CIR VS CAMPOS

G.R. No. L-13250 October 29, 1971

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
ANTONIO CAMPOS RUEDA, respondent..

Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G. Azurin, (O.S.G.) for petitioner.

Ramirez and Ortigas for respondent.

FERNANDO, J.:

The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a decision of the Court
of Tax Appeals as to whether or not the requisites of statehood, or at least so much thereof as may be
necessary for the acquisition of an international personality, must be satisfied for a "foreign country" to fall
within the exemption of Section 122 of the National Internal Revenue Code 1 is now ripe for adjudication. The
Court of Tax Appeals answered the question in the negative, and thus reversed the action taken by petitioner
Collector, who would hold respondent Antonio Campos Rueda, as administrator of the estate of the late
Estrella Soriano Vda. de Cerdeira, liable for the sum of P161,874.95 as deficiency estate and inheritance
taxes for the transfer of intangible personal properties in the Philippines, the deceased, a Spanish national
having been a resident of Tangier, Morocco from 1931 up to the time of her death in 1955. In an earlier
resolution promulgated May 30, 1962, this Court on the assumption that the need for resolving the principal
question would be obviated, referred the matter back to the Court of Tax Appeals to determine whether the
alleged law of Tangier did grant the reciprocal tax exemption required by the aforesaid Section 122. Then
came an order from the Court of Tax Appeals submitting copies of legislation of Tangier that would manifest
that the element of reciprocity was not lacking. It was not until July 29, 1969 that the case was deemed
submitted for decision. When the petition for review was filed on January 2, 1958, the basic issue raised was
impressed with an element of novelty. Four days thereafter, however, on January 6, 1958, it was held by
this Court that the aforesaid provision does not require that the "foreign country" possess an international
personality to come within its terms.2 Accordingly, we have to affirm.

The decision of the Court of Tax Appeals, now under review, sets forth the background facts as follows: "This
is an appeal interposed by petitioner Antonio Campos Rueda as administrator of the estate of the deceased
Doña Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of the respondent Collector of Internal
Revenue, assessing against and demanding from the former the sum P161,874.95 as deficiency estate and
inheritance taxes, including interest and penalties, on the transfer of intangible personal properties situated
in the Philippines and belonging to said Maria de la Estrella Soriano Vda. de Cerdeira. Maria de la Estrella
Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish national, by reason of her marriage to a
Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At
the time of her demise she left, among others, intangible personal properties in the Philippines." 3 Then came
this portion: "On September 29, 1955, petitioner filed a provisional estate and inheritance tax return on all
the properties of the late Maria Cerdeira. On the same date, respondent, pending investigation, issued an
assessment for state and inheritance taxes in the respective amounts of P111,592.48 and P157,791.48, or a
total of P369,383.96 which tax liabilities were paid by petitioner ... . On November 17, 1955, an amended
return was filed ... wherein intangible personal properties with the value of P396,308.90 were claimed as
exempted from taxes. On November 23, 1955, respondent, pending investigation, issued another
assessment for estate and inheritance taxes in the amounts of P202,262.40 and P267,402.84, respectively,
or a total of P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the request for
exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the National Internal
Revenue Code. Hence, respondent demanded the payment of the sums of P239,439.49 representing
deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interests and
compromise penalties ... . In a letter dated February 8, 1956, and received by respondent on the following
day, petitioner requested for the reconsideration of the decision denying the claim for tax exemption of the
intangible personal properties and the imposition of the 25% and 5% ad valorem penalties ... . However,
respondent denied request, in his letter dated May 5, 1956 ... and received by petitioner on May 21, 1956.
Respondent premised the denial on the grounds that there was no reciprocity [with Tangier, which was
moreover] a mere principality, not a foreign country. Consequently, respondent demanded the payment of
the sums of P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as deficiency estate and
inheritance taxes including surcharges, interests and compromise penalties."4

The matter was then elevated to the Court of Tax Appeals. As there was no dispute between the parties
regarding the values of the properties and the mathematical correctness of the deficiency assessments, the
principal question as noted dealt with the reciprocity aspect as well as the insisting by the Collector of
Internal Revenue that Tangier was not a foreign country within the meaning of Section 122. In ruling against
the contention of the Collector of Internal Revenue, the appealed decision states: "In fine, we believe, and so
hold, that the expression "foreign country", used in the last proviso of Section 122 of the National Internal
Revenue Code, refers to a government of that foreign power which, although not an international person in
the sense of international law, does not impose transfer or death upon intangible person properties of our
citizens not residing therein, or whose law allows a similar exemption from such taxes. It is, therefore, not
necessary that Tangier should have been recognized by our Government order to entitle the petitioner to the
exemption benefits of the proviso of Section 122 of our Tax. Code."5

Hence appeal to this court by petitioner. The respective briefs of the parties duly submitted, but as above
indicated, instead of ruling definitely on the question, this Court, on May 30, 1962, resolve to inquire further
into the question of reciprocity and sent back the case to the Court of Tax Appeals for the motion of evidence
thereon. The dispositive portion of such resolution reads as follows: "While section 122 of the Philippine Tax
Code aforequoted speaks of 'intangible personal property' in both subdivisions (a) and (b); the alleged laws
of Tangier refer to 'bienes muebles situados en Tanger', 'bienes muebles radicantes en Tanger', 'movables'
and 'movable property'. In order that this Court may be able to determine whether the alleged laws of
Tangier grant the reciprocal tax exemptions required by Section 122 of the Tax Code, and without, for the
time being, going into the merits of the issues raised by the petitioner-appellant, the case is [remanded] to
the Court of Tax Appeals for the reception of evidence or proof on whether or not the words `bienes
muebles', 'movables' and 'movable properties as used in the Tangier laws, include or embrace 'intangible
person property', as used in the Tax Code."6 In line with the above resolution, the Court of Tax Appeals
admitted evidence submitted by the administrator petitioner Antonio Campos Rueda, consisting of exhibits of
laws of Tangier to the effect that "the transfers by reason of death of movable properties, corporeal or
incorporeal, including furniture and personal effects as well as of securities, bonds, shares, ..., were not
subject, on that date and in said zone, to the payment of any death tax, whatever might have been the
nationality of the deceased or his heirs and legatees." It was further noted in an order of such Court referring
the matter back to us that such were duly admitted in evidence during the hearing of the case on September
9, 1963. Respondent presented no evidence."7

The controlling legal provision as noted is a proviso in Section 122 of the National Internal Revenue Code. It
reads thus: "That no tax shall be collected under this Title in respect of intangible personal property (a) if the
decedent at the time of his death was a resident of a foreign country which at the time of his death did not
impose a transfer tax or death tax of any character in respect of intangible person property of the Philippines
not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent was a
resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned by citizens of the Philippines not residing in that
foreign country."8 The only obstacle therefore to a definitive ruling is whether or not as vigorously insisted
upon by petitioner the acquisition of internal personality is a condition sine qua non to Tangier being
considered a "foreign country". Deference to the De Lara ruling, as was made clear in the opening paragraph
of this opinion, calls for an affirmance of the decision of the Court of Tax Appeals.

It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with
Pound's formulation that it be a politically organized sovereign community independent of outside control
bound by penalties of nationhood, legally supreme within its territory, acting through a government
functioning under a regime of
law.9 It is thus a sovereign person with the people composing it viewed as an organized corporate society
under a government with the legal competence to exact obedience to its commands. 10 It has been referred
to as a body-politic organized by common consent for mutual defense and mutual safety and to promote the
general welfare.11Correctly has it been described by Esmein as "the juridical personification of the
nation." 12 This is to view it in the light of its historical development. The stress is on its being a nation, its
people occupying a definite territory, politically organized, exercising by means of its government its
sovereign will over the individuals within it and maintaining its separate international personality. Laski could
speak of it then as a territorial society divided into government and subjects, claiming within its allotted area
a supremacy over all other institutions.13 McIver similarly would point to the power entrusted to its
government to maintain within its territory the conditions of a legal order and to enter into international
relations. 14 With the latter requisite satisfied, international law do not exact independence as a condition of
statehood. So Hyde did opine. 15

Even on the assumption then that Tangier is bereft of international personality, petitioner has not
successfully made out a case. It bears repeating that four days after the filing of this petition on January 6,
1958 in Collector of Internal Revenue v. De Lara, 16 it was specifically held by us: "Considering the State of
California as a foreign country in relation to section 122 of our Tax Code we believe and hold, as did the Tax
Court, that the Ancilliary Administrator is entitled the exemption from the inheritance tax on the intangible
personal property found in the Philippines." 17 There can be no doubt that California as a state in the
American Union was in the alleged requisite of international personality. Nonetheless, it was held to be a
foreign country within the meaning of Section 122 of the National Internal Revenue Code. 18

What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the doctrine that
even a tiny principality, that of Liechtenstein, hardly an international personality in the sense, did fall under
this exempt category. So it appears in an opinion of the Court by the then Acting Chief Justicem Bengson
who thereafter assumed that position in a permanent capacity, in Kiene v. Collector of Internal
Revenue. 19 As was therein noted: 'The Board found from the documents submitted to it — proof of the laws
of Liechtenstein — that said country does not impose estate, inheritance and gift taxes on intangible
property of Filipino citizens not residing in that country. Wherefore, the Board declared that pursuant to the
exemption above established, no estate or inheritance taxes were collectible, Ludwig Kiene being a resident
of Liechtestein when he passed away." 20 Then came this definitive ruling: "The Collector — hereafter named
the respondent — cites decisions of the United States Supreme Court and of this Court, holding that
intangible personal property in the Philippines belonging to a non-resident foreigner, who died outside of this
country is subject to the estate tax, in disregard of the principle 'mobilia sequuntur personam'. Such
property is admittedly taxable here. Without the proviso above quoted, the shares of stock owned here by
the Ludwig Kiene would be concededly subject to estate and inheritance taxes. Nevertheless our Congress
chose to make an exemption where conditions are such that demand reciprocity — as in this case. And the
exemption must be honored." 21

WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is affirmed. Without
pronouncement as to costs.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Villamor and Makasiar, JJ., concur.

Reyes, J.B.L., J., concurs in the result.

Teehankee and Barredo, JJ., took no par

THE UNITED STATES, complainant-appellee,

vs.
FRED L. DORR, ET AL., defendants-appellants.

F. G. Waite for appellants.

Solicitor-General Araneta for appellee.

LADD, J.:

The defendants have been convicted upon a complaint charging them with the offense of writing, publishing, and
circulating a scurrilous libel against the Government of the United States and the Insular Government of the Philippine
Islands. The complaint is based upon section 8 of Act No. 292 of the Commission, which is as follows:
 Every person who shall utter seditious words or speeches, write, publish, or circulate scurrilous libels against
the Government of the United States or the Insular Government of the Philippine Islands, or which tend to
disturb or obstruct any lawful officer in executing his office, or which tend to instigate others to cabal or meet
together for unlawful purposes, or which suggest or incite rebellious conspiracies or riots, or which tend to stir
up the people against the lawful authorities, or to disturb the peace of the community, the safety and order of
the Government, or who shall knowingly conceal such evil practices, shall be punished by a fine not exceeding
two thousand dollars or by imprisonment not exceeding two years, or both, in the discretion of the court.

The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April 6, 1902, under the caption
of "A few hard facts."

The Attorney-General in his brief indicates the following passages of the article as those upon which he relies to
sustain the conviction:

Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say of the action of the Civil
Commission in appointing rascally natives to important Government positions:

"It is a strong thing to say, but nevertheless true, that the Civil Commission, through its ex-insurgent
office holders, and by its continual disregard for the records of natives obtained during the military rule
of the Islands, has, in its distribution of offices, constituted a protectorate over a set of men who should
be in jail or deported. . . . [Reference is then made to the appointment of one Tecson as justice of the
peace.] This is the kind of foolish work that the Commission is doing all over the Islands, reinstating
insurgents and rogues and turning down the men who have during the struggle, at the risk of their lives,
aided the Americans."

xxx xxx xxx

There is no doubt but that the Filipino office holders of the Islands are in a good many instances rascals.

xxx xxx xxx

The commission has exalted to the highest positions in the Islands Filipinos who are alleged to be notoriously
corrupt and rascally, and men of no personal character.

xxx xxx xxx

Editor Valdez, of "Miau," made serious charges against two of the native Commissioners — charges against Trinidad
H. Pardo de Tavera, which, if true, would brand the man as a coward and a rascal, and with what result? . . .
[Reference is then made to the prosecution and conviction of Valdez for libel "under a law which specifies that the
greater the truth the greater the libel."] Is it the desire of the people of the United States that the natives against whom
these charges have been made (which, if true, absolutely vilify their personal characters) be permitted to retain their
seats on the Civil Commission, the executive body of the Philippine Government, without an investigation?

xxx xxx xxx

It is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and
corrupt. The fiscal system, upon which life, liberty, and justice depends, is admitted by the Attorney-General
himself to be most unsatisfactory. It is a fact that the Philippine judiciary is far from being what it should. Neither
fiscals nor judges can be persuaded to convict insurgents when they wish to protect them.

xxx xxx xxx

Now we hear all sorts of reports as to rottenness existing in the province [of Tayabas], and especially the
northern end of it; it is said that it is impossible to secure the conviction of lawbreakers and outlaws by the
native justices, or a prosecution by the native fiscals.

xxx xxx xxx

 The long and short of it is that Americans will not stand for an arbitrary government, especially when evidences
of carpetbagging and rumors of graft are too thick to be pleasant.

We do not understand that it is claimed that the defendants succeeded in establishing at the trial the truth of any of the
foregoing statements. The only question which we have considered is whether their publication constitutes an offense
under section 8 of Act No. 292, above cited.

Several allied offenses or modes of committing the same offense are defined in that section, viz: (1) The uttering of
seditious words or speeches; (2) the writing, publishing, or circulating of scurrilous libels against the Government of the
United States or the Insular Government of the Philippine Islands; (3) the writing, publishing, or circulating of libels
which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend to instigate others to cabal
or meet together for unlawful purposes; (5) or which suggest or incite rebellious conspiracies or riots; (6) or which tend
to stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the
Government; (7) knowingly concealing such evil practices.

The complaint appears to be framed upon the theory that a writing, in order to be punishable as a libel under this
section, must be of a scurrilous nature and directed against the Government of the United States or the Insular
Government of the Philippine Islands, and must, in addition, tend to some one of the results enumerated in the section.
The article in question is described in the complaint as "a scurrilous libel against the Government of the United States
and the Insular Government of the Philippine Islands, which tends to obstruct the lawful officers of the United States
and the Insular Government of the Philippine Islands in the execution of their offices, and which tends to instigate
others to cabal and meet together for unlawful purposes, and which suggests and incites rebellious conspiracies, and
which tends to stir up the people against the lawful authorities, and which disturbs the safety and order of the
Government of the United States and the Insular Government of the Philippine Islands." But it is "a well-settled rule in
considering indictments that where an offense may be committed in any of several different modes, and the offense, in
any particular instance, is alleged to have been committed in two or more modes specified, it is sufficient to prove the
offense committed in any one of them, provided that it be such as to constitute the substantive offense"
(Com. vs. Kneeland, 20 Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the
substantive charges into which the complaint may be separated has been made out.

We are all, however, agreed upon the proposition that the article in question has no appreciable tendency to "disturb or
obstruct any lawful officer in executing his office," or to "instigate" any person or class of persons "to cabal or meet
together for unlawful purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir up the people
against the lawful authorities or to disturb the peace of the community, the safety and order of the Government." All
these various tendencies, which are described in section 8 of Act No. 292, each one of which is made an element of a
certain form of libel, may be characterized in general terms as seditious tendencies. This is recognized in the
description of the offenses punished by this section, which is found in the title of the act, where they are defined as the
crimes of the "seditious utterances, whether written or spoken."

Excluding from consideration the offense of publishing "scurrilous libels against the Government of the United States or
the Insular Government of the Philippine Islands," which may conceivably stand on a somewhat different footing, the
offenses punished by this section all consist in inciting, orally or in writing, to acts of disloyalty or disobedience to the
lawfully constituted authorities in these Islands. And while the article in question, which is, in the main, a virulent attack
against the policy of the Civil Commission in appointing natives to office, may have had the effect of exciting among
certain classes dissatisfaction with the Commission and its measures, we are unable to discover anything in it which
can be regarded as having a tendency to produce anything like what may be called disaffection, or, in other words, a
state of feeling incompatible with a disposition to remain loyal to the Government and obedient to the laws. There can
be no conviction, therefore, for any of the offenses described in the section on which the complaint is based, unless it
is for the offense of publishing a scurrilous libel against the Government of the of the United States or the Insular
Government of the Philippine Islands.

Can the article be regarded as embraced within the description of "scurrilous libels against the Government of the
United States or the Insular Government of the Philippine Islands?" In the determination of this question we have
encountered great difficulty, by reason of the almost entire lack of American precedents which might serve as a guide
in the construction of the law. There are, indeed, numerous English decisions, most of them of the eighteenth century,
on the subject of libelous attacks upon the "Government, the constitution, or the law generally," attacks upon the
Houses of Parliament, the Cabinet, the Established Church, and other governmental organisms, but these decisions
are not now accessible to us, and, if they were, they were made under such different conditions from those which
prevail at the present day, and are founded upon theories of government so foreign to those which have inspired the
legislation of which the enactment in question forms a part, that they would probably afford but little light in the present
inquiry. In England, in the latter part of the eighteenth century, any "written censure upon public men for their conduct
as such," as well as any written censure "upon the laws or upon the institutions of the country," would probably have
been regarded as a libel upon the Government. (2 Stephen, History of the Criminal Law of England, 348.) This has
ceased to be the law in England, and it is doubtful whether it was ever the common law of any American State. "It is
true that there are ancient dicta to the effect that any publication tending to "possess the people with an ill opinion of
the Government" is a seditious libel ( per Holt, C. J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in
R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine now. Unless the words used directly
tend to foment riot or rebellion or otherwise to disturb the peace and tranquility of the Kingdom, the utmost latitude is
allowed in the discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley says (Const. Lim.,
528): "The English common law rule which made libels on the constitution or the government indictable, as it was
administered by the courts, seems to us unsuited to the condition and circumstances of the people of America, and
therefore never to have been adopted in the several States."

We find no decisions construing the Tennessee statute (Code, sec. 6663), which is apparently the only existing
American statute of a similar character to that in question, and from which much of the phraseology of then latter
appears to have been taken, though with some essential modifications.

The important question is to determine what is meant in section 8 of Act No. 292 by the expression "the Insular
Government of the Philippine Islands." Does it mean in a general and abstract sense the existing laws and institutions
of the Islands, or does it mean the aggregate of the individuals by whom the government of the Islands is, for the time
being, administered? Either sense would doubtless be admissible.

We understand, in modern political science, . . . by the term government, that institution or aggregate of institutions by
which an independent society makes and carries out those rules of action which are unnecessary to enable men to live
in a social state, or which are imposed upon the people forming that society by those who possess the power or
authority of prescribing them. Government is the aggregate of authorities which rule a society. By "dministration, again,
we understand in modern times, and especially in more or less free countries, the aggregate of those persons in
whose hands the reins of government are for the time being (the chief ministers or heads of departments)." (Bouvier,
Law Dictionary, 891.) But the writer adds that the terms "government" and "administration" are not always used in their
strictness, and that "government" is often used for "administration."

In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made an offense to "write, print,
utter, or published," or to "knowingly and willingly assist or aid in writing, printing, uttering, or publishing any false,
scandalous, and malicious writing or writings against the Government of the United States, or either House of the
Congress of the United States, or the President of the United States, with intent to defame the said Government, or
either House of the said Congress, or the said President, or to bring them, or either of them, into contempt or disrepute,
or to excite against them or either or any of them the hatred of the good people of the United States," etc. The term
"government" would appear to be used here in the abstract sense of the existing political system, as distinguished from
the concrete organisms of the Government — the Houses of Congress and the Executive — which are also specially
mentioned.

Upon the whole, we are of the opinion that this is the sense in which the term is used in the enactment under
consideration.

It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel, upon an abstraction like the
Government in the sense of the laws and institutions of a country, but we think an answer to this suggestion is that the
expression "scurrilous libel" is not used in section 8 of Act No. 292 in the sense in which it is used in the general libel
law (Act No. 277) — that is, in the sense of written defamation of individuals — but in the wider sense, in which it is
applied in the common law to blasphemous, obscene, or seditious publications in which there may be no element of
defamation whatever. "The word 'libel' as popularly used, seems to mean only defamatory words; but words written, if
obscene, blasphemous, or seditious, are technically called libels, and the publication of them is, by the law of England,
an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per Bramwell L. J. See Com. vs. Kneeland, 20
Pick., 206, 211.)

While libels upon forms of government, unconnected with defamation of individuals, must in the nature of things be of
uncommon occurrence, the offense is by no means an imaginary one. An instance of a prosecution for an offense
essentially of this nature is Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted "as a factious
and seditious person of a wicked mind and unquiet and turbulent disposition and conversation, seditiously, maliciously,
and willfully intending, as much as in him lay, to bring into contempt and hatred the independence of the United States,
the constitution of this Commonwealth and of the United States, to excite popular discontent and dissatisfaction against
the scheme of polity instituted, and upon trial in the said United States and in the said Commonwealth, to molest,
disturb, and destroy the peace and tranquility of the said United States and of the said Commonwealth, to condemn
the principles of the Revolution, and revile, depreciate, and scandalize the characters of the Revolutionary patriots and
statesmen, to endanger, subvert, and totally destroy the republican constitutions and free governments of the said
United States and this Commonwealth, to involve the said United States and this Commonwealth in civil war,
desolation, and anarchy, and to procure by art and force a radical change and alteration in the principles and forms of
the said constitutions and governments, without the free will, wish, and concurrence of the people of the said United
States and this Commonwealth, respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked,
seditious, and detestable intentions aforesaid he . . . falsely, maliciously, factiously, and seditiously did make, compose,
write, and publish the following libel, to wit; 'A democracy is scarcely tolerable at any period of national history. Its
omens are always sinister and its powers are unpropitious. With all the lights or experience blazing before our eyes, it
is impossible not to discover the futility of this form of government. It was weak and wicked at Athens, it was bad in
Sparta, and worse in Rome. It has been tried in France and terminated in despotism. it was tried in England and
rejected with the utmost loathing and abhorrence. It is on its trial here and its issue will be civil war, desolation, and
anarchy. No wise man but discerns its imperfections; no good man but shudders at its miseries; no honest man but
proclaims its fraud, and no brave man but draws his sword against its force. The institution of a scheme of polity so
radically contemptible and vicious is a memorable example of what the villainy of some men can devise, the folly of
others receive, and both establish, in despite of reason, reflection, and sensation.'"

An attack upon the lawfully established system of civil government in the Philippine Islands, like that which Dennie was
accused of making upon the republican form of government lawfully established in the United States and in the State
of Pennsylvania would, we think, if couched in scandalous language, constitute the precise offense described in
section 8 of Act No. 292 as a scurrilous libel against the Insular Government of the Philippine Islands.

Defamation of individuals, whether holding official positions or not, and whether directed to their public conduct or to
their private life, may always be adequately punished under the general libel law. Defamation of the Civil Commission
as an aggregation, it being "a body of persons definite and small enough for its individual members to be recognized
as such" (Stephen, Digest of the Criminal Law, art. 277), as well as defamation of any of the individual members of the
Commission or of the Civil Governor, either in his public capacity or as a private individual, may be so punished. The
general libel law enacted by the Commission was in force when Act No. 292, was passed. There was no occasion for
any further legislation on the subject of libels against the individuals by whom the Insular Government is administered
— against the Insular Government in the sense of the aggregate of such individuals. There was occasion for stringent
legislation against seditious words or libels, and that is the main if not the sole purpose of the section under
consideration. It is not unreasonable to suppose that the Commission, in enacting this section, may have conceived of
attacks of a malignant or scurrilous nature upon the existing political system of the United States, or the political
system established in these Islands by the authority of the United States, as necessarily of a seditious tendency, but it
is not so reasonable to suppose that they conceived of attacks upon the personnel of the government as necessarily
tending to sedition. Had this been their view it seems probable that they would, like the framers of the Sedition Act of
1798, have expressly and specifically mentioned the various public officials and collegiate governmental bodies
defamation of which they meant to punish as sedition.

The article in question contains no attack upon the governmental system of the United States, and it is quite apparent
that, though grossly abusive as respects both the Commission as a body and some of its individual members, it
contains no attack upon the governmental system by which the authority of the United States is enforced in these
Islands. The form of government by a Civil Commission and a Civil Governor is not assailed. It is the character of the
men who are intrusted with the administration of the government that the writer is seeking to bring into disrepute by
impugning the purity of their motives, their public integrity, and their private morals, and the wisdom of their policy. The
publication of the article, therefore, no seditious tendency being apparent, constitutes no offense under Act No. 292,
section 8.

The judgment of conviction is reversed and the defendants are acquitted, with costs de oficio
U.S. Supreme Court

Kawananokoa v. Polyblank, 205 U.S. 349 (1907)

Kawananokoa v. Polyblank

No. 273

Argued March 21, 1907

Decided April 8, 1907

205 U.S. 349

APPEAL FROM THE SUPREME COURT

OF THE TERRITORY OF HAWAII

Syllabus

Under Equity Rule 92, where a part of the mortgage premises has been sold to the sovereign power which
refuses to waive its exemption from suit, the court can, all other parties being joined, except the land so
conveyed and decree sale of the balance and enter deficiency judgment for sum remaining due if proceeds of
sale are insufficient to pay the debt.

A sovereign is exempt from suit not because of any formal conception or obsolete theory, but on the logical
and practical ground that there can be no legal right as against the authority that makes the law on which
the right depends, and as this doctrine is not confined to full sovereign powers, it extends to those, such as
the territories of the United States, which in actual administration originate and change the law of contract
and property.

A territory of the United States differs from the District of Columbia in that the former is itself the fountain
from which rights ordinarily flow, although Congress may intervene, while, in the latter, the body of private
rights is created and controlled by Congress, and not by a legislature of the District.

17 Haw. 82 affirmed.

The facts are stated in the opinion.

Page 205 U. S. 352

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is an appeal from a decree affirming a decree of foreclosure and sale under a mortgage executed by the
appellants to the appellee, Sister Albertina. 17 Haw. 82. The defendants (appellants) pleaded to the
jurisdiction that, after the execution of the mortgage, a part of the mortgaged land had been conveyed by
them to one Damon, and by Damon to the Territory of Hawaii, and was now part of a public street. The bill
originally made the territory a party, but the territory demurred and the plaintiffs dismissed their bill as to it
before the above plea was argued. Then the plea was overruled, and after answer and hearing, the decree of
foreclosure was made, the appellants having saved their rights. The decree excepted from the sale the land
conveyed to the territory, and directed a judgment for the sum remaining due in case the proceeds of the
sale were insufficient to pay the debt. Eq.Rule 92.

The appellants contend that the owners of the equity of redemption in all parts of the mortgage land must be
joined, and that no deficiency judgment should be entered until all the mortgaged premises have been sold.
In aid of their contention, they argue that the Territory of Hawaii is liable to suit like a municipal corporation,
irrespective of the permission given by its statutes, which does not extend to this case. They liken the
territory to the District of Columbia, Metropolitan

Page 205 U. S. 353

R. Co. v. District of Columbia, 132 U. S. 1, and point out that it has been a party to suits that have been
before this Court. Damson v. Hawaii, 194 U. S. 154; Carter v. Hawaii, 200 U. S. 255.

The territory, of course, could waive its exemption, Smith v. Reeves, 178 U. S. 436, and it took no objection
to the proceedings in the cases cited if it could have done so. See Act of April 30, 1900, c. 339, § 96. 31
Stat. 141, 160. But, in the case at bar, it did object, and the question raised is whether the plaintiffs were
bound to yield. Some doubts have been expressed as to the source of the immunity of a sovereign power
from suit without its own permission, but the answer has been public property since before the days of
Hobbes. Leviathan, c. 26, 2. A sovereign is exempt from suit not because of any formal conception or
obsolete theory, but on the logical and practical ground that there can be no legal right as against the
authority that makes the law on which the right depends. "Car on peut bien recevoir loy d'autruy, mais il est
impossible par nature de se donner loy." Bodin, Republique, 1, c. 8, ed. 1629, p. 132; Sir John Eliot, De Jure
Maiestatis, c. 3. Nemo suo statuto ligatur necessitative. Baldus, De Leg. et Const. Digna Vox, (2d ed. 1496,
fol. 51b, ed. 1539, fol. 61).

As the ground is thus logical and practical, the doctrine is not confined to powers that are sovereign in the
full sense of juridical theory, but naturally is extended to those that, in actual administration, originate and
change at their will the law of contract and property, from which persons within the jurisdiction derive their
rights. A suit presupposes that the defendants are subject to the law invoked. Of course, it cannot be
maintained unless they are so. But that is not the case with a territory of the United States, because the
territory itself is the fountain from which rights ordinarily flow. It is true that Congress might intervene, just
as, in the case of a state, the Constitution does, and the power that can alter the Constitution might. But the
rights that exist are not created by

Page 205 U. S. 354

Congress or the Constitution, except to the extent of certain limitations of power. The District of Columbia is
different, because there the body of private rights is created and controlled by Congress, and not by a
legislature of the District. But, for the Territory of Hawaii, it is enough to refer to the organic act. Act of April
30, 1900, c. 339, §§ 6, 55. 31 Stat. 141, 142, 150. Coffield v. Territory, 13 Haw. 478. See further, Territory
v. Doty, 1 Pinney 396, 405; Langford v. King, 1 Mont. 33; Fisk v. Cuttabert, 2 Mont. 593, 598.

However it might be in a different case, when the inability to join all parties and to sell all the land is due to
a conveyance by the mortgagor directly or indirectly to the territory, the court is not thereby deprived of
ability to proceed.
Decree affirmed.

MR. JUSTICE HARLAN concurs in the result.

GARCIA VS CHIEF OF STAFF

G.R. No. L-20213 January 31, 1966

MARIANO E. GARCIA, plaintiff-appellant,

vs.
THE CHIEF OF STAFF and THE ADJUTANT GENERAL, ARMED FORCES OF THE PHILIPPINES and/or
THE CHAIRMAN, PHILIPPINE VETERANS BOARD and/or THE AUDITOR GENERAL OF THE
PHILIPPINES,defendants-appellees.

Tiangco and Millosa for the plaintiff-appellant.

Office of the Solicitor General for the defendants-appellees.

REGALA, J.:

This is an appeal from an order of dismissal.

It appears that on December 1, 1961, the plaintiff-appellant, Mariano E. Garcia, filed with the Court of First
Instance of Pangasinan an action to collect a sum of money against the Chief of Staff and the Adjutant
General of the Armed Forces of the Philippines, the Chairman of the Philippine Veterans Board and /or the
Auditor General. The complaint alleged: that sometime in July, 1948, the plaintiff suffered injuries while
undergoing the 10-month military training at Camp Floridablanca, Pampanga; that sometime thereafter he
filed his claim under Commonwealth Act 400 and in April, 1957, he submitted some papers in support of his
claim to the Adjutant General's Office upon the latter's request; that on May 2, 1957, he received a letter
from the said Adjutant General's Office disallowing his claim for disability benefits; that on November 24,
1958, after further demands of the plaintiff, the Adjutant General's Office denied the said claim, alleging that
Commonwealth Act 400 had already been repealed by Republic Act 610 which took effect on January 1,
1950; that by reason of the injuries suffered by plaintiff he was deprived of his sight or vision rendering him
permanently disabled; and that by reason of the unjustified refusal by defendants of plaintiff's claim, the
latter was deprived of his disability pension from July, 1948 totalling no less than P4,000 at the rate of P20 a
month and suffered thereby moral damages and attorney's fees the amount of P2,000.00.

The Philippine Veterans Administration and the Chief of Staff of the Armed Forces filed separate motions to
dismiss the complaint on the grounds that the court has no jurisdiction over the subject matter of the
complaint; that the plaintiff failed to exhaust all administrative remedies before coming to court; that the
complaint states no cause of action; and that the cause of action is barred by the statute of
limitations.1äwphï1.ñët

Acting on the said motion, the court, on March 2, 1962, rendered an order dismissing the complaint on the
ground that the action has prescribed.

Motion for reconsideration of the said order having been denied, the plaintiff has interposed this appeal.

Without need of discussing the various questions raised, We have to uphold the order of dismissal, not
necessarily on the same ground as found by the lower court; but for the simple reason that the Court of First
Instance has no jurisdiction over the subject matter, it being a money claim against the government.

This Court has already held (New Manila Lumber Co. Inc. vs. Republic, G.R. No. L-14248, April 28, 1960)
that a claim for the recovery of money against the government should be filed with the Auditor General, in
line with the principle that the State cannot be sued without its consent. Commonwealth Act 327 provides:
 SECTION 1. In all cases involving the settlement of accounts or claims, other than those of
accountable officers, the Auditor General shall act and decide the same within sixty days, exclusive of
Sundays and holidays, after their presentation. . . .

SEC. 2. The party aggrieved by the final decision of the Auditor General in the settlement of an
account or claim may, within thirty days from receipt of the decision, take an appeal in writing:

xxx xxx x x x.

(c) To the Supreme Court of the Philippines, if the appellant is a private person or entity.

The well established rule that no recourse to court can be had until all administrative remedies had been
exhausted and that actions against administrative officers should not be entertained if superior
administrative officers could grant relief is squarely applicable to the present case.

In view therefor, the order dismissing the complaint is hereby affirmed, without pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes J.B.L., Barrera, Dizon, Bengzon, J.P., and Zaldivar, JJ.,
concur.
Makalintal, J., took no part.
G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati,
Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the
Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court, Branch 61, Makati, Metro
Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case No. 90-
183, while the Order dated September 19, 1991 denied the motion for reconsideration of the June 20,1991
Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented
in the Philippines by the Papal Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate
business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A,
Transfer Certificate of Title No. 390440) located in the Municipality of Parañaque, Metro Manila and
registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title Nos.
271108 and 265388 respectively and registered in the name of the Philippine Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the
sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to
who of the parties has the responsibility of evicting and clearing the land of squatters. Complicating the
relations of the parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development
Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61, Makati,
Metro Manila for annulment of the sale of the three parcels of land, and specific performance and damages
against petitioner, represented by the Papal Nuncio, and three other defendants: namely, Msgr. Domingo A.
Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the PRC,
agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per square meters; (2) the
agreement to sell was made on the condition that earnest money of P100,000.00 be paid by Licup to the
sellers, and that the sellers clear the said lots of squatters who were then occupying the same; (3) Licup
paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the property
to private respondent and informed the sellers of the said assignment; (5) thereafter, private respondent
demanded from Msgr. Cirilos that the sellers fulfill their undertaking and clear the property of squatters;
however, Msgr. Cirilos informed private respondent of the squatters' refusal to vacate the lots, proposing
instead either that private respondent undertake the eviction or that the earnest money be returned to the
latter; (6) private respondent counterproposed that if it would undertake the eviction of the squatters, the
purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per square meter; (7) Msgr.
Cirilos returned the earnest money of P100,000.00 and wrote private respondent giving it seven days from
receipt of the letter to pay the original purchase price in cash; (8) private respondent sent the earnest
money back to the sellers, but later discovered that on March 30, 1989, petitioner and the PRC, without
notice to private respondent, sold the lots to Tropicana, as evidenced by two separate Deeds of Sale, one
over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the
lots were cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner
and the PRC to sell the lots to it and thus enriched itself at the expense of private respondent; (10) private
respondent demanded the rescission of the sale to Tropicana and the reconveyance of the lots, to no avail;
and (11) private respondent is willing and able to comply with the terms of the contract to sell and has
actually made plans to develop the lots into a townhouse project, but in view of the sellers' breach, it lost
profits of not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and the PRC
on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in question; (3) specific
performance of the agreement to sell between it and the owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint — petitioner for lack
of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for being an improper party. An
opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to dismiss after
finding that petitioner "shed off [its] sovereign immunity by entering into the business contract in question"
(Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner filed a
"Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of Immunity as a
Jurisdictional Defense." So as to facilitate the determination of its defense of sovereign immunity, petitioner
prayed that a hearing be conducted to allow it to establish certain facts upon which the said defense is
based. Private respondent opposed this motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration
until after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign
immunity only on its own behalf and on behalf of its official representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign Affairs,
claiming that it has a legal interest in the outcome of the case as regards the diplomatic immunity of
petitioner, and that it "adopts by reference, the allegations contained in the petition of the Holy See insofar
as they refer to arguments relative to its claim of sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with the
resolution of this Court, both parties and the Department of Foreign Affairs submitted their respective
memoranda.

II
A preliminary matter to be threshed out is the procedural issue of whether the petition for certiorari under
Rule 65 of the Revised Rules of Court can be availed of to question the order denying petitioner's motion to
dismiss. The general rule is that an order denying a motion to dismiss is not reviewable by the appellate
courts, the remedy of the movant being to file his answer and to proceed with the hearing before the trial
court. But the general rule admits of exceptions, and one of these is when it is very clear in the records that
the trial court has no alternative but to dismiss the complaint (Philippine National Bank v. Florendo, 206
SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such a case, it would be a
sheer waste of time and energy to require the parties to undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal interest of the
Department of Foreign Affairs to intervene in the case in behalf of the Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic
immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court
that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or the
international organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the
defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign Office issues
a certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965];
Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088
[1941]).

In the Philippines, the practice is for the foreign government or the international organization to first secure
an executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign
Office conveys its endorsement to the courts varies. In International Catholic Migration Commission v.
Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of
Labor and Employment, informing the latter that the respondent-employer could not be sued because it
enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of
Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent
Judge. The Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus
curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with this
Court to be allowed to intervene on the side of petitioner. The Court allowed the said Department to file its
memorandum in support of petitioner's claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-
Ryukyus Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA 644 [1990] and
companion cases). In cases where the foreign states bypass the Foreign Office, the courts can inquire into
the facts and make their own determination as to the nature of the acts and transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a foreign
state enjoying sovereign immunity. On the other hand, private respondent insists that the doctrine of non-
suability is not anymore absolute and that petitioner has divested itself of such a cloak when, of its own free
will, it entered into a commercial transaction for the sale of a parcel of land located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign state is
in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the Holy
See, was considered a subject of International Law. With the loss of the Papal States and the limitation of
the territory under the Holy See to an area of 108.7 acres, the position of the Holy See in International Law
became controversial (Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive
dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also recognized the right of the
Holy See to receive foreign diplomats, to send its own diplomats to foreign countries, and to enter into
treaties according to International Law (Garcia, Questions and Problems In International Law, Public and
Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the Holy See
absolute and visible independence and of guaranteeing to it indisputable sovereignty also in the field of
international relations" (O'Connell, I International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is vested in
the Holy See or in the Vatican City. Some writers even suggested that the treaty created two international
persons — the Holy See and Vatican City (Salonga and Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution to it of
"sovereignty" must be made in a sense different from that in which it is applied to other states (Fenwick,
International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community of national states,
the Vatican City represents an entity organized not for political but for ecclesiastical purposes and
international objects. Despite its size and object, the Vatican City has an independent government of its own,
with the Pope, who is also head of the Roman Catholic Church, as the Holy See or Head of State, in
conformity with its traditions, and the demands of its mission in the world. Indeed, the world-wide interests
and activities of the Vatican City are such as to make it in a sense an "international state" (Fenwick, supra.,
125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication — that it is
possible for any entity pursuing objects essentially different from those pursued by states to be invested with
international personality (Kunz, The Status of the Holy See in International Law, 46 The American Journal of
International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See and
not in the name of the Vatican City, one can conclude that in the Pope's own view, it is the Holy See that is
the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy See,
through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine
government since 1957 (Rollo, p. 87). This appears to be the universal practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted
principles of International Law. Even without this affirmation, such principles of International Law are
deemed incorporated as part of the law of the land as a condition and consequence of our admission in the
society of nations (United States of America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According
to the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the
courts of another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is
recognized only with regard to public acts or acts jure imperii of a state, but not with regard to private acts
or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International
Law 194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial determination when an act
may be considered as jure gestionis. The United States passed the Foreign Sovereign Immunities Act of
1976, which defines a commercial activity as "either a regular course of commercial conduct or a particular
commercial transaction or act." Furthermore, the law declared that the "commercial character of the activity
shall be determined by reference to the nature of the course of conduct or particular transaction or act,
rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an Act to Provide For
State Immunity in Canadian Courts. The Act defines a "commercial activity" as any particular transaction, act
or conduct or any regular course of conduct that by reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of
sovereign immunity, has created problems of its own. Legal treatises and the decisions in countries which
follow the restrictive theory have difficulty in characterizing whether a contract of a sovereign state with a
private party is an act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial activities
remotely connected with the discharge of governmental functions. This is particularly true with respect to the
Communist states which took control of nationalized business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure
imperii: (1) the lease by a foreign government of apartment buildings for use of its military officers (Syquia
v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a United States
Naval Station (United States of America v. Ruiz, supra.); and (3) the change of employment status of base
employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private
parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three
restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in
Baguio City, to cater to American servicemen and the general public (United States of America v. Rodrigo,
182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air Base in Angeles
City (United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other
facilities open to the general public is undoubtedly for profit as a commercial and not a governmental
activity. By entering into the employment contract with the cook in the discharge of its proprietary function,
the United States government impliedly divested itself of its sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered "commercial" and
as constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate
test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is
engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a
business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit
of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not
undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be deemed to
have impliedly waived its non-suability if it has entered into a contract in its proprietary or
private capacity. It is only when the contract involves its sovereign or governmental capacity
that no such waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business,
surely the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that
the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said
property for the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to
dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not
for commercial purpose, but for the use of petitioner to construct thereon the official place of residence of
the Papal Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state,
necessary for the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna
Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and
entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and administrative
jurisdiction of the receiving state over any real action relating to private immovable property situated in the
territory of the receiving state which the envoy holds on behalf of the sending state for the purposes of the
mission. If this immunity is provided for a diplomatic envoy, with all the more reason should immunity be
recognized as regards the sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a
governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it
almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters have
occupied and are still occupying the lot, and that they stubbornly refuse to leave the premises, has been
admitted by private respondent in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the light
of the pleadings, particularly the admission of private respondent. Besides, the privilege of sovereign
immunity in this case was sufficiently established by the Memorandum and Certification of the Department of
Foreign Affairs. As the department tasked with the conduct of the Philippines' foreign relations
(Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally
intervened in this case and officially certified that the Embassy of the Holy See is a duly accredited
diplomatic mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all the
rights, privileges and immunities of a diplomatic mission or embassy in this country (Rollo, pp. 156-157).
The determination of the executive arm of government that a state or instrumentality is entitled to sovereign
or diplomatic immunity is a political question that is conclusive upon the courts (International Catholic
Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is recognized and
affirmed by the executive branch, it is the duty of the courts to accept this claim so as not to embarrass the
executive arm of the government in conducting the country's foreign relations (World Health Organization v.
Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration Commission and in World Health
Organization, we abide by the certification of the Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing to
establish the facts alleged by petitioner in its motion. In view of said certification, such procedure would
however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso Velasco, G.R. No.
109645, July 25, 1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances. Under both Public
International Law and Transnational Law, a person who feels aggrieved by the acts of a foreign sovereign
can ask his own government to espouse his cause through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its claims
against the Holy See. Its first task is to persuade the Philippine government to take up with the Holy See the
validity of its claims. Of course, the Foreign Office shall first make a determination of the impact of its
espousal on the relations between the Philippine government and the Holy See (Young, Remedies of Private
Claimants Against Foreign States, Selected Readings on Protection by Law of Private Foreign Investments
905, 919 [1964]). Once the Philippine government decides to espouse the claim, the latter ceases to be a
private cause.

According to the Permanent Court of International Justice, the forerunner of the International Court of
Justice:
 By taking up the case of one of its subjects and by reporting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own rights —
its right to ensure, in the person of its subjects, respect for the rules of international law (The
Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183 against
petitioner is DISMISSED.

US VS. RUIZ

G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and ROBERT
GOHIER, petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal and ELIGIO DE
GUZMAN & CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.

Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil Case
No. 779M of the defunct Court of First Instance of Rizal.

The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic, Zambales. The base
was one of those provided in the Military Bases Agreement between the Philippines and the United States.

Sometime in May, 1972, the United States invited the submission of bids for the following projects

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.

2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment, NAVBASE
Subic; and repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the
company received from the United States two telegrams requesting it to confirm its price proposals and for
the name of its bonding company. The company complied with the requests. [In its complaint, the company
alleges that the United States had accepted its bids because "A request to confirm a price proposal confirms
the acceptance of a bid pursuant to defendant United States' bidding practices." (Rollo, p. 30.) The truth of
this allegation has not been tested because the case has not reached the trial stage.]

In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director, Contracts
Division, Naval Facilities Engineering Command, Southwest Pacific, Department of the Navy of the United
States, who is one of the petitioners herein. The letter said that the company did not qualify to receive an
award for the projects because of its previous unsatisfactory performance rating on a repair contract for the
sea wall at the boat landings of the U.S. Naval Station in Subic Bay. The letter further said that the projects
had been awarded to third parties. In the abovementioned Civil Case No. 779-M, the company sued the
United States of America and Messrs. James E. Galloway, William I. Collins and Robert Gohier all members of
the Engineering Command of the U.S. Navy. The complaint is to order the defendants to allow the plaintiff to
perform the work on the projects and, in the event that specific performance was no longer possible, to
order the defendants to pay damages. The company also asked for the issuance of a writ of preliminary
injunction to restrain the defendants from entering into contracts with third parties for work on the projects.

The defendants entered their special appearance for the purpose only of questioning the jurisdiction of this
court over the subject matter of the complaint and the persons of defendants, the subject matter of the
complaint being acts and omissions of the individual defendants as agents of defendant United States of
America, a foreign sovereign which has not given her consent to this suit or any other suit for the causes of
action asserted in the complaint." (Rollo, p. 50.)

Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to the
issuance of the writ of preliminary injunction. The company opposed the motion. The trial court denied the
motion and issued the writ. The defendants moved twice to reconsider but to no avail. Hence the instant
petition which seeks to restrain perpetually the proceedings in Civil Case No. 779-M for lack of jurisdiction on
the part of the trial court.

The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State from being sued in the courts of another State
without its consent or waiver. This rule is a necessary consequence of the principles of independence and
equality of States. However, the rules of International Law are not petrified; they are constantly developing
and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them-
between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts
(jure gestionis). The result is that State immunity now extends only to acts jure imperil The restrictive
application of State immunity is now the rule in the United States, the United Kingdom and other states in
western Europe. (See Coquia and Defensor Santiago, Public International Law, pp. 207-209 [1984].)

The respondent judge recognized the restrictive doctrine of State immunity when he said in his Order
denying the defendants' (now petitioners) motion: " A distinction should be made between a strictly
governmental function of the sovereign state from its private, proprietary or non- governmental acts (Rollo,
p. 20.) However, the respondent judge also said: "It is the Court's considered opinion that entering into a
contract for the repair of wharves or shoreline is certainly not a governmental function altho it may partake
of a public nature or character. As aptly pointed out by plaintiff's counsel in his reply citing the ruling in the
case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes with approval, viz.:

It is however contended that when a sovereign state enters into a contract with a private
person, the state can be sued upon the theory that it has descended to the level of an
individual from which it can be implied that it has given its consent to be sued under the
contract. ...

xxx xxx xxx

We agree to the above contention, and considering that the United States government,
through its agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay Area, a U.S. Naval Reservation, it is evident
that it can bring an action before our courts for any contractual liability that that political entity
may assume under the contract. The trial court, therefore, has jurisdiction to entertain this
case ... (Rollo, pp. 20-21.)

The reliance placed on Lyons by the respondent judge is misplaced for the following reasons:

In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of First
Instance of Manila to collect several sums of money on account of a contract between plaintiff and
defendant. The defendant filed a motion to dismiss on the ground that the court had no jurisdiction over
defendant and over the subject matter of the action. The court granted the motion on the grounds that: (a)
it had no jurisdiction over the defendant who did not give its consent to the suit; and (b) plaintiff failed to
exhaust the administrative remedies provided in the contract. The order of dismissal was elevated to this
Court for review.

In sustaining the action of the lower court, this Court said:

It appearing in the complaint that appellant has not complied with the procedure laid down in
Article XXI of the contract regarding the prosecution of its claim against the United States
Government, or, stated differently, it has failed to first exhaust its administrative remedies
against said Government, the lower court acted properly in dismissing this case.(At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely
gratuitous and, therefore, obiter so that it has no value as an imperative authority.

The restrictive application of State immunity is proper only when the proceedings arise out of commercial
transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State
may be said to have descended to the level of an individual and can thus be deemed to have tacitly given its
consent to be sued only when it enters into business contracts. It does not apply where the contract relates
to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base
which is devoted to the defense of both the United States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for nor dedicated to commercial or business purposes.

That the correct test for the application of State immunity is not the conclusion of a contract by a State but
the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the plaintiffs
leased three apartment buildings to the United States of America for the use of its military officials. The
plaintiffs sued to recover possession of the premises on the ground that the term of the leases had expired.
They also asked for increased rentals until the apartments shall have been vacated.

The defendants who were armed forces officers of the United States moved to dismiss the suit for lack of
jurisdiction in the part of the court. The Municipal Court of Manila granted the motion to dismiss; sustained
by the Court of First Instance, the plaintiffs went to this Court for review on certiorari. In denying the
petition, this Court said:

On the basis of the foregoing considerations we are of the belief and we hold that the real
party defendant in interest is the Government of the United States of America; that any
judgment for back or Increased rentals or damages will have to be paid not by defendants
Moore and Tillman and their 64 co-defendants but by the said U.S. Government. On the basis
of the ruling in the case of Land vs. Dollar already cited, and on what we have already stated,
the present action must be considered as one against the U.S. Government. It is clear hat the
courts of the Philippines including the Municipal Court of Manila have no jurisdiction over the
present case for unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government has not , given its
consent to the filing of this suit which is essentially against her, though not in name. Moreover,
this is not only a case of a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign government without said
government's consent, which renders more obvious the lack of jurisdiction of the courts of his
country. The principles of law behind this rule are so elementary and of such general
acceptance that we deem it unnecessary to cite authorities in support thereof. (At p. 323.)

In Syquia,the United States concluded contracts with private individuals but the contracts notwithstanding
the States was not deemed to have given or waived its consent to be sued for the reason that the contracts
were for jure imperii and not for jure gestionis.

WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside and Civil
Case No. is dismissed. Costs against the private respondent.

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, Relova, Gutierrez, Jr., De la Fuente,
Cuevas and Alampay, JJ., concur.
Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC)
of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into
between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and
labor services within the Subic Bay area, this Court further stated that inasmuch as ". . . the United States
Government. through its agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is evident that it can
bring an action before our courts for any contractual liability that that political entity may assume under the
contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private
company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a
contract and thus waived the mantle of sovereign immunity from suit and descended to the level of the
ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering into a contract (Santos
vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in
the case at bar by the unilateral cancellation of the award for the project by the United States government,
through its agency at Subic Bay should not be allowed to take undue advantage of a party who may have
legitimate claims against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his own country for violation
of his rights committed by the agents of the foreign government professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil.
312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic courts of
justice, such rule is inapplicable to cases in which the foreign government enters into private
contracts with the citizens of the court's jurisdiction. A contrary view would simply run against
all principles of decency and violative of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as well with regard to
private individuals as with regard to governments either domestic or foreign. Once a foreign
government enters into a private contract with the private citizens of another country, such
foreign government cannot shield its non-performance or contravention of the terms of the
contract under the cloak of non-jurisdiction. To place such foreign government beyond the
jurisdiction of the domestic courts is to give approval to the execution of unilateral contracts,
graphically described in Spanish as 'contratos leoninos', because one party gets the lion's
share to the detriment of the other. To give validity to such contract is to sanctify bad faith,
deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including
governments and the most powerful of them, are amenable to law, and that such contracts
are enforceable through the help of the courts of justice with jurisdiction to take cognizance of
any violation of such contracts if the same had been entered into only by private individuals.
Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges
unduly upon our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or
domestic contractors from transacting business and entering into contracts with United States authorities or
facilities in the Philippines whether naval, air or ground forces-because the difficulty, if not impossibility, of
enforcing a validly executed contract and of seeking judicial remedy in our own courts for breaches of
contractual obligation committed by agents of the United States government, always, looms large, thereby
hampering the growth of Filipino enterprises and creating a virtual monopoly in our own country by United
States contractors of contracts for services or supplies with the various U.S. offices and agencies operating in
the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether
the parties are nations or private individuals, it is to be reasonably assumed and expected that the
undertakings in the contract will be complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the United States of
America, can always overwhelm small and weak nations. The declaration in the United Nations Charter that
its member states are equal and sovereign, becomes hollow and meaningless because big nations wielding
economic and military superiority impose upon and dictate to small nations, subverting their sovereignty and
dignity as nations. Thus, more often than not, when U.S. interest clashes with the interest of small nations,
the American governmental agencies or its citizens invoke principles of international law for their own
benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand,
and herein private respondent on the other, was honored more in the breach than in the compliance The
opinion of the majority will certainly open the floodgates of more violations of contractual obligations.
American authorities or any foreign government in the Philippines for that matter, dealing with the citizens of
this country, can conveniently seek protective cover under the majority opinion. The result is disastrous to
the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign
political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360;
Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government, through its naval
authorities at Subic Bay, should be held amenable to lawsuits in our country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of
the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the
above-mentioned rights, powers and authority, the United States agrees that the powers granted to it will
not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the
aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and maintain sound
employment practices which will assure equality of treatment of all employees ... and continuing favorable
employer-employee relations ..." and "(B)elieving that an agreement will be mutually beneficial and will
strengthen the democratic institutions cherished by both Governments, ... the United States Government
agrees to accord preferential employment of Filipino citizens in the Bases, thus (1) the U.S. Forces in the
Philippines shall fill the needs for civilian employment by employing Filipino citizens, etc." (Par. 1, Art. I of
the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of
Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires
performing work for the U.S. Armed Forces shall be required by their contract or concession agreements to
comply with all applicable Philippine labor laws and regulations, " even though paragraph 2 thereof affirms
that "nothing in this Agreement shall imply any waiver by either of the two Governments of such immunity
under international law."
Reliance by petitioners on the non-suability of the United States Government before the local courts, actually
clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7,
1979, also amending RP-US Military Bases Agreement, which stresses that "it is the duty of members of the
United States Forces, the civilian component and their dependents, to respect the laws of the Republic of the
Philippines and to abstain from any activity inconsistent with the spirit of the Military Bases Agreement and,
in particular, from any political activity in the Philippines. The United States shag take all measures within its
authority to insure that they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the
economic and social improvement of areas surrounding the bases, which directs that "moreover, the United
States Forces shall procure goods and services in the Philippines to the maximum extent feasible" (Emphasis
supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be
conducted on the basis of the principles of equality of treatment, the right to organize, and bargain
collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos
and Vice-President Mondale of the United States dated May 4, 1978 that "the United States re-affirms that
Philippine sovereignty extends over the bases and that Its base shall be under the command of a Philippine
Base Commander," which is supposed to underscore the joint Communique of President Marcos and U.S.
President Ford of December 7, 1975, under which "they affirm that sovereign equality, territorial integrity
and political independence of all States are fundamental principles which both countries scrupulously
respect; and that "they confirm that mutual respect for the dignity of each nation shall characterize their
friendship as well as the alliance between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of
both the Philippine and American Base Commanders that "in the performance of their duties, the Philippine
Base Commander and the American Base Commander shall be guided by full respect for Philippine
sovereignty on the one hand and the assurance of unhampered U.S. military operations on the other hand
and that "they shall promote cooperation understanding and harmonious relations within the Base and with
the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the exchange
of notes, January 7, 1979, between Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P.
Romulo, Emphasis supplied).

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC)
of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into
between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and
labor services within the Subic Bay area, this Court further stated that inasmuch as ". . . the United States
Government. through its agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is evident that it can
bring an action before our courts for any contractual liability that that political entity may assume under the
contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private
company for the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a
contract and thus waived the mantle of sovereign immunity from suit and descended to the level of the
ordinary citizen. Its consent to be sued, therefore, is implied from its act of entering into a contract (Santos
vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in
the case at bar by the unilateral cancellation of the award for the project by the United States government,
through its agency at Subic Bay should not be allowed to take undue advantage of a party who may have
legitimate claims against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his own country for violation
of his rights committed by the agents of the foreign government professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil.
312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic courts of
justice, such rule is inapplicable to cases in which the foreign government enters into private
contracts with the citizens of the court's jurisdiction. A contrary view would simply run against
all principles of decency and violative of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as well with regard to
private individuals as with regard to governments either domestic or foreign. Once a foreign
government enters into a private contract with the private citizens of another country, such
foreign government cannot shield its non-performance or contravention of the terms of the
contract under the cloak of non-jurisdiction. To place such foreign government beyond the
jurisdiction of the domestic courts is to give approval to the execution of unilateral contracts,
graphically described in Spanish as 'contratos leoninos', because one party gets the lion's
share to the detriment of the other. To give validity to such contract is to sanctify bad faith,
deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including
governments and the most powerful of them, are amenable to law, and that such contracts
are enforceable through the help of the courts of justice with jurisdiction to take cognizance of
any violation of such contracts if the same had been entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges
unduly upon our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or
domestic contractors from transacting business and entering into contracts with United States authorities or
facilities in the Philippines whether naval, air or ground forces-because the difficulty, if not impossibility, of
enforcing a validly executed contract and of seeking judicial remedy in our own courts for breaches of
contractual obligation committed by agents of the United States government, always, looms large, thereby
hampering the growth of Filipino enterprises and creating a virtual monopoly in our own country by United
States contractors of contracts for services or supplies with the various U.S. offices and agencies operating in
the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether
the parties are nations or private individuals, it is to be reasonably assumed and expected that the
undertakings in the contract will be complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the United States of
America, can always overwhelm small and weak nations. The declaration in the United Nations Charter that
its member states are equal and sovereign, becomes hollow and meaningless because big nations wielding
economic and military superiority impose upon and dictate to small nations, subverting their sovereignty and
dignity as nations. Thus, more often than not, when U.S. interest clashes with the interest of small nations,
the American governmental agencies or its citizens invoke principles of international law for their own
benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand,
and herein private respondent on the other, was honored more in the breach than in the compliance The
opinion of the majority will certainly open the floodgates of more violations of contractual obligations.
American authorities or any foreign government in the Philippines for that matter, dealing with the citizens of
this country, can conveniently seek protective cover under the majority opinion. The result is disastrous to
the Philippines.
This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign
political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for
perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360;
Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government, through its naval
authorities at Subic Bay, should be held amenable to lawsuits in our country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of
the original RP-US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the
above-mentioned rights, powers and authority, the United States agrees that the powers granted to it will
not be used unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the
aforesaid RP-US Military Bases Agreement, which recognizes "the need to promote and maintain sound
employment practices which will assure equality of treatment of all employees ... and continuing favorable
employer-employee relations ..." and "(B)elieving that an agreement will be mutually beneficial and will
strengthen the democratic institutions cherished by both Governments, ... the United States Government
agrees to accord preferential employment of Filipino citizens in the Bases, thus (1) the U.S. Forces in the
Philippines shall fill the needs for civilian employment by employing Filipino citizens, etc." (Par. 1, Art. I of
the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of
Article IV of the aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires
performing work for the U.S. Armed Forces shall be required by their contract or concession agreements to
comply with all applicable Philippine labor laws and regulations, " even though paragraph 2 thereof affirms
that "nothing in this Agreement shall imply any waiver by either of the two Governments of such immunity
under international law."

Reliance by petitioners on the non-suability of the United States Government before the local courts, actually
clashes with No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7,
1979, also amending RP-US Military Bases Agreement, which stresses that "it is the duty of members of the
United States Forces, the civilian component and their dependents, to respect the laws of the Republic of the
Philippines and to abstain from any activity inconsistent with the spirit of the Military Bases Agreement and,
in particular, from any political activity in the Philippines. The United States shag take all measures within its
authority to insure that they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the
economic and social improvement of areas surrounding the bases, which directs that "moreover, the United
States Forces shall procure goods and services in the Philippines to the maximum extent feasible" (Emphasis
supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the
discussions on possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be
conducted on the basis of the principles of equality of treatment, the right to organize, and bargain
collectively, and respect for the sovereignty of the Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos
and Vice-President Mondale of the United States dated May 4, 1978 that "the United States re-affirms that
Philippine sovereignty extends over the bases and that Its base shall be under the command of a Philippine
Base Commander," which is supposed to underscore the joint Communique of President Marcos and U.S.
President Ford of December 7, 1975, under which "they affirm that sovereign equality, territorial integrity
and political independence of all States are fundamental principles which both countries scrupulously
respect; and that "they confirm that mutual respect for the dignity of each nation shall characterize their
friendship as well as the alliance between their two countries. "
The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of
both the Philippine and American Base Commanders that "in the performance of their duties, the Philippine
Base Commander and the American Base Commander shall be guided by full respect for Philippine
sovereignty on the one hand and the assurance of unhampered U.S. military operations on the other hand
and that "they shall promote cooperation understanding and harmonious relations within the Base and with
the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the exchange
of notes, January 7, 1979, between Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P.
Romulo, Emphasis supplied).

USA VS GUINTO

G.R. No. 76607 February 26, 1990

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners,

vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City,
ROBERTO T. VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.

G.R. No. 79470 February 26, 1990

UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO BELSA, PETER
ORASCION AND ROSE CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial Court (BAGUIO
CITY), La Trinidad, Benguet and FABIAN GENOVE, respondents.

G.R. No. 80018 February 26, 1990

UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.

BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial Court, Branch 66, Capas, Tarlac,
and LUIS BAUTISTA, respondents.

G.R. No. 80258 February 26, 1990

UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC ERNEST E.

RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT.
WAYNE L. BENJAMIN, ET AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62 REGIONAL TRIAL
COURT, Angeles City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN
MARIANO, AKA JESSIE DOLORES SANGALANG, ET AL., respondents.

Luna, Sison & Manas Law Office for petitioners.

CRUZ, J.:

These cases have been consolidated because they all involve the doctrine of state immunity. The
United States of America was not impleaded in the complaints below but has moved to dismiss on
the ground that they are in effect suits against it to which it has not consented. It is now
contesting the denial of its motions by the respondent judges.

In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force
stationed in Clark Air Base in connection with the bidding conducted by them for contracts for
barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air
Force, solicited bids for such contracts through its contracting officer, James F. Shaw. Among
those who submitted their bids were private respondents Roberto T. Valencia, Emerenciana C.
Tanglao, and Pablo C. del Pilar. Valencia had been a concessionaire inside Clark for 34 years; del
Pilar for 12 years; and Tanglao for 50 years.

The bidding was won by Ramon Dizon, over the objection of the private respondents, who
claimed that he had made a bid for four facilities, including the Civil Engineering Area, which was
not included in the invitation to bid.

The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through
its representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil
Engineering concession had not been awarded to Dizon as a result of the February 24, 1986
solicitation. Dizon was already operating this concession, then known as the NCO club
concession, and the expiration of the contract had been extended from June 30, 1986 to August
31, 1986. They further explained that the solicitation of the CE barbershop would be available
only by the end of June and the private respondents would be notified.

On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX
and the individual petitioners to cancel the award to defendant Dizon, to conduct a rebidding for
the barbershop concessions and to allow the private respondents by a writ of preliminary
injunction to continue operating the concessions pending litigation. 1

Upon the filing of the complaint, the respondent court issued an ex parte order directing the
individual petitioners to maintain the status quo.

On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for
preliminary injunction on the ground that the action was in effect a suit against the United States
of America, which had not waived its non-suability. The individual defendants, as official
employees of the U.S. Air Force, were also immune from suit.

On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary
injunction.

On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part as
follows:

From the pleadings thus far presented to this Court by the parties, the Court's
attention is called by the relationship between the plaintiffs as well as the
defendants, including the US Government, in that prior to the bidding or solicitation
in question, there was a binding contract between the plaintiffs as well as the
defendants, including the US Government. By virtue of said contract of concession it
is the Court's understanding that neither the US Government nor the herein principal
defendants would become the employer/s of the plaintiffs but that the latter are the
employers themselves of the barbers, etc. with the employer, the plaintiffs herein,
remitting the stipulated percentage of commissions to the Philippine Area Exchange.
The same circumstance would become in effect when the Philippine Area Exchange
opened for bidding or solicitation the questioned barber shop concessions. To this
extent, therefore, indeed a commercial transaction has been entered, and for
purposes of the said solicitation, would necessarily be entered between the plaintiffs
as well as the defendants.

The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement
does not cover such kind of services falling under the concessionaireship, such as a
barber shop concession. 2
On December 11, 1986, following the filing of the herein petition for certiorari and prohibition with
preliminary injunction, we issued a temporary restraining order against further proceedings in the court
below. 3

In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia,
Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook in the U.S. Air Force Recreation
Center at the John Hay Air Station in Baguio City. It had been ascertained after investigation, from the
testimony of Belsa Cartalla and Orascion, that Genove had poured urine into the soup stock used in cooking
the vegetables served to the club customers. Lamachia, as club manager, suspended him and thereafter
referred the case to a board of arbitrators conformably to the collective bargaining agreement between the
Center and its employees. The board unanimously found him guilty and recommended his dismissal. This
was effected on March 5, 1986, by Col. David C. Kimball, Commander of the 3rd Combat Support Group,
PACAF Clark Air Force Base. Genove's reaction was to file Ms complaint in the Regional Trial Court of Baguio
City against the individual petitioners. 4

On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss the complaint,
alleging that Lamachia, as an officer of the U.S. Air Force stationed at John Hay Air Station, was immune
from suit for the acts done by him in his official capacity. They argued that the suit was in effect against the
United States, which had not given its consent to be sued.

This motion was denied by the respondent judge on June 4, 1987, in an order which read in part:

It is the understanding of the Court, based on the allegations of the complaint — which have
been hypothetically admitted by defendants upon the filing of their motion to dismiss — that
although defendants acted initially in their official capacities, their going beyond what their
functions called for brought them out of the protective mantle of whatever immunities they
may have had in the beginning. Thus, the allegation that the acts complained of were illegal,
done. with extreme bad faith and with pre-conceived sinister plan to harass and finally dismiss
the plaintiff, gains significance. 5

The petitioners then came to this Court seeking certiorari and prohibition with preliminary injunction.

In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell, an extension of
Clark Air Base, was arrested following a buy-bust operation conducted by the individual petitioners herein,
namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special agents
of the Air Force Office of Special Investigators (AFOSI). On the basis of the sworn statements made by them,
an information for violation of R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed against
Bautista in the Regional Trial Court of Tarlac. The above-named officers testified against him at his trial. As a
result of the filing of the charge, Bautista was dismissed from his employment. He then filed a complaint for
damages against the individual petitioners herein claiming that it was because of their acts that he was
removed. 6

During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to the International
Law Division, Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the
defendants and moved for an extension within which to file an "answer and/or other pleadings." His reason
was that the Attorney General of the United States had not yet designated counsel to represent the
defendants, who were being sued for their official acts. Within the extended period, the defendants, without
the assistance of counsel or authority from the U.S. Department of Justice, filed their answer. They alleged
therein as affirmative defenses that they had only done their duty in the enforcement of the laws of the
Philippines inside the American bases pursuant to the RP-US Military Bases Agreement.

On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the defendants,
filed with leave of court a motion to withdraw the answer and dismiss the complaint. The ground invoked
was that the defendants were acting in their official capacity when they did the acts complained of and that
the complaint against them was in effect a suit against the United States without its consent.

The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the
claimed immunity under the Military Bases Agreement covered only criminal and not civil cases. Moreover,
the defendants had come under the jurisdiction of the court when they submitted their answer.7
Following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued
on October 14, 1987, a temporary restraining order. 8

In G.R. No. 80258, a complaint for damages was filed by the private respondents against the herein
petitioners (except the United States of America), for injuries allegedly sustained by the plaintiffs as a result
of the acts of the defendants. 9 There is a conflict of factual allegations here. According to the plaintiffs, the
defendants beat them up, handcuffed them and unleashed dogs on them which bit them in several parts of
their bodies and caused extensive injuries to them. The defendants deny this and claim the plaintiffs were
arrested for theft and were bitten by the dogs because they were struggling and resisting arrest, The
defendants stress that the dogs were called off and the plaintiffs were immediately taken to the medical
center for treatment of their wounds.

In a motion to dismiss the complaint, the United States of America and the individually named defendants
argued that the suit was in effect a suit against the United States, which had not given its consent to be
sued. The defendants were also immune from suit under the RP-US Bases Treaty for acts done by them in
the performance of their official functions.

The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as
follows:

The defendants certainly cannot correctly argue that they are immune from suit. The
allegations, of the complaint which is sought to be dismissed, had to be hypothetically
admitted and whatever ground the defendants may have, had to be ventilated during the trial
of the case on the merits. The complaint alleged criminal acts against the individually-named
defendants and from the nature of said acts it could not be said that they are Acts of State, for
which immunity should be invoked. If the Filipinos themselves are duty bound to respect, obey
and submit themselves to the laws of the country, with more reason, the members of the
United States Armed Forces who are being treated as guests of this country should respect,
obey and submit themselves to its laws. 10

and so was the motion for reconsideration. The defendants submitted their answer as required but
subsequently filed their petition for certiorari and prohibition with preliminary injunction with this Court. We
issued a temporary restraining order on October 27, 1987. 11

II

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.

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." 12 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." 13

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. 14 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 or it
itself commences litigation.

The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the
Philippine government "consents and submits to be sued upon any moneyed claim involving liability arising
from contract, express or implied, which could serve as a basis of civil action between private parties."
In Merritt v. Government of the Philippine Islands, 15 a special law was passed to enable a person to sue the
government for an alleged tort. When the government enters into a contract, it is deemed to have
descended to the level of the other contracting party and divested of its sovereign immunity from suit with
its implied consent. 16 Waiver is also implied when the government files a complaint, thus opening itself to a
counterclaim. 17

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. 18 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. 19 As for the filing of a complaint by the government, suability will result only where the
government is claiming affirmative relief from the defendant. 20

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, 21 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 stationed 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 4 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
firing 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 then came Marvel Building Corporation v.
Philippine War Damage Commission, where respondent, a United States Agency established to
compensate damages suffered by the Philippines during World War II was held as falling within
the above doctrine as the suit against it would eventually be a charge against or financial
liability of the United States Government because ... , the Commission has no funds of its own
for the purpose of paying money judgments.' The Syquia ruling was again explicitly relied
upon in Marquez Lim v. Nelson, involving a complaint for the recovery of a motor launch, plus
damages, the special defense interposed being 'that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said Government, and that the
United States Government is therefore the real party in interest.' So it was in Philippine Alien
Property Administration v. Castelo, where it was held that a suit against Alien Property
Custodian and the Attorney General of the United States involving vested property under the
Trading with the Enemy Act is in substance a suit against the United States. To the same
effect is Parreno v. McGranery, as the following excerpt from the opinion of justice Tuazon
clearly shows: 'It is a widely accepted principle of international law, which is made a part of
the law of the land (Article II, Section 3 of the Constitution), that a foreign state may not be
brought to suit before the courts of another state or its own courts without its consent.'
Finally, there is Johnson v. Turner, an appeal by the defendant, then Commanding General,
Philippine Command (Air Force, with office at Clark Field) from a decision ordering the return
to plaintiff of the confiscated military payment certificates known as scrip money. In reversing
the lower court decision, this Tribunal, through Justice Montemayor, relied on Syquia v.
Almeda Lopez, explaining why it could not be sustained.

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 UnitedStates of America v. Ruiz, 22 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 exempts a State from being sued in the courts of another
State without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not petrified;
they are constantly developing and evolving. And because the activities of states have
multiplied, it has been necessary to distinguish them — between sovereign and governmental
acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is
that State immunity now extends only to acts jure 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.

In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever, appropriated private
land and converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he
moved to dismiss the complaint on the ground that the suit was in effect against the Philippine government,
which had not given its consent to be sued. This Court sustained the denial of the motion and held that the
doctrine of state immunity was not applicable. The director was being sued in his private capacity for a
personal tort.

With these considerations in mind, we now proceed to resolve the cases at hand.

III

It is clear from a study of the records of G.R. No. 80018 that the individually-named petitioners therein were
acting in the exercise of their official functions when they conducted the buy-bust operation against the
complainant and thereafter testified against him at his trial. The said petitioners were in fact connected with
the Air Force Office of Special Investigators and were charged precisely with the function of preventing the
distribution, possession and use of prohibited drugs and prosecuting those guilty of such acts. 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. As we observed in Sanders v. Veridiano: 24

Given the official character of the above-described letters, we have to conclude that the
petitioners were, legally speaking, being sued as officers of the United States government. As
they have acted on behalf of that government, and within the scope of their authority, it is
that government, and not the petitioners personally, that is responsible for their acts.

The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts
through a special agent. The argument, it would seem, is premised on the ground that since the officers are
designated "special agents," the United States government should be liable for their torts.

There seems to be a failure to distinguish between suability and liability and a misconception that the two
terms are synonymous. Suability depends on the consent of the state to be sued, liability on the applicable
law and the established facts. The circumstance that a state is suable does not necessarily mean that it is
liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not
conceded by the mere fact that the state has allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government may be held liable under this rule
only if it first allows itself to be sued through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent even if he is so denominated, as
in the case at bar. No less important, the said provision appears to regulate only the relations of the local
state with its inhabitants and, hence, applies only to the Philippine government and not to foreign
governments impleaded in our courts.

We reject the conclusion of the trial court that the answer filed by the special counsel of the Office of the
Sheriff Judge Advocate of Clark Air Base was a submission by the United States government to its
jurisdiction. As we noted in Republic v. Purisima, 25 express waiver of immunity cannot be made by a mere
counsel of the government but must be effected through a duly-enacted statute. Neither does such answer
come under the implied forms of consent as earlier discussed.

But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the discharge of
their official functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual
allegations in this case deserve in our view a closer study of what actually happened to the plaintiffs. The
record is too meager to indicate if the defendants were really discharging their official duties or had actually
exceeded their authority when the incident in question occurred. Lacking this information, this Court cannot
directly decide this case. The needed inquiry must first be made by the lower court so it may assess and
resolve the conflicting claims of the parties on the basis of the evidence that has yet to be presented at the
trial. Only after it shall have determined in what capacity the petitioners were acting at the time of the
incident in question will this Court determine, if still necessary, if the doctrine of state immunity is applicable.

In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club located at the U.S.
Air Force Recreation Center, also known as the Open Mess Complex, at John Hay Air Station. As manager of
this complex, petitioner Lamachia is responsible for eleven diversified activities generating an annual income
of $2 million. Under his executive management are three service restaurants, a cafeteria, a bakery, a Class
VI store, a coffee and pantry shop, a main cashier cage, an administrative office, and a decentralized
warehouse which maintains a stock level of $200,000.00 per month in resale items. He supervises 167
employees, one of whom was Genove, with whom the United States government has concluded a collective
bargaining agreement.

From these circumstances, the Court can assume that the restaurant services offered at the John Hay Air
Station partake of the nature of a business enterprise undertaken by the United States government in its
proprietary capacity. Such services are not extended to the American servicemen for free as a perquisite of
membership in the Armed Forces of the United States. Neither does it appear that they are exclusively
offered to these servicemen; on the contrary, it is well known that they are available to the general public as
well, including the tourists in Baguio City, many of whom make it a point to visit John Hay for this reason. All
persons availing themselves of this facility pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable and relatively low, such services are undoubtedly
operated for profit, as a commercial and not a governmental activity.

The consequence of this finding is that the petitioners cannot invoke the doctrine of state immunity to justify
the dismissal of the damage suit against them by Genove. Such defense will not prosper even if it be
established that they were acting as agents of the United States when they investigated and later dismissed
Genove. For that matter, not even the United States government itself can claim such immunity. The reason
is that by entering into the employment contract with Genove in the discharge of its proprietary functions, it
impliedly divested itself of its sovereign immunity from suit.

But these considerations notwithstanding, we hold that the complaint against the petitioners in the court
below must still be dismissed. While suable, the petitioners are nevertheless not liable. It is obvious that the
claim for damages cannot be allowed on the strength of the evidence before us, which we have carefully
examined.

The dismissal of the private respondent was decided upon only after a thorough investigation where it was
established beyond doubt that he had polluted the soup stock with urine. The investigation, in fact, did not
stop there. Despite the definitive finding of Genove's guilt, the case was still referred to the board of
arbitrators provided for in the collective bargaining agreement. This board unanimously affirmed the findings
of the investigators and recommended Genove's dismissal. There was nothing arbitrary about the
proceedings. The petitioners acted quite properly in terminating the private respondent's employment for his
unbelievably nauseating act. It is surprising that he should still have the temerity to file his complaint for
damages after committing his utterly disgusting offense.

Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions granted by the
United States government are commercial enterprises operated by private person's. They are not agencies of
the United States Armed Forces nor are their facilities demandable as a matter of right by the American
servicemen. These establishments provide for the grooming needs of their customers and offer not only the
basic haircut and shave (as required in most military organizations) but such other amenities as shampoo,
massage, manicure and other similar indulgences. And all for a fee. Interestingly, one of the concessionaires,
private respondent Valencia, was even sent abroad to improve his tonsorial business, presumably for the
benefit of his customers. No less significantly, if not more so, all the barbershop concessionaires are under
the terms of their contracts, required to remit to the United States government fixed commissions in
consideration of the exclusive concessions granted to them in their respective areas.

This being the case, the petitioners cannot plead any immunity from the complaint filed by the private
respondents in the court below. The contracts in question being decidedly commercial, the conclusion
reached in the United States of America v. Ruiz case cannot be applied here.

The Court would have directly resolved the claims against the defendants as we have done in G.R. No.
79470, except for the paucity of the record in the case at hand. The evidence of the alleged irregularity in
the grant of the barbershop concessions is not before us. This means that, as in G.R. No. 80258, the
respondent court will have to receive that evidence first, so it can later determine on the basis thereof if the
plaintiffs are entitled to the relief they seek. Accordingly, this case must also be remanded to the court below
for further proceedings.

IV

There are a number of other cases now pending before us which also involve the question of the immunity of
the United States from the jurisdiction of the Philippines. This is cause for regret, indeed, as they mar the
traditional friendship between two countries long allied in the cause of democracy. It is hoped that the so-
called "irritants" in their relations will be resolved in a spirit of mutual accommodation and respect, without
the inconvenience and asperity of litigation and always with justice to both parties.

WHEREFORE, after considering all the above premises, the Court hereby renders judgment as follows:

1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to
proceed with the hearing and decision of Civil Case No. 4772. The temporary restraining order
dated December 11, 1986, is LIFTED.

2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is DISMISSED.

3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is DISMISSED. The
temporary restraining order dated October 14, 1987, is made permanent.

4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to
proceed with the hearing and decision of Civil Case No. 4996. The temporary restraining order
dated October 27, 1987, is LIFTED.

All without any pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.
TORIO VS FONTANILLA

G.R. No. L-29993 October 23, 1978

LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO R. MAGSANOC,

JESUS MACARANAS, MAXIMO MANANGAN, FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON
TULAGAN, all Members of the Municipal Council of Malasiqui in 1959, Malasiqui,
Pangasinan, petitioners,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA,
VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and THE HONORABLE COURT OF
APPEALS, respondents.

G.R. No. L-30183 October 23, 1978

MUNICIPALITY OF MALASIQUI, petitioner,

vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA,
VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and the Honorable COURT OF
APPEALS, respondents.

Julian M. Armas, Assistant Provincial Fiscal for petitioners.

Isidro L. Padilla for respondents.

MUÑOZ PALMA, J.:

These Petitions for review present the issue of whether or not the celebration of a town fiesta authorized by
a municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised Administrative Code is
a governmental or a corporate or proprietary function of the municipality.

A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of
Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a death which
occurred during the celebration of the town fiesta on January 22, 1959, and which was attributed to the
negligence of the municipality and its council members.

The following facts are not in dispute:

On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it
resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23, 1959." Resolution
No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn
organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman. the council
appropriated the amount of P100.00 for the construction of 2 stages, one for the "zarzuela" and another for
the cancionan Jose Macaraeg supervised the construction of the stage and as constructed the stage for the
"zarzuela" was "5-½ meters by 8 meters in size, had a wooden floor high at the rear and was supported by
24 bamboo posts — 4 in a row in front, 4 in the rear and 5 on each side — with bamboo braces." 1

The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui employees of the
Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of January 22 for the
performance and one of the members of the group was Vicente Fontanilla. The program started at about
10:15 o'clock that evening with some speeches, and many persons went up the stage. The "zarzuela" then
began but before the dramatic part of the play was reached, the stage collapsed and Vicente Fontanilla who
was at the rear of the stage was pinned underneath. Fontanilia was taken to tile San Carlos General Hospital
where he died in the afternoon of the following day.

The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on September 11,
1959 to recover damages. Named party-defendants were the Municipality of Malasiqui, the Municipal Council
of Malasiqui and all the individual members of the Municipal Council in 1959.

Answering the complaint defendant municipality invoked inter alia the principal defense that as a legally and
duly organized public corporation it performs sovereign functions and the holding of a town fiesta was an
exercise of its governmental functions from which no liability can arise to answer for the negligence of any of
its agents.

The defendant councilors inturn maintained that they merely acted as agents of the municipality in carrying
out the municipal ordinance providing for the management of the town fiesta celebration and as such they
are likewise not liable for damages as the undertaking was not one for profit; furthermore, they had
exercised due care and diligence in implementing the municipal ordinance. 2

After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the defendants
exercised due diligence 'm the construction of the stage. From his findings he arrived at the conclusion that
the Executive Committee appointed by the municipal council had exercised due diligence and care like a
good father of the family in selecting a competent man to construct a stage strong enough for the occasion
and that if it collapsed that was due to forces beyond the control of the committee on entertainment,
consequently, the defendants were not liable for damages for the death of Vicente Fontanilla. The complaint
was accordingly dismissed in a decision dated July 10, 1962. 3

The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968, the Court
of Appeals through its Fourth Division composed at the time of Justices Salvador V. Esguerra, Nicasio A.
Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered all the defendants-appellees to
pay jointly and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual
damages: P1200.00 its attorney's fees; and the costs. 4

The case is now before Us on various assignments of errors all of which center on the proposition stated at
the sentence of this Opinion and which We repeat:

Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or public
function or is it or a private or proprietary character?

1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with the
faculties of municipal corporations to be exercised by and through their respective municipal governments in
conformity with law, and in their proper corporate name, they may inter alia sue and be sued, and contract
and be contracted with. 5

The powers of a municipality are twofold in character public, governmental or political on the one hand, and
corporate, private, or proprietary on the other. Governmental powers are those exercised by the corporation
in administering the powers of the state and promoting the public welfare and they include the legislative,
judicial public, and political Municipal powers on the other hand are exercised for the special benefit and
advantage of the community and include those which are ministerial private and corporate. 6

As to when a certain activity is governmental and when proprietary or private, that is generally a difficult
matter to determine. The evolution of the municipal law in American Jurisprudence, for instance, has shown
that; none of the tests which have evolved and are stated in textbooks have set down a conclusive principle
or rule, so that each case will have to be determined on the basis of attending circumstances.

In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper has ... a
public character as regards the state at large insofar as it is its agent in government, and private (so-called)
insofar as it is to promote local necessities and conveniences for its own community. 7
Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of Indiana in
1916, thus:

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

In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant T. Trent,
relying mainly on American Jurisprudence classified certain activities of the municipality as governmental,
e.g.: regulations against fire, disease, preservation of public peace, maintenance of municipal prisons,
establishment of schools, post-offices, etc. while the following are corporate or proprietary in character, viz:
municipal waterwork, slaughter houses, markets, stables, bathing establishments, wharves, ferries, and
fisheries. 8 Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as
municipal or city activities of a proprietary character. 9

2. This distinction of powers becomes important for purposes of determining the liability of the municipality
for the acts of its agents which result in an injury to third persons.

If the injury is caused in the course of the performance of a governmental function or duty no recovery, as a
rule, can be. had from the municipality unless there is an existing statute on the matter,10 nor from its
officers, so long as they performed their duties honestly and in good faith or that they did not act wantonly
and maliciously. 11 In Palafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck driver employed by the
provincial government of Ilocos Norte ran over Proceto Palafox in the course of his work at the construction
of a road. The Supreme Court in affirming the trial court's dismissal of the complaint for damages held that
the province could not be made liable because its employee was in the performance of a governmental
function — the construction and maintenance of roads — and however tragic and deplorable it may be, the
death of Palafox imposed on the province no duty to pay monetary consideration. 12

With respect to proprietary functions, the settled rule is that a municipal corporation can be held liable to
third persons ex contract 13 or ex delicto. 14

Municipal corporations are subject to be sued upon contracts and in tort. ...

xxx xxx xxx

The rule of law is a general one, that the superior or employer must answer civilly for the
negligence or want of skill of its agent or servant in the course or fine of his employment, by
which another, who is free from contributory fault, is injured. Municipal corporations under the
conditions herein stated, fall within the operation of this rule of law, and are liable,
accordingly, to civil actions for damages when the requisite elements of liability co-exist. ...
(Dillon on Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de Leon, supra.
514)

3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of the
town fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a private or proprietary
function of the municipality.

Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides:

Section 2282. Celebration of fiesta. — fiesta may be held in each municipality not oftener than
once a year upon a date fixed by the municipal council A fiesta s not be held upon any other
date than that lawfully fixed therefor, except when, for weighty reasons, such as typhoons,
 foundations, earthquakes, epidemics, or other public ties, the fiesta cannot be hold in the date
fixed in which case it may be held at a later date in the same year, by resolution of the
council.

This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not impose
upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or
historical event of the town is in essence an act for the special benefit of the community and not for the
general welfare of the public performed in pursuance of a policy of the state. The mere fact that the
celebration, as claimed was not to secure profit or gain but merely to provide entertainment to the town
inhabitants is not a conclusive test. For instance, the maintenance of parks is not a source of income for the
nonetheless it is private undertaking as distinguished from the maintenance of public schools, jails, and the
like which are for public service.

As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an
undertaking or function of a municipality; the surrounding circumstances of a particular case are to be
considered and will be decisive. The basic element, however beneficial to the public the undertaking may be,
is that it is governmental in essence, otherwise. the function becomes private or proprietary in character.
Easily, no overnmental or public policy of the state is involved in the celebration of a town fiesta. 15

4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable for
damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the municipality's
officers, employees, or agents.

Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one's
own acts or omission, but also for those of persons for whom one is responsible. . .

On this point, the Court of Appeals found and held that there was negligence.

The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now
petitioners), that a member of the "extravaganza troupe removed two principal braces located on the front
portion of the stage and u them to hang the screen or "telon", and that when many people went up the
stage the latter collapsed. This testimony was not believed however by respondent appellate court, and
rightly so. According to said defendants, those two braces were "mother" or "principal" braces located semi-
diagonally from the front ends of the stage to the front posts of the ticket booth located at the rear of the
stage and were fastened with a bamboo twine. 16 That being the case, it becomes incredible that any person
in his right mind would remove those principal braces and leave the front portion of the stage practically
unsuported Moreover, if that did happen, there was indeed negligence as there was lack of suspension over
the use of the stage to prevent such an occurrence.

At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo braces
denied having done go. The Court of Appeals said "Amor by himself alone could not have removed the two
braces which must be about ten meters long and fastened them on top of the stags for the curtain. The
stage was only five and a half meters wide. Surely, it, would be impractical and unwieldy to use a ten meter
bamboo pole, much more two poles for the stage curtain. 17

The appellate court also found that the stage was not strong enough considering that only P100.00 was
appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of wooden
planks, the Post and braces used were of bamboo material We likewise observe that although the stage was
described by the Petitioners as being supported by "24" posts, nevertheless there were only 4 in front, 4 at
the rear, and 5 on each side. Where were the rest?

The Court of Appeals thus concluded

The court a quo itself attributed the collapse of the stage to the great number of onlookers
who mounted the stage. The municipality and/or its agents had the necessary means within its
 command to prevent such an occurrence. Having filed to take the necessary steps to maintain
the safety of the stage for the use of the participants in the stage presentation prepared in
connection with the celebration of the town fiesta, particularly, in preventing non participants
or spectators from mounting and accumulating on the stage which was not constructed to
meet the additional weight- the defendant-appellees were negligent and are liable for the
death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993)

The findings of the respondent appellate court that the facts as presented to it establish negligence as a
matter of law and that the Municipality failed to exercise the due diligence of a good father of the family, will
not disturbed by Us in the absence of a clear showing of an abuse of discretion or a gross misapprehension
of facts." 18

Liability rests on negligence which is "the want of such care as a person of ordinary prudence would exercise
under the circumstances of the case." 19

Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during the town
fiesta was a "donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in
Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and constructed
precisely a "zarzuela stage" for the purpose, the participants in the stage show had the right to expect that
the Municipality through its "Committee on entertainment and stage" would build or put up a stage or
platform strong enough to sustain the weight or burden of the performance and take the necessary
measures to insure the personal safety of the participants. 20 We agree.

Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which was an
action against the city for injuries sustained from a fall when plaintiff was descending the steps of the city
auditorium. The city was conducting a "Know your City Week" and one of the features was the showing of a
motion picture in the city auditorium to which the general public was invited and plaintiff Sanders was one of
those who attended. In sustaining the award for Damages in favor of plaintiff, the District Court of Appeal,
Second district, California, held inter alia that the "Know your City Week" was a "proprietary activity" and not
a "governmental one" of the city, that defendant owed to plaintiff, an invitee the duty of exercising ordinary
care for her safety, and plaintiff was entitled to assume that she would not be exposed to a danger (which in
this case consisted of lack of sufficient illumination of the premises) that would come to her through a
violation of defendant duty. 21

We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality of
Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a committee in charge of the
entertainment and stage; an association of Malasiqui residents responded to the call for the festivities and
volunteered to present a stage show; Vicente Fontanilla was one of the participants who like Sanders had the
right to expect that he would be exposed to danger on that occasion.

Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was Jose
Macaraeg who constructed the stage. The municipality acting through its municipal council appointed
Macaraeg as chairman of the sub-committee on entertainment and in charge of the construction of the
"zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine of respondent
superior mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting within his
assigned tasks. 22

... when it is sought to render a municipal corporation liable for the act of servants or agents, a cardinal
inquiry is, whether they are the servants or agents of the corporation. If the corporation appoints or elects
them, can control them in the discharge of their duties, can continue or remove the can hold them
responsible for the manner in which they discharge their trust, and if those duties relate to the exercise of
corporate powers, and are for the benefit of the corporation in its local or special interest, they may justly be
regarded as its agents or servants, and the maxim of respondent superior applies." ... (Dillon on Municipal
Corporations, 5th Ed., Vol IV, p. 2879)

5. The remaining question to be resolved centers on the liability of the municipal councilors who enacted the
ordinance and created the fiesta committee.
The Court of Appeals held the councilors jointly and solidarity liable with the municipality for damages under
Article 27 of the Civil Code which provides that d any person suffering ing material or moral loss because a
public servant or employee refuses or neglects, without just cause to perform his official duty may file an
action for damages and other relief at the latter. 23

In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling that the
holding of a town fiesta is not a governmental function and that there was negligence on their part for not
maintaining and supervising the safe use of the stage, in applying Article 27 of the Civil Code against them
and in not holding Jose Macaraeg liable for the collapse of the stage and the consequent death of Vicente
Fontanilla. 24

We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code against the
for this particular article covers a case of nonfeasance or non-performance by a public officer of his official
duty; it does not apply to a case of negligence or misfeasance in carrying out an official duty.

If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are concerned, it is
because of a plain error committed by respondent court which however is not invoked in petitioners' brief.

In Miguel v. The Court of appeal. et al., the Court, through Justice, now Chief Justice, Fred Ruiz Castro, held
that the Supreme Court is vested with ample authority to review matters not assigned as errors in an appeal
if it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision
in a given case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We believe that this
pronouncement can well be applied in the instant case.

The Court of Appeals in its decision now under review held that the celebration of a town fiesta by the
Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal consequence
thereof is that the Municipality stands on the same footing as an ordinary private corporation with the
municipal council acting as its board of directors. It is an elementary principle that a corporation has a
personality, separate and distinct from its officers, directors, or persons composing it 26 and the latter are not
as a rule co-responsible in an action for damages for tort or negligence culpa aquilla committed by the
corporation's employees or agents unless there is a showing of bad faith or gross or wanton negligence on
their part. 27

xxx xxx xxx

The ordinary doctrine is that a director, merely by reason of his office, is not personally Stable
for the torts of his corporation; he Must be shown to have personally voted for or otherwise
participated in them ... Fletcher Encyclopedia Corporations, Vol 3A Chapt 11, p. 207)

Officers of a corporation 'are not held liable for the negligence of the corporation merely
because of their official relation to it, but because of some wrongful or negligent act by such
officer amounting to a breach of duty which resulted in an injury ... To make an officer of a
corporation liable for the negligence of the corporation there must have been upon his part
such a breach of duty as contributed to, or helped to bring about, the injury; that is to say, he
must be a participant in the wrongful act. ... (pp. 207-208, Ibid.)

xxx xxx xxx

Directors who merely employ one to give a fireworks Ambition on the corporate are not
personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.)

On these people We absolve Use municipal councilors from any liability for the death of Vicente Fontanilla.
The records do not show that said petitioners directly participated in the defective construction of the
"zarzuela" stage or that they personally permitted spectators to go up the platform.

6. One last point We have to resolve is on the award of attorney's fees by respondent court. Petitioner-
municipality assails the award.
Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be granted
when the court deems it just and equitable. In this case of Vicente Fontanilla, although respondent appellate
court failed to state the grounds for awarding attorney's fees, the records show however that attempts were
made by plaintiffs, now private respondents, to secure an extrajudicial compensation from the municipality:
that the latter gave prorases and assurances of assistance but failed to comply; and it was only eight month
after the incident that the bereaved family of Vicente Fontanilla was compelled to seek relief from the courts
to ventilate what was believed to be a just cause. 28

We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a matter
of judicial discretion. The amount of P1,200.00 is fair and reasonable.

PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the Municipality
of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from liability and SET ASIDE
the judgment against them (L-9993).

Without pronouncement as to costs.

SO ORDERED,

Teehankee (Chairman), Makasiar, Fernandez, and Guerrero, JJ., concur.

Footnotes

1 pp- 3-4 of Petitioner's brief

2 pp. 35-37, rollo L-29993

3 pp- 42-44, Ibid

4 pp. 21-31, Ibid.

5 Sec. 2125, Art. 1, Municipal Law as embodied in the Revised Administrative Code.

6 Mendoza v. de In 33 Phil 508; 56 Am Jur 2d 254, sec 199; Martin on the Revised
Administrative Code, 1963 ed., pp. 482-483, citing Cooley's Municipal Corporation, pp. 136-
137.

7 2nd Ed. Vol 1, Sec. 12&, p. 381, cited in Dept. of Treasury v. City of Evansville, Sup. Ct. of
Indiana, 60 N.E. 2nd 952,954.

8 supra, p. 509

9 Dept. of Treasury v. City of Evansville. supra, p. 956

10 For instance, Art. 2189, Civil Code provides "Art. 2189. Provinces, cities and municipalities
shall be liable for damages for the death of, or injuries, suffered by, any person by reason of
the defective condition of roads, streets, bridges, public buildings, and other public works
under their control or supervision. "

11 Mendoza v. de Leon, supra, p 513. In Palma v. Graciano, the City of Cebu, et al., 99 Phil.
72, the Court held that although the prosecution of crimes is a governmental function and as a
rule the province and City of Cebu are not civilly liable by reason thereof, nonetheless when
public official goes beyond the scope of this duty, particularly when acting tortiously, he is not
entitled to protection on account of his office but is liable for his acts like any private
individual.
12 L-10659, January 31, 1958, Unrep 102 Phil. 1186

13 Municipality of Paoay Ilocos Norte v. Manaois, et al., 86 Phil. 629; Municipality of Moncada
v. Cajuigan et al., 21 Phil. 184

14 Mendoza v. de Leon, supra, p. 513

15 We came across an interesting case which shows that surrounding circumstances plus the
political, social, and cultural backgrounds may have a decisive bearing on this question. The
case of Pope v. City of New Haven et al, was an action to recover damages for personal
injuries caused during a Fourth of July fireworks display resulting in the death of a bystander
alleged to have been caused by defendants' negligence. The defendants demurred to the
complaint invoking the defense that the city was engaged in the performance of a public
governmental duty from which it received no pecuniary benefit and for negligence, in i lie
performance 4t which no statutory liability is imposed. This demurrer was sustained by the
Superior Court of New Haven Country. Plaintiff sought to amend his complaint to allege that
the celebration was for the corporate advantage of the city. This was denied. In affirming the
order, the Supreme Court of Errors of Connection held inter alia.

Municipal corporations are exempt from liability for the negligent performance of purely public
governmental' duties, Illness made liable by statute ... "A municipal corporation, which under
permissive authority of its charter or of statue, concluded a public Court of July celebration,
including a display, of fireworks, and sent up a bomb intended to explode in the air, but which
Jailed to explode until it reached the ground and then killed a spectator, was engaged in the
performance of a governmental duty. (99 A.R. 51)

This decision was concurred in by three Judges while two dissented.

At any rate the rationale of the Majority Opinion is evident from ttis excerpt:

July 4th. or, when that date tails upon Sunday, July 5th. is made a public holiday, called
Independence Day, by our statutes. All or nearly all of the other states have similar statutes.
While there is no United States statute making a similar provision, the different departments
of the government recognize, and have recognized since the government was established, July
4th as a national holiday. 'Throughout the country it has been recognized and celebrated as
such. These celebrations, calculated to entertain and instruct the people generally and to
arouse and stimulate patriotic sentiments and love of country, frequently take the form of
literary exercises consisting of patriotic speeches and the reading of the Constitution,
accompartied by a musical program including patriotic airs sometimes preceded by the firing of
cannon and followed by fireworks. That such celebrations are of advantage to the. general
public and their promotion a proper subject of legi
G.R. No. L-11154 March 21, 1916

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

Crossfield and O'Brien for plaintiff.

Attorney-General Avanceña for defendant..

TRENT, J.:

This is an appeal by both parties from a judgment of the Court of First Instance of the city of Manila in favor
of the plaintiff for the sum of P14,741, together with the costs of the cause.

Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which the
plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint," and (2) "in limiting the time
when plaintiff was entirely disabled to two months and twenty-one days and fixing the damage accordingly in
the sum of P2,666, instead of P6,000 as claimed by plaintiff in his complaint."

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the
collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due to the
negligence of the chauffeur; (b) in holding that the Government of the Philippine Islands is liable for the
damages sustained by the plaintiff as a result of the collision, even if it be true that the collision was due to
the negligence of the chauffeur; and (c) in rendering judgment against the defendant for the sum of
P14,741.

The trial court's findings of fact, which are fully supported by the record, are as follows:

It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a motorcycle,
was going toward the western part of Calle Padre Faura, passing along the west side thereof at a
speed of ten to twelve miles an hour, upon crossing Taft Avenue and when he was ten feet from the
southwestern intersection of said streets, the General Hospital ambulance, upon reaching said
avenue, instead of turning toward the south, after passing the center thereof, so that it would be on
the left side of said avenue, as is prescribed by the ordinance and the Motor Vehicle Act, turned
suddenly and unexpectedly and long before reaching the center of the street, into the right side of
Taft Avenue, without having sounded any whistle or horn, by which movement it struck the plaintiff,
who was already six feet from the southwestern point or from the post place there.

By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr.
Saleeby, who examined him on the very same day that he was taken to the General Hospital, he was
suffering from a depression in the left parietal region, a would in the same place and in the back part
of his head, while blood issued from his nose and he was entirely unconscious.

The marks revealed that he had one or more fractures of the skull and that the grey matter and brain
was had suffered material injury. At ten o'clock of the night in question, which was the time set for
performing the operation, his pulse was so weak and so irregular that, in his opinion, there was little
hope that he would live. His right leg was broken in such a way that the fracture extended to the
outer skin in such manner that it might be regarded as double and the would be exposed to infection,
for which reason it was of the most serious nature.
 At another examination six days before the day of the trial, Dr. Saleeby noticed that the plaintiff's leg
showed a contraction of an inch and a half and a curvature that made his leg very weak and painful at
the point of the fracture. Examination of his head revealed a notable readjustment of the functions of
the brain and nerves. The patient apparently was slightly deaf, had a light weakness in his eyes and
in his mental condition. This latter weakness was always noticed when the plaintiff had to do any
difficult mental labor, especially when he attempted to use his money for mathematical calculations.

According to the various merchants who testified as witnesses, the plaintiff's mental and physical
condition prior to the accident was excellent, and that after having received the injuries that have
been discussed, his physical condition had undergone a noticeable depreciation, for he had lost the
agility, energy, and ability that he had constantly displayed before the accident as one of the best
constructors of wooden buildings and he could not now earn even a half of the income that he had
secured for his work because he had lost 50 per cent of his efficiency. As a contractor, he could no
longer, as he had before done, climb up ladders and scaffoldings to reach the highest parts of the
building.

As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he had
to dissolved the partnership he had formed with the engineer. Wilson, because he was incapacitated
from making mathematical calculations on account of the condition of his leg and of his mental
faculties, and he had to give up a contract he had for the construction of the Uy Chaco building."

We may say at the outset that we are in full accord with the trial court to the effect that the collision
between the plaintiff's motorcycle and the ambulance of the General Hospital was due solely to the
negligence of the chauffeur.

The two items which constitute a part of the P14,741 and which are drawn in question by the plaintiff are (a)
P5,000, the award awarded for permanent injuries, and (b) the P2,666, the amount allowed for the loss of
wages during the time the plaintiff was incapacitated from pursuing his occupation. We find nothing in the
record which would justify us in increasing the amount of the first. As to the second, the record shows, and
the trial court so found, that the plaintiff's services as a contractor were worth P1,000 per month. The court,
however, limited the time to two months and twenty-one days, which the plaintiff was actually confined in
the hospital. In this we think there was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in the hospital only two months and
twenty-one days while the remainder of the six months was spent in his home, would not prevent recovery
for the whole time. We, therefore, find that the amount of damages sustained by the plaintiff, without any
fault on his part, is P18,075.

As the negligence which caused the collision is a tort committed by an agent or employee of the
Government, the inquiry at once arises whether the Government is legally-liable for the damages resulting
therefrom.

Act No. 2457, effective February 3, 1915, reads:

An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands and
authorizing the Attorney-General of said Islands to appear in said suit.

Whereas a claim has been filed against the Government of the Philippine Islands by Mr. E. Merritt, of
Manila, for damages resulting from a collision between his motorcycle and the ambulance of the
General Hospital on March twenty-fifth, nineteen hundred and thirteen;

Whereas it is not known who is responsible for the accident nor is it possible to determine the amount
of damages, if any, to which the claimant is entitled; and

Whereas the Director of Public Works and the Attorney-General recommended that an Act be passed
by the Legislature authorizing Mr. E. Merritt to bring suit in the courts against the Government, in
order that said questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine Legislature, that:

 SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of the city of
Manila against the Government of the Philippine Islands in order to fix the responsibility for the
collision between his motorcycle and the ambulance of the General Hospital, and to determine the
amount of the damages, if any, to which Mr. E. Merritt is entitled on account of said collision, and the
Attorney-General of the Philippine Islands is hereby authorized and directed to appear at the trial on
the behalf of the Government of said Islands, to defendant said Government at the same.

SEC. 2. This Act shall take effect on its passage.

Enacted, February 3, 1915.

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it also
concede its liability to the plaintiff? If only the former, then it cannot be held that the Act created any new
cause of action in favor of the plaintiff or extended the defendant's liability to any case not previously
recognized.

All admit that the Insular Government (the defendant) cannot be sued by an individual without its consent. It
is also admitted that the instant case is one against the Government. As the consent of the Government to
be sued by the plaintiff was entirely voluntary on its part, it is our duty to look carefully into the terms of the
consent, and render judgment accordingly.

The plaintiff was authorized to bring this action against the Government "in order to fix the responsibility for
the collision between his motorcycle and the ambulance of the General Hospital and to determine the
amount of the damages, if any, to which Mr. E. Merritt is entitled on account of said collision, . . . ." These
were the two questions submitted to the court for determination. The Act was passed "in order that said
questions may be decided." We have "decided" that the accident was due solely to the negligence of the
chauffeur, who was at the time an employee of the defendant, and we have also fixed the amount of
damages sustained by the plaintiff as a result of the collision. Does the Act authorize us to hold that the
Government is legally liable for that amount? If not, we must look elsewhere for such authority, if it exists.

The Government of the Philippine Islands having been "modeled after the Federal and State Governments in
the United States," we may look to the decisions of the high courts of that country for aid in determining the
purpose and scope of Act No. 2457.

In the United States the rule that the state is not liable for the torts committed by its officers or agents
whom it employs, except when expressly made so by legislative enactment, is well settled. "The
Government," says Justice Story, "does not undertake to guarantee to any person the fidelity of the officers
or agents whom it employs, since that would involve it in all its operations in endless embarrassments,
difficulties and losses, which would be subversive of the public interest." (Claussen vs. City of Luverne, 103
Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15
L. Ed., 991.)

In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the state for
personal injuries received on account of the negligence of the state officers at the state fair, a state
institution created by the legislature for the purpose of improving agricultural and kindred industries; to
disseminate information calculated to educate and benefit the industrial classes; and to advance by such
means the material interests of the state, being objects similar to those sought by the public school system.
In passing upon the question of the state's liability for the negligent acts of its officers or agents, the court
said:

No claim arises against any government is favor of an individual, by reason of the misfeasance,
laches, or unauthorized exercise of powers by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall.,
269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43
Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203;
Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where the cause of action
arises out of either fort or contract, the rule is stated in 36 Cyc., 915, thus:
 By consenting to be sued a state simply waives its immunity from suit. It does not thereby concede
its liability to plaintiff, or create any cause of action in his favor, or extend its liability to any cause not
previously recognized. It merely gives a remedy to enforce a preexisting liability and submits itself to
the jurisdiction of the court, subject to its right to interpose any lawful defense.

In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of 1913, which
authorized the bringing of this suit, read:

SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha
County, Wisconsin, to bring suit in such court or courts and in such form or forms as he may be
advised for the purpose of settling and determining all controversies which he may now have with the
State of Wisconsin, or its duly authorized officers and agents, relative to the mill property of said
George Apfelbacher, the fish hatchery of the State of Wisconsin on the Bark River, and the mill
property of Evan Humphrey at the lower end of Nagawicka Lake, and relative to the use of the waters
of said Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin.

In determining the scope of this act, the court said:

Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of the
state for the acts of its officers, and that the suit now stands just as it would stand between private
parties. It is difficult to see how the act does, or was intended to do, more than remove the state's
immunity from suit. It simply gives authority to commence suit for the purpose of settling plaintiff's
controversies with the estate. Nowhere in the act is there a whisper or suggestion that the court or
courts in the disposition of the suit shall depart from well established principles of law, or that the
amount of damages is the only question to be settled. The act opened the door of the court to the
plaintiff. It did not pass upon the question of liability, but left the suit just where it would be in the
absence of the state's immunity from suit. If the Legislature had intended to change the rule that
obtained in this state so long and to declare liability on the part of the state, it would not have left so
important a matter to mere inference, but would have done so in express terms. (Murdock Grate Co.
vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)

In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and considered, are as
follows:

All persons who have, or shall hereafter have, claims on contract or for negligence against the state
not allowed by the state board of examiners, are hereby authorized, on the terms and conditions
herein contained, to bring suit thereon against the state in any of the courts of this state of
competent jurisdiction, and prosecute the same to final judgment. The rules of practice in civil cases
shall apply to such suits, except as herein otherwise provided.

And the court said:

This statute has been considered by this court in at least two cases, arising under different facts, and
in both it was held that said statute did not create any liability or cause of action against the state
where none existed before, but merely gave an additional remedy to enforce such liability as would
have existed if the statute had not been enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St.
Rep., 158; Melvin vs. State, 121 Cal., 16.)

A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims against the
commonwealth, whether at law or in equity," with an exception not necessary to be here mentioned. In
construing this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28), said:

The statute we are discussing disclose no intention to create against the state a new and heretofore
unrecognized class of liabilities, but only an intention to provide a judicial tribunal where well
recognized existing liabilities can be adjudicated.

In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the statute of
New York, jurisdiction of claims for damages for injuries in the management of the canals such as the
plaintiff had sustained, Chief Justice Ruger remarks: "It must be conceded that the state can be made liable
for injuries arising from the negligence of its agents or servants, only by force of some positive statute
assuming such liability."

It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any cause not
previously recognized, we will now examine the substantive law touching the defendant's liability for the
negligent acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the Civil Code reads:

The state is liable in this sense when it acts through a special agent, but not when the damage should
have been caused by the official to whom properly it pertained to do the act performed, in which case
the provisions of the preceding article shall be applicable.

The supreme court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by his fault or
negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person
obligated, by his own fault or negligence, takes part in the act or omission of the third party who
caused the damage. It follows therefrom that the state, by virtue of such provisions of law, is not
responsible for the damages suffered by private individuals in consequence of acts performed by its
employees in the discharge of the functions pertaining to their office, because neither fault nor even
negligence can be presumed on the part of the state in the organization of branches of public service
and in the appointment of its agents; on the contrary, we must presuppose all foresight humanly
possible on its part in order that each branch of service serves the general weal an that of private
persons interested in its operation. Between these latter and the state, therefore, no relations of a
private nature governed by the civil law can arise except in a case where the state acts as a judicial
person capable of acquiring rights and contracting obligations. (Supreme Court of Spain, January 7,
1898; 83 Jur. Civ., 24.)

That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out of fault or
negligence; and whereas in the first article thereof. No. 1902, where the general principle is laid down
that where a person who by an act or omission causes damage to another through fault or
negligence, shall be obliged to repair the damage so done, reference is made to acts or omissions of
the persons who directly or indirectly cause the damage, the following articles refers to this persons
and imposes an identical obligation upon those who maintain fixed relations of authority and
superiority over the authors of the damage, because the law presumes that in consequence of such
relations the evil caused by their own fault or negligence is imputable to them. This legal presumption
gives way to proof, however, because, as held in the last paragraph of article 1903, responsibility for
acts of third persons ceases when the persons mentioned in said article prove that they employed all
the diligence of a good father of a family to avoid the damage, and among these persons, called upon
to answer in a direct and not a subsidiary manner, are found, in addition to the mother or the father
in a proper case, guardians and owners or directors of an establishment or enterprise, the state, but
not always, except when it acts through the agency of a special agent, doubtless because and only in
this case, the fault or negligence, which is the original basis of this kind of objections, must be
presumed to lie with the state.

That although in some cases the state might by virtue of the general principle set forth in article 1902
respond for all the damage that is occasioned to private parties by orders or resolutions which by
fault or negligence are made by branches of the central administration acting in the name and
representation of the state itself and as an external expression of its sovereignty in the exercise of its
executive powers, yet said article is not applicable in the case of damages said to have been
occasioned to the petitioners by an executive official, acting in the exercise of his powers, in
proceedings to enforce the collections of certain property taxes owing by the owner of the property
which they hold in sublease.

That the responsibility of the state is limited by article 1903 to the case wherein it acts through a
special agent(and a special agent, in the sense in which these words are employed, is one who
receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if
he is a special official) 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 acting 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." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)

That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a
decision, among others, of the 18th of May, 1904, in a damage case, the responsibility of the state is
limited to that which it contracts through a special agent, duly empowered by a definite order or
commission to perform some act or charged with some definite purpose which gives rise to the claim,
and not where the claim is based on acts or omissions imputable to a public official charged with
some administrative or technical office who can be held to the proper responsibility in the manner laid
down by the law of civil responsibility. Consequently, the trial court in not so deciding and in
sentencing the said entity to the payment of damages, caused by an official of the second class
referred to, has by erroneous interpretation infringed the provisions of articles 1902 and 1903 of the
Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)

It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable, according to
the above quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees
when they act as special agents within the meaning of paragraph 5 of article 1903, supra, and that the
chauffeur of the ambulance of the General Hospital was not such an agent.

For the foregoing reasons, the judgment appealed from must be reversed, without costs in this instance.
Whether the Government intends to make itself legally liable for the amount of damages above set forth,
which the plaintiff has sustained by reason of the negligent acts of one of its employees, by legislative
enactment and by appropriating sufficient funds therefor, we are not called upon to determine. This matter
rests solely with the Legislature and not with the courts.

Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.

REPUBLIC VS PURISIMA

G.R. No. L-36084 August 31, 1977

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the court of first Instance of Manila (Branch VII),
and YELLOW BALL FREIGHT LINES, INC., respondents.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan, Solicitor Oscar C.
Fernandez and Special Attorney Renato P. Mabugat for petitioner.

Jose Q. Calingo for private respondent.

FERNANDO, Acting C.J.:

The jurisdictional issued raised by Solicitor General Estelito P. Mendoza on behalf of the Republic of the
Philippines in this certiorari and prohibition proceeding arose from the failure of respondent Judge Amante P.
Purisima of the Court of First Instance of Manila to apply the well-known and of-reiterated doctrine of the
non-suability of a State, including its offices and agencies, from suit without its consent. it was so alleged in
a motion to dismiss filed by defendant Rice and Corn Administration in a pending civil suit in the sala of
respondent Judge for the collection of a money claim arising from an alleged breach of contract, the plaintiff
being private respondent Yellow Ball Freight Lines, Inc. 1 Such a motion to dismiss was filed on September 7,
1972. At that time, the leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 2 were
Justice Bengzon stressed the lack of jurisdiction of a court to pass on the merits of a claim against any office
or entity acting as part of the machinery of the national government unless consent be shown, had been
applied in 53 other decisions. 3 There is thus more than sufficient basis for an allegation of jurisdiction
infirmity against the order of respondent Judge denying the motion to dismiss dated October 4, 1972. 4 What
is more, the position of the Republic has been fortified with the explicit affirmation found in this provision of
the present Constitution: "The State may not be sued without its consent." 5

The merit of the petition for certiorari and prohibition is thus obvious.

1. There is pertinence to this excerpt from Switzerland General Insurance Co., Ltd. v. Republic of the
Philippines: 6"The doctrine of non-suability recognized in this jurisdiction even prior to the effectivity of the
[1935] Constitution is a logical corollary of the positivist concept of law which, to para-phrase Holmes,
negates the assertion of any legal right as against the state, in itself the source of the law on which such a
right may be predicated. Nor is this all.lwphl@itç Even if such a principle does give rise to problems,
considering the vastly expanded role of government enabling it to engage in business pursuits to promote
the general welfare, it is not obeisance to the analytical school of thought alone that calls for its continued
applicability. Why it must continue to be so, even if the matter be viewed sociologically, was set forth
in Providence Washington Insurance Co. v. Republic thus: "Nonetheless, a continued adherence to the
doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused private
parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious functions
are far greater if such a fundamental principle were abandoned and the availability of judicial remedy were
not thus restricted. With the well-known propensity on the part of our people to go the court, at the least
provocation, the loss of time and energy required to defend against law suits, in the absence of such a basic
principle that constitutes such an effective obstacle, could very well be imagined." 7 It only remains to be
added that under the present Constitution which, as noted, expressly reaffirmed such a doctrine, the
following decisions had been rendered: Del mar v. The Philippine veterans Administration; 8 Republic v.
Villasor; 9 Sayson v. Singson; 10 and Director of the Bureau of Printing v. Francisco. 11

2. Equally so, the next paragraph in the above opinion from the Switzerland General Insurance Company
decision is likewise relevant: "Nor is injustice thereby cause private parties. They could still proceed to seek
collection of their money claims by pursuing the statutory remedy of having the Auditor General pass upon
them subject to appeal to judicial tribunals for final adjudication. We could thus correctly conclude as we did
in the cited Provindence Washington Insurance decision: "Thus the doctrine of non-suability of the
government without its consent, as it has operated in practice, hardly lends itself to the charge that it could
be the fruitful parent of injustice, considering the vast and ever-widening scope of state activities at present
being undertaken. Whatever difficulties for private claimants may still exist, is, from an objective appraisal of
all factors, minimal. In the balancing of interests, so unavoidable in the determination of what principles
must prevail if government is to satisfy the public weal, the verdict must be, as it has been these so many
years, for its continuing recognition as a fundamental postulate of constitutional law." 12

3. Apparently respondent Judge was misled by the terms of the contract between the private respondent,
plaintiff in his sala, and defendant Rice and Corn Administration which, according to him, anticipated the
case of a breach of contract within the parties and the suits that may thereafter arise. 13 The consent, to be
effective though, must come from the State acting through a duly enacted statute as pointed out by Justice
Bengzon in Mobil. Thus, whatever counsel for defendant Rice and Corn Administration agreed to had no
binding force on the government. That was clearly beyond the scope of his authority. At any rate, Justice
Sanchez, in Ramos v. Court of Industrial Relations, 14 was quite categorical as to its "not [being] possessed
of a separate and distinct corporate existence. On the contrary, by the law of its creation, it is an office
directly 'under the Office of the President of the Philippines." 15

WHEREFORE, the petitioner for certiorari is granted and the resolution of October 4, 1972 denying the
motion to dismiss filed by the Rice and Corn Administration nullified and set aside and the petitioner for
prohibition is likewise granted restraining respondent Judge from acting on civil Case No. 79082 pending in
his sala except for the purpose of ordering its dismissal for lack of jurisdiction. The temporary restraining
order issued on February 8, 1973 by this Court is made permanent terminating this case. Costs against
Yellow Ball Freight Lines, Inc.
G.R. No. L-6060 September 30, 1954

FERNANDO A. FROILAN, plaintiff-appellee,

vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Quisumbing, Sycip, Quisumbing and Salazar, for appellant.

Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.

PARAS, C.J.:

The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-appellee as
follows:

1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against the

defendant-appellant, Pan Oriental Shipping Co., alleging that he purchased from the Shipping
Commission the vessel FS-197 for P200,000, paying P50,000 down and agreeing to pay the balance
in installments; that to secure the payment of the balance of the purchase price, he executed a
chattel mortgage of said vessel in favor of the Shipping Commission; that for various reason, among
them the non-payment of the installments, the Shipping Commission took possession of said vessel
and considered the contract of sale cancelled; that the Shipping Commission chartered and delivered
said vessel to the defendant-appellant Pan Oriental Shipping Co. subject to the approval of the
President of the Philippines; that he appealed the action of the Shipping Commission to the President
of the Philippines and, in its meeting on August 25, 1950, the Cabinet restored him to all his rights
under his original contract with the Shipping Commission; that he had repeatedly demanded from the
Pan Oriental Shipping Co. the possession of the vessel in question but the latter refused to do so. He,
therefore, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin
be issued for the seizure of said vessel with all its equipment and appurtenances, and that after
hearing, he be adjudged to have the rightful possession thereof (Rec. on App. pp. 2-8).

2. On February 3, 1951, the lower court issued the writ of replevin prayed for by Froilan and by virtue
thereof the Pan Oriental Shipping Co. was divested of its possession of said vessel (Rec. on App. p.
47).

3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of Froilan to the
possession of the said vessel; it alleged that the action of the Cabinet on August 25, 1950, restoring
Froilan to his rights under his original contract with the Shipping Commission was null and void; that,
in any event, Froilan had not complied with the conditions precedent imposed by the Cabinet for the
restoration of his rights to the vessel under the original contract; that it suffered damages in the
amount of P22,764.59 for wrongful replevin in the month of February, 1951, and the sum of
P17,651.84 a month as damages suffered for wrongful replevin from March 1, 1951; it alleged that it
had incurred necessary and useful expenses on the vessel amounting to P127,057.31 and claimed the
right to retain said vessel until its useful and necessary expenses had been reimbursed (Rec. on App.
pp. 8-53).

4. On November 10, 1951, after the leave of the lower court had been obtained, the intervenor-
appellee, Government of the Republic of the Philippines, filed a complaint in intervention alleging that
Froilan had failed to pay to the Shipping Commission (which name was later changed to Shipping
Administration) the balance due on the purchase price of the vessel in question, the interest thereon,
and its advances on insurance premium totalling P162,142.95, excluding the dry-docking expenses
incurred on said vessel by the Pan Oriental Shipping Co.; that intervenor was entitled to the
possession of the said vessel either under the terms of the original contract as supplemented by
Froilan's letter dated January 28, 1949, or in order that it may cause the extrajudicial sale thereof
under the Chattel Mortgage Law. It, therefore, prayed that Froilan be ordered to deliver the vessel in
question to its authorized representative, the Board of Liquidators; that Froilan be declared to be
without any rights on said vessel and the amounts he paid thereon forfeited or alternately, that the
said vessel be delivered to the Board of Liquidators in order that the intervenor may have its chattel
 mortgage extrajudicially foreclosed in accordance with the provisions of the Chattel Mortgage Law;
and that pending the hearing on the merits, the said vessel be delivered to it (Rec. on App. pp. 54-
66).

5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the complaint in
intervention alleging that the Government of the Republic of the Philippines was obligated to deliver
the vessel in question to it by virtue of a contract of bare-boat charter with option to purchase
executed on June 16, 1949, by the latter in favor of the former; it also alleged that it had made
necessary and useful expenses on the vessel and claimed the right of retention of the vessel. It,
therefore, prayed that, if the Republic of the Philippines succeeded in obtaining possession of the said
vessel, to comply with its obligations of delivering to it (Pan Oriental Shipping co.) or causing its
delivery by recovering it from Froilan (Rec. on App. pp. 69-81).

6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which was liquidating the
affairs of the Shipping Administration, a check in the amount of P162,576.96 in payment of his
obligation to the Shipping Administration for the said vessel as claimed in the complaint in
intervention of the Government of the Republic of the Philippines. The Board of Liquidators issued an
official report therefor stating that it was a 'deposit pending the issuance of an order of the Court of
First Instance of Manila' (Rec. on App. pp. 92-93).

7. On December 7, 1951, the Government of the Republic of the Philippines brought the matter of
said payment and the circumstance surrounding it to the attention of the lower court "in order that
they may be taken into account by this Honorable Court in connection with the questions that are not
pending before it for determination" (Rec. on App. pp. 82-86).

8. On February 3, 1952, the lower court held that the payment by Froilan of the amount of
P162,576.96 on November 29, 1951, to the Board of Liquidators constituted a payment and a
discharge of Froilan's obligation to the Government of the Republic of the Philippines and ordered the
dismissal of the latter's complaint in intervention. In the same order, the lower court made it very
clear that said order did not pre-judge the question involved between Froilan and the Oriental
Shipping Co. which was also pending determination in said court (Rec. on App. pp. 92-93). This order
dismissing the complaint in intervention, but reserving for future adjudication the controversy
between Froilan and the Pan Oriental Shipping Co. has already become final since neither the
Government of the Republic of the Philippines nor the Pan Oriental Shipping Co. had appealed
therefrom.

9. On May 10, 1952, the Government of the Republic of the Philippines filed a motion to dismiss the
counterclaim of the Pan Oriental Shipping Co. against it on the ground that the purpose of said
counterclaim was to compel the Government of the Republic of the Philippines to deliver the vessel to
it (Pan Oriental Shipping Co.) in the event that the Government of the Republic of the Philippines
recovers the vessel in question from Froilan. In view, however, of the order of the lower court dated
February 3, holding that the payment made by Froilan to the Board of Liquidators constituted full
payment of Froilan's obligation to the Shipping Administration, which order had already become final,
the claim of the Pan Oriental Shipping Co. against the Republic of the Philippines was no longer
feasible, said counterclaim was barred by prior judgment and stated no cause of action. It was also
alleged that movant was not subject to the jurisdiction of the court in connection with the
counterclaim. (Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental Shipping Co. in
its written opposition dated June 4, 1952 (Rec. on app. pp. 19-104).

10. In an order dated July 1, 1952, the lower court dismissed the counterclaim of the Pan Oriental
Shipping Co. as prayed for by the Republic of the Philippines (Rec. on App. pp. 104-106).

11. It if from this order of the lower court dismissing its counterclaim against the Government of the
Republic of the Philippines that Pan Oriental Shipping Co. has perfected the present appeal (Rec. on
App. p. 107).

The order of the Court of First Instance of Manila, dismissing the counterclaim of the defendant Pan Oriental
Shipping Co., from which the latter has appealed, reads as follows:
 This is a motion to dismiss the counterclaim interposed by the defendant in its answer to the
complaint in intervention.

"The counterclaim states as follows:

"COUNTERCLAIM

"As counterclaim against the intervenor Republic of the Philippines, the defendant alleges:

"1. That the defendant reproduces herein all the pertinent allegations of the foregoing answer to the
complaint in intervention

"2. That, as shown by the allegations of the foregoing answer to the complaint in intervention, the
defendant Pan Oriental Shipping Company is entitled to the possession of the vessel and the
intervenor Republic of the Philippines is bound under the contract of charter with option to purchase it
entered into with the defendant to deliver that possession to the defendant — whether it actually has
the said possession or it does not have that possession from the plaintiff Fernando A. Froilan and
deliver the same to the defendant;

"3. That, notwithstanding demand, the intervenor Republic of the Philippines has not to date complied
with its obligation of delivering or causing the delivery of the vessel to the defendant Pan Oriental
Shipping Company.1âwphïl.nêt

"RELIEF

"WHEREFORE, the defendant respectfully prays that judgment be rendered ordering the intervenor
Republic of the Philippines alternatively to deliver to the defendants the possession of the said vessel,
or to comply with its obligation to the defendant or causing the delivery to the latter of the said vessel
by recovering the same from plaintiff, with costs.

"The defendant prays for such other remedy as the Court may deem just and equitable
in the premises."

The ground of the motion to dismiss are (a) That the cause of action is barred by prior judgment; (b)
That the counterclaim states no cause of action; and (c) That this Honorable Court has no jurisdiction
over the intervenor government of the Republic of the Philippines in connection with the counterclaim
of the defendant Pan Oriental Shipping Co.

The intervenor contends that the complaint in intervention having been dismissed and no appeal
having been taken, the dismissal of said complaint is tantamount to a judgment.

The complaint in intervention did not contain any claim whatsoever against the defendant Pan
Oriental Shipping Co.; hence, the counterclaim has no foundation.

The question as to whether the Court has jurisdiction over the intervenor with regard to the
counterclaim, the Court is of the opinion that it has no jurisdiction over said intervenor.

It appearing, therefore, that the grounds of the motion to dismiss are well taken, the counterclaim of
the defendant is dismissed, without pronouncement as to costs.

The defendant's appeal is predicated upon the following assignments of error:

I. The lower court erred in dismissing the counterclaim on the ground of prior judgment.

II. The lower court erred in dismissing the counterclaim on the ground that the counterclaim had no
foundation because made to a complaint in intervention that contained no claim against the
defendant.
 III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of jurisdiction
over the intervenor Republic of the Philippines.

We agree with appellant's contention that its counterclaim is not barred by prior judgment (order of February
8, 1952, dismissing the complaint in intervention), first, because said counterclaim was filed on November
29, 1951, before the issuance of the order invoked; and, secondly, because in said order of February 8, the
court dismissed the complaint in intervention, "without, of course, precluding the determination of the right
of the defendant in the instant case," and subject to the condition that the "release and cancellation of the
chattel mortgage does not, however, prejudge the question involved between the plaintiff and the defendant
which is still the subject of determination in this case." It is to be noted that the first condition referred to
the right of the defendant, as distinguished from the second condition that expressly specified the
controversy between the plaintiff and the defendant. That the first condition reserved the right of the
defendant as against the intervenor, is clearly to be deduced from the fact that the order of February 8
mentioned the circumstance that "the question of the expenses of drydocking incurred by the defendant has
been included in its counterclaim against the plaintiff," apparently as one of the grounds for granting the
motion to dismiss the complaint in intervention.

The defendant's failure to appeal from the order of February 8 cannot, therefore, be held as barring the
defendant from proceeding with its counterclaim, since, as already stated, said order preserved its right as
against the intervenor. Indeed, the maintenance of said right is in consonance with Rule 30, section 2, of the
Rules of Court providing that "if a counterclaim has been pleaded by a defendant prior to the service upon
him of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection
unless the counterclaim can remain pending for independent adjudication by the court."

The lower court also erred in holding that, as the intervenor had not made any claim against the defendant,
the latter's counterclaim had no foundation. The complaint in intervention sought to recover possession of
the vessel in question from the plaintiff, and this claim is logically adverse to the position assumed by the
defendant that it has a better right to said possession than the plaintiff who alleges in his complaint that he
is entitled to recover the vessel from the defendant. At any rate a counterclaim should be judged by its own
allegations, and not by the averments of the adverse party. It should be recalled that the defendant's theory
is that the plaintiff had already lost his rights under the contract with the Shipping Administration and that,
on the other hand, the defendant is relying on the charter contract executed in its favor by the intervenor
which is bound to protect the defendant in its possession of the vessel. In other words, the counterclaim calls
for specific performance on the part of the intervenor. As to whether this counterclaim is meritorious is
another question which is not now before us.

The other ground for dismissing the defendant's counterclaim is that the State is immune from suit. This is
untenable, because by filing its complaint in intervention the Government in effect waived its right of
nonsuability.

The immunity of the state from suits does not deprive it of the right to sue private parties in its own
courts. The state as plaintiff may avail itself of the different forms of actions open to private litigants.
In short, by taking the initiative in an action against a private party, the state surrenders its
privileged position and comes down to the level of the defendant. The latter automatically acquires,
within certain limits, the right to set up whatever claims and other defenses he might have against
the state. The United States Supreme Court thus explains:

"No direct suit can be maintained against the United States. But when an action is brought by
the United States to recover money in the hands of a party who has a legal claim against
them, it would be a very rigid principle to deny to him the right of setting up such claim in a
court of justice, and turn him around to an application to Congress." (Sinco, Philippine Political
Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.)

It is however, contended for the intervenor that, if there was at all any waiver, it was in favor of the plaintiff
against whom the complaint in intervention was directed. This contention is untenable. As already stated,
the complaint in intervention was in a sense in derogation of the defendant's claim over the possession of
the vessel in question.
Wherefore, the appealed order is hereby reversed and set aside and the case remanded to the lower court
for further proceedings. So ordered, without costs.

Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Concepcion, and Reyes, J.B.L., JJ., concur.

REPUBLIC VS VILLASOR
G.R. No. L-30671 November 28, 1973

FERNANDO, J.:

The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an order
issued by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch
I,1 declaring a decision final and executory and of an alias writ of execution directed against the funds of the
Armed Forces of the Philippines subsequently issued in pursuance thereof, the alleged ground being excess
of jurisdiction, or at the very least, grave abuse of discretion. As thus simply and tersely put, with the facts
being undisputed and the principle of law that calls for application indisputable, the outcome is predictable.
The Republic of the Philippines is entitled to the writs prayed for. Respondent Judge ought not to have acted
thus. The order thus impugned and the alias writ of execution must be nullified.

In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus:
"7. On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J.
Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against the petitioner
herein, confirming the arbitration award in the amount of P1,712,396.40, subject of Special Proceedings. 8.
On June 24, 1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring the aforestated
decision of July 3, 1961 final and executory, directing the Sheriffs of Rizal Province, Quezon City [as well as]
Manila to execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the corresponding
Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On the strength of the afore-mentioned
Alias Writ of Execution dated June 26, 1969, the Provincial Sheriff of Rizal (respondent herein) served
notices of garnishment dated June 28, 1969 with several Banks, specially on the "monies due the Armed
Forces of the Philippines in the form of deposits sufficient to cover the amount mentioned in the said Writ of
Execution"; the Philippine Veterans Bank received the same notice of garnishment on June 30, 1969 .... 11.
The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly, with the Philippine
Veterans Bank and the Philippine National Bank [or] their branches are public funds duly appropriated and
allocated for the payment of pensions of retirees, pay and allowances of military and civilian personnel and
for maintenance and operations of the Armed Forces of the Philippines, as per Certification dated July 3,
1969 by the AFP Controller,..."2. The paragraph immediately succeeding in such petition then alleged: "12.
Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction [or] with grave abuse of
discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the
properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of
garnishment issued pursuant thereto are null and void."3 In the answer filed by respondents, through
counsel Andres T. Velarde and Marcelo B. Fernan, the facts set forth were admitted with the only
qualification being that the total award was in the amount of P2,372,331.40. 4

The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition
proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. .

It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the
state as well as its government is immune from suit unless it gives its consent. It is readily understandable
why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of
any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal
right as against the authority that makes the law on which the right depends."5 Sociological jurisprudence
supplies an answer not dissimilar. So it was indicated in a recent decision, Providence Washington Insurance
Co. v. Republic of the Philippines,6 with its affirmation that "a continued adherence to the doctrine of non-
suability is not to be deplored for as against the inconvenience that may be caused private parties, the loss
of governmental efficiency and the obstacle to the performance of its multifarious functions are far greater if
such a fundamental principle were abandoned and the availability of judicial remedy were not thus restricted.
With the well known propensity on the part of our people to go to court, at the least provocation, the loss of
time and energy required to defend against law suits, in the absence of such a basic principle that
constitutes such an effective obstacle, could very well be imagined." 7

This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is
therein expressly provided: "The State may not be sued without its consent." 8 A corollary, both dictated by
logic and sound sense from a basic concept is that public funds cannot be the object of a garnishment
proceeding even if the consent to be sued had been previously granted and the state liability adjudged. Thus
in the recent case of Commissioner of Public Highways v. San Diego,9 such a well-settled doctrine was
restated in the opinion of Justice Teehankee: "The universal rule that where the State gives its consent to be
sued by private parties either by general or special law, it may limit claimant's action 'only up to the
completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when
the judgment is rendered, since government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation as required by law. The
functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific objects, as appropriated by law." 10 Such a
principle applies even to an attempted garnishment of a salary that had accrued in favor of an
employee. Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as
ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money
in the hands of public officers, although it may be due government employees, is not liable to the creditors
of these employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty,
may not be sued in its own courts except by express authorization by the Legislature, and to subject its
officers to garnishment would be to permit indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as they remain in the hands of the disbursing officer of the
Government, belong to the latter, although the defendant in garnishment may be entitled to a specific
portion thereof. And still another reason which covers both of the foregoing is that every consideration of
public policy forbids it." 12

In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully
allege a legitimate grievance.

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of
June 24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued
thereunder. The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent.

PNB VS PABALAN
G.R. No. L-33112 June 15, 1978

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III, La Union, AGOO TOBACCO
PLANTERS ASSOCIATION, INC., PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, and PANFILO P.
JIMENEZ, Deputy Sheriff, La Union, respondents.

FERNANDO, Acting C.J.:

The reliance of petitioner Philippine National Bank in this certiorari and prohibition proceeding against
respondent Judge Javier Pabalan who issued a writ of execution, 1 followed thereafter by a notice of
garnishment of the funds of respondent Philippine Virginia Tobacco Administration, 2 deposited with it, is on
the fundamental constitutional law doctrine of non-suability of a state, it being alleged that such funds are
public in character. This is not the first time petitioner raised that issue. It did so before in Philippine National
Bank v. Court of industrial Relations, 3 decided only last January. It did not meet with success, this Court
ruling in accordance with the two previous cases of National Shipyard and Steel Corporation 4 and Manila
Hotel Employees Association v. Manila Hotel Company,5 that funds of public corporations which can sue and
be sued were not exempt from garnishment. As respondent Philippine Virginia Tobacco Administration is
likewise a public corporation possessed of the same attributes,6 a similar outcome is indicated. This petition
must be dismissed.

It is undisputed that the judgment against respondent Philippine Virginia Tobacco Administration had
reached the stage of finality. A writ of execution was, therefore, in order. It was accordingly issued on
December 17, 1970. 7There was a notice of garnishment for the full amount mentioned in such writ of
execution in the sum of P12,724,66. 8 In view of the objection, however, by petitioner Philippine National
Bank on the above ground, coupled with an inquiry as to whether or not respondent Philippine Virginia
Tobacco Administration had funds deposited with petitioner's La Union branch, it was not until January 25,
1971 that the order sought to be set aside in this certiorari proceeding was issued by respondent Judge. 9 Its
dispositive portion reads as follows: Conformably with the foregoing, it is now ordered, in accordance with
law, that sufficient funds of the Philippine Virginia Tobacco Administration now deposited with the Philippine
National Bank, La Union Branch, shall be garnished and delivered to the plaintiff immediately to satisfy the
Writ of Execution for one-half of the amount awarded in the decision of November 16, 1970." 10 Hence this
certiorari and prohibition proceeding.

As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of non-suability. It is to
be admitted that under the present Constitution, what was formerly implicit as a fundamental doctrine in
constitutional law has been set forth in express terms: "The State may not be sued without its consent." 11 If
the funds appertained to one of the regular departments or offices in the government, then, certainly, such a
provision would be a bar to garnishment. Such is not the case here. Garnishment would lie. Only last
January, as noted in the opening paragraph of this decision, this Court, in a case brought by the same
petitioner precisely invoking such a doctrine, left no doubt that the funds of public corporations could
properly be made the object of a notice of garnishment. Accordingly, this petition must fail.

1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was sought to be justified on
the failure of respondent Judge to set aside the notice of garnishment of funds belonging to respondent
Philippine Virginia Tobacco Administration. This excerpt from the aforecited decision of Philippine National
Bank v. Court of Industrial Relations makes manifest why such an argument is far from persuasive. "The
premise that the funds could be spoken as public character may be accepted in the sense that the People
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 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 be sue and be sued and may be subjected to court processes just
like any other corporation (Section 13, Act No. 1459, as amended.)" ... To repeat, the ruling 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." 12

2. The National Shipyard and Steel Corporation decision was not the first of its kind. The ruling therein could
be inferred from the judgment announced in Manila Hotel Employees Association v. Manila Hotel Company,
decided as far back as 1941. 13 In the language of its ponente Justice Ozaeta "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 government divests
itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law
governing private corporations." 14 It is worth mentioning that Justice Ozaeta could find support for such a
pronouncement from the leading American Supreme Court case of united States v. Planters' Bank, 15 with the
opinion coming from the illustrious Chief Justice Marshall. It was handed down more than one hundred fifty
years ago, 1824 to be exact. It is apparent, therefore, that petitioner Bank could it legally set forth as a bar
or impediment to a notice of garnishment the doctrine of non-suability.

WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.

Barredo, Antonio, Aquino, and Santos, JJ., concur.

ARCEGA VS CA G.R. No. L-20869 August 28, 1975

ALICIA O. ARCEGA, assisted by her husband RAF. L. ARCEGA, doing business under the firm name of
"FAIRMONT ICE CREAM CO.," petitioner,
vs.
THE COURT OF APPEALS, THE CENTRAL BANK OF THE PHILIPPINES, and THE PHILIPPINE NATIONAL
BANK, respondents.

CASTRO, J.:

On August 17, 1956 the petitioner Alicia O. Arcega, doing business under the firm name "Fairmont Ice
Cream Company," filed a complaint with the Court of First Instance of Manila, Branch I, docketed as civil
case 30443, against the respondents Central Bank of the Philippines and Philippine National Bank, for the
refund, under four causes of action, of the total sum of P18,030.13 representing allegedly unauthorized
payments made by her in the concept of the 17% special excise tax on foreign exchange levied under
Section 1 of Republic Act 601, as amended by Republic Acts 1175 and 1197.

The refund prayed for involves purchases of foreign exchange from the Philippine National Bank to cover the
costs and transportation and other charges incident to the importation into the Philippines (1) under the first
cause of action, of coffee roasted, vanilla, fruit cocktail, peaches, butter and pecan nuts which were used as
"flavors" for the petitioner's ice cream product; (2) under the second cause of action, of paper containers
and corresponding covers, specially manufactured by her supplier Sealright Pacific, Ltd., which were utilized
as containers in the manufacture and distribution of ice cream; (3) under the third cause of action, of ice
cream wooden spoons individually wrapped used as accessories to or inseparable articles in the manufacture,
sale and distribution in retail of ice cream; and (4) under the fourth cause of action,
of machineries, equipment and spare parts which were used by the petitioner in her factory.

The Philippine National Bank moved to dismiss the complaint on the ground that it does not state a sufficient
cause of action because, although the PNB is being sued as an agent of the Central Bank, there is no
allegation in the complaint that it had contracted in its own name or exceeded its authority as such agent,
hence, even assuming that the averments of the complaint could be established, it cannot be held liable for
the amount of the special excise tax it had collected from the petitioner. The trial court denied the motion.

The Central Bank also moved to dismiss the complaint on the grounds that (1) the trial court has no
jurisdiction over the subject-matter of the action, because the judgment sought will constitute a financial
charge against the Government, and therefore the suit is one against the Government, which cannot prosper
without its consent, and in this case no such consent has been given; (2) the complaint states no cause of
action; and (3) there is a misjoinder of party defendant, for neither the Treasurer of the Philippines nor the
Secretary of Finance was impleaded as Party defendant, notwithstanding that either of them, representing
the Government of the Philippines, is an indispensable party, not only because the foreign exchange tax
accrued to the National Treasury but also because, December 31, 1955, the expiry date of the foreign
exchange tax law, the authority to order the refund of special excise taxes or to approve exemptions under
the foreign exchange tax law upon tie Secretary of Finance.

After the filing by the petitioner of an opposition to the Central Bank's motion to dismiss, by the Central Bank
of a reply thereto, and by the petitioner of a rejoinder to the Central Bank's reply, the trial court, on
November 23, 1956, dismissed the complaint on the three grounds set forth in the Central Bank's motion to
dismiss.

On December 12, 1956 the petitioner Arcega filed a motion for reconsideration of the resolution of November
23, 1956, to which an opposition was filed by the Central Bank. A certificate dated December 18, 1956 and
signed by Jose Carmona, Chief Accountant of the Central Bank, was attached as an annex to the Central
Bank's opposition, certifying "that the balance of P7,137,747.71 as of December 29, 1955 of the total
amount collected as special excise tax on sales of foreign exchange was turned over to the Treasurer of the
Philippines on June 20, 1956." In an order dated December 12, 1955 the court denied the petitioner's motion
for reconsideration. She appealed to the Court of Appeals.

Holding that the suit is indirectly against the Republic of the Philippines which cannot be sued without its
consent, the Court of Appeals affirmed the dismissal of the complaint.

The petitioner interposed the present appeal by certiorari, presenting for resolution two issues: first, whether
the trial court has jurisdiction over the subject-matter of the action, or, stated differently, whether a suit
against the Central Bank for refund of the 17% foreign exchange tax collected by it under Republic Act 601,
as amended, is actually a suit against the State; and, second, assuming arguendo that the trial court has
jurisdiction, whether the dismissal of the petitioner's complaint upon a motion to dismiss constitutes a denial
of her constitutional right to due process of law in the sense that such dismissal deprived her of the right to
present evidence to prove the truth of the essential allegations of her complaint.

1. The suability of the Central Bank for the refund of taxes collected by it under Republic Act 601, as
amended, was upheld in Central Azucarera Don Pedro vs. Central Bank of the Philippines,1 which ruling
merited elaboration in Olizon vs. Central Bank2 as follows:

It is next urged that inasmuch as the amounts here involved have already been turned over to
the national treasury the present action may no longer be maintained since it would, in effect,
be a suit against the State without its consent.

We cannot agree to the proposition. This suit is brought against the Central Bank of the
Philippines, an entity authorized by its charter to sue and be sued. The consent of the State to
thus be sued, therefore, has been given.

This doctrine was reiterated in Philippines Acetylene Co. vs. Central Bank of the Philippines3 where it was
pointedly stated that "sec. 5 of Republic Act No. 601 (as amended) directs that refund of taxes be made by
the Central Bank."

The courts below, therefore, erred in dismissing the complaint on the ground that the Central Bank was non-
suable for the refund of taxes it had collected under the statute..

2. In resolving the second issue we find it needless to dwell on the alleged denial of constitutional due
process.

Upon the first cause of action, the petitioner alleges that she used the coffee roasted, vanilla, fruit cocktail,
peaches, butter and pecan nuts as "flavors" for her ice cream product. The respondent Central Bank, in its
motion to dismiss, contended that these items are not "flavors," and that what is exempt from the 17%
foreign exchange tax under Section 2 of Republic Act 601 is the importation of "flavors." The motion to
dismiss, therefore, assails the correctness of the allegation that the abovenamed commodities were used as
"flavors." It was thus improper for the court a quo to grant the motion upon the presumption that the
averment in the motion are true and those of the complaint are not. The court should have either denied the
motion, without prejudice to the defendant bank's right to plead, as a special defense in its answer, the very
issue upon which said motion was predicated, or proceeded to the reception of evidence on the issue of fact
thus raised before revolving the same.4

The second and third causes of action must however fall. For the importation of containers and ice cream
wooden spoons to be exempt from the foreign exchange tax, these articles must be used by the importer in
the manufacture or preparation of a local product and the product so manufactured or prepared must be
consigned or exported abroad; here there is no allegation in the complaint that the ice cream wooden spoons
and paper containers used by the petitioner in her ice cream industry and her ice cream product were
consigned or exported abroad.

The fourth cause of action suffers from lack of particularity. Under Republic Act 601, as amended, the cost of
importations of" machinery, equipment, accessories and spare parts for the use of industries, miners, mining
enterprises, planters and farmers" was exempt from the 17% foreign exchange tax, but the complaint does
not allege (a) when the corresponding letters of credit were opened, (b) the kind of "machinery, equipment,
accessories and spare parts" imported by the petitioner to be used in her ice cream industry, (c) when the
goods arrived, and (d) when the foreign exchange tax was paid. The proper course of action the trial court
should have taken was to treat the motion to dismiss as one for a bill of particulars and consequently require
the plaintiff to submit a bill of particulars.5

ACCORDINGLY, the judgment appealed from is set aside. Another one is hereby entered (a) dismissing the
complaint as to the second and third causes of action, and (b) remanding the case to the trial court for
further proceedings on the first and fourth causes of action, conformably with this decision and with law,
after impleading the National Treasurer and the Secretary of Finance as parties defendants. No
pronouncement as to costs.

Makalintal, C.J., Teehankee, Makasiar and Martin, JJ., concur

RAYO VS CFI OF BULACAN

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

GAUDENCIO RAYO, 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.

PNR VS INTERMEDIATE APPELLATE COURT

PHILIPPINE NATIONAL RAILWAYS and HONORIO CABARDO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT, INC., respondents.

MELO, J.:

The imputation of culpa on the part of herein petitioners as a result of the collision between its train, bound
for Manila from La Union, with a Baliwag transit bus at the railroad crossing on the road going to Hagonoy,
Bulacan on August l0, 1974, is the subject of the petition at bar directed against the judgment of affirmance
rendered by respondent court, through the Fourth Civil Cases Division (Sison, Bidin (P), Veloso, JJ.), vis-a-
vis the decretal portion handed down by the court of origin in:

1. Ordering the defendants, jointly and severally to pay the plaintiff the amount of
P179,511.52 as actual damages.

2. Ordering the defendants jointly and severally to pay the plaintiff P436,642.03 as
reimbursement for the damages paid by the plaintiff to death, injury and damage claimants.

3. Ordering the defendants jointly and severally to pay exemplary damages in the amount of
P50, 000.00 to the plaintiff.

4. Ordering the defendants jointly and severally to pay the plaintiff attorney's fees in the
amount of P5, 000.00.

5. Ordering the defendants, jointly and severally to pay the plaintiff interest at the legal rate
on the above amounts due the plaintiff from August 10, 1974 until fully paid.

6. Ordering the defendants to pay the cost of this suit.

7. Ordering the dismissal of the defendants' counterclaim for lack of factual and legal basis. (p.
101, Record on Appeal; p. 103. Rollo.)

Culled from the text of the assailed disposition are the facts of the case at bar which are hereunder
adopted verbatim:

The case arose from a collision of a passenger express train of defendant Philippine National
Railways, (PNR) coming from San Fernando, La Union and bound for Manila and a passenger
bus of Baliwag Transit, Inc. which was on its way to Hagonoy, Bulacan, from Manila, but upon
reaching the railroad crossing at Barrio Balungao, Calumpit, Bulacan at about 1:30 in the
afternoon of August 10, 1974, got stalled and was hit by defendant's express train causing
damages to plaintiff's bus and its passengers, eighteen (18) of whom died and fifty-three (53)
others suffered physical injuries. Plaintiff alleging that the proximate cause of the collision was
the negligence and imprudence of defendant PNR and its locomotive engineer, Honorio
Cirbado, in operating its passenger train in a busy intersection without any bars, semaphores,
signal lights, flagman or switchman to warn the public of approaching train that would pass
through the crossing, filed the instant action for Damages against defendants. The defendants,
in their Answer traversed the material allegation of the Complaint and as affirmative defense
alleged that the collision was caused by the negligence, imprudence and lack of foresight of
plaintiff's bus driver, Romeo Hughes.

At the pre-trial conference held on June 23, 1976, the parties agreed on a partial stipulation of
facts and issues which as amplified at the continuation of the pre-trial conference, on July 12,
1976, are as follows:
1 That plaintiff is a duly constituted corporation registered with the Securities
and Exchange Commission engaged in the business of transportation and
operating public utility buses for the public with lines covering Manila, Caloocan
City, Quezon City, Malabon, Rizal, Bulacan, Pampanga and Nueva Ecija, and
particularly from Manila to Hagonoy, Bulacan and return in the month of August,
l974 passing thru the town of Calumpit Bulacan, temporarily while the bridge at
Hagonoy, Bulacan was under construction;

2 That defendant Philippine National Railways is a purely government owned and

controlled corporation duly registered and existing virtue of Presidential Decree
No. 741, with capacity to sue and be sued, and is likewise engaged in
transporting passengers and cargoes by trains and buses and that, it operates a
train line between San Fernando, La Union and Manila particularly Passenger
Express Train with Body No. 73, passing along the intersection of Barrio
Balungao, Calumpit, Bulacan, in going to San Fernando, La Union from Manila
and return;

3. That on August 10, 1974, at about 1:20 o'clock in the afternoon, a Baliuag
Transit Bus with Body No. 1066 and Plate No. XS-929 PUB-Bulacan '74 was
driven by its authorized driver Romeo Hughes and PNR Train No. 73 was
operated by Train Engineer Honorio Cabardo alias Honorio Cirbado and at the
railroad intersection at Barrio Balungao, Calumpit, Bulacan, said passenger train
No. 73 hit and bumped the right mid portion of the plaintiff's passenger bus No.
1066, while the rear portion of said bus was at the railroad track and its
direction was towards Hagonoy, Bulacan at about 1:30 o'clock in the afternoon;

4. That at the time of the collision there was a slight rainfall in the vicinity of the
scene of the accident and that there was at said intersection no bars,
semaphores, and signal lights that would warn the public of the approaching
train that was about to pass through the intersection and likewise there was no
warning devices to passing trains showing that they were about to pass an
intersection in going to Manila from San Fernando, La Union and back;

5. That on account of said collision, the Baliuag Transit Bus with Body No. 1066
driven by Romeo Hughes was damaged and eighteen (18) of its passengers died
and the rest who were more than fifty three (53) passengers suffered physical
injuries;

6. That after the investigation the Chief of Police of Calumpit, Bulacan, filed a
criminal case of Reckless Imprudence Causing Multiple Homicide with Multiple
Physical Injuries and Damage to Property against Romeo Hughes y Parfan,
driver of the Baliuag Transit bus docketed under Crim. Case No. 2392; while the
train Engineer Honorio Cabardo alias Honorio Cirbado was not included as an
accused in said case, although his train No. 73 was the one that hit and bumped
the right rear portion of the said bus;

7. That immediately after the said accident Major Manuel A. Macam, Chief of the
Municipal Police of Calumpit, Bulacan, together with some of his policemen
conducted an investigation of the accident;

8. That at the railroad crossing in Calumpit, Bulacan where the accident took
place there is no railroad crossing bar, however, during the pre-war days there
was a railroad crossing bar at said intersection; that, however, there was only
one sign of railroad crossing "Stop, Look and Listen" placed on a concrete slab
and attached to a concrete post existing at the approach of the railroad track
from the Highway going towards Hagonoy, Bulacan and that after the said
railroad track there was a designated jeep parking area at the right side in the
direction from the Highway to Hagonoy Bulacan;
 9. That the train No. 73 driven by Train Engineer Honorio Cabardo alias Honorio
Cirbado stopped after passing the railroad crossing at a distance of about 50
meters from the said intersection after the collision on August, 1974;

10. That the expected time of arrival of said Train No. 73 in Manila was 2:41
P.M. and its departure time from San Fernando, La Union was 9:00 A.M. and its
expected arrival at Calumpit, Bulacan was 1:41 P.M. with no stop at Calumpit,
Bulacan.

SIMPLIFICATION OF ISSUES

11. That the principal issue in the instant case is who between the driver Romeo
Hughes of Baliuag Transit, Incorporated and the train engineer Honorio Cabardo
alias Honorio Cirbado of the Philippine National Railways was negligent or
whether or not both are negligent; that likewise which of said companies was
negligent at said railroad intersection;

12. That another additional issue is whether the Baliuag Transit Incorporated
has exercised the diligence of a good father of the family in the selection and
supervision of its employees. (pp.
85-87, Record on Appeal). ( Annex A, Petition; pp. 79-82, Rollo)

In addition, respondent court deemed it necessary to reflect the salient findings of the case for damages as
formulated by the trial court:

Posed for resolution are the following issues: Who between the driver Romeo Hughes of the
Baliuag Transit Incorporated and Honorio Cabardo, train Engineer of the Philippine National
Railways was negligent in the operation of their respective vehicles, or whether or both were
negligent? Could either of the companies Baliuag Transit Incorporated and the Philippine
National Railways be held accountable for the collision because of negligence?

The defendants presented several statements or affidavits of alleged witnesses to the collision,
specifically Exhibits 2, 3, 4, 5, 6, 11, 13, 14, 15, 16, 17, 18 and 19; the Court is at a loss as to
why the persons who gave the said statements were not presented as witnesses during the
trial of the
case, as aptly said, the statements are hearsay evidence (Azcueta v. Cabangbang, — 45 O.G.
144); at most they be taken as proof only of the fact that statements of said persons were
taken and that investigation was conducted of the incident; the Court cannot consider the
averments in said statements as testimonies or evidence of truth.

Defendants endeavored to show that the proximate and immediate cause of the collision was
the negligence of the bus driver because the driver did not make a stop before ascending the
railtrack; he did not heed the warning or shoutings of bystanders and passengers and
proceeded in traversing the railtrack at a fast speed; that the bus driver was in fact violating
Section 42(d) of R.A. 4136, otherwise known as the Land Transportation and Traffic Code for
failure to "stop, look, and listen" at the intersection, before crossing the railtrack; that it is
incumbent upon him to take the necessary precautions at the intersection because the railroad
track is in itself a warning; and the bus driver ignored such a warning and must assume the
responsibility for the result of the motion taken by him (U.S. v. Mananquil, 42 Phil. 90)

Except the testimony of the train engineer Cabardo, there is no admissible evidence to show
that indeed, the bus driver did not take the necessary precaution in traversing the track. Note
that he first noticed the bus when it was only 15 meters away from him; he could not have
possibly noticed the position of the bus before negotiating the track.

On the other hand, it was shown by plaintiff that the bus driver Romeo Hughes took the
necessary precautions in traversing the track.
The bus driver had stopped before traversing the track and in fact asked the conductor to
alight and made a "Look and Listen" before proceeding; the conductor had done just that and
made a signal to proceed when he did not see any oncoming train. (TSN, October 2l, 1976, p.
4); plaintiff's bus drivers and conductors are enjoined to observe such a precautionary
measure in seminars conducted by the company. (TSN, September 23, 1976. pp. 26-27).

The evidence disclosed that the train was running fast because by his own testimony, the train
engineer had testified that before reaching the station of Calumpit the terrain was downgrade
and levelled only after passing the Calumpit bridge (TSN, July 28, 1976, p. 14 ); the tendency
of the train, coming from a high point is to accelerate as the gravity will necessarily make it
so, especially when it is pulling seven coaches loaded with goods and passengers.

Moreover, upon impact, the bus loaded with passengers was dragged and thrown into a ditch
several meters away; the train had stopped only after the engine portion was about 190
meters away from the fallen bus; several passengers were injured and at least 20 died; such
facts conclusively indicate that the train was speeding, because if it were moving at moderate
speed, it would not run some 190 meters after impact and throw the bus at quite a distance
especially so when it is claimed that the train's emergency brakes were applied.

Further, the train was an express train; its departure was 9:00 A.M. at San Fernando, La
Union and expected in Manila at 2:41 P.M.; the collision occurred at 1:30 P.M. or 4 1/2 hours
after it left La Union; surely, the train could have not negotiated such a distance in so short a
time if it were not running at fast speed.

It may be argued that a railroad is not subject to the same restrictions to the speed of its train
as a motorists (Mckelvey v. Delaware L. and W.R. Co. 253 App. D.V. 109, 300 NYS 1263 ); but
it does not follow that a train will be permitted to run fast under all conditions at any rate of
speed it may choose. It must regulate its speed with proper regard for the safety of human life
and property (Johnson v. Southern Pacific Company (Cal. App. 288 p. 81), considering the
surrounding circumstances particularly the nature of the locality (Atchinson, T. and SFR Co. v.
Nicks (Arts) 165 p. 2d 167).

Cabardo's route included the passage over the said intersection; he could have noticed that it
is a very busy intersection because the crossroad leads to the Calumpit Poblacion as well as to
the neighboring town of Hagonoy; there was a parking lot by the side of the track whereat
passengers board jeepneys for the neighboring barrios and towns; stalls abound in the vicinity
and bystanders congregate nearby. A prudent train operator must, under the circumstances,
slacken his speed almost for the protection of motorists and pedestrians, not only when a
collision is inevitable but even if no hindrance is apparent on the way;

Moreover, there was an intermittent rain at the time of the collision (see stipulation of facts
and photographs); the condition of the weather was such that even if for this reason alone,
the train engineer should have foreseen that danger of collision lurked because of poor
visibility of slippery road; he should have taken extra precaution by considerably slackening its
speed. This he failed to do even if the nature of his job required him to observe care exercised
by a prudent man.

Contributory negligence may not be ascribed to the bus driver; it was evident that he had
taken the necessary precautions before passing over the railway track; if the bus was hit, it
was for reasons beyond the control of the bus driver because he had no place to go; there
were vehicles to his left which prevented him in swerving towards that direction; his bus
stalled in view of the obstructions in his front where a sand and gravel truck stopped because
of a jeep maneuvering into a garage up front. All the wheels at the bus have already passed
the rail portion of the track and only the rear portion of the bus' body occupied or covered the
railtrack. This was evident because the part of the bus hit by the train was the rear since the
bus fell on a nearby ditch. Otherwise, if the bus was really hit in mid-body, the bus could have
been halved into two because of the force of the impact.
 The stipulation of facts between the parties show that there was no crossing bar at the railroad
intersection at Calumpit, Bulacan at the time of collision (par. 8, Stipulation of Facts); the
plaintiff contended and the defendants did not deny, that there were no signal lights,
semaphores, flagman or switchman thereat; the absence of such devices, the plaintiff argues
constitute negligence on the part of the Philippine National Railways.

A railroad is not required to have a gate (crossing bar) or a flagman, or to maintain signals at
every intersection; only at such places reasonably necessary; what is considered reasonably
necessary will depend on the amount of travel upon the road, the frequency with which trains
pass over it and the view which could be obtained of trains as they approach the crossing, and
other conditions (Pari v. Los Angeles, Ry. Corporation (Cal A2d) 128 p2d 563; Swdyk v.
Indiana Harbor Belt R. Co. 148 F. 2d 795, and others).

As has been amply discussed, the crossroad at the intersection at Calumpit is one which is a
busy thoroughfare; it leads to the Poblacion at Calumpit and other barrios as well as the town
of Hagonoy; the vicinity is utilized as a parking and waiting area for passengers of jeepneys
that ply between the barrios, clearly, the flow of vehicular traffic thereat is huge. It can be said
also that, since there is no other railtrack going North except that one passing at Calumpit,
trains pass over it frequently;

A portion of the intersection is being used as a parking area with stalls and other obstructions
present making it difficult, if not impossible, to see approaching trains (see photographs).

The failure of the Philippine National Railways to put a cross bar, or signal light, flagman or
switchman, or semaphores is evidence of negligence and disregard of the safety of the public,
even if there is no law or ordinance requiring it, because public safety demands that said
devices or equipments be installed, in the light of aforesaid jurisprudence. In the opinion of
this Court the X sign or the presence of "STOP, LOOK, LISTEN" warnings would not be
sufficient protection of the motoring public as well as the pedestrians, in the said intersection;

The parties likewise have stipulated that during the pre-war days, there was a railroad
crossing bar at the said intersection (Par-8, Stipulation of Facts). It appears that it was a self
imposed requirement which has been abandoned. In a case it was held that where the use of a
flagman was self imposed, the abandonment thereof may constitute negligence. (Fleming v.
Missouri and A. Ry. Co. 198 ARDC 290, 128 S.W. 2d 286 and others; cited in Sec. 1082
SCRWARTZ, Vol. 2). Similarly, the abandonment by the PNR of the use of the crossing bar at
the intersection at Calumpit constitutes negligence, as its installation has become imperative,
because of the prevailing circumstances in the place.

A railroad company has been adjudged guilty of negligence and civilly liable for damages when
it failed to install semaphores, or where it does not see to it that its flagman or switchman
comply with their duties faithfully, to motorist injured by a crossing train as long as he had
crossed without negligence on his part (Lilius vs. MRR, 39 Phil. 758). (Decision, pages 94-100,
R A.; pp. 83-89, Rollo).

On the aspect of whether the Philippine National Railways enjoys immunity from suit, respondent court
initially noted that an exculpation of this nature that was raised for the first time on appeal may no longer be
entertained in view of the proscription under Section 2, Rule 9 of the Revised Rules of Court, apart from the
fact that the lawyer of petitioner agreed to stipulate inter alia that the railroad company had capacity to sue
and be sued. This being so, respondent court continued, PNR was perforce estopped from disavowing the
prejudicial repercussion of an admission in judicio. Even as the laws governing the creation and rehabilitation
of the PNR were entirely mute on its power to sue and be sued, respondent court nonetheless opined that
such prerogative was implied from the general power to transact business pertinent or indispensable to the
attainment of the goals of the railroad company under Section 4 of Republic Act No. 4156 as amended by
Republic Act No. 6366:

Sec. 4 General Powers — The Philippine National Railways shall have the following general
powers:
 (a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the corporation; and

(b) Generally, to exercise all powers of a railroad corporation under the Corporation law.

in conjunction with Section 2(b) of Presidential Decree No. 741:

(b) To own or operate railroad transways, bus lines, trucklines, subways, and other kinds of
land transportation, vessels, and pipelines, for the purpose of transporting for consideration,
passengers, mail and property between any points in the Philippines;

Thus, respondent court utilized the doctrine of implied powers announced in National Airports Corporation
vs. Teodoro, Sr. and Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the power to sue and be
sued is implicit from the faculty to transact private business. At any rate, respondent court characterized the
railroad company as a private entity created not to discharge a governmental function but, among other
things, to operate a transport service which is essentially a business concern, and thus barred from invoking
immunity from suit.

In brushing aside petitioners' asseveration that the bus driver outraced the train at the crossing, respondent
court observed that the bus was hit by the train at its rear portion then protruding over the tracks as the bus
could not move because another truck at its front was equally immobile due to a jeep maneuvering into a
nearby parking area. Under these tight conditions, respondent court blamed the train engineer who admitted
to have seen the maneuvering jeep at a distance (TSN, July 28, 1976, page 18) and had the last clear
chance to apply the brakes, knowing fully well that the vehicles following the jeep could not move away from
the path of the train. Apart from these considerations, it was perceived below that the train was running fast
during the entire trip since the train stopped 190 meters from the point of impact and arrived at Calumpit,
Bulacan earlier than its expected time of arrival thereat.

Moreover, respondent court agreed with the conclusion reached by the trial court that the absence of a
crossing bar, signal light, flagman or switchman to warn the public of an approaching train constitutes
negligence per the pronouncement of this Court in Lilius vs. Manila Railroad Company (59 Phil 758 [1934]).

Concerning the exercise of diligence normally expected of an employer in the selection and supervision of its
employees, respondent court expressed the view that PNR was remiss on this score since it allowed Honorio
Cabardo, who finished only primary education and became an engineer only through sheer experience, to
operate the locomotive, not to mention the fact that such plea in avoidance was not asserted in the answer
and was thus belatedly raised on appeal.

Petitioner moved to reconsider, but respondent court was far from persuaded. Hence, the petition before Us
which, in essence, incorporates similar disputations anent PNR's immunity from suit and the attempt to toss
the burden of negligence from the train engineer to the bus driver of herein private respondent.

The bone of contention for exculpation is premised on the familiar maxim in political law that the State, by
virtue of its sovereign nature and as reaffirmed by constitutional precept, is insulated from suits without its
consent (Article 16, Section 3, 1987 Constitution). However, equally conceded is the legal proposition that
the acquiescence of the State to be sued can be manifested expressly through a general or special law, or
indicated implicitly, as when the State commences litigation for the purpose of asserting an affirmative relief
or when it enters into a contract (Cruz,Philippine Political Law, 1991 edition, page 33; Sinco, Philippine
Political Law, Eleventh Edition, 1962, page 34). When the State participates in a covenant, it is deemed to
have descended from its superior position to the level of an ordinary citizen and thus virtually opens itself to
judicial process. Of course, We realize that this Court qualified this form of consent only to those contracts
concluded in a proprietary capacity and therefore immunity will attach for those contracts entered into in a
governmental capacity, following the ruling in the 1985 case of United States of America vs. Ruiz (136 SCRA
487 [1985]; cited by Cruz, supra at pages 36-37). But the restrictive interpretation laid down therein is of no
practical worth nor can it give rise to herein petitioner PNR's exoneration since the case of Malong vs.
Philippine National Railways (138 SCRA 63, [1985]); 3 Padilla, 1987 Constitution with Comments and Cases,
1991 edition, page 644), decided three months after Ruiz was promulgated, was categorical enough to
specify that the Philippine National Railways "is not performing any governmental function" (supra, at page
68).
In Malong, Justice Aquino, speaking for the Court en banc, declared:

The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not immune
from suit under Act No. 1510, its charter.

The PNR Charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and
Presidential Decree No. 741, provides that the PNR is a government instrumentality under
government ownership during its 50-year term, 1964 to 2014. It is under the Office of the
President of the Philippines. Republic Act No. 6366 provides:

Sec. 1-a. Statement of policy. — The Philippine National Railways, being a factor
for socio-economic development and growth, shall be a part of the infrastructure
program of the government and as such shall remain in and under government
ownership during its corporate existence. The Philippine National Railways must
be administered with the view of serving the interests of the public by providing
them the maximum of service and, while aiming at its greatest utility by the
public, the economy of operation must be ensured so that service can be
rendered at the minimum passenger and freight prices possible.

The charter also provides:

Sec. 4. General powers. — The Philippine National Railways shall have the
following general powers:

(a) To do all such other things and to transact all such business directly or
indirectly necessary, incidental or conducive to the attainment of the purpose of
the corporation; and

(b) Generally, to exercise all powers of a railroad corporation under the

Corporation Law. (This refers to Sections 81 to 102 of the Corporation Law on
railroad corporations, not reproduced in the Corporation Code.)

Section 36 of the Corporation Code provides that every corporation has the power to sue and be sued in its
corporate name. Section 13(2) of the Corporation Law provides that every corporation has the power to sue
and be sued in any court.

A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but
on the logical and practical ground that there can be no legal right as against the authority
that makes the law on which the right depends (Justice Holmes in Kawananakoa vs. Polyblank,
205 U.S. 353, 51 L. 3d 834).

The public service would be hindered, and public safety endangered, if the supreme authority
could be subjected to suit at the instance of every citizen and, consequently, controlled in the
use and disposition of the means required for the proper administration of the Government
(The Siren vs. U.S., 7 Wall. 152, 19 L. ed. 129). (at pp.
65-66).

To the pivotal issue of whether the State acted in a sovereign capacity when it organized the PNR for the
purpose of engaging in transportation, Malong continued to hold that:

. . . in the instant case the State divested itself of its sovereign capacity when it organized the
PNR which is no different from its predecessor, the Manila Railroad Company. The PNR did not
become immune from suit. It did not remove itself from the operation of Articles 1732 to 1766
of the Civil Code on common carriers.

The correct rule is that "not all government entities, whether corporate or noncorporate, are
immune from suits. Immunity from suit is determined by the character of the objects for which
the entity was organized." (Nat. Airports Corp. vs. Teodoro and Phil. Airlines, Inc., 91 Phil.
203, 206; Santos vs. Santos, 92 Phil. 281, 285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).

Suits against State agencies with respect to matters in which they have assumed to act in a
private or nongovernmental capacity are not suits against the State (81 C.J.S. 1319).

Suits against State agencies with relation to matters in which they have
assumed to act in a private or nongovernmental capacity, and various suits
against certain corporations created by the State for public purposes, but to
engage in matters partaking more of the nature of ordinary business rather than
functions of a governmental or political character, are not regarded as suits
against the State.

The latter is true, although the State may own the stock or property of such a
corporation, for by engaging in business operations through a corporation the
State divests itself so far of its sovereign character, and by implicating consents
to suits against the corporation. (81 C.J.S. 1319).

The foregoing rule was applied to State Dock Commissions carrying on business relating to
pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 27 Fed. 2nd 370)
and to State Highways Commissions created to build public roads and given appropriations in
advance to discharge obligations incurred in their behalf (Arkansas State Highway Commission
vs. Dodge, 26 SW 2nd 879 and State Highway Commission of Missouri vs. Bates, 296 SW 418,
cited in National Airports case).

The point is that when the government enters into a commercial business it abandons its
sovereign capacity and is to be treated like any other private corporation (Bank of the U.S. vs.
Planters' Bank, 9 Wheat. 904, 6 L ed. 244, cited in Manila Hotel Employees Association vs.
Manila Hotel Company, et al., 73 Phil. 374, 388). The Manila Hotel case also relied on the
following rulings:

By engaging in a particular business through the instrumentality of a

corporation, the government divests itself pro hac vice of its sovereign
character, so as to render the corporation subject to the rules of law governing
private corporations.

When the State acts in its proprietary capacity, it is amenable to all the rules of
law which bind private individuals.

There is not one law for the sovereign and another for the subject, but when the
sovereign engages in business and the conduct of business enterprises, and
contracts with individuals, whenever the contract in any form comes before the
courts, the rights and obligation of the contracting parties must be adjusted
upon the same principles as if both contracting parties were private persons.
Both stand upon equality before the law, and the sovereign is merged in the
dealer, contractor and suitor (People vs. Stephens, 71 N.Y. 549).

It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc., L-31948,
July 25, 1978, 84 SCRA 223, it was held that the PNR funds could be garnished at the instance
of a labor union.

It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees
could not sue the PNR for damages. Like any private common carrier, the PNR is subject to the
obligations of persons engaged in that private enterprise. It is not performing any
governmental function.

Thus, the National Development Company is not immune from suit. It does not exercise
sovereign functions. It is an agency for the performance of purely corporate, proprietary or
 business functions (National Development Company vs. Tobias, 117 Phil. 703, 705 and cases
cited therein; National Development Company vs. NDC Employees and Workers' Union, L-
32387, August 19, 1975, 66 SCRA 18l, 184).

Other government agencies not enjoying immunity from suit are the Social Security System
(Social Security System vs. Court of Appeals,
L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank (Republic vs.
Philippine National Bank, 121 Phil. 26). (at pp. 66-68).

We come now to the question of whether respondent court properly agreed with the trial court in imputing
negligence on the part of the train engineer and his employer.

It was demonstrated beyond cavil in the course of the pre-trial hearings held for the purpose of stipulating
on crucial facts that the bus was hit on the rear portion thereof after it crossed the railroad tracks. Then, too
the train engineer was frank enough to say that he saw the jeep maneuvering into a parking area near the
crossing which caused the obstruction in the flow of traffic such that the gravel and sand truck including the
bus of herein private respondent were not able to move forward or to take the opposite lane due to other
vehicles. The unmindful demeanor of the train engineer in surging forward despite the obstruction before
him is definitely anathema to the conduct of a prudent person placed under the same set of perceived
danger. Indeed:

When it is apparent, or when in the exercise of reasonable diligence commensurate with the
surroundings it should be apparent, to the company that a person on its track or to get on its
track is unaware of his danger or cannot get out of the way, it becomes the duty of the
company to use such precautions, by warnings, applying brakes, or otherwise, as may be
reasonably necessary to avoid injury to him. (65 Am. Jur., Second Edition. p. 649).

Likewise, it was established that the weather condition was characterized with intermittent rain which should
have prompted the train engineer to exercise extra precaution. Also, the train reached Calumpit, Bulacan
ahead of scheduled arrival thereat, indicating that the train was travelling more than the normal speed of 30
kilometers per hour. If the train were really running at 30 kilometers per hour when it was approaching the
intersection, it would probably not have travelled 190 meters more from the place of the accident (page 10,
Brief for Petitioners). All of these factors, taken collectively, engendered the concrete and yes, correct
conclusion that the train engineer was negligent who, moreover, despite the last opportunity within his
hands vis-a-vis the weather condition including the presence of people near the intersection, could have
obviated the impending collision had he slackened his speed and applied the brakes (Picart vs. Smith, 37
Phil. 809 [1918]).Withal, these considerations were addressed to the trial judge who, unlike appellate
magistrates, was in a better position to assign weight on factual questions. Having resolved the question of
negligence between the train engineer and the bus driver after collating the mass of evidence, the conclusion
reached thereafter thus commands great respect especially so in this case where respondent court gave its
nod of approval to the findings of the court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206
[1991]); Amigo vs. Teves, 50 O.G. 5799; Regalado, Remedial Law Compendium, Fifth edition, page 353).

What exacerbates against petitioners' contention is the authority in this jurisdiction to the effect that the
failure of a railroad company to install a semaphore or at the very least, to post a flagman or watchman to
warn the public of the passing train amounts to negligence (Lilius vs. Manila Railroad Company, 59 Phil. 758
[1934]).

WHEREFORE, the petition is hereby DISMISSED and the decision of respondent court AFFIRMED.

SO ORDERED.

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

NATIONAL AIRPORTS CORPORATION VS TEODORO

G.R. No. L-5122 April 30, 1952

NATIONAL AIRPORTS CORPORATION, petitioner,

vs.
JOSE TEODORO, SR., as Judge of the Court of First Instance of Negros Occidental and PHILIPPINE AIRLINES,
INC., respondents.

Office of the Solicitor General Pompeyo Diaz and Solicitor Augusto M. Luciano for petitioner.
Ozeata, Roxas, Lichauco and Picazo for respondents.

TUASON, J.:

The National Airports Corporation was organized under Republic Act No. 224, which expressly made the
provisions of the Corporation Law applicable to the said corporation. On November 10, 1950, the National
Airports Corporation was abolished by Executive Order No. 365 and to take its place the Civil Aeronautics
Administration was created. Before the abolition, the Philippine Airlines, Inc. paid to the National Airports
Corporation P65,245 as fees for landing and parking on Bacolod Airport No. 2 for the period up to and
including July 31, 1948. These fees are said to have been due and payable to the Capitol Subdivision, Inc.
which owned the land used by the National Airports Corporation as airport, and the owner commenced an
action in the Court of First Instance of Negros Occidental against the Philippine Airlines, Inc., in 1951 to
recover the above amount. The Philippine Airlines, Inc. countered with a third-party complaint against the
National Airports Corporation, which by that time had been dissolved, and served summons on the Civil
Aeronautics Administration. The third party plaintiff alleged that it had paid to the National Airports
Corporation the fees claimed by the Capitol Subdivision, Inc. "on the belief and assumption that the third
party defendant was the lessee of the lands subject of the complaint and that the third party defendant and
its predecessors in interest were the operators and maintainers of said Bacolod Airport No. 2 and, further,
that the third party defendant would pay to the landowners, particularly the Capitol Subdivision, Inc., the
reasonable rentals for the use of their lands."

The Solicitor General, after answering the third party complaint, filed a motion to dismiss on the ground that
the court lacks jurisdiction to entertain the third- party complaint, first, because the National Airports
Corporation "has lost its juridical personality," and, second, because agency of the Republic of the
Philippines, unincorporated and not possessing juridical personality under the law, is incapable of suing and
being sued."

Section 7 of Executive Order No. 365 reads:

 All records, properties, equipment, assets, rights, choses in action, obligations, liabilities and
contracts of the National Airport Corporation abolished under this Order, are hereby transferred to,
vested in, and assumed by, the Civil Aeronautics Administration. All works, construction, and
improvements made by the National Airports Corporation or any agency of the National Government
in or upon government airfields, including all appropriations or the unreleased and unexpended
balances thereof, shall likewise be transferred to the Civil Aeronautics Administration.

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 concession 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. And if it has the
power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have
the power to prosecute and defend suits for and against the National Airports Corporation, having acquired
all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the
National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics
Administration is to say that the government could impair the obligation of its corporations by the simple
expedient of converting them into unincorporated agencies.

But repudiation of the National Airports Corporation's obligation was far from the intention in its dissolution
and the setting up of the Civil Aeronautics Administration. Nor would such scheme work even if the executive
order had so expressly provided.

Not all government entities, whether corporate or non corporate, are immune from suits. Immunity from
suits is determined by the character of the obligations for which the entity was organized. The rule is thus
stated in Corpus Juris:

Suits against state agencies with relation to matters in which they have assumed to act in private or
nongovernment capacity, and various suits against certain corporations created by the state for public
purposes, but to engage in matters partaking more of the nature of ordinary business rather than
functions of a governmental or political character, are not regarded as suits against the state. The
Latter is true, although the state may own stock or property of such a corporation for by engaging in
business operations through a corporation the state divests itself so far of its sovereign character, and
by implication consents to suits against the corporation. (59 C. J., 313.)

This rule has been applied to such government agencies as State Dock Commissions carrying on business
relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs. U.S., 26 Fed. (2d) 480),
and State Highway Commissions created to build public roads, and given appropriations in advance to
discharge obligations incurred in that behalf (Arkansas State Highway Commission of Missouri vs. Bates,
269, S W 418.)

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. It is engaged in an enterprise which, far
from being the exclusive prerogative of state, may, more than the construction of public roads, be
undertaken by private concerns.

In the light of a well-established precedents, and as a matter of simple justice to the parties who dealt with
the National Airports Corporation on the faith of equality in the enforcement of their mutual commitments,
the Civil Aeronautics Administration may not, and should not, claim for itself the privileges and immunities of
the sovereign state.

The case of National Airports Corporation vs. Hon. V. Jimenez Yanzon et al., (89 Phil. 745), relied upon by
counsel, is not controlling. That was a labor dispute and can be distinguished from the case at bar in at least
one fundamental respect.
Involving labor demands and labor- management relations, any decision in that case would, if given force
and effect, operate prospectively and for an indefinite period against the Civil Aeronautics Administration
whose rights and obligations with respect to its officers and employees were regulated by the regular law on
civil service. Moreover, some of the petitioners might already have ceased. By Sections 5 and 8 of Executive
Order No. 365 all employees of the National Airports Corporation were, upon the latter's dissolution,
automatically separated from the service, and the part of the personnel whose employment was "necessary
and convenient" to the Civil Aeronautics Administration would have to be reappointed and, what was more
important, "in accordance with the Civil Service rules and regulations." If the petitioners in that case had
been absorbed into the Civil Aeronautics Administration, the Matters raised in their petition were outside the
jurisdiction of the Court of Industrial Relations, and of this Court on Appeal, to entertain. Their rights,
privileges, hours of work, and rates of compensation were already governed by the Civil Service Law.

The Philippine Airlines' third party-complaint is premised on the assumption that the National Airports
Corporation is still in existence, at least for the limited object of winding up its affairs under Section 77 of the
Corporation Law. Our opinion is that by its abolition that corporation stands abolished for all purposes. No
trustees, assignees or receivers have been designated to make a liquidation and, what is more, there is
nothing to liquidate. Everything the National Airports Corporation had, has been taken over by the Civil
Aeronautics Administration. To all legal intents and practical purposes, the National Airports Corporation is
dead and the Civil Aeronautics Administration is its heir or legal representative, acting by the law of its
creation upon its own rights and in its own name. The better practice then should have been to make the
Civil Aeronautics Administration the third party defendant instead of the National Airports Corporation. The
error, however, is purely procedural, not put in issue, and may be corrected by amendment of the pleadings
if deemed necessary.

Wherefore, the petition is denied with costs against the Civil Aeronautics Administration.

Paras, C. J., Feria, Pablo, Bengzon, Montemayor, Reyes and Bautista Angelo, JJ., concur.
BUREAU OF PRINTING VS BUREAU OF PRINTING EMPLOYEES

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.
MOBIL PHILS EXPLORATION VS CUSTOMS ARASTRE

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.

SANTIAGO VS REPUBLIC

G.R. No. L-48214 December 19, 1978

ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T. SANTIAGO, petitioner,

vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the Director, Bureau
of Plant Industry, and the Regional Director, Region IX, Zamboanga City, respondent,

Ahmad D. Sahak for petitioner.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez and Solicitor Mariano M.
Martinez for respondents.

FERNANDO, J.:

The first impression yielded by a perusal of this petition for certiorari is its inherent weakness considering the
explicit provision in the present Constitution prohibiting a suit against the Republic without its
consent. 1 Here petitioner Ildefonso Santiago 2 filed on August 9, 1976 an action in the Court of First
Instance of Zamboanga City naming as defendant the government of the Republic of the Philippines
represented by the Director of the Bureau of Plant Industry. 3 His plea was for the revocation of a deed of
donation executed by him and his spouse in January of 1971, 4 with the Bureau of Plant Industry as the
donee. As alleged in such complaint, such Bureau, contrary to the terms of the donation, failed to "install
lighting facilities and water system on the property donated and to build an office building and parking [lot]
thereon which should have been constructed and ready for occupancy on or before December 7, 1974. 5 That
led him to conclude that under the circumstances, he was exempt from compliance with such an explicit
constitutional command. The lower court, in the order challenged in this petition, was of a different view. It
sustained a motion to dismiss on the part of the defendant Republic of the Philippines, now named as one of
the respondents, the other respondent being the Court of First Instance of Zamboanga City, Branch II. It
premised such an order on the settled "rule that the state cannot be sued without its consent. This is so,
because the New Constitution of the Philippines expressly provides that the state may not be sued without
its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the com ment on the petition filed with this Court, is
for the affirmance of the order of dismissal of respondent Court precisely to accord deference to the above
categorical constitutional mandate.

On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is impressed with the
unique aspect of this petition for certiorari, dealing as it does with a suit for the revocation of a donation to
the Republic, which allegedly fatted to conform with what was agreed to by the donee. If an order of
dismissal would suffice, then the element of unfairness enters, the facts alleged being hypothetically
admitted. It is the considered opinion of this Court then that to conform to the high dictates of equity and
justice, the presumption of consent could be indulged in safely. That would serve to accord to petitioner as
plaintiff, at the very least, the right to be heard. certiorari lies.

1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in language plain
and unmistakable: "The State may not be sued without its consent. 8 The Republic cannot be proceeded
against unless it allows itself to be sued. Neither can a department, bureau, agency, office, or
instrumentality of the government where the suit, according to the then Justice, now Chief Justice, Castro in
Del Mar v. Philippine Veterans Administration, 9 may result "in adverse consequences to the public treasury,
whether in the disbursements of funds or loss of property. 10 Such a doctrine was reiterated in the following
cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v.
Francisco, 13 and Republic v. Purisima. 14

2. It is contended by counsel for petitioner that the above constitutional provision would be given a
retroactive application in this case if the suit for the revocation of donation were dismissed. That is not the
case at all. In Republic v. Purisima, this Court made clear that such a basic postulate is part and parcel of the
system of government implanted in the Philippines from the time of the acquisition of sovereignty by the
United States, and therefore, was implicit in the 1935 Constitution even in the absence of any explicit
language to that effect. This it did in a citation from Switzerland General Insurance Co., Ltd. v. Republic of
the Philippines: 15 "The doctrine of non-suability recognized in this jurisdiction even prior to the effectivity of
the [1935] Constitution is a logical corollary of the positivist concept of law which, to paraphrase Holmes,
negates the assertion of any legal right as against the state, in itself the source of the law on which such a
right may be predicated. Nor is this all. Even if such a principle does give rise to problems, considering the
vastly expanded role of government enabling it to engage in business pursuits to promote the general
welfare, it is not obeisance to the analytical school of thought alone that calls for its continued
applicability. 16 That is the teaching of the leading case of Mobil Philippines Exploration, Inc. v. Customs
Arrastre Service, 17 promulgated in December of 1966. As a matter of fact, the Switzerland General
Insurance Co. decision was the thirty-seventh of its kind after Mobil. Clearly, then, the contention that to
dismiss the suit would be to give the applicable constitutional provision a retroactive effect is, to put it at its
mildest, untenable.

3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough analysis ought to have
cautioned him against reliance on such a case. It was therein clearly pointed out that the government entity
involved was originally the National Airports Corporation. Thereafter, it "was abolished by Executive Order
No. 365, series of 1950, and in its place and stead the Civil Aeronautics Administration was created and took
over all the assets and assumed all the liabilities of the abolished corporation. The Civil Aeronautics
Administration, even if it is not a juridical entity, cannot legally prevent a party or parties from enforcing
their proprietary rights under the cloak or shield of lack of juridical personality, because to took over all the
powers and assumed all the obligations of the defunct corporation which had entered into the contract in
question." 19 Then came National Shipyard and Steel Corporation v. Court of Industrial Relations, 20 a 1963
decision, where the then Justice, later Chief Justice, Concepcion, as ponente, stated that a government-
owned and controlled corporation "has a personality of its own distinct and separate from that of the
government. ... Accordingly, it may sue and be sued and may be subjected to court processes just like any
other corporation. (Section 13, Act 1459, as amended). 21 In three recent decisions, Philippine National Bank
v. Court of Industrial Relations, 22 Philippine National Bank v. Honorable Judge Pabalan, 23and Philippine
National Railways v. Union de Maquinistas, 24 this constitutional provision on non-suability was unavailing in
view of the suit being against a government-owned or controlled corporation. That point apparently escaped
the attention of counsel for petitioner. Hence Santos v. Santos is hardly controlling.

4. It is to be noted further that the trend against the interpretation sought to be fastened in the broad
language of Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M. Gatmaitan, 25 decided
in 1957, it was held that an action [against] Government officials, is essentially one against the Government,
... . 26 In the same year, this Court, in Angat River Irrigation System v. Angat River Workers 27 Union, after
referring to the "basic and fundamental principle of the law that the Government cannot be sued before
courts of justice without its consent," pointed out that "this privilege of non-suability of the Government"
covers with the mantle of its protection "an entity," in this case, the Angat River Irrigation System. 28 Then,
in 1960, came Lim v. Brownell, Jr., 29 where there was a reaffirmation of the doctrine that a "claim
[constituting] a charge against, or financial liability to, the Government cannot be entertained by the courts
except with the consent of said government. 30 Bureau of Printing v. Bureau of Printing Employees
Association 31 came a year later; it reiterated such a doctrine. It was not surprising therefore that in 1966,
Mobil Philippines Exploration, Inc. was decided the way it was. The remedy, where the liability is based on
contract, according to this Court, speaking through Justice J. P. Bengzon, is for plaintiff to file a claim with
the general office in accordance with the controlling statute, Commonwealth Act No. 327. 32 To repeat, that
doctrine has been adhered to ever since. The latest case in point is Travelers Indemnity Company v. Barber
Steamship Lines, Inc. 33 Justice Aquino's opinion concluded with this paragraph: "It is settled that the Bureau
of Customs, acting as part of the machinery of the national government in the operation of the arrastre
service, is immune from suit under the doctrine of non-suability of the State. The claimant's remedy to
recover the loss or damage to the goods under the custody of the customs arrastre service is to file a claim
with the Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. 327. 34 With the
explicit provision found in the present Constitution, the fundamental principle of non-suability becomes even
more exigent in its command.

5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily follow that
this suit cannot prosper. Nonetheless, as set forth at the outset, there is a novel aspect that suffices to call
for a contrary conclusion. It would be manifestly unfair for the Republic, as donee, alleged to have violated
the conditions under which it received gratuitously certain property, thereafter to put as a barrier the
concept of non-suitability. That would be a purely one-sided arrangement offensive to one's sense of justice.
Such conduct, whether proceeding from an individual or governmental agency, is to be condemned. As a
matter of fact, in case it is the latter that is culpable, the affront to decency is even more manifest. The
government, to paraphrase Justice Brandeis, should set the example. If it is susceptible to the charge of
having acted dishonorably, then it forfeits public trust-and rightly so.

6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a suit may be filed.
Consent need not be express. It can be implied. So it was more than implied in Ministerio v. Court of First
Instance of Cebu: 35 "The doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice on a citizen. 36 The fact that this decision arose from a suit against the Public
Highways Commissioner and the Auditor General for failure of the government to pay for land necessary to
widen a national highway, the defense of immunity without the consent proving unavailing, is not material.
The analogy is quite obvious. Where the government ordinarily benefited by the taking of the land, the
failure to institute the necessary condemnation proceedings should not be a bar to an ordinary action for the
collection of the just compensation due. Here, the alleged failure to abide by the conditions under which a
donation was given should not prove an insuperable obstacle to a civil action, the consent likewise being
presumed. This conclusion is strengthened by the fact that while a donation partakes of a contract, there is
no money claim, and therefore reliance on Commonwealth Act No. 327 would be futile.

7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the Republic or any
of its agency being the donee, is entitled to go to court in case of an alleged breach of the conditions of such
donation. He has the right to be heard. Under the circumstances, the fundamental postulate of non-suability
cannot stand in the way. It is made to accommodate itself to the demands of procedural due process, which
is the negation of arbitrariness and inequity. The government, in the final analysis, is the beneficiary. It
thereby manifests its adherence to the highest ethical standards, which can only be ignored at the risk of
losing the confidence of the people, the repository of the sovereign power. The judiciary under this
circumstance has the grave responsibility of living up to the ideal of objectivity and impartiality, the very
essence of the rule of law. Only by displaying the neutrality expected of an arbiter, even if it happens to be
one of the departments of a litigant, can the decision arrived at, whatever it may be, command respect and
be entitled to acceptance.

WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of October 20, 1977 is
nullified, set aside and declared to be without force and effect. The Court of First Instance of Zamboanga
City, Branch II, is hereby directed to proceed with this case, observing the procedure set forth in the Rules of
Court. No costs.

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

AMIGABLE VS CUENCA

G.R. No. L-26400 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant,

vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE
PHILIPPINES, defendants-appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977,
dismissing the plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu
City as shown by Transfer Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No.
RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu on February 1, 1924. No annotation in
favor of the government of any right or interest in the property appears at the back of the certificate.
Without prior expropriation or negotiated sale, the government used a portion of said lot, with an area of
6,167 square meters, for the construction of the Mango and Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and very
narrow, unlike the wide and beautiful avenues that they are now," and "that the tracing of said roads was
begun in 1924, and the formal construction in
1925." *

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the
portion of her lot which had been appropriated by the government. The claim was indorsed to the Auditor
General, who disallowed it in his 9th Indorsement dated December 9, 1958. A copy of said indorsement was
transmitted to Amigable's counsel by the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17,
1959 upon motion of the defendants, against the Republic of the Philippines and Nicolas Cuenca, in his
capacity as Commissioner of Public Highways for the recovery of ownership and possession of the 6,167
square meters of land traversed by the Mango and Gorordo Avenues. She also sought the payment of
compensatory damages in the sum of P50,000.00 for the illegal occupation of her land, moral damages in
the sum of P25,000.00, attorney's fees in the sum of P5,000.00 and the costs of the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations of the
complaint and interposing the following affirmative defenses, to wit: (1) that the action was premature, the
claim not having been filed first with the Office of the Auditor General; (2) that the right of action for the
recovery of any amount which might be due the plaintiff, if any, had already prescribed; (3) that the action
being a suit against the Government, the claim for moral damages, attorney's fees and costs had no valid
basis since as to these items the Government had not given its consent to be sued; and (4) that inasmuch as
it was the province of Cebu that appropriated and used the area involved in the construction of Mango
Avenue, plaintiff had no cause of action against the defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial
court proceeded to receive the plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision
holding that it had no jurisdiction over the plaintiff's cause of action for the recovery of possession and
ownership of the portion of her lot in question on the ground that the government cannot be sued without its
consent; that it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for
compensatory damages in the sum of P50,000.00, the same being a money claim against the government;
and that the claim for moral damages had long prescribed, nor did it have jurisdiction over said claim
because the government had not given its consent to be sued. Accordingly, the complaint was dismissed.
Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently
certified the case to Us, there being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of the case.

In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a claim for payment of the value of a
portion of land used for the widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice
Enrique M. Fernando, held that where the government takes away property from a private landowner for
public use without going through the legal process of expropriation or negotiated sale, the aggrieved party
may properly maintain a suit against the government without thereby violating the doctrine of governmental
immunity from suit without its consent. We there said: .

... . If the constitutional mandate that the owner be compensated for property taken for public
use were to be respected, as it should, then a suit of this character should not be summarily
dismissed. The doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice on a citizen. Had the government followed the procedure indicated by
the governing law at the time, a complaint would have been filed by it, and only upon payment
of the compensation fixed by the judgment, or after tender to the party entitled to such
payment of the amount fixed, may it "have the right to enter in and upon the land so
condemned, to appropriate the same to the public use defined in the judgment." If there were
an observance of procedural regularity, petitioners would not be in the sad plaint they are
now. It is unthinkable then that precisely because there was a failure to abide by what the law
 requires, the government would stand to benefit. It is just as important, if not more so, that
there be fidelity to legal norms on the part of officialdom if the rule of law were to be
maintained. It is not too much to say that when the government takes any property for public
use, which is conditioned upon the payment of just compensation, to be judicially ascertained,
it makes manifest that it submits to the jurisdiction of a court. There is no thought then that
the doctrine of immunity from suit could still be appropriately invoked.

Considering that no annotation in favor of the government appears at the back of her certificate of title and
that she has not executed any deed of conveyance of any portion of her lot to the government, the appellant
remains the owner of the whole lot. As registered owner, she could bring an action to recover possession of
the portion of land in question at anytime because possession is one of the attributes of ownership. However,
since restoration of possession of said portion by the government is neither convenient nor feasible at this
time because it is now and has been used for road purposes, the only relief available is for the government
to make due compensation which it could and should have done years ago. To determine the due
compensation for the land, the basis should be the price or value thereof at the time of the taking. 2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of
the land from the time it was taken up to the time that payment is made by the government.3 In addition,
the government should pay for attorney's fees, the amount of which should be fixed by the trial court after
hearing.

WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the court a quo for
the determination of compensation, including attorney's fees, to which the appellant is entitled as above
indicated. No pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar JJ.,
concur.