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G.R.No.

L36084August31,1977
REPUBLICOFTHEPHILIPPINES,petitioner,
vs.
HONORABLEAMANTEP.PURISIMA,thePresidingJudgeofthecourtoffirstInstanceof
Manila(BranchVII),andYELLOWBALLFREIGHTLINES,INC.,respondents.
SolicitorGeneralEstelitoP.Mendoza,AssistantSolicitorGeneralSantiagoM.Kapunan,Solicitor
OscarC.FernandezandSpecialAttorneyRenatoP.Mabugatforpetitioner.
JoseQ.Calingoforprivaterespondent.

FERNANDO,ActingC.J.:
ThejurisdictionalissuedraisedbySolicitorGeneralEstelitoP.MendozaonbehalfoftheRepublic
ofthePhilippinesinthiscertiorariandprohibitionproceedingarosefromthefailureofrespondent
JudgeAmanteP.PurisimaoftheCourtofFirstInstanceofManilatoapplythewellknownandof
reiterateddoctrineofthenonsuabilityofaState,includingitsofficesandagencies,fromsuit
withoutitsconsent.itwassoallegedinamotiontodismissfiledbydefendantRiceandCorn
AdministrationinapendingcivilsuitinthesalaofrespondentJudgeforthecollectionofamoney
claimarisingfromanallegedbreachofcontract,theplaintiffbeingprivaterespondentYellowBall
FreightLines,Inc.1SuchamotiontodismisswasfiledonSeptember7,1972.Atthattime,the
leadingcaseofMobilPhilippinesExploration,Inc.v.CustomsArrastreService,2wereJustice
Bengzonstressedthelackofjurisdictionofacourttopassonthemeritsofaclaimagainstany
officeorentityactingaspartofthemachineryofthenationalgovernmentunlessconsentbeshown,
hadbeenappliedin53otherdecisions.3Thereisthusmorethansufficientbasisforanallegationof
jurisdictioninfirmityagainsttheorderofrespondentJudgedenyingthemotiontodismissdated
October4,1972.4Whatismore,thepositionoftheRepublichasbeenfortifiedwiththeexplicit

affirmationfoundinthisprovisionofthepresentConstitution:"TheStatemaynotbesuedwithout
itsconsent."5
Themeritofthepetitionforcertiorariandprohibitionisthusobvious.
1.ThereispertinencetothisexcerptfromSwitzerlandGeneralInsuranceCo.,Ltd.v.Republicof
thePhilippines:6"Thedoctrineofnonsuabilityrecognizedinthisjurisdictionevenpriortothe
effectivityofthe[1935]Constitutionisalogicalcorollaryofthepositivistconceptoflawwhich,to
paraphraseHolmes,negatestheassertionofanylegalrightasagainstthestate,initselfthesource
ofthelawonwhichsucharightmaybepredicated.Noristhisall.lwphl@itEvenifsucha
principledoesgiverisetoproblems,consideringthevastlyexpandedroleofgovernmentenabling
ittoengageinbusinesspursuitstopromotethegeneralwelfare,itisnotobeisancetotheanalytical
schoolofthoughtalonethatcallsforitscontinuedapplicability.Whyitmustcontinuetobeso,
evenifthematterbeviewedsociologically,wassetforthinProvidenceWashingtonInsuranceCo.
v.Republicthus:"Nonetheless,acontinuedadherencetothedoctrineofnonsuabilityisnottobe
deploredforasagainsttheinconveniencethatmaybecausedprivateparties,thelossof
governmentalefficiencyandtheobstacletotheperformanceofitsmultifariousfunctionsarefar
greaterifsuchafundamentalprinciplewereabandonedandtheavailabilityofjudicialremedywere
notthusrestricted.Withthewellknownpropensityonthepartofourpeopletogothecourt,atthe
leastprovocation,thelossoftimeandenergyrequiredtodefendagainstlawsuits,intheabsenceof
suchabasicprinciplethatconstitutessuchaneffectiveobstacle,couldverywellbeimagined."7It
onlyremainstobeaddedthatunderthepresentConstitutionwhich,asnoted,expresslyreaffirmed
suchadoctrine,thefollowingdecisionshadbeenrendered:Delmarv.ThePhilippineveterans
Administration;8Republicv.Villasor;9Saysonv.Singson;10andDirectoroftheBureauof
Printingv.Francisco.11
2.Equallyso,thenextparagraphintheaboveopinionfromtheSwitzerlandGeneralInsurance

Companydecisionislikewiserelevant:"Norisinjusticetherebycauseprivateparties.Theycould
stillproceedtoseekcollectionoftheirmoneyclaimsbypursuingthestatutoryremedyofhaving
theAuditorGeneralpassuponthemsubjecttoappealtojudicialtribunalsforfinaladjudication.
WecouldthuscorrectlyconcludeaswedidinthecitedProvindenceWashingtonInsurance
decision:"Thusthedoctrineofnonsuabilityofthegovernmentwithoutitsconsent,asithas
operatedinpractice,hardlylendsitselftothechargethatitcouldbethefruitfulparentofinjustice,
consideringthevastandeverwideningscopeofstateactivitiesatpresentbeingundertaken.
Whateverdifficultiesforprivateclaimantsmaystillexist,is,fromanobjectiveappraisalofall
factors,minimal.Inthebalancingofinterests,sounavoidableinthedeterminationofwhat
principlesmustprevailifgovernmentistosatisfythepublicweal,theverdictmustbe,asithas
beenthesesomanyyears,foritscontinuingrecognitionasafundamentalpostulateof
constitutionallaw."12
3.ApparentlyrespondentJudgewasmisledbythetermsofthecontractbetweentheprivate
respondent,plaintiffinhissala,anddefendantRiceandCornAdministrationwhich,accordingto
him,anticipatedthecaseofabreachofcontractwithinthepartiesandthesuitsthatmaythereafter
arise.13Theconsent,tobeeffectivethough,mustcomefromtheStateactingthroughaduly
enactedstatuteaspointedoutbyJusticeBengzoninMobil.Thus,whatevercounselfordefendant
RiceandCornAdministrationagreedtohadnobindingforceonthegovernment.Thatwasclearly
beyondthescopeofhisauthority.Atanyrate,JusticeSanchez,inRamosv.CourtofIndustrial
Relations,14wasquitecategoricalastoits"not[being]possessedofaseparateanddistinct
corporateexistence.Onthecontrary,bythelawofitscreation,itisanofficedirectly'underthe
OfficeofthePresidentofthePhilippines."15
WHEREFORE,thepetitionerforcertiorariisgrantedandtheresolutionofOctober4,1972
denyingthemotiontodismissfiledbytheRiceandCornAdministrationnullifiedandsetasideand

thepetitionerforprohibitionislikewisegrantedrestrainingrespondentJudgefromactingoncivil
CaseNo.79082pendinginhissalaexceptforthepurposeoforderingitsdismissalforlackof
jurisdiction.ThetemporaryrestrainingorderissuedonFebruary8,1973bythisCourtismade
permanentterminatingthiscase.CostsagainstYellowBallFreightLines,Inc.
Antonio,Aquino,Concepcion,Jr.andSantos,JJ.,concur.
Barredo,J.,tooknopart.

G.R.No.L6060September30,1954
FERNANDOA.FROILAN,plaintiffappellee,
vs.
PANORIENTALSHIPPINGCO.,defendantappellant,
REPUBLICOFTHEPHILIPPINES,intervenorappellee.
Quisumbing,Sycip,QuisumbingandSalazar,forappellant.
ErnestoZaragozaforappellee.
HilarionU.Jarenciofortheintervenor.
PARAS,C.J.:
Thefactualantecedentsofthiscasearesufficientlyrecitedinthebrieffiledbytheintervenor
appelleeasfollows:
1.OnFebruary3,1951,plaintiffappellee,FernandoA.Froilan,filedacomplaintagainstthe
defendantappellant,PanOrientalShippingCo.,allegingthathepurchasedfromtheShipping
CommissionthevesselFS197forP200,000,payingP50,000downandagreeingtopaythe
balanceininstallments;thattosecurethepaymentofthebalanceofthepurchaseprice,he
executedachattelmortgageofsaidvesselinfavoroftheShippingCommission;thatfor
variousreason,amongthemthenonpaymentoftheinstallments,theShippingCommission
tookpossessionofsaidvesselandconsideredthecontractofsalecancelled;thattheShipping
CommissioncharteredanddeliveredsaidvesseltothedefendantappellantPanOriental
ShippingCo.subjecttotheapprovalofthePresidentofthePhilippines;thatheappealedthe

actionoftheShippingCommissiontothePresidentofthePhilippinesand,initsmeetingon
August25,1950,theCabinetrestoredhimtoallhisrightsunderhisoriginalcontractwiththe
ShippingCommission;thathehadrepeatedlydemandedfromthePanOrientalShippingCo.
thepossessionofthevesselinquestionbutthelatterrefusedtodoso.He,therefore,prayed
that,upontheapprovalofthebondaccompanyinghiscomplaint,awritofreplevinbeissued
fortheseizureofsaidvesselwithallitsequipmentandappurtenances,andthatafterhearing,
hebeadjudgedtohavetherightfulpossessionthereof(Rec.onApp.pp.28).
2.OnFebruary3,1951,thelowercourtissuedthewritofreplevinprayedforbyFroilanand
byvirtuethereofthePanOrientalShippingCo.wasdivestedofitspossessionofsaidvessel
(Rec.onApp.p.47).
3.OnMarch1,1951,PanOrientalShippingCo.fileditsanswerdenyingtherightofFroilan
tothepossessionofthesaidvessel;itallegedthattheactionoftheCabinetonAugust25,
1950,restoringFroilantohisrightsunderhisoriginalcontractwiththeShippingCommission
wasnullandvoid;that,inanyevent,Froilanhadnotcompliedwiththeconditionsprecedent
imposedbytheCabinetfortherestorationofhisrightstothevesselundertheoriginal
contract;thatitsuffereddamagesintheamountofP22,764.59forwrongfulreplevininthe
monthofFebruary,1951,andthesumofP17,651.84amonthasdamagessufferedfor
wrongfulreplevinfromMarch1,1951;itallegedthatithadincurrednecessaryanduseful
expensesonthevesselamountingtoP127,057.31andclaimedtherighttoretainsaidvessel
untilitsusefulandnecessaryexpenseshadbeenreimbursed(Rec.onApp.pp.853).
4.OnNovember10,1951,aftertheleaveofthelowercourthadbeenobtained,theintervenor
appellee,GovernmentoftheRepublicofthePhilippines,filedacomplaintinintervention
allegingthatFroilanhadfailedtopaytotheShippingCommission(whichnamewaslater
changedtoShippingAdministration)thebalancedueonthepurchasepriceofthevesselin

question,theinterestthereon,anditsadvancesoninsurancepremiumtotallingP162,142.95,
excludingthedrydockingexpensesincurredonsaidvesselbythePanOrientalShippingCo.;
thatintervenorwasentitledtothepossessionofthesaidvesseleitherunderthetermsofthe
originalcontractassupplementedbyFroilan'sletterdatedJanuary28,1949,orinorderthatit
maycausetheextrajudicialsalethereofundertheChattelMortgageLaw.It,therefore,prayed
thatFroilanbeorderedtodeliverthevesselinquestiontoitsauthorizedrepresentative,the
BoardofLiquidators;thatFroilanbedeclaredtobewithoutanyrightsonsaidvesselandthe
amountshepaidthereonforfeitedoralternately,thatthesaidvesselbedeliveredtotheBoard
ofLiquidatorsinorderthattheintervenormayhaveitschattelmortgageextrajudicially
foreclosedinaccordancewiththeprovisionsoftheChattelMortgageLaw;andthatpending
thehearingonthemerits,thesaidvesselbedeliveredtoit(Rec.onApp.pp.5466).
5.OnNovember29,1951,thePanOrientalShippingCo.filedananswertothecomplaintin
interventionallegingthattheGovernmentoftheRepublicofthePhilippineswasobligatedto
deliverthevesselinquestiontoitbyvirtueofacontractofbareboatcharterwithoptionto
purchaseexecutedonJune16,1949,bythelatterinfavoroftheformer;italsoallegedthatit
hadmadenecessaryandusefulexpensesonthevesselandclaimedtherightofretentionofthe
vessel.It,therefore,prayedthat,iftheRepublicofthePhilippinessucceededinobtaining
possessionofthesaidvessel,tocomplywithitsobligationsofdeliveringtoit(PanOriental
Shippingco.)orcausingitsdeliverybyrecoveringitfromFroilan(Rec.onApp.pp.6981).
6.OnNovember29,1951,FroilantenderedtotheBoardofLiquidators,whichwasliquidating
theaffairsoftheShippingAdministration,acheckintheamountofP162,576.96inpayment
ofhisobligationtotheShippingAdministrationforthesaidvesselasclaimedinthecomplaint
ininterventionoftheGovernmentoftheRepublicofthePhilippines.TheBoardof
Liquidatorsissuedanofficialreportthereforstatingthatitwasa'depositpendingtheissuance

ofanorderoftheCourtofFirstInstanceofManila'(Rec.onApp.pp.9293).
7.OnDecember7,1951,theGovernmentoftheRepublicofthePhilippinesbroughtthe
matterofsaidpaymentandthecircumstancesurroundingittotheattentionofthelowercourt
"inorderthattheymaybetakenintoaccountbythisHonorableCourtinconnectionwiththe
questionsthatarenotpendingbeforeitfordetermination"(Rec.onApp.pp.8286).
8.OnFebruary3,1952,thelowercourtheldthatthepaymentbyFroilanoftheamountof
P162,576.96onNovember29,1951,totheBoardofLiquidatorsconstitutedapaymentanda
dischargeofFroilan'sobligationtotheGovernmentoftheRepublicofthePhilippinesand
orderedthedismissalofthelatter'scomplaintinintervention.Inthesameorder,thelower
courtmadeitveryclearthatsaidorderdidnotprejudgethequestioninvolvedbetween
FroilanandtheOrientalShippingCo.whichwasalsopendingdeterminationinsaidcourt
(Rec.onApp.pp.9293).Thisorderdismissingthecomplaintinintervention,butreserving
forfutureadjudicationthecontroversybetweenFroilanandthePanOrientalShippingCo.has
alreadybecomefinalsinceneithertheGovernmentoftheRepublicofthePhilippinesnorthe
PanOrientalShippingCo.hadappealedtherefrom.
9.OnMay10,1952,theGovernmentoftheRepublicofthePhilippinesfiledamotionto
dismissthecounterclaimofthePanOrientalShippingCo.againstitonthegroundthatthe
purposeofsaidcounterclaimwastocompeltheGovernmentoftheRepublicofthe
Philippinestodeliverthevesseltoit(PanOrientalShippingCo.)intheeventthatthe
GovernmentoftheRepublicofthePhilippinesrecoversthevesselinquestionfromFroilan.In
view,however,oftheorderofthelowercourtdatedFebruary3,holdingthatthepayment
madebyFroilantotheBoardofLiquidatorsconstitutedfullpaymentofFroilan'sobligationto
theShippingAdministration,whichorderhadalreadybecomefinal,theclaimofthePan
OrientalShippingCo.againsttheRepublicofthePhilippineswasnolongerfeasible,said

counterclaimwasbarredbypriorjudgmentandstatednocauseofaction.Itwasalsoalleged
thatmovantwasnotsubjecttothejurisdictionofthecourtinconnectionwiththe
counterclaim.(Rec.onApp.pp.9497).ThismotionwasopposedbythePanOriental
ShippingCo.initswrittenoppositiondatedJune4,1952(Rec.onapp.pp.19104).
10.InanorderdatedJuly1,1952,thelowercourtdismissedthecounterclaimofthePan
OrientalShippingCo.asprayedforbytheRepublicofthePhilippines(Rec.onApp.pp.104
106).
11.ItiffromthisorderofthelowercourtdismissingitscounterclaimagainsttheGovernment
oftheRepublicofthePhilippinesthatPanOrientalShippingCo.hasperfectedthepresent
appeal(Rec.onApp.p.107).
TheorderoftheCourtofFirstInstanceofManila,dismissingthecounterclaimofthedefendant
PanOrientalShippingCo.,fromwhichthelatterhasappealed,readsasfollows:
Thisisamotiontodismissthecounterclaiminterposedbythedefendantinitsanswertothe
complaintinintervention.
"Thecounterclaimstatesasfollows:
"COUNTERCLAIM
"AscounterclaimagainsttheintervenorRepublicofthePhilippines,thedefendantalleges:
"1.Thatthedefendantreproduceshereinallthepertinentallegationsoftheforegoinganswer
tothecomplaintinintervention
"2.That,asshownbytheallegationsoftheforegoinganswertothecomplaintinintervention,
thedefendantPanOrientalShippingCompanyisentitledtothepossessionofthevesseland
theintervenorRepublicofthePhilippinesisboundunderthecontractofcharterwithoptionto
purchaseitenteredintowiththedefendanttodeliverthatpossessiontothedefendant
whetheritactuallyhasthesaidpossessionoritdoesnothavethatpossessionfromtheplaintiff

FernandoA.Froilananddeliverthesametothedefendant;
"3.That,notwithstandingdemand,theintervenorRepublicofthePhilippineshasnottodate
compliedwithitsobligationofdeliveringorcausingthedeliveryofthevesseltothedefendant
PanOrientalShippingCompany.1wphl.nt
"RELIEF
"WHEREFORE,thedefendantrespectfullypraysthatjudgmentberenderedorderingthe
intervenorRepublicofthePhilippinesalternativelytodelivertothedefendantsthepossession
ofthesaidvessel,ortocomplywithitsobligationtothedefendantorcausingthedeliveryto
thelatterofthesaidvesselbyrecoveringthesamefromplaintiff,withcosts.
"ThedefendantpraysforsuchotherremedyastheCourtmaydeemjustand
equitableinthepremises."
Thegroundofthemotiontodismissare(a)Thatthecauseofactionisbarredbyprior
judgment;(b)Thatthecounterclaimstatesnocauseofaction;and(c)ThatthisHonorable
CourthasnojurisdictionovertheintervenorgovernmentoftheRepublicofthePhilippinesin
connectionwiththecounterclaimofthedefendantPanOrientalShippingCo.
Theintervenorcontendsthatthecomplaintininterventionhavingbeendismissedandno
appealhavingbeentaken,thedismissalofsaidcomplaintistantamounttoajudgment.
ThecomplaintininterventiondidnotcontainanyclaimwhatsoeveragainstthedefendantPan
OrientalShippingCo.;hence,thecounterclaimhasnofoundation.
ThequestionastowhethertheCourthasjurisdictionovertheintervenorwithregardtothe
counterclaim,theCourtisoftheopinionthatithasnojurisdictionoversaidintervenor.
Itappearing,therefore,thatthegroundsofthemotiontodismissarewelltaken,the
counterclaimofthedefendantisdismissed,withoutpronouncementastocosts.
Thedefendant'sappealispredicateduponthefollowingassignmentsoferror:

I.Thelowercourterredindismissingthecounterclaimonthegroundofpriorjudgment.
II.Thelowercourterredindismissingthecounterclaimonthegroundthatthecounterclaim
hadnofoundationbecausemadetoacomplaintininterventionthatcontainednoclaimagainst
thedefendant.
III.Thelowercourterredindismissingthecounterclaimonthegroundofallegedlackof
jurisdictionovertheintervenorRepublicofthePhilippines.
Weagreewithappellant'scontentionthatitscounterclaimisnotbarredbypriorjudgment(orderof
February8,1952,dismissingthecomplaintinintervention),first,becausesaidcounterclaimwas
filedonNovember29,1951,beforetheissuanceoftheorderinvoked;and,secondly,becausein
saidorderofFebruary8,thecourtdismissedthecomplaintinintervention,"without,ofcourse,
precludingthedeterminationoftherightofthedefendantintheinstantcase,"andsubjecttothe
conditionthatthe"releaseandcancellationofthechattelmortgagedoesnot,however,prejudgethe
questioninvolvedbetweentheplaintiffandthedefendantwhichisstillthesubjectofdetermination
inthiscase."Itistobenotedthatthefirstconditionreferredtotherightofthedefendant,as
distinguishedfromthesecondconditionthatexpresslyspecifiedthecontroversybetweenthe
plaintiffandthedefendant.Thatthefirstconditionreservedtherightofthedefendantasagainstthe
intervenor,isclearlytobededucedfromthefactthattheorderofFebruary8mentionedthe
circumstancethat"thequestionoftheexpensesofdrydockingincurredbythedefendanthasbeen
includedinitscounterclaimagainsttheplaintiff,"apparentlyasoneofthegroundsforgrantingthe
motiontodismissthecomplaintinintervention.
Thedefendant'sfailuretoappealfromtheorderofFebruary8cannot,therefore,beheldasbarring
thedefendantfromproceedingwithitscounterclaim,since,asalreadystated,saidorderpreserved
itsrightasagainsttheintervenor.Indeed,themaintenanceofsaidrightisinconsonancewithRule
30,section2,oftheRulesofCourtprovidingthat"ifacounterclaimhasbeenpleadedbya

defendantpriortotheserviceuponhimoftheplaintiff'smotiontodismiss,theactionshallnotbe
dismissedagainstthedefendant'sobjectionunlessthecounterclaimcanremainpendingfor
independentadjudicationbythecourt."
Thelowercourtalsoerredinholdingthat,astheintervenorhadnotmadeanyclaimagainstthe
defendant,thelatter'scounterclaimhadnofoundation.Thecomplaintininterventionsoughtto
recoverpossessionofthevesselinquestionfromtheplaintiff,andthisclaimislogicallyadverseto
thepositionassumedbythedefendantthatithasabetterrighttosaidpossessionthantheplaintiff
whoallegesinhiscomplaintthatheisentitledtorecoverthevesselfromthedefendant.Atanyrate
acounterclaimshouldbejudgedbyitsownallegations,andnotbytheavermentsoftheadverse
party.Itshouldberecalledthatthedefendant'stheoryisthattheplaintiffhadalreadylosthisrights
underthecontractwiththeShippingAdministrationandthat,ontheotherhand,thedefendantis
relyingonthechartercontractexecutedinitsfavorbytheintervenorwhichisboundtoprotectthe
defendantinitspossessionofthevessel.Inotherwords,thecounterclaimcallsforspecific
performanceonthepartoftheintervenor.Astowhetherthiscounterclaimismeritoriousisanother
questionwhichisnotnowbeforeus.
Theothergroundfordismissingthedefendant'scounterclaimisthattheStateisimmunefromsuit.
Thisisuntenable,becausebyfilingitscomplaintininterventiontheGovernmentineffectwaived
itsrightofnonsuability.
Theimmunityofthestatefromsuitsdoesnotdepriveitoftherighttosueprivatepartiesinits
owncourts.Thestateasplaintiffmayavailitselfofthedifferentformsofactionsopento
privatelitigants.Inshort,bytakingtheinitiativeinanactionagainstaprivateparty,thestate
surrendersitsprivilegedpositionandcomesdowntothelevelofthedefendant.Thelatter
automaticallyacquires,withincertainlimits,therighttosetupwhateverclaimsandother
defenseshemighthaveagainstthestate.TheUnitedStatesSupremeCourtthusexplains:

"NodirectsuitcanbemaintainedagainsttheUnitedStates.Butwhenanactionis
broughtbytheUnitedStatestorecovermoneyinthehandsofapartywhohasalegal
claimagainstthem,itwouldbeaveryrigidprincipletodenytohimtherightofsetting
upsuchclaiminacourtofjustice,andturnhimaroundtoanapplicationtoCongress."
(Sinco,PhilippinePoliticalLaw,TenthEd.,pp.3637,citingU.S.vs.Ringgold,8Pet.
150,8L.ed.899.)
Itishowever,contendedfortheintervenorthat,iftherewasatallanywaiver,itwasinfavorofthe
plaintiffagainstwhomthecomplaintininterventionwasdirected.Thiscontentionisuntenable.As
alreadystated,thecomplaintininterventionwasinasenseinderogationofthedefendant'sclaim
overthepossessionofthevesselinquestion.
Wherefore,theappealedorderisherebyreversedandsetasideandthecaseremandedtothelower
courtforfurtherproceedings.Soordered,withoutcosts.
Pablo,Padilla,Montemayor,Reyes,A.,Jugo,BautistaAngelo,Concepcion,andReyes,J.B.L.,
JJ.,concur.

G.R.No.L8587March24,1960
BENITOE.LIM,asadministratoroftheIntestateEstateofArseniaEnriquez,plaintiff
appellant,
vs.
HERBERTBROWNELL,JR.,AttorneyGeneraloftheUnitedStates,andASAICHI
KAGAWA,defendantsappellee,REPUBLICOFTHEPHILIPPINES,intervenorappellee.
AngelS.Gamboaforappellant.
Townsend,Gilbert,SantosandPatajoforappellee.
AlfredoCatolicoforintervenor.
GUTIERREZDAVID,J.:
ThisisanappealfromanorderoftheCourtofFirstInstanceofManila,dismissingplaintiff's
actionfortherecoveryofrealpropertyforlackofjurisdictionoverthesubjectmatter.
ThepropertyindisputeconsistsoffourparcelsoflandsituatedinTondo,CityofManila,witha
totalareaof29,151squaremeters.Thelandswere,afterthelastworldwar,foundbytheAlien
PropertyCustodianoftheUnitedStatestoberegisteredinthenameofAsaichiKagawa,nationalof
anenemycountry,Japan,asevidencedbyTransferCertificatesofTitleNos.64904to65140,
inclusive,forwhichreasonthesaidAlienPropertyCustodian,onMarch14,1946,issuedavesting
orderontheauthorityoftheTradingwiththeEnemyActoftheUnitedStates,asamended,vesting

inhimselftheownershipovertwoofthesaidlots,LotsNos.1and2.OnJuly,6,1948,the
PhilippineAlienPropertyAdministrator(successoroftheAlienPropertyCustodian)underthe
authorityofthesamestatute,issuedasupplementalvestingorder,vestinginhimselftitletothe
remainingLotsNos.3and4.OnAugust3,1948,thePhilippineAlienPropertyAdministrator
(actingonbehalfofthePresidentoftheUnitedStates)andthePresidentofthePhilippines,
executedtwoformalagreements,onereferringtoLots1and2andtheothertoLots3and4,
wherebythesaidAdministratortransferredallthesaidfourlotstotheRepublicofthePhilippines
uponthelatter'sundertakingfullytoindemnifytheUnitedStatesforallclaimsinrelationtothe
propertytransferred,whichclaimsarepayablebytheUnitedStatesofAmericaorthePhilippine
AlienPropertyAdministratoroftheUnitedStatesundertheTradingwiththeEnemyAct,as
amended,andforallsuchcostsandexpensesofadministrationasmaybylawbechargedagainst
thepropertyorproceedsthereofherebytransferred."Thetransferagreementswereexecuted
pursuanttosection3ofthePhilippinePropertyActof1946andExecutiveOrderNo.9921,dated
January10,1948,ofthePresidentoftheUnitedStates.
OnthetheorythatthelotsinquestionstillbelongedtoArseniaEnriquez,thelatter'ssonBenitoE.
LimfiledonNovember15,1948aformalnoticeofclaimtothepropertywiththePhilippineAlien
PropertyAdministrator.ThenoticewassubsequentlyamendedtopermitLimtoprosecutethe
claimasadministratoroftheintestateestateofthedeceasedArseniaEnriquez,thus,ineffect,
substitutingtheintestateestateastheclaimant,itbeingallegedthatthelotswereoncetheproperty
ofArseniaEnriquez;thattheyweremortgagedbyhertotheMercantileBankofChina;thatthe
mortgagehavingbeenforeclosed,thepropertywassoldatpublicauctionduringthewartothe
JapaneseAsaichiKagawa,who,bymeansofthreatandintimidationsucceededinpreventing
ArseniaEnriquezfromexercisingherrightofredemption;andthatKagawaneveracquiredany
validtitletothepropertybecausehewasineligibleundertheConstitutiontoacquireresidential

landinthePhilippinesbyreasonofalienage.
OnMarch7,1950,theclaimwasdisallowedbytheVestedPropertyClaimsCommitteeofthe
PhilippineAlienPropertyAdministrator,andcopyofthedecisiondisallowingtheclaimwas
receivedbyclaimant'scounselonthe15thofthatmonth.Theclaimant,however,tooknoappealto
thePhilippineAlienPropertyAdministrator,sothatpursuanttotherulesofproceduregoverning
claimsbeforethePhilippineAlienPropertyAdministrator,thedecisionofthecommitteebecame
finalonApril15,1950,thatis,twentydaysafterreceiptofthedecisionbyclaimant'scounsel.
OnNovember13,1950,theclaimantBenitoE.Lim,asadministratoroftheintestateestateof
ArseniaEnriquez,filedacomplaintintheCourtofFirstInstanceofManilaagainstthePhilippine
AlienPropertyAdministrator(latersubstitutedbytheAttorneyGeneraloftheUnitedStates)for
therecoveryofthepropertyinquestionwithbackrents.Thecomplaintwaslateramendedto
includeAsaichiKagawaasdefendant.Asamended,itallegedthatthelandsinquestionformerly
belongedtoArseniaEnriquezandweremortgagedbyhertotheMercantileBankofChina;thatthe
mortgagehavingbeenforeclosed,shewassentencedtopaythemortgagedebtwithin3months;
thatwithinthose3monthsthebankcommissioner,whohadbeenappointedliquidatorofsaidbank,
assuredherthatshecouldpayhermortgagedebtlittlebylittleinmonthlyinstallments,and
pursuanttothatarrangementtheincomederivedfromthemortgagedpropertywerethereafter
appliedtoherindebtedness,thatsuchpaymentofthemortgagedebtcontinueduntilafewmonths
aftertheoccupationoftheCityofManilabytheJapaneseforces,whentheBankofTaiwan,having
takenovertheadministrationandcontrolofallbanksinthePhilippines,includingtheMercantile
BankofChina,hadthepropertiessoldatpublicauctiononOctober26,1942bythesheriffofthe
city;thatthepropertieswereawardedtoAsaichiKagawaandthesalewassubsequentlyconfirmed
bythecourt;thatifArseniaEnriquezfailedtoredeemthepropertiesbeforetheconfirmationofthe
sale,itwasbecauseofthefinancialdepressionandalsobecauseshewaspreventedfromdoingso

byKagawathroughthreatsandintimidation;thattheauctionsalewasirregularandillegalbecause
itwasmadewithoutpublicationornoticeandbecausethoughthelandwassubdividedintolots,the
samewassoldasawhole;thatbecauseoftheirregularitiesmentioned,competitivebiddingwas
preventedorstifledwiththeresultthatthelands,whichcouldhavebeeneasilysoldforP300,000at
thenprevailingprices,wereawardedtoKagawawhosebidwasonlyP54,460.40,apricethatwas
"grosslyinadequateandshockingtotheconscience;"thatthetitlestothelandshavingbeen
subsequentlytransferredtoKagawa,thelatterinJune,1943illegallydispossessedArsenia
EnriquezandkeptpossessionofthepropertiesuntiltheliberationoftheCityofManila;thatas
ArseniaEnriquezwasstilltheowneroftheproperties,theseizurethereofbytheUnitedStates
AttorneyGeneral'spredecessorsontheassumptionthattheybelongtoKagawa,aswellastheir
decisiondisallowingherclaim,wascontrarytolaw.Plaintiff,therefore,prayedthatthesheriff's
saletoKagawaandthevestingofthepropertiesinthePhilippineAlienPropertyAdministratorand
thetransferthereofbytheUnitedStatestotheRepublicofthePhilippinesbedeclarednulland
void;thatArseniaEnriquezbeadjudgedownerofthesaidpropertiesandtheRegisterofDeedsof
Manilabeorderedtoissuethecorrespondingtransfercertificatesoftitletoher;andthatthe
defendantAttorneyGeneraloftheUnitedStatesberequiredtopayrentalfromMarch14,1946,
andtheGovernmentofthePhilippinesfromAugust3,1948,attherateofP30,000perannumwith
legalinterest.ThedefendantAttorneyGeneraloftheUnitedStatesandthedefendantintervenor
RepublicofthePhilippineseachfiledananswer,allegingbywayofaffirmativedefenses(1)that
theactionwithrespecttoLots1and2hadalreadyprescribed,thesamenothavingbeenbrought
withintheperiodprescribedinsection33oftheTradingwiththeEnemyAct,asamended,and(2)
thatthelowercourthadnojurisdictionovertheclaimforrentalssincetheactioninthatregard
constitutedasuitagainsttheUnitedStatestowhichithadnotgivenitsconsent.
ThedefendantAsaichiKagawawassummonedbypublication,buthavingfailedtofileananswer

tothecomplaint,hewasdeclaredindefault.Thereafter,apreliminaryhearingontheaffirmative
defenseswasheldattheinstanceoftheUnitedStatesAttorneyGeneralpursuanttoSection5,Rule
8oftheRulesofCourt.Aftersaidhearing,thecourtorderedthecomplaintdismissedontheground
asstatedinthedispositivepartoftheorderthatthe"courthasnojurisdictionoverthesubject
matterofthisaction,takingintoconsiderationtheprovisionsofSec.34(mustbe33)oftheTrading
withtheEnemyAct,astherequirementsneededbytheabovementionedActhavenotbeen
fulfilledbythehereinplaintiff."Fromthatorder,plaintiffhastakenthepresentappeal.
Judgingfromthecontextoftheordercomplainedof,itwouldappearthatthedismissalofplaintiff's
actionwasactuallybasedupontheprinciplethataforeignstateoritsgovernmentcannotbesued
withoutitsconsent.Considering,however,thelawapplicable,wedonotthinktheorderof
dismissalcanbesustainedinitsentirety.ThereisnodenyingthatanactionagainsttheAlien
PropertyCustodian,ortheAttorneyGeneraloftheUnitedStatesashissuccessor,involvingvested
propertyundertheTradingwiththeEnemyActlocatedinthePhilippines,isinsubstanceanaction
againsttheUnitedStates.Theimmunityofthestatefromsuit,however,cannotbeinvokedwhere
theaction,asinthepresentcase,isinstitutedbyapersonwhoisneitheranenemyorallyofan
enemyforthepurposeofestablishinghisright,titleorinterestinvestedproperty,andofrecovering
hisownershipandpossession.Congressionalconsenttosuchsuithasexpresslybeengivenbythe
UnitedStates.(Sec.3,PhilippinePropertyActof1946;PhilippineAlienProperty
Administrationvs.Castelo,etal.,89Phil.,568.)
Theorderofdismissal,however,withrespecttoplaintiff'sclaimfordamagesagainstthedefendant
AttorneyGeneraloftheUnitedStatesmustbeupheld.Thereliefavailabletoapersonclaiming
enemypropertywhichhasbeenvestedbythePhilippinesAlienPropertyCustodianislimitedto
thoseexpresslyprovidedforintheTradingwiththeEnemyAct,whichdoesnotincludeasuitfor
damagesfortheuseofsuchvestedproperty.Thataction,asheldbythisCourtintheCastelocase

justcited,isnotoneofthoseauthorizedundertheActwhichmaybeinstitutedintheappropriate
courtsofthePhilippinesundertheprovisionsofsection3ofthePhilippinePropertyActof1946.
Congressionalconsenttosuchsuithasnotbeengranted.
TheclaimfordamagesfortheuseofthepropertyagainsttheintervenordefendantRepublicofthe
Philippinestowhichiswastransferred,likewise,cannotbemaintainedbecauseoftheimmunityof
thestatefromsuit.Theclaimobviouslyconstitutesachargeagainst,orfinancialliabilityto,the
Governmentandconsequentlycannotbeentertainedbythecourtsexceptwiththeconsentofsaid
government.(Syquiavs.AlmedaLopez,84Phil.,312;47Off.Gaz.,665;CompaiaGeneralde
Tabacosvs.Gov'tofPI,45Phil.,663.)Plaintiffarguesthatbyitsintervention,theRepublicofthe
Philippines,ineffect,waiveditsrightofnonsuability,butitwillberememberedthattheRepublic
intervenedinthecasemerelytounitewiththedefendantAttorneyGeneraloftheUnitedStatesin
resistingplaintiff'sclaims,andforthatreasonaskednoaffirmativereliefagainstanypartyinthe
answerininterventionitfiled.Ontheotherhand,plaintiffinhisoriginalcomplaintmadenoclaim
againsttheRepublicandonlyaskedfordamagesagainstitfortheuseofthepropertywhenthe
complaintwasamended.Initsanswertotheamendedcomplaint,theRepublic"reproducedand
incorporatedbyreference"alltheaffirmativedefensescontainedintheanswerofthedefendant
AttorneyGeneral,oneofwhich,asalreadystated,isthatthelowercourthadnojurisdictionover
theclaimforrentalsbecauseoflackofconsenttobesued.Clearly,thisisnotacasewherethestate
takestheinitiativeinanactionagainstaprivatepartybyfilingacomplaintinintervention,thereby
surrenderingitsprivilegedpositionandcomingdowntothelevelofthedefendantaswhat
happenedinthecaseofFroilanvs.PanOrientalShippingCo.,etal.95Phil.,905citedbyplaintiff
butonewherethestate,asoneofthedefendantsmerelyresistedaclaimagainstitpreciselyon
theground,amongothers,ofitsprivilegedpositionwhichexemptsitfromsuit..
Withrespecttotherecoveryorreturnofthepropertiesvested,section33oftheTradingwiththe

EnemyAct,asamended,provides:
SEC.33.Returnofproperty;notice;institutionofsuits,computationoftime.Noreturn
maybemadepursuanttosection9or32unlessnoticeofclaimhasbeenfiled:(a)inthecase
ofanypropertyorinterestacquiredbytheUnitedStatespriortoDecember18,1941,by
August9,1948;or(b)inthecaseofanypropertyorinterestacquiredbytheUnitedStateson
orafterDecember18,1941,byApril30,1949,ortwoyearsfromthevestingoftheproperty
orinterestinrespectofwhichtheclaimismade,whicheverislater.Nosuitpursuantto
section9maybeinstitutedafterApril30,1949,oraftertheexpirationoftwoyearsfromthe
dateoftheseizurebyorvestingintheAlienPropertyCustodian,asthecasemaybe,ofthe
propertyorinterestinrespectofwhichreliefissought,whicheverislater,butincomputing
suchtwoyearsthereshallbeexcludedanyperiodduringwhichtherewaspendingasuitor
claimforreturnpursuanttosection9or32(a)hereof.(USCA,Tit.50,App.,p.216.)
Fromtheaboveprovisions,itisevidentthataconditionprecedenttoasuitforthereturnof
propertyvestedundertheTradingwiththeEnemyActisthatitshouldbefilednotlaterthanApril
30,1949,orwithintwoyearsfromthedateofvesting,whicheverislater,butincomputingsuch
twoyears,theperiodduringwhichtherewaspendingasuitorclaimforthereturnofthesaid
propertypursuanttosecs.9or32(a)oftheActshallbeexcluded.Thatlimitation,asheldinacase,
isjurisdictional.(SeeCisatlanticCorporation,etal.vs.Brownell,Jr.,CivilCodeNo.8221,U.S.
DistrictCourt,SouthernDistrict,NewYork,affirmedbytheUnitedStatesCourtofAppeals,2nd
Circuit,May11,1955(DocketNo.23499),annexedasappendices"D"and"E"inappellees'brief.)
Suchbeingthecase,itisevidentthatthecourtbelowerredindismissingthecomplaint,atleast
insofaraslots3and4ofthelandindisputeareconcerned.TheselotswerevestedonlyonJuly6,
1948andconsequentlythetwoyearperiodwithinwhichtofiletheactionfortheirrecovery
expiredonJuly7,1950.Butincomputingthatthetwoyearperiod,thetimeduringwhich

plaintiff'sclaimwiththePhilippineAlienPropertyAdministrationwaspendingfromNovember
16,1948whentheclaimwasfiledtoMarch7,1950whenitwasdissallowedshouldbe
excluded.ThecomplaintthereoffiledonNovember13,1950iswellwithintheprescribedperiod.
Asamatteroffact,theAttorneyGeneraloftheUnitedStatesconcedesthatthedismissalofthe
complaintwithrespecttotheselotswaserroneous.Indeed,hestatesthathehadneveraskedforthe
dismissalofthecomplaintwithrespecttothembecausethecomplaintinsofarasthoseproperties
wereconcernedwasfiledwithintheperiodprovidedforinthelaw.
Ontheotherhand,lots1and2werevestedbytheAlienPropertyCustodianonMarch14,1946.
Thetwoyearperiod,therefore,withinwhichtofileasuitfortheirreturnexpiredonMarch14,
1948.Asnosuitorclaimforthereturnofsaidpropertiespursuanttosections9or32(a)ofthe
TradingwiththeEnemyActwasfiledbyplaintiffwithintwoyearsfromthedateofvesting,the
"later"dateandthelastonwhichsuitcouldbebroughtwasApril30,1949.Theclaimfiledby
plaintiffwiththePhilippineAlienPropertyAdministrationonNovember15,1948obviouslycould
nottollthetwoyearperiodthathadalreadyexpiredonMarch14,1948.Andthecomplaintinthe
presentcasehavingbeenfiledonlyonNovember13,1950,thesameisalreadybarred.
(Passvs.McGrath,192F.2d415;Krollvs.McGrath,91F.Supp.173.)Thelowercourt,therefore,
hadnojurisdictiontoentertaintheactioninsofarastheselotsareconcerned.
Plaintiffcontendsthatsection33oftheTradingwiththeEnemyActcannotprevailoversection40
oftheCodeofCivilProcedure,whichprovidesthatanactiontorecoverrealpropertyprescribes
after10years,onthetheorythatunderinternationallawquestionsrelatingtorealpropertyare
governedbythelawoftheplacewherethepropertyislocatedandthatprescription,being
remedial,islikewisegovernedbythelawsoftheforum.ButthetradingwiththeEnemyAct,by
consentofthePhilippineGovernment,continuedtobeinforceinthePhilippinesevenafterJuly4,
1946(Brownell,Jr.,vs.SunLifeAssuranceCo.ofCanada,*50Off.Gaz.,4814;Brownell,

Jr.vs.Bautista,95Phil.,853)andconsequently,isasmuchpartofthelawofthelandassection40
oftheCodeofCivilProcedure.Contrarytoplaintiff'sclaim,therefore,thereisherenoconflictof
lawsinvolved.ItshouldbestatedthatinanactionundertheTradingwiththeEnemyActforthe
recoveryofpropertyvestedthereunder,therightsofthepartiesmustnecessarilybegovernedby
thetermsofthatAct.Indeed,section7(c)thereofexplicitlyprovidesthatthereliefavailabletoa
claimantofvestedpropertyislimitedtothoseexpresslyprovidedforbyitsterms.
Needlesstosay,thedefenseoflimitationascontainedinsection33ofTradingwiththeEnemy
Act,asamended,maybeinvokednotonlybythedefendantAttorneyGeneraloftheUnitedStates
butalsobytheintervenorRepublicofthePhilippinestowhichthelandsinquestionwere
transferred.Tosustainplaintiff'sclaimandprecludetheRepublicfromputtingupthatdefense
wouldrendernugatorytheprovisionsoftheAct.Forinsuchcase,aclaimantwhohasfailedtofile
hisclaimorsuitwithintheperiodprovidedforinsection33oftheActandconsequentlyhas
forfeitedwhateverrightshemayhavetherein,couldeasilycircumventthelaw.Itwouldalsomean
thatthetransferofvestedpropertytotheRepublicwouldhavetheeffectofpermittingre
examinationofthetitletosuchvestedpropertywhichhasalreadybecomeabsoluteinthenameof
theUnitedStates,thetransferor,forfailureoftheclaimanttoasserthisclaimwithintheprescribed
time.Thisabsurdity,tosaytheleast,cannotbecountenanced.
Inviewoftheforegoing,theorderappealedfrominsofarasitdismissesthecomplaintwithrespect
toLots1and2andtheclaimfordamagesagainsttheAttorneyGeneraloftheUnitedStatesandthe
RepublicofthePhilippines,isaffirmed,butrevokedinsofarasitdismissesthecomplaintwith
respecttoLots3and4,astowhichthecaseisherebyremandedtothecourtbelowforfurther
proceedings.Withoutcosts.
Paras,C.J.,Bengzon,Montemayor,BautistaAngelo,Labrador,Concepcion,Reyes,J.B.L.,
EndenciaandBarrera,JJ.,concur.

G.R.No.L35645May22,1985
UNITEDSTATESOFAMERICA,CAPT.JAMESE.GALLOWAY,WILLIAMI.
COLLINSandROBERTGOHIER,petitioners,
vs.
HON.V.M.RUIZ,PresidingJudgeofBranchXV,CourtofFirstInstanceofRizaland
ELIGIODEGUZMAN&CO.,INC.,respondents.
Sycip,Salazar,Luna&Manalo&FelicianoLawforpetitioners.
Albert,Vergara,Benares,Perias&DominguezLawOfficeforrespondents.

ABADSANTOS,J.:
Thisisapetitiontoreview,setasidecertainordersandrestraintherespondentjudgefromtrying
CivilCaseNo.779MofthedefunctCourtofFirstInstanceofRizal.
Thefactualbackgroundisasfollows:
Attimesmaterialtothiscase,theUnitedStatesofAmericahadanavalbaseinSubic,Zambales.
ThebasewasoneofthoseprovidedintheMilitaryBasesAgreementbetweenthePhilippinesand
theUnitedStates.
SometimeinMay,1972,theUnitedStatesinvitedthesubmissionofbidsforthefollowingprojects
1.Repairoffendersystem,AlavaWharfattheU.S.NavalStationSubicBay,Philippines.
2.RepairtyphoondamagetoNASCubishoreline;repairtyphoondamagetoshorelinerevetment,
NAVBASESubic;andrepairtoLeyteWharfapproach,NAVBASESubicBay,Philippines.
EligiodeGuzman&Co.,Inc.respondedtotheinvitationandsubmittedbids.Subsequentthereto,
thecompanyreceivedfromtheUnitedStatestwotelegramsrequestingittoconfirmitsprice
proposalsandforthenameofitsbondingcompany.Thecompanycompliedwiththerequests.[In
itscomplaint,thecompanyallegesthattheUnitedStateshadaccepteditsbidsbecause"Arequest

toconfirmapriceproposalconfirmstheacceptanceofabidpursuanttodefendantUnitedStates'
biddingpractices."(Rollo,p.30.)Thetruthofthisallegationhasnotbeentestedbecausethecase
hasnotreachedthetrialstage.]
InJune,1972,thecompanyreceivedaletterwhichwassignedbyWilhamI.Collins,Director,
ContractsDivision,NavalFacilitiesEngineeringCommand,SouthwestPacific,Departmentofthe
NavyoftheUnitedStates,whoisoneofthepetitionersherein.Thelettersaidthatthecompanydid
notqualifytoreceiveanawardfortheprojectsbecauseofitspreviousunsatisfactoryperformance
ratingonarepaircontractfortheseawallattheboatlandingsoftheU.S.NavalStationinSubic
Bay.Theletterfurthersaidthattheprojectshadbeenawardedtothirdparties.Inthe
abovementionedCivilCaseNo.779M,thecompanysuedtheUnitedStatesofAmericaand
Messrs.JamesE.Galloway,WilliamI.CollinsandRobertGohierallmembersoftheEngineering
CommandoftheU.S.Navy.Thecomplaintistoorderthedefendantstoallowtheplaintiffto
performtheworkontheprojectsand,intheeventthatspecificperformancewasnolonger
possible,toorderthedefendantstopaydamages.Thecompanyalsoaskedfortheissuanceofawrit
ofpreliminaryinjunctiontorestrainthedefendantsfromenteringintocontractswiththirdparties
forworkontheprojects.
Thedefendantsenteredtheirspecialappearanceforthepurposeonlyofquestioningthejurisdiction
ofthiscourtoverthesubjectmatterofthecomplaintandthepersonsofdefendants,thesubject
matterofthecomplaintbeingactsandomissionsoftheindividualdefendantsasagentsof
defendantUnitedStatesofAmerica,aforeignsovereignwhichhasnotgivenherconsenttothis
suitoranyothersuitforthecausesofactionassertedinthecomplaint."(Rollo,p.50.)
Subsequentlythedefendantsfiledamotiontodismissthecomplaintwhichincludedanopposition
totheissuanceofthewritofpreliminaryinjunction.Thecompanyopposedthemotion.Thetrial
courtdeniedthemotionandissuedthewrit.Thedefendantsmovedtwicetoreconsiderbuttono

avail.HencetheinstantpetitionwhichseekstorestrainperpetuallytheproceedingsinCivilCase
No.779Mforlackofjurisdictiononthepartofthetrialcourt.
Thepetitionishighlyimpressedwithmerit.
ThetraditionalruleofStateimmunityexemptsaStatefrombeingsuedinthecourtsofanother
Statewithoutitsconsentorwaiver.Thisruleisanecessaryconsequenceoftheprinciplesof
independenceandequalityofStates.However,therulesofInternationalLawarenotpetrified;they
areconstantlydevelopingandevolving.Andbecausetheactivitiesofstateshavemultiplied,ithas
beennecessarytodistinguishthembetweensovereignandgovernmentalacts(jureimperii)and
private,commercialandproprietaryacts(juregestionis).TheresultisthatStateimmunitynow
extendsonlytoactsjureimperilTherestrictiveapplicationofStateimmunityisnowtheruleinthe
UnitedStates,theUnitedKingdomandotherstatesinwesternEurope.(SeeCoquiaandDefensor
Santiago,PublicInternationalLaw,pp.207209[1984].)
TherespondentjudgerecognizedtherestrictivedoctrineofStateimmunitywhenhesaidinhis
Orderdenyingthedefendants'(nowpetitioners)motion:"Adistinctionshouldbemadebetweena
strictlygovernmentalfunctionofthesovereignstatefromitsprivate,proprietaryornon
governmentalacts(Rollo,p.20.)However,therespondentjudgealsosaid:"ItistheCourt's
consideredopinionthatenteringintoacontractfortherepairofwharvesorshorelineiscertainly
notagovernmentalfunctionalthoitmaypartakeofapublicnatureorcharacter.Asaptlypointed
outbyplaintiff'scounselinhisreplycitingtherulinginthecaseofLyons,Inc.,[104Phil.594
(1958)],andwhichthisCourtquoteswithapproval,viz.:
Itishowevercontendedthatwhenasovereignstateentersintoacontractwithaprivate
person,thestatecanbesueduponthetheorythatithasdescendedtothelevelofan
individualfromwhichitcanbeimpliedthatithasgivenitsconsenttobesuedunderthe
contract....

xxxxxxxxx
Weagreetotheabovecontention,andconsideringthattheUnitedStatesgovernment,
throughitsagencyatSubicBay,enteredintoacontractwithappellantforstevedoring
andmiscellaneouslaborserviceswithintheSubicBayArea,aU.S.NavalReservation,it
isevidentthatitcanbringanactionbeforeourcourtsforanycontractualliabilitythat
thatpoliticalentitymayassumeunderthecontract.Thetrialcourt,therefore,has
jurisdictiontoentertainthiscase...(Rollo,pp.2021.)
TherelianceplacedonLyonsbytherespondentjudgeismisplacedforthefollowingreasons:
InHarryLyons,Inc.vs.TheUnitedStatesofAmerica,supra,plaintiffbroughtsuitintheCourtof
FirstInstanceofManilatocollectseveralsumsofmoneyonaccountofacontractbetweenplaintiff
anddefendant.Thedefendantfiledamotiontodismissonthegroundthatthecourthadno
jurisdictionoverdefendantandoverthesubjectmatteroftheaction.Thecourtgrantedthemotion
onthegroundsthat:(a)ithadnojurisdictionoverthedefendantwhodidnotgiveitsconsenttothe
suit;and(b)plaintifffailedtoexhausttheadministrativeremediesprovidedinthecontract.The
orderofdismissalwaselevatedtothisCourtforreview.
Insustainingtheactionofthelowercourt,thisCourtsaid:
Itappearinginthecomplaintthatappellanthasnotcompliedwiththeprocedurelaid
downinArticleXXIofthecontractregardingtheprosecutionofitsclaimagainstthe
UnitedStatesGovernment,or,stateddifferently,ithasfailedtofirstexhaustits
administrativeremediesagainstsaidGovernment,thelowercourtactedproperlyin
dismissingthiscase.(Atp.598.)
ItcanthusbeseenthatthestatementinrespectofthewaiverofStateimmunityfromsuitwas
purelygratuitousand,therefore,obitersothatithasnovalueasanimperativeauthority.
TherestrictiveapplicationofStateimmunityisproperonlywhentheproceedingsariseoutof

commercialtransactionsoftheforeignsovereign,itscommercialactivitiesoreconomicaffairs.
Stateddifferently,aStatemaybesaidtohavedescendedtothelevelofanindividualandcanthus
bedeemedtohavetacitlygivenitsconsenttobesuedonlywhenitentersintobusinesscontracts.It
doesnotapplywherethecontractrelatestotheexerciseofitssovereignfunctions.Inthiscasethe
projectsareanintegralpartofthenavalbasewhichisdevotedtothedefenseofboththeUnited
StatesandthePhilippines,indisputablyafunctionofthegovernmentofthehighestorder;theyare
notutilizedfornordedicatedtocommercialorbusinesspurposes.
ThatthecorrecttestfortheapplicationofStateimmunityisnottheconclusionofacontractbya
StatebutthelegalnatureoftheactisshowninSyquiavs.Lopez,84Phil.312(1949).Inthatcase
theplaintiffsleasedthreeapartmentbuildingstotheUnitedStatesofAmericafortheuseofits
militaryofficials.Theplaintiffssuedtorecoverpossessionofthepremisesonthegroundthatthe
termoftheleaseshadexpired.Theyalsoaskedforincreasedrentalsuntiltheapartmentsshallhave
beenvacated.
ThedefendantswhowerearmedforcesofficersoftheUnitedStatesmovedtodismissthesuitfor
lackofjurisdictioninthepartofthecourt.TheMunicipalCourtofManilagrantedthemotionto
dismiss;sustainedbytheCourtofFirstInstance,theplaintiffswenttothisCourtforreviewon
certiorari.Indenyingthepetition,thisCourtsaid:
Onthebasisoftheforegoingconsiderationsweareofthebeliefandweholdthatthereal
partydefendantininterestistheGovernmentoftheUnitedStatesofAmerica;thatany
judgmentforbackorIncreasedrentalsordamageswillhavetobepaidnotbydefendants
MooreandTillmanandtheir64codefendantsbutbythesaidU.S.Government.Onthe
basisoftherulinginthecaseofLandvs.Dollaralreadycited,andonwhatwehave
alreadystated,thepresentactionmustbeconsideredasoneagainsttheU.S.Government.
ItisclearhatthecourtsofthePhilippinesincludingtheMunicipalCourtofManilahave

nojurisdictionoverthepresentcaseforunlawfuldetainer.Thequestionoflackof
jurisdictionwasraisedandinterposedattheverybeginningoftheaction.TheU.S.
Governmenthasnot,givenitsconsenttothefilingofthissuitwhichisessentially
againsther,thoughnotinname.Moreover,thisisnotonlyacaseofacitizenfilingasuit
againsthisownGovernmentwithoutthelatter'sconsentbutitisofacitizenfilingan
actionagainstaforeigngovernmentwithoutsaidgovernment'sconsent,whichrenders
moreobviousthelackofjurisdictionofthecourtsofhiscountry.Theprinciplesoflaw
behindthisrulearesoelementaryandofsuchgeneralacceptancethatwedeemit
unnecessarytociteauthoritiesinsupportthereof.(Atp.323.)
InSyquia,theUnitedStatesconcludedcontractswithprivateindividualsbutthecontracts
notwithstandingtheStateswasnotdeemedtohavegivenorwaiveditsconsenttobesuedforthe
reasonthatthecontractswereforjureimperiiandnotforjuregestionis.
WHEREFORE,thepetitionisgranted;thequestionedordersoftherespondentjudgearesetaside
andCivilCaseNo.isdismissed.Costsagainsttheprivaterespondent.
Teehankee,Aquino,Concepcion,Jr.,MelencioHerrera,Plana,*Escolin,Relova,Gutierrez,Jr.,
DelaFuente,CuevasandAlampay,JJ.,concur.
Fernando,C.J.,tooknopart.

G.R.No.76607February26,1990
UNITEDSTATESOFAMERICA,FREDERICKM.SMOUSEANDYVONNE
REEVES,petitioners,
vs.
HON.ELIODOROB.GUINTO,PresidingJudge,BranchLVII,RegionalTrialCourt,Angeles
City,ROBERTOT.VALENCIA,EMERENCIANAC.TANGLAO,ANDPABLOC.DEL
PILAR,respondents.
G.R.No.79470February26,1990
UNITEDSTATESOFAMERICA,ANTHONYLAMACHIA,T/SGT.USAF,WILFREDO
BELSA,PETERORASCIONANDROSECARTALLA,petitioners,
vs.
HON.RODOLFOD.RODRIGO,asPresidingJudgeofBranch7,RegionalTrialCourt(BAGUIO
CITY),LaTrinidad,BenguetandFABIANGENOVE,respondents.
G.R.No.80018February26,1990
UNITEDSTATESOFAMERICA,TOMIJ.KINGI,DARRELD.DYEandSTEVENF.

BOSTICK,petitioners,
vs.
HON.JOSEFINAD.CEBALLOS,AsPresidingJudge,RegionalTrialCourt,Branch66,Capas,
Tarlac,andLUISBAUTISTA,respondents.
G.R.No.80258February26,1990
UNITEDSTATESOFAMERICA,MAJORGENERALMICHAELP.C.CARNS,AICERNEST
E.RIVENBURGH,AICROBINBLEVINS,SGT.NOELA.GONZALES,SGT.THOMAS
MITCHELL,SGT.WAYNEL.BENJAMIN,ETAL.,petitioners,
vs.
HON.CONCEPCIONS.ALARCONVERGARA,asPresidingJudge,Branch62REGIONAL
TRIALCOURT,AngelesCity,andRICKYSANCHEZ,FREDDIESANCHEZAKAFREDDIE
RIVERA,EDWINMARIANO,AKAJESSIEDOLORESSANGALANG,ETAL.,respondents.
Luna,Sison&ManasLawOfficeforpetitioners.

CRUZ,J.:
Thesecaseshavebeenconsolidatedbecausetheyallinvolvethedoctrineofstateimmunity.The
UnitedStatesofAmericawasnotimpleadedinthecomplaintsbelowbuthasmovedtodismisson
thegroundthattheyareineffectsuitsagainstittowhichithasnotconsented.Itisnowcontesting
thedenialofitsmotionsbytherespondentjudges.
InG.R.No.76607,theprivaterespondentsaresuingseveralofficersoftheU.S.AirForce
stationedinClarkAirBaseinconnectionwiththebiddingconductedbythemforcontractsfor
barberservicesinthesaidbase.
OnFebruary24,1986,theWesternPacificContractingOffice,OkinawaAreaExchange,U.S.Air
Force,solicitedbidsforsuchcontractsthroughitscontractingofficer,JamesF.Shaw.Amongthose

whosubmittedtheirbidswereprivaterespondentsRobertoT.Valencia,EmerencianaC.Tanglao,
andPabloC.delPilar.ValenciahadbeenaconcessionaireinsideClarkfor34years;delPilarfor
12years;andTanglaofor50years.
ThebiddingwaswonbyRamonDizon,overtheobjectionoftheprivaterespondents,whoclaimed
thathehadmadeabidforfourfacilities,includingtheCivilEngineeringArea,whichwasnot
includedintheinvitationtobid.
TheprivaterespondentscomplainedtothePhilippineAreaExchange(PHAX).Thelatter,through
itsrepresentatives,petitionersYvonneReevesandFredericM.SmouseexplainedthattheCivil
EngineeringconcessionhadnotbeenawardedtoDizonasaresultoftheFebruary24,1986
solicitation.Dizonwasalreadyoperatingthisconcession,thenknownastheNCOclubconcession,
andtheexpirationofthecontracthadbeenextendedfromJune30,1986toAugust31,1986.They
furtherexplainedthatthesolicitationoftheCEbarbershopwouldbeavailableonlybytheendof
Juneandtheprivaterespondentswouldbenotified.
OnJune30,1986,theprivaterespondentsfiledacomplaintinthecourtbelowtocompelPHAX
andtheindividualpetitionerstocanceltheawardtodefendantDizon,toconductarebiddingforthe
barbershopconcessionsandtoallowtheprivaterespondentsbyawritofpreliminaryinjunctionto
continueoperatingtheconcessionspendinglitigation.1
Uponthefilingofthecomplaint,therespondentcourtissuedanexparteorderdirectingthe
individualpetitionerstomaintainthestatusquo.
OnJuly22,1986,thepetitionersfiledamotiontodismissandoppositiontothepetitionfor
preliminaryinjunctiononthegroundthattheactionwasineffectasuitagainsttheUnitedStatesof
America,whichhadnotwaiveditsnonsuability.Theindividualdefendants,asofficialemployees
oftheU.S.AirForce,werealsoimmunefromsuit.
Onthesamedate,July22,1986,thetrialcourtdeniedtheapplicationforawritofpreliminary

injunction.
OnOctober10,1988,thetrialcourtdeniedthepetitioners'motiontodismiss,holdinginpartas
follows:
FromthepleadingsthusfarpresentedtothisCourtbytheparties,theCourt'sattentionis
calledbytherelationshipbetweentheplaintiffsaswellasthedefendants,includingthe
USGovernment,inthatpriortothebiddingorsolicitationinquestion,therewasa
bindingcontractbetweentheplaintiffsaswellasthedefendants,includingtheUS
Government.ByvirtueofsaidcontractofconcessionitistheCourt'sunderstandingthat
neithertheUSGovernmentnorthehereinprincipaldefendantswouldbecomethe
employer/softheplaintiffsbutthatthelatteraretheemployersthemselvesofthebarbers,
etc.withtheemployer,theplaintiffsherein,remittingthestipulatedpercentageof
commissionstothePhilippineAreaExchange.Thesamecircumstancewouldbecomein
effectwhenthePhilippineAreaExchangeopenedforbiddingorsolicitationthe
questionedbarbershopconcessions.Tothisextent,therefore,indeedacommercial
transactionhasbeenentered,andforpurposesofthesaidsolicitation,wouldnecessarily
beenteredbetweentheplaintiffsaswellasthedefendants.
TheCourt,further,isoftheviewthatArticleXVIIIoftheRPUSBasesAgreementdoes
notcoversuchkindofservicesfallingundertheconcessionaireship,suchasabarber
shopconcession.2
OnDecember11,1986,followingthefilingofthehereinpetitionforcertiorariandprohibition
withpreliminaryinjunction,weissuedatemporaryrestrainingorderagainstfurtherproceedingsin
thecourtbelow.3
InG.R.No.79470,FabianGenovefiledacomplaintfordamagesagainstpetitionersAnthony
Lamachia,WilfredoBelsa,RoseCartallaandPeterOrascionforhisdismissalascookintheU.S.

AirForceRecreationCenterattheJohnHayAirStationinBaguioCity.Ithadbeenascertained
afterinvestigation,fromthetestimonyofBelsaCartallaandOrascion,thatGenovehadpoured
urineintothesoupstockusedincookingthevegetablesservedtotheclubcustomers.Lamachia,as
clubmanager,suspendedhimandthereafterreferredthecasetoaboardofarbitratorsconformably
tothecollectivebargainingagreementbetweentheCenteranditsemployees.Theboard
unanimouslyfoundhimguiltyandrecommendedhisdismissal.ThiswaseffectedonMarch5,
1986,byCol.DavidC.Kimball,Commanderofthe3rdCombatSupportGroup,PACAFClarkAir
ForceBase.Genove'sreactionwastofileMscomplaintintheRegionalTrialCourtofBaguioCity
againsttheindividualpetitioners.4
OnMarch13,1987,thedefendants,joinedbytheUnitedStatesofAmerica,movedtodismissthe
complaint,allegingthatLamachia,asanofficeroftheU.S.AirForcestationedatJohnHayAir
Station,wasimmunefromsuitfortheactsdonebyhiminhisofficialcapacity.Theyarguedthat
thesuitwasineffectagainsttheUnitedStates,whichhadnotgivenitsconsenttobesued.
ThismotionwasdeniedbytherespondentjudgeonJune4,1987,inanorderwhichreadinpart:
ItistheunderstandingoftheCourt,basedontheallegationsofthecomplaintwhich
havebeenhypotheticallyadmittedbydefendantsuponthefilingoftheirmotionto
dismissthatalthoughdefendantsactedinitiallyintheirofficialcapacities,theirgoing
beyondwhattheirfunctionscalledforbroughtthemoutoftheprotectivemantleof
whateverimmunitiestheymayhavehadinthebeginning.Thus,theallegationthatthe
actscomplainedofwereillegal,done.withextremebadfaithandwithpreconceived
sinisterplantoharassandfinallydismisstheplaintiff,gainssignificance.5
ThepetitionersthencametothisCourtseekingcertiorariandprohibitionwithpreliminary
injunction.
InG.R.No.80018,LuisBautista,whowasemployedasabarracksboyinCampO'Donnell,an

extensionofClarkAirBase,wasarrestedfollowingabuybustoperationconductedbythe
individualpetitionersherein,namely,TomiJ.King,DarrelD.DyeandStephenF.Bostick,officers
oftheU.S.AirForceandspecialagentsoftheAirForceOfficeofSpecialInvestigators(AFOSI).
Onthebasisoftheswornstatementsmadebythem,aninformationforviolationofR.A.6425,
otherwiseknownastheDangerousDrugsAct,wasfiledagainstBautistaintheRegionalTrial
CourtofTarlac.Theabovenamedofficerstestifiedagainsthimathistrial.Asaresultofthefiling
ofthecharge,Bautistawasdismissedfromhisemployment.Hethenfiledacomplaintfordamages
againsttheindividualpetitionershereinclaimingthatitwasbecauseoftheiractsthathewas
removed.6
Duringtheperiodforfilingoftheanswer,MarianoY.Navarroaspecialcounselassignedtothe
InternationalLawDivision,OfficeoftheStaffJudgeAdvocateofClarkAirBase,enteredaspecial
appearanceforthedefendantsandmovedforanextensionwithinwhichtofilean"answerand/or
otherpleadings."HisreasonwasthattheAttorneyGeneraloftheUnitedStateshadnotyet
designatedcounseltorepresentthedefendants,whowerebeingsuedfortheirofficialacts.Within
theextendedperiod,thedefendants,withouttheassistanceofcounselorauthorityfromtheU.S.
DepartmentofJustice,filedtheiranswer.Theyallegedthereinasaffirmativedefensesthattheyhad
onlydonetheirdutyintheenforcementofthelawsofthePhilippinesinsidetheAmericanbases
pursuanttotheRPUSMilitaryBasesAgreement.
OnMay7,1987,thelawfirmofLuna,SisonandManas,havingbeenretainedtorepresentthe
defendants,filedwithleaveofcourtamotiontowithdrawtheansweranddismissthecomplaint.
Thegroundinvokedwasthatthedefendantswereactingintheirofficialcapacitywhentheydidthe
actscomplainedofandthatthecomplaintagainstthemwasineffectasuitagainsttheUnitedStates
withoutitsconsent.
ThemotionwasdeniedbytherespondentjudgeinhisorderdatedSeptember11,1987,whichheld

thattheclaimedimmunityundertheMilitaryBasesAgreementcoveredonlycriminalandnotcivil
cases.Moreover,thedefendantshadcomeunderthejurisdictionofthecourtwhentheysubmitted
theiranswer.7
Followingthefilingofthehereinpetitionforcertiorariandprohibitionwithpreliminary
injunction,weissuedonOctober14,1987,atemporaryrestrainingorder.8
InG.R.No.80258,acomplaintfordamageswasfiledbytheprivaterespondentsagainsttheherein
petitioners(excepttheUnitedStatesofAmerica),forinjuriesallegedlysustainedbytheplaintiffs
asaresultoftheactsofthedefendants.9Thereisaconflictoffactualallegationshere.According
totheplaintiffs,thedefendantsbeatthemup,handcuffedthemandunleasheddogsonthemwhich
bittheminseveralpartsoftheirbodiesandcausedextensiveinjuriestothem.Thedefendantsdeny
thisandclaimtheplaintiffswerearrestedfortheftandwerebittenbythedogsbecausetheywere
strugglingandresistingarrest,Thedefendantsstressthatthedogswerecalledoffandtheplaintiffs
wereimmediatelytakentothemedicalcenterfortreatmentoftheirwounds.
Inamotiontodismissthecomplaint,theUnitedStatesofAmericaandtheindividuallynamed
defendantsarguedthatthesuitwasineffectasuitagainsttheUnitedStates,whichhadnotgivenits
consenttobesued.ThedefendantswerealsoimmunefromsuitundertheRPUSBasesTreatyfor
actsdonebythemintheperformanceoftheirofficialfunctions.
ThemotiontodismisswasdeniedbythetrialcourtinitsorderdatedAugust10,1987,readingin
partasfollows:
Thedefendantscertainlycannotcorrectlyarguethattheyareimmunefromsuit.The
allegations,ofthecomplaintwhichissoughttobedismissed,hadtobehypothetically
admittedandwhatevergroundthedefendantsmayhave,hadtobeventilatedduringthe
trialofthecaseonthemerits.Thecomplaintallegedcriminalactsagainstthe
individuallynameddefendantsandfromthenatureofsaidactsitcouldnotbesaidthat

theyareActsofState,forwhichimmunityshouldbeinvoked.IftheFilipinosthemselves
aredutyboundtorespect,obeyandsubmitthemselvestothelawsofthecountry,with
morereason,themembersoftheUnitedStatesArmedForceswhoarebeingtreatedas
guestsofthiscountryshouldrespect,obeyandsubmitthemselvestoitslaws.10
andsowasthemotionforreconsideration.Thedefendantssubmittedtheiranswerasrequiredbut
subsequentlyfiledtheirpetitionforcertiorariandprohibitionwithpreliminaryinjunctionwiththis
Court.WeissuedatemporaryrestrainingorderonOctober27,1987.11
II
Therulethatastatemaynotbesuedwithoutitsconsent,nowexpressedinArticleXVI,Section3,
ofthe1987Constitution,isoneofthegenerallyacceptedprinciplesofinternationallawthatwe
haveadoptedaspartofthelawofourlandunderArticleII,Section2.Thislatterprovisionmerely
reiteratesapolicyearlierembodiedinthe1935and1973Constitutionsandalsointendedto
manifestourresolvetoabidebytherulesoftheinternationalcommunity.
Evenwithoutsuchaffirmation,wewouldstillbeboundbythegenerallyacceptedprinciplesof
internationallawunderthedoctrineofincorporation.Underthisdoctrine,asacceptedbythe
majorityofstates,suchprinciplesaredeemedincorporatedinthelawofeverycivilizedstateasa
conditionandconsequenceofitsmembershipinthesocietyofnations.Uponitsadmissiontosuch
society,thestateisautomaticallyobligatedtocomplywiththeseprinciplesinitsrelationswith
otherstates.
Asappliedtothelocalstate,thedoctrineofstateimmunityisbasedonthejustificationgivenby
JusticeHolmesthat"therecanbenolegalrightagainsttheauthoritywhichmakesthelawonwhich
therightdepends."12Thereareotherpracticalreasonsfortheenforcementofthedoctrine.Inthe
caseoftheforeignstatesoughttobeimpleadedinthelocaljurisdiction,theaddedinhibitionis
expressedinthemaximparinparem,nonhabetimperium.Allstatesaresovereignequalsand

cannotassertjurisdictionoveroneanother.Acontrarydispositionwould,inthelanguageofa
celebratedcase,"undulyvexthepeaceofnations."13
Whilethedoctrineappearstoprohibitonlysuitsagainstthestatewithoutitsconsent,itisalso
applicabletocomplaintsfiledagainstofficialsofthestateforactsallegedlyperformedbythemin
thedischargeoftheirduties.Theruleisthatifthejudgmentagainstsuchofficialswillrequirethe
stateitselftoperformanaffirmativeacttosatisfythesame,suchastheappropriationoftheamount
neededtopaythedamagesawardedagainstthem,thesuitmustberegardedasagainstthestate
itselfalthoughithasnotbeenformallyimpleaded.14Insuchasituation,thestatemaymoveto
dismissthecomplaintonthegroundthatithasbeenfiledwithoutitsconsent.
Thedoctrineissometimesderisivelycalled"theroyalprerogativeofdishonesty"becauseofthe
privilegeitgrantsthestatetodefeatanylegitimateclaimagainstitbysimplyinvokingitsnon
suability.Thatishardlyfair,atleastindemocraticsocieties,forthestateisnotanunfeelingtyrant
unmovedbythevalidclaimsofitscitizens.Infact,thedoctrineisnotabsoluteanddoesnotsaythe
statemaynotbesuedunderanycircumstance.Onthecontrary,therulesaysthatthestatemaynot
besuedwithoutitsconsent,whichclearlyimportsthatitmaybesuedifitconsents.
Theconsentofthestatetobesuedmaybemanifestedexpresslyorimpliedly.Expressconsentmay
beembodiedinagenerallaworaspeciallaw.Consentisimpliedwhenthestateentersintoa
contractorititselfcommenceslitigation.
ThegenerallawwaivingtheimmunityofthestatefromsuitisfoundinActNo.3083,underwhich
thePhilippinegovernment"consentsandsubmitstobesueduponanymoneyedclaiminvolving
liabilityarisingfromcontract,expressorimplied,whichcouldserveasabasisofcivilaction
betweenprivateparties."InMerrittv.GovernmentofthePhilippineIslands,15aspeciallawwas
passedtoenableapersontosuethegovernmentforanallegedtort.Whenthegovernmententers
intoacontract,itisdeemedtohavedescendedtotheleveloftheothercontractingpartyand

divestedofitssovereignimmunityfromsuitwithitsimpliedconsent.16Waiverisalsoimplied
whenthegovernmentfilesacomplaint,thusopeningitselftoacounterclaim.17
Theaboverulesaresubjecttoqualification.Expressconsentiseffectedonlybythewillofthe
legislaturethroughthemediumofadulyenactedstatute.18Wehaveheldthatnotallcontracts
enteredintobythegovernmentwilloperateasawaiverofitsnonsuability;distinctionmustbe
madebetweenitssovereignandproprietaryacts.19Asforthefilingofacomplaintbythe
government,suabilitywillresultonlywherethegovernmentisclaimingaffirmativerelieffromthe
defendant.20
InthecaseoftheUnitedStatesofAmerica,thecustomaryruleofinternationallawonstate
immunityisexpressedwithmorespecificityintheRPUSBasesTreaty.ArticleIIIthereof
providesasfollows:
ItismutuallyagreedthattheUnitedStatesshallhavetherights,powerandauthority
withinthebaseswhicharenecessaryfortheestablishment,use,operationanddefense
thereoforappropriateforthecontrolthereofandalltherights,powerandauthority
withinthelimitsoftheterritorialwatersandairspaceadjacentto,orinthevicinityof,
thebaseswhicharenecessarytoprovideaccesstothemorappropriatefortheircontrol.
ThepetitionersalsorelyheavilyonBaerv.Tizon,21alongwithseveralotherdecisions,tosupport
theirpositionthattheyarenotsuableinthecasesbelow,theUnitedStatesnothavingwaivedits
sovereignimmunityfromsuit.ItisemphasizedthatinBaer,theCourtheld:
Theinvocationofthedoctrineofimmunityfromsuitofaforeignstatewithoutits
consentisappropriate.Morespecifically,insofarasalienarmedforcesisconcerned,the
startingpointisRaquizav.Bradford,a1945decision.Indismissingahabeascorpus
petitionforthereleaseofpetitionersconfinedbyAmericanarmyauthorities,Justice
HiladospeakingfortheCourt,citedColemanv.Tennessee,whereitwasexplicitly

declared:'Itiswellsettledthataforeignarmy,permittedtomarchthroughafriendly
countryortobestationedinit,bypermissionofitsgovernmentorsovereign,isexempt
fromthecivilandcriminaljurisdictionoftheplace.'Twoyearslater,inTubband
Tedrowv.Griess,thisCourtreliedontherulinginRaquizav.Bradfordandcitedin
supportthereofexcerptsfromtheworksofthefollowingauthoritativewriters:Vattel,
Wheaton,Hall,Lawrence,Oppenheim,Westlake,Hyde,andMcNairandLauterpacht.
AccuracydemandstheclarificationthataftertheconclusionofthePhilippineAmerican
MilitaryBasesAgreement,thetreatyprovisionsshouldcontrolonsuchmatter,the
assumptionbeingthattherewasamanifestationofthesubmissiontojurisdictiononthe
partoftheforeignpowerwheneverappropriate.MoretothepointisSyquiav.Almeda
Lopez,whereplaintiffsaslessorssuedtheCommandingGeneraloftheUnitedStates
ArmyinthePhilippines,seekingtherestorationtothemoftheapartmentbuildingsthey
ownedleasedtotheUnitedStatesarmedforcesstationedintheManilaarea.Amotionto
dismissonthegroundofnonsuabilitywasfiledandupheldbyrespondentJudge.The
matterwastakentothisCourtinamandamusproceeding.Itfailed.Itwastherulingthat
respondentJudgeactedcorrectlyconsideringthatthe4actionmustbeconsideredasone
againsttheU.S.Government.TheopinionofJusticeMontemayorcontinued:'Itisclear
thatthecourtsofthePhilippinesincludingtheMunicipalCourtofManilahaveno
jurisdictionoverthepresentcaseforunlawfuldetainer.Thequestionoflackof
jurisdictionwasraisedandinterposedattheverybeginningoftheaction.TheU.S.
Governmenthasnotgivenitsconsenttothefilingofthissuitwhichisessentiallyagainst
her,thoughnotinname.Moreover,thisisnotonlyacaseofacitizenfilingasuitagainst
hisownGovernmentwithoutthelatter'sconsentbutitisofacitizenfiringanaction
againstaforeigngovernmentwithoutsaidgovernment'sconsent,whichrendersmore

obviousthelackofjurisdictionofthecourtsofhiscountry.Theprinciplesoflawbehind
thisrulearesoelementaryandofsuchgeneralacceptancethatwedeemitunnecessaryto
citeauthoritiesinsupportthereofthencameMarvelBuildingCorporationv.Philippine
WarDamageCommission,whererespondent,aUnitedStatesAgencyestablishedto
compensatedamagessufferedbythePhilippinesduringWorldWarIIwasheldasfalling
withintheabovedoctrineasthesuitagainstitwouldeventuallybeachargeagainstor
financialliabilityoftheUnitedStatesGovernmentbecause...,theCommissionhasno
fundsofitsownforthepurposeofpayingmoneyjudgments.'TheSyquiarulingwas
againexplicitlyrelieduponinMarquezLimv.Nelson,involvingacomplaintforthe
recoveryofamotorlaunch,plusdamages,thespecialdefenseinterposedbeing'thatthe
vesselbelongedtotheUnitedStatesGovernment,thatthedefendantsmerelyactedas
agentsofsaidGovernment,andthattheUnitedStatesGovernmentisthereforethereal
partyininterest.'SoitwasinPhilippineAlienPropertyAdministrationv.Castelo,where
itwasheldthatasuitagainstAlienPropertyCustodianandtheAttorneyGeneralofthe
UnitedStatesinvolvingvestedpropertyundertheTradingwiththeEnemyActisin
substanceasuitagainsttheUnitedStates.TothesameeffectisParrenov.McGranery,
asthefollowingexcerptfromtheopinionofjusticeTuazonclearlyshows:'Itisawidely
acceptedprincipleofinternationallaw,whichismadeapartofthelawoftheland
(ArticleII,Section3oftheConstitution),thataforeignstatemaynotbebroughttosuit
beforethecourtsofanotherstateoritsowncourtswithoutitsconsent.'Finally,there
isJohnsonv.Turner,anappealbythedefendant,thenCommandingGeneral,Philippine
Command(AirForce,withofficeatClarkField)fromadecisionorderingthereturnto
plaintiffoftheconfiscatedmilitarypaymentcertificatesknownasscripmoney.In
reversingthelowercourtdecision,thisTribunal,throughJusticeMontemayor,relied

onSyquiav.AlmedaLopez,explainingwhyitcouldnotbesustained.
ItbearsstressingatthispointthattheaboveobservationsdonotconferontheUnitedStatesof
AmericaablanketimmunityforallactsdonebyitoritsagentsinthePhilippines.Neithermaythe
otherpetitionersclaimthattheyarealsoinsulatedfromsuitinthiscountrymerelybecausethey
haveactedasagentsoftheUnitedStatesinthedischargeoftheirofficialfunctions.
ThereisnoquestionthattheUnitedStatesofAmerica,likeanyotherstate,willbedeemedtohave
impliedlywaiveditsnonsuabilityifithasenteredintoacontractinitsproprietaryorprivate
capacity.Itisonlywhenthecontractinvolvesitssovereignorgovernmentalcapacitythatnosuch
waivermaybeimplied.ThiswasourrulinginUnitedStatesofAmericav.Ruiz,22wherethe
transactioninquestiondealtwiththeimprovementofthewharvesinthenavalinstallationatSubic
Bay.Asthiswasaclearlygovernmentalfunction,weheldthatthecontractdidnotoperatetodivest
theUnitedStatesofitssovereignimmunityfromsuit.InthewordsofJusticeVicenteAbadSantos:
ThetraditionalruleofimmunityexemptsaStatefrombeingsuedinthecourtsofanother
Statewithoutitsconsentorwaiver.Thisruleisanecessaryconsequenceoftheprinciples
ofindependenceandequalityofStates.However,therulesofInternationalLawarenot
petrified;theyareconstantlydevelopingandevolving.Andbecausetheactivitiesof
stateshavemultiplied,ithasbeennecessarytodistinguishthembetweensovereign
andgovernmentalacts(jureimperii)andprivate,commercialandproprietaryacts(jure
gestionis).TheresultisthatStateimmunitynowextendsonlytoactsjureimperiiThe
restrictiveapplicationofStateimmunityisnowtheruleintheUnitedStates,theUnited
kingdomandotherstatesinWesternEurope.
xxxxxxxxx
TherestrictiveapplicationofStateimmunityisproperonlywhentheproceedingsarise
outofcommercialtransactionsoftheforeignsovereign,itscommercialactivitiesor

economicaffairs.Stateddifferently,aStatemaybesaidtohavedescendedtothelevelof
anindividualandcanthusbedeemedtohavetacitlygivenitsconsenttobesuedonly
whenitentersintobusinesscontracts.Itdoesnotapplywherethecontractrelatestothe
exerciseofitssovereignfunctions.Inthiscasetheprojectsareanintegralpartofthe
navalbasewhichisdevotedtothedefenseofboththeUnitedStatesandthePhilippines,
indisputablyafunctionofthegovernmentofthehighestorder;theyarenotutilizedfor
nordedicatedtocommercialorbusinesspurposes.
Theotherpetitionersinthecasesbeforeusallavertheyhaveactedinthedischargeoftheirofficial
functionsasofficersoragentsoftheUnitedStates.However,thisisamatterofevidence.The
chargesagainstthemmaynotbesummarilydismissedontheirmereassertionthattheiractsare
imputabletotheUnitedStatesofAmerica,whichhasnotgivenitsconsenttobesued.Infact,the
defendantsaresoughttobeheldanswerableforpersonaltortsinwhichtheUnitedStatesitselfis
notinvolved.Iffoundliable,theyandtheyalonemustsatisfythejudgment.
InFestejov.Fernando,23abureaudirector,actingwithoutanyauthoritywhatsoever,appropriated
privatelandandconverteditintopublicirrigationditches.Suedforthevalueofthelotsinvalidly
takenbyhim,hemovedtodismissthecomplaintonthegroundthatthesuitwasineffectagainst
thePhilippinegovernment,whichhadnotgivenitsconsenttobesued.ThisCourtsustainedthe
denialofthemotionandheldthatthedoctrineofstateimmunitywasnotapplicable.Thedirector
wasbeingsuedinhisprivatecapacityforapersonaltort.
Withtheseconsiderationsinmind,wenowproceedtoresolvethecasesathand.
III
ItisclearfromastudyoftherecordsofG.R.No.80018thattheindividuallynamedpetitioners
thereinwereactingintheexerciseoftheirofficialfunctionswhentheyconductedthebuybust
operationagainstthecomplainantandthereaftertestifiedagainsthimathistrial.Thesaid

petitionerswereinfactconnectedwiththeAirForceOfficeofSpecialInvestigatorsandwere
chargedpreciselywiththefunctionofpreventingthedistribution,possessionanduseofprohibited
drugsandprosecutingthoseguiltyofsuchacts.Itcannotforamomentbeimaginedthattheywere
actingintheirprivateorunofficialcapacitywhentheyapprehendedandlatertestifiedagainstthe
complainant.ItfollowsthatfordischargingtheirdutiesasagentsoftheUnitedStates,theycannot
bedirectlyimpleadedforactsimputabletotheirprincipal,whichhasnotgivenitsconsenttobe
sued.AsweobservedinSandersv.Veridiano:24
Giventheofficialcharacteroftheabovedescribedletters,wehavetoconcludethatthe
petitionerswere,legallyspeaking,beingsuedasofficersoftheUnitedStates
government.Astheyhaveactedonbehalfofthatgovernment,andwithinthescopeof
theirauthority,itisthatgovernment,andnotthepetitionerspersonally,thatisresponsible
fortheiracts.
TheprivaterespondentinvokesArticle2180oftheCivilCodewhichholdsthegovernmentliableif
itactsthroughaspecialagent.Theargument,itwouldseem,ispremisedonthegroundthatsince
theofficersaredesignated"specialagents,"theUnitedStatesgovernmentshouldbeliablefortheir
torts.
Thereseemstobeafailuretodistinguishbetweensuabilityandliabilityandamisconceptionthat
thetwotermsaresynonymous.Suabilitydependsontheconsentofthestatetobesued,liabilityon
theapplicablelawandtheestablishedfacts.Thecircumstancethatastateissuabledoesnot
necessarilymeanthatitisliable;ontheotherhand,itcanneverbeheldliableifitdoesnotfirst
consenttobesued.Liabilityisnotconcededbythemerefactthatthestatehasalloweditselftobe
sued.Whenthestatedoeswaiveitssovereignimmunity,itisonlygivingtheplaintiffthechanceto
prove,ifitcan,thatthedefendantisliable.
Thesaidarticleestablishesaruleofliability,notsuability.Thegovernmentmaybeheldliable

underthisruleonlyifitfirstallowsitselftobesuedthroughanyoftheacceptedformsofconsent.
Moreover,theagentperforminghisregularfunctionsisnotaspecialagentevenifheisso
denominated,asinthecaseatbar.Nolessimportant,thesaidprovisionappearstoregulateonlythe
relationsofthelocalstatewithitsinhabitantsand,hence,appliesonlytothePhilippinegovernment
andnottoforeigngovernmentsimpleadedinourcourts.
WerejecttheconclusionofthetrialcourtthattheanswerfiledbythespecialcounseloftheOffice
oftheSheriffJudgeAdvocateofClarkAirBasewasasubmissionbytheUnitedStatesgovernment
toitsjurisdiction.AswenotedinRepublicv.Purisima,25expresswaiverofimmunitycannotbe
madebyamerecounselofthegovernmentbutmustbeeffectedthroughadulyenactedstatute.
Neitherdoessuchanswercomeundertheimpliedformsofconsentasearlierdiscussed.
ButevenaswearecertainthattheindividualpetitionersinG.R.No.80018wereactinginthe
dischargeoftheirofficialfunctions,wehesitatetomakethesameconclusioninG.R.No.80258.
Thecontradictoryfactualallegationsinthiscasedeserveinourviewacloserstudyofwhatactually
happenedtotheplaintiffs.Therecordistoomeagertoindicateifthedefendantswerereally
dischargingtheirofficialdutiesorhadactuallyexceededtheirauthoritywhentheincidentin
questionoccurred.Lackingthisinformation,thisCourtcannotdirectlydecidethiscase.Theneeded
inquirymustfirstbemadebythelowercourtsoitmayassessandresolvetheconflictingclaimsof
thepartiesonthebasisoftheevidencethathasyettobepresentedatthetrial.Onlyafteritshall
havedeterminedinwhatcapacitythepetitionerswereactingatthetimeoftheincidentinquestion
willthisCourtdetermine,ifstillnecessary,ifthedoctrineofstateimmunityisapplicable.
InG.R.No.79470,privaterespondentGenovewasemployedasacookintheMainClublocatedat
theU.S.AirForceRecreationCenter,alsoknownastheOpenMessComplex,atJohnHayAir
Station.Asmanagerofthiscomplex,petitionerLamachiaisresponsibleforelevendiversified
activitiesgeneratinganannualincomeof$2million.Underhisexecutivemanagementarethree

servicerestaurants,acafeteria,abakery,aClassVIstore,acoffeeandpantryshop,amaincashier
cage,anadministrativeoffice,andadecentralizedwarehousewhichmaintainsastocklevelof
$200,000.00permonthinresaleitems.Hesupervises167employees,oneofwhomwasGenove,
withwhomtheUnitedStatesgovernmenthasconcludedacollectivebargainingagreement.
Fromthesecircumstances,theCourtcanassumethattherestaurantservicesofferedattheJohnHay
AirStationpartakeofthenatureofabusinessenterpriseundertakenbytheUnitedStates
governmentinitsproprietarycapacity.SuchservicesarenotextendedtotheAmericanservicemen
forfreeasaperquisiteofmembershipintheArmedForcesoftheUnitedStates.Neitherdoesit
appearthattheyareexclusivelyofferedtotheseservicemen;onthecontrary,itiswellknownthat
theyareavailabletothegeneralpublicaswell,includingthetouristsinBaguioCity,manyof
whommakeitapointtovisitJohnHayforthisreason.Allpersonsavailingthemselvesofthis
facilitypayfortheprivilegelikeallothercustomersasinordinaryrestaurants.Althoughtheprices
areconcededlyreasonableandrelativelylow,suchservicesareundoubtedlyoperatedforprofit,as
acommercialandnotagovernmentalactivity.
Theconsequenceofthisfindingisthatthepetitionerscannotinvokethedoctrineofstateimmunity
tojustifythedismissalofthedamagesuitagainstthembyGenove.Suchdefensewillnotprosper
evenifitbeestablishedthattheywereactingasagentsoftheUnitedStateswhentheyinvestigated
andlaterdismissedGenove.Forthatmatter,noteventheUnitedStatesgovernmentitselfcanclaim
suchimmunity.ThereasonisthatbyenteringintotheemploymentcontractwithGenoveinthe
dischargeofitsproprietaryfunctions,itimpliedlydivesteditselfofitssovereignimmunityfrom
suit.
Buttheseconsiderationsnotwithstanding,weholdthatthecomplaintagainstthepetitionersinthe
courtbelowmuststillbedismissed.Whilesuable,thepetitionersareneverthelessnotliable.Itis
obviousthattheclaimfordamagescannotbeallowedonthestrengthoftheevidencebeforeus,

whichwehavecarefullyexamined.
Thedismissaloftheprivaterespondentwasdecidedupononlyafterathoroughinvestigationwhere
itwasestablishedbeyonddoubtthathehadpollutedthesoupstockwithurine.Theinvestigation,in
fact,didnotstopthere.DespitethedefinitivefindingofGenove'sguilt,thecasewasstillreferred
totheboardofarbitratorsprovidedforinthecollectivebargainingagreement.Thisboard
unanimouslyaffirmedthefindingsoftheinvestigatorsandrecommendedGenove'sdismissal.
Therewasnothingarbitraryabouttheproceedings.Thepetitionersactedquiteproperlyin
terminatingtheprivaterespondent'semploymentforhisunbelievablynauseatingact.Itis
surprisingthatheshouldstillhavethetemeritytofilehiscomplaintfordamagesaftercommitting
hisutterlydisgustingoffense.
ConcerningG.R.No.76607,wealsofindthatthebarbershopssubjectoftheconcessionsgranted
bytheUnitedStatesgovernmentarecommercialenterprisesoperatedbyprivateperson's.Theyare
notagenciesoftheUnitedStatesArmedForcesnoraretheirfacilitiesdemandableasamatterof
rightbytheAmericanservicemen.Theseestablishmentsprovideforthegroomingneedsoftheir
customersandoffernotonlythebasichaircutandshave(asrequiredinmostmilitary
organizations)butsuchotheramenitiesasshampoo,massage,manicureandothersimilar
indulgences.Andallforafee.Interestingly,oneoftheconcessionaires,privaterespondent
Valencia,wasevensentabroadtoimprovehistonsorialbusiness,presumablyforthebenefitofhis
customers.Nolesssignificantly,ifnotmoreso,allthebarbershopconcessionairesareunderthe
termsoftheircontracts,requiredtoremittotheUnitedStatesgovernmentfixedcommissionsin
considerationoftheexclusiveconcessionsgrantedtothemintheirrespectiveareas.
Thisbeingthecase,thepetitionerscannotpleadanyimmunityfromthecomplaintfiledbythe
privaterespondentsinthecourtbelow.Thecontractsinquestionbeingdecidedlycommercial,the
conclusionreachedintheUnitedStatesofAmericav.Ruizcasecannotbeappliedhere.

TheCourtwouldhavedirectlyresolvedtheclaimsagainstthedefendantsaswehavedoneinG.R.
No.79470,exceptforthepaucityoftherecordinthecaseathand.Theevidenceofthealleged
irregularityinthegrantofthebarbershopconcessionsisnotbeforeus.Thismeansthat,asinG.R.
No.80258,therespondentcourtwillhavetoreceivethatevidencefirst,soitcanlaterdetermineon
thebasisthereofiftheplaintiffsareentitledtotherelieftheyseek.Accordingly,thiscasemustalso
beremandedtothecourtbelowforfurtherproceedings.
IV
Thereareanumberofothercasesnowpendingbeforeuswhichalsoinvolvethequestionofthe
immunityoftheUnitedStatesfromthejurisdictionofthePhilippines.Thisiscauseforregret,
indeed,astheymarthetraditionalfriendshipbetweentwocountrieslongalliedinthecauseof
democracy.Itishopedthatthesocalled"irritants"intheirrelationswillberesolvedinaspiritof
mutualaccommodationandrespect,withouttheinconvenienceandasperityoflitigationand
alwayswithjusticetobothparties.
WHEREFORE,afterconsideringalltheabovepremises,theCourtherebyrendersjudgmentas
follows:
1.InG.R.No.76607,thepetitionisDISMISSEDandtherespondentjudgeisdirectedto
proceedwiththehearinganddecisionofCivilCaseNo.4772.Thetemporaryrestraining
orderdatedDecember11,1986,isLIFTED.
2.InG.R.No.79470,thepetitionisGRANTEDandCivilCaseNo.829R(298)is
DISMISSED.
3.InG.R.No.80018,thepetitionisGRANTEDandCivilCaseNo.115C87is
DISMISSED.ThetemporaryrestrainingorderdatedOctober14,1987,ismade
permanent.
4.InG.R.No.80258,thepetitionisDISMISSEDandtherespondentcourtisdirectedto

proceedwiththehearinganddecisionofCivilCaseNo.4996.Thetemporaryrestraining
orderdatedOctober27,1987,isLIFTED.
Allwithoutanypronouncementastocosts.

G.R.No.108813December15,1994
JUSMAGPHILIPPINES,petitioner,

vs.
THENATIONALLABORRELATIONSCOMMISSION(SecondDivision)and
FLORENCIOSACRAMENTO,UnionPresident,JPFCEA,respondents.
Juan,Luces,LunaandAssociatesforpetitioner.
Galutera&AguilarLawOfficesforprivaterespondent.

PUNO,J.:
TheimmunityfromsuitoftheJointUnitedStatesMilitaryAssistanceGrouptotheRepublicofthe
Philippines(JUSMAGPhilippines)isthepivotalissueinthecaseatbench.
JUSMAGassailstheJanuary29,1993ResolutionoftheNATIONALLABORRELATIONS
COMMISSION(publicrespondent),inNLRCNCRCASENO.00030209292,reversingtheJuly
30,1991OrderoftheLaborArbiter,andorderingthelattertoassumejurisdictionoverthe
complaintforillegaldismissalfiledbyFLORENCIOSACRAMENTO(privaterespondent)against
petitioner.
First,theundisputedfacts.
Privaterespondentwasoneoftheseventyfour(74)securityassistancesupportpersonnel(SASP)
workingatJUSMAGPhilippines.1HehadbeenwithJUSMAGfromDecember18,1969,untilhis
dismissalonApril27,1992.Whendismissed,heheldthepositionofIllustrator2andwasthe
incumbentPresidentofJUSMAGPHILIPPINESFILIPINOCIVILIANEMPLOYEES
ASSOCIATION(JPFCEA),alabororganizationdulyregisteredwiththeDepartmentofLaborand
Employment.Hisserviceswereterminatedallegedlyduetotheabolitionofhisposition.2Hewas
alsoadvisedthathewasunderadministrativeleaveuntilApril27,1992,althoughthesamewasnot
chargedagainsthisleave.
OnMarch31,1992,privaterespondentfiledacomplaintwiththeDepartmentofLaborand

Employmentonthegroundthathewasillegallysuspendedanddismissedfromserviceby
JUSMAG.3Heaskedforhisreinstatement.
JUSMAGthenfiledaMotiontoDismissinvokingitsimmunityfromsuitasanagencyofthe
UnitedStates.Itfurtherallegedlackofemployeremployeerelationshipandthatithasnojuridical
personalitytosueandbesued.4
InanOrderdatedJuly30,1991,LaborArbiterDanielC.Cuetodismissedthesubjectcomplaint
"forwantofjurisdiction."5Privaterespondentappealed6totheNationalLaborRelations
Commission(publicrespondent),assailingtherulingthatpetitionerisimmunefromsuitforalleged
violationofourlaborlaws.JUSMAGfileditsOpposition,7reiteratingitsimmunityfromsuitfor
itsnoncontractual,governmentaland/orpublicacts.
InaResolution,datedJanuary29,1993,theNLRC8reversedtherulingoftheLaborArbiterasit
heldthatpetitionerhadlostitsrightnottobesued.Theresolutionwaspredicatedontwogrounds:
(1)theprincipleofestoppelthatJUSMAGfailedtorefutetheexistenceofemployeremployee
relationshipunderthe"controltest";and(2)JUSMAGhaswaiveditsrighttoimmunityfromsuit
whenithiredtheservicesofprivaterespondentonDecember18,1969.
TheNLRCreliedonthecaseofHarryLyonsvs.UnitedStatesofAmerica,9wherethe"United
StatesGovernment(wasconsideredtohave)waiveditsimmunityfromsuitbyenteringinto(a)
contractofstevedoringservices,andthus,itsubmitteditselftothejurisdictionofthelocalcourts."
Accordingly,thecasewasremandedtothelaborarbiterforreceptionofevidenceastotheissueon
illegaldismissal.
Hence,thispetition,JUSMAGcontends:
I
THEPUBLICRESPONDENTCOMMITTEDGRAVEABUSEOFDISCRETION
AMOUNTINGTOLACKAND/OREXCESSOFJURISDICTION

A.INREVERSINGTHEDECISIONOFTHELABORARBITERANDIN
NOTAFFIRMINGTHEDISMISSALOFTHECOMPLAINTITBEINGA
SUITAGAINSTTHEUNITEDSTATESOFAMERICAWHICHHADNOT
GIVENITSCONSENTTOBESUED;AND
B.INFINDINGWAIVERBYJUSMAGOFIMMUNITYFROMSUIT;
II
THEPUBLICRESPONDENTCOMMITTEDGRAVEABUSEOFDISCRETION
AMOUNTINGTOLACKAND/OREXCESSOFJURISDICTION
A.WHENITFOUNDANEMPLOYEREMPLOYEERELATIONSHIP
BETWEENJUSMAGANDPRIVATERESPONDENT;AND
B.WHENITCONSIDEREDJUSMAGESTOPPEDFROMDENYING
THATPRIVATERESPONDENTISITSEMPLOYEEFORFAILURETO
PRESENTPROOFTOTHECONTRARY.
Wefindthepetitionimpressedwithmerit.
ItismeettodiscussthehistoricalbackgroundoftheJUSMAGtodetermineitsimmunityfromsuit.
JUSMAGwascreatedpursuanttotheMilitaryAssistanceAgreement10datedMarch21,1947,
betweentheGovernmentoftheRepublicofthePhilippinesandtheGovernmentoftheUnited
StatesofAmerica.Asagreedupon,JUSMAGshallconsistofAir,NavalandArmygroup,andits
primarytaskwastoadviseandassistthePhilippines,onairforce,armyandnavalmatters.11
Article14ofthe1947Agreementprovides,interalia,that"thecostofallservicesrequiredbythe
Group,includingcompensationoflocallyemployedinterpreters,clerks,laborers,andother
personnel,exceptpersonalservants,shallbebornebytheRepublicofthePhilippines."
Thissetupwastochangein1991.InNoteNo22,addressedtotheDepartmentofForeignAffairs
(DFA)ofthePhilippines,datedJanuary23,1991,theUnitedStatesGovernment,thruitsEmbassy,

manifesteditspreparedness"toprovidefundstocoverthesalariesofsecurityassistancesupport
personnel"andsecurityguards,therentofJUSMAGoccupiedbuildingsandhousing,andthecost
ofutilities.12ThisofferwasacceptedbyourGovernment,thrutheDFA,inNoteNo.911725,dated
April18,1991.13
Consequently,aMemorandumofAgreement14wasforgedbetweentheArmedForcesofthe
PhilippinesandJUSMAGPhilippines,thruGeneralLisandroC.AbadiaandU.S.Brigadier
GeneralRobertG.Sausser.TheAgreementdelineatedthetermsoftheassistanceinkindof
JUSMAGfor1991,therelevantpartsofwhichread:
a.Thetermsalariesasusedinthisagreementincludethoseforthesecurityguards
currentlycontractedbetweenJUSMAGandA'PrimeSecurityServicesInc.,and
theSecurityAssistanceSupportPersonnel(SASP).....
b.ThetermSecurityAssistanceSupportPersonnel(SASP)doesnotincludeactiveduty
uniformedmembersoftheArmedForcesofthePhilippinesperformingdutyat
JUSMAG.
c.ItisunderstoodthatSASPareemployeesoftheArmedForcesofthe
Philippines(AFP).Therefore,theAFPagreestoappoint,forservicewithJUSMAG,no
morethan74personneltodesignatedpositionswithJUSMAG.
d.SASPareunderthetotaloperationalcontroloftheChief,JUSMAGPhilippines.The
term"OperationalControl"includes,butisnotlimitedto,allpersonneladministrative
actions,suchas:hiringrecommendations;firingrecommendations;position
classification;discipline;nominationandapprovalofincentiveawards;andpayroll
computation.PersonneladministrationwillbeguidedbyAnnexEofJUSMAG
PhilippinesMemo102.Fortheperiodoftimethatthereisanexceptionalfunding
agreementbetweenthegovernmentofthePhilippinesandtheUnitedStatesGovernment

(USG),JUSMAGwillpaythetotalpayrollcostsfortheSASPemployees.Payrollcosts
includeonlyregularsalary;approvedovertime,costsoflivingallowance;medical
insurance;regularcontributionstothePhilippineSocialSecuritySystem,PAGIBIG
FundandPersonnelEconomicReliefAllowance(PERA);andthethirteenthmonth
bonus.Payrollcostsdonotincludegiftsorotherbonuspaymentsinadditiontothose
previouslydefinedabove.Entitlementsnotconsideredpayrollcostsunderthisagreement
willbefundedandpaidbytheAFP.
e.AllSASPemployedasofJuly1,1990willcontinuetheirservicewithJUSMAGat
theircurrentrateofpayandbenefitsupto30June1991,withanannualrenewalof
employmentthereaftersubjecttorenewaloftheirappointmentwiththeAFP(employees
andratesofpayareindicatedatEnclosure3).Nopromotionortransferinternalto
JUSMAGofthelistedpersonnelwillresultinthereductionoftheirpayandbenefits.
f.AllSASPwill,afterproperclassification,bepaidsalariesandbenefitsatestablished
AFPcivilianrates.Rulesforcomputationofpayandallowanceswillbemadeavailable
totheComptroller,JUSMAG,bytheComptroller,GHQ,AFP.Additionally,anylegally
mandatedchangesinsalarylevelsormethodsofcomputationshallbetransmittedwithin
48hoursofreceiptbyComptroller,GHQtoComptroller,JUSMAG.
g.TheAFPagreesnottoterminateSASPwithout60dayspriorwrittennoticetoChief,
JUSMAGPhilippines.Anyterminationofthesepersonnelthoughttobenecessary
becauseofbudgetaryrestrictionsormanpowerceilingwillbesubjecttoconsultations
betweenAFPandJUSMAGtoensurethatJUSMAG'smissionofdedicatedsupportto
theAFPwillnotbedegradedorharmedinanyway.
h.TheAFPagreestoassumetheseverancepay/retirementpayliabilityforallappointed
SASP.(Enclosure3liststheseverancepayliabilitydateforcurrentSASP).Any

terminationofservices,otherthanvoluntaryresignationsorterminationforcause,will
resultinimmediatepaymentsofAFPofallterminationpaytotheentitledemployee.
Vouchersforseverance/retirementpayandaccruedbonusesandannualleavewillbe
presentedtotheComptroller,GHQ,AFP,notlaterthan14calendardayspriorto
requireddateofpayment.
i.AllSASPlistedinEnclosure3willcontinuetoparticipateinthePhilippineSocial
SecuritySystem.
Ayearlater,orin1992,theUnitedStatesEmbassysentanothernoteofsimilarimporttothe
DepartmentofForeignAffairs(No.227,datedApril8,1992),extendingthefundingagreementfor
thesalariesofSASPandsecurityguardsuntilDecember31,1992.
Fromtheforegoing,itisapparentthatwhenJUSMAGtooktheservicesofprivaterespondent,it
wasperformingagovernmentalfunctiononbehalfoftheUnitedStatespursuanttotheMilitary
AssistanceAgreementdatedMarch21,1947.Hence,weagreewithpetitionerthatthesuitis,in
effect,oneagainsttheUnitedStatesGovernment,albeititwasnotimpleadedinthecomplaint.
ConsideringthattheUnitedStateshasnotwaivedorconsentedtothesuit,thecomplaintagainst
JUSMAGcannotnotprosper.
Inthisjurisdiction,werecognizeandadoptthegenerallyacceptedprinciplesofinternationallawas
partofthelawoftheland.15ImmunityofStatefromsuitisoneoftheseuniversallyrecognized
principles.Ininternationallaw,"immunity"iscommonlyunderstoodasanexemptionofthestate
anditsorgansfromthejudicialjurisdictionofanotherstate.16Thisisanchoredontheprincipleof
thesovereignequalityofstatesunderwhichonestatecannotassertjurisdictionoveranotherin
violationofthemaximparinparemnonhabetimperium(anequalhasnopoweroveranequal).17
UnderthetraditionalruleofStateimmunity,astatecannotbesuedinthecourtsofanotherState,
withoutitsconsentorwaiver.However,inSantos,etal.,vs.Santos,etal.,18werecognizedan

exceptiontothedoctrineofimmunityfromsuitbyastate,thus:
....Nevertheless,if,whereandwhenthestateoritsgovernmententersintoacontract,
throughitsofficersoragents,infurtheranceofalegitimateaimandpurposeandpursuant
toconstitutionallegislativeauthority,wherebymutualorreciprocalbenefitsaccrueand
rightsandobligationsarisetherefrom,andifthelawgrantingtheauthoritytoenterinto
suchcontractdoesnotprovideforornametheofficeragainstwhomactionmaybe
broughtintheeventofabreachthereof,thestateitselfmaybesued,evenwithoutits
consent,becausebyenteringintoacontract,thesovereignstatehasdescendedtothe
levelofthecitizenanditsconsenttobesuedisimpliedfromtheveryactofenteringinto
suchcontract.....(emphasisours)
ItwasinthislightthatthestateimmunityissueinHarryLyons,Inc.,vs.UnitedStatesof
America19wasdecided.
InthecaseofHarryLyons,Inc.,thepetitionerenteredintoacontractwiththeUnitedStates
GovernmentforstevedoringservicesattheU.S.NavalBase,SubicBay,Philippines.Itthensought
tocollectfromtheUSgovernmentsumsofmoneyarisingfromthecontract.Oneoftheissues
posedinthecasewaswhetherornotthedefunctCourtofFirstInstancehadjurisdictionoverthe
defendantUnitedStates,asovereignstatewhichcannotbesuedwithoutitsconsent.ThisCourt
upheldthecontentionofHarryLyons,Inc.,that"whenasovereignstateentersintoacontractwith
aprivateperson,thestatecanbesueduponthetheorythatithasdescendedtothelevelofan
individualfromwhichitcanbeimpliedthatithasgivenitsconsenttobesuedunderthecontract."
Thedoctrineofstateimmunityfromsuithasundergonefurthermetamorphosis.Theviewevolved
thattheexistenceofacontractdoesnot,perse,meanthatsovereignstatesmay,atalltimes,be
suedinlocalcourts.Thecomplexityofrelationshipsbetweensovereignstates,broughtaboutby
theirincreasingcommercialactivities,motheredamorerestrictiveapplicationofthe

doctrine.20Thus,inUnitedStatesofAmericavs.Ruiz,21weclarifiedthatourpronouncement
inHarryLyons,supra,withrespecttothewaiverofStateimmunity,wasobiterand"hasnovalue
asanimperativeauthority."
Asitstandsnow,theapplicationofthedoctrineofimmunityfromsuithas
beenrestrictedtosovereignorgovernmentalactivities(jureimperii).22Themantleofstate
immunitycannotbeextendedtocommercial,privateandproprietaryacts(juregestionis).As
aptlystatedbythisCourt(Enbanc)inUSvs.Ruiz,supra:
TherestrictiveapplicationofStateimmunityisproperwhentheproceedingsariseoutof
commercialtransactionsoftheforeignsovereign,itscommercialactivitiesoreconomic
affairs.Stateddifferently,aStatemaybesaidtohavedescendedtothelevelofan
individualandthuscanbedeemedtohavetacitlygivenitsconsenttobeusedonlywhen
itentersintobusinesscontracts.Itdoesnotapplywherethecontractrelatestothe
exerciseofitssovereignfunctions.(emphasisours)
Weheldfurther,thattheapplicationofthedoctrineofstateimmunitydependsonthelegal
natureoftheact.Ergo,sinceagovernmentalfunctionwasinvolvedthetransactiondealtwith
theimprovementofthewharvesinthenavalinstallationatSubicBayitwasheldthattheUnited
Stateswasnotdeemedtohavewaiveditsimmunityfromsuit.
ThencamethecaseofUnitedStatesvs.Hon.Rodrigo,etal.23Insaidcase,Genovewasemployed
asacookintheMainClublocatedatU.S.AirForceRecreationCenter,JohnHayAirStation.He
wasdismissedfromserviceafterhewasfoundtohavepollutedthestockofsoupwithurine.
Genovecounteredwithacomplaintfordamages.Apparently,therestaurantservicesofferedatthe
JohnHayAirStationpartakeofthenatureofabusinessenterpriseundertakenbytheUnitedStates
governmentinitsproprietarycapacity.TheCourtthennotedthattherestaurantiswellknownand
availabletothegeneralpublic,thus,theservicesareoperatedforprofit,asacommercialandnota

governmentalactivity.SpeakingthroughAssociateJusticeIsaganiCruz,theCourt(EnBanc)said:
Theconsequenceofthisfindingisthatthepetitionerscannotinvokethedoctrineofstate
immunitytojustifythedismissalofthedamagesuitagainstthembyGenove.Such
defensewillnotprosperevenifitbeestablishedthattheywereactingasagentsofthe
UnitedStateswhentheyinvestigatedandlaterdismissedGenove.Forthematter,not
eventheUnitedStatesgovernmentitselfcanclaimsuchimmunity.Thereasonisthatby
enteringintotheemploymentcontractwithGenoveinthedischargeofitsproprietary
functions,itimpliedlydivesteditselfofitssovereignimmunityfromsuit.(emphasisours)
Conversely,ifthecontractwasenteredintointhedischargeofitsgovernmentalfunctions,the
sovereignstatecannotbedeemedtohavewaiveditsimmunityfromsuit.24Suchisthecaseat
bench.Prescindingfromthispremise,weneednotdeterminewhetherJUSMAGcontrolsthe
employmentconditionsoftheprivaterespondent.
WealsoholdthatthereappearstobenobasisforpublicrespondenttorulethatJUSMAGis
stoppedfromdenyingtheexistenceofemployeremployeerelationshipwithprivaterespondent.On
thecontrary,initsOppositionbeforethepublicrespondent,JUSMAGconsistentlycontendedthat
the(74)SASP,includingprivaterespondent,workinginJUSMAG,areemployeesoftheArmed
ForcesofthePhilippines.Thiscanbegleanedfrom:(1)theMilitaryAssistanceAgreement,supra,
(2)theexchangeofnotesbetweenourGovernment,thruDepartmentofForeignAffairs,andthe
UnitedStates,thrutheUSEmbassytothePhilippines,and(3)theAgreementonMay21,
1991,suprabetweentheArmedForcesofthePhilippinesandJUSMAG.
WesymphatizewiththeplightofprivaterespondentwhohadservedJUSMAGformorethan
twenty(20)years.ConsideringhislengthofservicewithJUSMAG,hedeservesamore
compassionatetreatment.Unfortunately,JUSMAGisbeyondthejurisdictionofthisCourt.
Nonetheless,theExecutivebranch,throughtheDepartmentofForeignAffairsandtheArmed

ForcesofthePhilippines,cantakethecudgelforprivaterespondentandtheotherSASPworking
forJUSMAG,pursuanttotheaforestatedMilitaryAssistanceAgreement.
INVIEWOFTHEFOREGOING,thepetitionforcertiorariisGRANTED.Accordingly,the
impugnedResolutiondatedJanuary29,1993oftheNationalLaborRelationsCommissionis
REVERSEDandSETASIDE.Nocosts.SOORDERED.
[G.R. No. 154705. June 26, 2003]
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR
SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners,
vs. JAMES VINZON, doing business under the name and style of VINZON TRADE
AND SERVICES, respondent.
DECISION
AZCUNA, J:
This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated
May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled The
Republic of Indonesia, His Excellency Ambassador Soeratmin and Minister Counselor Azhari
Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145, Makati City, and James
Vinzon, doing business under the name and style of Vinzon Trade and Services.
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a

Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon
Trade and Services. The Maintenance Agreement stated that respondent shall, for a consideration,
maintain specified equipment at the Embassy Main Building, Embassy Annex Building and the
Wisma Duta, the official residence of petitioner Ambassador Soeratmin. The equipment covered by
the Maintenance Agreement are air conditioning units, generator sets, electrical facilities, water
heaters, and water motor pumps. It is likewise stated therein that the agreement shall be effective
for a period of four years and will renew itself automatically unless cancelled by either party by
giving thirty days prior written notice from the date of expiry.[1]
Petitioners claim that sometime prior to the date of expiration of the said agreement, or before
August 1999, they informed respondent that the renewal of the agreement shall be at the discretion
of the incoming Chief of Administration, Minister Counsellor Azhari Kasim, who was expected to
arrive in February 2000. When Minister Counsellor Kasim assumed the position of Chief of
Administration in March 2000, he allegedly found respondents work and services unsatisfactory
and not in compliance with the standards set in the Maintenance Agreement. Hence, the Indonesian
Embassy terminated the agreement in a letter dated August 31, 2000. [2] Petitioners claim, moreover,
that they had earlier verbally informed respondent of their decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary and
unlawful. Respondent cites various circumstances which purportedly negated petitioners alleged
dissatisfaction over respondents services: (a) in July 2000, Minister Counsellor Kasim still
requested respondent to assign to the embassy an additional full-time worker to assist one of his
other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent to donate a prize,
which the latter did, on the occasion of the Indonesian Independence Day golf tournament; and (c)
in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for
sponsoring a prize and expressed his hope that the cordial relations happily existing between them

will continue to prosper and be strengthened in the coming years.


Hence, on December 15, 2000, respondent filed a complaint [3] against petitioners docketed as Civil
Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001,
petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign
sovereign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the
Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor
Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and
therefore enjoy diplomatic immunity.[4] In turn, respondent filed on March 20, 2001, an Opposition
to the said motion alleging that the Republic of Indonesia has expressly waived its immunity from
suit. He based this claim upon the following provision in the Maintenance Agreement:
Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of
the Philippines and by the proper court of Makati City, Philippines.
Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor
Kasim can be sued and held liable in their private capacities for tortious acts done with malice and
bad faith.[5]
On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It likewise denied the
Motion for Reconsideration subsequently filed.
The trial courts denial of the Motion to Dismiss was brought up to the Court of Appeals by herein
petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No.
66894, alleged that the trial court gravely abused its discretion in ruling that the Republic of
Indonesia gave its consent to be sued and voluntarily submitted itself to the laws and jurisdiction of
Philippine courts and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim

waived their immunity from suit.


On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack
of merit.[6] On August 16, 2002, it denied herein petitioners motion for reconsideration.[7]
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in
sustaining the trial courts decision that petitioners have waived their immunity from suit by using
as its basis the abovementioned provision in the Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity, independence, and
equality of States which were adopted as part of the law of our land under Article II, Section 2 of
the 1987 Constitution.[8] The rule that a State may not be sued without its consent is a necessary
consequence of the principles of independence and equality of States. [9] As enunciated in Sanders v.
Veridiano II,[10] the practical justification for the doctrine of sovereign immunity is that there can be
no legal right against the authority that makes the law on which the right depends. In the case of
foreign States, the rule is derived from the principle of the sovereign equality of States, as
expressed in the maxim par in parem non habet imperium. All states are sovereign equals and
cannot assert jurisdiction over one another.[11] A contrary attitude would unduly vex the peace of
nations.[12]
The rules of International Law, however, are neither unyielding nor impervious to change. The
increasing need of sovereign States to enter into purely commercial activities remotely connected
with the discharge of their governmental functions brought about a new concept of sovereign

immunity. This concept, the restrictive theory, holds that the immunity of the sovereign is
recognized only with regard to public acts or acts jure imperii, but not with regard to private acts or
acts jure gestionis.[13]
In United States v. Ruiz,[14] for instance, we held that the conduct of public bidding for the repair of
a wharf at a United States Naval Station is an act jure imperii. On the other hand, we considered as
an act jure gestionis the hiring of a cook in the recreation center catering to American servicemen
and the general public at the John Hay Air Station in Baguio City, [15] as well as the bidding for the
operation of barber shops in Clark Air Base in Angeles City.[16]
Apropos the present case, the mere entering into a contract by a foreign State with a private party
cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure
gestionis. Such act is only the start of the inquiry. Is the foreign State engaged in the regular
conduct of a business? If the foreign State is not engaged regularly in a business or commercial
activity, and in this case it has not been shown to be so engaged, 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.[17]
Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of
the agreement shall be settled according to the laws of the Philippines and by a specified court of
the Philippines is not necessarily a waiver of sovereign immunity from suit. The aforesaid
provision contains language not necessarily inconsistent with sovereign immunity. On the other
hand, such provision may also be meant to apply where the sovereign party elects to sue in the local
courts, or otherwise waives its immunity by any subsequent act. The applicability of Philippine
laws must be deemed to include Philippine laws in its totality, including the principle recognizing
sovereign immunity. Hence, the proper court may have no proper action, by way of settling the
case, except to dismiss it.

Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given
explicitly or by necessary implication. We find no such waiver in this case.
Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the
other hand, he argues that the actual physical maintenance of the premises of the diplomatic
mission, such as the upkeep of its furnishings and equipment, is no longer a sovereign function of
the State.[18]
We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure
imperii. A sovereign State does not merely establish a diplomatic mission and leave it at that; the
establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State
may enter into contracts with private entities to maintain the premises, furnishings and equipment
of the embassy and the living quarters of its agents and officials. It is therefore clear that petitioner
Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract
with respondent for the upkeep or maintenance of the air conditioning units, generator sets,
electrical facilities, water heaters, and water motor pumps of the Indonesian Embassy and the
official residence of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, the Maintenance Agreement was
entered into by the Republic of Indonesia in the discharge of its governmental functions. In such a
case, it cannot be deemed to have waived its immunity from suit. As to the paragraph in the
agreement relied upon by respondent, the Solicitor General states that it was not a waiver of their
immunity from suit but a mere stipulation that in the event they do waive their immunity,
Philippine laws shall govern the resolution of any legal action arising out of the agreement and the
proper court in Makati City shall be the agreed venue thereof.[19]
On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim

may be sued herein in their private capacities, Article 31 of the Vienna Convention on Diplomatic
Relations provides:
xxx
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving
State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in the case
of:
(a) a real action relating to private immovable property situated in the territory of the receiving
State, unless he holds it on behalf of the sending State for the purposes of the mission;
(b) an action relating to succession in which the diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and not on behalf of the sending State;
(c) an action relating to any professional or commercial activity exercised by the diplomatic agent
in the receiving State outside his official functions.
xxx
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the
Maintenance Agreement is not covered by the exceptions provided in the abovementioned
provision.
The Solicitor General believes that said act may fall under subparagraph (c) thereof, [20] but said
provision clearly applies only to a situation where the diplomatic agent engages in any professional
or commercial activity outside official functions, which is not the case herein.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of
Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil

Case No. 18203 against petitioners is DISMISSED.


No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, SandovalGutierrez, Carpio, Corona, Carpio-Morales, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on leave.

[G.R.No.142476.March20,2001]
REPUBLIC OF THE PHILIPPINES,petitioner, vs.THE HONORABLE
SANDIGANBAYAN(FIRSTDIVISION),respondent.
DECISION
SANDOVALGUTIERREZ,J.:
TheissueinthepetitioniswhetherornottheRepublicofthePhilippinesmaywithdrawfunds
derived from the sale of an erroneously sequestered aircraft and ordered by this Court to be
depositedinescrowforthebenefitofthepersonwhomaybelegallyentitledtothefunds.
Before us is the petition for certiorari and mandamus under Section 65 of the 1997 Rules of
Procedure,asamended,filedbytheRepublicofthePhilippines(Republic)assailingtheResolution
of the Sandiganbayan dated September 3, 1999 in Civil Case No. 0033, "Republic of the
Philippinesvs.EduardoM.Cojuangco,Jr.,etal."anditsResolutiondatedFebruary17,2000.
On July 31, 1987, petitioner Republic and the Presidential Commission on Good Government
(PCGG)filedwithrespondentSandiganbayanthesaidCivil CaseNo.0033forreconveyance,
reversion, accounting, restitution and damages against Eduardo Cojuangco, Jr. and 60 other
defendants.Onthestrengthofthiscomplaint,thePCGGissuedseveralsequestrationorders,oneof
whichcoversanaircraft,moreparticularlydescribedasfollows:
AvionsDassaultBreguetFalcon50

JetModel1982
Manufacturer'sSerialNo.082
Cert.ofReg.No.RPC754
Therecordsshowthat:
1.TheFalconjetwasleasedbytheUnitedCoconutChemicalsInc.(Unichem)fromFaysoundLtd.,
acompanyintheUnitedStates;
2.Theleaseovertheaircraftlapsedin1987,atwhichtimetheaircraftshouldhavebeenreturned
byUnichemtoFaysoundLtd.,itsownerlessor;
3.InCivilCaseNo.0033,Cojuangcooranyofthedefendantshasnotclaimedownershipor
interestintheFalconjet;
4.Unichemhasnotbeensequestered.OnlythesharesofCojuangcoinUnichemweresequestered;
and
5. But no one, not even the owner, Faysound Ltd., came forward or questioned before the
SandiganbayanthelegalityofPCGG'ssequestrationoftheaircraft.
OnMarch20,1989,ortwo(2)yearsaftertheleaseoftheFalconFalconjetexpired,thePCGG
filed with the Sandiganbayan a "Motion For Authority To Sell Sequestered Aircraft Pending
Litigation"onthegroundthatitisfastdeteriorating.TheSandiganbayan,initsResolutiondated
May 18, 1989, denied PCGGs motion, holding that it found "no justificationprima facieor
otherwisexxxfortheseizurefromthelessee.Forthwith,thePCGGfiledwiththisCourtapetition
forcertiorari(G.R.No.88336)alleginginthemainthattheSandiganbayanactedwithgraveabuse

ofdiscretionindenyingitsmotiontoselltheaircraftandprayingthattheResolutionofMay18,
1989benullified.OnJune6,1989,thisCourtissuedatemporaryrestrainingorderdirectingthe
SandiganbayantoceaseanddesistfromenforcingitsassailedMay18,1989Resolution.ThisTRO
aimedtopreventtheSandiganbayanfromtakingfurtheractionsproceedinguponorpursuanttoits
assumptionthattheairplanehasbeenunlawfullysequesteredandshouldnotbeinthecustodyof
thePCGG,sincethatwastheboneofcontentiontoberesolvedatthatpostureofthecase.
RelyingonthetemporaryrestrainingorderissuedbythisCourt,thePCGG,onSeptember28,
1989, sold the aircraft to Walter Fuller Aircraft, Inc., (Fuller Aircraft), a US corporation, for
US$7,138,168.65whichwasdepositedinescrowwiththePNB. [1]Thesalewaswithoutauthority
fromtheSandiganbayan.
OnDecember26,1990,theSupremeCourtenbancdismissedPCGGspetitioninG.R.No.88336,
nowin192SCRA743,holdingthat"thedecisiontoselltheaircraftisnotwithinthelimited
administrativepowersofthePCGGbutrequiresthesanctionoftheSandiganbayanwhichcangrant
orwithholdthesameintheexerciseofsounddiscretionandonthebasisoftheevidencebeforeit."
ThedispositiveportionofthisCourt'sDecisionreads:
'WHEREFORE,thepetitionatbarisherebyDISMISSED.ThePCGGisherebyorderedtodeposit
theproceedsofthesaleofthesubjectaircraftunderaspecialtimedepositwiththePhilippine
NationalBankfortheaccountoftheSandiganbayaninescrowforthepersonorpersons,naturalor
juridical,whomaybeadjudgedlawfullyentitledthereto.TheSolicitorGeneralisalsoorderedto
submittothisCourt,withinten(10)daysfromnoticehereof,certifiedtruecopiesofthebillofthe
saleandallotherpertinentdocumentsregardingthesaleofsaidaircrafttoWalterFullerAircraft,
Inc."[2]

AccordingtopetitionerRepublic,theCertificateofTimeDepositNo.463109datedJuly28,1999
showsthatasofthatdate,theamountofUS$8,568,905.55wasdepositedwiththePNBforthe
accountoftheSandiganbayanintrustforthebeneficialowner.[3]
Meanwhile,FaysoundLtd.,filedwiththeDistrictCourtofArkansasintheUnitedStatesanaction
(No.LRC89834)torecovertheFalconjetfromFullerAircraft,thebuyerinthe1989PCGG
sale.
InajudgmentdatedOctober29,1990,theDistrictCourtorderedthattitletotheFalconjetbe
returnedbyFullerAircrafttoFaysound,Ltd.,thus:
"PursuanttotheMemorandumOpinionfiledcontemporaneouslyherewith,summaryjudgmentis
herebygrantedinfavorofplaintiffFaysoundLimited.Onthemotionforsummaryjudgmentfiled
bydefendantWalterFullerAircraftSales,Inc.,thesameisherebydeniedandjudgmentonsaid
motionisrenderedinfavorofplaintiffFaysoundLimited.
Inconformitywiththisruling,titletotheFalcon50,whichisthesubjectofthislitigation,isvested
intheplaintiffFaysoundLimitedfreeandclearofanyandallencumbrancessaveforthecostsof
anyrepairsmadeonsaidplanebytheFalconJetCorporation.Theclaimforstoragechargedon
behalfofFalconJetisdeniedsinceFaysoundbearsnoresponsibilityforthepresenceoftheplane
attheFalconJetfacilityinLittleRockArkansas.Atanyrate,FalconJetinterpledtheplaneintothe
custodyoftheCourtandunderthesecircumstancescannotclaimstoragefortheplane.Storage
chargesmaybeclaimedbyFalconjetagainstFaysoundLimitedbeginningwiththedateofthis
judgment."[4]
Consideringthatitwasdeprivedoftheaircraftsoldtoit,FullerAircraftsuedtheRepublicand
PCGGforbreachofwarrantywithdamages(No.CA3902785R)intheDistrictCourtofTexas,

Dallas Division.On December 2, 1993, this court rendered against the Republic and PCGG a
decision[5]whichpartlyreads:
"BEITREMEMBERED,inaccordancewiththeCourt'sfindingsofFactandConclusionsofLaw,
madeonthe21stdayofOctober,1993,asfollows:
"ITISORDERED,ADJUDGED,ANDDECREED,thatjudgmentbeandthesameishereby
enteredinfavorofthePlaintiffWalterFullerAircraftSales,Inc.andagainsttheDefendantsThe
RepublicofthePhilippinesandthePresidentialCommissiononGoodGovernment,jointlyand
severally,intheamountofFourteenMillionNineHundredTwentyEightThousandFourHundred
FiftySevenDollarsandTwentyNineCents($14,928,457.29).Theprincipalamountofthis
judgmentincludesprejudgmentinterestattherateof10%compoundedontheattorney'sfees
award,fortheperiodfromApril9,1990,throughOctober27,1993,asfollows:
$9,750,000.00
975,000.00interestthroughApril1991
____________
$10,725,000.00
1,072,500.00interestthroughApril1992
_____________
$11,795,000.00
1,179,750.00interestthroughApril1993
____________
$12,977,250.00
718,193.01interestthroughOctober
27,1992at$3,555.41per
_______________day($1,297.275divided

$13,945,443.01by365daysx202days)
ITISFURTHERORDERED,ADJUDGED,ANDDECREEDthattheDefendants,jointlyand
severally,shallpaypostjudgmentinterestatthelegalrateof3.385%perannumpursuantto18
U.S.C.&1961fromandafterOctober28,1993,untilsuchtimeasthisJudgmentissatisfiedinfull.
OnOctober14,1996,thePCGG,inordertosettlethemoneyjudgmentagainstit,enteredintoan
agreement[6]with fuller Aircraft providing, among others, that the Republic of the Philippines
agreed to pay Fuller $11 million on October 15, 1996 and $3 million, in equal monthly
installments, beginning November 15, 1996 and ending October 15, 1997 in settlement of
FullerAircraftsclaimwhich,perdecisionoftheTexasCourt,amountsto$14,928,457.29.
OnApril13,1998,thePCGGfiledwiththeSandiganbayanan"ExParteMotiontoWithdraw"
datedApril7,1998whereinitsoughtthat:
"theplaintiff'sUrgentMotiontoWithdrawFundsDepositedinEscrowdatedOctober9,1996,be
deemedwithdrawnandthePNBbeimmediatelydirectedtoreleasethefundsondeposittothe
BureauofTreasuryfortransmissiontoWalterFullerSales,Inc.,withtheaboveAgreementand
decisionsoftheUSFederalCourts."
On September 3, 1999, the Sandiganbayan issued the first questioned Resolution denying
petitioner'smotiontoreleasethe"FalconJetescrowaccount"because:(a)itdoesnotappearfrom
the records that the person lawfully entitled to the escrow deposit has been determined; (b)
themotioncontravenestherulingoftheSupremeCourtinRepublicv.Sandiganbayan [7]requiring
thePCGGtodeposittheproceedsofthesaleofthesequesteredaircraftwiththePNB;and(c)
althoughtherecordsdisclosetwoauthenticatedcopiesofforeignjudgments,[8]thereisnoindication
that copies of the deed of sale of the aircraft and the compromise agreement have been duly
authenticated.

ThePCGGthenfiledamotionforreconsiderationbutthesamewasdeniedbytheSandiganbayan
initsResolutiondatedFebruary17,2000.
Hence,theinstantpetition.PetitionerRepubliccontendsthatrespondentSandiganbayangravely
abuseditsdiscretionwhenitdeniedPCGGsmotiontoreleasethefundsdepositedinescrowwith
thePNBtotheBureauofTreasuryfortransmissiontoFullerAircraft.
TheSandiganbayanfailedtofileacommentontheinstantpetition.Thus,thisCourthasnowayof
determiningwhyitfailedtoresolveinmorethanonedecadewhoislawfullyentitledtotheescrow
deposit.
Asshownbytherecords,FaysoundLtd.istheowneroftheFalconjet.Infact,thisisadmittedby
petitionerRepublicitself.Asmentionedearlier,CojuangcooranyofthedefendantsinCivilCase
No.0033hasnointerestinit.Clearly,thisaircraftwaserroneouslysequestered.Itisthuspatently
illegalforthePCGGtosellittoFullerAircraft.
PetitionerdoesnotdisclaimitsfinancialobligationtoFullerAircraftundertheAgreement.Because
ofitsfailuretofulfillthesame,petitioner,aspreviouslystated,filedwiththeSandiganbayana
motionforthereleaseoftheescrowdeposittotheBureauofTreasuryfortransmittaltoFuller
Aircraft.Petitionerallegedthatforthedelayinthefinalsettlementofitsfinancialliability,the
GovernmentofthePhilippinesmustpayaninterestsurchargeinfavorofFullerAircraftinthesum
ofUS$2,000.00aday.Moreover,petitionerisunderheavydiplomaticpressure.
Consideringthecircumstancesobtaininginthiscase,werulethatpetitionerRepubliccannotbe
heldliableundertheAgreement.ItmustbestressedthatpetitionerdidnotauthorizethePCGGto
enterintosuchcontractwithFullerAircraft.GrantingthatthePCGGwassoauthorized,however,

it exceeded its authority.Worse, the sale of the aircraft was without the approval of the
Sandiganbayan.ThisCourt,inG.R.No.88336,held:
xxxFromtheprecedingdiscussionofthecaseshereinbeforecitedandthecontendingsubmissions
ofthepartiesinthepresentrecourse,wecannotbutmaketheobservationthatthedecisiontosell
theaircraftisnotwithinthelimitedadministrativepowersofthePCGGbutrequiresthesanctionof
theSandiganbayanwhichcangrantorwithholdthesameintheexerciseofsounddiscretionandon
thebasisoftheevidencebeforeit.Withoutsuchapprovalbythejudicialauthorityconcerned,and
noabuseofdiscretiononitsparthavingbeenestablished,itisirresistiblyfollowsthatanysaleof
saidaircraftunderthecircumstancesobtaininginthiscasewouldconstituteaprohibitedand
invaliddispositionbythePCGG.(Underscoringsupplied.)
Moreover,inasmuchasthesaleoftheaircraftbythePCGGtoFullerAircraftisvoid,itfollows
thattheAgreementbetweenthePCGGandFullerAircraftislikewiseanullity.
Correspondingly,petitionerRepubliccannotbeboundbythetermsofthesaidAgreementandthus,
therecanbenocauseofactionagainstit.
InChavezvs.Sandiganbayan,[9]thisCourtruledthatthePCGGoranyofitsmembermaybeheld
civilly liable if they did not act in good faith and within the scope of their authority in the
performance of their official duties.Likewise, in Director of Bureau of Communications vs.
Aligaen,[10]thisCourtheldthatunauthorizedactsbyitsgovernmentofficialsorofficersarenotacts
oftheState.
Petitionermust,therefore,takeimmediateappropriateactionagainstthePCGGpersonnelinvolved
intheunauthorizedsaleoftheaircraft.

Meanwhile,itisthelegaldutyofpetitionerRepublictoreturntoFullerAircraft,throughthe
PCGG,theescrowdepositinthesumofUS$8,568,905.55asofJuly1999.Otherwise,petitioner
mayenrichitselfunjustlyandmaybeheldliableforkeepingthesaidamountindefinitelytothe
prejudiceofFullerAircraftwhoserighttotheescrowdeposithasnotbeenquestionedbyanyparty
inCivilCaseNo.0033.
WHEREFORE,thepetitionisGRANTED.ThechallengedResolutionsdatedSeptember3,1999
andFebruary17,2000areREVERSEDandSETASIDE.RespondentSandiganbayanisdirectedto
orderthereleaseofthesubjectescrowaccounttothePCGGfortransmissiontoWalterFuller
AircraftSales,Inc.Withinten(10)daysfromitscompliance,thePCGGisorderedtosubmittothe
Sandiganbayanthecorrespondingreport.Nocosts.
SOORDERED.
Melo,(Chairman),Vitug,Panganiban,andGonzagaReyes,JJ.,concur.

G.R.No.L30671November28,1973
REPUBLICOFTHEPHILIPPINES,petitioner,
vs.
HON.GUILLERMOP.VILLASOR,asJudgeoftheCourtofFirstInstanceofCebu,Branch
I,THEPROVINCIALSHERIFFOFRIZAL,THESHERIFFOFQUEZONCITY,andTHE
SHERIFFOFTHECITYOFMANILA,THECLERKOFCOURT,CourtofFirstInstance

ofCebu,P.J.KIENERCO.,LTD.,GAVINOUNCHUAN,ANDINTERNATIONAL
CONSTRUCTIONCORPORATION,respondents.
OfficeoftheSolicitorGeneralFelixV.MakasiarandSolicitorBernardoP.Pardoforpetitioner.
AndresT.VelardeandMarceloB.Fernanforrespondents.

FERNANDO,J.:
TheRepublicofthePhilippinesinthiscertiorariandprohibitionproceedingchallengesthevalidity
ofanorderissuedbyrespondentJudgeGuillermoP.Villasor,thenoftheCourtofFirstInstanceof
Cebu,BranchI,1declaringadecisionfinalandexecutoryandofanaliaswritofexecutiondirected
againstthefundsoftheArmedForcesofthePhilippinessubsequentlyissuedinpursuancethereof,
theallegedgroundbeingexcessofjurisdiction,orattheveryleast,graveabuseofdiscretion.As
thussimplyandterselyput,withthefactsbeingundisputedandtheprincipleoflawthatcallsfor
applicationindisputable,theoutcomeispredictable.TheRepublicofthePhilippinesisentitledto
thewritsprayedfor.RespondentJudgeoughtnottohaveactedthus.Theorderthusimpugnedand
thealiaswritofexecutionmustbenullified.
InthepetitionfiledbytheRepublicofthePhilippinesonJuly7,1969,asummaryoffactswasset
forththus:"7.OnJuly3,1961,adecisionwasrenderedinSpecialProceedingsNo.2156Rinfavor
ofrespondentsP.J.KienerCo.,Ltd.,GavinoUnchuan,andInternationalConstructionCorporation,
andagainstthepetitionerherein,confirmingthearbitrationawardintheamountofP1,712,396.40,
subjectofSpecialProceedings.8.OnJune24,1969,respondentHonorableGuillermoP.Villasor,
issuedanOrderdeclaringtheaforestateddecisionofJuly3,1961finalandexecutory,directingthe
SheriffsofRizalProvince,QuezonCity[aswellas]Manilatoexecutethesaiddecision.9.
PursuanttothesaidOrderdatedJune24,1969,thecorrespondingAliasWritofExecution[was
issued]datedJune26,1969,....10.OnthestrengthoftheaforementionedAliasWritofExecution

datedJune26,1969,theProvincialSheriffofRizal(respondentherein)servednoticesof
garnishmentdatedJune28,1969withseveralBanks,speciallyonthe"moniesduetheArmed
ForcesofthePhilippinesintheformofdepositssufficienttocovertheamountmentionedinthe
saidWritofExecution";thePhilippineVeteransBankreceivedthesamenoticeofgarnishmenton
June30,1969....11.ThefundsoftheArmedForcesofthePhilippinesondepositwiththeBanks,
particularly,withthePhilippineVeteransBankandthePhilippineNationalBank[or]their
branchesarepublicfundsdulyappropriatedandallocatedforthepaymentofpensionsofretirees,
payandallowancesofmilitaryandcivilianpersonnelandformaintenanceandoperationsofthe
ArmedForcesofthePhilippines,asperCertificationdatedJuly3,1969bytheAFPController,..."2.
Theparagraphimmediatelysucceedinginsuchpetitionthenalleged:"12.RespondentJudge,
HonorableGuillermoP.Villasor,actedinexcessofjurisdiction[or]withgraveabuseofdiscretion
amountingtolackofjurisdictioningrantingtheissuanceofanaliaswritofexecutionagainstthe
propertiesoftheArmedForcesofthePhilippines,hence,theAliasWritofExecutionandnotices
ofgarnishmentissuedpursuanttheretoarenullandvoid."3Intheanswerfiledbyrespondents,
throughcounselAndresT.VelardeandMarceloB.Fernan,thefactssetforthwereadmittedwith
theonlyqualificationbeingthatthetotalawardwasintheamountofP2,372,331.40.4
TheRepublicofthePhilippines,asmentionedattheoutset,didrightinfilingthiscertiorariand
prohibitionproceeding.WhatwasdonebyrespondentJudgeisnotinconformitywiththedictates
oftheConstitution..
Itisafundamentalpostulateofconstitutionalismflowingfromthejuristicconceptofsovereignty
thatthestateaswellasitsgovernmentisimmunefromsuitunlessitgivesitsconsent.Itisreadily
understandablewhyitmustbeso.IntheclassicformulationofHolmes:"Asovereignisexempt
fromsuit,notbecauseofanyformalconceptionorobsoletetheory,butonthelogicalandpractical
groundthattherecanbenolegalrightasagainsttheauthoritythatmakesthelawonwhichthe

rightdepends."5Sociologicaljurisprudencesuppliesananswernotdissimilar.Soitwasindicated
inarecentdecision,ProvidenceWashingtonInsuranceCo.v.RepublicofthePhilippines,6withits
affirmationthat"acontinuedadherencetothedoctrineofnonsuabilityisnottobedeploredforas
againsttheinconveniencethatmaybecausedprivateparties,thelossofgovernmentalefficiency
andtheobstacletotheperformanceofitsmultifariousfunctionsarefargreaterifsucha
fundamentalprinciplewereabandonedandtheavailabilityofjudicialremedywerenotthus
restricted.Withthewellknownpropensityonthepartofourpeopletogotocourt,attheleast
provocation,thelossoftimeandenergyrequiredtodefendagainstlawsuits,intheabsenceofsuch
abasicprinciplethatconstitutessuchaneffectiveobstacle,couldverywellbeimagined."7
Thisfundamentalpostulateunderlyingthe1935Constitutionisnowmadeexplicitintherevised
charter.Itisthereinexpresslyprovided:"TheStatemaynotbesuedwithoutitsconsent."8A
corollary,bothdictatedbylogicandsoundsensefromabasicconceptisthatpublicfundscannot
betheobjectofagarnishmentproceedingeveniftheconsenttobesuedhadbeenpreviously
grantedandthestateliabilityadjudged.ThusintherecentcaseofCommissionerofPublic
Highwaysv.SanDiego,9suchawellsettleddoctrinewasrestatedintheopinionofJustice
Teehankee:"TheuniversalrulethatwheretheStategivesitsconsenttobesuedbyprivateparties
eitherbygeneralorspeciallaw,itmaylimitclaimant'saction'onlyuptothecompletionof
proceedingsanteriortothestageofexecution'andthatthepoweroftheCourtsendswhenthe
judgmentisrendered,sincegovernmentfundsandpropertiesmaynotbeseizedunderwritsof
executionorgarnishmenttosatisfysuchjudgments,isbasedonobviousconsiderationsofpublic
policy.Disbursementsofpublicfundsmustbecoveredbythecorrespondingappropriationas
requiredbylaw.ThefunctionsandpublicservicesrenderedbytheStatecannotbeallowedtobe
paralyzedordisruptedbythediversionofpublicfundsfromtheirlegitimateandspecificobjects,as
appropriatedbylaw."10Suchaprincipleapplieseventoanattemptedgarnishmentofasalarythat

hadaccruedinfavorofanemployee.DirectorofCommerceandIndustryv.Concepcion,11speaks
tothateffect.JusticeMalcolmasponenteleftnodoubtonthatscore.Thus:"Arulewhichhas
neverbeenseriouslyquestioned,isthatmoneyinthehandsofpublicofficers,althoughitmaybe
duegovernmentemployees,isnotliabletothecreditorsoftheseemployeesintheprocessof
garnishment.Onereasonis,thattheState,byvirtueofitssovereignty,maynotbesuedinitsown
courtsexceptbyexpressauthorizationbytheLegislature,andtosubjectitsofficerstogarnishment
wouldbetopermitindirectlywhatisprohibiteddirectly.Anotherreasonisthatmoneyssoughtto
begarnished,aslongastheyremaininthehandsofthedisbursingofficeroftheGovernment,
belongtothelatter,althoughthedefendantingarnishmentmaybeentitledtoaspecificportion
thereof.Andstillanotherreasonwhichcoversbothoftheforegoingisthateveryconsiderationof
publicpolicyforbidsit."12
Inthelightoftheabove,itismadeabundantlyclearwhytheRepublicofthePhilippinescould
rightfullyallegealegitimategrievance.
WHEREFORE,thewritsofcertiorariandprohibitionaregranted,nullifyingandsettingasideboth
theorderofJune24,1969declaringexecutorythedecisionofJuly3,1961aswellasthealiaswrit
ofexecutionissuedthereunder.ThepreliminaryinjunctionissuedbythisCourtonJuly12,1969is
herebymadepermanent.
Zaldivar(Chairman),Antonio,FernandezandAquino,JJ.,concur.
Barredo,J,tooknopart.

G.R.No.104269November11,1993
DEPARTMENTOFAGRICULTURE,petitioner,
vs.
THENATIONALLABORRELATIONSCOMMISSION,etal.,respondents.
RoyLagoSalcedoforprivaterespondents.

VITUG,J.:
Forconsiderationaretheincidentsthatflowfromthefamiliardoctrineofnonsuabilityofthestate.
Inthispetitionforcertiorari,theDepartmentofAgricultureseekstonullifytheResolution,1dated
27November1991,oftheNationalLaborRelationsCommission(NLRC),FifthDivision,Cagayan
deOroCity,denyingthepetitionforinjunction,prohibitionandmandamusthatpraystoenjoin
permanentlytheNLRC'sRegionalArbitrationBranchXandCagayandeOroCitySherifffrom
enforcingthedecision2of31May1991oftheExecutiveLaborArbiterandfromattachingand
executingonpetitioner'sproperty.
TheDepartmentofAgriculture(hereinpetitioner)andSultanSecurityAgencyenteredintoa
contract3on01April1989forsecurityservicestobeprovidedbythelattertothesaid
governmentalentity.Savefortheincreaseinthemonthlyrateoftheguards,thesametermsand

conditionswerealsomadetoapplytoanothercontract,dated01May1990,betweenthesame
parties.Pursuanttotheirarrangements,guardsweredeployedbySultanAgencyinthevarious
premisesofthepetitioner.
On13September1990,severalguardsoftheSultanSecurityAgencyfiledacomplaintfor
underpaymentofwages,nonpaymentof13thmonthpay,uniformallowances,nightshift
differentialpay,holidaypayandovertimepay,aswellasfordamages,4beforetheRegional
ArbitrationBranchXofCagayandeOroCity,docketedasNLRCCaseNo.10090045590(or
10100051990,itsoriginaldocketnumber),againsttheDepartmentofAgricultureandSultan
SecurityAgency.
TheExecutiveLaborArbiterrenderedadecisionon31Mayfindinghereinpetitioner
andjointlyandseverallyliablewithSultanSecurityAgencyforthepaymentofmoneyclaims,
aggregatingP266,483.91,ofthecomplainantsecurityguards.ThepetitionerandSultanSecurity
AgencydidnotappealthedecisionoftheLaborArbiter.Thus,thedecisionbecamefinaland
executory.
On18July1991,theLaborArbiterissuedawritofexecution.5commandingtheCitySheriffto
enforceandexecutethejudgmentagainstthepropertyofthetworespondents.Forthwith,oron19
July1991,theCitySheriffleviedonexecutionthemotorvehiclesofthepetitioner,i.e.one(1)unit
ToyotaHiAce,one(1)unitToyotaMiniCruiser,andone(1)unitToyotaCrown.6Theseunits
wereputunderthecustodyofZachariasRoa,thepropertycustodianofthepetitioner,pendingtheir
saleatpublicauctionorthefinalsettlementofthecase,whicheverwouldcomefirst.
Apetitionforinjunction,prohibitionandmandamus,withprayerforpreliminarywritofinjunction
wasfiledbythepetitionerwiththeNationalLaborRelationsCommission(NLRC),Cagayande
Oro,alleging,interalia,thatthewritissuedwaseffectedwithouttheLaborArbiterhavingduly
acquiredjurisdictionoverthepetitioner,andthat,therefore,thedecisionoftheLaborArbiterwas

nullandvoidandallactionspursuanttheretoshouldbedeemedequallyinvalidandofnolegal,
effect.Thepetitioneralsopointedoutthattheattachmentorseizureofitspropertywouldhamper
andjeopardizepetitioner'sgovernmentalfunctionstotheprejudiceofthepublicgood.
On27November1991,theNLRCpromulgateditsassailedresolution;viz:
WHEREFORE,premisesconsidered,thefollowingordersareissued:
1.TheenforcementandexecutionofthejudgmentsagainstpetitionerinNLRCRABX
CasesNos.10100045590;1010048190and10100051990aretemporarily
suspendedforaperiodoftwo(2)months,moreorless,butnotextendingbeyondthelast
quarterofcalendaryear1991toenablepetitionertosourceandraisefundstosatisfythe
judgmentawardsagainstit;
2.Meantime,petitionerisorderedanddirectedtosourceforfundswithintheperiod
abovestatedandtodepositthesumsofmoneyequivalenttotheaggregateamount.ithas
beenadjudgedtopayjointlyandseverallywithrespondentSultanSecurityAgencywith
theRegionalArbitrationBranchX,CagayandeOroCitywithinthesameperiodfor
properdispositions;
3.Inordertoensurecompliancewiththisorder,petitionerislikewisedirectedtoputup
andpostsufficientsuretyandsupersedeasbondequivalenttoatleasttofifty(50%)
percentofthetotalmonetaryawardissuedbyareputablebondingcompanyduly
accreditedbytheSupremeCourtorbytheRegionalTrialCourtofMisamisOrientalto
answerforthesatisfactionofthemoneyclaimsincaseoffailureordefaultonthepartof
petitionertosatisfythemoneyclaims;
4.TheCitySheriffisorderedtoimmediatelyreleasethepropertiesofpetitionerleviedon
executionwithinten(10)daysfromnoticeofthepostingofsufficientsuretyor
supersedeasbondasspecifiedabove.Inthemeanwhile,petitionerisassessedtopaythe

costsand/orexpensesincurredbytheCitySheriff,ifany,inconnectionwiththe
executionofthejudgmentsintheabovestatedcasesuponpresentationoftheappropriate
claimsorvouchersandreceiptsbythecitySheriff,subjecttotheconditionsspecifiedin
theNLRCSheriff,subjecttotheconditionsspecifiedintheNLRCManualof
InstructionsforSheriffs;
5.Therightofanyofthejudgmentdebtorstoclaimreimbursementagainsteachotherfor
anypaymentsmadeinconnectionwiththesatisfactionofthejudgmentshereinishereby
recognizedpursuanttotherulingintheEagleSecuritycase,(supra).Incaseofdispute
betweenthejudgmentdebtors,theExecutiveLaborArbiteroftheBranchoforiginmay
uponproperpetitionbyanyofthepartiesconductarbitrationproceedingsforthepurpose
andtherebyrenderhisdecisionafterduenoticeandhearings;
7.Finally,thepetitionforinjunctionisDismissedforlackofbasis.Thewritof
preliminaryinjunctionpreviouslyissuedisLiftedandSetAsideandinlieuthereof,
aTemporaryStayofExecutionisissuedforaperiodoftwo(2)monthsbutnotextending
beyondthelastquarterofcalendaryear1991,conditioneduponthepostingofasuretyor
supersedeasbondbypetitionerwithinten(10)daysfromnoticepursuanttoparagraph3
ofthisdisposition.ThemotiontoadmitthecomplaintininterventionisDeniedforlackof
meritwhilethemotiontodismissthepetitionfiledbyDutySheriffisNoted
SOORDERED.
Inthispetitionforcertiorari,thepetitionerchargestheNLRCwithgraveabuseofdiscretionfor
refusingtoquashthewritofexecution.ThepetitionerfaultstheNLRCforassumingjurisdiction
overamoneyclaimagainsttheDepartment,which,itclaims,fallsundertheexclusivejurisdiction
oftheCommissiononAudit.Moreimportantly,thepetitionerasserts,theNLRChasdisregarded
thecardinalruleonthenonsuabilityoftheState.

Theprivaterespondents,ontheotherhand,arguethatthepetitionerhasimpliedlywaivedits
immunityfromsuitbyconcludingaservicecontractwithSultanSecurityAgency.
Thebasicpostulateenshrinedintheconstitutionthat"(t)heStatemaynotbesuedwithoutits
consent,"7reflectsnothinglessthanarecognitionofthesovereigncharacteroftheStateandan
expressaffirmationoftheunwrittenruleeffectivelyinsulatingitfromthejurisdictionofcourts.8It
isbasedontheveryessenceofsovereignty.Ashasbeenaptlyobserved,byJusticeHolmes,a
sovereignisexemptfromsuit,notbecauseofanyformalconceptionorobsoletetheory,butonthe
logicalandpracticalgroundthattherecanbenolegalrightasagainsttheauthoritythatmakesthe
lawonwhichtherightdepends.9True,thedoctrine,nottooinfrequently,isderisivelycalled"the
royalprerogativeofdishonesty"becauseitgrantsthestatetheprerogativetodefeatanylegitimate
claimagainstitbysimplyinvokingitsnonsuability.10Wehavehadoccasion,toexplaininits
defense,however,thatacontinuedadherencetothedoctrineofnonsuabilitycannotbedeplored,
forthelossofgovernmentalefficiencyandtheobstacletotheperformanceofitsmultifarious
functionswouldbefargreaterinseveritythantheinconveniencethatmaybecausedprivate
parties,ifsuchfundamentalprincipleistobeabandonedandtheavailabilityofjudicialremedyis
nottobeaccordinglyrestricted.11
Therule,inanycase,isnotreallyabsoluteforitdoesnotsaythatthestatemaynotbesuedunder
anycircumstances.Onthecontrary,ascorrectlyphrased,thedoctrineonlyconveys,"thestatemay
notbesuedwithoutitsconsent;"itsclearimportthenisthattheStatemayattimesbesued.12The
States'consentmaybegivenexpresslyorimpliedly.Expressconsentmaybemadethrougha
generallaw13oraspeciallaw.14Inthisjurisdiction,thegenerallawwaivingtheimmunityofthe
statefromsuitisfoundinActNo.3083,wherethePhilippinegovernment"consentsandsubmitsto
besueduponanymoneyclaimsinvolvingliabilityarisingfromcontract,expressorimplied,which
couldserveasabasisofcivilactionbetweenprivateparties."15Impliedconsent,ontheotherhand,

isconcededwhentheStateitselfcommenceslitigation,thusopeningitselftoacounterclaim16or
whenitentersintoacontract.17Inthissituation,thegovernmentisdeemedtohavedescendedto
theleveloftheothercontractingpartyandtohavedivesteditselfofitssovereignimmunity.This
rule,relieduponbytheNLRCandtheprivaterespondents,isnot,however,withoutqualification.
Notallcontractsenteredintobythegovernmentoperateasawaiverofitsnonsuability;distinction
muststillbemadebetweenonewhichisexecutedintheexerciseofitssovereignfunctionand
anotherwhichisdoneinitsproprietarycapacity.18
IntheUnitesStatesofAmericavs.Ruiz,19wherethequestionedtransactiondealtwith
improvementsonthewharvesinthenavalinstallationatSubicBay,weheld:
ThetraditionalruleofimmunityexemptsaStatefrombeingsuedinthecourtsofanother
Statewithoutitsconsentorwaiver.Thisruleisanecessaryconsequenceoftheprinciples
ofindependenceandequalityofStates.However,therulesofInternationalLawarenot
petrified;theyareconstantlydevelopingandevolving.Andbecausetheactivitiesof
stateshavemultiplied,ithasbeennecessarytodistinguishthembetweensovereign
andgovernmentalacts(jureimperii)andprivate,commercialandproprietaryact(jure
gestionisis).TheresultisthatStateimmunitynowextendsonlytoactsjureimperii.The
restrictiveapplicationofStateimmunityisnowtheruleintheUnitedStates,theUnited
KingdomandotherstatesinWesternEurope.
xxxxxxxxx
TherestrictiveapplicationofStateimmunityisproperonlywhentheproceedingsarise
outofcommercialtransactionsoftheforeignsovereign,itscommercialactivitiesor
economicaffairs.Stateddifferently,astatemaybesaidtohavedescendedtothelevelof
anindividualandcanthisbedeemedtohaveactuallygivenitsconsenttobesuedonly
whenitentersintobusinesscontracts.Itdoesnotapplywherethecontractsrelatestothe

exerciseofitssovereignfunctions.Inthiscasetheprojectsareanintegralpartofthe
navalbasewhichisdevotedtothedefenseofboththeUnitedStatesandthePhilippines,
indisputablyafunctionofthegovernmentofthehighestorder;theyarenotutilizedfor
notdedicatedtocommercialorbusinesspurposes.
Intheinstantcase,theDepartmentofAgriculturehasnotpretendedtohaveassumedacapacity
apartfromitsbeingagovernmentalentitywhenitenteredintothequestionedcontract;northatit
couldhave,infact,performedanyactproprietaryincharacter.
But,bethatasitmay,theclaimsofprivaterespondents,i.e.forunderpaymentofwages,holiday
pay,overtimepayandsimilarotheritems,arisingfromtheContractforService,clearlyconstitute
moneyclaims.ActNo.3083,aforecited,givestheconsentoftheStatetobe"sueduponany
moneyedclaiminvolvingliabilityarisingfromcontract,expressorimplied,...Pursuant,however,
toCommonwealthAct("C.A.")No.327,asamendedbyPresidentialDecree("P.D.")No.1145,the
moneyclaimfirstbebroughttotheCommissiononAudit.Thus,inCarabao,Inc.,vs.Agricultural
ProductivityCommission,20weruled:
(C)laimantshavetoprosecutetheirmoneyclaimsagainsttheGovernmentunder
CommonwealthAct327,statingthatAct3083standsnowmerelyasthegenerallaw
waivingtheState'simmunityfromsuit,subjecttothegenerallimitationexpressedin
Section7thereofthat"noexecutionshallissueuponanyjudgmentrenderedbyanyCourt
againsttheGovernmentofthe(Philippines),andthattheconditionsprovidedin
CommonwealthAct327forfilingmoneyclaimsagainsttheGovernmentmustbestrictly
observed."
WefailtoseeanysubstantialconflictorinconsistencybetweentheprovisionsofC.A.No.327and
theLaborCodewithrespecttomoneyclaimsagainsttheState.TheLaborcode,inrelationtoAct
No.3083,providesthelegalbasisfortheStateliabilitybuttheprosecution,enforcementor

satisfactionthereofmuststillbepursuedinaccordancewiththerulesandprocedureslaiddownin
C.A.No.327,asamendedbyP.D.1445.
Whenthestategivesitsconsenttobesued,itdoestherebynecessarilyconsenttounrestrained
executionagainstit.terselyput,whentheStatewaivesitsimmunity,allitdoes,ineffect,istogive
theotherpartyanopportunitytoprove,ifitcan,thattheStatehasaliability.21InRepublicvs.
Villasor22thisCourt,innullifyingtheissuanceofanaliaswritofexecutiondirectedagainstthe
fundsoftheArmedForcesofthePhilippinestosatisfyafinalandexecutoryjudgment,has
explained,thus
TheuniversalrulethatwheretheStategivesitsconsenttobesuedbyprivateparties
eitherbygeneralorspeciallaw,itmaylimittheclaimant'saction"onlyuptothe
completionofproceedingsanteriortothestageofexecution"andthatthepowerofthe
Courtsendswhenthejudgmentisrendered,sincegovernmentfundsandpropertiesmay
notbeseizedunderwritsorexecutionorgarnishmenttosatisfysuchjudgments,isbased
onobviousconsiderationsofpublicpolicy.Disbursementsofpublicfundsmustbe
coveredbythecorrespondentappropriationasrequiredbylaw.Thefunctionsandpublic
servicesrenderedbytheStatecannotbeallowedtobeparalyzedordisruptedbythe
diversionofpublicfundsfromtheirlegitimateandspecificobjects,asappropriatedby
law.23
WHEREFORE,thepetitionisGRANTED.Theresolution,dated27November1991,ishereby
REVERSEDandSETASIDE.Thewritofexecutiondirectedagainstthepropertyofthe
DepartmentofAgricultureisnullified,andthepublicrespondentsareherebyenjoinedpermanently
fromdoing,issuingandimplementinganyandallwritsofexecutionissuedpursuanttothedecision
renderedbytheLaborArbiteragainstsaidpetitioner.SOORDERED.
G.R.No.L33112June15,1978

PHILIPPINENATIONALBANK,petitioner,
vs.
HON.JUDGEJAVIERPABALAN,JudgeoftheCourtofFirstInstance,BranchIII,La
Union,AGOOTOBACCOPLANTERSASSOCIATION,INC.,PHILIPPINEVIRGINIA
TOBACCOADMINISTRATION,andPANFILOP.JIMENEZ,DeputySheriff,La
Union,respondents.
ConradoE.Medina,EdgardoM.Magtalas&WalfridoClimacoforpetitioner.
FelimonA.AspirinfitrespondentAgoo'TobaccoPlantersAssociation,Inc.
VirgilioC.AbejoforrespondentPhil.VirginiaTobaccoAdministration.

FERNANDO,ActingC.J.:
TherelianceofpetitionerPhilippineNationalBankinthiscertiorariandprohibitionproceeding
againstrespondentJudgeJavierPabalanwhoissuedawritofexecution,1followedthereafterbya
noticeofgarnishmentofthefundsofrespondentPhilippineVirginiaTobacco
Administration,2depositedwithit,isonthefundamentalconstitutionallawdoctrineofnon
suabilityofastate,itbeingallegedthatsuchfundsarepublicincharacter.Thisisnotthefirsttime
petitionerraisedthatissue.ItdidsobeforeinPhilippineNationalBankv.Courtofindustrial
Relations,3decidedonlylastJanuary.Itdidnotmeetwithsuccess,thisCourtrulinginaccordance
withthetwopreviouscasesofNationalShipyardandSteelCorporation4andManilaHotel
EmployeesAssociationv.ManilaHotelCompany,5thatfundsofpubliccorporationswhichcan
sueandbesuedwerenotexemptfromgarnishment.AsrespondentPhilippineVirginiaTobacco
Administrationislikewiseapubliccorporationpossessedofthesameattributes,6asimilaroutcome
isindicated.Thispetitionmustbedismissed.

ItisundisputedthatthejudgmentagainstrespondentPhilippineVirginiaTobaccoAdministration
hadreachedthestageoffinality.Awritofexecutionwas,therefore,inorder.Itwasaccordingly
issuedonDecember17,1970.7Therewasanoticeofgarnishmentforthefullamountmentionedin
suchwritofexecutioninthesumofP12,724,66.8Inviewoftheobjection,however,bypetitioner
PhilippineNationalBankontheaboveground,coupledwithaninquiryastowhetherornot
respondentPhilippineVirginiaTobaccoAdministrationhadfundsdepositedwithpetitioner'sLa
Unionbranch,itwasnotuntilJanuary25,1971thattheordersoughttobesetasideinthis
certiorariproceedingwasissuedbyrespondentJudge.9Itsdispositiveportionreadsasfollows:
Conformablywiththeforegoing,itisnowordered,inaccordancewithlaw,thatsufficientfundsof
thePhilippineVirginiaTobaccoAdministrationnowdepositedwiththePhilippineNationalBank,
LaUnionBranch,shallbegarnishedanddeliveredtotheplaintiffimmediatelytosatisfytheWrit
ofExecutionforonehalfoftheamountawardedinthedecisionofNovember16,1970."10Hence
thiscertiorariandprohibitionproceeding.
Asnotedattheoutset,petitionerPhilippineNationalBankwouldinvokethedoctrineofnon
suability.ItistobeadmittedthatunderthepresentConstitution,whatwasformerlyimplicitasa
fundamentaldoctrineinconstitutionallawhasbeensetforthinexpressterms:"TheStatemaynot
besuedwithoutitsconsent."11Ifthefundsappertainedtooneoftheregulardepartmentsoroffices
inthegovernment,then,certainly,suchaprovisionwouldbeabartogarnishment.Suchisnotthe
casehere.Garnishmentwouldlie.OnlylastJanuary,asnotedintheopeningparagraphofthis
decision,thisCourt,inacasebroughtbythesamepetitionerpreciselyinvokingsuchadoctrine,
leftnodoubtthatthefundsofpubliccorporationscouldproperlybemadetheobjectofanoticeof
garnishment.Accordingly,thispetitionmustfail.
1.Theallegedgraveabuseofdiscretion,thebasisofthiscertiorariproceeding,wassoughttobe
justifiedonthefailureofrespondentJudgetosetasidethenoticeofgarnishmentoffunds

belongingtorespondentPhilippineVirginiaTobaccoAdministration.Thisexcerptfromthe
aforeciteddecisionofPhilippineNationalBankv.CourtofIndustrialRelationsmakesmanifest
whysuchanargumentisfarfrompersuasive."Thepremisethatthefundscouldbespokenas
publiccharactermaybeacceptedinthesensethatthePeopleHomesiteandHousingCorporation
wasagovernmentownedentity.Itdoesnotfollowthoughthattheywereexempt.from
garnishment.NationalShipyardandSteelCorporationv.CourtofIndustrialRelationsissquarely
inpoint.AswasexplicitlystatedintheopinionofthethenJustice,laterChiefJustice,Concepcion:
"TheallegationtotheeffectthatthefundsoftheNASSCOarepublicfundsofthegovernment,and
that,assuch,thesamemaynotbegarnished,attachedorleviedupon,isuntenablefor,asa
governmentownedandcontrolledcorporation,theNASSCOhasapersonalityofitsown.distinct
andseparatefromthatoftheGovernment.IthaspursuanttoSection2ofExecutiveOrderNo.
356,datedOctober23,1950...,pursuanttowhichTheNASSCOhasbeenestablishedallthe
powersofacorporationundertheCorporationLaw...."Accordingly,itmaybesueandbesued
andmaybesubjectedtocourtprocessesjustlikeanyothercorporation(Section13,ActNo.1459,
asamended.)"...Torepeat,therulingwastheappropriateremedyfortheprevailingpartywhich
couldproceedagainstthefundsofacorporateentityevenifownedorcontrolledbythe
government."12
2.TheNationalShipyardandSteelCorporationdecisionwasnotthefirstofitskind.Theruling
thereincouldbeinferredfromthejudgmentannouncedinManilaHotelEmployeesAssociationv.
ManilaHotelCompany,decidedasfarbackas1941.13InthelanguageofitsponenteJustice
Ozaeta"Ontheotherhand,itiswellsettledthatwhenthegovernmententersintocommercial
business,itabandonsitssovereigncapacityandistobetreatedlikeanyothercorporation.(Bankof
theUnitedStatesv.Planters'Bank,9Wheat.904,6L.ed.244).Byengaginginaparticular
businessthrutheinstrumentalityofacorporation,thegovernmentdivestsitselfprohacviceofits

sovereigncharacter,soastorenderthecorporationsubjecttotherulesoflawgoverningprivate
corporations."14ItisworthmentioningthatJusticeOzaetacouldfindsupportforsucha
pronouncementfromtheleadingAmericanSupremeCourtcaseofunitedStatesv.Planters'
Bank,15withtheopinioncomingfromtheillustriousChiefJusticeMarshall.Itwashandeddown
morethanonehundredfiftyyearsago,1824tobeexact.Itisapparent,therefore,thatpetitioner
Bankcoulditlegallysetforthasabarorimpedimenttoanoticeofgarnishmentthedoctrineof
nonsuability.
WHEREFORE,thispetitionforcertiorariandprohibitionisdismissed.Nocosts.
Barredo,Antonio,Aquino,andSantos,JJ.,concur.
Concepcion,Jr.,J.,isonleave.

[G.R.No.154411.June19,2003]
NATIONAL HOUSING AUTHORITY,petitioner,vs.HEIRS OF ISIDRO
GUIVELONDO,COURTOFAPPEALS,HON.ISAIASDICDICAN,PresidingJudge,
Regional Trial Court, Branch 11, Cebu City, and PASCUAL Y. ABORDO, Sheriff,
RegionalTrialCourt,Branch11,CebuCity,respondents.
DECISION
YNARESSANTIAGO,J.:
OnFebruary23,1999,petitionerNationalHousingAuthorityfiledwiththeRegionalTrialCourtof
CebuCity,Branch11,anAmendedComplaintforeminentdomainagainstAssociacionBenevola
deCebu,EngraciaUrotandtheHeirsofIsidroGuivelondo,docketedasCivilCaseNo.CEB
23386.PetitionerallegedthatdefendantAssociacionBenevoladeCebuwastheclaimant/ownerof
Lot 108C located in the Banilad Estate, Cebu City; that defendant Engracia Urot was the
claimant/ownerofLotsNos.108F,108I,108G,6019Aand6013A,alloftheBaniladEstate;
thatdefendantHeirsofIsidroGuivelondoweretheclaimants/ownersofCadastralLotNo.1613D

locatedatCarreta,Mabolo,CebuCity;andthatthelandsarewithinablightedurbancenterwhich
petitionerintendstodevelopasasocializedhousingproject.[1]
OnNovember12,1999,theHeirsofIsidroGuivelondo,respondentsherein,filedaManifestation
stating that they were waiving their objections to petitioners power to expropriate their
properties.Hence,thetrialcourtissuedanOrderasfollows:
WHEREFORE,theCourtherebydeclaresthattheplaintiffhasalawfulrighttoexpropriatethe
propertiesofthedefendantswhoareheirsofIsidroGuivelondo.
TheappointmentofcommissionerswhowouldascertainandreporttotheCourtthejust
compensationforsaidpropertieswillbedoneassoonasthepartiesshallhavesubmittedtothe
Courtthenamesofpersonsdesiredbythemtobeappointedassuchcommissioners.
SOORDERED.[2]
Thereafter, the trial court appointed three Commissioners to ascertain the correct and just
compensationofthepropertiesofrespondents.OnApril17,2000,theCommissionerssubmitted
theirreportwhereintheyrecommendedthatthejustcompensationofthesubjectpropertiesbefixed
atP11,200.00persquaremeter.[3]OnAugust7,2000,thetrialcourtrenderedPartialJudgment
adoptingtherecommendationoftheCommissionersandfixingthejustcompensationofthelands
ofrespondentHeirsofIsidroGuivelondoatP11,200.00persquaremeter,towit:
WHEREFORE,inviewoftheforegoingpremises,judgmentisherebyrenderedbytheCourtinthis
casefixingthejustcompensationforthelandsofthedefendantswhoaretheheirsofIsidro
Guivelondo,moreparticularlyLotsNos.1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,19,20,6016
F,6016H,6016Eand6016DofCsd10219,whichweresoughttobeexpropriatedbythe
plaintiffatP11,200.00persquaremeterandorderingtheplaintifftopaytothesaiddefendantsthe
justcompensationforthesaidlandscomputedatP11,200.00persquaremeter.

ITISSOORDERED.[4]
PetitionerNHAfiledtwomotionsforreconsiderationdatedAugust30,2000andAugust31,2000,
assailing the inclusion of Lots 12, 13 and 19 as well as the amount of just compensation,
respectively.RespondentHeirsalsofiledamotionforreconsiderationofthePartialJudgment.On
October11,2000,thetrialcourtissuedanOmnibusOrderdenyingthemotionforreconsideration
ofrespondentHeirsandtheAugust31,2000motionofpetitioner,onthegroundthatthefixingof
thejustcompensationhadadequatebasisandsupport.Ontheotherhand,thetrialcourtgranted
petitioners August 30, 2000 motion for reconsideration on the ground that the Commissioners
ReportdidnotincludeLots12,13and19withinitscoverage.Thus:
WHEREFORE,inviewoftheforegoingpremises,theCourtherebydeniesthemotionoftheheirs
ofIsidroGuivelondo(withtheexceptionofCarlotaMercadoandJuanitaSuemith)for
reconsiderationofthepartialjudgmentrenderedinthiscaseonAugust7,2000andplaintiffs
motionforreconsiderationofsaidjudgment,datedAugust31,2000.
However,theCourtherebygrantstheplaintiffsmotionforreconsiderationofsaidjudgment,dated
August30,2000.Accordingly,thejudgmentrenderedinthiscaseonAugust7,2000isherebyset
asideinsofarasithasfixedjustcompensationsforLotsNos.12,13and19ofCsd10219because
thefixingofsaidjustcompensationsappearstolackadequatebasis.
SOORDERED.[5]
PetitionerfiledwiththeCourtofAppealsapetitionforcertiorari,whichwasdocketedasCAG.R.
SPNo.61746.[6]Meanwhile,onOctober31,2000,thetrialcourtissuedanEntryofJudgmentover
thePartialJudgmentdatedAugust7,2000asmodifiedbytheOmnibusOrderdatedOctober11,
2000.[7]Subsequently, respondent Heirs filed a Motion for Execution, which was granted on
November22,2000.

OnJanuary31,2001,theCourtofAppealsdismissedthepetitionforcertiorarionthegroundthat
thePartialJudgmentandOmnibusOrderbecamefinalandexecutorywhenpetitionerfailedto
appealthesame.[8]
PetitionersMotionforReconsiderationandUrgentExParteMotionforaClarificatoryRulingwere
deniedinaResolutiondatedMarch18,2001.[9]Apetitionforreviewwasfiledbypetitionerwith
thisCourt,whichwasdocketedasG.R.No.147527.However,thesamewasdeniedinaMinute
ResolutiondatedMay9,2001forfailuretoshowthattheCourtofAppealscommittedareversible
error.[10]
PetitionerfiledaMotionforReconsiderationwhichwashoweverdeniedwithfinalityonAugust
20,2001.[11]
PriortotheaforesaiddenialoftheMotionforReconsideration,petitioner,onJuly16,2001,filed
withthetrialcourtaMotiontoDismissCivilCaseNo.CEB23386,complaintforeminentdomain,
allegingthattheimplementationofitssocializedhousingprojectwasrenderedimpossiblebythe
unconscionablevalueofthelandsoughttobeexpropriated,whichtheintendedbeneficiariescan
not afford.[12]The Motion was denied on September 17, 2001, on the ground that the Partial
Judgmenthadalreadybecomefinalandexecutoryandtherewasnojustandequitablereasonto
warrant the dismissal of the case.[13]Petitioner filed a Motion for Reconsideration, which was
deniedinanOrderdatedNovember20,2001.[14]
PetitionerthusfiledapetitionforcertiorariwiththeCourtofAppeals,whichwasdocketedasCA
G.R.SPNo.68670,prayingfortheannulmentoftheOrderofthetrialcourtdenyingitsMotionto
DismissanditsMotionforReconsideration.[15]

On February 5, 2002, the Court of Appeals summarily dismissed the petition.Immediately


thereafter,respondentSheriffPascualY.AbordooftheRegionalTrialCourtofCebuCity,Branch
11,servedonpetitioneraNoticeofLevypursuanttotheWritofExecutionissuedbythetrialcourt
toenforcethePartialJudgmentofAugust7,2000andtheOmnibusOrderofOctober11,2000.[16]
OnFebruary18,2002,theCourtofAppealssetasidethedismissalofthepetitionandreinstatedthe
same.[17]Thereafter, a temporary restraining order was issued enjoining respondent sheriff to
preservethestatusquo.[18]
OnMay27,2002,respondentsheriffservedontheLandbankofthePhilippinesaNoticeofThird
Garnishment against the deposits, moneys and interests of petitioner therein.[19]Subsequently,
respondentsheriffleviedonfundsandpersonalpropertiesofpetitioner.[20]
OnJuly16,2002,theCourtofAppealsrenderedtheassaileddecisiondismissingthepetitionfor
certiorari.[21]
Hence,petitionerfiledthispetitionforreview,raisingthefollowingissues:
1)WHETHERORNOTTHESTATECANBECOMPELLEDANDCOERCEDBY
THECOURTSTOEXERCISEORCONTINUEWITHTHEEXERCISEOFITS
INHERENTPOWEROFEMINENTDOMAIN;
2)WHETHERORNOTJUDGMENTHASBECOMEFINALANDEXECUTORY
ANDIFESTOPPELORLACHESAPPLIESTOGOVERNMENT;
3)WHETHERORNOTWRITSOFEXECUTIONANDGARNISHMENTMAYBE
ISSUEDAGAINSTTHESTATEINANEXPROPRIATIONWHEREINTHE
EXERCISEOFTHEPOWEROFEMINENTDOMAINWILLNOTSERVEPUBLIC

USEORPURPOSE{APPLICATIONOFSUPREMECOURTADMINISTRATIVE
CIRCULARNO.102000}.[22]
RespondentHeirsofIsidroGuivelondofiledtheirComment,arguingasfollows:
I
ASEARLIERUPHELDBYTHEHONORABLECOURT,THEJUDGMENTOFTHETRIAL
COURTISALREADYFINALANDEXECUTORY,HENCE,COULDNOLONGERBE
DISTURBEDNORSETASIDE
II
THEFUNDSANDASSETSOFTHEPETITIONERARENOTEXEMPTFROMLEVYAND
GARNISHMENT
III
THEISSUESRAISEDINTHISSECONDPETITIONFORREVIEWWEREALREADY
RESOLVEDBYTHEHONORABLECOURT[23]
IntheearlycaseofCityofManilav.Ruymann,[24]theCourtwasconfrontedwiththequestion:May
thepetitioner,inanactionforexpropriation,afterhehasbeenplacedinpossessionoftheproperty
andbeforetheterminationoftheaction,dismissthepetition?Itresolvedtheissueintheaffirmative
andheld:
Therightoftheplaintifftodismissanactionwiththeconsentofthecourtisuniversallyrecognized
withcertainwelldefinedexceptions.Iftheplaintiffdiscoversthattheactionwhichhecommenced
wasbroughtforthepurposeofenforcingarightorabenefit,theadvisabilityornecessityofwhich
helaterdiscoversnolongerexists,orthattheresultoftheactionwouldbedifferentfromwhathe

hadintended,thenheshouldbepermittedtowithdrawhisaction,subjecttotheapprovalofthe
court.Theplaintiffshouldnotberequiredtocontinuetheaction,subjecttosomewelldefined
exceptions,whenitisnottohisadvantagetodoso.Litigationshouldbediscouragedandnot
encouraged.Courtsshouldnotrequirepartiestolitigatewhentheynolongerdesiretodo
so.Courts,ingrantingpermissiontodismissanaction,ofcourse,shouldalwaystakeinto
considerationtheeffectwhichsaiddismissalwouldhaveupontherightsofthedefendant.[25]
Subsequently,inMetropolitanWaterDistrictv.DeLosAngeles,[26]theCourthadoccasiontoapply
the abovequoted ruling when the petitioner, during the pendency of the expropriation case,
resolvedthatthelandsoughttobecondemnedwasnolongernecessaryinthemaintenanceand
operationofitssystemofwaterworks.Itwasheld:
Itisnotdeniedthatthepurposeoftheplaintiffwastoacquirethelandinquestionforapublic
use.Thefundamentalbasisthenofallactionsbroughtfortheexpropriationoflands,underthe
powerofeminentdomain,ispublicuse.Thatbeingtrue,theverymomentthatitappearsatany
stageoftheproceedingsthattheexpropriationisnotforapublicuse,theactionmustnecessarily
failandshouldbedismissed,forthereasonthattheactioncannotbemaintainedatallexceptwhen
theexpropriationisforsomepublicuse.Thatmustbetrueevenduringthependencyoftheappeal
ofatanyotherstageoftheproceedings.If,forexample,duringthetrialinthelowercourt,itshould
bemadetoappeartothesatisfactionofthecourtthattheexpropriationisnotforsomepublicuse,it
wouldbethedutyandtheobligationofthetrialcourttodismisstheaction.Andevenduringthe
pendencyoftheappeal,ifitshouldbemadetoappeartothesatisfactionoftheappellatecourtthat
theexpropriationisnotforpublicuse,thenitwouldbecomethedutyandtheobligationofthe
appellatecourttodismissit.[27]
Notably,theforegoingcasesrefertothedismissalofanactionforeminentdomainattheinstance

oftheplaintiffduringthependencyofthecase.Theruleisdifferentwherethecasehadbeen
decidedandthejudgmenthadalreadybecomefinalandexecutory.
Expropriationproceedingsconsistsoftwostages:first,condemnationofthepropertyafteritis
determined that its acquisition will be for a public purpose or public use and, second, the
determinationofjustcompensationtobepaidforthetakingofprivatepropertytobemadebythe
courtwiththeassistanceofnotmorethanthreecommissioners.[28]Thus:
Therearetwo(2)stagesineveryactionforexpropriation.Thefirstisconcernedwiththe
determinationoftheauthorityoftheplaintifftoexercisethepowerofeminentdomainandthe
proprietyofitsexerciseinthecontextofthefactsinvolvedinthesuit.Itendswithanorder,ifnot
ofdismissaloftheaction,ofcondemnationdeclaringthattheplaintiffhasalawfulrighttotakethe
propertysoughttobecondemned,forthepublicuseorpurposedescribedinthecomplaint,upon
thepaymentofjustcompensationtobedeterminedasofthedateofthefilingofthecomplaint.An
orderofdismissal,ifthisbeordained,wouldbeafinalone,ofcourse,sinceitfinallydisposesof
theactionandleavesnothingmoretobedonebytheCourtonthemerits.So,too,wouldanorder
ofcondemnationbeafinalone,forthereafter,astheRulesexpresslystate,intheproceedings
beforetheTrialCourt,noobjectiontotheexerciseoftherightofcondemnation(orthepropriety
thereof)shallbefiledorheard.
ThesecondphaseoftheeminentdomainactionisconcernedwiththedeterminationbytheCourtof
thejustcompensationforthepropertysoughttobetaken.ThisisdonebytheCourtwiththe
assistanceofnotmorethanthree(3)commissioners.Theorderfixingthejustcompensationonthe
basisoftheevidencebefore,andfindingsof,thecommissionerswouldbefinal,too.Itwould
finallydisposeofthesecondstageofthesuit,andleavenothingmoretobedonebytheCourt
regardingtheissue.Obviously,oneoranotherofthepartiesmaybelievetheordertobeerroneous

initsappreciationoftheevidenceorfindingsoffactorotherwise.Obviously,too,sucha
dissatisfiedpartymayseekareversaloftheorderbytakinganappealtherefrom.[29]
The outcome of the first phase of expropriation proceedings, which is either an order of
expropriationoranorderofdismissal,isfinalsinceitfinallydisposesofthecase.Ontheother
hand,thesecondphaseendswithanorderfixingtheamountofjustcompensation.Bothorders,
beingfinal,areappealable.[30]Anorderofcondemnationordismissalisfinal,resolvingthequestion
ofwhetherornottheplaintiffhasproperlyandlegallyexerciseditspowerofeminentdomain.
[31]
Oncethefirstorderbecomesfinalandnoappealtheretoistaken,theauthoritytoexpropriate
anditspublicusecannolongerbequestioned.[32]
The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil Procedure, which
provides:
Orderofexpropriation.Iftheobjectionstoandthedefensesagainsttherightoftheplaintiffto
expropriatethepropertyareoverruled,orwhennopartyappearstodefendasrequiredbythisRule,
thecourtmayissueanorderofexpropriationdeclaringthattheplaintiffhasalawfulrighttotake
thepropertysoughttobeexpropriated,forthepublicuseorpurposedescribedinthecomplaint,
uponthepaymentofjustcompensationtobedeterminedasofthedateofthetakingoftheproperty
orthefilingofthecomplaint,whichevercamefirst.
Afinalordersustainingtherighttoexpropriatethepropertymaybeappealedbyanyparty
aggrievedthereby.Suchappeal,however,shallnotpreventthecourtfromdeterminingthejust
compensationtobepaid.
Aftertherenditionofsuchanorder,theplaintiffshallnotbepermittedtodismissordiscontinuethe
proceedingexceptonsuchtermsasthecourtdeemsjustandequitable.(underscoringours)
Inthecaseatbar,petitionerdidnotappealtheOrderofthetrialcourtdatedDecember10,1999,

whichdeclaredthatithasalawfulrighttoexpropriatethepropertiesofrespondentHeirsofIsidro
Guivelondo.Hence,theOrderbecamefinalandmaynolongerbesubjecttorevieworreversalin
anycourt.[33]Afinalandexecutorydecisionorordercannolongerbedisturbedorreopenedno
matterhowerroneousitmaybe.Althoughjudicialdeterminationsarenotinfallible,judicialerror
shouldbecorrectedthroughappeals,notthroughrepeatedsuitsonthesameclaim.[34]
PetitioneranchorsitsargumentsonthelastparagraphoftheabovequotedRule67,Section4.In
essence,itcontendsthattherearejustandequitablegroundstoallowdismissalordiscontinuance
oftheexpropriationproceedings.Morespecifically,petitionerallegesthattheintendedpublicuse
wasrenderednugatorybytheunreasonablejustcompensationfixedbythecourt,whichisbeyond
themeansoftheintendedbeneficiariesofthesocializedhousingproject.Theargumentistenuous.
Socializedhousinghasbeenrecognizedaspublicuseforpurposesofexercisingthepowerof
eminentdomain.
Housingisabasichumanneed.Shortageinhousingisamatterofstateconcernsinceitdirectly
andsignificantlyaffectspublichealth,safety,theenvironmentandinsum,thegeneralwelfare.The
publiccharacterofhousingmeasuresdoesnotchangebecauseunitsinhousingprojectscannotbe
occupiedbyallbutonlybythosewhosatisfyprescribedqualifications.Abeginninghastobe
made,foritisnotpossibletoprovidehousingforallwhoneedit,allatonce.
xxxxxxxxx.
Inthelightoftheforegoing,thisCourtissatisfiedthatsocializedhousingfallswiththeconfinesof
publicuse.xxxxxxxxx.Provisionsoneconomicopportunitiesinextricablylinkedwithlowcost
housing,orslumclearance,relocationandresettlement,orslumimprovementemphasizethepublic
purposeoftheproject.[35]

Thepublicpurposeofthesocializedhousingprojectisnotinanywaydiminishedbytheamountof
justcompensationthatthecourthasfixed.Theneedtoprovidedecenthousingtotheurbanpoor
dwellersinthelocalitywasnotlostbythemerefactthatthelandcostmorethanpetitionerhad
expected.ItisworthytonotethatpetitionerpursueditspetitionforcertiorariwiththeCourtof
AppealsassailingtheamountofjustcompensationanditspetitionforreviewwiththisCourtwhich
eloquentlyindicatesthattherestillexistsapublicuseforthehousingproject.Itwasonlyafterits
appealandpetitionsforreviewweredismissedthatpetitionermadeacompleteturnaroundand
decideditdidnotwantthepropertyanymore.
Respondentlandownershadalreadybeenprejudicedbytheexpropriationcase.Petitionercannotbe
permittedtoinstitutecondemnationproceedingsagainstrespondentsonlytoabandonitlaterwhen
it finds the amount of just compensation unacceptable.Indeed, our reprobation in the case
ofCosculluelav.CourtofAppeals[36]isapropos:
Itisarbitraryandcapriciousforagovernmentagencytoinitiateexpropriationproceedings,seizea
personsproperty,allowthejudgmentofthecourttobecomefinalandexecutoryandthenrefuseto
payonthegroundthattherearenoappropriationsforthepropertyearliertakenandprofitably
used.Wecondemninthestrongestpossibletermsthecavalierattitudeofgovernmentofficialswho
adoptsuchadespoticandirresponsiblestance.
Inordertoresolvetheissueoftheproprietyofthegarnishmentagainstpetitionersfundsand
personal properties, there is a need to first determine its true character as a government
entity.Generally, funds and properties of the government cannot be the object of garnishment
proceedingseveniftheconsenttobesuedhadbeenpreviouslygrantedandthestateliability
adjudged.[37]
TheuniversalrulethatwheretheStategivesitsconsenttobesuedbyprivatepartieseitherby

generalorspeciallaw,itmaylimitclaimantsactiononlyuptothecompletionofproceedings
anteriortothestageofexecutionandthatthepoweroftheCourtsendswhenthejudgmentis
rendered,sincegovernmentfundsandpropertiesmaynotbeseizedunderwritsofexecutionor
garnishmenttosatisfysuchjudgments,isbasedonobviousconsiderationsofpublic
policy.Disbursementsofpublicfundsmustbecoveredbythecorrespondingappropriationas
requiredbylaw.ThefunctionsandpublicservicesrenderedbytheStatecannotbeallowedtobe
paralyzedordisruptedbythediversionofpublicfundsfromtheirlegitimateandspecificobjects,as
appropriatedbylaw.[38]
However, if the funds belong to a public corporation or a governmentowned or controlled
corporationwhichisclothedwithapersonalityofitsown,separateanddistinctfromthatofthe
government, then its funds are not exempt from garnishment. [39]This is so because when the
governmententersintocommercialbusiness,itabandonsitssovereigncapacityandistobetreated
likeanyothercorporation.[40]
InthecaseofpetitionerNHA,thematterofwhetheritsfundsandpropertiesareexemptfrom
garnishmenthasalreadybeenresolvedsquarelyagainstitspredecessor,thePeoplesHomesiteand
HousingCorporation(PHHC),towit:
ThepleaforsettingasidethenoticeofgarnishmentwaspremisedonthefundsofthePeoples
HomesiteandHousingCorporationdepositedwithpetitionerbeingpublicincharacter.Therewas
notevenacategoricalassertiontothateffect.Itisonlythepossibilityofitsbeingpublicin
character.Thetonewasthusirresolute,theapproachdiffident.Thepremisethatthefundscoldbe
spokenofaspublicincharactermaybeacceptedinthesensethatthePeoplesHomesiteand
HousingCorporationwasagovernmentownedentity.Itdoesnotfollowthoughthattheywere
exemptfromgarnishment.[41]

This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v. Board of
Liquidators:[42]
Havingajuridicalpersonalityseparateanddistinctfromthegovernment,thefundsofsuch
governmentownedandcontrolledcorporationsandnoncorporateagency,althoughconsidered
publicincharacter,arenotexemptfromgarnishment.Thisdoctrinewasappliedtosuitsfiled
againstthePhilippineVirginiaTobaccoAdministration(PNBvs.Pabalan,etal.,83SCRA695);
theNationalShipyard&SteelCorporation(NASSCOvs.CIR,118Phil.782);theManilaHotel
Company(ManilaHotelEmployeesAsso.vs.ManilaHotelCo.,73Phil.374);andthePeople's
HomesiteandHousingCorporation(PNBvs.CIR,81SCRA314).[emphasisours]
Hence, it is clear that the funds of petitioner NHA are not exempt from garnishment or
execution.PetitionersprayerforinjunctiverelieftorestrainrespondentSheriffPascualAbordo
from enforcing the Notice of Levy and Garnishment against its funds and properties must,
therefore,bedenied.
WHEREFORE,inviewoftheforegoing,theinstantpetitionforreviewisDENIED.Thedecision
of the Court of Appeals in CAG.R. SP No. 68670, affirming the trial courts Order denying
petitioners Motion to Dismiss the expropriation proceedings in Civil Case No. CEB23386, is
AFFIRMED.Petitionersprayerforinjunctivereliefagainstthelevyandgarnishmentofitsfunds
andpersonalpropertiesisDENIED.TheTemporaryRestrainingOrderdatedJanuary22,2003is
LIFTED.
SOORDERED.
Davide,Jr.,C.J.,(Chairman),Vitug,Carpio,andAzcuna,JJ.,concur.

G.R.No.92432February23,1995
T/SGTALDORALARKINS,petitioner,
vs.
NATIONALLABORRELATIONSCOMMISSION,HON.IRINEOBERNARDO,DANIEL
HERRERA,MARIETTADEGUZMAN,JOSELITOCATACUTAN,JOSEPHGALANG,
ROBERTOHERRERA,DELPINPECSON,CARLOSCORTEZ,JAIMECORTEZ,
ARSENIODIAZ,ROBERTOSAGADandMARCELOLOZANO,respondents.

QUIASON,J.:
ThisisapetitionforcertiorariunderRule65oftheRevisedRulesofCourttosetasidethe
ResolutionsdatedAugust31,1989andFebruary5,1990oftheNationalLaborRelations
Commission(NLRC)inNLRCCaseNo.RABIII08057288.

Wegrantthepetition.
I
PetitionerwasamemberoftheUnitedStatesAirForce(USAF)assignedtooverseethe
dormitoriesoftheThirdAircraftGenerationSquadron(3AGS)atClarkAirBase,Pampanga.
OnAugust10,1988,3AGSterminatedthecontractforthemaintenanceandupkeepofthe
dormitorieswiththeDeGuzmanCustodialServices.Theemployeesthereof,includingprivate
respondents,wereallowedtocontinueworkingfor3AGS.Itwaslefttothenewcontractor,the
JACMaintenanceServicesownedbyJoselitoCunanan,todecidewhetheritwouldretaintheir
services.
JoselitoCunanan,however,chosetobringinhisownworkers.Asaresult,theworkersoftheDe
GuzmanCustodialServiceswererequestedtosurrendertheirbasepassestoLt.Col.Frankhauseror
topetitioner.
OnAugust12,1988,privaterespondentsfiledacomplaintwiththeRegionalArbitrationBranch
No.IIIoftheNLRC,SanFernando,Pampanga,againstpetitioner,Lt.Col.Frankhauser,and
Cunananforillegaldismissalandunderpaymentofwages(NLRCCaseNo.RABIII08057288).
OnSeptember9,1988,privaterespondentsamendedtheircomplaintandaddedthereinclaimsfor
emergencycostoflivingallowance,thirteenthmonthpay,serviceincentiveleavepayandholiday
premiums.
TheLaborArbiter,withtheconformityofprivaterespondents,orderedCunanandroppedasparty
respondent.
PetitionerandLt.Col.Frankhauserfailedtoanswerthecomplaintandtoappearatthehearings.
They,likewise,failedtosubmittheirpositionpaper,whichtheLaborArbiterdeemedawaiveron
theirparttodoso.Thecasewasthereforesubmittedfordecisiononthebasisofprivate
respondents'positionpaperandsupportingdocuments.

OnNovember21,1988,theLaborArbiterrenderedadecisiongrantingalltheclaimsofprivate
respondents.HefoundbothLt.Col.Frankhauserandpetitioner"guiltyofillegaldismissal"and
orderedthemtoreinstateprivaterespondentswithfullbackwages,orifthatisnolongerpossible,
topayprivaterespondents'separationpay(Rollo,p.78).
PetitionerappealedtotheNLRCclaimingthattheLaborArbiterneveracquiredjurisdictionover
herpersonbecausenosummonsorcopiesofthecomplaints,bothoriginalandamended,wereever
servedonher.Inher"SupplementalMemorandumtoMemorandumofAppeal,"petitionerargued
thattheattemptstoserveherwithnoticesofhearingwerenotinaccordancewiththeprovisionsof
theR.P.U.S.MilitaryBasesAgreementof1947(Rollo,pp.3537).
OnAugust31,1989,NLRCissuedaResolutionaffirmingthedecisionoftheLaborArbiter,but
declaredthat:
Intheeventthisdecisionisexecutedand/orenforced,andconsideringourfindingthat
therealpartyrespondentistheUnitedStatesGovernmentthroughitsArmedForces
stationedatClarkAirBase,letsuchexecutionbemadesubjecttoexistinginternational
agreementsdiplomaticprotocol(Rollo,p.95).
Petitionermovedforreconsideration,whichNLRCdeniedonFebruary5,1990(Rollo,p.101).
Petitionerthenelevatedthemattertous.
OnJuly11,1990,theOfficeofthesolicitorGeneralfiledaManifestationstatingthatit"cannot
legallysupportthedecisionoftheLaborArbiter"andthereforeprayedthatitberelievedfromthe
responsibilityoffilingtherequiredCommentforthepublicrespondents(Rollo,pp.117118).In
viewofthisManifestation,onJuly18,1990,weresolvedtorequireNLRCtofileitsowncomment
tothepetition,whichNLRCdidonNovember29,1990(Rollo,pp.120,133139).
II
Itispetitioner'scontentionthatthequestionedresolutionsarenullandvoidbecauserespondent

LaborArbiterdidnotacquirejurisdictiontoentertainanddecidethecase.Petitionerallegesthat
sheneverreceivednorwasserved,anysummonsorcopiesoftheoriginalandamendedcomplaints,
andthereforetheLaborArbiterhadnojurisdictionoverherpersonunderArticleXIVoftheR.P.
U.S.MilitaryBasesAgreement.
Weagree.
The"AgreementBetweentheRepublicofthePhilippinesandtheUnitedStatesofAmerica
ConcerningMilitaryBases,"otherwiseknownastheR.P.U.S.MilitaryBasesAgreement,
governedtherights,duties,authority,andtheexercisethereofbyPhilippineandAmerican
nationalsinsidetheU.S.militarybasesinthecountry.
ArticleXIVthereof,governingtheprocedureforserviceofsummonsonpersonsinsideU.S.
militarybases,providesthat:
...[N]oprocess,civilorcriminal,shallbeservedwithinanybaseexceptwiththe
permissionofthecommandingofficerofsuchbase;butshouldthecommandingofficer
refusetograntsuchpermissionheshallforthwithtakethenecessarysteps....toserve
suchprocess,asthecasemaybe,andtoprovidetheattendanceoftheserverofsuch
processbeforetheappropriatecourtinthePhilippinesorprocuresuchservertomakethe
necessaryaffidavitordeclarationtoprovesuchserviceasthecasemayrequire.
SummonsesandotherprocessesissuedbyPhilippinecourtsandadministrativeagenciesforUnited
StatesArmedForcespersonnelwithinanyU.S.baseinthePhilippinescouldbeservedthereinonly
withthepermissionoftheBaseCommander.Ifhewithholdsgivinghispermission,heshould
insteaddesignateanotherpersontoservetheprocess,andobtaintheserver'saffidavitforfiling
withtheappropriatecourt.
RespondentLaborArbiterdidnotfollowsaidprocedure.Heinstead,addressedthesummonstoLt.
Col.FrankhauserandnottheBaseCommander(Rollo,p.11).

Respondentsdonotdisputepetitioner'sclaimthatnosummonswaseverissuedandservedonher.
Theycontend,however,thattheysentnoticesofthehearingstoher(Rollo,pp.1213).
Noticesofhearingarenotsummonses.TheprovisionsandprevailingjurisprudenceinCivil
ProceduremaybeappliedbyanalogytoNLRCproceedings(RevisedRulesoftheNLRC,RuleI,
Sec.3).ItisbasicthattheLaborArbitercannotacquirejurisdictionoverthepersonofthe
respondentwithoutthelatterbeingservedwithsummons(cf.Vda.deMacoyv.CourtofAppeals,
206SCRA244[1992];FilmercoCommercialCo.,Inc.v.IntermediateAppellateCourt,149SCRA
193[1987]).Intheabsenceofserviceofsummonsoravalidwaiverthereof,thehearingsand
judgmentrenderedbytheLaborArbiterarenullandvoid(cf.Vda.deMacoyv.Courtof
Appeals,supra.)
Petitioner,inthecaseatbench,appealedtotheNLRCandparticipatedintheoralargumentbefore
thesaidbody.This,however,doesnotconstituteawaiverofthelackofsummonsandavoluntary
submissionofherpersontothejurisdictionoftheLaborArbiter.Shemayhaveraisedinher
pleadingsgroundsotherthanlackofjurisdiction,butthesegroundswerediscussedinrelationto
andasaresultoftheissueofthelackofjurisdiction.Ineffect,petitionersetforthonlyoneissue
andthatistheabsenceofjurisdictionoverherperson.IfanappearancebeforetheNLRCis
preciselytoquestionthejurisdictionofthesaidagencyoverthepersonofthedefendant,thenthis
appearanceisnotequivalenttoserviceofsummons(DelosSantosv.Montera,221SCRA15
[1993]).
Bethatasitmay,ontheassumptionthatpetitionervalidlywaivedserviceofsummonsonher,still
thecasecouldnotprosper.ThereisnoallegationfromthepleadingsfiledthatLt.Col.Frankhauser
andpetitionerwerebeingsuedintheirpersonalcapacitiesfortortiousacts(UnitedStatesof
Americav.Guinto,182SCRA644[1990]).However,privaterespondentsnamed3AGSasoneof
therespondentsintheircomplaint(Rollo,p.10).

ItisworthnotingthatNLRCadmittedthat:
Attheoutset,letitbemadeclearthatWeareawareastowhoistherealpartyrespondent
inthiscase;itistheGovernmentoftheUnitedStatesofAmericawhichismaintaining
militaryfacilitiesinthePhilippines,oneofwhichislocatedinsideClarkAirBase.The3
AGSwheretheappelleespreviouslyworkedasdormitoryattendantsisjustoneofthe
variousunitsoftheUnitedStatesArmedForces(USAF)insidethesaidmilitarybase.
Whileindividualrespondents,particularlyLt.Col.WilliamFrankhauserandT/Sgt.
AldoraLarkins,aremereelementsoftheUSAFassignedtothe3AGS.Thus,whatever
awards,monetaryorotherwise,theappelleesareentitledtobyvirtueofthiscasearethe
primaryliabilitiesoftheirrealemployer,theUnitedStatesGovernment(Rollo,pp.91
92).
PrivaterespondentsweredismissedfromtheiremploymentbyLt.Col.Frankhauseractingforand
inbehalfoftheU.S.Government.TheemployerofprivaterespondentswasnotLt.Col.
Frankhausernorpetitioner.Theemployerofprivaterespondents,asfoundbyNLRC,wastheU.S.
Governmentwhich,byrightofsovereignpower,operatedandmaintainedthedormitoriesatClark
AirBaseformembersoftheUSAF(UnitedStatesofAmericav.Guinto,182SCRA644[1990];
UnitedStatesofAmericav.Ruiz,136SCRA487[1985]).
Indeed,assumingthatjurisdictionwasacquiredovertheUnitedStatesGovernmentandthe
monetaryclaimsofprivaterespondentsproved,suchawardswillhavetobesatisfiednotbyLt.
Col.Frankhauserandpetitionerintheirpersonalcapacities,butbytheUnitedStatesgovernment
(Sandersv.VeridianoII,162SCRA88[1988]).
Underthe"AgreementBetweentheGovernmentoftheRepublicofthePhilippinesandthe
GovernmentoftheUnitedStatesofAmericaRelatingtotheEmploymentofPhilippineNationals
intheUnitedStatesMilitaryBasesinthePhilippines"otherwiseknownastheBaseLabor

AgreementofMay27,1968,anydisputeordisagreementbetweentheUnitedStatesArmedForces
andFilipinoemployeesshouldbesettledundergrievanceorlaborrelationsproceduresestablished
therein(Art.II)orbythearbitrationprocessprovidedintheRomualdezBosworthMemorandumof
AgreementdatedSeptember5,1985.Ifnoagreementwasreachedorifthegrievanceprocedure
failed,thedisputewasappealablebyeitherpartytoaJointLaborCommitteeestablishedinArticle
IIIoftheBaseLaborAgreement.
Unquestionablytherefore,nojurisdictionwaseveracquiredbytheLaborArbiteroverthecaseand
thepersonofpetitionerandthejudgmentrenderedisnullandvoid(FilmercoCommercialCo.v.
IntermediateAppellateCourt,supra.;Syv.Navarro,81SCRA458[1978]).
WHEREFORE,thepetitionforcertiorariisGRANTED.
SOORDERED.
Padilla,Davide,Jr.BellosilloandKapunan,JJ.,concur.

LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC.,


Petitioner,
G.R. No. 185918
Present:

- versus LEONARDO-DE CASTRO,


Acting Chairperson,
PERALTA, *
BERSAMIN,
VILLARAMA, JR., and
REYES,** JJ
UNIVERSITY OF THEPHILIPPINES,
Respondent.
Promulgated:
April 18, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the August 20, 2008 Amended Decision [1] and December 23, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 91281.
The antecedent facts of the case are as follows:
Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered into a contract for
security services with respondent University of the Philippines (UP).
In 1998, several security guards assigned to UP filed separate complaints against Lockheed and UP
for payment of underpaid wages, 25% overtime pay, premium pay for rest days and special
holidays, holiday pay, service incentive leave pay, night shift differentials, 13 th month pay, refund of
cash bond, refund of deductions for the Mutual Benefits Aids System (MBAS), unpaid wages from
December 16-31, 1998, and attorneys fees.
On February 16, 2000, the Labor Arbiter rendered a decision as follows:
WHEREFORE, premises considered, respondents Lockheed Detective and Watchman
Agency, Inc. and UP as job contractor and principal, respectively, are hereby declared to
be solidarily liable to complainants for the following claims of the latter which are found
meritorious.
Underpaid wages/salaries, premium pay for work on rest day and special holiday, holiday
pay, 5 days service incentive leave pay, 13 th month pay for 1998, refund of cash bond
(deducted at P50.00 per month from January to May 1996, P100.00 per month from June
1996 and P200.00 from November 1997), refund of deduction for Mutual Benefits Aids
System at the rate of P50.00 a month, and attorneys fees; in the total amount of

P1,184,763.12 broken down as follows per attached computation of the Computation and
[E]xamination Unit of this Commission, which computation forms part of this Decision:
1. JOSE SABALAS P77,983.62
2. TIRSO DOMASIAN 76,262.70
3. JUAN TAPEL 80,546.03
4. DINDO MURING 80,546.03
5. ALEXANDER ALLORDE 80,471.78
6. WILFREDO ESCOBAR 80,160.63
7. FERDINAND VELASQUEZ 78,595.53
8. ANTHONY GONZALES 76,869.97
9. SAMUEL ESCARIO 80,509.78
10. PEDRO FAILORINA 80,350.87
11. MATEO TANELA 70,590.58
12. JOB SABALAS 59,362.40
13. ANDRES DACANAYAN 77,403.73
14. EDDIE OLIVAR 77,403.73
P1,077,057.38
plus 10% attorneys fees 107,705.74
GRAND TOTAL AWARD P1,184,763.12
Third party respondent University of the Philippines is hereby declared to be liable to

Third Party Complainant and cross claimant Lockheed Detective and Watchman Agency
for the unpaid legislated salary increases of the latters security guards for the years 1996
to 1998, in the total amount of P13,066,794.14, out of which amount the amounts due
complainants here shall be paid.
The other claims are hereby DISMISSED for lack of merit (night shift differential and
13th month pay) or for having been paid in the course of this proceedings (salaries
for December 15-31, 1997 in the amount of P40,140.44).
The claims of Erlindo Collado, Rogelio Banjao and Amor Banjao are hereby
DISMISSED as amicably settled for and in consideration of the amounts of P12,315.72,
P12,271.77 and P12,819.33, respectively.
SO ORDERED.[3]
Both Lockheed and UP appealed the Labor Arbiters decision. By Decision[4] dated April 12, 2002,
the NLRC modified the Labor Arbiters decision. The NLRC held:
WHEREFORE, the decision appealed from is hereby modified as follows:
1.
Complainants claims for premium pay for work on rest day and special
holiday, and 5 days service incentive leave pay, are hereby dismissed for lack of
basis.
2.
The respondent University of the Philippines is still solidarily liable with
Lockheed in the payment of the rest of the claims covering the period of their
service contract.
The Financial Analyst is hereby ordered to recompute the awards of the complainants in
accordance with the foregoing modifications.

SO ORDERED.[5]
The complaining security guards and UP filed their respective
reconsideration. On August 14, 2002, however, the NLRC denied said motions.

motions

for

As the parties did not appeal the NLRC decision, the same became final and executory on October
26, 2002.[6] A writ of execution was then issued but later quashed by the Labor Arbiter
on November 23, 2003 on motion of UP due to disputes regarding the amount of the award. Later,
however, said order quashing the writ was reversed by the NLRC by Resolution [7] dated June 8,
2004, disposing as follows:
WHEREFORE, premises considered, we grant this instant appeal. The Order dated 23
November 2003 is hereby reversed and set aside. The Labor Arbiter is directed to issue a
Writ of Execution for the satisfaction of the judgment award in favor of Third-Party
complainants.
SO ORDERED.[8]
UP moved to reconsider the NLRC resolution. On December 28, 2004, the NLRC upheld its
resolution but with modification that the satisfaction of the judgment award in favor of Lockheed
will be only against the funds of UP which are not identified as public funds.
The NLRC order and resolution having become final, Lockheed filed a motion for the issuance of
an alias writ of execution. The same was granted on May 23, 2005.[9]
On July 25, 2005, a Notice of Garnishment [10] was issued to Philippine National Bank (PNB) UP
Diliman Branch for the satisfaction of the award of P12,142,522.69 (inclusive of execution fee).

In a letter[11] dated August 9, 2005, PNB informed UP that it has received an order of release
dated August 8, 2005 issued by the Labor Arbiter directing PNB UP Diliman Branch to release to
the NLRC Cashier, through the assigned NLRC Sheriff Max L. Lago, the judgment award/amount
of P12,142,522.69. PNB likewise reminded UP that the bank only has 10 working days from
receipt of the order to deliver the garnished funds and unless it receives a notice from UP or the
NLRC before the expiry of the 10-day period regarding the issuance of a court order or writ of
injunction discharging or enjoining the implementation and execution of the Notice of Garnishment
and Writ of Execution, the bank shall be constrained to cause the release of the garnished funds in
favor of the NLRC.
On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment. [12] UP contended that the
funds being subjected to garnishment at PNB are government/public funds. As certified by the
University Accountant, the subject funds are covered by Savings Account No. 275-529999-8, under
the name of UP System Trust Receipts, earmarked for Student Guaranty Deposit, Scholarship Fund,
Student Fund, Publications, Research Grants, and Miscellaneous Trust Account. UP argued that as
public funds, the subject PNB account cannot be disbursed except pursuant to an appropriation
required by law. The Labor Arbiter, however, dismissed the urgent motion for lack of merit
on August 30, 2005.[13]
On September 2, 2005, the amount of P12,062,398.71 was withdrawn by the sheriff from UPs PNB
account.[14]
On September 12, 2005, UP filed a petition for certiorari before the CA based on the following
grounds:
I.

The concept of solidary liability by an indirect employer notwithstanding, respondent


NLRC gravely abused its discretion in a manner amounting to lack or excess of
jurisdiction by misusing such concept to justify the garnishment by the executing Sheriff
of public/government funds belonging to UP.
II.
Respondents NLRC and Arbiter LORA acted without jurisdiction or gravely abused their
discretion in a manner amounting to lack or excess of jurisdiction when, by means of an
Alias Writ of Execution against petitioner UP, they authorized respondent Sheriff to
garnish UPs public funds. Similarly, respondent LORA gravely abused her discretion
when she resolved petitioners Motion to Quash Notice of Garnishment addressed to, and
intended for, the NLRC, and when she unilaterally and arbitrarily disregarded an official
Certification that the funds garnished are public/government funds, and thereby allowed
respondent Sheriff to withdraw the same from PNB.
III.
Respondents gravely abused their discretion in a manner amounting to lack or excess of
jurisdiction when they, despite prior knowledge, effected the execution that caused
paralyzation and dislocation to petitioners governmental functions. [15]
On March 12, 2008, the CA rendered a decision [16] dismissing UPs petition for
certiorari. Citing Republic v. COCOFED,[17] which defines public funds as moneys belonging to the
State or to any political subdivisions of the State, more specifically taxes, customs, duties and
moneys raised by operation of law for the support of the government or the discharge of its
obligations, the appellate court ruled that the funds sought to be garnished do not seem to fall

within the stated definition.


On reconsideration, however, the CA issued the assailed Amended Decision. It held that without
departing from its findings that the funds covered in the savings account sought to be garnished do
not fall within the classification of public funds, it reconsiders the dismissal of the petition in light
of the ruling in the case of National Electrification Administration v. Morales[18] which mandates
that all money claims against the government must first be filed with the Commission on Audit
(COA).
Lockheed moved to reconsider the amended decision but the same was denied in the assailed CA
Resolution dated December 23, 2008. The CA cited Manila International Airport Authority v.
Court of Appeals[19] which held that UP ranks with MIAA, a government instrumentality exercising
corporate powers but not organized as a stock or non-stock corporation. While said corporations are
government instrumentalities, they are loosely called government corporate entities but not
government-owned and controlled corporations in the strict sense.
Hence this petition by Lockheed raising the following arguments:
1.
RESPONDENT UP IS A GOVERNMENT ENTITY WITH A SEPARATE AND
DISTINCT PERSONALITY FROM THE NATIONAL GOVERNMENT AND HAS
ITS OWN CHARTER GRANTING IT THE RIGHT TO SUE AND BE SUED. IT
THEREFORE CANNOT AVAIL OF THE IMMUNITY FROM SUIT OF THE
GOVERNMENT. NOT HAVING IMMUNITY FROM SUIT, RESPONDENT UP
CAN BE HELD LIABLE AND EXECUTION CAN THUS ENSUE.
2.
MOREOVER, IF THE COURT LENDS IT ASSENT TO THE INVOCATION
OF THE DOCTRINE OF STATE IMMUNITY, THIS WILL RESULT [IN] GRAVE

INJUSTICE.
3.
FURTHERMORE, THE PROTESTATIONS OF THE RESPONDENT ARE
TOO LATE IN THE DAY, AS THE EXECUTION PROCEEDINGS HAVE
ALREADY BEEN TERMINATED.[20]
Lockheed contends that UP has its own separate and distinct juridical entity from the national
government and has its own charter. Thus, it can be sued and be held liable. Moreover, Executive
Order No. 714 entitled Fiscal Control and Management of the Funds of UP recognizes that as an
institution of higher learning, UP has always granted full management and control of its affairs
including its financial affairs.[21] Therefore, it cannot shield itself from its private contractual
liabilities by simply invoking the public character of its funds. Lockheed also cites several cases
wherein it was ruled that funds of public corporations which can sue and be sued were not exempt
from garnishment.
Lockheed likewise argues that the rulings in the NEA and MIAA cases are inapplicable. It contends
that UP is not similarly situated with NEA because the jurisdiction of COA over the accounts of UP
is only on a post-audit basis. As to the MIAAcase, the liability of MIAA pertains to the real estate
taxes imposed by the City of Paranaque while the obligation of UP in this case involves a private
contractual obligation. Lockheed also argues that the declaration in MIAA specifically citing UP
was mere obiter dictum.
Lockheed moreover submits that UP cannot invoke state immunity to justify and perpetrate an
injustice. UP itself admitted its liability and thus it should not be allowed to renege on its
contractual obligations. Lockheed contends that this might create a ruinous precedent that would
likely affect the relationship between the public and private sectors.

Lastly, Lockheed contends that UP cannot anymore seek the quashal of the writ of execution and
notice of garnishment as they are already fait accompli.
For its part, UP contends that it did not invoke the doctrine of state immunity from suit in the
proceedings a quo and in fact, it did not object to being sued before the labor department. It maintains,
however, that suability does not necessarily mean liability.UP argues that the CA correctly applied
the NEA ruling when it held that all money claims must be filed with the COA.
As to alleged injustice that may result for invocation of state immunity from suit, UP reiterates that
it consented to be sued and even participated in the proceedings below. Lockheed cannot now claim
that invocation of state immunity, which UP did not invoke in the first place, can result in injustice.
On the fait accompli argument, UP argues that Lockheed cannot wash its hands from liability for
the consummated garnishment and execution of UPs trust fund in the amount
of P12,062,398.71. UP cites that damage was done to UP and the beneficiaries of the fund when
said funds, which were earmarked for specific educational purposes, were misapplied, for instance,
to answer for the execution fee of P120,123.98 unilaterally stipulated by the sheriff. Lockheed,
being the party which procured the illegal garnishment, should be held primarily liable. The mere
fact that the CA set aside the writ of garnishment confirms the liability of Lockheed to reimburse
and indemnify in accordance with law.
The petition has no merit.
We agree with UP that there was no point for Lockheed in discussing the doctrine of state immunity
from suit as this was never an issue in this case. Clearly, UP consented to be sued when it
participated in the proceedings below. What UP questions is the hasty garnishment of its funds in

its PNB account.


This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a juridical
personality separate and distinct from the government and has the capacity to sue and be
sued. Thus, also like NEA, it cannot evade execution, and its funds may be subject to garnishment
or levy. However, before execution may be had, a claim for payment of the judgment award must
first be filed with the COA. Under Commonwealth Act No. 327,[22] as amended by Section 26 of
P.D. No. 1445,[23] it is the COA which has primary jurisdiction to examine, audit and settle all debts
and claims of any sort due from or owing the Government or any of its subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their
subsidiaries. With respect to money claims arising from the implementation of Republic Act No.
6758,[24] their allowance or disallowance is for COA to decide, subject only to the remedy of appeal
by petition for certiorari to this Court.[25]
We cannot subscribe to Lockheeds argument that NEA is not similarly situated with UP because the
COAs jurisdiction over the latter is only on post-audit basis. A reading of the pertinent
Commonwealth Act provision clearly shows that it does not make any distinction as to which of the
government subdivisions, agencies and instrumentalities, including government-owned or
controlled corporations and their subsidiaries whose debts should be filed before the COA.
As to the fait accompli argument of Lockheed, contrary to its claim that there is nothing that can be
done since the funds of UP had already been garnished, since the garnishment was erroneously
carried out and did not go through the proper procedure (the filing of a claim with the COA), UP is
entitled to reimbursement of the garnished funds plus interest of 6% per annum, to be computed
from the time of judicial demand to be reckoned from the time UP filed a petition for certiorari
before the CA which occurred right after the withdrawal of the garnished funds from PNB.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit. Petitioner
Lockheed Detective and Watchman Agency, Inc. is ordered to REIMBURSE respondent
University of the Philippines the amount of P12,062,398.71 plus interest of 6% per annum, to be
computed from September 12, 2005 up to the finality of this Decision, and 12% interest on the
entire amount from date of finality of this Decision until fully paid.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 171182

August 23, 2012

UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN


P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and
JOSEFINA R. LICUANAN,Petitioners,
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of
Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA
CRUZ, Respondents.
DECISION

BERSAMIN, J.:
Trial judges should not immediately issue writs of execution or garnishment against the
Government or any of its subdivisions, agencies and instrumentalities to enforce money
judgments.1 They should bear in mind that the primary jurisdiction to examine, audit and settle all
claims of any sort due from the Government or any of its subdivisions, agencies and
instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential Decree No.
1445 (Government Auditing Code of the Philippines).
The Case
On appeal by the University of the Philippines and its then incumbent officials (collectively, the
UP) is the decision promulgated on September 16, 2005,2 whereby the Court of Appeals (CA)
upheld the order of the Regional Trial Court (RTC), Branch 80, in Quezon City that directed the
garnishment of public funds amounting to P16,370,191.74 belonging to the UP to satisfy the writ of
execution issued to enforce the already final and executory judgment against the UP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General
Construction Agreement with respondent Stern Builders Corporation (Stern Builders), represented
by its President and General Manager Servillano dela Cruz, for the construction of the extension
building and the renovation of the College of Arts and Sciences Building in the campus of the
University of the Philippines in Los Baos (UPLB).3
In the course of the implementation of the contract, Stern Builders submitted three progress billings
corresponding to the work accomplished, but the UP paid only two of the billings. The third billing
worth P273,729.47 was not paid due to its disallowance by the Commission on Audit (COA).
Despite the lifting of the disallowance, the UP failed to pay the billing, prompting Stern Builders

and dela Cruz to sue the UP and its co-respondent officials to collect the unpaid billing and to
recover various damages. The suit, entitled Stern Builders Corporation and Servillano R. Dela
Cruz v. University of the Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P.
Aspiras, Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R. Licuanan,was
docketed as Civil Case No. Q-93-14971 of the Regional Trial Court in Quezon City (RTC). 4
After trial, on November 28, 2001, the RTC rendered its decision in favor of the plaintiffs, 5 viz:
Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering the latter to pay plaintiff, jointly and severally, the following, to
wit:
1. P 503,462.74 amount of the third billing, additional accomplished work and retention
money
2. P 5,716,729.00 in actual damages
3. P 10,000,000.00 in moral damages
4. P 150,000.00 and P 1,500.00 per appearance as attorneys fees; and
5. Costs of suit.
SO ORDERED.
Following the RTCs denial of its motion for reconsideration on May 7, 2002,6 the UP filed a notice
of appeal on June 3, 2002.7 Stern Builders and dela Cruz opposed the notice of appeal on the
ground of its filing being belated, and moved for the execution of the decision. The UP countered
that the notice of appeal was filed within the reglementary period because the UPs Office of Legal
Affairs (OLS) in Diliman, Quezon City received the order of denial only on May 31, 2002. On

September 26, 2002, the RTC denied due course to the notice of appeal for having been filed out of
time and granted the private respondents motion for execution.8
The RTC issued the writ of execution on October 4, 2002,9 and the sheriff of the RTC served the
writ of execution and notice of demand upon the UP, through its counsel, on October 9, 2002. 10 The
UP filed an urgent motion to reconsider the order dated September 26, 2002, to quash the writ of
execution dated October 4, 2002, and to restrain the proceedings.11 However, the RTC denied the
urgent motion on April 1, 2003.12
On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition
for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395.13
On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UPs
notice of appeal had been filed late,14 stating:
Records clearly show that petitioners received a copy of the Decision dated November 28, 2001
and January 7, 2002, thus, they had until January 22, 2002 within which to file their appeal. On
January 16, 2002 or after the lapse of nine (9) days, petitioners through their counsel Atty. Nolasco
filed a Motion for Reconsideration of the aforesaid decision, hence, pursuant to the rules,
petitioners still had six (6) remaining days to file their appeal. As admitted by the petitioners in
their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Order denying their motion for
reconsideration on May 17, 2002, thus, petitioners still has until May 23, 2002 (the remaining six
(6) days) within which to file their appeal. Obviously, petitioners were not able to file their Notice
of Appeal on May 23, 2002 as it was only filed on June 3, 2002.
In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal filed
by the petitioners was really filed out of time, the same having been filed seventeen (17) days late
of the reglementary period. By reason of which, the decision dated November 28, 2001 had already

become final and executory. "Settled is the rule that the perfection of an appeal in the manner and
within the period permitted by law is not only mandatory but jurisdictional, and failure to perfect
that appeal renders the challenged judgment final and executory. This is not an empty procedural
rule but is grounded on fundamental considerations of public policy and sound practice." (Rams
Studio and Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty.
Nolasco received the order of denial of the Motion for Reconsideration on May 17, 2002 but filed a
Notice of Appeal only on June 3, 3003. As such, the decision of the lower court ipso facto became
final when no appeal was perfected after the lapse of the reglementary period. This procedural
caveat cannot be trifled with, not even by the High Court.15
The UP sought a reconsideration, but the CA denied the UPs motion for reconsideration on April
19, 2004.16
On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No.
163501).
On June 23, 2004, the Court denied the petition for review.17 The UP moved for the reconsideration
of the denial of its petition for review on August 29, 2004,18 but the Court denied the motion on
October 6, 2004.19 The denial became final and executory on November 12, 2004.20
In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due
course to the appeal and the issuance of the writ of execution, Stern Builders and dela Cruz filed in
the RTC their motions for execution despite their previous motion having already been granted and
despite the writ of execution having already issued. On June 11, 2003, the RTC granted another
motion for execution filed on May 9, 2003 (although the RTC had already issued the writ of
execution on October 4, 2002).21
On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on the

UPs depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the
Development Bank of the Philippines (DBP), Commonwealth Branch.22 The UP assailed the
garnishment through an urgent motion to quash the notices of garnishment;23 and a motion to quash
the writ of execution dated May 9, 2003.24
On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release
order.25
On October 14, 2003, the RTC denied the UPs urgent motion to quash, and granted Stern Builders
and dela Cruzs ex parte motion for issuance of a release order.26
The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the
motion on November 7, 2003.27
On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished
funds.28 Despite the UPs opposition,29 the RTC granted the motion to release the garnished funds
on March 16, 2004.30 On April 20, 2004, however, the RTC held in abeyance the enforcement of the
writs of execution issued on October 4, 2002 and June 3, 2003 and all the ensuing notices of
garnishment, citing Section 4, Rule 52, Rules of Court, which provided that the pendency of a
timely motion for reconsideration stayed the execution of the judgment. 31
On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the
release of the garnished funds of the UP,32 to wit:
WHEREFORE, premises considered, there being no more legal impediment for the release of the
garnished amount in satisfaction of the judgment award in the instant case, let the amount garnished
be immediately released by the Development Bank of the Philippines, Commonwealth Branch,
Quezon City in favor of the plaintiff.

SO ORDERED.
The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to
release the garnished funds.33
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court
for its non-compliance with the order of release.34
Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to challenge the
jurisdiction of the RTC in issuing the order of December 21, 2004 (CA-G.R. CV No.
88125).35 Aside from raising the denial of due process, the UP averred that the RTC committed
grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that there was no
longer any legal impediment to the release of the garnished funds. The UP argued that government
funds and properties could not be seized by virtue of writs of execution or garnishment, as held in
Department of Agriculture v. National Labor Relations Commission, 36 and citing Section 84 of
Presidential Decree No. 1445 to the effect that "revenue funds shall not be paid out of any public
treasury or depository except in pursuance of an appropriation law or other specific statutory
authority;" and that the order of garnishment clashed with the ruling in University of the
Philippines Board of Regents v. Ligot-Telan37 to the effect that the funds belonging to the UP were
public funds.
On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by the
UP.38
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for
sheriffs assistance to implement the release order dated December 21, 2004, stating that the 60-day
period of the TRO of the CA had already lapsed.39 The UP opposed the amended motion and
countered that the implementation of the release order be suspended. 40

On May 3, 2005, the RTC granted the amended motion for sheriffs assistance and directed the
sheriff to proceed to the DBP to receive the check in satisfaction of the judgment. 41
The UP sought the reconsideration of the order of May 3, 2005.42
On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and to
dismiss the motion to cite its officials in contempt of court. 43
On May 23, 2005, the UP presented a motion to withhold the release of the payment of the
judgment award.44
On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had already
delivered to the sheriff Managers Check No. 811941 for P 16,370,191.74 representing the
garnished funds payable to the order of Stern Builders and dela Cruz as its compliance with the
RTCs order dated December 21, 2004.46 However, the RTC directed in the same order that Stern
Builders and dela Cruz should not encash the check or withdraw its amount pending the final
resolution of the UPs petition for certiorari, to wit:47
To enable the money represented in the check in question (No. 00008119411) to earn interest
during the pendency of the defendant University of the Philippines application for a writ of
injunction with the Court of Appeals the same may now be deposited by the plaintiff at the
garnishee Bank (Development Bank of the Philippines), the disposition of the amount represented
therein being subject to the final outcome of the case of the University of the Philippines et al., vs.
Hon. Agustin S. Dizon et al., (CA G.R. 88125) before the Court of Appeals.
Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount
represented in the check in question and enjoy the same in the fashion of an owner during the
pendency of the case between the parties before the Court of Appeals which may or may not be
resolved in plaintiffs favor.

With the end in view of seeing to it that the check in question is deposited by the plaintiff at the
Development Bank of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is directed
to accompany and/or escort the plaintiff in making the deposit of the check in question.
SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision dismissing the UPs petition for
certiorari, ruling that the UP had been given ample opportunity to contest the motion to direct the
DBP to deposit the check in the name of Stern Builders and dela Cruz; and that the garnished funds
could be the proper subject of garnishment because they had been already earmarked for the
project, with the UP holding the funds only in a fiduciary capacity,48 viz:
Petitioners next argue that the UP funds may not be seized for execution or garnishment to satisfy
the judgment award. Citing Department of Agriculture vs. NLRC, University of the Philippines
Board of Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at Land Bank and the
Development Bank of the Philippines, being government funds, may not be released absent an
appropriations bill from Congress.
The argument is specious. UP entered into a contract with private respondents for the expansion
and renovation of the Arts and Sciences Building of its campus in Los Baos, Laguna. Decidedly,
there was already an appropriations earmarked for the said project. The said funds are retained by
UP, in a fiduciary capacity, pending completion of the construction project.
We agree with the trial Court [sic] observation on this score:
"4. Executive Order No. 109 (Directing all National Government Agencies to Revert
Certain Accounts Payable to the Cumulative Result of Operations of the National
Government and for Other Purposes) Section 9. Reversion of Accounts Payable, provides
that, all 1995 and prior years documented accounts payable and all undocumented

accounts regardless of the year they were incurred shall be reverted to the Cumulative
Result of Operations of the National Government (CROU). This shall apply to accounts
payable of all funds, except fiduciary funds, as long as the purpose for which the funds
were created have not been accomplished and accounts payable under foreign assisted
projects for the duration of the said project. In this regard, the Department of Budget and
Management issued Joint-Circular No. 99-6 4.0 (4.3) Procedural Guidelines which
provides that all accounts payable that reverted to the CROU may be considered for
payment upon determination thru administrative process, of the existence, validity and
legality of the claim. Thus, the allegation of the defendants that considering no
appropriation for the payment of any amount awarded to plaintiffs appellee the funds of
defendant-appellants may not be seized pursuant to a writ of execution issued by the
regular court is misplaced. Surely when the defendants and the plaintiff entered into the
General Construction of Agreement there is an amount already allocated by the latter for
the said project which is no longer subject of future appropriation." 49
After the CA denied their motion for reconsideration on December 23, 2005, the petitioners
appealed by petition for review.
Matters Arising During the Pendency of the Petition
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela Cruzs
motion to withdraw the deposit, in consideration of the UPs intention to appeal to the
CA,50 stating:
Since it appears that the defendants are intending to file a petition for review of the Court of
Appeals resolution in CA-G.R. No. 88125 within the reglementary period of fifteen (15) days from
receipt of resolution, the Court agrees with the defendants stand that the granting of plaintiffs
subject motion is premature.

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case of
the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125
before the Court of Appeals) is that the judgment or resolution of said court has to be final and
executory, for if the same will still be elevated to the Supreme Court, it will not attain finality yet
until the highest court has rendered its own final judgment or resolution.51
However, on January 22, 2007, the UP filed an Urgent Application for A Temporary Restraining
Order and/or A Writ of Preliminary Injunction,52 averring that on January 3, 2007, Judge Maria
Theresa dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latters appointment
to the CA) had issued another order allowing Stern Builders and dela Cruz to withdraw the
deposit,53 to wit:
It bears stressing that defendants liability for the payment of the judgment obligation has become
indubitable due to the final and executory nature of the Decision dated November 28, 2001. Insofar
as the payment of the [sic] judgment obligation is concerned, the Court believes that there is
nothing more the defendant can do to escape liability. It is observed that there is nothing more the
defendant can do to escape liability. It is observed that defendant U.P. System had already
exhausted all its legal remedies to overturn, set aside or modify the decision (dated November 28,
2001( rendered against it. The way the Court sees it, defendant U.P. Systems petition before the
Supreme Court concerns only with the manner by which said judgment award should be satisfied. It
has nothing to do with the legality or propriety thereof, although it prays for the deletion of [sic]
reduction of the award of moral damages.
It must be emphasized that this Courts finding, i.e., that there was sufficient appropriation
earmarked for the project, was upheld by the Court of Appeals in its decision dated September 16,
2005. Being a finding of fact, the Supreme Court will, ordinarily, not disturb the same was said

Court is not a trier of fact. Such being the case, defendants arguments that there was no sufficient
appropriation for the payment of the judgment obligation must fail.
While it is true that the former Presiding Judge of this Court in its Order dated January 30, 2006
had stated that:
Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case of
the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125
before the Court of Appeals) is that the judgment or resolution of said court has to be final and
executory, for if the same will still be elevated to the Supreme Court, it will not attain finality yet
until the highest court has rendered its own final judgment or resolution.
it should be noted that neither the Court of Appeals nor the Supreme Court issued a preliminary
injunction enjoining the release or withdrawal of the garnished amount. In fact, in its present
petition for review before the Supreme Court, U.P. System has not prayed for the issuance of a writ
of preliminary injunction. Thus, the Court doubts whether such writ is forthcoming.
The Court honestly believes that if defendants petition assailing the Order of this Court dated
December 31, 2004 granting the motion for the release of the garnished amount was meritorious,
the Court of Appeals would have issued a writ of injunction enjoining the same. Instead, said
appellate court not only refused to issue a wit of preliminary injunction prayed for by U.P. System
but denied the petition, as well.54
The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of
Judge Dizon disallowing the withdrawal of the garnished amount until after the decision in the case
would have become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons acting

pursuant to her authority from enforcing her order of January 3, 2007,55 it appears that on January
16, 2007, or prior to the issuance of the TRO, she had already directed the DBP to forthwith release
the garnished amount to Stern Builders and dela Cruz; 56 and that DBP had forthwith complied with
the order on January 17, 2007 upon the sheriffs service of the order of Judge Yadao. 57
These intervening developments impelled the UP to file in this Court a supplemental petition on
January 26, 2007,58 alleging that the RTC (Judge Yadao) gravely erred in ordering the immediate
release of the garnished amount despite the pendency of the petition for review in this Court.
The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied the UPs motion
for the redeposit of the withdrawn amount on April 10, 2007,60 to wit:
This resolves defendant U.P. Systems Urgent Motion to Redeposit Judgment Award praying that
plaintiffs be directed to redeposit the judgment award to DBP pursuant to the Temporary
Restraining Order issued by the Supreme Court. Plaintiffs opposed the motion and countered that
the Temporary Restraining Order issued by the Supreme Court has become moot and academic
considering that the act sought to be restrained by it has already been performed. They also alleged
that the redeposit of the judgment award was no longer feasible as they have already spent the
same.
It bears stressing, if only to set the record straight, that this Court did not in its Order dated
January 3, 2007 (the implementation of which was restrained by the Supreme Court in its
Resolution dated January 24, 2002) direct that that garnished amount "be deposited with the
garnishee bank (Development Bank of the Philippines)". In the first place, there was no need to
order DBP to make such deposit, as the garnished amount was already deposited in the account of
plaintiffs with the DBP as early as May 13, 2005. What the Court granted in its Order dated January
3, 2007 was plaintiffs motion to allow the release of said deposit. It must be recalled that the Court
found plaintiffs motion meritorious and, at that time, there was no restraining order or preliminary

injunction from either the Court of Appeals or the Supreme Court which could have enjoined the
release of plaintiffs deposit. The Court also took into account the following factors:
a) the Decision in this case had long been final and executory after it was rendered on
November 28, 2001;
b) the propriety of the dismissal of U.P. Systems appeal was upheld by the Supreme
Court;
c) a writ of execution had been issued;
d) defendant U.P. Systems deposit with DBP was garnished pursuant to a lawful writ of
execution issued by the Court; and
e) the garnished amount had already been turned over to the plaintiffs and deposited in
their account with DBP.
The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by the
plaintiffs, having been delivered to them by the Deputy Sheriff of this Court pursuant to par. (c),
Section 9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment obligation has
already been fully satisfied as per Report of the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme Court, the same has become functus
oficio, having been issued after the garnished amount had been released to the plaintiffs. The
judgment debt was released to the plaintiffs on January 17, 2007, while the Temporary Restraining
Order issued by the Supreme Court was received by this Court on February 2, 2007. At the time of
the issuance of the Restraining Order, the act sought to be restrained had already been done,
thereby rendering the said Order ineffectual.
After a careful and thorough study of the arguments advanced by the parties, the Court is of the

considered opinion that there is no legal basis to grant defendant U.P. Systems motion to redeposit
the judgment amount. Granting said motion is not only contrary to law, but it will also render this
Courts final executory judgment nugatory. Litigation must end and terminate sometime and
somewhere, and it is essential to an effective administration of justice that once a judgment has
become final the issue or cause involved therein should be laid to rest. This doctrine of finality of
judgment is grounded on fundamental considerations of public policy and sound practice. In fact,
nothing is more settled in law than that once a judgment attains finality it thereby becomes
immutable and unalterable. It may no longer be modified in any respect, even if the modification is
meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by the highest court
of the land.
WHEREFORE, premises considered, finding defendant U.P. Systems Urgent Motion to Redeposit
Judgment Award devoid of merit, the same is hereby DENIED.
SO ORDERED.
Issues
The UP now submits that:
I
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE PETITION,
ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT
FUNDS HAVE ALREADY BEEN EARMARKED FOR THE CONSTRUCTION PROJECT; AND
THUS, THERE IS NO NEED FOR FURTHER APPROPRIATIONS.
II

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT


OF A STATE UNIVERSITYS FUNDS IN VIOLATION OF ARTICLE XIV, SECTION 5(5) OF
THE CONSTITUTION.
III
IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW
POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE
AWARD OF P 10 MILLION AS MORAL DAMAGES TO RESPONDENTS.
IV
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE
RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE
GROUND OF EQUITY AND JUDICIAL COURTESY.
V
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE
RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON THE
GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION FOR
RECONSIDERATION OF THE ORDER DATED 3 JANUARY 2007.
VI
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE
REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR
LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24 JANUARY 2007.
The UP argues that the amount earmarked for the construction project had been purposely set aside

only for the aborted project and did not include incidental matters like the awards of actual
damages, moral damages and attorneys fees. In support of its argument, the UP cited Article 12.2
of the General Construction Agreement, which stipulated that no deductions would be allowed for
the payment of claims, damages, losses and expenses, including attorneys fees, in case of any
litigation arising out of the performance of the work. The UP insists that the CA decision was
inconsistent with the rulings in Commissioner of Public Highways v. San Diego61 and Department
of Agriculture v. NLRC62 to the effect that government funds and properties could not be seized
under writs of execution or garnishment to satisfy judgment awards.
Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the Constitution
by allowing the garnishment of UP funds, because the garnishment resulted in a substantial
reduction of the UPs limited budget allocated for the remuneration, job satisfaction and fulfillment
of the best available teachers; that Judge Yadao should have exhibited judicial courtesy towards the
Court due to the pendency of the UPs petition for review; and that she should have also desisted
from declaring that the TRO issued by this Court had become functus officio.
Lastly, the UP states that the awards of actual damages of P 5,716,729.00 and moral damages
of P 10 million should be reduced, if not entirely deleted, due to its being unconscionable,
inequitable and detrimental to public service.
In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective for
its failure to mention the other cases upon the same issues pending between the parties (i.e., CAG.R. No. 77395 and G.R No. 163501); that the UP was evidently resorting to forum shopping, and
to delaying the satisfaction of the final judgment by the filing of its petition for review; that the
ruling in Commissioner of Public Works v. San Diego had no application because there was an
appropriation for the project; that the UP retained the funds allotted for the project only in a
fiduciary capacity; that the contract price had been meanwhile adjusted to P 22,338,553.25, an

amount already more than sufficient to cover the judgment award; that the UPs prayer to reduce or
delete the award of damages had no factual basis, because they had been gravely wronged, had
been deprived of their source of income, and had suffered untold miseries, discomfort, humiliation
and sleepless years; that dela Cruz had even been constrained to sell his house, his equipment and
the implements of his trade, and together with his family had been forced to live miserably because
of the wrongful actuations of the UP; and that the RTC correctly declared the Courts TRO to be
already functus officio by reason of the withdrawal of the garnished amount from the DBP.
The decisive issues to be considered and passed upon are, therefore:
(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UPs prayer for the deletion of the awards of actual damages
of P 5,716,729.00, moral damages of P 10,000,000.00 and attorneys fees of P 150,000.00
plus P 1,500.00 per appearance could be granted despite the finality of the judgment of the RTC.
Ruling
The petition for review is meritorious.
I.
UPs funds, being government funds,
are not subject to garnishment
The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in
literature, philosophy, the sciences, and arts, and to give professional and technical training to
deserving students.63 Despite its establishment as a body corporate,64 the UP remains to be a
"chartered institution"65 performing a legitimate government function. It is an institution of higher
learning, not a corporation established for profit and declaring any dividends. 66 In enacting
Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congress has declared

the UP as the national university67 "dedicated to the search for truth and knowledge as well as the
development of future leaders."68
Irrefragably, the UP is a government instrumentality,69 performing the States constitutional
mandate of promoting quality and accessible education.70 As a government instrumentality, the UP
administers special funds sourced from the fees and income enumerated under Act No. 1870 and
Section 1 of Executive Order No. 714,71 and from the yearly appropriations, to achieve the purposes
laid down by Section 2 of Act 1870, as expanded in Republic Act No. 9500.72 All the funds going
into the possession of the UP, including any interest accruing from the deposit of such funds in any
banking institution, constitute a "special trust fund," the disbursement of which should always be
aligned with the UPs mission and purpose,73 and should always be subject to auditing by the
COA.74
Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the possession
of an agency of the government or of a public officer as trustee, agent or administrator, or that is
received for the fulfillment of some obligation.75 A trust fund may be utilized only for the "specific
purpose for which the trust was created or the funds received."76
The funds of the UP are government funds that are public in character. They include the income
accruing from the use of real property ceded to the UP that may be spent only for the attainment of
its institutional objectives.77Hence, the funds subject of this action could not be validly made the
subject of the RTCs writ of execution or garnishment. The adverse judgment rendered against the
UP in a suit to which it had impliedly consented was not immediately enforceable by execution
against the UP,78 because suability of the State did not necessarily mean its liability.79
A marked distinction exists between suability of the State and its liability. As the Court succinctly
stated in Municipality of San Fernando, La Union v. Firme:80

A distinction should first be made between suability and liability. "Suability depends on the consent
of the state to be sued, liability on the applicable law and the established facts. The circumstance
that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be
held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable.
Also, in Republic v. Villasor,81 where the issuance of an alias writ of execution directed against the
funds of the Armed Forces of the Philippines to satisfy a final and executory judgment was
nullified, the Court said:
xxx 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 claimants 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.
The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards of
actual and moral damages (including attorneys fees) was not validly made if there was no special
appropriation by Congress to cover the liability. It was, therefore, legally unwarranted for the CA to
agree with the RTCs holding in the order issued on April 1, 2003 that no appropriation by
Congress to allocate and set aside the payment of the judgment awards was necessary because
"there (were) already an appropriations (sic) earmarked for the said project." 82The CA and the RTC

thereby unjustifiably ignored the legal restriction imposed on the trust funds of the Government and
its agencies and instrumentalities to be used exclusively to fulfill the purposes for which the trusts
were created or for which the funds were received except upon express authorization by Congress
or by the head of a government agency in control of the funds, and subject to pertinent budgetary
laws, rules and regulations.83
Indeed, an appropriation by Congress was required before the judgment that rendered the UP liable
for moral and actual damages (including attorneys fees) would be satisfied considering that such
monetary liabilities were not covered by the "appropriations earmarked for the said project." The
Constitution strictly mandated that "(n)o money shall be paid out of the Treasury except in
pursuance of an appropriation made by law."84
II
COA must adjudicate private respondents claim
before execution should proceed
The execution of the monetary judgment against the UP was within the primary jurisdiction of the
COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, to wit:
Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to the Government or any of its
subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned
or controlled corporations, including their subsidiaries, and other self-governing boards,

commissions, or agencies of the Government, and as herein prescribed, including non


governmental entities subsidized by the government, those funded by donations through the
government, those required to pay levies or government share, and those for which the government
has put up a counterpart fund or those partly funded by the government.
It was of no moment that a final and executory decision already validated the claim against the UP.
The settlement of the monetary claim was still subject to the primary jurisdiction of the COA
despite the final decision of the RTC having already validated the claim. 85 As such, Stern Builders
and dela Cruz as the claimants had no alternative except to first seek the approval of the COA of
their monetary claim.
On its part, the RTC should have exercised utmost caution, prudence and judiciousness in dealing
with the motions for execution against the UP and the garnishment of the UPs funds. The RTC had
no authority to direct the immediate withdrawal of any portion of the garnished funds from the
depository banks of the UP. By eschewing utmost caution, prudence and judiciousness in dealing
with the execution and garnishment, and by authorizing the withdrawal of the garnished funds of
the UP, the RTC acted beyond its jurisdiction, and all its orders and issuances thereon were void
and of no legal effect, specifically: (a) the order Judge Yadao issued on January 3, 2007 allowing
Stern Builders and dela Cruz to withdraw the deposited garnished amount; (b) the order Judge
Yadao issued on January 16, 2007 directing DBP to forthwith release the garnish amount to Stern
Builders and dela Cruz; (c) the sheriffs report of January 17, 2007 manifesting the full satisfaction
of the writ of execution; and (d) the order of April 10, 2007 deying the UPs motion for the
redeposit of the withdrawn amount. Hence, such orders and issuances should be struck down
without exception.
Nothing extenuated Judge Yadaos successive violations of Presidential Decree No. 1445. She was
aware of Presidential Decree No. 1445, considering that the Court circulated to all judges its

Administrative Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to observe
utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units" precisely in order to prevent
the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the
COA, to wit:
In order to prevent possible circumvention of the rules and procedures of the Commission on
Audit, judges are hereby enjoined to observe utmost caution, prudence and judiciousness in
the issuance of writs of execution to satisfy money judgments against government agencies
and local government units.
Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA 617,
625 1970), this Court explicitly stated:
"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 claimants action only up to the completion of proceedings
anterior to the stage of execution and that the power of the Court 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.
Moreover, it is settled jurisprudence that upon determination of State liability, the
prosecution, enforcement or satisfaction thereof must still be pursued in accordance with the
rules and procedures laid down in P.D. No. 1445, otherwise known as the Government
Auditing Code of the Philippines (Department of Agriculture v. NLRC, 227 SCRA 693, 701-02

1993 citing Republic vs. Villasor, 54 SCRA 84 1973). All money claims against the
Government must first be filed with the Commission on Audit which must act upon it within
sixty days. Rejection of the claim will authorize the claimant to elevate the matter to the
Supreme Court on certiorari and in effect, sue the State thereby (P.D. 1445, Sections 49-50).
However, notwithstanding the rule that government properties are not subject to levy and execution
unless otherwise provided for by statute (Republic v. Palacio, 23 SCRA 899 1968; Commissioner
of Public Highways v. San Diego, supra) or municipal ordinance (Municipality of Makati v. Court
of Appeals, 190 SCRA 206 1990), the Court has, in various instances, distinguished between
government funds and properties for public use and those not held for public use. Thus, in Viuda de
Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the Court ruled that "where property of a
municipal or other public corporation is sought to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to
be determined by the usage and purposes for which it is held." The following can be culled from
Viuda de Tan Toco v. Municipal Council of Iloilo:
1. Properties held for public uses and generally everything held for governmental purposes
are not subject to levy and sale under execution against such corporation. The same rule
applies to funds in the hands of a public officer and taxes due to a municipal corporation.
2. Where a municipal corporation owns in its proprietary capacity, as distinguished from its public
or government capacity, property not used or used for a public purpose but for quasi-private
purposes, it is the general rule that such property may be seized and sold under execution against
the corporation.
3. Property held for public purposes is not subject to execution merely because it is temporarily
used for private purposes. If the public use is wholly abandoned, such property becomes subject to
execution.

This Administrative Circular shall take effect immediately and the Court Administrator shall see to
it that it is faithfully implemented.
Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any writ
of preliminary injunction to enjoin the release or withdrawal of the garnished amount, she did not
need any writ of injunction from a superior court to compel her obedience to the law. The Court is
disturbed that an experienced judge like her should look at public laws like Presidential Decree No.
1445 dismissively instead of loyally following and unquestioningly implementing them. That she
did so turned her court into an oppressive bastion of mindless tyranny instead of having it as a true
haven for the seekers of justice like the UP.
III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period rule announced in
Neypes v. Court of Appeals
can be given retroactive application
The UP next pleads that the Court gives due course to its petition for review in the name of equity
in order to reverse or modify the adverse judgment against it despite its finality. At stake in the
UPs plea for equity was the return of the amount of P 16,370,191.74 illegally garnished from its
trust funds. Obstructing the plea is the finality of the judgment based on the supposed tardiness of
UPs appeal, which the RTC declared on September 26, 2002. The CA upheld the declaration of
finality on February 24, 2004, and the Court itself denied the UPs petition for review on that issue
on May 11, 2004 (G.R. No. 163501). The denial became final on November 12, 2004.
It is true that a decision that has attained finality becomes immutable and unalterable, and cannot be
modified in any respect,87 even if the modification is meant to correct erroneous conclusions of fact

and law, and whether the modification is made by the court that rendered it or by this Court as the
highest court of the land.88 Public policy dictates that once a judgment becomes final, executory and
unappealable, the prevailing party should not be deprived of the fruits of victory by some
subterfuge devised by the losing party. Unjustified delay in the enforcement of such judgment sets
at naught the role and purpose of the courts to resolve justiciable controversies with
finality.89 Indeed, all litigations must at some time end, even at the risk of occasional errors.
But the doctrine of immutability of a final judgment has not been absolute, and has admitted
several exceptions, among them: (a) the correction of clerical errors; (b) the so-called nunc pro tunc
entries that cause no prejudice to any party; (c) void judgments; and (d) whenever circumstances
transpire after the finality of the decision that render its execution unjust and
inequitable.90 Moreover, in Heirs of Maura So v. Obliosca,91 we stated that despite the absence of
the preceding circumstances, the Court is not precluded from brushing aside procedural norms if
only to serve the higher interests of justice and equity. Also, in Gumaru v. Quirino State
College,92 the Court nullified the proceedings and the writ of execution issued by the RTC for the
reason that respondent state college had not been represented in the litigation by the Office of the
Solicitor General.
We rule that the UPs plea for equity warrants the Courts exercise of the exceptional power to
disregard the declaration of finality of the judgment of the RTC for being in clear violation of the
UPs right to due process.
Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to be
tardy. They based their finding on the fact that only six days remained of the UPs reglementary 15day period within which to file the notice of appeal because the UP had filed a motion for
reconsideration on January 16, 2002 vis--vis the RTCs decision the UP received on January 7,
2002; and that because the denial of the motion for reconsideration had been served upon Atty.

Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only until May 23,
2002 within which to file the notice of appeal.
The UP counters that the service of the denial of the motion for reconsideration upon Atty. Nolasco
was defective considering that its counsel of record was not Atty. Nolasco of the UPLB Legal
Office but the OLS in Diliman, Quezon City; and that the period of appeal should be reckoned from
May 31, 2002, the date when the OLS received the order. The UP submits that the filing of the
notice of appeal on June 3, 2002 was well within the reglementary period to appeal.
We agree with the submission of the UP.
Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the UPLB
Legal Office was invalid and ineffectual because he was admittedly not the counsel of record of the
UP. The rule is that it is on the counsel and not the client that the service should be made. 93
That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on May
31, 2002. As such, the running of the remaining period of six days resumed only on June 1,
2002,94 rendering the filing of the UPs notice of appeal on June 3, 2002 timely and well within the
remaining days of the UPs period to appeal.
Verily, the service of the denial of the motion for reconsideration could only be validly made upon
the OLS in Diliman, and no other. The fact that Atty. Nolasco was in the employ of the UP at the
UPLB Legal Office did not render the service upon him effective. It is settled that where a party has
appeared by counsel, service must be made upon such counsel.95 Service on the party or the partys
employee is not effective because such notice is not notice in law.96 This is clear enough from
Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any party
has appeared by counsel, service upon him shall be made upon his counsel or one of them, unless
service upon the party himself is ordered by the court. Where one counsel appears for several

parties, he shall only be entitled to one copy of any paper served upon him by the opposite side." As
such, the period to appeal resumed only on June 1, 2002, the date following the service on May 31,
2002 upon the OLS in Diliman of the copy of the decision of the RTC, not from the date when the
UP was notified.97
Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual and
legal bases, is set aside.
Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such that the
remaining period for the UP to take a timely appeal would end by May 23, 2002, it would still not
be correct to find that the judgment of the RTC became final and immutable thereafter due to the
notice of appeal being filed too late on June 3, 2002.
In so declaring the judgment of the RTC as final against the UP, the CA and the RTC applied the
rule contained in the second paragraph of Section 3, Rule 41 of the Rules of Court to the effect that
the filing of a motion for reconsideration interrupted the running of the period for filing the appeal;
and that the period resumed upon notice of the denial of the motion for reconsideration. For that
reason, the CA and the RTC might not be taken to task for strictly adhering to the rule then
prevailing.
However, equity calls for the retroactive application in the UPs favor of the fresh-period rule that
the Court first announced in mid-September of 2005 through its ruling in Neypes v. Court of
Appeals,98 viz:
To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to
appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to
file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration.

The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or
make the appeal period uniform, to be counted from receipt of the order denying the motion for
new trial, motion for reconsideration (whether full or partial) or any final order or resolution," 99 is
impervious to any serious challenge. This is because there are no vested rights in rules of
procedure.100 A law or regulation is procedural when it prescribes rules and forms of procedure in
order that courts may be able to administer justice.101 It does not come within the legal conception
of a retroactive law, or is not subject of the general rule prohibiting the retroactive operation of
statues, but is given retroactive effect in actions pending and undetermined at the time of its
passage without violating any right of a person who may feel that he is adversely affected.
We have further said that a procedural rule that is amended for the benefit of litigants in furtherance
of the administration of justice shall be retroactively applied to likewise favor actions then pending,
as equity delights in equality.102 We may even relax stringent procedural rules in order to serve
substantial justice and in the exercise of this Courts equity jurisdiction. 103 Equity jurisdiction aims
to do complete justice in cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of the inflexibility of its statutory or legal jurisdiction. 104
It is cogent to add in this regard that to deny the benefit of the fresh-period rule to the UP would
amount to injustice and absurdity injustice, because the judgment in question was issued on
November 28, 2001 as compared to the judgment in Neypes that was rendered in 1998; absurdity,
because parties receiving notices of judgment and final orders issued in the year 1998 would enjoy
the benefit of the fresh-period rule but the later rulings of the lower courts like that herein would
not.105
Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received the
denial, the UPs filing on June 3, 2002 of the notice of appeal was not tardy within the context of
the fresh-period rule. For the UP, the fresh period of 15-days counted from service of the denial of

the motion for reconsideration would end on June 1, 2002, which was a Saturday. Hence, the UP
had until the next working day, or June 3, 2002, a Monday, within which to appeal, conformably
with Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of the period, as thus
computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the
time shall not run until the next working day."
IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted
Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of law
should be made in the decision rendered by any court, to wit:
Section 14. No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall be refused due
course or denied without stating the legal basis therefor.
Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of Court,
viz:
Section 1. Rendition of judgments and final orders. A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating clearly
and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of
the court. (1a)
The Constitution and the Rules of Court apparently delineate two main essential parts of a
judgment, namely: the body and the decretal portion. Although the latter is the controlling

part,106 the importance of the former is not to be lightly regarded because it is there where the court
clearly and distinctly states its findings of fact and of law on which the decision is based. To state it
differently, one without the other is ineffectual and useless. The omission of either inevitably results
in a judgment that violates the letter and the spirit of the Constitution and the Rules of Court.
The term findings of fact that must be found in the body of the decision refers to statements of fact,
not to conclusions of law.107 Unlike in pleadings where ultimate facts alone need to be stated, the
Constitution and the Rules of Court require not only that a decision should state the ultimate facts
but also that it should specify the supporting evidentiary facts, for they are what are called the
findings of fact.
The importance of the findings of fact and of law cannot be overstated. The reason and purpose of
the Constitution and the Rules of Court in that regard are obviously to inform the parties why they
win or lose, and what their rights and obligations are. Only thereby is the demand of due process
met as to the parties. As Justice Isagani A. Cruz explained in Nicos Industrial Corporation v. Court
of Appeals:108
It is a requirement of due process that the parties to a litigation be informed of how it was decided,
with an explanation of the factual and legal reasons that led to the conclusions of the court. The
court cannot simply say that judgment is rendered in favor of X and against Y and just leave it at
that without any justification whatsoever for its action. The losing party is entitled to know why he
lost, so he may appeal to a higher court, if permitted, should he believe that the decision should be
reversed. A decision that does not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is especially prejudicial to the
losing party, who is unable to pinpoint the possible errors of the court for review by a higher
tribunal.
Here, the decision of the RTC justified the grant of actual and moral damages, and attorneys fees

in the following terse manner, viz:


xxx The Court is not unmindful that due to defendants unjustified refusal to pay their outstanding
obligation to plaintiff, the same suffered losses and incurred expenses as he was forced to remortgage his house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to
pay its monetary obligations in the form of interest and penalties incurred in the course of the
construction of the subject project.109
The statement that "due to defendants unjustified refusal to pay their outstanding obligation to
plaintiff, the same suffered losses and incurred expenses as he was forced to re-mortgage his house
and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its monetary
obligations in the form of interest and penalties incurred in the course of the construction of the
subject project" was only a conclusion of fact and law that did not comply with the constitutional
and statutory prescription. The statement specified no detailed expenses or losses constituting
the P 5,716,729.00 actual damages sustained by Stern Builders in relation to the construction
project or to other pecuniary hardships. The omission of such expenses or losses directly indicated
that Stern Builders did not prove them at all, which then contravened Article 2199, Civil Code, the
statutory basis for the award of actual damages, which entitled a person to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. As such, the
actual damages allowed by the RTC, being bereft of factual support, were speculative and
whimsical. Without the clear and distinct findings of fact and law, the award amounted only to an
ipse dixit on the part of the RTC,110 and did not attain finality.
There was also no clear and distinct statement of the factual and legal support for the award of
moral damages in the substantial amount of P 10,000,000.00. The award was thus also speculative
and whimsical. Like the actual damages, the moral damages constituted another judicial ipse dixit,
the inevitable consequence of which was to render the award of moral damages incapable of

attaining finality. In addition, the grant of moral damages in that manner contravened the law that
permitted the recovery of moral damages as the means to assuage "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury."111 The contravention of the law was manifest considering that Stern
Builders, as an artificial person, was incapable of experiencing pain and moral
sufferings.112 Assuming that in granting the substantial amount of P 10,000,000.00 as moral
damages, the RTC might have had in mind that dela Cruz had himself suffered mental anguish and
anxiety. If that was the case, then the RTC obviously disregarded his separate and distinct
personality from that of Stern Builders.113 Moreover, his moral and emotional sufferings as the
President of Stern Builders were not the sufferings of Stern Builders. Lastly, the RTC violated the
basic principle that moral damages were not intended to enrich the plaintiff at the expense of the
defendant, but to restore the plaintiff to his status quo ante as much as possible. Taken together,
therefore, all these considerations exposed the substantial amount of P 10,000,000.00 allowed as
moral damages not only to be factually baseless and legally indefensible, but also to be
unconscionable, inequitable and unreasonable.
Like the actual and moral damages, the P 150,000.00, plus P 1,500.00 per appearance, granted as
attorneys fees were factually unwarranted and devoid of legal basis. The general rule is that a
successful litigant cannot recover attorneys fees as part of the damages to be assessed against the
losing party because of the policy that no premium should be placed on the right to litigate. 114 Prior
to the effectivity of the present Civil Code, indeed, such fees could be recovered only when there
was a stipulation to that effect. It was only under the present Civil Code that the right to collect
attorneys fees in the cases mentioned in Article 2208115 of the Civil Code came to be
recognized.116 Nonetheless, with attorneys fees being allowed in the concept of actual
damages,117 their amounts must be factually and legally justified in the body of the decision and not
stated for the first time in the decretal portion.118 Stating the amounts only in the dispositive portion

of the judgment is not enough;119 a rendition of the factual and legal justifications for them must
also be laid out in the body of the decision.120
That the attorneys fees granted to the private respondents did not satisfy the foregoing requirement
suffices for the Court to undo them.121 The grant was ineffectual for being contrary to law and
public policy, it being clear that the express findings of fact and law were intended to bring the case
within the exception and thereby justify the award of the attorneys fees. Devoid of such express
findings, the award was a conclusion without a premise, its basis being improperly left to
speculation and conjecture.122
Nonetheless, the absence of findings of fact and of any statement of the law and jurisprudence on
which the awards of actual and moral damages, as well as of attorneys fees, were based was a fatal
flaw that invalidated the decision of the RTC only as to such awards. As the Court declared in
Velarde v. Social Justice Society,123 the failure to comply with the constitutional requirement for a
clear and distinct statement of the supporting facts and law "is a grave abuse of discretion
amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in careless
disregard of the constitutional mandate are a patent nullity and must be struck down as
void."124 The other item granted by the RTC (i.e., P 503,462.74) shall stand, subject to the action of
the COA as stated herein.
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS
ASIDE the decision of the Court of Appeals under review; ANNULS the orders for the
garnishment of the funds of the University of the Philippines and for the release of the garnished
amount to Stern Builders Corporation and Servillano dela Cruz; and DELETES from the decision
of the Regional Trial Court dated November 28, 2001 for being void only the awards of actual
damages of P 5,716,729.00, moral damages of P 10,000,000.00, and attorney's fees of P150,000.00,
plus P 1,500.00 per appearance, in favor of Stern Builders Corporation and Servillano dela Cruz.

The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the amount
of P16,370,191.74 within 10 days from receipt of this decision.
Costs of suit to be paid by the private respondents.
SO ORDERED.

G.R.No.L61744June25,1984
MUNICIPALITYOFSANMIGUEL,BULACAN,petitioner,
vs.
HONORABLEOSCARC.FERNANDEZ,inhiscapacityasthePresidingJudge,BranchIV,
Baliuag,Bulacan,ThePROVINCIALSHERIFFofBulacan,MARGARITAD.VDA.DE
IMPERIO,ADORACIONIMPERIO,RODOLFOIMPERIO,CONRADOIMPERIO,
ERNESTOIMPERIO,ALFREDOIMPERIO,CARLOSIMPERIO,JR.,JUANIMPERIO

andSPOUSESMARCELOPINEDAandLUCILAPONGCO,respondents.
PascualC.Liatchkoforpetitioner.
TheSolicitorGeneralandMarceloPinedaforrespondents.

RELOVA,J.:
InCivilCaseNo.604B,entitled"MargaritaD.Vda.deImperio,etal.vs.MunicipalGovernment
ofSanMiguel,Bulacan,etal.",thethenCourtofFirstInstanceofBulacan,onApril28,1978,
renderedjudgmentholdinghereinpetitionermunicipalityliabletoprivaterespondents,asfollows:
WHEREFORE,premisesconsidered,judgmentisherebyrenderedinfavorofthe
plaintiffsandagainstthedefendantMunicipalGovernmentofSanMiguelBulacan,
representedbyMayorMarMarceloG.AureanditsMunicipalTreasurer:
1.orderingthepartialrevocationoftheDeedofDonationsignedbythedeceasedCarlos
ImperioinfavoroftheMunicipalityofSanMiguelBulacan,datedOctober27,1947
insofarasLotsNos.1,2,3,4and5,Block11ofSubdivisionPlanPsd20831are
concerned,withanaggregatetotalareaof4,646squaremeters,whichlotsareamong
thosecoveredanddescribedunderTCTNo.T1831oftheRegisterofDeedsofBulacan
inthenameoftheMunicipalGovernmentofSanMiguelBulacan,
2.orderingthedefendanttoexecutethecorrespondingDeedofReconveyanceoverthe
aforementionedfivelotsinfavoroftheplaintiffsintheproportionoftheundividedone
half()shareinthenameofplaintiffsMargaritaD.Vda.deImperio,Adoracion,
Rodolfo,Conrado,Ernesto,Alfredo,Carlos,Jr.andJuan,allsurnamedImperio,andthe
remainingundividedonehalf()shareinfavorofplaintiffsusesMarceloE.Pinedaand
LucilaPongco;
3.orderingthedefendantmunicipalitytopaytotheplaintiffsintheproportionmentioned

intheimmediatelyprecedingparagraphthesumofP64,440.00correspondingtothe
rentalsithascollectedfromtheoccupantsfortheiruseandoccupationofthepremises
from1970uptoandincluding1975,plusinterestthereonatthelegalratefromJanuary
1970untilfullypaid;
4.orderingtherestorationofownershipandpossessionoverthefivelotsinquestionin
favoroftheplaintiffsinthesameproportionaforementioned;
5.orderingthedefendanttopaytheplaintiffsthesumofP3,000.00forattomey'sfees;
andtopaythecostofsuit.
Thecounterclaimofthedefendantisherebyordereddismissedforlackofevidence
presentedtosubstantiatethesame.
SOORDERED.(pp.1112,Rollo)
Theforegoingjudgmentbecamefinalwhenhereinpetitioner'sappealwasdismissedduetoits
failuretofiletherecordonappealontime.ThedismissalwasaffirmedbythethenCourtof
AppealsinCAG.R.No.SP12118andbythisCourtinG.R.No.59938.Thereafter,hereinprivate
respondentsmovedforissuanceofawritofexecutionforthesatisfactionofthejudgment.
Respondentjudge,onJuly27,1982,issuedanorder,towit:
ConsideringthatanentryofjudgmenthadalreadybeenmadeonJune14,1982inG.R.
No.L59938and;
Consideringfurtherthatthereisnooppositiontoplaintiffs'motionforexecutiondated
July23,1983;
Letawritofexecutionbesoissued,asprayedforintheaforestatedmotion.(p.10,
Rollo)
Petitioner,onJuly30,1982,filedaMotiontoQuashthewritofexecutiononthegroundthatthe
municipality'spropertyorfundsareallpublicfundsexemptfromexecution.Thesaidmotionto

quashwas,however,deniedbytherespondentjudgeinanorderdatedAugust23,1982andthe
aliaswritofexecutionstandsinfullforceandeffect.
OnSeptember13,1982,respondentjudgeissuedanorderwhichinpart,states:
Itisclearandevidentfromtheforegoingthatdefendanthasmorethanenoughfundsto
meetitsjudgmentobligation.MunicipalTreasurerMiguelC,RouraofSanMiguel,
BulacanandProvincialTreasurerofBulacanAgustinO.Talaveraarethereforhereby
orderedtocomplywiththemoneyjudgmentrenderedbyJudgeAgustinC.Bagasao
againstsaidmunicipality.Inlikemanner,themunicipalauthoritiesofSanMiguel,
Bulacanarelikewiseorderedtodesistfromplaintiffs'legalpossessionoftheproperty
alreadyreturnedtoplaintiffsbyvirtueofthealiaswritofexecution.
Finally,defendantsareherebygivenaninextendibleperiodoften(10)daysfromreceipt
ofacopyofthisorderbytheOfficeoftheProvincialFiscalofBulacanwithinwhichto
submittheirwrittencompliance,(p.24,Rollo)
Whenthetreasurers(provincialandmunicipal)failedtocomplywiththeorderofSeptember13,
1982,respondentjudgeissuedanorderfortheirarrestandthattheywillbereleaseonlyupon
compliancethereof.
Hence,thepresentpetitionontheissuewhetherthefundsoftheMunicipalityofSanMiguel,
Bulacan,inthehandsoftheprovincialandmunicipaltreasurersofBulacanandSanMiguel,
respectively,arepublicfundswhichareexemptfromexecutionforthesatisfactionofthemoney
judgmentinCivilCaseNo.604B.
Wellsettledistherulethatpublicfundsarenotsubjecttolevyandexecution.Thereasonforthis
wasexplainedinthecaseofMunicipalityofPaoayvs.Manaois,86Phil.629"thattheyareheldin
trustforthepeople,intendedandusedfortheaccomplishmentofthepurposesforwhichmunicipal
corporationsarecreated,andthattosubjectsaidpropertiesandpublicfundstoexecutionwould

materiallyimpede,evendefeatandinsomeinstancesdestroysaidpurpose."And,inTantocovs.
MunicipalCouncilofIloilo,49Phil.52,itwasheldthat"itisthesettleddoctrineofthelawthatnot
onlythepublicpropertybutalsothetaxesandpublicrevenuesofsuchcorporationsCannotbe
seizedunderexecutionagainstthem,eitherinthetreasuryorwhenintransittoit.Judgments
renderedfortaxes,andtheproceedsofsuchjudgmentsinthehandsofofficersofthelaw,arenot
subjecttoexecutionunlesssodeclaredbystatute."Thus,itisclearthatallthefundsofpetitioner
municipalityinthepossessionoftheMunicipalTreasurerofSanMiguel,aswellasthoseinthe
possessionoftheProvincialTreasurerofBulacan,arealsopublicfundsandassuchtheyare
exemptfromexecution.
Besides,PresidentialDecreeNo.477,knownas"TheDecreeonLocalFiscalAdministration",
Section2(a),provides:
SEC.2.FundamentalPrinciples.Localgovernmentfinancialaffairs,transactions,and
operationsshallbegovernedbythefundamentalprinciplessetforthhereunder:
(a)Nomoneyshallbepaidoutofthetreasuryexceptinpursuanceofalawful
appropriationorotherspecificstatutoryauthority.
xxxxxxxxx
Otherwisestated,theremustbeacorrespondingappropriationintheformofanordinanceduly
passedbytheSangguniangBayanbeforeanymoneyofthemunicipalitymaybepaidout.Inthe
caseatbar,ithasnotbeenshownthattheSangguniangBayanhaspassedanordinancetothis
effect.
Furthermore,Section15,Rule39oftheNewRulesofCourt,outlinestheprocedureforthe
enforcementofmoneyjudgment:
(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt
from execution, or only on such part of the property as is sufficient to satisfy the judgment and
accruing cost, if he has more than sufficient property for the purpose;

(b) By selling the property levied upon;


(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and
accruing costs; and
(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment
or order of the court.
Theforegoinghasnotbeenfollowedinthecaseatbar.
ACCORDINGLY,thepetitionisgrantedandtheorderofrespondentjudge,datedJuly27,1982,
grantingissuanceofawritofexecution;thealiaswritofexecution,datedJuly27,1982;andthe
orderofrespondentjudge,datedSeptember13,1982,directingtheProvincialTreasurerofBulacan
andtheMunicipalTreasurerofSanMiguel,Bulacantocomplywiththemoneyjudgments,are
SETASIDE;andrespondentsareherebyenjoinedfromimplementingthewritofexecution.SO
ORDERED.
[G.R.No.107271.September10,2003]
CITYOFCALOOCANandNORMAM.ABRACIA,petitioners,vs.HON.MAUROT.
ALLARDE, Presiding Judge of Branch 123, RTC of Caloocan City, ALBERTO A.
CASTILLO, Deputy Sheriff of Branch 123, RTC of Caloocan City, and DELFINA
HERNANDEZSANTIAGOandPHILIPPINENATIONALBANK(PNB),respondents.
DECISION
CORONA,J.:

Assailedinthispetitionforcertiorariisthedecision[1]datedAugust31,1992,oftheCourtof
AppealsinCAG.R.SPNo.27423,orderingtheRegionalTrialCourtofCaloocanCity,Branch
123,toimplementanaliaswritofexecutiondatedJanuary16,1992.Thedispositiveportionread
asfollows:
WHEREFOREthepetitionisherebygrantedorderingtheRegionalTrialCourtofKaloocanCity,
Branch123,toimmediatelyeffectthealiaswritofexecutiondatedJanuary16,1992without
furtherdelay.
Counselfortherespondentsarewarnedthatarepetitionoftheircontemptuousacttodelaythe
executionofafinalandexecutoryjudgmentwillbedealtwithmoreseverely.
SOORDERED.[2]
Itisimportanttostateattheoutsetthatthedisputebetweenpetitionerandprivaterespondenthas
beenlitigatedthricebeforethisCourt:first,inG.R.No.L3928889,entitledHeirsofAbelardo
Palomique,etal.vs.MarcialSamson,etal.,decidedonJanuary31,1985;second,inG.R.No.
98366,entitledCityGovernmentofCaloocanvs.CourtofAppeals,etal.,resolvedonMay16,
1991,andthird,inG.R.No.102625,entitledSantiagovs.Sto.Tomas,etal.,decidedonAugust1,
1995.ThisisnottomentionthenumerousconcurrenteffortsbytheCityGovernmentofCaloocan
toseekrelieffromotherjudicialandquasijudicialbodies.Thepresentpetitionforcertiorariis
thefourthtimewearecalledupontoresolvethedispute.
Thefactualandproceduralantecedentsfollow.
Sometimein1972,MarcialSamson,CityMayorofCaloocanCity,throughOrdinanceNo.1749,
abolishedthepositionofAssistantCityAdministratorand17otherpositionsfromtheplantillaof
thelocalgovernmentofCaloocan.ThenAssistantCityAdministratorDelfinaHernandezSantiago

andthe17affectedemployeesoftheCityGovernmentassailedthelegalityoftheabolitionbefore
thethenCourtofFirstInstance(CFI)ofCaloocanCity,Branch33.
In1973,theCFIdeclaredtheabolitionillegalandorderedthereinstatementofallthedismissed
employeesandthepaymentoftheirbacksalariesandotheremoluments.TheCityGovernmentof
CaloocanappealedtotheCourtofAppeals.RespondentSantiagoandhercopartiesmovedforthe
dismissaloftheappealforbeingdilatoryandfrivolousbuttheappellatecourtdeniedtheirmotion.
Thus, they elevated the case on certiorari before this Court, docketed as G.R. No. L39288
89,HeirsofAbelardoPalomique,etal.vs.MarcialSamson,etal.InourResolutiondatedJanuary
31,1985,weheldthattheappellatecourterredinnotdismissingtheappeal,andthattheappealof
theCityGovernmentofCaloocanwasfrivolousanddilatory.Induetime,theresolutionlapsedinto
finalityandentryofjudgmentwasmadeonFebruary27,1985.
In1986,theCityGovernmentofCaloocanpaidrespondentSantiagoP75,083.37inpartialpayment
ofherbackwages,therebyleavingabalanceofP530,761.91.Hercopartieswerepaidinfull. [3]In
1987,theCityofCaloocanappropriatedfundsforherunpaidbacksalaries.Thiswasincludedin
SupplementalBudgetNo.3forthefiscalyear1987.Surprisingly,however,theCitylaterrefusedto
releasethemoneytorespondentSantiago.
RespondentSantiagoexertedeffortfortheexecutionoftheremainderofthemoneyjudgmentbut
shemetstiffoppositionfromtheCityGovernmentofCaloocan.OnFebruary12,1991,Judge
MauroT.Allarde,RTCofCaloocanCity,Branch123,issuedawritofexecutionforthepayment
oftheremainderofrespondentSantiagosbacksalariesandotheremoluments.[4]
Forthesecondtime,theCityGovernmentofCaloocanwentuptotheCourtofAppealsandfileda
petitionforcertiorari,prohibitionandinjunctiontostopthetrialcourtfromenforcingthewritof

execution. The CA dismissed the petition and affirmed the order of issuance of the writ of
execution.[5]Oneoftheissuesraisedandresolvedthereinwastheextenttowhichbacksalariesand
emolumentswereduetorespondentSantiago.Theappellatecourtheldthatshewasentitledtoher
salariesfromOctober,1983toDecember,1986.
Andforthesecondtime,theCityGovernmentofCaloocanappealedtothisCourtinG.R.No.
98366,City Government of Caloocan vs. Court of Appeals, et al. The petition was dismissed,
throughourResolutionofMay16,1991,forhavingbeenfiledlateandforfailuretoshowany
reversibleerroronthepartoftheCourtofAppeals.Theresolutionsubsequentlyattainedfinality
andthecorrespondingentryofjudgmentwasmadeonJuly29,1991.
OnmotionofprivaterespondentSantiago,JudgeMauroT.Allardeorderedtheissuanceofanalias
writofexecutiononMarch3,1992.TheCityGovernmentofCaloocanmovedtoreconsiderthe
order,insistinginthemainthatrespondentSantiagowasnotentitledtobackwagesfrom1983to
1986.Thecourtaquodeniedthemotionandforthwithissuedthealiaswritofexecution.Unfazed,
theCityGovernmentofCaloocanfiledamotiontoquashthewrit,maintainingthatthemoney
judgmentsoughttobeenforcedshouldnothaveincludedsalariesandallowancesfortheyears
19831986.Thetrialcourtlikewisedeniedthemotion.
OnJuly27,1992,SheriffAlbertoA.Castilloleviedandsoldatpublicauctiononeofthemotor
vehiclesoftheCityGovernmentofCaloocan,withplateno.SBH165,forP100,000.Theproceeds
ofthesalewereturnedovertorespondentSantiagoinpartialsatisfactionofherclaim,thereby
leavingabalanceofP439,377.14,inclusiveofinterest.Petitionersfiledamotionquestioningthe
validityoftheauctionsaleofthevehiclewithplateno.SBH165,andasupplementalmotion
maintainingthatthepropertiesofthemunicipalitywereexemptfromexecution.InhisOrderdated

October1,1992,JudgeAllardedeniedbothmotionsanddirectedthesherifftolevyandscheduleat
publicauctionthreemorevehiclesoftheCityofCaloocan[6]
ONE(1)UnitMotorVehicle(HunterStationWagon);MotorNo.C240199629;ChassisNo.
MBB910369C;
ONE(1)UnitMotorVehicle(HunterSeries11Diesel);EngineNo.4FB1174328,ChassisNo.
MBB910345C;PlateNo.SDL653;
ONE(1)UnitMotorVehicle(HunterSeries11Diesel);EngineNo.4FB165196;ChassisNo.
MBB910349C.
Allthevehicles,includingthatpreviouslysoldintheauctionsale,wereownedbytheCityand
assignedfortheuseofhereinpetitionerNormaAbracia,DivisionSuperintendentofCaloocanCity,
andotherofficialsoftheDivisionofCitySchools.
Meanwhile, the City Government of Caloocan sought clarification from the Civil Service
Commission(CSC)onwhetherrespondentSantiagowasconsideredtohaverenderedservicesfrom
19831986astobeentitledtobackwagesforthatperiod.InitsResolutionNo.911124,theCSC
ruledinthenegative.
OnNovember22,1991,privaterespondentSantiagochallengedtheCSCresolutionbeforethis
CourtinG.R.No.102625,Santiagovs.Sto.Tomas,etal.OnJuly8,1993,weinitiallydismissed
the petition for lack of merit; however, we reconsidered the dismissal of the petition in our
ResolutiondatedAugust1,1995,thistimerulinginfavorofrespondentSantiago:
TheissueofpetitionerSantiagosrighttobacksalariesfortheperiodfromOctober1983to
December1986havingbeenresolvedinG.R.No.98366on16May1991,CSCResolutionNo.91
1124promulgatedlateron24September1991inparticular,itsrulingontheextentofbackwages

duepetitionerSantiagowasinfactmootandacademicatthetimeofitspromulgation.CSC
ResolutionNo.911124couldnot,ofcourse,setasidewhathadbeenjudiciallydecidedwith
finalityxxxxthecourtconsidersthatresortbytheCityGovernmentofCaloocantorespondent
CSCwasbutanotherattempttodeprivepetitionerSantiagoofherclaimtobacksalariesxxxanda
continuationoftheCitysabuseandmisuseoftherulesofjudicialprocedure.TheCitysactshave
resultedinwastingtheprecioustimeandresourcesofthecourtsandrespondentCSC.
(Underscoringsupplied).
OnOctober5,1992,theCityCouncilofCaloocanpassedOrdinanceNo.0134,Seriesof1992,
whichincludedtheamountofP439,377.14claimedbyrespondentSantiagoasbacksalaries,plus
interest.[7]Pursuanttothesubjectordinance,JudgeAllardeissuedanorderdatedNovember10,
1992,decreeingthat:
WHEREFORE,theCityTreasurer(ofCaloocan),NorbertoAzarconisherebyorderedtodeliverto
thisCourtwithinfive(5)daysfromreceipthereof,(a)managerscheckcoveringtheamount
ofP439,378.00representingthebacksalariesofpetitionerDelfinaH.Santiagoinaccordancewith
OrdinanceNo.0134S.1992andpursuanttothefinalandexecutorydecisioninthesecases.
ThenCaloocanMayorMacarioA.Asistio,Jr.,however,refusedtosignthecheckintendedas
paymentforrespondentSantiagosclaims.This,despitethefactthathewasoneofthesignatoriesof
theordinanceauthorizingsuchpayment.OnApril29,1993,JudgeAllardeissuedanotherorder
directingtheActingCityMayorofCaloocan,ReynaldoO.Malonzo,tosignthecheckwhichhad
been pending before the Office of the Mayor since December 11, 1992. Acting City Mayor
Malonzoinformedthetrialcourtthathecouldnotcomplywiththeordersincethesubjectcheck
wasnotformallyturnedovertohimbytheCityMayorwhowentonofficialleaveofabsenceon
April15,1993,andthathedoubtedwhetherhehadauthoritytosignthesame.[8]

Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A. Castillo to
immediatelygarnishthefundsoftheCityGovernmentofCaloocancorrespondingtotheclaimof
respondentSantiago.[9]Onthesameday,SheriffAlbertoA.CastilloservedacopyoftheNoticeof
GarnishmentonthePhilippineNationalBank(PNB),SangandaanBranch,CaloocanCity.When
PNBimmediatelynotifiedtheCityofCaloocanoftheNoticeofGarnishment,theCityTreasurer
sentaletteradviceinformingPNBthattheorderofgarnishmentwasillegal,withawarningthatit
wouldholdPNBliableforanydamageswhichmaybecausedbythewithholdingofthefundsof
the city.PNB opted to comply with the order of Judge Allarde and released to the Sheriff a
managers check amounting toP439,378. After 21 long years, the claim of private respondent
Santiagowasfinallysettledinfull.
On June 4, 1993, however, while the instant petition was pending, the City Government of
CaloocanfiledyetanothermotionwiththisCourt,aMotiontoDeclareinContemptofCourt;to
Set Aside the Garnishment and Administrative Complaint against Judge Allarde, respondent
SantiagoandPNB.Subsequently,theCityGovernmentofCaloocanfiledaSupplementalPetition
formallyimpleadingPNBasapartyrespondentinthiscase.
Theinstantpetitionforcertiorariisdirectedthistimeagainstthevalidityofthegarnishmentofthe
fundsoftheCityofCaloocan,aswellasthevalidityofthelevyandsaleofthemotorvehicles
belongingtotheCityofCaloocan.Morespecifically,petitionersinsistthatJudgeAllardegravely
abusedhisdiscretionin:
(a)orderingthegarnishmentofthefundsoftheCityofCaloocandepositedwiththePNB,sinceit
issettledthatpublicfundsarebeyondthereachofgarnishmentandevenwiththe
appropriationpassedbytheCityCouncil,theauthorityoftheMayorisstillneededfortherelease
oftheappropriation;

(b)orderingthelevyandsaleatpublicauctionofthree(3)motorvehiclesownedbytheCityof
Caloocan,whichvehiclesarenecessaryforpublicuseandcannotbeattachednorsoldinan
executionsaletosatisfyamoneyjudgmentagainsttheCityofCaloocan;
(c)peremptorilydenyingpetitionerCityofCaloocansurgentmotionstovacateandsetasidethe
auctionsaleofthemotorvehiclewithPLATENO.SBH165,notwithstandingthattheauctionsale
bytheSheriffwastaintedwithseriousirregularities,moreparticularly:
i.noncompliancewiththemandatorypostingofthenoticeofsale;
ii.nonobservanceoftheprocedurethatasalethroughpublicauctionhastobemadeand
consummatedatthetimeoftheauction,atthedesignatedplaceanduponactualpaymentofthe
purchasepricebythewinningbidder;
iii.violationofSec.21,Rule39oftheRulesofCourttotheeffectthatsaleofpersonalproperty
capableofmanualdeliverymustbesoldwithintheviewofthoseattendingthesale;and,
iv.theSheriffsCertificateofSalecontainedfalsenarrationoffactsrespectingtheactualtimeofthe
publicauction;
(d)theenforcementofthelevymadebytheSheriffcoveringthethree(3)motorvehiclesbasedon
analiaswritthathaslongexpired.
Thepetitionhasabsolutelynomerit.Thetrialcourtcommittednograveabuseofdiscretionin
implementingthealiaswritofexecutiontosettletheclaimofrespondentSantiago,thesatisfaction
ofwhichpetitionerhadbeenmaliciouslyevadingfor21years.
PetitionerarguesthatthegarnishmentofitsfundsinPNBwasinvalidinasmuchasthesewere
publicfundsandthusexemptfromexecution.Garnishmentisconsideredaspecieofattachmentby
meansofwhichtheplaintiffseekstosubjecttohisclaimpropertyofthedefendantinthehandsofa
thirdperson,ormoneyowedbysuchthirdpersonorgarnisheetothedefendant.[10]

TheruleisandhasalwaysbeenthatallgovernmentfundsdepositedinthePNBoranyother
official depositary of the Philippine Government by any of its agencies or instrumentalities,
whether by general or special deposit, remain government funds and may not be subject to
garnishmentorlevy,intheabsenceofacorrespondingappropriationasrequiredbylaw:[11]
Eventhoughtheruleastoimmunityofastatefromsuitisrelaxed,thepowerofthecourtsends
whenthejudgmentisrendered.Althoughtheliabilityofthestatehasbeenjudiciallyascertained,
thestateisatlibertytodetermineforitselfwhethertopaythejudgmentornot,andexecution
cannotissueonajudgmentagainstthestate.Suchstatutesdonotauthorizeaseizureofstate
propertytosatisfyjudgmentsrecovered,andonlyconveyanimplicationthatthelegislaturewill
recognizesuchjudgmentasfinalandmakeprovisionforthesatisfactionthereof.[12]
Theruleisbasedonobviousconsiderationsofpublicpolicy.Thefunctionsandpublicservices
renderedbytheStatecannotbeallowedtobeparalyzedordisruptedbythediversionofpublic
fundsfromtheirlegitimateandspecificobjects,asappropriatedbylaw.[13]
However,theruleisnotabsoluteandadmitsofawelldefinedexception,thatis,whenthereisa
correspondingappropriationasrequiredbylaw.Otherwisestated,theruleontheimmunityof
publicfundsfromseizureorgarnishmentdoesnotapplywherethefundssoughttobeleviedunder
executionarealreadyallocatedbylawspecificallyforthesatisfactionofthemoneyjudgment
againstthegovernment.Insuchacase,themonetaryjudgmentmaybelegallyenforcedbyjudicial
processes.
Thus,inthesimilarcaseofPasayCityGovernment,etal.vs.CFIofManila,Br.X,etal.,[14]where
petitionerschallengedthetrialcourtsordergarnishingitsfundsinpaymentofthecontractpricefor
theconstructionoftheCityHall,weruledthat,whilegovernmentfundsdepositedinthePNBare

exemptfromexecutionorgarnishment,thisruledoesnotapplyifanordinancehasalreadybeen
enactedforthepaymentoftheCitysobligations
Upontheissuanceofthewritofexecution,thepetitionerappellantsmovedforitsquashalalleging
amongotherthingstheexemptionofthegovernmentfromexecution.Thismoveonthepartof
petitionerappellantsisatfirstglancelaudableforallgovernmentfundsdepositedwiththe
PhilippineNationalBankbyanyagencyorinstrumentalityofthegovernment,whetherbywayof
generalorspecialdeposit,remaingovernmentfundsandmaynotbesubjecttogarnishmentorlevy.
Butinasmuchasanordinancehasalreadybeenenactedexpresslyappropriatingtheamount
ofP613,096.00aspaymenttotherespondentappellee,thenthehereincaseiscoveredbythe
exceptiontothegeneralrulexxxx
Intheinstantcase,theCityCouncilofCaloocanalreadyapprovedandpassedOrdinanceNo.0134,
Seriesof1992,allocatingtheamountofP439,377.14forrespondentSantiagosbacksalariesplus
interest.Thusthiscasefellsquarelywithintheexception.Forallintentsandpurposes,Ordinance
No. 0134, Series of 1992, was the corresponding appropriation as required by law. The sum
indicated in the ordinance for Santiago were deemed automatically segregated from the other
budgetary allocations of the City of Caloocan and earmarked solely for the Citys monetary
obligationtoher.Thejudgmentofthetrialcourtcouldthenbevalidlyenforcedagainstsuchfunds.
Indeed,thisconclusionisfurtherbuttressedbytheCertificationissuedonDecember23,1992by
NorbertoC.Azarcon,CityTreasurerofCaloocan:
CERTIFICATION
ThisistocertifythataccordingtotherecordsavailableinthisOfficetheclaimforbackwagesof
theHON.JUDGEDELFINAH.SANTIAGOhasbeenproperlyobligatedandcanbecollectedin
accordancewithexistingaccountingandauditingrulesandregulations.

Thisistocertifyfurtherthatincasetheclaimisnotcollectedwithinthepresentfiscalyear,such
claimshallbeenteredinthebooksofAccountsPayableandcanstillbecollectedinthenextfiscal
yearxxxx(Underscoringsupplied)
PetitionersrelianceonMunicipalityofMakativs.CourtofAppeals,etal.,[15]andCommissionerof
PublicHighwaysvs.SanDiego,[16]doesnothelptheircause.[17]Bothcasesimplicitlyaffirmedthat
public funds may be garnishedif there is a statute which appropriated the amount so
garnished.Thus,inMunicipalityofMakati,citingSanDiego,weunequivocallyheldthat:
Inthisjurisdiction,wellsettledistherulethatpublicfundsarenotsubjecttolevyand
execution,unlessotherwiseprovidedbystatutexxxx
Similarly,wecannotagreewithpetitionersargumentthattheappropriationordinanceoftheCity
CouncildidnotauthorizePNBtoreleasethefundsbecauseonlytheCityMayorcouldauthorize
thereleasethereof.Avalidappropriationofpublicfundsliftsitsexemptionfromexecution.Here,
theappropriationpassedbytheCityCouncilofCaloocanprovidingforthepaymentofbackwages
torespondentwasdulyapprovedandsignedbyboththecouncilandthenMayorMacarioAsistio,
Jr.Themayorssignatureapprovingthebudgetordinancewashisassenttotheappropriationof
fundsforrespondentSantiagosbackwages.Ifhedidnotagreewithsuchallocation,hecouldhave
vetoedtheitempursuanttoSection55oftheLocalGovernmentCode.[18]Therewasnosuchveto.
Inviewoftheforegoingdiscourse,wedismisspetitionersunfoundedassertion,probablymade
moreoutofsheerignoranceofprevailingjurisprudencethanadeliberateattempttomisleadus,that
therulethatpublicfunds(are)beyondthereachoflevyandgarnishmentisnotqualifiedbyany
condition.[19]
Wenowcometotheissueofthelegalityofthelevyonthethreemotorvehiclesbelongingtothe

CityofCaloocanwhichpetitionersclaimedtobeexemptfromexecution,andwhichlevywas
basedonanaliaswritthathadpurportedlyexpired.SufficeittosaythatJudgeAllarde,inhisOrder
dated November 10, 1992,[20]already lifted the levy on the three vehicles, thereby formally
dischargingthemfromthejurisdictionofthecourtandturningthemovertotheCityGovernment
ofCaloocan:
xxxxthelevyofthethree(3)vehiclesmadebySheriffAlbertoCastillopursuanttotheOrdersof
thisCourtdatedOctober1and8,1992isherebyliftedandthesaidSheriffisherebyorderedto
returnthesametotheCityGovernmentinviewofthesatisfactionofthedecisioninthesecasesxx
xx
Itisthusunnecessaryforustodiscussamootissue.
WeturntothethirdissueraisedbypetitionersthattheauctionsalebySheriffAlbertoA.Castilloof
themotorvehiclewithplateno.SBH165wastaintedwithseriousirregularities.Weneednot
emphasizethatthesheriffenjoysthepresumptionofregularityintheperformanceofthefunctions
ofhisoffice.Thispresumptionprevailsintheabsenceofsubstantialevidencetothecontraryand
cannotbeovercomebybareandselfservingallegations.Thepetitionersfailedtoconvinceusthat
the auction sale conducted by the sheriff indeed suffered from fatal flaws. No evidence was
adducedtoprovethatthesheriffhadbeenremissintheperformanceofhisdutiesduringthepublic
auctionsale.Indeeditwouldbeinjudiciousforustoassume,aspetitionerswantustodo,thatthe
sherifffailedtofollowtheestablishedproceduresgoverningpublicauctions.
Onthecontrary,areviewoftherecordsshowsthatthesheriffcompliedwiththerulesonpublic
auction.ThesaleoftheCitysvehiclewasmadepubliclyinfrontoftheCaloocanCityHallonthe
datefixedinthenoticeJuly27,1992.Infact,petitionersintheirMotiontoDeclareinContemptof

Court;toSetAsidetheGarnishmentandAdministrativeComplaintadmittedasmuch:
OnJuly27,1992,byvirtueofanaliaswritofexecutionissuedbytherespondentcourt,avehicle
ownedbythepetitionerxxxwasleviedandsoldatpublicauctionfortheamountofP100,000.00
andwhichamountwasimmediatelydeliveredtotheprivaterespondentxxxx[21]
Hence,petitionerscannotnowbeheardtoimpugnthevalidityoftheauctionsale.
Petitioners,indesperation,likewisemakemuchoftheproceedingsbeforethetrialcourtonOctober
8,1992,whereinpetitionerNormaAbracia,SuperintendentoftheDivisionofCitySchoolsof
Caloocan,wascommandedtoappearandshowcausewhysheshouldnotbecitedincontemptfor
delaying the execution of judgment. This was in connection with her failure (or refusal) to
surrenderthethreemotorvehiclesassignedtotheDivisionofCitySchoolstothecustodyofthe
sheriff.PetitionerAbracia,assistedbyMr.RicardoNagpacanoftheDivisionofCitySchools,
appearedduringthehearingbutrequestedatendayperiodwithinwhichtoreferthematterof
contempttoacounselofherchoice.TherequestwasdeniedbyJudgeAllardeinhisassailedorder
datedOctober8,1992.ThuspetitionerAbraciaclaimed,interalia,that:(a)shewasdenieddue
process;(b)thesilenceoftheorderofJudgeAllardeonherrequestfortimeviolatedanorderlyand
faithful recording of the proceedings, and (c) she was coerced into agreeing to surrender the
vehicles.
Wedonotthinkso.Whatviolatesdueprocessistheabsolutelackofopportunitytobeheard.That
opportunity, the Court is convinced, was sufficiently accorded to petitioner Abracia. She was
notifiedofthecontemptchargeagainsther;shewaseffectivelyassistedbycounselwhenshe
appearedduringthehearingonOctober8,1992;andshewasaffordedampleopportunitytoanswer
andrefutethechargeagainsther.Thecircumstancethatsheoptednottoavailofherchancetobe

heardonthatoccasionbyaskingforanextensionoftimewithinwhichtohireacounselofher
choice,arequestdeniedbythetrialcourt,didnottransgressnordepriveherofherrighttodue
process.
Significantly,duringthehearingonOctober8,1992,Mr.Nagpacanmanifestedinopencourtthat,
afterconferringwithpetitionerAbracia,thelatterwaswillingtosurrenderthesevehiclesintothe
custodyofthesheriffontheconditionthatthestandingmotion(forcontempt)bewithdrawn.[22]Her
decisionwasmadefreelyandvoluntarily,andafterconferringwithhercounsel.Moreover,itwas
petitionerAbraciaherselfwhoimposedtheconditionthatrespondentSantiagoshouldwithdrawher
motionforcontemptinexchangeforherpromisetosurrenderthesubjectvehicles.Thus,petitioner
Abraciasclaimthatshewascoercedintosurrenderingthevehicleshadnobasis.
Evenassumingexgratiaargumentithatthereindeedexistedcertainlegalinfirmitiesinconnection
withtheassailedordersofJudgeAllarde,still,consideringthetotalityofcircumstancesofthis
case,thenullificationofthecontestedorderswouldbewayoutofline.For21longyears,starting
1972whenthiscontroversystartedupto1993whenherclaimwasfullypaidoutofthegarnished
fundsoftheCityofCaloocan,respondentSantiagowascruellyandunjustlydeprivedofwhatwas
dueher.Itwouldbe,attheveryleast,mercilessandunchristiantomakeprivaterespondentrefund
theCityofCaloocantheamountalreadypaidtoher,onlytoforcehertogothroughthesame
nightmarealloveragain.
Atanyrate,ofparamountimportancetousisthatjusticehasbeenserved.Norightofthepublic
wasviolatedandpublicinterestwaspreserved.
Finally,wecannotsimplypassoverinsilencethedeplorableactoftheformerMayorofCaloocan
CityinrefusingtosignthecheckinpaymentoftheCitysobligationtoprivaterespondent.Itwas

anopendefianceofjudicialprocesses,smackingofpoliticalarrogance,andadirectviolationofthe
very ordinance he himself approved. Our Resolution in G.R. No. 98366,City Government of
Caloocanvs.CourtofAppeals,etal.,datedMay16,1991,dismissingthepetitionoftheCityof
Caloocanassailingtheissuanceofawritofexecutionbythetrialcourt,alreadyresolvedwith
finalityallimpedimentstotheexecutionofjudgmentinthiscase.Yet,theCityGovernmentof
Caloocan,inablatantdisplayofmaliceandbadfaith,refusedtocomplywiththedecision.Now,it
hasthetemeritytocometothisCourtoncemoreandcontinueinflictinginjusticeonahapless
citizen,asifalltheharmandprejudiceithasalreadyheapeduponrespondentSantiagoarestillnot
enough.
This Court will not condone the repudiation of just obligations contracted by municipal
corporations.Onthecontrary,wewillextendouraidandeveryjudicialfacilitytoanycitizeninthe
enforcementofjustandvalidclaimsagainstabusivelocalgovernmentunits.
WHEREFORE,thepetitionisherebyDISMISSEDforutterlackofmerit.Theassailedordersof
the trial court dated October 1, 1992, October 8, 1992 and May 7, 1993, respectively, are
AFFIRMED.
Petitionersandtheircounselsareherebywarnedagainstfilinganymorepleadingsinconnection
withtheissuesalreadyresolvedwithfinalityhereinandinrelatedcases.
Costsagainstpetitioners.
SOORDERED.

G.R.Nos.8989899October1,1990
MUNICIPALITYOFMAKATI,petitioner,
vs.
THEHONORABLECOURTOFAPPEALS,HON.SALVADORP.DEGUZMAN,JR.,as
JudgeRTCofMakati,BranchCXLIIADMIRALFINANCECREDITORSCONSORTIUM,
INC.,andSHERIFFSILVINOR.PASTRANA,respondents.
Defante&Elegadoforpetitioner.
RobertoB.LugueforprivaterespondentAdmiralFinanceCreditors'Consortium,Inc.
RESOLUTION

CORTS,J.:
Thepresentpetitionforreviewisanoffshootofexpropriationproceedingsinitiatedbypetitioner
MunicipalityofMakatiagainstprivaterespondentAdmiralFinanceCreditorsConsortium,Inc.,
HomeBuildingSystem&RealtyCorporationandoneArceliP.Jo,involvingaparceloflandand
improvementsthereonlocatedatMayapisSt.,SanAntonioVillage,Makatiandregisteredinthe
nameofArceliP.JounderTCTNo.S5499.
ItappearsthattheactionforeminentdomainwasfiledonMay20,1986,docketedasCivilCase
No.13699.Attachedtopetitioner'scomplaintwasacertificationthatabankaccount(AccountNo.
S/A2655371543)hadbeenopenedwiththePNBBuendiaBranchunderpetitioner'sname
containingthesumofP417,510.00,madepursuanttotheprovisionsofPres.DecreeNo.42.After
duehearingwherethepartiespresentedtheirrespectiveappraisalreportsregardingthevalueofthe
property,respondentRTCjudgerenderedadecisiononJune4,1987,fixingtheappraisedvalueof
thepropertyatP5,291,666.00,andorderingpetitionertopaythisamountminustheadvanced
paymentofP338,160.00whichwasearlierreleasedtoprivaterespondent.

Afterthisdecisionbecamefinalandexecutory,privaterespondentmovedfortheissuanceofawrit
ofexecution.ThismotionwasgrantedbyrespondentRTCjudge.Afterissuanceofthewritof
execution,aNoticeofGarnishmentdatedJanuary14,1988wasservedbyrespondentsheriff
SilvinoR.PastranauponthemanagerofthePNBBuendiaBranch.However,respondentsheriff
wasinformedthata"holdcode"wasplacedontheaccountofpetitioner.Asaresultofthis,private
respondentfiledamotiondatedJanuary27,1988prayingthatanorderbeissueddirectingthebank
todelivertorespondentsherifftheamountequivalenttotheunpaidbalancedueundertheRTC
decisiondatedJune4,1987.
Petitionerfiledamotiontoliftthegarnishment,onthegroundthatthemannerofpaymentofthe
expropriationamountshouldbedoneininstallmentswhichtherespondentRTCjudgefailedto
stateinhisdecision.Privaterespondentfileditsoppositiontothemotion.
Pendingresolutionoftheabovemotions,petitionerfiledonJuly20,1988a"Manifestation"
informingthecourtthatprivaterespondentwasnolongerthetrueandlawfulownerofthesubject
propertybecauseanewtitleoverthepropertyhadbeenregisteredinthenameofPhilippine
SavingsBank,Inc.(PSB)RespondentRTCjudgeissuedanorderrequiringPSBtomakeavailable
thedocumentspertainingtoitstransactionsoverthesubjectproperty,andthePNBBuendiaBranch
torevealtheamountinpetitioner'saccountwhichwasgarnishedbyrespondentsheriff.In
compliancewiththisorder,PSBfiledamanifestationinformingthecourtthatithadconsolidated
itsownershipoverthepropertyasmortgagee/purchaseratanextrajudicialforeclosuresaleheldon
April20,1987.Afterseveralconferences,PSBandprivaterespondententeredintoacompromise
agreementwherebytheyagreedtodividebetweenthemselvesthecompensationduefromthe
expropriationproceedings.
RespondenttrialjudgesubsequentlyissuedanorderdatedSeptember8,1988which:(1)approved
thecompromiseagreement;(2)orderedPNBBuendiaBranchtoimmediatelyreleasetoPSBthe

sumofP4,953,506.45whichcorrespondstothebalanceoftheappraisedvalueofthesubject
propertyundertheRTCdecisiondatedJune4,1987,fromthegarnishedaccountofpetitioner;and,
(3)orderedPSBandprivaterespondenttoexecutethenecessarydeedofconveyanceoverthe
subjectpropertyinfavorofpetitioner.Petitioner'smotiontoliftthegarnishmentwasdenied.
Petitionerfiledamotionforreconsideration,whichwasdulyopposedbyprivaterespondent.On
theotherhand,forfailureofthemanagerofthePNBBuendiaBranchtocomplywiththeorder
datedSeptember8,1988,privaterespondentfiledtwosucceedingmotionstorequirethebank
managertoshowcausewhyheshouldnotbeheldincontemptofcourt.Duringthehearings
conductedfortheabovemotions,thegeneralmanagerofthePNBBuendiaBranch,aMr.Antonio
Bautista,informedthecourtthathewasstillwaitingforproperauthorizationfromthePNBhead
officeenablinghimtomakeadisbursementfortheamountsoordered.Foritspart,petitioner
contendedthatitsfundsatthePNBBuendiaBranchcouldneitherbegarnishednorleviedupon
execution,fortodosowouldresultinthedisbursementofpublicfundswithouttheproper
appropriationrequiredunderthelaw,citingthecaseofRepublicofthePhilippinesv.Palacio[G.R.
No.L20322,May29,1968,23SCRA899].
RespondenttrialjudgeissuedanorderdatedDecember21,1988denyingpetitioner'smotionfor
reconsiderationonthegroundthatthedoctrineenunciatedinRepublicv.Palaciodidnotapplyto
thecasebecausepetitioner'sPNBAccountNo.S/A2655371543wasanaccountspecifically
openedfortheexpropriationproceedingsofthesubjectpropertypursuanttoPres.DecreeNo.42.
RespondentRTCjudgelikewisedeclaredMr.AntonioBautistaguiltyofcontemptofcourtforhis
inexcusablerefusaltoobeytheorderdatedSeptember8,1988,andthusorderedhisarrestand
detentionuntilhiscompliancewiththesaidorder.
PetitionerandthebankmanagerofPNBBuendiaBranchthenfiledseparatepetitions
forcertiorariwiththeCourtofAppeals,whichwereeventuallyconsolidated.Inadecision

promulgatedonJune28,1989,theCourtofAppealsdismissedbothpetitionsforlackofmerit,
sustainedthejurisdictionofrespondentRTCjudgeoverthefundscontainedinpetitioner'sPNB
AccountNo.2655371543,andaffirmedhisauthoritytolevyonsuchfunds.
ItsmotionforreconsiderationhavingbeendeniedbytheCourtofAppeals,petitionernowfilesthe
presentpetitionforreviewwithprayerforpreliminaryinjunction.
OnNovember20,1989,theCourtresolvedtoissueatemporaryrestrainingorderenjoining
respondentRTCjudge,respondentsheriff,andtheirrepresentatives,fromenforcingand/orcarrying
outtheRTCorderdatedDecember21,1988andthewritofgarnishmentissuedpursuantthereto.
Privaterespondentthenfileditscommenttothepetition,whilepetitionerfileditsreply.
PetitionernotonlyreiteratestheargumentsadducedinitspetitionbeforetheCourtofAppeals,but
alsoallegesforthefirsttimethatithasactuallytwoaccountswiththePNBBuendiaBranch,towit:
xxxxxxxxx
(1)AccountNo.S/A2655371543exclusivelyfortheexpropriationofthesubject
property,withanoutstandingbalanceofP99,743.94.
(2)AccountNo.S/A2635308507forstatutoryobligationsandotherpurposesofthe
municipalgovernment,withabalanceofP170,098,421.72,asofJuly12,1989.
xxxxxxxxx
[Petition,pp.67;Rollo,pp.1112.]
BecausethepetitionerhasbelatedlyallegedonlyinthisCourttheexistenceoftwobankaccounts,
itmayfairlybeaskedwhetherthesecondaccountwasopenedonlyforthepurposeofundermining
thelegalbasisoftheassailedordersofrespondentRTCjudgeandthedecisionoftheCourtof
Appeals,andstrengtheningitsrelianceonthedoctrinethatpublicfundsareexemptedfrom
garnishmentorexecutionasenunciatedinRepublicv.Palacio[supra.]Atanyrate,theCourtwill
givepetitionerthebenefitofthedoubt,andproceedtoresolvetheprincipalissuespresentedbased

onthefactualcircumstancesthusallegedbypetitioner.
AdmittingthatitsPNBAccountNo.S/A2655371543wasspecificallyopenedforexpropriation
proceedingsithadinitiatedoverthesubjectproperty,petitionerposesnoobjectiontothe
garnishmentorthelevyunderexecutionofthefundsdepositedthereinamountingtoP99,743.94.
However,itispetitioner'smaincontentionthatinasmuchastheassailedordersofrespondentRTC
judgeinvolvedthenetamountofP4,965,506.45,thefundsgarnishedbyrespondentsheriffin
excessofP99,743.94,whicharepublicfundsearmarkedforthemunicipalgovernment'sother
statutoryobligations,areexemptedfromexecutionwithouttheproperappropriationrequiredunder
thelaw.
Thereismeritinthiscontention.ThefundsdepositedinthesecondPNBAccountNo.S/A263
5308507arepublicfundsofthemunicipalgovernment.Inthisjurisdiction,wellsettledistherule
thatpublicfundsarenotsubjecttolevyandexecution,unlessotherwiseprovidedforbystatute
[Republicv.Palacio,supra.;TheCommissionerofPublicHighwaysv.SanDiego,G.R.No.L
30098,February18,1970,31SCRA616].Moreparticularly,thepropertiesofamunicipality,
whetherrealorpersonal,whicharenecessaryforpublicusecannotbeattachedandsoldat
executionsaletosatisfyamoneyjudgmentagainstthemunicipality.Municipalrevenuesderived
fromtaxes,licensesandmarketfees,andwhichareintendedprimarilyandexclusivelyforthe
purposeoffinancingthegovernmentalactivitiesandfunctionsofthemunicipality,areexemptfrom
execution[SeeViudaDeTanTocov.TheMunicipalCouncilofIloilo,49Phil.52(1926):The
MunicipalityofPaoay,IlocosNortev.Manaois,86Phil.629(1950);MunicipalityofSanMiguel,
Bulacanv.Fernandez,G.R.No.61744,June25,1984,130SCRA56].Theforegoingrulefinds
applicationinthecaseatbar.AbsentashowingthatthemunicipalcouncilofMakatihaspassedan
ordinanceappropriatingfromitspublicfundsanamountcorrespondingtothebalancedueunder
theRTCdecisiondatedJune4,1987,lessthesumofP99,743.94depositedinAccountNo.S/A

2655371543,nolevyunderexecutionmaybevalidlyeffectedonthepublicfundsofpetitioner
depositedinAccountNo.S/A2635308507.
Nevertheless,thisisnottosaythatprivaterespondentandPSBareleftwithnolegalrecourse.
Whereamunicipalityfailsorrefuses,withoutjustifiablereason,toeffectpaymentofafinalmoney
judgmentrenderedagainstit,theclaimantmayavailoftheremedyofmandamusinorderto
compeltheenactmentandapprovalofthenecessaryappropriationordinance,andthe
correspondingdisbursementofmunicipalfundstherefor[SeeViudaDeTanTocov.TheMunicipal
CouncilofIloilo,supra;Baldiviav.Lota,107Phil.1099(1960);Yuviengcov.Gonzales,108Phil.
247(1960)].
Inthecaseatbar,thevalidityoftheRTCdecisiondatedJune4,1987isnotdisputedbypetitioner.
Noappealwastakentherefrom.Forthreeyearsnow,petitionerhasenjoyedpossessionanduseof
thesubjectpropertynotwithstandingitsinexcusablefailuretocomplywithitslegalobligationto
payjustcompensation.Petitionerhasbenefitedfromitspossessionofthepropertysincethesame
hasbeenthesiteofMakatiWestHighSchoolsincetheschoolyear19861987.ThisCourtwillnot
condonepetitioner'sblatantrefusaltosettleitslegalobligationarisingfromexpropriation
proceedingsithadinfactinitiated.Itcannotbeoveremphasizedthat,withinthecontextofthe
State'sinherentpowerofeminentdomain,
...[j]ustcompensationmeansnotonlythecorrectdeterminationoftheamounttobe
paidtotheownerofthelandbutalsothepaymentofthelandwithinareasonabletime
fromitstaking.Withoutpromptpayment,compensationcannotbeconsidered"just"for
thepropertyownerismadetosuffertheconsequenceofbeingimmediatelydeprivedof
hislandwhilebeingmadetowaitforadecadeormorebeforeactuallyreceivingthe
amountnecessarytocopewithhisloss[Cosculluelav.TheHonorableCourtofAppeals,
G.R.No.77765,August15,1988,164SCRA393,400.SeealsoProvincialGovernment

ofSorsogonv.Vda.deVillaroya,G.R.No.64037,August27,1987,153SCRA291].
TheState'spowerofeminentdomainshouldbeexercisedwithintheboundsoffairplayandjustice.
Inthecaseatbar,consideringthatvaluablepropertyhasbeentaken,thecompensationtobepaid
fixedandthemunicipalityisinfullpossessionandutilizingthepropertyforpublicpurpose,for
three(3)years,theCourtfindsthatthemunicipalityhashadmorethanreasonabletimetopayfull
compensation.
WHEREFORE,theCourtResolvedtoORDERpetitionerMunicipalityofMakatitoimmediately
payPhilippineSavingsBank,Inc.andprivaterespondenttheamountofP4,953,506.45.Petitioner
isherebyrequiredtosubmittothisCourtareportofitscompliancewiththeforegoingorderwithin
anonextendibleperiodofSIXTY(60)DAYSfromthedateofreceiptofthisresolution.Theorder
ofrespondentRTCjudgedatedDecember21,1988,whichwasrenderedinCivilCaseNo.13699,
isSETASIDEandthetemporaryrestrainingorderissuedbytheCourtonNovember20,1989is
MADEPERMANENT.SOORDERED.

FIRSTDIVISION

G.R.No.L33777January30,1990
PACIFICPRODUCTS,INC.,petitioner,
vs.
VICENTES.ONG,respondent.
Bito,Misa&Lozadaforpetitioner.
VicenteS.Ongforrespondent.

MEDIALDEA,J.:
ThisisanappealbycertiorarifromthedecisionoftheCourtofAppeals(p.45,Rollo)inCAG.R.
No.34038Rentitled"VicenteS.Ong,PlaintiffAppellant,versusMacarioOfilada,inhiscapacity
asSheriffofManila,ThePacificProducts,Inc.andtheFirstQuezonCityInsuranceCo.,Inc.,
DefendantsAppellees,"whichreversedthedecision(pp.3237,RecordonAppeal,p.26Rollo)of
theCourtofFirstInstanceofManilainCivilCaseNo.53124.
Theantecedentfactsareasfollows:
OnFebruary15,1963,VicenteOngfiledanactionfordamagesagainstMacarioOfiladainhis
capacityasSheriffofManila,thePacificProducts,Inc.,andtheFirstQuezonCityInsurance,with
theCourtofFirstInstanceofManila(BranchXIX)anddocketedasCivilCaseNo.53124.The
complaintprayedfordamagesasaresultofdefendants'refusaltofavorablyconsiderhisthirdparty
claimfiledwiththeSheriffofManilainconnectionwithCivilCaseNo.50120,alsoofthe
RegionalTrialCourtofManila(BranchXVI).OnJuly2,1963,thepartiessubmittedapartial
stipulationoffacts,quotedhereinasfollows:
PARTIALSTIPULATIONOFFACTS

COMENOWpartiesplaintiffanddefendants,bytheirrespectivecounsel,andtothis
HonorableCourtrespectfullysubmitthefollowingstipulationoffacts:
1.ThatonAprill2,1962,defendantPacificProducts,Inc.filedCivilCaseNo.50120
entitled'PacificProducts,Inc.vsH.D.Labrador',doingbusinessunderthenameand
styleof'BMLTradingandSupply,'withtheCourtofFirstInstanceofManila(Branch
XIV)forrecoveryofP9,111.70,plusinterest,costsandattorney'sfees;
2.Thatuponmotion,thesaidBranchXIVofthisHonorableCourtissuedanorder
directingtheSheriffofManilaoranyofhisdeputiestoattach,'theestate,realor
personal,ofthesaiddefendantH.D.Labrador,etc.;'
3.ThatpursuanttothesaidordertheSheriffofManila,throughDeputySheriffSantiago
GeronillainanoticeofgarnishmentdatedOctober17,1962garnishedP9,111.70ofthe
amountofP10,500.00payabletotheBMLTradingandSupply,thenameandstyle
underwhichthedefendantH.D.LabradorinsaidCivilCaseNo.50120isdoingbusiness,
bytheBureauofTelecommunications,therebystoppingthepaymentofthesaid
P10,500.00;
4.ThatonDecember21,1962,thisHonorableCourt(BranchXVI)rendereditsdecision
inCivilCaseNo.50120,thedispositiveportionofwhichreadsasfollows:
WHEREFORE,defendantH.D.LabradorissentencedtopayplaintiffthesumofP
9,111.70withinterestthereonat6%perannumfromApril12,1962whenthecomplaint
wasfiledanduntilthedecisioninthiscaseisfullycompliedwithplusattorney'sfees
whichtheCourtfixesinthesumofP500.00pluscosts.'
5.Thataftertheabovedecisionbecamefinal,awritofexecutionwasissued,andthe
sheriffofManila,throughDeputySheriffSantiagoGeronilla,furthergarnishedP
l,181.65oftheP10,500.00mentionedinPar.3hereof;

6.Thatplaintiffinthiscase,asstatedinparagraph2ofthecomplaintenteredintoand
executedanAGREEMENTwiththeBMLTradingandSupplyonOctober6,1962
(Annex'A'oftheComplaint),butdefendantPacificProducts,Inc.firstcametoknowof
thesamethrucounselonNovember8,1962anddefendantSheriffofManilaon
November9,1962,whenplaintifffiledapetitiontoLiftAttachmentinCivilCaseNo.
50120oftheCourtofFirstInstanceofManila,BranchXVI;theBureauof
TelecommunicationswasnotifiedoftheAgreementAnnex'A,'onoraboutNovember
15,1962;
7.ThatOfficialReceiptNo.2174andOfficialInvoiceNo.6491,photostaticcopiesof
whichareattachedtothecomplaintasAnnexes'B'and'C,'respectively,wereissuedon
October8,1962whenplaintiffpaidthesumofP9,300.00totheL&SChemicalSupply
ofMalabon,Rizalaspurchasepriceof15,000poundsofBluestonecoppersulfate
pursuanttotheAGREEMENT(Annex'A'ofthecomplaint);
8.That,asstatedinparagraph4ofthecomplaintthe15,000poundsofBluestonecopper
sulfatementionedintheAgreementweredulyreceivedonOctober8,1962bythe
BureauofTelecommunicationsasevidencedbyInvoiceNo.125,photostaticcopyof
whichwasattachedtothecomplaintasAnnex'D;'
9.ThatpursuanttotheAGREEMENT(Annex'A'ofthecomplaint),theBMLTrading
andSupplyexecutedonOctober19,1962aWaiverandAssignmentofRightsoverits
shareof40%inthenetprofitinfavoroftheplaintiff,photostaticcopyofwhichwas
attachedtothecomplaintasAnnex'E',butdefendantPacificProducts,Inc.firstcameto
knowofthesameonNovember16,1962whenitwasservedacopyoftheplaintiff's
ThirdPartyClaimtowhichacopyofsaidWaiverandAssignmentofRightswas
attached,anddefendantSheriffofManilafirstcametoknowofthesamewhenplaintiff

filedhissaidThirdPartyClaimwiththeOfficeoftheSheriffofManilaonNovember19,
1962;theBureauofTelecommunicationswasnotifiedoftheWaiverandAssignmentof
RightsonoraboutNovember15,1962;
10.ThatplaintifffiledhisThirdPartyClaimonNovemberl9,1962withtheOfficeofthe
SheriffofManilaandthedefendantPacificProducts,Inc.filedonNovember29,1962in
CivilCaseNo.50120aMotiontoStrikeOutThirdPartyClaimwhichwasdeniedfor
lackofmeritinanorderofthisCourt,BranchXVI,datedDecember21,1962;
11.ThatplaintiffreceivedfromtheOfficeofthe,SheriffofManilaanoticedated
January22,1963,simplecopyofwhichisattachedheretoasAnnex'A,'thatdefendant
PacificProducts,Inc.filedIndemnityBondNo.3879ofthedefendantFirstQuezonCity
InsuranceCo.,andanothernoticedatedApril30,1963,asimplecopyofwhichis
attachedheretoasAnnex'B',thatdefendantPacificProducts,Inc.postedanadditional
bondofP1,181.55,bothtoanswerfortheThirdPartyClaim;
12.Thatthereafter,onFebruary15,1963plaintifffiledtheinstantaction;
13.ThatafterbeingadvisedbytheSheriffofManilainaletterdatedApril30,1963,
Annex"B,"hereof.tosecureaninjunctioninhibitinghimfromreleasingthemoneyin
questionintheamountofPl0,293.35,plaintiffisconvincedthatdefendantSheriffof
ManilaisnotunjustifiedandpersistentinrefusingtosatisfytheThirdPartyClaimof
plaintiff;
14.ThattheletteroftheBureauofTelecommunicationsaddressedtotheChiefDeputy
SheriffofManila,datedNovember5,1962andsignedbyitsActingDirectorA.Soriano,
wasinreplytothenoticeofgarnishmentdatedOctober17,1962,simplecopyofwhich
isattachedheretoasAnnex"C;"
15.Thatthepartieshereinadmittheirrespectivecapacitytosueandbesued.

WHEREFORE,thepartiesheretorespectfullysubmittheforegoingstipulationoffactsas
partoftheevidenceinthiscasewithoutprejudicetothepresentationofevidenceasto
mattersnotcoveredbythisStipulationsoffacts.
Manila,June26,1963.
MANUELP.CALANOS&ASSOCIATES
By:
(Sgd.)JERRYP.REBUTOC
(T)JERRYP.REBUTOC
CounselforthePlaintiff404ReginaBuildingEscolta,Manila
ROSS,SELPH&CARRASCOSO
By:
(Sgd.)FELINOS.MEGINO
(T)FELINOS.MEGINO
AttorneysfortheDefendantPacificProducts,Inc.405FNCBBuildingManila
(Sgd.)FERNANDOP.AGDAMAG
FERNANDOP.AGDAMAG
AssistantFiscalCounselfortheDefendantSheriffofManila
(RecordonAppeal,pp.2632)
Asaforequoted,PacificProducts,Inc.(Pacific,forbrevity)filedanactionforsumofmoney
againstHilarionD.Labrador(hereinafterreferredtoasH.D.Labrador),"doingbusinessunderthe
nameandstyleofBMLTradingandSupply,"withtheCourtofFirstInstanceofManila(Br.XVI)
anddocketedasCivilCaseNo.50102.UponMotionofPacific,anorderwasissueddirectingthe
SheriffofManilatoattachthepropertiesofthedefendant.
Meanwhile,BMLTradingandSupply(BMLTrading,forbrevity)woninabidtosupplythe

BureauofTelecommunications(Bureau,forbrevity)with15,000poundsofbluestonecopper
sulfateworthP10,500.00.H.D.Labrador,asagentofBMLTradingdeliveredthecompound.
BeforetheBureaucouldreleasethepaymenttoBMLTrading,theSheriffofManilagarnished
P9,111.70ofP10,500.00onOctober17,1962.
UnknowntoPacific,BMLTrading,throughitsattorneyinfact,H.D.Labradorassigneditstights
overtheP10,500.00tohereinrespondent,VicenteS.OngonOctober19,1962(pp.1417,Record
onAppeal;p.26,Rollo).ItappearsthatitwasVicenteOngwhoadvancedthenecessaryfundsto
purchasethecoppersulfateandthepartiesagreedthattheprofitswillbesharedbyBMLTrading
andVicenteOngona4060percentbasis.ItwasalsotheiragreementthatBMLTradingwill
waiveitsshareinthenetprofitswhichmayberealizedfromthetransactionshoulditfailtosecure
thereleaseofthepaymentfromtheBureauofTelecommunicationswithinseven(7)daysfromthe
deliveryofthecompound(pp.913,RecordonAppeal).Pacificlearnedabouttheassignmentonly
whenacopyofthethirdpartyclaimfiledbyVicenteOngwiththeOfficeoftheSheriffofManila
wasservedonthemonNovember19,1962.
OnNovember29,1962,PacificfiledamotiontostrikeoutthethirdpartyclaimofVicenteOng,but
thesamewasdeniedforlackofmerit.
H.D.LabradorwasdeclaredindefaultandwasorderedtopayPacificthesumofP9,111.70ina
decisionwhichwasrenderedbythetrialcourtonDecember21,1962,thedispositiveportionof
whichreads:
WHEREFORE,defendantH.D.Labradorissentencedtopayplaintiffthesumof
P9,111.70withinterestthereonat6%perannumfromApril12,1962whenthe
complaintwasfiledanduntilthedecisioninthiscaseisfullycompliedwithplus
attorney'sfeeswhichtheCourtfixesinthesumofP500,000pluscost.(P.13,Rollo)
ThecorrespondingwritofexecutionwasissuedandtheSheriffofManilafurthergarnished

Pl,181.65oftheP10,500.00inthepossessionoftheBureau.
Ong'sthirdpartyclaimwasfrustratedwhenPacificfiledanIndemnityBondwiththeOfficeofthe
Sheriff.Thus,theactionfordamagesagainsttheSheriff,PacificProductsandFirstQuezonCity
InsurancefiledbyOngonFebruary14,1963tovindicatehisclaimontheamountgarnished.
OnFebruary21,1964,judgmentwasrenderedbythetrialcourt,asfollows:
WHEREFORE,judgmentisherebyrendered,dismissingthecomplaint,withoutspecial
pronouncementastocosts.(p.37,RecordonAppeal)
OngfiledanoticeofappealonMarch20,1964(p.38,RecordonAppeal;p.26,Rollo)whichwas
approvedonApril25,1964(p.41,RecordonAppeal;supra).
OnMay7,1971,theCourtofAppealsreversedthedecisionofthetrialcourt.Thedispositive
portionofthedecisionreads:
WHEREFORE,thedecisionappealedfromisreversedandjudgmentisherebyrendered
orderingthedefendants,thePacificProducts,Inc.,andtheFirstQuezonCityInsurance
Co.,Inc.,topayjointlyandseverally,theplaintiffappellantthesumoftenthousandtwo
hundredninetythreepesosandthirtyfivecentavos(P10,293.35),withlegalinterestfrom
November19,1962,thedateofthefilingofthethirdpartyclaimandthecosts.
SOORDERED.(p.24,Rollo)
PacificfiledaMotionforReconsiderationwhichwasdeniedonJuly2,1971(p.25,Rollo).Hence,
theinstantappealbycertiorarifiledbyPacificonJuly17,1971.
PetitionerassailsthedecisionoftheCourtofAppealswhenitheldthatthegarnishmentofthe
amountofP10,500.00payabletoBMLTradingandSupplywhileitwasstillinthepossessionof
theBureauofTelecommunicationswasillegalandtherefore,nullandvoid.Itisalsopetitioner's
contentionthatthecasesofDirectorofCommerceandIndustryv.Concepcion,43Phil.384
andAvendanoetal.vs.Alikpala,etal.,G.R.No.L21189,November28,1964,whereinthisCourt

declarednullandvoidthegarnishmentofthesalariesofgovernmentemployees,relieduponbythe
appellatecourtarenotapplicablebecausenogarnishmentofsalariesofgovernmentofficialor
employeeisinvolvedinthiscase.
Thereisnomeritinthispetition.
ItisnotedthatthenoticeofgarnishmentservedupontheBureauofTelecommunicationswasmade
pursuanttoanorderofattachmentissuedbythetrialcourtinthecaseforsumofmoneyagainst
H.D.Labrador.Atthetimeofsuchservice,theamountagainstwhichthenoticewasissuedwas
stillinthepossessionandcontroloftheBureau.Thesamesituationobtainsinthetwocasesrelied
uponbytheappellatecourt.Whileitistruethatinthecaseatbarnosalariesofpublicofficialsor
employeesareinvolved,thereasonsfortherulinginthetwocitedcasesareclear.Itwasheld,thus:
...Bytheprocessofgarnishment,theplaintiffvirtuallysuesthegarnisheeforadebtdue
tothedefendant.Thedebtorstrangerbecomesaforcedintervenor.TheDirectorofthe
BureauofCommerceandIndustry,anofficeroftheGovernmentofthePhilippine
Islands,whenservedwiththewritofattachment,thusbecameapartytotheaction.
(TayabasLandCo.vs.Sharruf(1921),41Phil.382).
Arule,whichhasneverbeenseriouslyquestioned,isthatmoneyinthehandsofpublic
officers,althoughitmaybeduegovernmentemployees,isnotliabletothecreditorsof
theseemployeesintheprocessofgarnishment.Onereasonis,thattheState,byvirtueof
itssovereigntymaynotbesuedinitsowncourtsexceptbyexpressauthorizationbythe
Legislature,andtoSubjectitsofficerstogarnishmentwouldbetopermitindirectlywhat
isprohibiteddirectly.Anotherreasonisthatmoneyssoughttobegarnished,aslongasit
remainsinthehandsofthedisbursingofficeroftheGovernment,belonglatter,although
thedefendantingarnishmentmaybeentitledtoaspecificportionthereof.Andstill
anotherreasonwhichcoversbothoftheforegoingisthateveryconsiderationofpublic

policyforbidsit.(DirectorofCommerceandIndustryv.Concepcion.43Phil.386;Italics
ours)
Againstthefirstreasonabovecited,petitionercontendsthatimmunityfromsuitwaswaivedwhen
theBureauofTelecommunicationsenteredintoabusinesstransactionwithBMLTradingsincein
thisjurisdiction,itisnow"awellestablisheddoctrinethatwhentheGovernmentengagesin
business,itabdicatespartofitssovereignprerogativesandascendstothelevelofacitizen"(Price
StabilizationCorporationv.CourtofIndustrialRelations,G.R.L9797andL9834.November29.
1957).
Thiscontentionisnotcorrect.Suabilitywouldfollowonlyifthecontractenteredintobythe
governmentisintheexerciseofaproprietaryasdistinguishedfromagovernmentalfunction(see
U.S.Avs.Ruiz,L35645,May22,1985).TheBureauofTelecommunicationsisaservicebureau
andisnotengagedinbusiness.Thereisalsonothingintherecordsofthiscasefromwhichitcould
beconcludedthatinthepurchaseofthe15,000poundsofbluestonecoppersulfate,theBureauwas
engaginginbusiness.
Likewise,petitionercontendsthatinthiscase,wheretheBureauisauthorizedtoenterintoa
contract,thegovernment"maysueandbesuedandmaybesubjectedtocourtprocessesjustlike
anyotherperson,"aswasheldinthecaseofNationalShipyardsandSteelCorporation(NASSCO)
vs.CIR,etal.,G.R.L17874,August31,1963,8SCRA781.
Thereisnomeritinthiscontention.NASSCOisagovernmentownedandcontrolledcorporation,
withapersonalityofitsown,separateanddistinctfromthatofthegovernment.Ithas,pursuantto
Section2ofExecutiveOrderNo.356datedOctober23,1950(46OfficialGazette,4677),which
establishedtheNASSCOallthepowersofacorporationundertheCorporationCode.Accordingly,
itmaysueandbesuedandmaybesubjectedtocourtprocessesjustlikeanyothercorporation..."
(supra).Ontheotherhand,theBureauofTelecommunicationsisagovernmentagencycreated

underSection78ofExecutiveOrderNo.94,Seriesof1947.Ithasnocharterandnodistinct
personalityofitsown.Beingagovernmentagency,thedoctrineofStateimmunityfromsuit
applies.
Fortheforegoingreasons,Weaffirmtherulingoftheappellatecourtthatthewritofgarnishment
issuedagainsttheP10,500.00payabletoBMLTradingwhilestillinthepossessionoftheBureau
ofTelecommunicationsisillegalandtherefore,nullandvoid.Inviewoftheassignmentandwaiver
byBMLTradingofthesaidamountinfavorofVicenteOng,thelatterbecametherightfulowner
thereof.
Finally,petitionerclaimsthattheCourtofAppealserredinrulingthatthemoneyduetoBML
TradingandSupplyinthehandsoftheBureaucannotbemadetoanswerforapersonaljudgment
againstH.D.LabradorinCivilCaseNo.50120.Accordingtopetitioner,VicenteOngadmittedin
thestipulationoffactsthatH.D.Labradorwas"doingbusinessunderthenameandstyleofBML
TradingandSupply"andthatH.D.LabradorandBMLTradingareone.Ajudgmentrendered
againstH.D.LabradorcanthereforebesatisfiedfromthefundstheBureauholdsinfavorofBML
Trading.
Wedonotagree.Thereisnothingintherecordsfromwhichitmaybeconcludedthatinthe
transactionsinvolvedinCivilCase50120,H.D.LabradoractedasanagentofBMLTrading.On
thecontrary,thejudgmentthereinwasrenderedonlyagainstH.D.Labrador.Presumably,itwasa
personaljudgmentagainsthim.Ontheotherhand,theP10,500.00inthehandsoftheBureauwas
payabletoBMLTradingandSupplyownedbyBenedictaLabradorandrepresentedinthe
transactionbyH.D.Labrador,ThereisalsonoevidenceonrecordtosupportaconclusionthatH.D.
LabradorheldhimselfoutastheownerofBMLTradinginhistransactionswiththeBureau.Inthe
stipulationoffacts,VicenteOngneveradmittedthatH.D.Labradorwasdoingbusinessunderthe
nameandstyleofBMLTrading.WhatwasadmittedbyOngwasthefactthatCivilCaseNo.

50120wasentitled"PacificProducts,Inc.vs.H.D.Labrador,doingbusinessunderthenameand
styleofBMLTradingandSupply."
ACCORDINGLY,thepetitionisDISMISSED.ThedecisionoftheCourtofAppealsappealed
fromisAFFIRMED.
Nocosts.
SOORDERED.
Narvasa,Cruz,GancaycoandGrioAquinoJJ.,concur.

[G.R.No.129169.November17,1999]

NATIONAL IRRIGATION ADMINISTRATION (NIA),petitioner, vs.HONORABLE


COURTOFAPPEALS(4thDivision),CONSTRUCTIONINDUSTRYARBITRATION
COMMISSION, and HYDRO RESOURCES CONTRACTORS
CORPORATION,respondents.
DECISION
DAVIDE,JR.,C.J.:
InthisspecialcivilactionforcertiorariunderRule65oftheRulesofCourt,theNationalIrrigation
Administration (hereafter NIA), seeks to annul and set aside the Resolutions[1]of the Court of
AppealsinCAGR.SPNo.37180dated28June1996and24February1997,whichdismissed
respectively NIAs petition forcertiorariandprohibitionagainst the Construction Industry
ArbitrationCommission(hereafterCIAC),andthemotionforreconsiderationthereafterfiled.
Records show that in a competitive bidding held by NIA in August 1978, Hydro Resources
ContractorsCorporation(hereafterHYDRO)wasawardedContractMPIC2fortheconstruction
of the main civil works of the Magat River MultiPurpose Project.The contract provided that
HYDROwouldbepaidpartlyinPhilippinepesosandpartlyinU.S.dollars.HYDROsubstantially
completed the works under the contract in 1982 and final acceptance by NIA was made in
1984.HYDROthereafterdeterminedthatitstillhadanaccountreceivablefromNIArepresenting
thedollarratedifferentialofthepriceescalationforthecontract.[2]
AfterunsuccessfullypursuingitscasewithNIA,HYDRO,on7December1994,filedwiththe
CIACaRequestforAdjudicationoftheaforesaidclaim.HYDROnominatedsixarbitratorsforthe

arbitrationpanel,fromamongwhomCIACappointedEngr.LauroM.Cruz.On6January1995,
NIAfileditsAnswerwhereinitquestionedthejurisdictionoftheCIACalleginglackofcauseof
action,lachesandestoppelinviewofHYDROsallegedfailuretoavailofitsrighttosubmitthe
disputetoarbitrationwithintheprescribedperiodasprovidedinthecontract.Onthesamedate,
NIAfiledaCompliancewhereinitnominatedsixarbitrators,fromamongwhomCIACappointed
Atty. Custodio O. Parlade, and made a counterclaim forP1,000,000 as moral damages; at
leastP100,000asexemplarydamages;P100,000asattorneysfees;andthecostsofthearbitration.[3]
The two designated arbitrators appointed Certified Public Accountant Joven B. Joaquin as
ChairmanoftheArbitrationPanel.Thepartieswererequiredtosubmitcopiesoftheevidencethey
intendedtopresentduringtheproceedingsandwereprovidedthedraftTermsofReference.[4]
Atthepreliminaryconference,NIAthroughitscounselAtty.JoyC.LegaspioftheOfficeofthe
GovernmentCorporateCounsel,manifestedthatitcouldnotadmitthegenuinenessofHYDROs
evidencesinceNIAsrecordshadalreadybeendestroyed.NIArequestedanopportunitytoexamine
theoriginalsofthedocumentswhichHYDROagreedtoprovide.[5]
After reaching an accord on the issues to be considered by the arbitration panel, the parties
scheduledthedatesofhearingsandofsubmissionofsimultaneousmemoranda.[6]
On13March1995,NIAfiledaMotiontoDismiss [7]alleginglackofjurisdictionoverthedisputes.
NIAcontendedthattherewasnoagreementwithHYDROtosubmitthedisputetoCIACfor
arbitration considering that the construction contract was executed in 1978 and the project
completedin1982,whereastheConstructionIndustryArbitrationLawcreatingCIACwassigned
onlyin1985;andthatwhiletheyhaveagreedtoarbitrationasamodeofsettlementofdisputes,
theycouldnothavecontemplatedsubmissionoftheirdisputestoCIAC.NIAfurtherarguedthat

recordsshowthatithadnotvoluntarilysubmitteditselftoarbitrationbyCIACcitingTESCO
Services,Inc.v.Hon.AbrahamVera,etal.,[8]whereinitwasruled:
CIACdidnotacquirejurisdictionoverthedisputearisingfromthesubcontractagreementbetween
petitionerTESCOandprivaterespondentLAROSA.Therecordsdonotshowthattheparties
agreedtosubmitthedisputestoarbitrationbytheCIACxxxx.Whilebothpartiesinthesub
contracthadagreedtosubmitthemattertoarbitration,thiswasonlybetweenthemselves,no
requesthavingbeenmadebybothwiththeCIAC.Hence,asalreadystated,theCIAC,hasno
jurisdictionoverthedispute.xxxx.Nowhereinthesaidarticle(subcontract)doesitmentionthe
CIAC,muchless,vestjurisdictionwiththeCIAC.
On11April1995,thearbitralbodyissuedanorder [9]whichdeferredthedeterminationofthe
motiontodismissandresolvedtoproceedwiththehearingofthecaseonthemeritsasthegrounds
citedbyNIAdidnotseemtobeindubitable.NIAfiledamotionforreconsiderationoftheaforesaid
Order.CIAC in denying the motion for reconsideration ruled that it has jurisdiction over the
HYDROsclaimoverNIApursuanttoE.O1008andthatthehearingshouldproceedasscheduled.
[10]

On 26 May 1996, NIA filed with the Court of Appeals an original action ofcertiorariand
prohibitionwithprayerforrestrainingorderand/orinjunction,seekingtoannultheOrdersofthe
CIACforhavingbeenissuedwithoutorinexcessofjurisdiction.InsupportofitspetitionNIA
allegedthat:
A
RESPONDENTCIACHASNOAUTHORITYORJURIDICTIONTOHEARANDTRYTHIS
DISPUTEBETWEENTHEHEREINPARTIESASE.O.NO.1008HADNORETROACTIVE

EFFECT.
B
THEDISPUTEBETWEENTHEPARTIESSHOULDBESETTLEDINACCORDANCEWITH
GCNO.25,ART.2046OFTHECIVILCODEANDR.A.NO.876THEGOVERNINGLAWS
ATTHETIMECONTRACTWASEXECUTEDANDTERMINATED.
C
E.O.NO.1008ISASUBSTANTIVELAW,NOTMERELYPROCEDURALASRULEDBY
THECIAC.
D
ANINDORSEMENTOFTHEAUDITORGENERALDECIDINGACONTROVERSYISA
DECISIONBECAUSEALLTHEELEMENTSFORJUDGMENTARETHERE;THE
CONTROVERSY,THEAUTHORITYTODECIDEANDTHEDECISION.IFITISNOT
APPEALEDSEASONABLY,THESAMEBECOMESFINAL.
E
NIAHASTIMELYRAISEDTHEISSUEOFJURISDICTION.ITDIDNOTWAIVENORISIT
ESTOPPEDFROMASSAILINGTHESAME.
F
THELEGALDOCTRINETHATJURISDICTIONISDETERMINEDBYTHESTATUTEIN
FORCEATTHETIMEOFTHECOMMENCEMENTOFTHEACTIONDOESNOTONLY
APPLYTOTHEINSTANTCASE.[11]

TheCourtofAppeals,afterfindingthattherewasnograveabuseofdiscretiononthepartofthe
CIAC in issuing the aforesaid Orders, dismissed the petition in its Resolution dated 28 June
1996.NIAsmotionforreconsiderationofthesaiddecisionwaslikewisedeniedbytheCourtof
Appealson26February1997.
On2June1997,NIAfiledbeforeusanoriginalactionforcertiorariandprohibitionwithurgent
prayerfortemporaryrestrainingorderandwritofpreliminaryinjunction,prayingfortheannulment
oftheResolutionsoftheCourtofAppealsdated28June1996and24February1997.Inthesaid
specialcivilaction,NIAmerelyreiteratestheissuesitraisedbeforetheCourtofAppeals.[12]
Wetakejudicialnoticethaton10June1997,CIACrenderedadecisioninthemaincaseinfavorof
HYDRO.[13]NIAassailedthesaiddecisionwiththeCourtofAppeals.Inviewofthependencyof
thepresentpetitionsbeforeustheappellatecourtissuedaresolutiondated26March1998holding
inabeyancetheresolutionofthesameuntilaftertheinstantpetitionshavebeenfinallydecided.[14]
Attheoutset,wenotethatthepetitionsuffersfromaproceduraldefectthatwarrantsitsoutright
dismissal.The questioned resolutions of the Court of Appeals have already become final and
executory by reason of the failure of NIA to appeal therefrom.Instead of filing this petition
forcertiorariunderRule65oftheRulesofCourt,NIAshouldhavefiledatimelypetitionfor
reviewunderRule45.
There is no doubt that the Court of Appeals has jurisdiction over the special civil action
forcertiorariunder Rule 65 filed before it by NIA.The original jurisdiction of the Court of
Appeals over special civil actions forcertiorariis vested upon it under Section 9(1) of B.P.
129.ThisjurisdictionisconcurrentwiththeSupremeCourt[15]andwiththeRegionalTrialCourt.[16]

Thus,sincetheCourtofAppealshadjurisdictionoverthepetitionunderRule65,anyalleged
errorscommittedbyitintheexerciseofitsjurisdictionwouldbeerrorsofjudgmentwhichare
reviewablebytimelyappealandnotbyaspecialcivilactionofcertiorari.[17]Iftheaggrievedparty
failstodosowithinthereglementaryperiod,andthedecisionaccordinglybecomesfinaland
executory,hecannotavailhimselfofthewritofcertiorari,hispredicamentbeingtheeffectofhis
deliberateinaction.[18]
TheappealfromafinaldispositionoftheCourtofAppealsisapetitionforreviewunderRule45
andnotaspecialcivilactionunderRule65oftheRulesofCourt,nowRule45andRule65,
respectively,ofthe1997RulesofCivilProcedure.[19]Rule45isclearthatdecisions,finalordersor
resolutions of the Court of Appeals in any case,i.e., regardless of the nature of the action or
proceedingsinvolved,maybeappealedtothisCourtbyfilingapetitionforreview,whichwouldbe
but a continuation of the appellate process over the original case. [20]Under Rule 45 the
reglementaryperiodtoappealisfifteen(15)daysfromnoticeofjudgmentordenialofmotionfor
reconsideration.[21]
IntheinstantcasetheResolutionoftheCourtofAppealsdated24February1997denyingthe
motion for reconsideration of its Resolution dated 28 June 1997 was received by NIA on 4
March1997.Thus,ithaduntil19March1997withinwhichtoperfectitsappeal.NIAdidnot
appeal.WhatitdidwastofileanoriginalactionforcertioraribeforethisCourt,reiteratingthe
issuesandargumentsitraisedbeforetheCourtofAppeals.
ForthewritofcertiorariunderRule65oftheRulesofCourttoissue,apetitionermustshowthat
hehasnoplain,speedyandadequateremedyintheordinarycourseoflawagainstitsperceived
grievance.[22]Aremedyisconsideredplain,speedyandadequateifitwillpromptlyrelievethe

petitionerfromtheinjuriouseffectsofthejudgmentandtheactsofthelowercourtoragency. [23]In
thiscase,appealwasnotonlyavailablebutalsoaspeedyandadequateremedy.
Obviously,NIAinterposedthepresentspecialcivilactionofcertiorarinotbecauseitisthespeedy
andadequateremedybuttomakeupfortheloss,throughomissionoroversight,oftherightof
ordinaryappeal.Itiselementarythatthespecialcivilactionofcertiorariisnotandcannotbea
substituteforanappeal,wherethelatterremedyisavailable,asitwasinthiscase.Aspecialcivil
actionunderRule65oftheRulesofCourtwillnotbeacureforfailuretotimelyfileapetitionfor
reviewoncertiorariunderRule45oftheRulesofCourt.[24]Rule65isanindependentactionthat
cannotbeavailedofasasubstituteforthelostremedyofanordinaryappeal,includingthatunder
Rule45,[25]especiallyifsuchlossorlapsewasoccasionedbyonesownneglectorerrorinthe
choiceofremedies.[26]
Forobviousreasonstherulesforbidrecoursetoaspecialcivilactionforcertiorariifappealis
available,astheremediesofappealandcertiorariaremutuallyexclusiveandnotalternativeor
successive.[27]Althoughthereareexceptionstotherules,noneispresentinthecaseatbar.NIA
failedtoshowcircumstancesthatwilljustifyadeviationfromthegeneralruleastomakeavailable
apetitionforcertiorariinlieuoftakinganappropriateappeal.
Basedontheforegoing,theinstantpetitionshouldbedismissed.
Inanycase,eveniftheissueoftechnicalityisdisregardedandrecourseunderRule65isallowed,
thesameresultwouldbereachedsinceareviewofthequestionedresolutionsoftheCIACshows
thatitcommittednograveabuseofdiscretion.
ContrarytotheclaimofNIA,theCIAChasjurisdictionoverthecontroversy.ExecutiveOrder

No.1008,otherwiseknownastheConstructionIndustryArbitrationLawwhichwaspromulgated
on4February1985,vestsuponCIACoriginalandexclusivejurisdictionoverdisputesarising
from, or connected with contracts entered into by parties involved in construction in the
Philippines,whetherthedisputearisesbeforeorafterthecompletionofthecontract,orafterthe
abandonmentorbreachthereof.Thedisputesmayinvolvegovernmentorprivatecontracts.Forthe
Boardtoacquirejurisdiction,thepartiestoadisputemustagreetosubmitthesametovoluntary
arbitration.[28]
ThecomplaintofHYDROagainstNIAonthebasisofthecontractexecutedbetweenthemwas
filedon7December1994,duringtheeffectivityofE.O.No.1008.Hence,itiswellwithinthe
jurisdictionofCIAC.Thejurisdictionofacourtisdeterminedbythelawinforceatthetimeofthe
commencementoftheaction.[29]
NIAsargumentthatCIAChadnojurisdictiontoarbitrateoncontractwhichprecededitsexistence
isuntenable.E.O.1008isclearthattheCIAChasjurisdictionoveralldisputesarisingfromor
connectedwithconstructioncontractwhetherthedisputearisesbeforeorafterthecompletionof
thecontract.Thus,thedatethepartiesenteredintoacontractandthedateofcompletionofthe
same,eveniftheseoccurredbeforetheconstitutionoftheCIAC,didnotautomaticallydivestthe
CIACofjurisdictionaslongasthedisputesubmittedforarbitrationaroseaftertheconstitutionof
theCIAC.Stateddifferently,thejurisdictionofCIACisoverthedispute,notthecontract;andthe
instantdisputehavingarisenwhenCIACwasalreadyconstituted,thearbitralboardwasactually
exercisingcurrent,notretroactive,jurisdiction.Assuch,thereisnoneedtopassupontheissueof
whetherE.O.No.1008isasubstantiveorproceduralstatute.
NIAalsocontendedthattheCIACdidnotacquirejurisdictionoverthedisputesinceitwasonly

HYDROthatrequestedforarbitration.Itassertsthattoacquirejurisdictionoveracase,asprovided
underE.O.1008,therequestforarbitrationfiledwithCIACshouldbemadebybothparties,and
hencetherequestbyonepartyisnotenough.
It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause
whereintheyagreedtosubmittoarbitrationanydisputebetweenthemthatmayarisebeforeor
aftertheterminationoftheagreement.Consequently,theclaimofHYDROhavingarisenfromthe
contractisarbitrable.NIAsreliancewiththerulingonthecaseofTescoServicesIncorporatedv.
Vera,[30]ismisplaced.
The1988CIACRulesofProcedurewhichwereappliedbythisCourtinTescocasehadbeenduly
amended by CIAC Resolutions No. 291 and 393, Section 1 of Article III of which read as
follows:
SubmissiontoCIACJurisdictionAnarbitrationclauseinaconstructioncontractorasubmission
toarbitrationofaconstructioncontractorasubmissiontoarbitrationofaconstructiondisputeshall
bedeemedanagreementtosubmitanexistingorfuturecontroversytoCIACjurisdiction,
notwithstandingthereferencetoadifferentarbitrationinstitutionorarbitralbodyinsuchcontract
orsubmission.Whenacontractcontainsaclauseforthesubmissionofafuturecontroversyto
arbitration,itisnotnecessaryforthepartiestoenterintoasubmissionagreementbeforethe
claimantmayinvokethejurisdictionofCIAC.
Under the present Rules of Procedure, for a particular construction contract to fall within the
jurisdictionofCIAC,itismerelyrequiredthatthepartiesagreetosubmitthesametovoluntary
arbitration.UnlikeintheoriginalversionofSection1,asappliedintheTescocase,thelawasit
nowstandsdoesnotprovidethatthepartiesshouldagreetosubmitdisputesarisingfromtheir

agreementspecificallytotheCIACforthelattertoacquirejurisdictionoverthesame.Rather,itis
plainandclearthataslongasthepartiesagreetosubmittovoluntaryarbitration,regardlessofwhat
forumtheymaychoose,theiragreementwillfallwithinthejurisdictionoftheCIAC,suchthat,
eveniftheyspecificallychooseanotherforum,thepartieswillnotbeprecludedfromelectingto
submit their dispute before the CIAC because this right has been vested upon each party by
law,i.e.,E.O.No.1008.[31]
Moreover,itisundeniablethatNIAagreedtosubmitthedisputeforarbitrationtotheCIAC.NIA
throughitscounselactivelyparticipatedinthearbitrationproceedingsbyfilingananswerwith
counterclaim,aswellasitscompliancewhereinitnominatedarbitratorstotheproposedpanel,
participating in the deliberations on, and the formulation of, the Terms of Reference of the
arbitrationproceeding,andexaminingthedocumentssubmittedbyHYDROafterNIAaskedfor
theoriginalsofthesaiddocuments.[32]
Astothedefensesoflachesandprescription,theyareevidentiaryinnaturewhichcouldnotbe
establishedbymereallegationsinthepleadingsandmustnotberesolvedinamotiontodismiss.
Thoseissuesmustberesolvedatthetrialofthecaseonthemeritswhereinbothpartieswillbe
given ample opportunity to prove their respective claims and defenses.[33]Under the rule[34]the
defermentoftheresolutionofthesaidissueswas,thus,inorder.Anallegationofprescriptioncan
effectivelybeusedinamotiontodismissonlywhenthecomplaintonitsfaceshowsthatindeed
theactionhasalreadyprescribed.[35]Intheinstantcase,theissueofprescriptionandlachescannot
beresolvedonthebasissolelyofthecomplaint.Itmust,however,bepointedthatunderthenew
rules,[36]defermentoftheresolutionisnolongerpermitted.Thecourtmayeithergrantthemotion
todismiss,denyit,orordertheamendmentofthepleading.

WHEREFORE,theinstantpetitionisDISMISSEDforlackofmerit.TheCourtofAppealsis
herebyDIRECTEDtoproceedwithreasonabledispatchinthedispositionofC.A.G.R.No.44527
andincludeintheresolutionthereoftheissueoflachesandprescription.
SOORDERED.
Puno,Kapunan,Pardo,andYnaresSantiago,JJ.,concur.