in the opinion of Justice
Makalintal, characterized with vigor, clarity and precision, represents what for me is a
clear tendency not to be necessarily bound by our previous pronouncements on what
activities partake of a nature that is governmental. Of even greater significance, there
is a definite rejection of the 'constituent-ministrant' criterion of governmental
functions, followed in Bacani vs. National Coconut Corporation. That indeed is cause
for gratification. For me at least, there is again full adherence to the basic philosophy
of the Constitution as to the extensive and vast power lodged in our government to
cope with the social and economic problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of the court, distinguished by its
high quality of juristic craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the government is freed from the
compulsion exerted by the Bacani doctrine of the 'constituent-ministrant' test as a
criterion for the type of activity in which it may engage. It constricting effect is
consigned to oblivion. No doubts or misgivings need assail us that government
efforts to promote the public wealth whether through regulatory legislation of vast
scope and emplitude or through the undertaking of business activities, would have to
face a searching and rigorous scrutiny. It is clear that their legitimacy cannot be
challenged on the ground alone of their being offensive to the implications of the
laissez- faire concept. Unless there be a repugnancy then to the limitations expressly
set forth in the Constitution to protect individual rights, the government enjoys a
much wider latitude of action as to the means it chooses to cope with grave social
and economic problems that urgently press for solution. For me, at least, that is to
manifest deference to the philosophy of our fundamental law. Hence my full
concurrence, as announced at the outset. (pp- 682-683, emphasis supplied).

The 1935 Constitution declared:

 Sec. 5. The promotion of social justice to insure the well being and economic security
of all the people should be the concern of the State. (Art. II, Declaration of
Principles).

The present 1973 Constitution provides under its Declaration of Principles and State Policies (Article
11), that

The State shall promote social justice to ensure the dignity, welfare, and security of
all the people. Towards this end, the State shall regulate the acquisition, ownership,
use, enjoyment, and disposition of private property, and equitably diffuse property
ownership and profits. (Section 6);

and

The State 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. (Section 7).

The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No.
1161 entitled "The Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of the Philippines to develop,

establish gradually and perfect a social security system which shall be suitable to the
needs of the people throughout the Philippines, and shall provide protection against
the hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social Security Act of
1954:

It is a recognized principle in free societies that the State must help its citizens to
make provision for emergencies beyond their control, such as unemployment,
sickness requiring expensive medical treatment, and similar emergencies to a
greater or lesser degree by means of social security legislation in a variety of forms.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 10 [1961]),
declared that "the Social Security Law was enacted pursuant to the 'policy of the Republic to
develop, establish gradually and perfect a social security system which shall be suitable to the needs
of the people throughout the Philippines and provide protection to employees against the hazards of
disability, sickness, old age and death' (Sec. 2, Republic Act No. 1161, as amended). Such
enactment is a legitimate exercise of the police power. It affords protection to labor, especially to
working women and minors, and is in full accord with the constitutional provisions on the 'promotion
of social justice to insure the well being and economic security of all the people.

It is interesting to note that aforesaid pronouncement of this Court was incorporated in the Social
Security Act (R.A. 1161) by Presidential Decree No. 24 issued on October 19, 1972. Thus, as
amended by said Decree, its section 2 now reads: "It is the policy of the Republic of the Philippines
to establish, develop, promote and perfect a sound viable 'tax exempt social security service suitable
to the needs of the people throughout the Philippines, which shall provide to covered employees and
their families protection against the hazards of disability, sickness, old age, and death, with a view to
promoting their well-being in the spirit of social justice" (emphasis supplied). And one of its
whereases expressly states that "the measure is necessary to effect reforms in SSS operations
and to revitalize its structure as an important agency in the promotion of the social and economic
development programs of the Government; ... (emphasis supplied).

Considering therefore that the establishment and maintenance of an adequate social security and
social services, which the Social Security System seeks to perform and achieve are functions
pursuant to the basic constitutional mandate directing the State to promote "social justice to insure
the well-being and economic security of all the people" (1935 Constitution) or "to insure the dignity,
welfare and security of all the people" as well as the police power of the State, the inescapable
conclusion is that the function of the SSS is and has always been governmental.

It thus becomes clear that petitioner Social Security System, under the obtaining facts and
applicable laws in the case, is not liable for the damages caused to private respondents by the
tortious acts of its officers and employees to whom the task done properly pertained.

A contrary rule as that enunciated in the majority opinion invites conspiracy between officials and
employees of the Social Security System and private parties to create financial liabilities against the
System. Its funds are public funds and more importantly trust funds, which must be protected.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-52179 April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR., SOR
MARIETA BANIÑA, MONTANO BANIÑA, ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents.

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by the
respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-
BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated November 4, 1975;
July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering
defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally,
the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of
Macario Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo
N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of
La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Baniña,
Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña are
heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg before the
aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger
jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and
sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the
Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Baniña Sr. died as a result of the injuries they
sustained and four (4) others suffered varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch
I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge
and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7,
1975, the private respondents amended the complaint wherein the petitioner and its regular
employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer
and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger jeepney
as the proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July
13, 1976 filed by the Municipality and Bislig for having been filed out of time;

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing
that parties have not yet submitted their respective memoranda despite the court's direction;
and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted
as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to
pay jointly and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B. Surell, Laureano
Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano Baniña, Orja Baniña and Lydia
B. Baniña the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected
earnings of the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.
 The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo
Balagot.

SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion
which was then pending. However, respondent judge issued another order dated November 7, 1979
denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of
time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants
municipality and Bislig further wish to pursue the matter disposed of in the order of July 26, 1979,
such should be elevated to a higher court in accordance with the Rules of Court. Hence, this petition.

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and
adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the
petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner
has not considered that every court, including respondent court, has the inherent power to amend
and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed
grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the
State amounting to lack of jurisdiction in a motion to dismiss.

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the
State amounting to lack of jurisdiction until trial. However, said respondent judge failed to resolve
such defense, proceeded with the trial and thereafter rendered a decision against the municipality
and its driver.

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment
it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the
municipality. However, said judge acted in excess of his jurisdiction when in his decision dated
October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular
employee.

The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."

Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act No.
3083. A special law may be passed to enable a person to sue the government for an alleged quasi-
delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)
Consent is implied when the government enters into business contracts, thereby descending to the
level of the other contracting party, and also when the State files a complaint, thus opening itself to a
counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they
are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions because their
charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent
of the state to be sued, liability on the applicable law and the established facts. The circumstance
that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be
held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of
America vs. Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee,
the test of liability of the municipality depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As emphasized in the case of
Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of
powers becomes important for purposes of determining the liability of the municipality for the acts of
its agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of
Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are twofold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental. Their officers and agents in such
capacity, though elected or appointed by them, are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state.
In the other capacity the municipalities exercise a private, proprietary or corporate right,
arising from their existence as legal persons and not as public agencies. Their officers and
agents in the performance of such functions act in behalf of the municipalities in their
corporate or individual capacity, and not for the state or sovereign power." (112 N.E., 994-
995) (Ibid, pp. 605-606.)

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

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to
the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that
the driver of the dump truck was performing duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer,
and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which
the truck and the driver worked at the time of the accident are admittedly governmental activities."

After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its regular employee, who was then
engaged in the discharge of governmental functions. Hence, the death of the passenger –– tragic
and deplorable though it may be –– imposed on the municipality no duty to pay monetary
compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-15751 January 28, 1961

BUREAU OF PRINTING, SERAFIN SALVADOR and MARIANO LEDESMA, petitioners,

vs.
THE BUREAU OF PRINTING EMPLOYEES ASSOCIATION (NLU), PACIFICO ADVINCULA,
ROBERTO MENDOZA, PONCIANO ARGANDA and TEODULO TOLERAN, respondents.

Office of the Solicitor General for petitioners.

Eulogio R. Lerum for respondents.

GUTIERREZ DAVID, J.:

This is a petition for certiorari and prohibition with preliminary injunction to annul Certain orders of
the respondent Court of Industrial Relations and to restrain it from further proceeding in the action for
unfair labor practice pending before it on the ground of lack of jurisdiction. Giving due course to the
petition, this Court ordered the issuance of the writ of preliminary injunction prayed for without bond.

The action in question was — upon complaint of the respondents Bureau of Printing Employees
Association (NLU) Pacifico Advincula, Roberto Mendoza, Ponciano Arganda and Teodulo Toleran —
filed by an acting prosecutor of the Industrial Court against herein petitioner Bureau of Printing,
Serafin Salvador, the Acting Secretary of the Department of General Services, and Mariano
Ledesma the Director of the Bureau of Printing. The complaint alleged that Serafin Salvador and
Mariano Ledesma have been engaging in unfair labor practices by interfering with, or coercing the
employees of the Bureau of Printing particularly the members of the complaining association
petition, in the exercise of their right to self-organization an discriminating in regard to hire and
tenure of their employment in order to discourage them from pursuing the union activities.

Answering the complaint, the petitioners Bureau of Printing, Serafin Salvador and Mariano Ledesma
denied the charges of unfair labor practices attributed to the and, by way of affirmative defenses,
alleged, among other things, that respondents Pacifico Advincula, Roberto Mendoza Ponciano
Arganda and Teodulo Toleran were suspended pending result of an administrative investigation
against them for breach of Civil Service rules and regulations petitions; that the Bureau of Printing
has no juridical personality to sue and be sued; that said Bureau of Printing is not an industrial
concern engaged for the purpose of gain but is an agency of the Republic performing government
functions. For relief, they prayed that the case be dismissed for lack of jurisdiction. Thereafter,
before the case could be heard, petitioners filed an "Omnibus Motion" asking for a preliminary
hearing on the question of jurisdiction raised by them in their answer and for suspension of the trial
of the case on the merits pending the determination of such jurisdictional question. The motion was
granted, but after hearing, the trial judge of the Industrial Court in an order dated January 27, 1959
sustained the jurisdiction of the court on the theory that the functions of the Bureau of Printing are
"exclusively proprietary in nature," and, consequently, denied the prayer for dismissal.
Reconsideration of this order having been also denied by the court in banc, the petitioners brought
the case to this Court through the present petition for certiorari and prohibition.

We find the petition to be meritorious.

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916
(Act No. 2657). As such instrumentality of the Government, it operates under the direct supervision
of the Executive Secretary, Office of the President, and is "charged with the execution of all printing
and binding, including work incidental to those processes, required by the National Government and
such other work of the same character as said Bureau may, by law or by order of the (Secretary of
Finance) Executive Secretary, be authorized to undertake . . .." (See. 1644, Rev. Adm. Code). It has
no corporate existence, and its appropriations are provided for in the General Appropriations Act.
Designed to meet the printing needs of the Government, it is primarily a service bureau and
obviously, not engaged in business or occupation for pecuniary profit.

It is true, as stated in the order complained of, that the Bureau of Printing receives outside jobs and
that many of its employees are paid for overtime work on regular working days and on holidays, but
these facts do not justify the conclusion that its functions are "exclusively proprietary in nature."
Overtime work in the Bureau of Printing is done only when the interest of the service so requires
(sec. 566, Rev. Adm. Code). As a matter of administrative policy, the overtime compensation may be
paid, but such payment is discretionary with the head of the Bureau depending upon its current
appropriations, so that it cannot be the basis for holding that the functions of said Bureau are wholly
proprietary in character. Anent the additional work it executes for private persons, we find that such
work is done upon request, as distinguished from those solicited, and only "as the requirements of
Government work will permit" (sec. 1654, Rev. Adm. Code), and "upon terms fixed by the Director of
Printing, with the approval of the Department Head" (sec. 1655, id.). As shown by the uncontradicted
evidence of the petitioners, most of these works consist of orders for greeting cards during
Christmas from government officials, and for printing of checks of private banking institutions. On
those greeting cards, the Government seal, of which only the Bureau of Printing is authorized to use,
is embossed, and on the bank cheeks, only the Bureau of Printing can print the reproduction of the
official documentary stamps appearing thereon. The volume of private jobs done, in comparison with
government jobs, is only one-half of 1 per cent, and in computing the costs for work done for private
parties, the Bureau does not include profit because it is not allowed to make any. Clearly, while the
Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it is
thereby an industrial or business concern. The additional work it executes for private parties is
merely incidental to its function, and although such work may be deemed proprietary in character,
there is no showing that the employees performing said proprietary function are separate and
distinct from those employed in its general governmental functions.

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

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of
Printing cannot be sued. (Sec. 1, Rule 3, Rules of Court). Any suit, action or proceeding against it, if
it were to produce any effect, would actually be a suit, action or proceeding against the Government
itself, and the rule is settled that the Government cannot be sued without its consent, much less over
its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River Irrigation System, et al. vs.
Angat River Workers' Union, et. al., G.R. Nos. L-10943-44, December 28, 1957).
The record also discloses that the instant case arose from the filing of administrative charges against
some officers of the respondent Bureau of Printing Employees' Association by the Acting Secretary
of General Services. Said administrative charges are for insubordination, grave misconduct and acts
prejudicial to public service committed by inciting the employees, of the Bureau of Printing to walk
out of their jobs against the order of the duly constituted officials. Under the law, the Heads of
Departments and Bureaus are authorized to institute and investigate administrative charges against
erring subordinates. For the Industrial Court now to take cognizance of the case filed before it, which
is in effect a review of the acts of executive officials having to do with the discipline of government
employees under them, would be to interfere with the discharge of such functions by said officials.
WHEREFORE, the petition for a writ of prohibition is granted. The orders complained of are set
aside and the complaint for unfair labor practice against the petitioners is dismissed, with costs
against respondents other than the respondent court.

Bengzon, Bautista Angelo, Labrador, Paredes and Dizon, JJ., concur.

Reyes, J.B.L., J., concurs in the result.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23139 December 17, 1966

MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,

vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

Alejandro Basin, Jr. and Associates for plaintiff-appellant.

Felipe T. Cuison for defendants-appellees.

BENGZON, J.P., J.:

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November
of 1962, consigned to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of
Manila on April 10, 1963, and was discharged to the custody of the Customs Arrastre Service, the
unit of the Bureau of Customs then handling arrastre operations therein. The Customs Arrastre
Service later delivered to the broker of the consignee three cases only of the shipment.

On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila
against the Customs Arrastre Service and the Bureau of Customs to recover the value of the
undelivered case in the amount of P18,493.37 plus other damages.

On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not
being persons under the law, defendants cannot be sued.

After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the
ground that neither the Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff
appealed to Us from the order of dismissal.

Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the
facts stated.

Appellant contends that not all government entities are immune from suit; that defendant Bureau of
Customs as operator of the arrastre service at the Port of Manila, is discharging proprietary functions
and as such, can be sued by private individuals.

The Rules of Court, in Section 1, Rule 3, provide:

SECTION 1. Who may be parties.—Only natural or juridical persons or entities authorized by

law may be parties in a civil action.

Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an
entity authorized by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit,
the Customs Arrastre Service, is a person. They are merely parts of the machinery of Government.
The Bureau of Customs is a bureau under the Department of Finance (Sec. 81, Revised
Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau of
Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to
Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants herein cannot he
sued under the first two abovementioned categories of natural or juridical persons.

Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the
law thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the nature of
this function (arrastre service) is proprietary, not governmental. Thus, insofar as arrastre operation is
concerned, appellant would put defendants under the third category of "entities authorized by law" to
be sued. Stated differently, it is argued that while there is no law expressly authorizing the Bureau of
Customs to sue or be sued, still its capacity to be sued is implied from its very power to render
arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of a private
business.

The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and
Customs Code, effective June 1, 1957), and it states:

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.—The Bureau of Customs
shall have exclusive supervision and control over the receiving, handling, custody and
delivery of articles on the wharves and piers at all ports of entry and in the exercise of its
functions it is hereby authorized to acquire, take over, operate and superintend such plants
and facilities as may be necessary for the receiving, handling, custody and delivery of
articles, and the convenience and comfort of passengers and the handling of baggage; as
well as to acquire fire protection equipment for use in the piers: Provided, That whenever in
his judgment the receiving, handling, custody and delivery of articles can be carried on by
private parties with greater efficiency, the Commissioner may, after public bidding and
subject to the approval of the department head, contract with any private party for the service
of receiving, handling, custody and delivery of articles, and in such event, the contract may
include the sale or lease of government-owned equipment and facilities used in such service.

In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6,
1963, this Court indeed held "that the foregoing statutory provisions authorizing the grant by contract
to any private party of the right to render said arrastre services necessarily imply that the same is
deemed by Congress to be proprietary or non-governmental function." The issue in said case,
however, was whether laborers engaged in arrastre service fall under the concept of employees in
the Government employed in governmental functions for purposes of the prohibition in Section 11,
Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may
belong to any labor organization which does not impose the obligation to strike or to join in strike,"
which prohibition "shall apply only to employees employed in governmental functions of the
Government . . . .

Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject
matter of the case, but not that the Bureau of Customs can be sued. Said issue of suability was not
resolved, the resolution stating only that "the issue on the personality or lack of personality of the
Bureau of Customs to be sued does not affect the jurisdiction of the lower court over the subject
matter of the case, aside from the fact that amendment may be made in the pleadings by the
inclusion as respondents of the public officers deemed responsible, for the unfair labor practice acts
charged by petitioning Unions".

Now, the fact that a non-corporate government entity performs a function proprietary in nature does
not necessarily result in its being suable. If said non-governmental function is undertaken as an
incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit
extended to such government entity. This is the doctrine recognized in Bureau of Printing, et al. vs.
Bureau of Printing Employees Association, et al., L-15751, January 28, 1961:

The Bureau of Printing is an office of the Government created by the Administrative Code of
1916 (Act No. 2657). As such instrumentality of the Government, it operates under the direct
supervision of the Executive Secretary, Office of the President, and is "charged with the
execution of all printing and binding, including work incidental to those processes, required
by the National Government and such other work of the same character as said Bureau may,
by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to
undertake . . . ." (Sec. 1644, Rev. Adm. Code.) It has no corporate existence, and its
appropriations are provided for in the General Appropriations Act. Designed to meet the
printing needs of the Government, it is primarily a service bureau and, obviously, not
engaged in business or occupation for pecuniary profit.

xxx xxx xxx

. . . Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it
cannot be pretended that it is thereby an industrial or business concern. The additional work
it executes for private parties is merely incidental to its function, and although such work may
be deemed proprietary in character, there is no showing that the employees performing said
proprietary function are separate and distinct from those emoloyed in its general
governmental functions.

xxx xxx xxx

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

The situation here is not materially different. The Bureau of Customs, to repeat, is part of the
Department of Finance (Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of
the national government. Its primary function is governmental, that of assessing and collecting lawful
revenues from imported articles and all other tariff and customs duties, fees, charges, fines and
penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident. For
practical reasons said revenues and customs duties can not be assessed and collected by simply
receiving the importer's or ship agent's or consignee's declaration of merchandise being imported
and imposing the duty provided in the Tariff law. Customs authorities and officers must see to it that
the declaration tallies with the merchandise actually landed. And this checking up requires that the
landed merchandise be hauled from the ship's side to a suitable place in the customs premises to
enable said customs officers to make it, that is, it requires arrastre operations.1

Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary
incident of the primary and governmental function of the Bureau of Customs, so that engaging in the
same does not necessarily render said Bureau liable to suit. For otherwise, it could not perform its
governmental function without necessarily exposing itself to suit. Sovereign immunity, granted as to
the end, should not be denied as to the necessary means to that end.
And herein lies the distinction between the present case and that of National Airports Corporation vs.
Teodoro, 91 Phil. 203, on which appellant would rely. For there, the Civil Aeronautics Administration
was found have for its prime reason for existence not a governmental but a proprietary function, so
that to it the latter was not a mere incidental function:

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to
execute contracts of any kind, to purchase property, and to grant concessions rights, and
under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline,
accessories and supplies, and rentals for the use of any property under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power
to sue and be sued. The power to sue and be sued is implied from the power to transact
private business. . . .

xxx xxx xxx

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

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

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

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

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Zaldivar and Sanchez, JJ., concur.

Makalintal, J., concurs in the result.

Castro, J., reserves his vote.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 90314 November 27, 1990

LOIDA Q. SHAUF and JACOB SHAUF, Petitioners,

vs.
HON. COURT OF APPEALS, DON E. DETWILER and ANTHONY PERSI, Respondents.

REGALADO, J.:

In this petition for review on certiorari, petitioners would have us reverse and set aside the decision
rendered by respondent Court of Appeals on August 22, 1989, in CA-G.R. CV No. 17932, entitled
"Loida Shauf and Jacob Shauf, Plaintiffs-Appellants, versus Don Detwiler and Anthony Persi,
Defendants-Appellants,"1 dismissing petitioners’ complaint for damages filed before the Regional
Trial Court, Branch LVI, Angeles City, in Civil Case No. 2783 thereof, and its subsequent resolution
denying petitioners’ motion for the reconsideration of its aforesaid decision.

As found by respondent court,2 Clark Air Base is one of the bases established and maintained by the
United States by authority of the agreement between the Philippines and the United States
concerning military bases which entered into force on March 26, 1947.

The Third Combat Support Group, a unit of Clark Air Base, maintains a Central Civilian Personnel
Office (CCPO) charged with the responsibility for civilian personnel management and administration.
It is through its civilian personnel officer that the base commander is responsible for direction and
administration of civilian personnel program, including advising management and operating officials
on civilian personnel matters. Acting for the commander, the civilian personnel officer is the
administrative official in charge of the activities of the CCPO, and the commander relies on him to
carry out all aspects of the civilian personnel program. The CCPO personnel program encompasses
placement and staffing, position management and classification.

The Third Combat Support Group also maintains an Education Branch, Personnel Division, which
provides an education program for military personnel, U.S. civilian employees, and adult
dependents, assigned or attached to Clark Air Base. Its head, the education director, is responsible
directly to the base director of personnel for administering the education services program for Clark
Air Base. In this capacity, and within broad agency policies, is delegated to him the full responsibility
and authority for the technical, administrative and management functions of the program. As part of
his duties, the education director provides complete academic and vocational guidance for military
dependents, including counseling, testing and test interpretation. During the time material to the
complaint, private respondent Don Detwiler was civilian personnel officer, while private respondent
Anthony Persi was education director.3

Petitioner Loida Q. Shauf, a Filipino by origin and married to an American who is a member of the
United States Air Force, applied for the vacant position of Guidance Counselor, GS17109, in the
Base Education Office at Clark Air Base, for which she is eminently qualified. As found by the trial
court, she received a Master of Arts degree from the University of Sto. Tomas, Manila, in 1971 and
has completed 34 semester hours in psychology-guidance and 25 quarter hours in human
behavioral science; she has also completed all course work in human behavior and counseling
psychology for a doctoral degree; she is a civil service eligible; and, more importantly, she had
functioned as a Guidance Counselor at the Clark Air Base at the GS 1710-9 level for approximately
four years at the time she applied for the same position in 1976.4

By reason of her non-selection to the position, petitioner Loida Q. Shauf filed an equal employment
opportunity complaint against private respondents, for alleged discrimination against the former by
reason of her nationality and sex. The controversy was investigated by one Rudolph Duncan, an
appeals and grievance examiner assigned to the Office of Civilian Personnel Operations, Appellate
Division, San Antonio, Texas, U.S.A. and what follows are taken from his findings embodied in a
report duly submitted by him to the Equal Opportunity Officer on February 22, 1977.5

On or about October 1976, the position of Guidance Counselor, GS 1710-9, became vacant in the
Base Education Office, Clark Air Base. A standard Form 52 was submitted to the Civilian Personnel
Office to fill said position. The Civilian Personnel Division took immediate steps to fill the position by
advertisement in the Clark Air Base Daily Bulletin #205 dated October 21, 1976. As a result of the
advertisement, one application was received by the Civilian Personnel Office and two applications
were retrieved from the applicants supply file in the Civilian Personnel Office. These applications
were that of Mrs. Jean Hollenshead, an employee of the DOD Schools at Clark Air Base, Mrs. Lydia
B. Gaillard, an unemployed dependent, and Mrs. Loida Q. Shauf. All three applications were
reviewed and their experiences were considered qualifying for the advertised position.

On November 11, 1976, the application of Loida Q. Shauf was referred to Mr. Anthony Persi, with
the applications of Mrs. Jean Hollenshead and Mrs. Lydia Gaillard, to be considered for the position
of Guidance Counselor, GS 1710-9, Mr. Persi, after review of the applications, stated that upon
screening the applications he concluded that two applicants had what he considered minimum
qualifications for the position. The two applicants were Mrs. Hollenshead and Mrs. Gaillard. In the
case of Loida Q. Shauf, Mr. Persi felt that her application was quite complete except for a reply to an
inquiry form attached to the application. This inquiry form stated that the National Personnel Records
Center, St. Louis, Missouri, was unable to find an official personnel folder for Loida Q. Shauf. Mr.
Persi said that as a result of the National Personnel Records Center, GSA, not being able to find any
records on Loida Q. Shauf, this raised some questions in his mind as to the validity of her work
experience. As a result of his reservations on Loida Q. Shauf’s work experience and his conclusions
that the two other applications listed minimum qualifications, Mr. Persi decided to solicit additional
names for consideration.

Subsequently in his correspondence dated November 12, 1976, Mr. Persi returned the three
applications to the Civilian Personnel Office without a selection decision. Mr. Persi also requested in
his correspondence that the Civilian Personnel Office initiate immediate inquiry to the Central
Oversea Rotation and Recruiting Office (CORRO) for the submission of a list of highly qualified
candidates. He further stated in his correspondence that the three applicants who had indicated an
interest would be considered with the CORRO input for selection.

As a result of Mr. Persi’s request, an AF Form 1188 "Oversea Civilian Personnel Request" was
submitted to CORRO on November 12, 1976. This request in fact asked for one Guidance
Counselor, GS 1710-9. The form listed the fact that local candidates are available. However, instead
of getting a list of candidates for consideration, Mr. Persi was informed by CORRO, through the
Civilian Personnel Office in their December 15, 1976 message that a Mr. Edward B. Isakson from
Loring AFB, Maine, was selected for the position. Mr. Persi stated, when informed of CORRO’s
selection, that he had heard of Mr. Isakson and, from what he had heard, Mr. Isakson was highly
qualified for the position; therefore, he wished to have the selection stand. This statement was
denied by Mr. Persi. Mr. Isakson was placed on the rolls at Clark Air Base on January 24, 1977.6
Said examiner, however, also stated in his findings that, by reason of petitioner Loida Q. Shauf’s
credentials which he recited therein, she is and was at the time of the vacancy,7 highly qualified for
the position of Guidance Counselor, GS 1710-9. In connection with said complaint, a Notice of
Proposed Disposition of Discrimination Complaint, dated May 16, 1977,8 was served upon petitioner
Loida Q. Shauf stating that because the individual selected did not meet the criteria of the
qualification requirements, it was recommended "that an overhire GS 1710-9 Assistant Education
Advisor position be established for a 180 day period. x x x. The position should be advertised for
local procurement on a best qualified basis with the stipulation that if a vacancy occurs in a
permanent GS 1710-9 position the selectee would automatically be selected to fill the vacancy. If a
position is not vacated in the 180 day period the temporary overhire would be released but would be
selected to fill a future vacancy if the selectee is available."

During that time, private respondents already knew that a permanent GS 1710-9 position would
shortly be vacant, that is, the position of Mrs. Mary Abalateo whose appointment was to expire on
August 6, 1977 and this was exactly what private respondent Detwiler had in mind when he denied
on June 27, 1977 Mrs. Abalateo’s request for extension of March 31, 1977. However, private
respondents deny that Col. Charles J. Corey represented to petitioner Loida Q. Shauf that she would
be appointed to the overhire position and to a permanent GS 1710-9 position as soon as it became
vacant, which allegedly prompted the latter to accept the proposed disposition.

Contrary to her expectations, petitioner Loida Q. Shauf was never appointed to the position occupied
by Mrs. Abalateo whose appointment was extended indefinitely by private respondent Detwiler.9

Feeling aggrieved by what she considered a shabby treatment accorded her, petitioner Loida Q.
Shauf wrote the U.S. Civil Service Commission questioning the qualifications of Edward Isakson.
Thereafter, said commission sent a communication addressed to private respondent
Detwiler,10 finding Edward Isakson not qualified to the position of Guidance Counselor, GS 1710-9,
and requesting that action be taken to remove him from the position and that efforts be made to
place him in a position for which he qualifies. Petitioner Loida Q. Shauf avers that said
recommendation was ignored by private respondent Detwiler and that Isakson continued to occupy
said position of guidance counselor.

Petitioner Loida Q. Shauf likewise wrote the Base Commander of Clark Air Base requesting a
hearing on her complaint for discrimination. Consequently, a hearing was held on March 29, 1978
before the U.S. Department of Air Force in Clark Air Base.11

Before the Department of Air Force could render a decision, petitioner Loida Q. Shauf filed a
complaint for damages, dated April 27, 1978, against private respondents Don Detwiler and Anthony
Persi before the Regional Trial Court, Branch LVI at Angeles City, docketed as Civil Case No. 2783,
for the alleged discriminatory acts of herein private respondents in maliciously denying her
application for the GS 1710-9 position.

Private respondents, as defendants in Civil Case No. 2783, filed a motion to dismiss on the ground
that as officers of the United States Armed Forces performing official functions in accordance with
the powers vested in them under the Philippine-American Military Bases Agreement, they are
immune from suit. The motion to dismiss was denied by the trial court. A motion for reconsideration
was likewise denied.

Consequently, private respondents filed an Answer reiterating the issue of jurisdiction and
alleging, inter alia, that defendant Persi’s request to Central Oversea Rotation and Recruiting Office
(CORRO) was not for appointment of a person to the position of Guidance Counselor, GS 1710-9,
but for referrals whom defendant Persi would consider together with local candidates for the position;
that the extension of the employment of Mrs. Abalato was in accordance with applicable regulation
and was not related to plaintiff Loida Q. Shauf’s discrimination complaint; that the decision was a
joint decision of management and CCPO reached at a meeting on June 29, 1977 and based on a
letter of the deputy director of civilian personnel, Headquarters Pacific Air Forces, dated June 15,
1977; and that the ruling was made known to and amplified by the director and the deputy director of
civilian personnel in letters to petitioner Loida Q. Shauf dated August 30, 1977 and September 19,
1977.

The parties submitted a Partial Stipulation of Facts in the court a quo providing, in part, as follows:

a) In October 1976, the position of guidance counselor, GS-1710-9, at Clark Air Base was
vacant;

b) Plaintiff Loida Q, Shauf, a qualified dependent locally available, was among those who
applied for said vacant position of guidance counselor, GS-1710-9;

c) Plaintiff Loida Q. Shauf at the time she filed her aforesaid application was qualified for the
position of guidance counselor, GS-1710-9;

d) Civilian Personnel Office accomplished and forwarded to CORRO an AF Form 1188

covering the position of guidance counselor, GS-1710-9, applied for by plaintiff Loida Q.
Shauf;

e) U.S. Department of Defense Instructions (DODI) No. 1400.23 under Policy and
Procedures provides that-

"Where qualified dependents of military or civilian personnel of the Department of Defense are
locally available for appointment to positions in foreign areas which are designated for U.S. citizen
occupancy and for which recruitment outside the current work force is appropriate, appointment to
the position will be limited to such dependents unless precluded by treaties or other agreements
which provide for preferential treatment for local nationals."

And Air Force Regulation 40-301 dated 12 May 1976 in par. 2 c (1) thereof provides that-

"c. Selection or Referral of Eligible Applicants From the 50 States:

(1)CORRO makes selection, except as provided in (3) below, for oversea positions of
Grades GS-11 and below (and wage grade equivalents) for which it has received an AF
Form 1188, and for higher grade positions if requested by the oversea activity."12

Likewise, a Supplement to Partial Stipulation of Facts was filed by the parties on October 6, 1978,
which reads:

1. Under date of 30 September 1978, plaintiff Loida Q. Shauf through her counsel, Quasha Asperilla
Ancheta Valmonte Peña & Marcos, lodged an appeal before the Civil Service Commission, Appeals
Review Board, from the decision of the Secretary of the Air Force dated 1 September 1978 affirming
the EEO Complaints Examiner’s Findings and Recommended Decision in the Discrimination
Complaint of Mrs. Loida Q. Shauf, No. SF 071380181 dated 3 July 1978, x x x;

2. The aforesaid appeal has not been decided up to now by the Civil Service Commission, Appeals
Review Board; and
3. Plaintiff Loida Q. Shauf has not instituted any action before any federal district court of the United
States impugning the validity of the decision of the Secretary of the Air Force dated 1 September
1978 affirming the EEO Complaints Examiner’s Findings and Recommended Decision in the
Discrimination Complaint of Mrs. Loida Q. Shauf, No. SF 071380181 dated 3 July 1978.13

Thereafter, on March 8, 1988, the trial court rendered judgment in favor of herein petitioner Loida Q.
Shauf, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally to pay the
plaintiffs:

1) The amount $39,662.49 as actual damages or its equivalent in Philippine pesos in

October 1976 as reported by the Central Bank of the Philippines or any authorized agency of
the Government;

2) The amount of P100,000.00 as moral and exemplary damages;

3) Twenty (20%) percent of $39,662.49 or its equivalent in Philippine Pesos in October 1976
as reported by the Central Bank of the Philippines or any authorized agency of the
Government, as attorney’s gees, and;

4) Cost(s) of suit.

SO ORDERED.14

Both parties appealed from the aforecited decision to respondent Court of Appeals.

In their appeal, plaintiffs-appellants (herein petitioners) raised the following assignment of errors:

1. Lower court gravely erred in holding that the actual and exemplary damages and
attorney’s fees may be paid in Philippine Pesos based on the exchange rate prevailing
during October 1976 as determined by the Central Bank;

2. Lower court gravely erred in limiting the amount of moral and exemplary damages
recoverable by plaintiff to P100,000.0015

On the other hand, defendants-appellants (private respondents herein) argued that:

1. The trial court erred in not dismissing the complaint on the ground that defendants-
appellants, as officers/officials of the United States Armed Forces, are immune from suit for
acts done or statements made by them in the performance of their official governmental
functions in accordance with the powers possessed by them under the Philippine-American
Military Bases Agreement of 1947, as amended;

2. The trial court erred in not dismissing the complaint for a) non-exhaustion of administrative
remedies; and b) lack of jurisdiction of the trial court over the subject matter of the case in
view of the exclusive jurisdiction of an appropriate U.S. District Court over an appeal from an
agency decision on a complaint of discrimination under the U.S. Federal Law on Equality of
opportunity for civilian employees;
 3. The trial court erred in holding that plaintiff-appellant Loida Q. Shauf was refused
appointment as guidance counselor by the defendants-appellants on account of her six
(female), color (brown), and national origin (Filipino by birth) and that the trial court erred in
awarding damages to plaintiffs-appellants.16

As stated at the outset, respondent Court of Appeals reversed the decision of the trial court,
dismissed herein petitioners’complaint and denied their motion for reconsideration. Hence this
petition, on the basis of he following grounds:

The respondent Honorable Court of Appeals has decided a question of substance not in accord with
law and/or with applicable decisions of this Honorable Court. Respondent court committed grave
error in dismissing plaintiffs-appellants’ complaint and-

(a) in holding that private respondents are immune from suit for discriminatory acts
performed without or in excess of, their authority as officers of the U.S. Armed Forces;

(b) for applying the doctrine of state immunity from suit when it is clear that the suit is not
against the U.S. Government or its Armed Forces; and

(c) for failing to recognize the fact that the instant action is a pure and simple case for
damages based on the discriminatory and malicious acts committed by private respondents
in their individual capacity who by force of circumstance and accident are officers of the U.S.
Armed Forces, against petitioner Loida Shauf solely on account of the latter’s sex (female),
color (brown), and national origin (Filipino).17

Petitioners aver that private respondents are being sued in their private capacity for discriminatory
acts performed beyond their authority, hence the instant action is not a suit against the United States
Government which would require its consent.

Private respondents, on the other hand, claim that in filing the case, petitioners sought a judicial
review by a Philippine court of the official actuations of respondents as officials of a military unit of
the U.S. Air Force stationed at Clark Air Base. The acts complained of were done by respondents
while administering the civil service laws of the United States. The acts sued upon being a
governmental activity of respondents, the complaint is barred by the immunity of the United States,
as a foreign sovereign, from suit without its consent and by the immunity of the officials of the United
States armed forces for acts committed in the performance of their official functions pursuant to the
grant to the United States armed forces of rights, power and authority within the bases under the
Military Bases Agreement. It is further contended that the rule allowing suits against public officers
and employees for unauthorized acts, torts and criminal acts is a rule of domestic law, not of
international law. It applies to cases involving the relations between private suitors and their
government or state, not the relations between one government and another from which springs the
doctrine of immunity of a foreign sovereign.

I. The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3,
of the 1987 Constitution, is one of the generally accepted principles of international law that we have
adopted as part of the law of our land under Article II, Section 2. This latter provision merely
reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and also intended to
manifest our resolve to abide by the rules of the international community.18

While the doctrine appears to prohibit only suits against the state without its consent, it is also
applicable to complaints filed against officials of the state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the judgment against such officials will require the state
itself to perform an affirmative act to satisfy the same, such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded as against the state
itself although it has been formally impleaded.19 It must be noted, however, that the rule is not also
all-encompassing as to be applicable under all circumstances.

It is a different matter where the public official is made to account in his capacity as such for acts
contrary to law and injurious to the rights of plaintiff. As we clearly set forth by Justice Zaldivar
in Director of the Bureau of Telecommunications, et al. Vs. Aligaen, etc., et al.:20 "Inasmuch as the
State authorizes only legal acts by its officers, unauthorized acts of government officials or officers
are not acts of the State, and an action against the officials or officers by one whose rights have
been invaded or violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at
law or suit in equity against a State officer or the director of a State department on the ground that,
while claiming to act for the State, he violates or invades the personal and property rights of the
plaintiff, under an unconstitutional act or under an assumption of authority which he does not have,
is not a suit against the State within the constitutional provision that the State may not be sued
without its consent."21 The rationale for this ruling is that the doctrine of state immunity cannot be
used as an instrument for perpetrating an injustice.22

In the case of Baer, etc. vs. Tizon, etc., et al.,23 it was ruled that:

There should be no misinterpretation of the scope of the decision reached by this Court. Petitioner,
as the Commander of the United States Naval Base in Olongapo, does not possess diplomatic
immunity. He may therefore be proceeded against in his personal capacity, or when the action taken
by him cannot be imputed to the government which he represents.

Also, in animos, et al. Vs. Philippine Veterans Affairs Office, et al.,24 we held that:

"x x x it is equally well-settled that where a litigation may have adverse consequences on the public
treasury, whether in the disbursements of funds or loss of property, the public official proceeded
against not being liable in his personal capacity, then the doctrine of non-suability may appropriately
be invoked. It has no application, however, where the suit against such a functionary had to be
instituted because of his failure to comply with the duty imposed by statute appropriating public
funds for the benefit of plaintiff or petitioner. x x x.

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit
will not apply and may not be invoked where the public official is being sued in his private and
personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of
the government is removed the moment they are sued in their individual capacity. This situation
usually arises where the public official acts without authority or in excess of the powers vested in
him. It is a well-settled principle of law that a public official may be liable in his personal private
capacity for whatever damage he may have caused by his act done with malice and in bad faith, or
beyond the scope of his authority or jurisdiction.25

The agents and officials of the United States armed forces stationed in Clark Air Base are no
exception to this rule. In the case of United States of America, et al. Vs. Guinto, etc., et al., ante,26 we
declared:

It bears stressing at this point that the above observation do not confer on the United States of
America blanket immunity for all acts done by it or its agents in the Philippines. Neither may the
other petitioners claim that they are also insulated from suit in this country merely because they have
acted as agents of the United States in the discharge of their official functions.
II. The court below, in finding that private respondents are guilty of discriminating against petitioner
Loida Q. Shauf on account of her sex, color and origin, categorically emphasized that:

There is ample evidence to sustain plaintiffs’ complaint that plaintiff Loida Q. Shauf was refused
appointment as Guidance Counselor by the defendants on account of her sex, color and origin.

She is a female, brown in color and a Filipino by origin, although married to an American who is a
member of the United States Air Force. She is qualified for the vacant position of Guidance
Counselor in the office of the education director at Clark Air Base. She received a Master of Arts
Degree from the University of Santo Tomas, Manila, in 1971 and has completed 34 semester hours
in psychology-guidance and 25 quarter hours in human behavioral science. She has also completed
all course work in human behavior and counseling psychology for a doctoral degree. She is a civil
service eligible. More important, she had functioned as a Guidance Counselor at the Clark Air Base
at the GS-1710-9 level for approximately four years at the time she applied for the same position in
1976.

In filling the vacant position of Guidance Counselor, defendant Persi did not even consider the
application of plaintiff Loida Q. Shauf, but referred the vacancy to CORRO which appointed Edward
B. Isakson who was not eligible to the position.

In defending his act, defendant Persi gave as his excuse that there was a question in his mind
regarding validity of plaintiff Loida Q. Shauf’s work experience because of lack of record. But his
assertion is belied by the fact that plaintiff Loida Q. Shauf had previously been employed as
Guidance Counselor at the Clark Air Base in 1971 and this would have come out if defendant Persi
had taken the trouble of interviewing her. Nor can defendant free himself from any blame for the
non-appointment of plaintiff Loida Q. Shauf by claiming that it was CORRO that appointed Edward
B. Isakson. This would not have happened if defendant Persi adhered to the regulation that limits the
appointment to the position of Guidance Counselor, GS-1710-9 to qualified dependents of military
personnel of the Department of Defense who are locally available like the plaintiff Loida Q. Shauf.
He should not have referred the matter to CORRO. Furthermore, defendant Persi should have
protested the appointment of Edward B. Isakson who was ineligible for the position. He, however,
remained silent because he was satisfied with the appointment.

Likewise, the acts of the defendant Detwiler in rejecting the appointment of plaintiff Loida Q. Shauf
were undoubtedly discriminatory.

Plaintiff Loida Q. Shauf twice applied for the position of Guidance Counselor sometime in 1975 and
in October 1978. Although she was qualified for the postision, her appointment was rejected ny the
defendant Detwiler. The two who were appointed, a certain Petrucci and Edward B. Isakson, were
ordered removed by the U.S. Civil Service Commission. Instead of replacing Petrucci with the
plaintiff Loida Q. Shauf, the defendant Detwiler had the position vacated by Petrucci abolished. And
in the case of Edward Isakson, the defendant Detwiler ignored the order of the U.S. Civil Service
Commission to have him removed according to the testimony of plaintiff Loida Q. Shauf.

In connection with her complaint against the defendants, plaintiff Loida Q. Shauf was presented a
Notice of Proposed Disposition of her Discrimination Complaint by Col. Charles J. Corey, Vice
Commander, Third Combat Support Group, Clark Air Base, which would entitle her to a temporary
appointment as Guidance Counselor with the implied assurance that she would be appointed in a
permanent capacity in the event of a vacancy.

At the time of the issuance of said Notice, defendants knew that there would be a vacancy in a
permanent position as Guidance Counselor occupied by Mrs. Mary Abalateo and it was understood
between Col. Corey and plaintiff Loida Q. Shauf that this position would be reserved for her.
Knowing this arrangement, defendant Detwiler rejected the request for extension of services of Mrs.
Mary Abalateo. However, after plaintiff Loida Q. Shauf consented to the terms of the Notice of
Proposed Disposition of her Discrimination Complaint, defendant Detwiler extended the services of
Mrs. Mary Abalateo indefinitely. This act barred plaintiff Loida Q. Shauf from applying for the position
of Mrs. Mary Abalateo.

To rebut the evidence of the plaintiffs, defendant cited the findings and conclusions of Mr. Rudolph
Duncan, who was appointed to investigate plaintiff Loida Q. Shauf’s complaint for discrimination and
Col. Charles J. Corey, Vice Commander, Third Combat Support Group that defendants were not
guilty of Discrimination.

It is pointed out, however, that Mr. Rudolph Duncan found plaintiff loida Q. Shauf to be highly
qualified for the position of Guidance Counselor at the GS-1710-9 level and that management
should have hired a local applicant. While Col. Corey characterized the act of defendant Persi as
sloppy and recommend that he be reprimanded. In any event their findings and conclusions are not
binding with this Court.

To blunt the accusation of discrimination against them, defendants maintained that the extension of
the appointment of Mrs. Mary Abalateo was a joint decision of management and Central Civilian
Personnel Office, Clark Air Base. Nonetheless, having earlier rejected by himself the request for
extension of the services of Mrs. Mary Abalateo, defendant Detwiler should not have concurred to
such an extension as the reversal of his stand gave added substance to the charge of discrimination
against him.

To further disprove the charge that the defendants discriminated against plaintiff Loida Q. Shauf for
her non-appointment as Guidance Counselor on account of her being a Filipino and a female,
counsel for the defendants cited the following: (1) that Mrs. Mary Abalateo whose appointment was
extended by the defendant Detwiler is likewise a female and a Filipino by origin; (2) that there are
Filipinos employed in the office of the defendant Persi; and (3) that there were two other women who
applied in 1976 with the plaintiff Loida Q. Shauf for the position of Guidance Counselor.

The contention of the defendants based on the allegations enumerated in Nos. 1 and 2 of the
preceding paragraph is without merit as there is no evidence to show that Mrs. Mary Abalateo and
the Filipinos in the office of the defendant Persi were appointed by the defendants. Moreover, faced
with a choice between plaintiff Loida Q. Shauf or Mrs. Mary Abalateo, it was to be expected that
defendant Detwiler chose to retain Mrs. Mary Abalateo as Guidance Counselor in retaliation for the
complaint of discrimination filed against him by plaintiff Loida Q. Shauf. Finally, as to the contention
based on the allegation in No. 3 of the preceding paragraph that there were two other women
applicants in 1976 with plaintiff Loida Q. Shauf, the record reveals that they had minimum
qualifications unlike plaintiff Loida Q. Shauf who was highly qualified.27

Elementary is the rule that the conclusions and findings of fact of the trial court are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent reasons.28 Absent any
substancial proof, therefore, that the trial court’s decision was grounded entirely on speculations,
surmises or conjectures, the same must be accorded full consideration and respect. This should be
so because the trial court is, after all, in a much better position to observe and correctly appreciate
the respective parties’ evidence as they were presented.29

In the case at bar, there is nothing in the record which suggests any arbitrary, irregular or abusive
conduct or motive on the part of the trial judge in ruling that private respondents committed acts of
discrimination for which they should be held personally liable. His conclusion on the matter is
sufficiently borne out by the evidence on record. We are thus constrained to uphold his findings of
fact.

Respondent Court of Appeals, in its questioned decision, states that private respondents did, in fact,
discriminate against petitioner Loida Q. Shauf. However, it deemed such acts insufficient to prevent
an application of the doctrine of state immunity, contrary to the findings made by the trial court. It
reasons out that "the parties invoked are all American citizens (although plaintiff is a Filipina by
origin) and the appointment of personnel inside the base is clearly a sovereign act of the United
States. This is an internal affair in which we cannot interfere without having to touch some delicate
constitutional issues."30 In other words, it believes that the alleged discriminatory acts are not so
grave in character as would justify the award of damages.

In view of the apparent discrepancy between the findings of fact of respondent Court of Appeals and
the trial court, we are tasked to review the evidence in order to arrive at the correct findings based
on the record. A consideration of the evidence presented supports our view that the court a quo was
correct in holding herein private respondents personally liable and in ordering the indemnification of
petitioner Loida Q. Shauf. The records are clear that even prior to the filing of the complaint in this
case, there were various reports and communications issued on the matter which, while they make
no categorical statement of the private respondents’ liability, nevertheless admit of facts from which
the intent of private respondents to discriminate against Loida Q. Shauf is easily discernible. Witness
the following pertinent excerpts from the documents extant in the folder of Plaintiff’s Exhibits:

1. Notice of Proposed Disposition of Discrimination Complaint, dated May 16, 1977 (Exhibit "G").

B. Mr. Anthony Persi was totally inept in the recruitment practices employed in attempting on fill the
GS 1710-9 Assistant Education applicable DOD regulations. In addition, he failed to conduct an
interview of qualified personnel in the local environment and when the qualifications of the
complainant (sic) were questioned by Mr. Persi he did not request a review by the CCPO nor
request an interview with the complainant (sic). Mr. Persi failed to follow Department of Defense
Instructions Number 1400.23, under Policy and Procedures which states-"Where qualified
dependents of military or civilian personnel of the Department of Defense are locally available for
appointment to positions in foreign areas which are designated for US citizen occupancy and for
which recruitment outside the current work force is appropriate, appointment to the positions will be
limited to such dependents unless precluded by treaties or other agreements which provide for
preferential treatment for local nationals." Attachment to Air Force Supplement to FFM 213.2106 (b)
(6) lists the positions of Guidance Counsellor, GS 1710-9, as positions to be filled by locally available
dependents. An added point is the lack of qualifications of the individual selected for the GS 1710-9
positions as outlined under X-118 Civil Service Handbook. x x x31

2. Letter of the Director of the U.S. Civil Service Commission, San Francisco Region, dated October
27, 1977, addressed to Mr. Don Detwiler, concerning Mr. Edward B. Isakson whose file was
reviewed by the Commission (Exhibit "K").

The position of Guidance Counsellor is one for which the Commission has established a mandatory
education requirement that may not be waived. An individual may not be assigned to such a position
without meeting the minimum qualification requirements. The requirements, as given in Handbook X-
118, are completion of all academic requirements for a bachelor’s degree from an accredited college
or university and successful completion of a teacher education program under an "approved
program" or successful completion of required kinds of courses.

On review of his record, we find that Mr. Isakson has a bachelor’s degree but he does not show
completion of a teacher education program. To qualify for Guidance Counselor on the basis of
coursework and semester hour credit, he would need to have 24 semester hours in Education and
12 semester hours in a combination of Psychology and Guidance subjects directly related to
education. We do not find that he meets these requirements.

xxx

We can appreciate the fact that Mr. Isakson may be working toward meeting the Guidance
Counselor requirements. Nonetheless, he does not appear to meet them at this time. We must,
therefore, request that action be taken to remove him from the position and that efforts be made to
place him in a position for which he qualifies.32

3. Letter of the Staff Judge Advocate of the Department of the Airforce addressed to Mr. Detwiler,
dated January 25, 1977 (Exhibit "L").

1. The attached memo from Captain John Vento of this office is forwarded for your review
and any action you deem appropriate. I concur with his conclusion that there is no evidence
of sex or ethnic bias in this matter. I also concur, however, that there were certain
irregularities in the handling of this selection.

xxx

3. Considering the above, it is most unfortunate that the filing of this latest Guidance
Counselor vacancy was not handled wholly in accordance with prescribed policies and
regulations. This is not to suggest that Mrs. Shauf should necessarily have been hired. But,
she and other qualified candidates should have been given the consideration to which they
were entitled. (At no time now or in the past have Mrs. Shauf’s qualifications ever been
questioned.) Had that happened and management chose to select some qualified candidate
other than Mrs. Shauf, there would be no basis for her complaint.

4. It is my understanding that Mrs. Shauf has filed a formal EEO complaint. While I am
convinced that there was no discrimination in this case, my experience with EEO complaints
teaches me that, if Civil Service Commission finds that nonselection resulted from any kind
of management malpractice, it is prone to brand it as a "discriminatory practice." This usually
results in a remedial order which can often be distasteful to management. x x x.33

The initial burden is on the plaintiff to establish a prima facie case or discrimination. Once the
discriminatory act is proven, the burden shifts to the defendant to articulate some legitimate,
undiscriminatory reason for the plaintiff’s rejection.34 Any such justification is wanting in the case at
bar, despite the prima facie case for petitioner Loida Q. Shauf. Private respondents’ defense is
based purely on outright denials which are insufficient to discharge the onus probandi imposed upon
them. They equally rely on the assertion that they are immune from suit by reason of their official
functions. As correctly pointed out by petitioners in their Memorandum, the mere invocation by
private respondents of the official character of their duties cannot shield them from liability especially
when the same were clearly done beyond the scope of their authority, again citing
the Guinto, case, supra:

The other petitioners in the case before us all aver they have acted in the discharge of their official
functions as officers or agents of the United States. However, this is a matter of evidence. The
charges against them may not be summarily dismissed on their mere assertion that their acts are
imputable to the United States of America, which has not given its consent to be sued. In fact, the
defendants are sought to be held answerable for personal torts in which the United States itself is
not involved. If found liable, they and they alone must satisfy the judgment.
III. Article XIII, Section 3, of the 1987 Constitution provides that the State shall afford full protection
to labor, local and overseas, organized and unorganized, and promote full employment and equality
of employment opportunities for all. This is a carry-over from Article II, Section 9, of the 1973
Constitution ensuring equal work opportunities regardless of sex, race, or creed.

Under the Constitution of the United States, the assurance of equality in employment and work
opportunities regardless of sex, race, or creed is also given by the equal protection clause of the Bill
of Rights. The 14th Amendment, in declaring that no state shall deprive a person of his life, liberty, or
property without due process of law or deny to any person within its jurisdiction the equal protection
of the laws, undoubtedly intended not only that there should be no arbitrary spoliation of property,
but that equal protection and security should be given to all under like circumstances in the
enjoyment of their personal and civil rights, and that all persons should be equally entitled to pursue
their happiness ands acquire and enjoy property. It extends its protection to all persons without
regard to race, color, or class. It means equality of opportunity to all in like circumstances.35

The words "life, liberty, and property" as used in constitutions are representative terms and are
intended to cover every right to which a member of the body politic in entitled under the law. These
terms include the right of self-defense, freedom of speech, religious and political freedom, exemption
from arbitrary arrests, the right to freely buy and sell as others may, the right to labor, to contract, to
terminate contracts, to acquire property, and the right to all our liberties, personal, civil and political-
in short, all that makes life worth living.36

There is no doubt that private respondents Persi and Detwiler, in committing the acts complained of
have, in effect, violated the basic constitutional right of petitioner Loida Q. Shauf to earn a living
which is very much an integral aspect of the right to life. For this, they should be held accountable.

While we recognize petitioner Loida Q. Shauf’s entitlement to an award of moral damages, we

however find no justification for the award of actual or compensatory damages, based on her
supposedly unearned income from March, 1975 up to April, 1978 in the total amount of $39,662.49,
as erroneously granted by the trial court.

Evidence that the plaintiff could have bettered her position had it not been for the defendants’
wrongful act cannot serve as basis for an award of damages, because it is highly
speculative.37 Petitioner Loida Q. Shauf’s claim is merely premised on the possibility that had she
been employed, she would have earned said amount. But, the undeniable fact remains that she was
never so employed. Petitioner never acquired any vested right to the salaries pertaining to the
position of GS 1710-9 to which she was never appointed. Damages which are merely possible are
speculative.38 In determining actual damages, the court cannot rely on speculation, conjecture or
guesswork. Without the actual proof of loss, the award of actual damages is
erroneous.39 Consequently, the award of actual damages made by the trial court should be deleted.
Attorney’s fees, however, may be granted and we believe that an award thereof in the sum of
P20,000.00 is reasonable under the circumstances. 1âw phi 1

IV. Finally, private respondents postulate that petitioner Loida Q. Shauf failed to avail herself of her
remedy under the United States federal legislation on equality of opportunity for civilian employees,
which is allegedly exclusive of any other remedy under American law, let alone remedies before a
foreign court and under a foreign law such as the Civil Code of the Philippines.

In a letter of the Department of the Air Force in Washington, D.C., dated September 1, 1978 and
addressed to petitioner Loida Q. Shauf,40 the appeal rights of the latter from the Air Force decision
were enumerated as follows:
 -You may appeal to the Civil Service Commission within 15 calendar days of receipt of the
decision. Your appeal should be addressed to the Civil Service Commission, Appeals
Review Board, 1990 E Street, N.Q., Washington, D.C. 20415. The appeal and any
representation in support thereof must be submitted in duplicate.

-In lieu of an appeal to the Commission you may file a civil action in an appropriate U.S.
District Court within 30 days of receipt of the decision.

-If you elect to appeal to the Commission’s Appeals Review Board, you may file a civil action
in a U.S. District Court within 30 days of receipt of the Commission’s final decision.

-A civil action may also be filed anytime after 180 days of the date of initial appeal to the
Commission, if a final decision has not been rendered.

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

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

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

SO ORDERED.

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

Decision and resolution annulled and set aside.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74135 May 28, 1992

M. H. WYLIE and CAPT. JAMES WILLIAMS, petitioners,

vs.
AURORA I. RARANG and THE HONORABLE INTERMEDIATE APPELLATE
COURT, respondents.

GUTIERREZ, JR., J.:

The pivotal issue in this petition centers on the extent of the "immunity from suit" of the officials of a
United States Naval Base inside Philippine territory.

In February, 1978, petitioner M. H. Wylie was the assistant administrative officer while petitioner
Capt. James Williams was the commanding officer of the U. S. Naval Base in Subic Bay, Olongapo
City. Private respondent Aurora I. Rarang was an employee in the office of the Provost Marshal
assigned as merchandise control guard.

M. H. Wylie, in his capacity as assistant administrative officer of the U.S. Naval Station supervised
the publication of the "Plan of the Day" (POD) which was published daily by the US Naval Base
station. The POD featured important announcements, necessary precautions, and general matters
of interest to military personnel. One of the regular features of the POD was the "action line inquiry."
On February 3, 1978, the POD published, under the "NAVSTA ACTION LINE INQUIRY" the
following:

Question: I have observed that Merchandise Control inspector/inspectress are (sic)

consuming for their own benefit things they have confiscated from Base Personnel.
The observation is even more aggravated by consuming such confiscated items as
cigarettes and food stuffs PUBLICLY. This is not to mention "Auring" who is in
herself, a disgrace to her division and to the Office of the Provost Marshal. In lieu of
this observation, may I therefore, ask if the head of the Merchandise Control Division
is aware of this malpractice?

Answer: Merchandise Control Guards and all other personnel are prohibited from
appropriating confiscated items for their own consumption or use. Two locked
containers are installed at the Main Gate area for deposit of confiscated items and
the OPM evidence custodian controls access to these containers.

Merchandise Control Guards are permitted to eat their meals at their worksite due to
heavy workload. Complaints regarding merchandise control guards procedure or
actions may be made directly at the Office of the Provost Marshal for immediate and
necessary action. Specific dates and time along with details of suspected violations
 would be most appreciated. Telephone 4-3430/4-3234 for further information or to
report noted or suspected irregularities. Exhibits E & E-1. (Rollo, pp. 11-12)

The private respondent was the only one who was named "Auring" in the Office of the Provost
Marshal. That the private respondent was the same "Auring" referred to in the POD was conclusively
proven when on February 7, 1978, petitioner M. H. Wylie wrote her a letter of apology for the
"inadvertent" publication. The private respondent then commenced an action for damages in the
Court of First Instance of Zambales (now Regional Trial Court) against
M. H. Wylie, Capt. James Williams and the U. S. Naval Base. She alleged that the article constituted
false, injurious, and malicious defamation and libel tending to impeach her honesty, virtue and
reputation exposing her to public hatred, contempt and ridicule; and that the libel was published and
circulated in the English language and read by almost all the U. S. Naval Base personnel. She
prayed that she be awarded P300,000.00 as moral damages; exemplary damages which the court
may find proper; and P50,000.00 as attorney's fees.

In response to the complaint, the defendants filed a motion to dismiss anchored on three grounds:

1. Defendants M. H. Wylie and Capt. James Williams acted in the performance of

their official functions as officers of the United States Navy and are, therefore,
immune from suit;

2. The United States Naval Base is an instrumentality of the US government which

cannot be sued without its consent; and

3. This Court has no jurisdiction over the subject matter as well as the parties in this
case. (Record on Appeal, pp. 133-134)

The motion was, however, denied.

In their answer, the defendants reiterated the lack of jurisdiction of the court over the case.

In its decision, the trial court ruled that the acts of defendants M. H. Wylie and Cpt. James Williams
were not official acts of the government of the United States of America in the operation and control
of the Base but personal and tortious acts which are exceptions to the general rule that a sovereign
country cannot be sued in the court of another country without its consent. In short, the trial court
ruled that the acts and omissions of the two US officials were not imputable against the US
government but were done in the individual and personal capacities of the said officials. The trial
court dismissed the suit against the US Naval Base. The dispositive portion of the decision reads as
follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants jointly and severally, as follows:

1) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff
Aurora Rarang the sum of one hundred thousand (P100,000.00) pesos by way of
moral and exemplary damages;

2) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff the
sum of thirty thousand (P30,000.00) pesos by way of attorney's fees and expenses of
litigation; and
 3) To pay the costs of this suit.

Counterclaims are dismissed.

Likewise, the suit against the U.S. Naval Base is ordered dismissed. (Record on
Appeal, p. 154)

On appeal, the petitioners reiterated their stance that they are immune from suit since the subject
publication was made in their official capacities as officers of the U. S. Navy. They also maintained
that they did not intentionally and maliciously cause the questioned publication.

The private respondent, not satisfied with the amount of damages awarded to her, also appealed the
trial court's decision.

Acting on these appeals, the Intermediate Appellate Court, now Court of Appeals, modified the trial
court's decision, to wit:

WHEREFORE, the judgment of the court below is modified so that the defendants
are ordered to pay the plaintiff, jointly and severally, the sum of P175,000.00 as
moral damages and the sum of P60,000.00 as exemplary damages. The rest of the
judgment appealed from is hereby affirmed in toto. Costs against the defendants-
appellants. (Rollo, p. 44)

The appellate court denied a motion for reconsideration filed by the petitioners.

Hence, this petition.

In a resolution dated March 9, 1987, we gave due course to the petition.

The petitioners persist that they made the questioned publication in the performance of their official
functions as administrative assistant, in the case of M. H. Wylie, and commanding officer, in the case
of Capt. James Williams of the US Navy assigned to the U. S. Naval Station, Subic Bay, Olongapo
City and were, therefore, immune from suit for their official actions.

In the case of United States of America v. Guinto (182 SCRA 644 [1990]), we discussed the principle
of the 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.

xxx xxx xxx

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." (Da 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 complaint on the ground that it has been
filed without its consent.

The doctrine is sometimes derisively called "the royal prerogative of dishonesty"

because of the privilege it grants the state to defeat any legitimate claim against it by
simply invoking its non-suability. That is hardly fair, at least in democratic societies,
for the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In
fact, the doctrine is not absolute and does not say the state may not be sued under
any circumstance. On the contrary, the rule says that the state may not be sued
without its consent, which clearly imports that it may be sued if it consents.

The consent of the state to be sued may be manifested expressly or impliedly.

Express consent may be embodied in a general law or a special law. Consent is
implied when the state enters into a contract it itself commences litigation.

xxx xxx xxx

The above rules are subject to qualification. Express consent is effected only by the
will of the legislature through the medium of a duly enacted statute. (Republic v.
Purisima, 78 SCRA 470) We have held that not all contracts entered into by the
government will operate as a waiver of its non-suability; distinction must be made
between its sovereign and proprietary acts. (United States of America v. Ruiz, 136
SCRA 487) As for the filing of a complaint by the government, suability will result only
where the government is claiming affirmative relief from the defendant. (Lim v.
Brownell, 107 Phil. 345) (at pp. 652-655)

In the same case we had opportunity to discuss extensively the nature and extent of immunity from
suit of United States personnel who are assigned and stationed in Philippine territory, to wit:

In the case of the United States of America, the customary rule of international law
on state immunity is expressed with more specificity in the RP-US Bases Treaty.
Article III thereof provides as follows:

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, operation and defense thereof or appropriate for
the control thereof and all the rights, power and authority within the
limits of the territorial waters and air space adjacent to, or in the
vicinity of, the bases which are necessary to provide access to them
or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, (57 SCRA 1) along with several
other decisions, to support their position that they are not suable in the cases below,
the United States not having waived its sovereign immunity from suit. It is
emphasized that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign state

without its consent is appropriate. More specifically, insofar as alien
armed forces is concerned, the starting point is Raquiza
v. Bradford, a 1945 decision. In dismissing a habeas corpus petition
for the release of petitioners confined by American army authorities,
Justice Hilado, speaking for the Court, cited Coleman
v. Tennessee, where it was explicitly declared: "It is well settled that a
foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is
exempt from the civil and criminal jurisdiction of the place." Two years
later, in Tubb and Tedrow v. Griess, this Court relied on the ruling
in Raquiza v. Bradford and cited in support thereof excerpts from the
works of the following authoritative writers: Vattel, Wheaton, Hall,
Lawrence, Oppenheim, Westlake, Hyde, and McNair and
Lauterpacht. Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement, the
treaty provisions should control on such matter, the assumption being
that there was a manifestation of the submission to jurisdiction on the
part of the foreign power whenever appropriate. More to the point
is Syquia v. Almeda Lopez, where plaintiffs as lessors sued the
Commanding General of the United States Army in the Philippines,
seeking the restoration to them of the apartment buildings they
owned leased to the United States armed forces station in the Manila
area. A motion to dismiss on the ground of non-suability was filed and
upheld by respondent Judge. The matter was taken to this Court in
a mandamus proceeding. It failed. It was the ruling that respondent
Judge acted correctly considering that the "action must be considered
as one against the U.S. Government." The opinion of Justice
Montemayor continued: "It is clear that 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."
 xxx xxx xxx

It bears stressing at this point that the above observations do not confer on the
United States of America a 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.

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. This was our ruling
in United States of America v. Ruiz, (136 SCRA 487) where the transaction in
question dealt with the improvement of the wharves in the naval installation at Subic
Bay. As this was a clearly governmental function, we held that the contract did not
operate to divest the United States of its sovereign immunity from suit. In the words
of Justice Vicente Abad Santos:

The traditional rule of immunity excepts 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
imperii. The restrictive application of State immunity is now the rule in
the United States, the United Kingdom and other states in Western
Europe.

xxx xxx xxx

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.

The other petitioners in the cases before us all aver they have acted in the discharge
of their official functions as officers or agents of the United States. However, this is a
matter of evidence. The charges against them may not be summarily dismissed on
their mere assertion that their acts are imputable to the United States of America,
which has not given its consent to be sued. In fact, the defendants are sought to be
 held answerable for personal torts in which the United States itself is not involved. If
found liable, they and they alone must satisfy the judgment. (At pp. 655-658)

In the light of these precedents, we proceed to resolve the present case.

The POD was published under the direction and authority of the commanding officer, U.S. Naval
Station Subic Bay. The administrative assistant, among his other duties, is tasked to prepare and
distribute the POD. On February 3, 1978, when the questioned article was published in the POD,
petitioner Capt. James Williams was the commanding officer while petitioner M.H. Wylie was the
administrative assistant of the US Naval Station at Subic bay.

The NAVSTA ACTION LINE INQUIRY is a regular feature of the POD. It is a telephone answering
device in the office of the Administrative Assistant. The Action Line is intended to provide personnel
access to the Commanding Officer on matters they feel should be brought to his attention for
correction or investigation. The matter of inquiry may be phoned in or mailed to the POD. (TSN,
September 9, 1980, pp. 12-13, Jerry Poblon) According to
M. H. Wylie, the action line naming "Auring" was received about three (3) weeks prior to its being
published in the POD on February 3, 1978. It was forwarded to Rarang's office of employment, the
Provost Marshal, for comment. The Provost Marshal office's response ". . . included a short note
stating that if the article was published, to remove the name." (Exhibit 8-A, p. 5) The Provost
Marshal's response was then forwarded to the executive officer and to the commanding officer for
approval. The approval of the Commanding officer was forwarded to the office of the Administrative
Assistant for inclusion in the POD. A certain Mrs. Dologmodin, a clerk typist in the office of the
Administrative Assistant prepared the smooth copy of the POD. Finally, M. H. Wylie, the
administrative assistant signed the smooth copy of the POD but failed to notice the reference to
"Auring" in the action line inquiry. (Exh. 8-A, pp. 4-5, Questions Nos. 14-15).

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 the
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.

Killing a person in cold blood while on patrol duty, running over a child while driving with reckless
imprudence on an official trip, or slandering a person during office hours could not possibly be
covered by the immunity agreement. Our laws and, we presume, those of the United States do not
allow the commission of crimes in the name of official duty.

The case of Chavez v. Sandiganbayan, 193 SCRA 282 [1991] gives the law on immunity from suit of
public officials:

The general rule is that public officials can be held personally accountable for acts
claimed to have been performed in connection with official duties where they have
acted ultra vires or where there is showing of bad faith.
 xxx xxx xxx

Moreover, the petitioner's argument that the immunity proviso under Section 4(a) of
Executive Order No. 1 also extends to him is not well-taken. A mere invocation of the
immunity clause does not ipso facto result in the charges being automatically
dropped.

In the case of Presidential Commission on Good Government v. Peña (159 SCRA

556 [1988] then Chief Justice Claudio Teehankee, added a clarification of the
immunity accorded PCGG officials under Section 4(a) of Executive Order No. 1 as
follows:

With respect to the qualifications expressed by Mr. Justice Feliciano

in his separate opinion, I just wish to point out two things: First, the
main opinion does not claim absolute immunity for the members of
the Commission. The cited section of Executive Order No. 1 provides
the Commission's members immunity from suit thus: "No civil action
shall lie against the Commission or any member thereof for anything
done or omitted in the discharge of the task contemplated by this
order." No absolute immunity like that sought by Mr. Marcos in his
Constitution for himself and his subordinates is herein involved. It is
understood that the immunity granted the members of the
Commission by virtue of the unimaginable magnitude of its task to
recover the plundered wealth and the State's exercise of police power
was immunity from liability for damages in the official discharge of the
task granted the members of the Commission much in the same
manner that judges are immune from suit in the official discharge of
the functions of their office.
. . . (at pp. 581-582)

xxx xxx xxx

Immunity from suit cannot institutionalize irresponsibility and non-accountability nor

grant a privileged status not claimed by any other official of the Republic. (id., at page
586)

Where the petitioner exceeds his authority as Solicitor General, acts in bad faith, or,
as contended by the private respondent, "maliciously conspir(es) with the PCGG
commissioners in persecuting respondent Enrile by filing against him an evidently
baseless suit in derogation of the latter's constitutional rights and liberties" (Rollo, p.
417), there can be no question that a complaint for damages does not confer a
license to persecute or recklessly injure another. The actions governed by Articles
19, 20, 21, and 32 of the Civil Code on Human Relations may be taken against public
officers or private citizens alike. . . . (pp. 289-291)

We apply the same ruling to this case.

The subject article in the US Newsletter POD dated February 3, 1978 mentions a certain "Auring" as
". . a disgrace to her division and to the Office of the Provost Marshal." The same article explicitly
implies that Auring was consuming and appropriating for herself confiscated items like cigarettes and
foodstuffs. There is no question that the Auring alluded to in the Article was the private respondent
as she was the only Auring in the Office of the Provost Marshal. Moreover, as a result of this article,
the private respondent was investigated by her supervisor. Before the article came out, the private
respondent had been the recipient of commendations by her superiors for honesty in the
performance of her duties.

It may be argued that Captain James Williams as commanding officer of the naval base is far
removed in the chain of command from the offensive publication and it would be asking too much to
hold him responsible for everything which goes wrong on the base. This may be true as a general
rule. In this particular case, however, the records show that the offensive publication was sent to the
commanding officer for approval and he approved it. The factual findings of the two courts below are
based on the records. The petitioners have shown no convincing reasons why our usual respect for
the findings of the trial court and the respondent court should be withheld in this particular case and
why their decisions should be reversed.

Article 2176 of the Civil Code prescribes a civil liability for damages caused by a person's act or
omission constituting fault or negligence, to wit:

Art. 2176. Whoever by act or omission, causes damage to another, there being fault
or negligence is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.

"Fault" or "negligence" in this Article covers not only acts "not punishable by law" but also acts
criminal in character, whether intentional or voluntary or negligent." (Andamo v. Intermediate
Appellate Court, 191 SCRA 195 [1990]).

Moreover, Article 2219(7) of the Civil Code provides that moral damages may be recovered in case
of libel, slander or any other form of defamation. In effect, the offended party in these cases is given
the right to receive from the guilty party moral damages for injury to his feelings and reputation in
addition to punitive or exemplary damages. (Occena v. Icamina, 181 SCRA 328 [1990]). In another
case, Heirs of Basilisa Justiva v. Gustilo, 7 SCRA 72 [1963], we ruled that the allegation of forgery of
documents could be a defamation, which in the light of Article 2219(7) of the Civil Code could by
analogy be ground for payment of moral damages, considering the wounded feelings and
besmirched reputation of the defendants.

Indeed the imputation of theft contained in the POD dated February 3, 1978 is a defamation against
the character and reputation of the private respondent. Petitioner Wylie himself admitted that the
Office of the Provost Marshal explicitly recommended the deletion of the name Auring if the article
were published. The petitioners, however, were negligent because under their direction they issued
the publication without deleting the name "Auring." Such act or omission is ultra vires and cannot be
part of official duty. It was a tortious act which ridiculed the private respondent. As a result of the
petitioners' act, the private respondent, according to the record, suffered besmirched reputation,
serious anxiety, wounded feelings and social humiliation, specially so, since the article was baseless
and false. The petitioners, alone, in their personal capacities are liable for the damages they caused
the private respondent.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision and resolution of the
then Intermediate Appellate Court, now Court of Appeals, are AFFIRMED.

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

Feliciano, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 84607 March 19, 1993

REPUBLIC OF THE PHILIPPINES, GEN. RAMON MONTANO, GEN. ALFREDO LIM, GEN.
ALEXANDER AGUIRRE, COL. EDGAR DULA TORRES, COL. CEZAR NAZARENO, MAJ.
FILEMON GASMEN, PAT. NICANOR ABANDO, PFC SERAFIN CEBU, JR., GEN. BRIGIDO
PAREDES, COL. ROGELIO MONFORTE, PFC ANTONIO LUCERO, PAT. JOSE MENDIOLA,
PAT. NELSON TUASON, POLICE CORPORAL PANFILO ROGOS, POLICE LT. JUAN B.
BELTRAN, PAT. NOEL MANAGBAO, MARINE THIRD CLASS TRAINEE (3CT) NOLITO
NOGATO, 3CT ALEJANDRO B. NAGUIO, JR., EFREN ARCILLAS, 3CT AGERICO LUNA, 3CT
BASILIO BORJA, 3CT MANOLITO LUSPO, 3CT CRISTITUTO GERVACIO, 3CT MANUEL DELA
CRUZ, JR., MARINE (CDC) BN., (CIVIL DISTURBANCE CONTROL), MOBILE DISPERSAL
TEAM (MDT), LT. ROMEO PAQUINTO, LT. LAONGLAANG GOCE, MAJ. DEMETRIO DE LA
CRUZ, POLICE CAPTAIN RODOLFO NAVAL, JOHN DOE, RICHARD DOE, ROBERTO DOE
AND OTHER DOES, petitioners,
vs.
HON. EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch IX, ERLINDA C.
CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA
GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA YUMUL, MIGUEL ARABE,
TERESITA ARJONA, RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE
CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the deceased (ROBERTO
C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO BAUTISTA, DANTE EVANGELIO, ADELFA
ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and
(names of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE ROSEL, RUBEN
CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR., EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA,
WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS, TOMAS VALLOS, ARNOLD ENAJE,
MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORIANO QUIJANO, JOEY ADIME, RESIENO ADUL,
ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO ALMONTE,
BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO,
FABIAN CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS,
MARIO DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN
LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL SAYAO,
BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO
MEDINA, LITO NOVENARIO, and ROSELLA ROBALE, respondents.

G.R. No. 84645 March 19, 1993

ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA

EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA
YUMUL, MIGUEL ARABE, TERESITA ARJONA, RONALDO CAMPOMANES AND CARMENCITA
ARDONI VDA. DE CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the
deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO GRAMPA, ANGELITO
GUTIERREZ, BERNABE LAKINDANUM, ROBERTO YUMUL, LEOPOLDO ALONZO, ADELFA
ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and
(names of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE ROSEL, RUBEN
CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR. EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA,
WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS TOMAS VALLOS, ARNOLD ENAJE,
MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORINO QUIJANO, JOEY ADIME, RESIENO ADUL,
ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO ALMONTE,
BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO,
FABIAN CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS,
MARIO DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN
LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL SAYAO,
BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO
MEDINA, LITO NOVENARIO, ROSELLA ROBALE, petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, and HONORABLE EDILBERTO G. SANDOVAL, Regional
Trial Court of Manila, Branch 9, respondents.

The Solicitor General for the Republic of the Philippines.

Structural Alternative Legal Assistance for Grassroots for petitioners in 84645 & private
respondents in 84607.

CAMPOS, JR., J.:

People may have already forgotten the tragedy that transpired on January 22, 1987. It is quite
ironic that then, some journalists called it a Black Thursday, as a grim reminder to the nation
of the misfortune that befell twelve (12) rallyists. But for most Filipinos now, the Mendiola
massacre may now just as well be a chapter in our history books. For those however, who
have become widows and orphans, certainly they would not settle for just that. They seek
retribution for the lives taken that will never be brought back to life again.

Hence, the heirs of the deceased, together with those injured (Caylao group), instituted this
petition, docketed as G.R. No. 84645, under Section 1 of Rule 65 of the Rules of Court,
seeking the reversal and setting aside of the Orders of respondent Judge Sandoval,1 dated
May 31 and August 8, 1988, dismissing the complaint for damages of herein petitioners against the
Republic of the Philippines in Civil Case No. 88-43351.

Petitioner, the Republic of the Philippines, through a similar remedy, docketed as G.R. No. 84607,
seeks to set aside the Order of respondent Judge dated May 31, 1988, in Civil Case No. 88-43351
entitled "Erlinda Caylao, et al. vs. Republic of the Philippines, et al."

The pertinent portion of the questioned Order2 dated May 31, 1988, reads as follows:

With respect however to the other defendants, the impleaded Military Officers, since
they are being charged in their personal and official capacity, and holding them
 liable, if at all, would not result in financial responsibility of the government, the
principle of immunity from suit can not conveniently and correspondingly be applied
to them.

WHEREFORE, the case as against the defendant Republic of the Philippines is

hereby dismissed. As against the rest of the defendants the motion to dismiss is
denied. They are given a period of ten (10) days from receipt of this order within
which to file their respective pleadings.

On the other hand, the Order3 , dated August 8, 1988, denied the motions filed by both parties, for a
reconsideration of the abovecited Order, respondent Judge finding no cogent reason to disturb the
said order.

The massacre was the culmination of eight days and seven nights of encampment by members of
the militant Kilusang Magbubukid sa Pilipinas (KMP) at the then Ministry (now Department) of
Agrarian Reform (MAR) at the Philippine Tobacco Administration Building along Elliptical Road in
Diliman, Quezon City.

The farmers and their sympathizers presented their demands for what they called "genuine agrarian
reform". The KMP, led by its national president, Jaime Tadeo, presented their problems and
demands, among which were: (a) giving lands for free to farmers; (b) zero retention of lands by
landlords; and (c) stop amortizations of land payments.

The dialogue between the farmers and the MAR officials began on January 15, 1987. The two days
that followed saw a marked increase in people at the encampment. It was only on January 19, 1987
that Jaime Tadeo arrived to meet with then Minister Heherson Alvarez, only to be informed that the
Minister can only meet with him the following day. On January 20, 1987, the meeting was held at the
MAR conference room. Tadeo demanded that the minimum comprehensive land reform program be
granted immediately. Minister Alvarez, for his part, can only promise to do his best to bring the
matter to the attention of then President Aquino, during the cabinet meeting on January 21, 1987.

Tension mounted the following day. The farmers, now on their seventh day of encampment,
barricaded the MAR premises and prevented the employees from going inside their offices. They
hoisted the KMP flag together with the Philippine flag.

At around 6:30 p.m. of the same day, Minister Alvarez, in a meeting with Tadeo and his leaders,
advised the latter to instead wait for the ratification of the 1987 Constitution and just allow the
government to implement its comprehensive land reform program. Tadeo, however, countered by
saying that he did not believe in the Constitution and that a genuine land reform cannot be realized
under a landlord-controlled Congress. A heated discussion ensued between Tadeo and Minister
Alvarez. This notwithstanding, Minister Alvarez suggested a negotiating panel from each side to
meet again the following day.

On January 22, 1987, Tadeo's group instead decided to march to Malacañang to air their demands.
Before the march started, Tadeo talked to the press and TV media. He uttered fiery words, the most
telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kinakailangan alisin din
niya ang barikada sa Mendiola sapagkat bubutasin din namin iyon at dadanak ang dugo . . . ."4

The farmers then proceeded to march to Malacañang, from Quezon Memorial Circle, at 10:00 a.m.
They were later joined by members of other sectoral organizations such as the Kilusang Mayo Uno
(KMU), Bagong Alyansang Makabayan (BAYAN), League of Filipino Students (LFS) and Kongreso
ng Pagkakaisa ng Maralitang Lungsod (KPML).

At around 1:00 p.m., the marchers reached Liwasang Bonifacio where they held a brief program. It
was at this point that some of the marchers entered the eastern side of the Post Office Building, and
removed the steel bars surrounding the garden. Thereafter, they joined the march to Malacañang. At
about 4:30 p.m., they reached C.M. Recto Avenue.

In anticipation of a civil disturbance, and acting upon reports received by the Capital Regional
Command (CAPCOM) that the rallyists would proceed to Mendiola to break through the police lines
and rush towards Malacañang, CAPCOM Commander General Ramon E. Montaño inspected the
preparations and adequacy of the government forces to quell impending attacks.

OPLAN YELLOW (Revised) was put into effect. Task Force Nazareno under the command of Col.
Cesar Nazareno was deployed at the vicinity of Malacañang. The civil disturbance control units of
the Western Police District under Police Brigadier General Alfredo S. Lim were also activated.

Intelligence reports were also received that the KMP was heavily infiltrated by CPP/NPA elements
and that an insurrection was impending. The threat seemed grave as there were also reports that
San Beda College and Centro Escolar University would be forcibly occupied.

In its report, the Citizens' Mendiola Commission (a body specifically tasked to investigate the facts
surrounding the incident, Commission for short) stated that the government anti-riot forces were
assembled at Mendiola in a formation of three phalanges, in the following manner:

(1) The first line was composed of policemen from police stations Nos. 3, 4, 6, 7, 8, 9
and 10 and the Chinatown detachment of the Western Police District. Police Colonel
Edgar Dula Torres, Deputy Superintendent of the Western Police District, was
designated as ground commander of the CDC first line of defense. The WPD CDC
elements were positioned at the intersection of Mendiola and Legarda Streets after
they were ordered to move forward from the top of Mendiola bridge. The WPD forces
were in khaki uniform and carried the standard CDC equipment — aluminum shields,
truncheons and gas masks.

(2) At the second line of defense about ten (10) yards behind the WPD policemen
were the elements of the Integrated National Police (INP) Field Force stationed at
Fort Bonifacio from the 61st and 62nd INP Field Force, who carried also the standard
CDC equipment — truncheons, shields and gas masks. The INP Field Force
was under the command of Police Major Demetrio dela Cruz.

(3) Forming the third line was the Marine Civil Disturbance Control Battalion
composed of the first and second companies of the Philippine Marines stationed at
Fort Bonifacio. The marines were all equipped with shields, truncheons and M-16
rifles (armalites) slung at their backs, under the command of Major Felimon B.
Gasmin. The Marine CDC Battalion was positioned in line formation ten (10) yards
farther behind the INP Field Force.

At the back of the marines were four (4) 6 x 6 army trucks, occupying the entire width
of Mendiola street, followed immediately by two water cannons, one on each side of
the street and eight fire trucks, four trucks on each side of the street. The eight fire
trucks from Fire District I of Manila under Fire Superintendent Mario C. Tanchanco,
were to supply water to the two water cannons.
 Stationed farther behind the CDC forces were the two Mobile Dispersal Teams
(MDT) each composed of two tear gas grenadiers, two spotters, an assistant
grenadier, a driver and the team leader.

In front of the College of the Holy Spirit near Gate 4 of Malacañang stood the VOLVO
Mobile Communications Van of the Commanding General of CAPCOM/INP, General
Ramon E. Montaño. At this command post, after General Montaño had conferred
with TF Nazareno Commander, Colonel Cezar Nazareno, about the adequacy and
readiness of his forces, it was agreed that Police General Alfredo S. Lim would
designate Police Colonel Edgar Dula Torres and Police Major Conrado Franciscoas
negotiators with the marchers. Police General Lim then proceeded to the WPD CDC
elements already positioned at the foot of Mendiola bridge to relay to Police Colonel
Torres and Police Major Francisco the instructions that the latter would negotiate with
the marchers.5 (Emphasis supplied)

The marchers, at around 4:30 p.m., numbered about 10,000 to 15,000. From C.M. Recto Avenue,
they proceeded toward the police lines. No dialogue took place between the marchers and the anti-
riot squad. It was at this moment that a clash occurred and, borrowing the words of the Commission
"pandemonium broke loose". The Commission stated in its findings, to wit:

. . . There was an explosion followed by throwing of pillboxes, stones and bottles.

Steel bars, wooden clubs and lead pipes were used against the police. The police
fought back with their shields and truncheons. The police line was breached.
Suddenly shots were heard. The demonstrators disengaged from the government
forces and retreated towards C.M. Recto Avenue. But sporadic firing continued from
the government forces.

After the firing ceased, two MDTs headed by Lt. Romeo Paquinto and Lt. Laonglaan
Goce sped towards Legarda Street and lobbed tear gas at the remaining rallyist still
grouped in the vicinity of Mendiola. After dispersing the crowd, the two MDTs,
together with the two WPD MDTs, proceeded to Liwasang Bonifacio upon order of
General Montaño to disperse the rallyists assembled thereat. Assisting the MDTs
were a number of policemen from the WPD, attired in civilian clothes with white head
bands, who were armed with long firearms.6 (Emphasis ours)

After the clash, twelve (12) marchers were officially confirmed dead, although according to Tadeo,
there were thirteen (13) dead, but he was not able to give the name and address of said victim.
Thirty-nine (39) were wounded by gunshots and twelve (12) sustained minor injuries, all belonging to
the group of the marchers.

Of the police and military personnel, three (3) sustained gunshot wounds and twenty (20) suffered
minor physical injuries such as abrasions, contusions and the like.

In the aftermath of the confrontation, then President Corazon C. Aquino issued Administrative Order
No. 11,7 (A.O. 11, for brevity) dated January 22, 1987, which created the Citizens' Mendiola
Commission. The body was composed of retired Supreme Court Justice Vicente Abad Santos as
Chairman, retired Supreme Court Justice Jose Y. Feria and Mr. Antonio U. Miranda, both as
members. A.O. 11 stated that the Commission was created precisely for the "purpose of conducting
an investigation of the disorder, deaths, and casualties that took place in the vicinity of Mendiola
Bridge and Mendiola Street and Claro M. Recto Avenue, Manila, in the afternoon of January 22,
1987". The Commission was expected to have submitted its findings not later than February 6, 1987.
But it failed to do so. Consequently, the deadline was moved to February 16, 1987 by Administrative
Order No. 13. Again, the Commission was unable to meet this deadline. Finally, on February 27,
1987, it submitted its report, in accordance with Administrative Order No. 17, issued on February 11,
1987.

In its report, the Commission recapitulated its findings, to wit:

(1) The march to Mendiola of the KMP led by Jaime Tadeo, together with the other
sectoral groups, was not covered by any permit as required under Batas Pambansa
Blg. 880, the Public Assembly Act of 1985, in violation of paragraph (a) Section 13,
punishable under paragraph (a), Section 14 of said law.

(2) The crowd dispersal control units of the police and the military were armed with
.38 and .45 caliber handguns, and M-16 armalites, which is a prohibited act under
paragraph 4(g), Section 13, and punishable under paragraph (b), Section 14 of Batas
Pambansa Blg. 880.

(3) The security men assigned to protect the WPD, INP Field Force, the Marines and
supporting military units, as well as the security officers of the police and military
commanders were in civilian attire in violation of paragraph (a), Section 10, Batas
Pambansa 880.

(4) There was unnecessary firing by the police and military crowd dispersal control
units in dispersing the marchers, a prohibited act under paragraph (e), Section 13,
and punishable under paragraph (b), Section 14, Batas Pambansa Blg. 880.

(5) The carrying and use of steel bars, pillboxes, darts, lead pipe, wooden clubs with
spikes, and guns by the marchers as offensive weapons are prohibited acts
punishable under paragraph (g), Section 13, and punishable under paragraph (e),
Section 14 of Batas Pambansa Blg. 880.

(6) The KMP farmers broke off further negotiations with the MAR officials and were
determined to march to Malacañang, emboldened as they are, by the inflammatory
and incendiary utterances of their leader, Jaime Tadeo — "bubutasin namin ang
barikada . . Dadanak and dugo . . . Ang nagugutom na magsasaka ay gagawa ng
sariling butas. . .

(7) There was no dialogue between the rallyists and the government forces. Upon
approaching the intersections of Legarda and Mendiola, the marchers began pushing
the police lines and penetrated and broke through the first line of the CDC
contingent.

(8) The police fought back with their truncheons and shields. They stood their ground
but the CDC line was breached. There ensued gunfire from both sides. It is not clear
who started the firing.

(9) At the onset of the disturbance and violence, the water cannons and tear gas
were not put into effective use to disperse the rioting crowd.

(10) The water cannons and fire trucks were not put into operation because (a) there
was no order to use them; (b) they were incorrectly prepositioned; and (c) they were
out of range of the marchers.
 (11) Tear gas was not used at the start of the disturbance to disperse the rioters.
After the crowd had dispersed and the wounded and dead were being carried away,
the MDTs of the police and the military with their tear gas equipment and
components conducted dispersal operations in the Mendiola area and proceeded to
Liwasang Bonifacio to disperse the remnants of the marchers.

(12) No barbed wire barricade was used in Mendiola but no official reason was given
for its absence.8

From the results of the probe, the Commission recommended9 the criminal prosecution of four
unidentified, uniformed individuals, shown either on tape or in pictures, firing at the direction of the
marchers. In connection with this, it was the Commission's recommendation that the National
Bureau of Investigation (NBI) be tasked to undertake investigations regarding the identities of those
who actually fired their guns that resulted in the death of or injury to the victims of the incident. The
Commission also suggested that all the commissioned officers of both the Western Police District
and the INP Field Force, who were armed during the incident, be prosecuted for violation of
paragraph 4(g) of Section 13, Batas Pambansa Blg. 880, the Public Assembly Act of 1985. The
Commission's recommendation also included the prosecution of the marchers, for carrying deadly or
offensive weapons, but whose identities have yet to be established. As for Jaime Tadeo, the
Commission said that he should be prosecuted both for violation of paragraph (a), Section 13, Batas
Pambansa Blg. 880 for holding the rally without a permit and for violation of Article 142, as
amended, of the Revised Penal Code for inciting to sedition. As for the following officers, namely: (1)
Gen. Ramon E. Montaño; (2) Police Gen. Alfredo S. Lim; (3) Police Gen. Edgar Dula Torres; (4)
Police Maj. Demetrio dela Cruz; (5) Col. Cezar Nazareno; and (5) Maj. Felimon Gasmin, for their
failure to make effective use of their skill and experience in directing the dispersal operations in
Mendiola, administrative sanctions were recommended to be imposed.

The last and the most significant recommendation of the Commission was for the deceased and
wounded victims of the Mendiola incident to be compensated by the government. It was this portion
that petitioners (Caylao group) invoke in their claim for damages from the government.

Notwithstanding such recommendation, no concrete form of compensation was received by the

victims. Thus, on July 27, 1987, herein petitioners, (Caylao group) filed a formal letter of demand for
compensation from the Government. 10 This formal demand was indorsed by the office of the
Executive Secretary to the Department of Budget and Management (DBM) on August 13, 1987. The
House Committee on Human Rights, on February 10, 1988, recommended the expeditious payment
of compensation to the Mendiola victims. 11

After almost a year, on January 20, 1988, petitioners (Caylao group) were constrained to institute an
action for damages against the Republic of the Philippines, together with the military officers, and
personnel involved in the Mendiola incident, before the trial court. The complaint was docketed as
Civil Case No. 88-43351.

On February 23, 1988, the Solicitor General filed a Motion to Dismiss on the ground that the State
cannot be sued without its consent. Petitioners opposed said motion on March 16, 1988, maintaining
that the State has waived its immunity from suit and that the dismissal of the instant action is
contrary to both the Constitution and the International Law on Human Rights.

Respondent Judge Sandoval, in his first questioned Order, dismissed the complaint as against the
Republic of the Philippines on the ground that there was no waiver by the State. Petitioners (Caylao
group) filed a Motion for Reconsideration therefrom, but the same was denied by respondent judge
in his Order dated August 8, 1988. Consequently, Caylao and her co-petitioners filed the instant
petition.

On the other hand, the Republic of the Philippines, together with the military officers and personnel
impleaded as defendants in the court below, filed its petition for certiorari.

Having arisen from the same factual beginnings and raising practically identical issues, the two (2)
petitions were consolidated and will therefore be jointly dealt with and resolved in this Decision.

The resolution of both petitions revolves around the main issue of whether or not the State has
waived its immunity from suit.

Petitioners (Caylao group) advance the argument that the State has impliedly waived its sovereign
immunity from suit. It is their considered view that by the recommendation made by the Commission
for the government to indemnify the heirs and victims of the Mendiola incident and by the public
addresses made by then President Aquino in the aftermath of the killings, the State has consented
to be sued.

Under our Constitution the principle of immunity of the government from suit is expressly provided in
Article XVI, Section 3. The principle is based on the very essence of sovereignty, and on the
practical ground that there can be no legal right as against the authority that makes the law on which
the right depends. 12 It also rests on reasons of public policy — that public service would be hindered,
and the public endangered, if the sovereign authority could be subjected to law suits at the instance
of every citizen and consequently controlled in the uses and dispositions of the means required for
the proper administration of the government. 13

This is not a suit against the State with its consent.

Firstly, the recommendation made by the Commission regarding indemnification of the heirs of the
deceased and the victims of the incident by the government does not in any way mean that liability
automatically attaches to the State. It is important to note that A.O. 11 expressly states that the
purpose of creating the Commission was to have a body that will conduct an "investigation of the
disorder, deaths and casualties that took place." 14 In the exercise of its functions, A.O. 11 provides
guidelines, and what is relevant to Our discussion reads:

1 Its conclusions regarding the existence of probable cause for the commission of
any offense and of the persons probably guilty of the same shall be sufficient
compliance with the rules on preliminary investigation and the charges arising
therefrom may be filed directly with the proper court. 15

In effect, whatever may be the findings of the Commission, the same shall only serve as the cause
of action in the event that any party decides to litigate his/her claim. Therefore, the Commission is
merely a preliminary venue. The Commission is not the end in itself. Whatever recommendation it
makes cannot in any way bind the State immediately, such recommendation not having become final
and, executory. This is precisely the essence of it being a fact-finding body.

Secondly, whatever acts or utterances that then President Aquino may have done or said, the same
are not tantamount to the State having waived its immunity from suit. The President's act of joining
the marchers, days after the incident, does not mean that there was an admission by the State of
any liability. In fact to borrow the words of petitioners (Caylao group), "it was an act of solidarity by
the government with the people". Moreover, petitioners rely on President Aquino's speech promising
that the government would address the grievances of the rallyists. By this alone, it cannot be inferred
that the State has admitted any liability, much less can it be inferred that it has consented to the suit.

Although consent to be sued may be given impliedly, still it cannot be maintained that such consent
was given considering the circumstances obtaining in the instant case.

Thirdly, the case does not qualify as a suit against the State.

Some instances when a suit against the State is proper are: 16

(1) When the Republic is sued by name;

(2) When the suit is against an unincorporated government agency;

(3) When the, suit is on its face against a government officer but the case is such that ultimate
liability will belong not to the officer but to the government.

While the Republic in this case is sued by name, the ultimate liability does not pertain to the
government. Although the military officers and personnel, then party defendants, were discharging
their official functions when the incident occurred, their functions ceased to be official the moment
they exceeded their authority. Based on the Commission findings, there was lack of justification by
the government forces in the use of firearms. 17 Moreover, the members of the police and military
crowd dispersal units committed a prohibited act under B.P. Blg. 880 18 as there was unnecessary
firing by them in dispersing the marchers. 19

As early as 1954, this Court has pronounced that an officer cannot shelter himself by the plea that
he is a public agent acting under the color of his office when his acts are wholly without
authority. 20 Until recently in 1991, 21 this doctrine still found application, this Court saying that
immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a privileged
status not claimed by any other official of the Republic. The military and police forces were deployed
to ensure that the rally would be peaceful and orderly as well as to guarantee the safety of the very
people that they are duty-bound to protect. However, the facts as found by the trial court showed
that they fired at the unruly crowd to disperse the latter.

While it is true that nothing is better settled than the general rule that a sovereign state and its
political subdivisions cannot be sued in the courts except when it has given its consent, it cannot be
invoked by both the military officers to release them from any liability, and by the heirs and victims to
demand indemnification from the government. The principle of state immunity from suit does not
apply, as in this case, when the relief demanded by the suit requires no affirmative official action on
the part of the State nor the affirmative discharge of any obligation which belongs to the State in its
political capacity, even though the officers or agents who are made defendants claim to hold or act
only by virtue of a title of the state and as its agents and servants. 22 This Court has made it quite
clear that even a "high position in the government does not confer a license to persecute or
recklessly injure another." 23

The inescapable conclusion is that the State cannot be held civilly liable for the deaths that followed
the incident. Instead, the liability should fall on the named defendants in the lower court. In line with
the ruling of this court in Shauf vs. Court of Appeals, 24 herein public officials, having been found to
have acted beyond the scope of their authority, may be held liable for damages.
WHEREFORE, finding no reversible error and no grave abuse of discretion committed by
respondent Judge in issuing the questioned orders, the instant petitions are hereby DISMISSED.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Quiason, JJ., concur.

Gutierrez, Jr., J., is on leave.

 [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 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 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
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 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:

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.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur