requested by any interested person (section 8).

The fees in question are for the transcript of

CONSTITUENT AND MINSTRANT FUNCTIONS OF THE GOVERNMENT
notes taken during the hearing of a case in which the National Coconut Corporation is
EN BANC interested, and the transcript was requested by its assistant corporate counsel for the use of
said corporation.
[G.R. No. L-9657. November 29, 1956.]
On the other hand, section 2 of the Revised Administrative Code defines the scope of the
LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL term “Government of the Republic of the Philippines” as follows: chanr oblesvirtua llawlibrary

COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and

BOARD OF LIQUIDATORS, Defendants-Appellants. “‘The Government of the Philippine Islands’ is a term which refers to the corporate
governmental entity through which the functions of government are exercised throughout
the Philippine Islands, including, save as the contrary appears from the context, the various
DECISION arms through which political authority is made effective in said Islands, whether pertaining to
the central Government or to the provincial or municipal branches or other form of local
BAUTISTA ANGELO, J.: government.”
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance The question now to be determined is whether the National Coconut Corporation may be
of Manila. During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip considered as included in the term “Government of the Republic of the Philippines” for the
vs. National Coconut Corporation, Assistant Corporate Counsel Federico Alikpala, counsel purposes of the exemption of the legal fees provided for in Rule 130 of the Rules of Court.
forDefendant, requested said stenographers for copies of the transcript of the stenographic
notes taken by them during the hearing. Plaintiffs complied with the request by delivering to As may be noted, the term “Government of the Republic of the Philippines” refers to a
Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him government entity through which the functions of government are exercised, including the
their bills for the payment of their fees. The National Coconut Corporation paid the amount various arms through which political authority is made effective in the Philippines, whether
of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of pertaining to the central government or to the provincial or municipal branches or other
P1 per page. form of local government. This requires a little digression on the nature and functions of our
government as instituted in our Constitution.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment
of these fees and sought the recovery of the amounts paid. On January 19, 1953, the Auditor To begin with, we state that the term “Government” may be defined as “that institution or
General required the Plaintiffs to reimburse said amounts on the strength of a circular of the aggregate of institutions by which an independent society makes and carries out those rules
Department of Justice wherein the opinion was expressed that the National Coconut of action which are necessary to enable men to live in a social state, or which are imposed
Corporation, being a government entity, was exempt from the payment of the fees in upon the people forming that society by those who possess the power or authority of
question. On February 6, 1954, the Auditor General issued an order directing the Cashier of prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the national
the Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 government, has reference to what our Constitution has established composed of three
every payday and from the salary of Mateo A. Matoto the amount of P10 every payday great departments, the legislative, executive, and the judicial, through which the powers and
beginning March 30, 1954. To prevent deduction of these fees from their salaries and secure functions of government are exercised. These functions are twofold: constitute and chanroble svirtuallawlibrary

a judicial ruling that the National Coconut Corporation is not a government entity within the ministrant. The former are those which constitute the very bonds of society and are
purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court compulsory in nature; the latter are those that are undertaken only by way of advancing
chan roblesvirtualawlibrary

of First Instance of Manila. the general interests of society, and are merely optional. President Wilson enumerates the
constituent functions as follows: cha nroble svirtuallawlibrary

Defendants set up as a defense that the National Coconut Corporation is a government entity
within the purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is “‘(1) The keeping of order and providing for the protection of persons and property from
exempt from paying the stenographers’ fees under Rule 130 of the Rules of Court. After trial, violence and robbery.
the court found for the Plaintiffs declaring (1) “that Defendant National Coconut Corporation ‘(2) The fixing of the legal relations between man and wife and between parents and
is not a government entity within the purview of section 16, Rule 130 of the Rules of Court; chan

children.
(2) that the payments already made by said Defendant to Plaintiffs herein and received by
roblesvirtualawlibrary

the latter from the former in the total amount of P714, for copies of the stenographic ‘(3) The regulation of the holding, transmission, and interchange of property, and the
transcripts in question, are valid, just and legal; and (3) that Plaintiffs are under no
chan roblesvirtualawlibrary
determination of its liabilities for debt or for crime.
obligation whatsoever to make a refund of these payments already received by them.” This is
‘(4) The determination of contract rights between individuals.
an appeal from said decision.
‘(5) The definition and punishment of crime.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is
exempt from paying the legal fees provided for therein, and among these fees are those ‘(6) The administration of justice in civil cases.
which stenographers may charge for the transcript of notes taken by them that may be
‘(7) The determination of the political duties, privileges, and relations of citizens. attribute of sovereignty, and in this are included those arms through which political authority
is made effective whether they be provincial, municipal or other form of local government.
‘(8) Dealings of the state with foreign powers: the preservation of the state from external
These are what we call municipal corporations. They do not include government entities
chanroblesvirtuallawlibrary

danger or encroachment and the advancement of its international interests.’“ (Malcolm, The
which are given a corporate personality separate and distinct from the government and
Government of the Philippine Islands, p. 19.)
which are governed by the Corporation Law. Their powers, duties and liabilities have to be
The most important of the ministrant functions are: public works, public education, public cha nroble svirtuallawlibrary
determined in the light of that law and of their corporate charters. They do not therefore
charity, health and safety regulations, and regulations of trade and industry. The principles come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court.
deter mining whether or not a government shall exercise certain of these optional functions
“Public corporations are those formed or organized for the government of a portion of the
are: (1) that a government should do for the public welfare those things which private
State.” (Section 3, Republic Act No. 1459, Corporation Law).
cha nroble svirtuallawlibrary

capital would not naturally undertake and (2) that a government should do these things
which by its very nature it is better equipped to administer for the public welfare than is any “‘The generally accepted definition of a municipal corporation would only include organized
private individual or group of individuals. (Malcolm, The Government of the Philippine cities and towns, and like organizations, with political and legislative powers for the local,
Islands, pp. 19-20.) civil government and police regulations of the inhabitants of the particular district included in
the boundaries of the corporation.’ Heller vs. Stremmel, 52 Mo. 309, 312.”
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our Constitution “In its more general sense the phrase ‘municipal corporation’ may include both towns and
and which are exercised by it as an attribute of sovereignty, and those which it may exercise counties, and other public corporations created by government for political purposes. In its
to promote merely the welfare, progress and prosperity of the people. To this latter class more common and limited signification, it embraces only incorporated villages, towns and
belongs the organization of those corporations owned or controlled by the government to cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661.” (McQuillin, Municipal
promote certain aspects of the economic life of our people such as the National Coconut Corporations, 2nd ed., Vol. 1, p. 385.)
Corporation. These are what we call government-owned or controlled corporations which
“We may, therefore, define a municipal corporation in its historical and strict sense to be the
may take on the form of a private enterprise or one organized with powers and formal
incorporation, by the authority of the government, of the inhabitants of a particular place or
characteristics of a private corporations under the Corporation Law.
district, and authorizing them in their corporate capacity to exercise subordinate specified
The question that now arises is: Does the fact that these corporation perform certain
chanr oblesvirtuallawlibrary powers of legislation and regulation with respect to their local and internal concerns. This
functions of government make them a part of the Government of the Philippines? power of local government is the distinctive purpose and the distinguishing feature of a
municipal corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)
The answer is simple: they do not acquire that status for the simple reason that they do
chanroblesvirtuallawlibrary

not come under the classification of municipal or public corporation. Take for instance the It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for
National Coconut Corporation. While it was organized with the purpose of “adjusting the each page of transcript of not less than 200 words before the appeal is taken and P0.15 for
coconut industry to a position independent of trade preferences in the United States” and of each page after the filing of the appeal, but in this case the National Coconut Corporation has
providing “Facilities for the better curing of copra products and the proper utilization of agreed and in fact has paid P1.00 per page for the services rendered by the Plaintiffs and has
coconut by-products”, a function which our government has chosen to exercise to promote not raised any objection to the amount paid until its propriety was disputed by the Auditor
the coconut industry, however, it was given a corporate power separate and distinct from General. The payment of the fees in question became therefore contractual and as such is
our government, for it was made subject to the provisions of our Corporation Law in so far as valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court.
its corporate existence and the powers that it may exercise are concerned (sections 2 and 4,
As regards the question of procedure raised by Appellants, suffice it to say that the same is
Commonwealth Act No. 518). It may sue and be sued in the same manner as any other
insubstantial, considering that this case refers not to a money claim disapproved by the
private corporations, and in this sense it is an entity different from our government. As this
Auditor General but to an action of prohibition the purpose of which is to restrain the
Court has aptly said, “The mere fact that the Government happens to be a majority
officials concerned from deducting from Plaintiffs’ salaries the amount paid to them as
stockholder does not make it a public corporation” (National Coal Co. vs. Collector of Internal
stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of Court
Revenue, 46 Phil., 586-587). “By becoming a stockholder in the National Coal Company, the
relative to appeals from a decision of the Auditor General.
Government divested itself of its sovereign character so far as respects the transactions of
the corporation . Unlike the Government, the corporation may be sued without its consent,
cralaw
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.
and is subject to taxation. Yet the National Coal Company remains an agency or
instrumentality of government.” (Government of the Philippine Islands vs. Springer, 50 Phil., Paras, C.J., Bengzon, Padilla, Montemayor, Labrador, Concepcion, Reyes, J. B. L., Endencia
288.) and Felix, JJ., concur.

To recapitulate, we may mention that the term “Government of the Republic of the
Philippines” used in section 2 of the Revised Administrative Code refers only to that
government entity through which the functions of the government are exercised as an
DE FACTO AND DE JURE GOVERNMENT 23, 1942, by the Commander in Chief of the Japanese Forces in the Philippines, and
Jorge B. Vargas, who was appointed Chairman thereof, was instructed to proceed to
Republic of the Philippines the immediate coordination of the existing central administrative organs and judicial
SUPREME COURT courts, based upon what had existed therefore, with approval of the said Commander
Manila in Chief, who was to exercise jurisdiction over judicial courts.

EN BANC The Chairman of the Executive Commission, as head of the central administrative
organization, issued Executive Orders Nos. 1 and 4, dated January 30 and February
5, 1942, respectively, in which the Supreme Court, Court of Appeals, Courts of First
G.R. No. L-5 September 17, 1945 Instance, and the justices of the peace and municipal courts under the
Commonwealth were continued with the same jurisdiction, in conformity with the
CO KIM CHAM (alias CO KIM CHAM), petitioner, instructions given to the said Chairman of the Executive Commission by the
vs. Commander in Chief of Japanese Forces in the Philippines in the latter's Order No. 3
EUSEBIO VALDEZ TAN KEH and ARSENIO P. DIZON, Judge of First Instance of of February 20, 1942, concerning basic principles to be observed by the Philippine
Manila, respondents.1 Executive Commission in exercising legislative, executive and judicial powers.
Section 1 of said Order provided that "activities of the administration organs and
judicial courts in the Philippines shall be based upon the existing statutes, orders,
Marcelino Lontok for petitioner.
ordinances and customs. . . ."
P. A. Revilla for respondent Valdez Tan Keh.
Respondent Judge Dizon in his own behalf.
On October 14, 1943, the so-called Republic of the Philippines was inaugurated, but
FERIA, J.: no substantial change was effected thereby in the organization and jurisdiction of the
different courts that functioned during the Philippine Executive Commission, and in
the laws they administered and enforced.
This petition for mandamus in which petitioner prays that the respondent judge of the
lower court be ordered to continue the proceedings in civil case No. 3012 of said
On October 23, 1944, a few days after the historic landing in Leyte, General Douglas
court, which were initiated under the regime of the so-called Republic of the
MacArthur issued a proclamation to the People of the Philippines which declared:
Philippines established during the Japanese military occupation of these Islands.

1. That the Government of the Commonwealth of the Philippines is, subject

The respondent judge refused to take cognizance of and continue the proceedings in
to the supreme authority of the Government of the United States, the sole
said case on the ground that the proclamation issued on October 23, 1944, by
and only government having legal and valid jurisdiction over the people in
General Douglas MacArthur had the effect of invalidating and nullifying all judicial
areas of the Philippines free of enemy occupation and control;
proceedings and judgements of the court of the Philippines under the Philippine
Executive Commission and the Republic of the Philippines established during the
Japanese military occupation, and that, furthermore, the lower courts have no 2. That the laws now existing on the statute books of the Commonwealth of
jurisdiction to take cognizance of and continue judicial proceedings pending in the the Philippines and the regulations promulgated pursuant thereto are in full
courts of the defunct Republic of the Philippines in the absence of an enabling law force and effect and legally binding upon the people in areas of the
granting such authority. And the same respondent, in his answer and memorandum Philippines free of enemy occupation and control; and
filed in this Court, contends that the government established in the Philippines during
the Japanese occupation were no de facto governments. 3. That all laws, regulations and processes of any other government in the
Philippines than that of the said Commonwealth are null and void and
On January 2, 1942, the Imperial Japanese Forces occupied the City of Manila, and without legal effect in areas of the Philippines free of enemy occupation and
on the next day their Commander in Chief proclaimed "the Military Administration control.
under law over the districts occupied by the Army." In said proclamation, it was also
provided that "so far as the Military Administration permits, all the laws now in force in On February 3, 1945, the City of Manila was partially liberated and on February 27,
the Commonwealth, as well as executive and judicial institutions, shall continue to be 1945, General MacArthur, on behalf of the Government of the United States,
effective for the time being as in the past," and "all public officials shall remain in their solemnly declared "the full powers and responsibilities under the Constitution restored
present posts and carry on faithfully their duties as before." to the Commonwealth whose seat is here established as provided by law."

A civil government or central administration organization under the name of In the light of these facts and events of contemporary history, the principal questions
"Philippine Executive Commission was organized by Order No. 1 issued on January to be resolved in the present case may be reduced to the following:(1) Whether the
judicial acts and proceedings of the court existing in the Philippines under the force. Its distinguishing characteristics are (1), that its existence is maintained by
Philippine Executive Commission and the Republic of the Philippines were good and active military power with the territories, and against the rightful authority of an
valid and remained so even after the liberation or reoccupation of the Philippines by established and lawful government; and (2), that while it exists it necessarily be
the United States and Filipino forces; (2)Whether the proclamation issued on October obeyed in civil matters by private citizens who, by acts of obedience rendered in
23, 1944, by General Douglas MacArthur, Commander in Chief of the United States submission to such force, do not become responsible, or wrongdoers, for those acts,
Army, in which he declared "that all laws, regulations and processes of any of the though not warranted by the laws of the rightful government. Actual governments of
government in the Philippines than that of the said Commonwealth are null and void this sort are established over districts differing greatly in extent and conditions. They
and without legal effect in areas of the Philippines free of enemy occupation and are usually administered directly by military authority, but they may be administered,
control," has invalidated all judgements and judicial acts and proceedings of the said also, civil authority, supported more or less directly by military force. . . . One example
courts; and (3) If the said judicial acts and proceedings have not been invalidated by of this sort of government is found in the case of Castine, in Mine, reduced to British
said proclamation, whether the present courts of the Commonwealth, which were the possession in the war of 1812 . . . U. S. vs. Rice (4 Wheaton, 253). A like example is
same court existing prior to, and continued during, the Japanese military occupation found in the case of Tampico, occupied during the war with Mexico, by the troops of
of the Philippines, may continue those proceedings pending in said courts at the time the United States . . . Fleming vs. Page (9 Howard, 614). These were cases of
the Philippines were reoccupied and liberated by the United States and Filipino temporary possessions of territory by lawfull and regular governments at war with the
forces, and the Commonwealth of the Philippines were reestablished in the Islands. country of which the territory so possessed was part."

We shall now proceed to consider the first question, that is, whether or not under the The powers and duties of de facto governments of this description are regulated in
rules of international law the judicial acts and proceedings of the courts established in Section III of the Hague Conventions of 1907, which is a revision of the provisions of
the Philippines under the Philippine Executive Commission and the Republic of the the Hague Conventions of 1899 on the same subject of said Section III provides "the
Philippines were good and valid and remained good and valid even after the liberation authority of the legislative power having actually passed into the hands of the
or reoccupation of the Philippines by the United States and Filipino forces. occupant, the latter shall take steps in his power to reestablish and insure, as far as
possible, public order and safety, while respecting, unless absolutely prevented, the
1. It is a legal truism in political and international law that all acts and proceedings of laws in force in the country."
the legislative, executive, and judicial departments of a de facto government are good
and valid. The question to be determined is whether or not the governments According to the precepts of the Hague Conventions, as the belligerent occupant has
established in these Islands under the names of the Philippine Executive Commission the right and is burdened with the duty to insure public order and safety during his
and Republic of the Philippines during the Japanese military occupation or regime military occupation, he possesses all the powers of a de facto government, and he
were de facto governments. If they were, the judicial acts and proceedings of those can suspended the old laws and promulgate new ones and make such changes in the
governments remain good and valid even after the liberation or reoccupation of the old as he may see fit, but he is enjoined to respect, unless absolutely prevented by
Philippines by the American and Filipino forces. the circumstances prevailing in the occupied territory, the municipal laws in force in
the country, that is, those laws which enforce public order and regulate social and
There are several kinds of de facto governments. The first, or government de facto in commercial life of the country. On the other hand, laws of a political nature or
a proper legal sense, is that government that gets possession and control of, or affecting political relations, such as, among others, the right of assembly, the right to
usurps, by force or by the voice of the majority, the rightful legal governments and bear arms, the freedom of the press, and the right to travel freely in the territory
maintains itself against the will of the latter, such as the government of England under occupied, are considered as suspended or in abeyance during the military
the Commonwealth, first by Parliament and later by Cromwell as Protector. The occupation. Although the local and civil administration of justice is suspended as a
second is that which is established and maintained by military forces who invade and matter of course as soon as a country is militarily occupied, it is not usual for the
occupy a territory of the enemy in the course of war, and which is denominated a invader to take the whole administration into his own hands. In practice, the local
government of paramount force, as the cases of Castine, in Maine, which was ordinary tribunals are authorized to continue administering justice; and judges and
reduced to British possession in the war of 1812, and Tampico, Mexico, occupied other judicial officers are kept in their posts if they accept the authority of the
during the war with Mexico, by the troops of the United States. And the third is that belligerent occupant or are required to continue in their positions under the
established as an independent government by the inhabitants of a country who rise in supervision of the military or civil authorities appointed, by the Commander in Chief of
insurrection against the parent state of such as the government of the Southern the occupant. These principles and practice have the sanction of all publicists who
Confederacy in revolt not concerned in the present case with the first kind, but only have considered the subject, and have been asserted by the Supreme Court and
with the second and third kinds of de factogovernments. applied by the President of the United States.

Speaking of government "de facto" of the second kind, the Supreme Court of the The doctrine upon this subject is thus summed up by Halleck, in his work on
United States, in the case of Thorington vs. Smith (8 Wall., 1), said: "But there is International Law (Vol. 2, p. 444): "The right of one belligerent to occupy and govern
another description of government, called also by publicists a government de facto, the territory of the enemy while in its military possession, is one of the incidents of
but which might, perhaps, be more aptly denominated a government of paramount war, and flows directly from the right to conquer. We, therefore, do not look to the
Constitution or political institutions of the conqueror, for authority to establish a
government for the territory of the enemy in his possession, during its military aware of, seriously questions the validity of judicial or legislative Acts in the
occupation, nor for the rules by which the powers of such government are regulated insurrectionary States touching these and kindered subjects, where they were not
and limited. Such authority and such rules are derived directly from the laws war, as hostile in their purpose or mode of enforcement to the authority of the National
established by the usage of the of the world, and confirmed by the writings of Government, and did not impair the rights of citizens under the Constitution'. The
publicists and decisions of courts — in fine, from the law of nations. . . . The municipal same doctrine has been asserted in numerous other cases."
laws of a conquered territory, or the laws which regulate private rights, continue in
force during military occupation, excepts so far as they are suspended or changed by And the same court, in the case of Baldy vs. Hunter (171 U. S., 388, 400), held: "That
the acts of conqueror. . . . He, nevertheless, has all the powers of a de what occured or was done in respect of such matters under the authority of the laws
facto government, and can at his pleasure either change the existing laws or make of these local de facto governments should not be disregarded or held to be
new ones." invalid merely because those governments were organized in hostility to the Union
established by the national Constitution; this, because the existence of war between
And applying the principles for the exercise of military authority in an occupied the United States and the Confederate States did not relieve those who are within the
territory, which were later embodied in the said Hague Conventions, President insurrectionary lines from the necessity of civil obedience, nor destroy the bonds of
McKinley, in his executive order to the Secretary of War of May 19,1898, relating to society nor do away with civil government or the regular administration of the laws,
the occupation of the Philippines by United States forces, said in part: "Though the and because transactions in the ordinary course of civil society as organized within
powers of the military occupant are absolute and supreme, and immediately operate the enemy's territory although they may have indirectly or remotely promoted the
upon the political condition of the inhabitants, the municipal laws of the conquered ends of the de facto or unlawful government organized to effect a dissolution of the
territory, such as affect private rights of person and property and provide for the Union, were without blame 'except when proved to have been entered intowith
punishment of crime, are considered as continuing in force, so far as they are actual intent to further invasion or insurrection:'" and "That judicial and legislative acts
compatible with the new order of things, until they are suspended or superseded by in the respective states composing the so-called Confederate States should be
the occupying belligerent; and in practice they are not usually abrogated, but are respected by the courts if they were not hostile in their purpose or mode of
allowed to remain in force and to be administered by the ordinary tribunals, enforcement to the authority of the National Government, and did not impair the rights
substantially as they were before the occupation. This enlightened practice is, so far of citizens under the Constitution."
as possible, to be adhered to on the present occasion. The judges and the other
officials connected with the administration of justice may, if they accept the authority In view of the foregoing, it is evident that the Philippine Executive Commission, which
of the United States, continue to administer the ordinary law of the land as between was organized by Order No. 1, issued on January 23, 1942, by the Commander of the
man and man under the supervision of the American Commander in Chief." Japanese forces, was a civil government established by the military forces of
(Richardson's Messages and Papers of President, X, p. 209.) occupation and therefore a de facto government of the second kind. It was not
different from the government established by the British in Castine, Maine, or by the
As to "de facto" government of the third kind, the Supreme Court of the United States, United States in Tampico, Mexico. As Halleck says, "The government established
in the same case of Thorington vs. Smith, supra, recognized the government set up over an enemy's territory during the military occupation may exercise all the powers
by the Confederate States as a de factogovernment. In that case, it was held that "the given by the laws of war to the conqueror over the conquered, and is subject to all
central government established for the insurgent States differed from the temporary restrictions which that code imposes. It is of little consequence whether such
governments at Castine and Tampico in the circumstance that its authority did no government be called a military or civil government. Its character is the same and the
originate in lawful acts of regular war; but it was not, on the account, less actual or source of its authority the same. In either case it is a government imposed by the laws
less supreme. And we think that it must be classed among the governments of which of war, and so far it concerns the inhabitants of such territory or the rest of the world,
these are examples. . . . those laws alone determine the legality or illegality of its acts." (Vol. 2, p. 466.) The
fact that the Philippine Executive Commission was a civil and not a military
In the case of William vs. Bruffy (96 U. S. 176, 192), the Supreme Court of the United government and was run by Filipinos and not by Japanese nationals, is of no
States, discussing the validity of the acts of the Confederate States, said: "The same consequence. In 1806, when Napoleon occupied the greater part of Prussia, he
general form of government, the same general laws for the administration of justice retained the existing administration under the general direction of a french official
and protection of private rights, which had existed in the States prior to the rebellion, (Langfrey History of Napoleon, 1, IV, 25); and, in the same way, the Duke of
remained during its continuance and afterwards. As far as the Acts of the States do Willington, on invading France, authorized the local authorities to continue the
not impair or tend to impair the supremacy of the national authority, or the just rights exercise of their functions, apparently without appointing an English superior.
of citizens under the Constitution, they are, in general, to be treated as valid and (Wellington Despatches, XI, 307.). The Germans, on the other hand, when they
binding. As we said in Horn vs. Lockhart (17 Wall., 570; 21 Law. ed., 657): "The invaded France in 1870, appointed their own officials, at least in Alsace and Lorraine,
existence of a state of insurrection and war did not loosen the bonds of society, or do in every department of administration and of every rank. (Calvo, pars. 2186-93; Hall,
away with civil government or the regular administration of the laws. Order was to be International Law, 7th ed., p. 505, note 2.)
preserved, police regulations maintained, crime prosecuted, property protected,
contracts enforced, marriages celebrated, estates settled, and the transfer and The so-called Republic of the Philippines, apparently established and organized as a
descent of property regulated, precisely as in the time of peace. No one, that we are sovereign state independent from any other government by the Filipino people, was,
in truth and reality, a government established by the belligerent occupant or the the same principles as that of a territory occupied by the hostile army of an enemy at
Japanese forces of occupation. It was of the same character as the Philippine regular war with the legitimate power.
Executive Commission, and the ultimate source of its authority was the same — the
Japanese military authority and government. As General MacArthur stated in his The governments by the Philippine Executive Commission and the Republic of the
proclamation of October 23, 1944, a portion of which has been already quoted, "under Philippines during the Japanese military occupation being de facto governments, it
enemy duress, a so-called government styled as the 'Republic of the Philippines' was necessarily follows that the judicial acts and proceedings of the courts of justice of
established on October 14, 1943, based upon neither the free expression of the those governments, which are not of a political complexion, were good and valid, and,
people's will nor the sanction of the Government of the United States." Japan had no by virtue of the well-known principle of postliminy (postliminium) in international law,
legal power to grant independence to the Philippines or transfer the sovereignty of the remained good and valid after the liberation or reoccupation of the Philippines by the
United States to, or recognize the latent sovereignty of, the Filipino people, before its American and Filipino forces under the leadership of General Douglas MacArthur.
military occupation and possession of the Islands had matured into an absolute and According to that well-known principle in international law, the fact that a territory
permanent dominion or sovereignty by a treaty of peace or other means recognized in which has been occupied by an enemy comes again into the power of its legitimate
the law of nations. For it is a well-established doctrine in International Law, government of sovereignty, "does not, except in a very few cases, wipe out the effects
recognized in Article 45 of the Hauge Conventions of 1907 (which prohibits of acts done by an invader, which for one reason or another it is within his
compulsion of the population of the occupied territory to swear allegiance to the competence to do. Thus judicial acts done under his control, when they are not of a
hostile power), the belligerent occupation, being essentially provisional, does not political complexion, administrative acts so done, to the extent that they take effect
serve to transfer sovereignty over the territory controlled although the de during the continuance of his control, and the various acts done during the same time
jure government is during the period of occupancy deprived of the power to exercise by private persons under the sanction of municipal law, remain good. Were it
its rights as such. (Thirty Hogshead of Sugar vs. Boyle, 9 Cranch, 191; United otherwise, the whole social life of a community would be paralyzed by an invasion;
States vs. Rice, 4 Wheat., 246; Fleming vs.Page, 9 Howard, 603; Downes vs. Bidwell, and as between the state and the individuals the evil would be scarcely less, — it
182 U. S., 345.) The formation of the Republic of the Philippines was a scheme would be hard for example that payment of taxes made under duress should be
contrived by Japan to delude the Filipino people into believing in the apparent ignored, and it would be contrary to the general interest that the sentences passed
magnanimity of the Japanese gesture of transferring or turning over the rights of upon criminals should be annulled by the disappearance of the intrusive government
government into the hands of Filipinos. It was established under the mistaken belief ." (Hall, International Law, 7th ed., p. 518.) And when the occupation and the
that by doing so, Japan would secure the cooperation or at least the neutrality of the abandonment have been each an incident of the same war as in the present case,
Filipino people in her war against the United States and other allied nations. postliminy applies, even though the occupant has acted as conqueror and for the time
substituted his own sovereignty as the Japanese intended to do apparently in
Indeed, even if the Republic of the Philippines had been established by the free will of granting independence to the Philippines and establishing the so-called Republic of
the Filipino who, taking advantage of the withdrawal of the American forces from the the Philippines. (Taylor, International Law, p. 615.)
Islands, and the occupation thereof by the Japanese forces of invasion, had
organized an independent government under the name with the support and backing That not only judicial but also legislative acts of de facto governments, which are not
of Japan, such government would have been considered as one established by the of a political complexion, are and remain valid after reoccupation of a territory
Filipinos in insurrection or rebellion against the parent state or the Unite States. And occupied by a belligerent occupant, is confirmed by the Proclamation issued by
as such, it would have been a de facto government similar to that organized by the General Douglas MacArthur on October 23, 1944, which declares null and void all
confederate states during the war of secession and recognized as such by the by the laws, regulations and processes of the governments established in the Philippines
Supreme Court of the United States in numerous cases, notably those of during the Japanese occupation, for it would not have been necessary for said
Thorington vs. Smith, Williams vs.Bruffy, and Badly vs. Hunter, above quoted; and proclamation to abrogate them if they were invalid ab initio.
similar to the short-lived government established by the Filipino insurgents in the
Island of Cebu during the Spanish-American war, recognized as a de
facto government by the Supreme Court of the United States in the case of 2. The second question hinges upon the interpretation of the phrase "processes of
McCleod vs. United States (299 U. S., 416). According to the facts in the last-named any other government" as used in the above-quoted proclamation of General Douglas
case, the Spanish forces evacuated the Island of Cebu on December 25, 1898, MacArthur of October 23, 1944 — that is, whether it was the intention of the
having first appointed a provisional government, and shortly afterwards, the Filipinos, Commander in Chief of the American Forces to annul and void thereby all judgments
formerly in insurrection against Spain, took possession of the Islands and established and judicial proceedings of the courts established in the Philippines during the
a republic, governing the Islands until possession thereof was surrendered to the Japanese military occupation.
United States on February 22, 1898. And the said Supreme Court held in that case
that "such government was of the class of de facto governments described in I The phrase "processes of any other government" is broad and may refer not only to
Moore's International Law Digest, S 20, . . . 'called also by publicists a government de the judicial processes, but also to administrative or legislative, as well as
facto, but which might, perhaps, be more aptly denominated a government of constitutional, processes of the Republic of the Philippines or other governmental
paramount force . . '." That is to say, that the government of a country in possession agencies established in the Islands during the Japanese occupation. Taking into
of belligerent forces in insurrection or rebellion against the parent state, rests upon consideration the fact that, as above indicated, according to the well-known principles
of international law all judgements and judicial proceedings, which are not of a annul all the judicial acts or proceedings of the tribunals which the belligerent
political complexion, of the de facto governments during the Japanese military occupant had the right and duty to establish in order to insure public order and safety
occupation were good and valid before and remained so after the occupied territory during military occupation, would be sufficient to paralyze the social life of the country
had come again into the power of the titular sovereign, it should be presumed that it or occupied territory, for it would have to be expected that litigants would not willingly
was not, and could not have been, the intention of General Douglas MacArthur, in submit their litigation to courts whose judgements or decisions may afterwards be
using the phrase "processes of any other government" in said proclamation, to refer annulled, and criminals would not be deterred from committing crimes or offenses in
to judicial processes, in violation of said principles of international law. The only the expectancy that they may escaped the penalty if judgments rendered against
reasonable construction of the said phrase is that it refers to governmental processes them may be afterwards set aside.
other than judicial processes of court proceedings, for according to a well-known rule
of statutory construction, set forth in 25 R. C. L., p. 1028, "a statute ought never to be That the proclamation has not invalidated all the judgements and proceedings of the
construed to violate the law of nations if any other possible construction remains." courts of justice during the Japanese regime, is impliedly confirmed by Executive
Order No. 37, which has the force of law, issued by the President of the Philippines
It is true that the commanding general of a belligerent army of occupation, as an on March 10, 1945, by virtue of the emergency legislative power vested in him by the
agent of his government, may not unlawfully suspend existing laws and promulgate Constitution and the laws of the Commonwealth of the Philippines. Said Executive
new ones in the occupied territory, if and when the exigencies of the military order abolished the Court of Appeals, and provided "that all case which have
occupation demand such action. But even assuming that, under the law of nations, heretofore been duly appealed to the Court of Appeals shall be transmitted to the
the legislative power of a commander in chief of military forces who liberates or Supreme Court final decision." This provision impliedly recognizes that the judgments
reoccupies his own territory which has been occupied by an enemy, during the and proceedings of the courts during the Japanese military occupation have not been
military and before the restoration of the civil regime, is as broad as that of the invalidated by the proclamation of General MacArthur of October 23, because the
commander in chief of the military forces of invasion and occupation (although the said Order does not say or refer to cases which have been duly appealed to said
exigencies of military reoccupation are evidently less than those of occupation), it is to court prior to the Japanese occupation, but to cases which had therefore, that is, up
be presumed that General Douglas MacArthur, who was acting as an agent or a to March 10, 1945, been duly appealed to the Court of Appeals; and it is to be
representative of the Government and the President of the United States, presumed that almost all, if not all, appealed cases pending in the Court of Appeals
constitutional commander in chief of the United States Army, did not intend to act prior to the Japanese military occupation of Manila on January 2, 1942, had been
against the principles of the law of nations asserted by the Supreme Court of the disposed of by the latter before the restoration of the Commonwealth Government in
United States from the early period of its existence, applied by the Presidents of the 1945; while almost all, if not all, appealed cases pending on March 10, 1945, in the
United States, and later embodied in the Hague Conventions of 1907, as above Court of Appeals were from judgments rendered by the Court of First Instance during
indicated. It is not to be presumed that General Douglas MacArthur, who enjoined in the Japanese regime.
the same proclamation of October 23, 1944, "upon the loyal citizens of the Philippines
full respect and obedience to the Constitution of the Commonwealth of the The respondent judge quotes a portion of Wheaton's International Law which say:
Philippines," should not only reverse the international policy and practice of his own "Moreover when it is said that an occupier's acts are valid and under international law
government, but also disregard in the same breath the provisions of section 3, Article should not be abrogated by the subsequent conqueror, it must be remembered that
II, of our Constitution, which provides that "The Philippines renounces war as an no crucial instances exist to show that if his acts should be reversed, any international
instrument of national policy, and adopts the generally accepted principles of wrong would be committed. What does happen is that most matters are allowed to
international law as part of the law of the Nation." stand by the restored government, but the matter can hardly be put further than this."
(Wheaton, International Law, War, 7th English edition of 1944, p. 245.) And from this
Moreover, from a contrary construction great inconvenience and public hardship quotion the respondent judge "draws the conclusion that whether the acts of the
would result, and great public interests would be endangered and sacrificed, for occupant should be considered valid or not, is a question that is up to the restored
disputes or suits already adjudged would have to be again settled accrued or vested government to decide; that there is no rule of international law that denies to the
rights nullified, sentences passed on criminals set aside, and criminals might easily restored government to decide; that there is no rule of international law that denies to
become immune for evidence against them may have already disappeared or be no the restored government the right of exercise its discretion on the matter, imposing
longer available, especially now that almost all court records in the Philippines have upon it in its stead the obligation of recognizing and enforcing the acts of the
been destroyed by fire as a consequence of the war. And it is another well- overthrown government."
established rule of statutory construction that where great inconvenience will result
from a particular construction, or great public interests would be endangered or There is doubt that the subsequent conqueror has the right to abrogate most of the
sacrificed, or great mischief done, such construction is to be avoided, or the court acts of the occupier, such as the laws, regulations and processes other than judicial
ought to presume that such construction was not intended by the makers of the law, of the government established by the belligerent occupant. But in view of the fact that
unless required by clear and unequivocal words. (25 R. C. L., pp. 1025, 1027.) the proclamation uses the words "processes of any other government" and not
"judicial processes" prisely, it is not necessary to determine whether or not General
The mere conception or thought of possibility that the titular sovereign or his Douglas MacArthur had power to annul and set aside all judgments and proceedings
representatives who reoccupies a territory occupied by an enemy, may set aside or of the courts during the Japanese occupation. The question to be determined is
whether or not it was his intention, as representative of the President of the United exercised. . . . It was an arbitrary stretch of authority, needful to no good end that can
States, to avoid or nullify them. If the proclamation had, expressly or by necessary be imagined. Whether Congress could have conferred the power to do such an act is
implication, declared null and void the judicial processes of any other government, it a question we are not called upon to consider. It is an unbending rule of law that the
would be necessary for this court to decide in the present case whether or not exercise of military power, where the rights of the citizen are concerned, shall never
General Douglas MacArthur had authority to declare them null and void. But the be pushed beyond what the exigency requires. (Mithell vs. Harmony, 13 How., 115;
proclamation did not so provide, undoubtedly because the author thereof was fully Warden vs. Bailey, 4 Taunt., 67; Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1 Smith's
aware of the limitations of his powers as Commander in Chief of Military Forces of L.C., pt. 2, p. 934.) Viewing the subject before us from the standpoint indicated, we
liberation or subsequent conqueror. hold that the order was void."

Not only the Hague Regulations, but also the principles of international law, as they It is, therefore, evident that the proclamation of General MacArthur of October 23,
result from the usages established between civilized nations, the laws of humanity 1944, which declared that "all laws, regulations and processes of any other
and the requirements of the public of conscience, constitute or from the law of government in the Philippines than that of the said Commonwealth are null and void
nations. (Preamble of the Hague Conventions; Westlake, International Law, 2d ed., without legal effect in areas of the Philippines free of enemy occupation and control,"
Part II, p. 61.) Article 43, section III, of the Hague Regulations or Conventions which has not invalidated the judicial acts and proceedings, which are not a political
we have already quoted in discussing the first question, imposes upon the occupant complexion, of the courts of justice in the Philippines that were continued by the
the obligation to establish courts; and Article 23 (h), section II, of the same Philippine Executive Commission and the Republic of the Philippines during the
Conventions, which prohibits the belligerent occupant "to declare . . . suspended . . . Japanese military occupation, and that said judicial acts and proceedings were good
in a Court of Law the rights and action of the nationals of the hostile party," forbids and valid before and now good and valid after the reoccupation of liberation of the
him to make any declaration preventing the inhabitants from using their courts to Philippines by the American and Filipino forces.
assert or enforce their civil rights. (Decision of the Court of Appeals of England in the
case of Porter vs. Fruedenburg, L.R. [1915], 1 K.B., 857.) If a belligerent occupant is 3. The third and last question is whether or not the courts of the Commonwealth,
required to establish courts of justice in the territory occupied, and forbidden to which are the same as those existing prior to, and continued during, the Japanese
prevent the nationals thereof from asserting or enforcing therein their civil rights, by military occupation by the Philippine Executive Commission and by the so-called
necessary implication, the military commander of the forces of liberation or the Republic of the Philippines, have jurisdiction to continue now the proceedings in
restored government is restrained from nullifying or setting aside the judgments actions pending in said courts at the time the Philippine Islands were reoccupied or
rendered by said courts in their litigation during the period of occupation. Otherwise, liberated by the American and Filipino forces, and the Commonwealth Government
the purpose of these precepts of the Hague Conventions would be thwarted, for to was restored.
declare them null and void would be tantamount to suspending in said courts the right
and action of the nationals of the territory during the military occupation thereof by the
enemy. It goes without saying that a law that enjoins a person to do something will Although in theory the authority the authority of the local civil and judicial
not at the same time empower another to undo the same. Although the question administration is suspended as a matter of course as soon as military occupation
whether the President or commanding officer of the United States Army has violated takes place, in practice the invader does not usually take the administration of justice
restraints imposed by the constitution and laws of his country is obviously of a into his own hands, but continues the ordinary courts or tribunals to administer the
domestic nature, yet, in construing and applying limitations imposed on the executive laws of the country which he is enjoined, unless absolutely prevented, to respect. As
authority, the Supreme Court of the United States, in the case of stated in the above-quoted Executive Order of President McKinley to the Secretary of
Ochoa, vs. Hernandez (230 U.S., 139), has declared that they "arise from general War on May 19, 1898, "in practice, they (the municipal laws) are not usually
rules of international law and from fundamental principles known wherever the abrogated but are allowed to remain in force and to be administered by the ordinary
American flag flies." tribunals substantially as they were before the occupation. This enlightened practice
is, so far as possible, to be adhered to on the present occasion." And Taylor in this
connection says: "From a theoretical point of view it may be said that the conqueror is
In the case of Raymond vs. Thomas (91 U.S., 712), a special order issued by the armed with the right to substitute his arbitrary will for all preexisting forms of
officer in command of the forces of the United States in South Carolina after the end government, legislative, executive and judicial. From the stand-point of actual practice
of the Civil War, wholly annulling a decree rendered by a court of chancery in that such arbitrary will is restrained by the provision of the law of nations which compels
state in a case within its jurisdiction, was declared void, and not warranted by the acts the conqueror to continue local laws and institution so far as military necessity will
approved respectively March 2, 1867 (14 Stat., 428), and July 19 of the same year permit." (Taylor, International Public Law, p.596.) Undoubtedly, this practice has been
(15 id., 14), which defined the powers and duties of military officers in command of adopted in order that the ordinary pursuits and business of society may not be
the several states then lately in rebellion. In the course of its decision the court said; unnecessarily deranged, inasmuch as belligerent occupation is essentially
"We have looked carefully through the acts of March 2, 1867 and July 19, 1867. They provisional, and the government established by the occupant of transient character.
give very large governmental powers to the military commanders designated, within
the States committed respectively to their jurisdiction; but we have found nothing to
warrant the order here in question. . . . The clearest language would be necessary to Following these practice and precepts of the law of nations, Commander in Chief of
satisfy us that Congress intended that the power given by these acts should be so the Japanese Forces proclaimed on January 3, 1942, when Manila was occupied, the
military administration under martial law over the territory occupied by the army, and institution or courts so continued remain the laws and institutions or courts of the
ordered that "all the laws now in force in the Commonwealth, as well as executive and occupied territory. The laws and the courts of the Philippines, therefore, did not
judicial institutions, shall continue to be affective for the time being as in the past," become, by being continued as required by the law of nations, laws and courts of
and "all public officials shall remain in their present post and carry on faithfully their Japan. The provision of Article 45, section III, of the Hague Conventions of 1907
duties as before." When the Philippine Executive Commission was organized by which prohibits any compulsion of the population of occupied territory to swear
Order No. 1 of the Japanese Commander in Chief, on January 23, 1942, the allegiance to the hostile power, "extends to prohibit everything which would assert or
Chairman of the Executive Commission, by Executive Orders Nos. 1 and 4 of January imply a change made by the invader in the legitimate sovereignty. This duty is neither
30 and February 5, respectively, continued the Supreme Court, Court of Appeals, to innovate in the political life of the occupied districts, nor needlessly to break the
Court of First Instance, and justices of the peace of courts, with the same jurisdiction continuity of their legal life. Hence, so far as the courts of justice are allowed to
in conformity with the instructions given by the Commander in Chief of the Imperial continue administering the territorial laws, they must be allowed to give their
Japanese Army in Order No. 3 of February 20, 1942. And on October 14, 1943 when sentences in the name of the legitimate sovereign " (Westlake, Int. Law, Part II,
the so-called Republic of the Philippines was inaugurated, the same courts were second ed., p. 102). According to Wheaton, however, the victor need not allow the
continued with no substantial change in organization and jurisdiction thereof. use of that of the legitimate government. When in 1870, the Germans in France
attempted to violate that rule by ordering, after the fall of the Emperor Napoleon, the
If the proceedings pending in the different courts of the Islands prior to the Japanese courts of Nancy to administer justice in the name of the "High German Powers
military occupation had been continued during the Japanese military administration, occupying Alsace and Lorraine," upon the ground that the exercise of their powers in
the Philippine Executive Commission, and the so-called Republic of the Philippines, it the name of French people and government was at least an implied recognition of the
stands to reason that the same courts, which had become reestablished and Republic, the courts refused to obey and suspended their sitting. Germany originally
conceived of as having in continued existence upon the reoccupation and liberation of ordered the use of the name of "High German Powers occupying Alsace and
the Philippines by virtue of the principle of postliminy (Hall, International Law, 7th ed., Lorraine," but later offered to allow use of the name of the Emperor or a compromise.
p. 516), may continue the proceedings in cases then pending in said courts, without (Wheaton, International Law, War, 7th English ed. 1944, p. 244.)
necessity of enacting a law conferring jurisdiction upon them to continue said
proceedings. As Taylor graphically points out in speaking of said principles "a state or Furthermore, it is a legal maxim, that excepting that of a political nature, "Law once
other governmental entity, upon the removal of a foreign military force, resumes its established continues until changed by the some competent legislative power. It is not
old place with its right and duties substantially unimpaired. . . . Such political change merely by change of sovereignty." (Joseph H. Beale, Cases on Conflict of
resurrection is the result of a law analogous to that which enables elastic bodies to Laws, III, Summary Section 9, citing Commonwealth vs. Chapman, 13 Met., 68.) As
regain their original shape upon removal of the external force, — and subject to the the same author says, in his Treatise on the Conflict on Laws (Cambridge, 1916,
same exception in case of absolute crushing of the whole fibre and content." (Taylor, Section 131): "There can no break or interregnum in law. From the time the law
International Public Law, p. 615.) comes into existence with the first-felt corporateness of a primitive people it must last
until the final disappearance of human society. Once created, it persists until a
The argument advanced by the respondent judge in his resolution in support in his change take place, and when changed it continues in such changed condition until
conclusion that the Court of First Instance of Manila presided over by him "has no the next change, and so forever. Conquest or colonization is impotent to bring law to
authority to take cognizance of, and continue said proceedings (of this case) to final an end; in spite of change of constitution, the law continues unchanged until the new
judgment until and unless the Government of the Commonwealth of the Philippines . . sovereign by legislative acts creates a change."
. shall have provided for the transfer of the jurisdiction of the courts of the now defunct
Republic of the Philippines, and the cases commenced and the left pending therein," As courts are creatures of statutes and their existence defends upon that of the laws
is "that said courts were a government alien to the Commonwealth Government. The which create and confer upon them their jurisdiction, it is evident that such laws, not
laws they enforced were, true enough, laws of the Commonwealth prior to Japanese being a political nature, are not abrogated by a change of sovereignty, and continue
occupation, but they had become the laws — and the courts had become the in force "ex proprio vigore" unless and until repealed by legislative acts. A
institutions — of Japan by adoption (U.S. vs. Reiter. 27 F. Cases, No. 16146), as they proclamation that said laws and courts are expressly continued is not necessary in
became later on the laws and institutions of the Philippine Executive Commission and order that they may continue in force. Such proclamation, if made, is but a declaration
the Republic of the Philippines." of the intention of respecting and not repealing those laws. Therefore, even assuming
that Japan had legally acquired sovereignty over these Islands, which she had
The court in the said case of U.S. vs. Reiter did not and could not say that the laws afterwards transferred to the so-called Republic of the Philippines, and that the laws
and institutions of the country occupied if continued by the conqueror or occupant, and the courts of these Islands had become the courts of Japan, as the said courts of
become the laws and the courts, by adoption, of the sovereign nation that is militarily the laws creating and conferring jurisdiction upon them have continued in force until
occupying the territory. Because, as already shown, belligerent or military occupation now, it necessarily follows that the same courts may continue exercising the same
is essentially provisional and does not serve to transfer the sovereignty over the jurisdiction over cases pending therein before the restoration of the Commonwealth
occupied territory to the occupant. What the court said was that, if such laws and Government, unless and until they are abolished or the laws creating and conferring
institutions are continued in use by the occupant, they become his and derive their jurisdiction upon them are repealed by the said government. As a consequence,
force from him, in the sense that he may continue or set them aside. The laws and enabling laws or acts providing that proceedings pending in one court be continued
by or transferred to another court, are not required by the mere change of It is, therefore, obvious that the present courts have jurisdiction to continue, to final
government or sovereignty. They are necessary only in case the former courts are judgment, the proceedings in cases, not of political complexion, pending therein at the
abolished or their jurisdiction so change that they can no longer continue taking time of the restoration of the Commonwealth Government.
cognizance of the cases and proceedings commenced therein, in order that the new
courts or the courts having jurisdiction over said cases may continue the proceedings. Having arrived at the above conclusions, it follows that the Court of First Instance of
When the Spanish sovereignty in the Philippine Islands ceased and the Islands came Manila has jurisdiction to continue to final judgment the proceedings in civil case No.
into the possession of the United States, the "Audiencia" or Supreme Court was 3012, which involves civil rights of the parties under the laws of the Commonwealth
continued and did not cease to exist, and proceeded to take cognizance of the Government, pending in said court at the time of the restoration of the said
actions pending therein upon the cessation of the Spanish sovereignty until the said Government; and that the respondent judge of the court, having refused to act and
"Audiencia" or Supreme Court was abolished, and the Supreme Court created in continue him does a duty resulting from his office as presiding judge of that
Chapter II of Act No. 136 was substituted in lieu thereof. And the Courts of First court, mandamus is the speedy and adequate remedy in the ordinary course of law,
Instance of the Islands during the Spanish regime continued taking cognizance of especially taking into consideration the fact that the question of jurisdiction herein
cases pending therein upon the change of sovereignty, until section 65 of the same involved does affect not only this particular case, but many other cases now pending
Act No. 136 abolished them and created in its Chapter IV the present Courts of First in all the courts of these Islands.
Instance in substitution of the former. Similarly, no enabling acts were enacted during
the Japanese occupation, but a mere proclamation or order that the courts in the
Island were continued. In view of all the foregoing it is adjudged and decreed that a writ of mandamus issue,
directed to the respondent judge of the Court of First Instance of Manila, ordering him
to take cognizance of and continue to final judgment the proceedings in civil case No.
On the other hand, during the American regime, when section 78 of Act No. 136 was 3012 of said court. No pronouncement as to costs. So ordered.
enacted abolishing the civil jurisdiction of the provost courts created by the military
government of occupation in the Philippines during the Spanish-American War of
1898, the same section 78 provided for the transfer of all civil actions then pending in Moran, C.J., Ozaeta, Paras, Jaranilla and Pablo, JJ., concur.
the provost courts to the proper tribunals, that is, to the justices of the peace courts,
Court of First Instance, or Supreme Court having jurisdiction over them according to
law. And later on, when the criminal jurisdiction of provost courts in the City of Manila
was abolished by section 3 of Act No. 186, the same section provided that criminal
cases pending therein within the jurisdiction of the municipal court created by Act No.
183 were transferred to the latter.

That the present courts as the same courts which had been functioning during the
Japanese regime and, therefore, can continue the proceedings in cases pending
therein prior to the restoration of the Commonwealth of the Philippines, is confirmed
by Executive Order No. 37 which we have already quoted in support of our conclusion
in connection with the second question. Said Executive Order provides"(1) that the
Court of Appeals created and established under Commonwealth Act No. 3 as
amended, be abolished, as it is hereby abolished," and "(2) that all cases which have
heretofore been duly appealed to the Court of Appeals shall be transmitted to the
Supreme Court for final decision. . . ." In so providing, the said Order considers that
the Court of Appeals abolished was the same that existed prior to, and continued
after, the restoration of the Commonwealth Government; for, as we have stated in
discussing the previous question, almost all, if not all, of the cases pending therein, or
which had theretofore (that is, up to March 10, 1945) been duly appealed to said
court, must have been cases coming from the Courts of First Instance during the so-
called Republic of the Philippines. If the Court of Appeals abolished by the said
Executive Order was not the same one which had been functioning during the
Republic, but that which had existed up to the time of the Japanese occupation, it
would have provided that all the cases which had, prior to and up to that occupation
on January 2, 1942, been dully appealed to the said Court of Appeals shall be
transmitted to the Supreme Court for final decision.
 on the reported unexplained wealth of Ramas. The relevant part of the Resolution
reads:
REVOLUTIONARY GOVERNMENT
III. FINDINGS and EVALUATION:
EN BANC
Evidence in the record showed that respondent is the owner of a house and lot
G.R. No. 104768 July 21, 2003 located at 15-Yakan St., La Vista, Quezon City. He is also the owner of a house and
lot located in Cebu City. The lot has an area of 3,327 square meters.
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs. The value of the property located in Quezon City may be estimated modestly at
SANDIGANBAYAN, MAJOR GENERAL JOSEPHUS Q. RAMAS and ELIZABETH ₱700,000.00.
DIMAANO, Respondents.
The equipment/items and communication facilities which were found in the premises
DECISION of Elizabeth Dimaano and were confiscated by elements of the PC Command of
Batangas were all covered by invoice receipt in the name of CAPT. EFREN SALIDO,
RSO Command Coy, MSC, PA. These items could not have been in the possession
CARPIO, J.: of Elizabeth Dimaano if not given for her use by respondent Commanding General of
the Philippine Army.
The Case
Aside from the military equipment/items and communications equipment, the raiding
Before this Court is a petition for review on certiorari seeking to set aside the team was also able to confiscate money in the amount of ₱2,870,000.00 and $50,000
Resolutions of the Sandiganbayan (First Division) dated 18 November 1991 and 25
1 US Dollars in the house of Elizabeth Dimaano on 3 March 1986.
March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioner’s
Amended Complaint and ordered the return of the confiscated items to respondent Affidavits of members of the Military Security Unit, Military Security Command,
Elizabeth Dimaano, while the second Resolution denied petitioner’s Motion for Philippine Army, stationed at Camp Eldridge, Los Baños, Laguna, disclosed that
Reconsideration. Petitioner prays for the grant of the reliefs sought in its Amended Elizabeth Dimaano is the mistress of respondent. That respondent usually goes and
Complaint, or in the alternative, for the remand of this case to the Sandiganbayan stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga,
(First Division) for further proceedings allowing petitioner to complete the presentation Itaas, Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses
of its evidence. respondent. That on February 25, 1986, a person who rode in a car went to the
residence of Elizabeth Dimaano with four (4) attache cases filled with money and
Antecedent Facts owned by MGen Ramas.

Immediately upon her assumption to office following the successful EDSA Revolution, Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible
then President Corazon C. Aquino issued Executive Order No. 1 ("EO No. 1") means of income and is supported by respondent for she was formerly a mere
creating the Presidential Commission on Good Government ("PCGG"). EO No. 1 secretary.
primarily tasked the PCGG to recover all ill-gotten wealth of former President
Ferdinand E. Marcos, his immediate family, relatives, subordinates and close Taking in toto the evidence, Elizabeth Dimaano could not have used the military
associates. EO No. 1 vested the PCGG with the power "(a) to conduct investigation equipment/items seized in her house on March 3, 1986 without the consent of
as may be necessary in order to accomplish and carry out the purposes of this order" respondent, he being the Commanding General of the Philippine Army. It is also
and the power "(h) to promulgate such rules and regulations as may be necessary to impossible for Elizabeth Dimaano to claim that she owns the ₱2,870,000.00 and
carry out the purpose of this order." Accordingly, the PCGG, through its then $50,000 US Dollars for she had no visible source of income.
Chairman Jovito R. Salonga, created an AFP Anti-Graft Board ("AFP Board") tasked
to investigate reports of unexplained wealth and corrupt practices by AFP personnel,
whether in the active service or retired.
2
This money was never declared in the Statement of Assets and Liabilities of
respondent. There was an intention to cover the existence of these money because
these are all ill-gotten and unexplained wealth. Were it not for the affidavits of the
Based on its mandate, the AFP Board investigated various reports of alleged members of the Military Security Unit assigned at Camp Eldridge, Los Baños,
unexplained wealth of respondent Major General Josephus Q. Ramas ("Ramas"). On Laguna, the existence and ownership of these money would have never been known.
27 July 1987, the AFP Board issued a Resolution on its findings and recommendation
The Statement of Assets and Liabilities of respondent were also submitted for Dimaano filed her own Answer to the Amended Complaint. Admitting her employment
scrutiny and analysis by the Board’s consultant. Although the amount of as a clerk-typist in the office of Ramas from January-November 1978 only, Dimaano
₱2,870,000.00 and $50,000 US Dollars were not included, still it was disclosed that claimed ownership of the monies, communications equipment, jewelry and land titles
respondent has an unexplained wealth of ₱104,134. 60. taken from her house by the Philippine Constabulary raiding team.

IV. CONCLUSION: After termination of the pre-trial, the court set the case for trial on the merits on 9-11
7

November 1988.
In view of the foregoing, the Board finds that a prima facie case exists against
respondent for ill-gotten and unexplained wealth in the amount of ₱2,974,134.00 and On 9 November 1988, petitioner asked for a deferment of the hearing due to its lack
$50,000 US Dollars. of preparation for trial and the absence of witnesses and vital documents to support
its case. The court reset the hearing to 17 and 18 April 1989.
V. RECOMMENDATION:
On 13 April 1989, petitioner filed a motion for leave to amend the complaint in order
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be "to charge the delinquent properties with being subject to forfeiture as having been
prosecuted and tried for violation of RA 3019, as amended, otherwise known as "Anti- unlawfully acquired by defendant Dimaano alone x x x." 8

Graft and Corrupt Practices Act" and RA 1379, as amended, otherwise known as
"The Act for the Forfeiture of Unlawfully Acquired Property."3
Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded with
petitioner’s presentation of evidence on the ground that the motion for leave to amend
Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under Republic Act complaint did not state when petitioner would file the amended complaint. The
No. 1379 ("RA No. 1379") against Ramas.
4
Sandiganbayan further stated that the subject matter of the amended complaint was
on its face vague and not related to the existing complaint. The Sandiganbayan also
held that due to the time that the case had been pending in court, petitioner should
Before Ramas could answer the petition, then Solicitor General Francisco I. Chavez proceed to present its evidence.
filed an Amended Complaint naming the Republic of the Philippines ("petitioner"),
represented by the PCGG, as plaintiff and Ramas as defendant. The Amended
Complaint also impleaded Elizabeth Dimaano ("Dimaano") as co-defendant. After presenting only three witnesses, petitioner asked for a postponement of the trial.

The Amended Complaint alleged that Ramas was the Commanding General of the On 28 September 1989, during the continuation of the trial, petitioner manifested its
Philippine Army until 1986. On the other hand, Dimaano was a confidential agent of inability to proceed to trial because of the absence of other witnesses or lack of
the Military Security Unit, Philippine Army, assigned as a clerk-typist at the office of further evidence to present. Instead, petitioner reiterated its motion to amend the
Ramas from 1 January 1978 to February 1979. The Amended Complaint further complaint to conform to the evidence already presented or to change the averments
alleged that Ramas "acquired funds, assets and properties manifestly out of to show that Dimaano alone unlawfully acquired the monies or properties subject of
proportion to his salary as an army officer and his other income from legitimately the forfeiture.
acquired property by taking undue advantage of his public office and/or using his
power, authority and influence as such officer of the Armed Forces of the Philippines The Sandiganbayan noted that petitioner had already delayed the case for over a
and as a subordinate and close associate of the deposed President Ferdinand year mainly because of its many postponements. Moreover, petitioner would want the
Marcos." 5
case to revert to its preliminary stage when in fact the case had long been ready for
trial. The Sandiganbayan ordered petitioner to prepare for presentation of its
The Amended Complaint also alleged that the AFP Board, after a previous inquiry, additional evidence, if any.
found reasonable ground to believe that respondents have violated RA No. 1379. The 6

Amended Complaint prayed for, among others, the forfeiture of respondents’ During the trial on 23 March 1990, petitioner again admitted its inability to present
properties, funds and equipment in favor of the State. further evidence. Giving petitioner one more chance to present further evidence or to
amend the complaint to conform to its evidence, the Sandiganbayan reset the trial to
Ramas filed an Answer with Special and/or Affirmative Defenses and Compulsory 18 May 1990. The Sandiganbayan, however, hinted that the re-setting was without
Counterclaim to the Amended Complaint. In his Answer, Ramas contended that his prejudice to any action that private respondents might take under the circumstances.
property consisted only of a residential house at La Vista Subdivision, Quezon City,
valued at ₱700,000, which was not out of proportion to his salary and other legitimate However, on 18 May 1990, petitioner again expressed its inability to proceed to trial
income. He denied ownership of any mansion in Cebu City and the cash, because it had no further evidence to present. Again, in the interest of justice, the
communications equipment and other items confiscated from the house of Dimaano. Sandiganbayan granted petitioner 60 days within which to file an appropriate
pleading. The Sandiganbayan, however, warned petitioner that failure to act would The Issues
constrain the court to take drastic action.
Petitioner raises the following issues:
Private respondents then filed their motions to dismiss based on Republic v.
Migrino. The Court held in Migrino that the PCGG does not have jurisdiction to
9
A. RESPONDENT COURT SERIOUSLY ERRED IN CONCLUDING THAT
investigate and prosecute military officers by reason of mere position held without a PETITIONER’S EVIDENCE CANNOT MAKE A CASE FOR FORFEITURE
showing that they are "subordinates" of former President Marcos. AND THAT THERE WAS NO SHOWING OF CONSPIRACY, COLLUSION
OR RELATIONSHIP BY CONSANGUINITY OR AFFINITY BY AND
On 18 November 1991, the Sandiganbayan rendered a resolution, the dispositive BETWEEN RESPONDENT RAMAS AND RESPONDENT DIMAANO
portion of which states: NOTWITHSTANDING THE FACT THAT SUCH CONCLUSIONS WERE
CLEARLY UNFOUNDED AND PREMATURE, HAVING BEEN RENDERED
WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint, PRIOR TO THE COMPLETION OF THE PRESENTATION OF THE
without pronouncement as to costs. The counterclaims are likewise dismissed for lack EVIDENCE OF THE PETITIONER.
of merit, but the confiscated sum of money, communications equipment, jewelry and
land titles are ordered returned to Elizabeth Dimaano. B. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE
ACTIONS TAKEN BY THE PETITIONER, INCLUDING THE FILING OF
The records of this case are hereby remanded and referred to the Hon. Ombudsman, THE ORIGINAL COMPLAINT AND THE AMENDED COMPLAINT, SHOULD
who has primary jurisdiction over the forfeiture cases under R.A. No. 1379, for such BE STRUCK OUT IN LINE WITH THE RULINGS OF THE SUPREME
appropriate action as the evidence warrants. This case is also referred to the COURT IN CRUZ, JR. v. SANDIGANBAYAN, 194 SCRA 474 AND
Commissioner of the Bureau of Internal Revenue for a determination of any tax REPUBLIC v. MIGRINO, 189 SCRA 289, NOTWITHSTANDING THE FACT
liability of respondent Elizabeth Dimaano in connection herewith. THAT:

SO ORDERED. 1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and Republic v.

Migrino, supra, are clearly not applicable to this case;
On 4 December 1991, petitioner filed its Motion for Reconsideration.
2. Any procedural defect in the institution of the complaint in Civil
Case No. 0037 was cured and/or waived by respondents with the
In answer to the Motion for Reconsideration, private respondents filed a Joint filing of their respective answers with counterclaim; and
Comment/Opposition to which petitioner filed its Reply on 10 January 1992.
3. The separate motions to dismiss were evidently improper
On 25 March 1992, the Sandiganbayan rendered a Resolution denying the Motion for considering that they were filed after commencement of the
Reconsideration. presentation of the evidence of the petitioner and even before the
latter was allowed to formally offer its evidence and rest its case;
Ruling of the Sandiganbayan
C. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE
The Sandiganbayan dismissed the Amended Complaint on the following grounds: ARTICLES AND THINGS SUCH AS SUMS OF MONEY,
COMMUNICATIONS EQUIPMENT, JEWELRY AND LAND TITLES
(1.) The actions taken by the PCGG are not in accordance with the rulings of CONFISCATED FROM THE HOUSE OF RESPONDENT DIMAANO WERE
the Supreme Court in Cruz, Jr. v. Sandiganbayan and Republic v.
10
ILLEGALLY SEIZED AND THEREFORE EXCLUDED AS EVIDENCE. 12

Migrino which involve the same issues.

11

The Court’s Ruling

(2.) No previous inquiry similar to preliminary investigations in criminal cases
was conducted against Ramas and Dimaano. First Issue: PCGG’s Jurisdiction to Investigate Private Respondents

(3.) The evidence adduced against Ramas does not constitute a prima facie This case involves a revisiting of an old issue already decided by this Court in Cruz,
case against him. Jr. v. Sandiganbayan and Republic v. Migrino.
13 14

(4.) There was an illegal search and seizure of the items confiscated.
The primary issue for resolution is whether the PCGG has the jurisdiction to We hold that Ramas was not a "subordinate" of former President Marcos in the sense
investigate and cause the filing of a forfeiture petition against Ramas and Dimaano for contemplated under EO No. 1 and its amendments.
unexplained wealth under RA No. 1379.
Mere position held by a military officer does not automatically make him a
We hold that PCGG has no such jurisdiction. "subordinate" as this term is used in EO Nos. 1, 2, 14 and 14-A absent a showing that
he enjoyed close association with former President Marcos. Migrino discussed this
The PCGG created the AFP Board to investigate the unexplained wealth and corrupt issue in this wise:
practices of AFP personnel, whether in the active service or retired. The PCGG
15

tasked the AFP Board to make the necessary recommendations to appropriate A close reading of EO No. 1 and related executive orders will readily show what is
government agencies on the action to be taken based on its findings. The PCGG
16
contemplated within the term ‘subordinate.’ The Whereas Clauses of EO No. 1
gave this task to the AFP Board pursuant to the PCGG’s power under Section 3 of express the urgent need to recover the ill-gotten wealth amassed by former President
EO No. 1 "to conduct investigation as may be necessary in order to accomplish and Ferdinand E. Marcos, his immediate family, relatives, and close associates both here
to carry out the purposes of this order." EO No. 1 gave the PCGG specific and abroad.
responsibilities, to wit:
EO No. 2 freezes ‘all assets and properties in the Philippines in which former
SEC. 2. The Commission shall be charged with the task of assisting the President in President Marcos and/or his wife, Mrs. Imelda Marcos, their close relatives,
regard to the following matters: subordinates, business associates, dummies, agents, or nominees have any interest
or participation.’
(a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates, whether Applying the rule in statutory construction known as ejusdem generis that is-
located in the Philippines or abroad, including the takeover and sequestration of all
business enterprises and entities owned or controlled by them, during his ‘[W]here general words follow an enumeration of persons or things by words of a
administration, directly or through nominees, by taking undue advantage of their particular and specific meaning, such general words are not to be construed in their
public office and/ or using their powers, authority, influence, connections or widest extent, but are to be held as applying only to persons or things of the same
relationship. kind or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of
Deeds of Davao, 96 Phil. 53, 58, citing Black on Interpretation of Laws, 2nd Ed.,
(b) The investigation of such cases of graft and corruption as the President may 203].’
assign to the Commission from time to time.
[T]he term "subordinate" as used in EO Nos. 1 & 2 refers to one who enjoys a close
x x x. association with former President Marcos and/or his wife, similar to the immediate
family member, relative, and close associate in EO No. 1 and the close relative,
The PCGG, through the AFP Board, can only investigate the unexplained wealth and business associate, dummy, agent, or nominee in EO No. 2.
corrupt practices of AFP personnel who fall under either of the two categories
mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who have xxx
accumulated ill-gotten wealth during the administration of former President Marcos by
being the latter’s immediate family, relative, subordinate or close associate, taking It does not suffice, as in this case, that the respondent is or was a government official
undue advantage of their public office or using their powers, influence x x x; or (2)
17
or employee during the administration of former President Marcos. There must be a
AFP personnel involved in other cases of graft and corruption provided the President prima facie showing that the respondent unlawfully accumulated wealth by virtue of
assigns their cases to the PCGG. 18
his close association or relation with former Pres. Marcos and/or his wife. (Emphasis
supplied)
Petitioner, however, does not claim that the President assigned Ramas’ case to the
PCGG. Therefore, Ramas’ case should fall under the first category of AFP personnel Ramas’ position alone as Commanding General of the Philippine Army with the rank
before the PCGG could exercise its jurisdiction over him. Petitioner argues that of Major General does not suffice to make him a "subordinate" of former President
19

Ramas was undoubtedly a subordinate of former President Marcos because of his Marcos for purposes of EO No. 1 and its amendments. The PCGG has to provide a
position as the Commanding General of the Philippine Army. Petitioner claims that prima facie showing that Ramas was a close associate of former President Marcos, in
Ramas’ position enabled him to receive orders directly from his commander-in-chief, the same manner that business associates, dummies, agents or nominees of former
undeniably making him a subordinate of former President Marcos. President Marcos were close to him. Such close association is manifested either by
Ramas’ complicity with former President Marcos in the accumulation of ill-gotten
wealth by the deposed President or by former President Marcos’ acquiescence in that vests jurisdiction on PCGG. EO No. 1 clearly premises the creation of the PCGG
22

Ramas’ own accumulation of ill-gotten wealth if any. on the urgent need to recover all ill-gotten wealth amassed by former President
Marcos, his immediate family, relatives, subordinates and close associates.
This, the PCGG failed to do. Therefore, to say that such omission was not fatal is clearly contrary to the intent
behind the creation of the PCGG.
Petitioner’s attempt to differentiate the instant case from Migrino does not convince
us. Petitioner argues that unlike in Migrino, the AFP Board Resolution in the instant In Cruz, Jr. v. Sandiganbayan, the Court outlined the cases that fall under the
23

case states that the AFP Board conducted the investigation pursuant to EO Nos. 1, 2, jurisdiction of the PCGG pursuant to EO Nos. 1, 2, 14, 14-A:
24 25 26

14 and 14-A in relation to RA No. 1379. Petitioner asserts that there is a presumption
that the PCGG was acting within its jurisdiction of investigating crony-related cases of A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with
graft and corruption and that Ramas was truly a subordinate of the former President. Sections 1, 2 and 3 of Executive Order No. 14, shows what the authority of the
However, the same AFP Board Resolution belies this contention. Although the respondent PCGG to investigate and prosecute covers:
Resolution begins with such statement, it ends with the following recommendation:
(a) the investigation and prosecution of the civil action for the recovery of ill-
V. RECOMMENDATION: gotten wealth under Republic Act No. 1379, accumulated by former
President Marcos, his immediate family, relatives, subordinates and close
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be associates, whether located in the Philippines or abroad, including the take-
prosecuted and tried for violation of RA 3019, as amended, otherwise known as "Anti- over or sequestration of all business enterprises and entities owned or
Graft and Corrupt Practices Act" and RA 1379, as amended, otherwise known as controlled by them, during his administration, directly or through his
"The Act for the Forfeiture of Unlawfully Acquired Property." 20
nominees, by taking undue advantage of their public office and/or using their
powers, authority and influence, connections or relationships; and
Thus, although the PCGG sought to investigate and prosecute private respondents
under EO Nos. 1, 2, 14 and 14-A, the result yielded a finding of violation of Republic (b) the investigation and prosecution of such offenses committed in the
Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-A. This acquisition of said ill-gotten wealth as contemplated under Section 2(a) of
absence of relation to EO No. 1 and its amendments proves fatal to petitioner’s case. Executive Order No. 1.
EO No. 1 created the PCGG for a specific and limited purpose, and necessarily its
powers must be construed to address such specific and limited purpose. However, other violations of the Anti-Graft and Corrupt Practices Act not
otherwise falling under the foregoing categories, require a previous authority of
Moreover, the resolution of the AFP Board and even the Amended Complaint do not the President for the respondent PCGG to investigate and prosecute in
show that the properties Ramas allegedly owned were accumulated by him in his accordance with Section 2 (b) of Executive Order No. 1. Otherwise, jurisdiction
capacity as a "subordinate" of his commander-in-chief. Petitioner merely enumerated over such cases is vested in the Ombudsman and other duly authorized
the properties Ramas allegedly owned and suggested that these properties were investigating agencies such as the provincial and city prosecutors, their
disproportionate to his salary and other legitimate income without showing that assistants, the Chief State Prosecutor and his assistants and the state
Ramas amassed them because of his close association with former President prosecutors. (Emphasis supplied)
Marcos. Petitioner, in fact, admits that the AFP Board resolution does not contain a
finding that Ramas accumulated his wealth because of his close association with The proper government agencies, and not the PCGG, should investigate and
former President Marcos, thus: prosecute forfeiture petitions not falling under EO No. 1 and its amendments. The
preliminary investigation of unexplained wealth amassed on or before 25 February
10. While it is true that the resolution of the Anti-Graft Board of the New Armed 1986 falls under the jurisdiction of the Ombudsman, while the authority to file the
Forces of the Philippines did not categorically find a prima facie evidence corresponding forfeiture petition rests with the Solicitor General. The Ombudsman
27

showing that respondent Ramas unlawfully accumulated wealth by virtue of his Act or Republic Act No. 6770 ("RA No. 6770") vests in the Ombudsman the power to
close association or relation with former President Marcos and/or his wife, it is conduct preliminary investigation and to file forfeiture proceedings involving
submitted that such omission was not fatal. The resolution of the Anti-Graft Board unexplained wealth amassed after 25 February 1986. 28

should be read in the context of the law creating the same and the objective of the
investigation which was, as stated in the above, pursuant to Republic Act Nos. 3019 After the pronouncements of the Court in Cruz, the PCGG still pursued this case
and 1379 in relation to Executive Order Nos. 1, 2, 14 and 14-a; (Emphasis supplied)
21
despite the absence of a prima facie finding that Ramas was a "subordinate" of
former President Marcos. The petition for forfeiture filed with the Sandiganbayan
Such omission is fatal. Petitioner forgets that it is precisely a prima facie showing that should be dismissed for lack of authority by the PCGG to investigate respondents
the ill-gotten wealth was accumulated by a "subordinate" of former President Marcos since there is no prima facie showing that EO No. 1 and its amendments apply to
respondents. The AFP Board Resolution and even the Amended Complaint state that evidence. First, this case has been pending for four years before the Sandiganbayan
there are violations of RA Nos. 3019 and 1379. Thus, the PCGG should have dismissed it. Petitioner filed its Amended Complaint on 11 August 1987, and only
recommended Ramas’ case to the Ombudsman who has jurisdiction to conduct the began to present its evidence on 17 April 1989. Petitioner had almost two years to
preliminary investigation of ordinary unexplained wealth and graft cases. As stated in prepare its evidence. However, despite this sufficient time, petitioner still delayed the
Migrino: presentation of the rest of its evidence by filing numerous motions for postponements
and extensions. Even before the date set for the presentation of its evidence,
[But] in view of the patent lack of authority of the PCGG to investigate and cause the petitioner filed, on 13 April 1989, a Motion for Leave to Amend the Complaint. The 34

prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379, the motion sought "to charge the delinquent properties (which comprise most of
PCGG must also be enjoined from proceeding with the case, without prejudice to any petitioner’s evidence) with being subject to forfeiture as having been unlawfully
action that may be taken by the proper prosecutory agency. The rule of law mandates acquired by defendant Dimaano alone x x x."
that an agency of government be allowed to exercise only the powers granted to it.
The Sandiganbayan, however, refused to defer the presentation of petitioner’s
Petitioner’s argument that private respondents have waived any defect in the filing of evidence since petitioner did not state when it would file the amended complaint. On
the forfeiture petition by submitting their respective Answers with counterclaim 18 April 1989, the Sandiganbayan set the continuation of the presentation of evidence
deserves no merit as well. on 28-29 September and 9-11 October 1989, giving petitioner ample time to prepare
its evidence. Still, on 28 September 1989, petitioner manifested its inability to proceed
with the presentation of its evidence. The Sandiganbayan issued an Order expressing
Petitioner has no jurisdiction over private respondents. Thus, there is no jurisdiction to its view on the matter, to wit:
waive in the first place. The PCGG cannot exercise investigative or prosecutorial
powers never granted to it. PCGG’s powers are specific and limited. Unless given
additional assignment by the President, PCGG’s sole task is only to recover the ill- The Court has gone through extended inquiry and a narration of the above events
gotten wealth of the Marcoses, their relatives and cronies. Without these elements,
29
because this case has been ready for trial for over a year and much of the delay
the PCGG cannot claim jurisdiction over a case. hereon has been due to the inability of the government to produce on scheduled
dates for pre-trial and for trial documents and witnesses, allegedly upon the failure of
the military to supply them for the preparation of the presentation of evidence thereon.
Private respondents questioned the authority and jurisdiction of the PCGG to Of equal interest is the fact that this Court has been held to task in public about its
investigate and prosecute their cases by filing their Motion to Dismiss as soon as they alleged failure to move cases such as this one beyond the preliminary stage, when, in
learned of the pronouncement of the Court in Migrino. This case was decided on 30 view of the developments such as those of today, this Court is now faced with a
August 1990, which explains why private respondents only filed their Motion to situation where a case already in progress will revert back to the preliminary stage,
Dismiss on 8 October 1990. Nevertheless, we have held that the parties may raise despite a five-month pause where appropriate action could have been undertaken by
lack of jurisdiction at any stage of the proceeding. Thus, we hold that there was no
30
the plaintiff Republic.
35

waiver of jurisdiction in this case. Jurisdiction is vested by law and not by the parties
to an action.31

On 9 October 1989, the PCGG manifested in court that it was conducting a

preliminary investigation on the unexplained wealth of private respondents as
Consequently, the petition should be dismissed for lack of jurisdiction by the PCGG to mandated by RA No. 1379. The PCGG prayed for an additional four months to
36

conduct the preliminary investigation. The Ombudsman may still conduct the proper conduct the preliminary investigation. The Sandiganbayan granted this request and
preliminary investigation for violation of RA No. 1379, and if warranted, the Solicitor scheduled the presentation of evidence on 26-29 March 1990. However, on the
General may file the forfeiture petition with the Sandiganbayan. The right of the State
32
scheduled date, petitioner failed to inform the court of the result of the preliminary
to forfeit unexplained wealth under RA No. 1379 is not subject to prescription, laches investigation the PCGG supposedly conducted. Again, the Sandiganbayan gave
or estoppel.33
petitioner until 18 May 1990 to continue with the presentation of its evidence and to
inform the court of "what lies ahead insofar as the status of the case is concerned x x
Second Issue: Propriety of Dismissal of Case x." Still on the date set, petitioner failed to present its evidence. Finally, on 11 July
37

Before Completion of Presentation of Evidence 1990, petitioner filed its Re-Amended Complaint. The Sandiganbayan correctly
38

observed that a case already pending for years would revert to its preliminary stage if
Petitioner also contends that the Sandiganbayan erred in dismissing the case before the court were to accept the Re-Amended Complaint.
completion of the presentation of petitioner’s evidence.
Based on these circumstances, obviously petitioner has only itself to blame for failure
We disagree. to complete the presentation of its evidence. The Sandiganbayan gave petitioner
more than sufficient time to finish the presentation of its evidence. The
Sandiganbayan overlooked petitioner’s delays and yet petitioner ended the long-
Based on the findings of the Sandiganbayan and the records of this case, we find that
petitioner has only itself to blame for non-completion of the presentation of its
string of delays with the filing of a Re-Amended Complaint, which would only prolong Petitioner is partly right in its arguments.
even more the disposition of the case.
The EDSA Revolution took place on 23-25 February 1986. As succinctly stated in
Moreover, the pronouncements of the Court in Migrino and Cruz prompted the President Aquino’s Proclamation No. 3 dated 25 March 1986, the EDSA Revolution
Sandiganbayan to dismiss the case since the PCGG has no jurisdiction to investigate was "done in defiance of the provisions of the 1973 Constitution." The resulting
41

and prosecute the case against private respondents. This alone would have been government was indisputably a revolutionary government bound by no constitution or
sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against legal limitations except treaty obligations that the revolutionary government, as the de
private respondents. jure government in the Philippines, assumed under international law.

Thus, we hold that the Sandiganbayan did not err in dismissing the case before The correct issues are: (1) whether the revolutionary government was bound by the
completion of the presentation of petitioner’s evidence. Bill of Rights of the 1973 Constitution during the interregnum, that is, after the actual
and effective take-over of power by the revolutionary government following the
Third Issue: Legality of the Search and Seizure cessation of resistance by loyalist forces up to 24 March 1986 (immediately before
the adoption of the Provisional Constitution); and (2) whether the protection accorded
to individuals under the International Covenant on Civil and Political Rights
Petitioner claims that the Sandiganbayan erred in declaring the properties confiscated ("Covenant") and the Universal Declaration of Human Rights ("Declaration") remained
from Dimaano’s house as illegally seized and therefore inadmissible in evidence. This in effect during the interregnum.
issue bears a significant effect on petitioner’s case since these properties comprise
most of petitioner’s evidence against private respondents. Petitioner will not have
much evidence to support its case against private respondents if these properties are We hold that the Bill of Rights under the 1973 Constitution was not operative during
inadmissible in evidence. the interregnum. However, we rule that the protection accorded to individuals under
the Covenant and the Declaration remained in effect during the interregnum.
On 3 March 1986, the Constabulary raiding team served at Dimaano’s residence a
search warrant captioned "Illegal Possession of Firearms and Ammunition." Dimaano During the interregnum, the directives and orders of the revolutionary government
was not present during the raid but Dimaano’s cousins witnessed the raid. The raiding were the supreme law because no constitution limited the extent and scope of such
team seized the items detailed in the seizure receipt together with other items not directives and orders. With the abrogation of the 1973 Constitution by the successful
included in the search warrant. The raiding team seized these items: one baby revolution, there was no municipal law higher than the directives and orders of the
armalite rifle with two magazines; 40 rounds of 5.56 ammunition; one pistol, caliber revolutionary government. Thus, during the interregnum, a person could not invoke
.45; communications equipment, cash consisting of ₱2,870,000 and US$50,000, any exclusionary right under a Bill of Rights because there was neither a constitution
jewelry, and land titles. nor a Bill of Rights during the interregnum. As the Court explained in Letter of
Associate Justice Reynato S. Puno: 42

Petitioner wants the Court to take judicial notice that the raiding team conducted the
search and seizure "on March 3, 1986 or five days after the successful EDSA A revolution has been defined as "the complete overthrow of the established
revolution." Petitioner argues that a revolutionary government was operative at that
39
government in any country or state by those who were previously subject to it" or as
time by virtue of Proclamation No. 1 announcing that President Aquino and Vice "a sudden, radical and fundamental change in the government or political system,
President Laurel were "taking power in the name and by the will of the Filipino usually effected with violence or at least some acts of violence." In Kelsen's book,
people." Petitioner asserts that the revolutionary government effectively withheld the
40
General Theory of Law and State, it is defined as that which "occurs whenever the
operation of the 1973 Constitution which guaranteed private respondents’ legal order of a community is nullified and replaced by a new order . . . a way not
exclusionary right. prescribed by the first order itself."

Moreover, petitioner argues that the exclusionary right arising from an illegal search It was through the February 1986 revolution, a relatively peaceful one, and more
applies only beginning 2 February 1987, the date of ratification of the 1987 popularly known as the "people power revolution" that the Filipino people tore
Constitution. Petitioner contends that all rights under the Bill of Rights had already themselves away from an existing regime. This revolution also saw the
reverted to its embryonic stage at the time of the search. Therefore, the government unprecedented rise to power of the Aquino government.
may confiscate the monies and items taken from Dimaano and use the same in
evidence against her since at the time of their seizure, private respondents did not From the natural law point of view, the right of revolution has been defined as "an
enjoy any constitutional right. inherent right of a people to cast out their rulers, change their policy or effect radical
reforms in their system of government or institutions by force or a general uprising
when the legal and constitutional methods of making such change have proved
inadequate or are so obstructed as to be unavailable." It has been said that "the locus
of positive law-making power lies with the people of the state" and from there is The framers of both the Freedom Constitution and the 1987 Constitution were fully
derived "the right of the people to abolish, to reform and to alter any existing form of aware that the sequestration orders would clash with the Bill of Rights. Thus, the
government without regard to the existing constitution." framers of both constitutions had to include specific language recognizing the validity
of the sequestration orders. The following discourse by Commissioner Joaquin G.
xxx Bernas during the deliberations of the Constitutional Commission is instructive:

It is widely known that Mrs. Aquino’s rise to the presidency was not due to FR. BERNAS: Madam President, there is something schizophrenic about the
constitutional processes; in fact, it was achieved in violation of the provisions arguments in defense of the present amendment.
of the 1973 Constitution as a Batasang Pambansa resolution had earlier
declared Mr. Marcos as the winner in the 1986 presidential election. Thus it can For instance, I have carefully studied Minister Salonga’s lecture in the Gregorio
be said that the organization of Mrs. Aquino’s Government which was met by little Araneta University Foundation, of which all of us have been given a copy. On the one
resistance and her control of the state evidenced by the appointment of the Cabinet hand, he argues that everything the Commission is doing is traditionally legal. This is
and other key officers of the administration, the departure of the Marcos Cabinet repeated by Commissioner Romulo also. Minister Salonga spends a major portion of
officials, revamp of the Judiciary and the Military signaled the point where the legal his lecture developing that argument. On the other hand, almost as an afterthought,
system then in effect, had ceased to be obeyed by the Filipino. (Emphasis he says that in the end what matters are the results and not the legal niceties, thus
supplied) suggesting that the PCGG should be allowed to make some legal shortcuts, another
word for niceties or exceptions.
To hold that the Bill of Rights under the 1973 Constitution remained operative during
the interregnum would render void all sequestration orders issued by the Philippine Now, if everything the PCGG is doing is legal, why is it asking the CONCOM for
Commission on Good Government ("PCGG") before the adoption of the Freedom special protection? The answer is clear. What they are doing will not stand the test of
Constitution. The sequestration orders, which direct the freezing and even the take- ordinary due process, hence they are asking for protection, for exceptions. Grandes
over of private property by mere executive issuance without judicial action, would malos, grandes remedios, fine, as the saying stands, but let us not say grandes
violate the due process and search and seizure clauses of the Bill of Rights. malos, grande y malos remedios. That is not an allowable extrapolation. Hence, we
should not give the exceptions asked for, and let me elaborate and give three
During the interregnum, the government in power was concededly a revolutionary reasons:
government bound by no constitution. No one could validly question the sequestration
orders as violative of the Bill of Rights because there was no Bill of Rights during the First, the whole point of the February Revolution and of the work of the CONCOM is
interregnum. However, upon the adoption of the Freedom Constitution, the to hasten constitutional normalization. Very much at the heart of the constitutional
sequestered companies assailed the sequestration orders as contrary to the Bill of normalization is the full effectivity of the Bill of Rights. We cannot, in one breath, ask
Rights of the Freedom Constitution. for constitutional normalization and at the same time ask for a temporary halt to the
full functioning of what is at the heart of constitutionalism. That would be hypocritical;
In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on Good that would be a repetition of Marcosian protestation of due process and rule of law.
Government, petitioner Baseco, while conceding there was no Bill of Rights during
43
The New Society word for that is "backsliding." It is tragic when we begin to backslide
the interregnum, questioned the continued validity of the sequestration orders upon even before we get there.
adoption of the Freedom Constitution in view of the due process clause in its Bill of
Rights. The Court ruled that the Freedom Constitution, and later the 1987 Second, this is really a corollary of the first. Habits tend to become ingrained. The
Constitution, expressly recognized the validity of sequestration orders, thus: committee report asks for extraordinary exceptions from the Bill of Rights for six
months after the convening of Congress, and Congress may even extend this longer.
If any doubt should still persist in the face of the foregoing considerations as to the
validity and propriety of sequestration, freeze and takeover orders, it should be Good deeds repeated ripen into virtue; bad deeds repeated become vice. What the
dispelled by the fact that these particular remedies and the authority of the PCGG to committee report is asking for is that we should allow the new government to acquire
issue them have received constitutional approbation and sanction. As already the vice of disregarding the Bill of Rights.
mentioned, the Provisional or "Freedom" Constitution recognizes the power and duty
of the President to enact "measures to achieve the mandate of the people to . . . Vices, once they become ingrained, become difficult to shed. The practitioners of the
(r)ecover ill-gotten properties amassed by the leaders and supporters of the previous vice begin to think that they have a vested right to its practice, and they will fight tooth
regime and protect the interest of the people through orders of sequestration or and nail to keep the franchise. That would be an unhealthy way of consolidating the
freezing of assets or accounts." And as also already adverted to, Section 26, Article gains of a democratic revolution.
XVIII of the 1987 Constitution treats of, and ratifies the "authority to issue
sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986."
Third, the argument that what matters are the results and not the legal niceties is an The revolutionary government, after installing itself as the de jure government,
argument that is very disturbing. When it comes from a staunch Christian like assumed responsibility for the State’s good faith compliance with the Covenant to
Commissioner Salonga, a Minister, and repeated verbatim by another staunch which the Philippines is a signatory. Article 2(1) of the Covenant requires each
Christian like Commissioner Tingson, it becomes doubly disturbing and even signatory State "to respect and to ensure to all individuals within its territory and
discombobulating. The argument makes the PCGG an auctioneer, placing the Bill of subject to its jurisdiction the rights recognized in the present Covenant." Under Article
45

Rights on the auction block. If the price is right, the search and seizure clause will be 17(1) of the Covenant, the revolutionary government had the duty to insure that "[n]o
sold. "Open your Swiss bank account to us and we will award you the search and one shall be subjected to arbitrary or unlawful interference with his privacy, family,
seizure clause. You can keep it in your private safe." home or correspondence."

Alternatively, the argument looks on the present government as hostage to the The Declaration, to which the Philippines is also a signatory, provides in its Article
hoarders of hidden wealth. The hoarders will release the hidden health if the ransom 17(2) that "[n]o one shall be arbitrarily deprived of his property." Although the
price is paid and the ransom price is the Bill of Rights, specifically the due process in signatories to the Declaration did not intend it as a legally binding document, being
the search and seizure clauses. So, there is something positively revolving about only a declaration, the Court has interpreted the Declaration as part of the generally
either argument. The Bill of Rights is not for sale to the highest bidder nor can it be accepted principles of international law and binding on the State. Thus, the 46

used to ransom captive dollars. This nation will survive and grow strong, only if it revolutionary government was also obligated under international law to observe the
would become convinced of the values enshrined in the Constitution of a price that is rights of individuals under the Declaration.
47

beyond monetary estimation.

The revolutionary government did not repudiate the Covenant or the Declaration
For these reasons, the honorable course for the Constitutional Commission is to during the interregnum. Whether the revolutionary government could have repudiated
delete all of Section 8 of the committee report and allow the new Constitution to take all its obligations under the Covenant or the Declaration is another matter and is not
effect in full vigor. If Section 8 is deleted, the PCGG has two options. First, it can the issue here. Suffice it to say that the Court considers the Declaration as part of
pursue the Salonga and the Romulo argument — that what the PCGG has been customary international law, and that Filipinos as human beings are proper subjects
doing has been completely within the pale of the law. If sustained, the PCGG can go of the rules of international law laid down in the Covenant. The fact is the
on and should be able to go on, even without the support of Section 8. If not revolutionary government did not repudiate the Covenant or the Declaration in the
sustained, however, the PCGG has only one honorable option, it must bow to the same way it repudiated the 1973 Constitution. As the de jure government, the
majesty of the Bill of Rights. revolutionary government could not escape responsibility for the State’s good faith
compliance with its treaty obligations under international law.
The PCGG extrapolation of the law is defended by staunch Christians. Let me
conclude with what another Christian replied when asked to toy around with the law. It was only upon the adoption of the Provisional Constitution on 25 March 1986 that
From his prison cell, Thomas More said, "I'll give the devil benefit of law for my the directives and orders of the revolutionary government became subject to a higher
nation’s safety sake." I ask the Commission to give the devil benefit of law for our municipal law that, if contravened, rendered such directives and orders void. The
nation’s sake. And we should delete Section 8. Provisional Constitution adopted verbatim the Bill of Rights of the 1973
Constitution. The Provisional Constitution served as a self-limitation by the
48

Thank you, Madam President. (Emphasis supplied) revolutionary government to avoid abuses of the absolute powers entrusted to it by
the people.
Despite the impassioned plea by Commissioner Bernas against the amendment
excepting sequestration orders from the Bill of Rights, the Constitutional Commission During the interregnum when no constitution or Bill of Rights existed, directives and
still adopted the amendment as Section 26, Article XVIII of the 1987 Constitution. The
44
orders issued by government officers were valid so long as these officers did not
framers of the Constitution were fully aware that absent Section 26, sequestration exceed the authority granted them by the revolutionary government. The directives
orders would not stand the test of due process under the Bill of Rights. and orders should not have also violated the Covenant or the Declaration. In this
case, the revolutionary government presumptively sanctioned the warrant since the
revolutionary government did not repudiate it. The warrant, issued by a judge upon
Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force during proper application, specified the items to be searched and seized. The warrant is thus
the interregnum, absent a constitutional provision excepting sequestration orders valid with respect to the items specifically described in the warrant.
from such Bill of Rights, would clearly render all sequestration orders void during the
interregnum. Nevertheless, even during the interregnum the Filipino people continued
to enjoy, under the Covenant and the Declaration, almost the same rights found in the However, the Constabulary raiding team seized items not included in the warrant. As
Bill of Rights of the 1973 Constitution. admitted by petitioner’s witnesses, the raiding team confiscated items not included in
the warrant, thus:

Direct Examination of Capt. Rodolfo Sebastian

AJ AMORES AJ AMORES

Q. According to the search warrant, you are supposed to seize only for weapons. Q. Before you applied for a search warrant, did you conduct surveillance in the house
What else, aside from the weapons, were seized from the house of Miss Elizabeth of Miss Elizabeth Dimaano?
Dimaano?
A. The Intelligence Operatives conducted surveillance together with the MSU
A. The communications equipment, money in Philippine currency and US dollars, elements, your Honor.
some jewelries, land titles, sir.
Q. And this party believed there were weapons deposited in the house of Miss
Q. Now, the search warrant speaks only of weapons to be seized from the house of Elizabeth Dimaano?
Elizabeth Dimaano. Do you know the reason why your team also seized other
properties not mentioned in said search warrant? A. Yes, your Honor.

A. During the conversation right after the conduct of said raid, I was informed that the Q. And they so swore before the Municipal Trial Judge?
reason why they also brought the other items not included in the search warrant was
because the money and other jewelries were contained in attaché cases and cartons
with markings "Sony Trinitron", and I think three (3) vaults or steel safes. Believing A. Yes, your Honor.
that the attaché cases and the steel safes were containing firearms, they forced open
these containers only to find out that they contained money. Q. But they did not mention to you, the applicant for the search warrant, any other
properties or contraband which could be found in the residence of Miss Elizabeth
xxx Dimaano?

Q. You said you found money instead of weapons, do you know the reason why your A. They just gave us still unconfirmed report about some hidden items, for instance,
team seized this money instead of weapons? the communications equipment and money. However, I did not include that in the
application for search warrant considering that we have not established concrete
evidence about that. So when…
A. I think the overall team leader and the other two officers assisting him decided to
bring along also the money because at that time it was already dark and they felt
most secured if they will bring that because they might be suspected also of taking Q. So that when you applied for search warrant, you had reason to believe that only
money out of those items, your Honor. 49
weapons were in the house of Miss Elizabeth Dimaano?

Cross-examination A. Yes, your Honor.50

Atty. Banaag xxx

Q. Were you present when the search warrant in connection with this case was Q. You stated that a .45 caliber pistol was seized along with one armalite rifle M-16
applied before the Municipal Trial Court of Batangas, Branch 1? and how many ammunition?

A. Yes, sir. A. Forty, sir.

Q. And the search warrant applied for by you was for the search and seizure of five Q. And this became the subject of your complaint with the issuing Court, with the
(5) baby armalite rifles M-16 and five (5) boxes of ammunition? fiscal’s office who charged Elizabeth Dimaano for Illegal Possession of Firearms and
Ammunition?
A. Yes, sir.
A. Yes, sir.
xxx
Q. Do you know what happened to that case?
A. I think it was dismissed, sir. seized them. However, we do not declare that such person is the lawful owner of
these items, merely that the search and seizure warrant could not be used as basis to
Q. In the fiscal’s office? seize and withhold these items from the possessor. We thus hold that these items
should be returned immediately to Dimaano.
A. Yes, sir.
WHEREFORE, the petition for certiorari is DISMISSED. The questioned Resolutions
of the Sandiganbayan dated 18 November 1991 and 25 March 1992 in Civil Case No.
Q. Because the armalite rifle you seized, as well as the .45 caliber pistol had a 0037, remanding the records of this case to the Ombudsman for such appropriate
Memorandum Receipt in the name of Felino Melegrito, is that not correct? action as the evidence may warrant, and referring this case to the Commissioner of
the Bureau of Internal Revenue for a determination of any tax liability of respondent
A. I think that was the reason, sir. Elizabeth Dimaano, are AFFIRMED.

Q. There were other articles seized which were not included in the search warrant, SO ORDERED.
like for instance, jewelries. Why did you seize the jewelries?

A. I think it was the decision of the overall team leader and his assistant to bring along
also the jewelries and other items, sir. I do not really know where it was taken but
they brought along also these articles. I do not really know their reason for bringing
the same, but I just learned that these were taken because they might get lost if they
will just leave this behind.

xxx

Q. How about the money seized by your raiding team, they were not also included in
the search warrant?

A. Yes sir, but I believe they were also taken considering that the money was
discovered to be contained in attaché cases. These attaché cases were suspected
1âwphi 1

to be containing pistols or other high powered firearms, but in the course of the
search the contents turned out to be money. So the team leader also decided to take
this considering that they believed that if they will just leave the money behind, it
might get lost also.

Q. That holds true also with respect to the other articles that were seized by your
raiding team, like Transfer Certificates of Title of lands?

A. Yes, sir. I think they were contained in one of the vaults that were opened. 51

It is obvious from the testimony of Captain Sebastian that the warrant did not include
the monies, communications equipment, jewelry and land titles that the raiding team
confiscated. The search warrant did not particularly describe these items and the
raiding team confiscated them on its own authority. The raiding team had no legal
basis to seize these items without showing that these items could be the subject of
warrantless search and seizure. Clearly, the raiding team exceeded its authority
52

when it seized these items.

The seizure of these items was therefore void, and unless these items are contraband
per se, and they are not, they must be returned to the person from whom the raiding
53
PARENS PATRIAE After a preliminary conference in which petitioner appeared, the MTRCB, by Order of
August 16, 2004, preventively suspended the showing of Ang Dating Daan program
Republic of the Philippines for 20 days, in accordance with Section 3(d) of Presidential Decree No. (PD) 1986,
SUPREME COURT creating the MTRCB, in relation to Sec. 3, Chapter XIII of the 2004 Implementing
Manila Rules and Regulations (IRR) of PD 1986 and Sec. 7, Rule VII of the MTRCB Rules of
Procedure.5The same order also set the case for preliminary investigation.
EN BANC
The following day, petitioner sought reconsideration of the preventive suspension
order, praying that Chairperson Consoliza P. Laguardia and two other members of
G.R. No. 164785 April 29, 2009 the adjudication board recuse themselves from hearing the case. 6 Two days after,
however, petitioner sought to withdraw7 his motion for reconsideration, followed by the
ELISEO F. SORIANO, Petitioner, filing with this Court of a petition for certiorari and prohibition,8 docketed as G.R. No.
vs. 164785, to nullify the preventive suspension order thus issued.
MA. CONSOLIZA P. LAGUARDIA, in her capacity as Chairperson of the Movie and
Television Review and Classification Board, MOVIE AND TELEVISION REVIEW AND
CLASSIFICATION BOARD, JESSIE L. GALAPON, ANABEL M. DELA CRUZ, MANUEL M. On September 27, 2004, in Adm. Case No. 01-04, the MTRCB issued a decision,
HERNANDEZ, JOSE L. LOPEZ, CRISANTO SORIANO, BERNABE S. YARIA, JR., MICHAEL disposing as follows:
M. SANDOVAL, and ROLDAN A. GAVINO, Respondents.
WHEREFORE, in view of all the foregoing, a Decision is hereby rendered, finding
DECISION respondent Soriano liable for his utterances and thereby imposing on him a penalty of
three (3) months suspension from his program, "Ang Dating Daan".
VELASCO, JR., J.:
Co-respondents Joselito Mallari, Luzviminda Cruz and UNTV Channel 37 and its
In these two petitions for certiorari and prohibition under Rule 65, petitioner Eliseo F. owner, PBC, are hereby exonerated for lack of evidence.
Soriano seeks to nullify and set aside an order and a decision of the Movie and
Television Review and Classification Board (MTRCB) in connection with certain SO ORDERED.9
utterances he made in his television show, Ang Dating Daan.
Petitioner then filed this petition for certiorari and prohibition with prayer for injunctive
Facts of the Case relief, docketed as G.R. No. 165636.

On August 10, 2004, at around 10:00 p.m., petitioner, as host of the program Ang In a Resolution dated April 4, 2005, the Court consolidated G.R. No. 164785 with
Dating Daan, aired on UNTV 37, made the following remarks: G.R. No. 165636.

Lehitimong anak ng demonyo; sinungaling; In G.R. No. 164785, petitioner raises the following issues:

Gago ka talaga Michael, masahol ka pa sa putang babae o di ba. Yung putang babae THE ORDER OF PREVENTIVE SUSPENSION PROMULGATED BY RESPONDENT
ang gumagana lang doon yung ibaba, [dito] kay Michael ang gumagana ang itaas, o [MTRCB] DATED 16 AUGUST 2004 AGAINST THE TELEVISION PROGRAM ANG
di ba! O, masahol pa sa putang babae yan. Sabi ng lola ko masahol pa sa putang DATING DAAN x x x IS NULL AND VOID FOR BEING ISSUED WITH GRAVE
babae yan. Sobra ang kasinungalingan ng mga demonyong ito.1 x x x ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION

Two days after, before the MTRCB, separate but almost identical affidavit-complaints (A) BY REASON THAT THE [IRR] IS INVALID INSOFAR AS IT
were lodged by Jessie L. Galapon and seven other private respondents, all members PROVIDES FOR THE ISSUANCE OF PREVENTIVE
of the Iglesia ni Cristo (INC),2 against petitioner in connection with the above SUSPENSION ORDERS;
broadcast. Respondent Michael M. Sandoval, who felt directly alluded to in
petitioner’s remark, was then a minister of INC and a regular host of the TV program (B) BY REASON OF LACK OF DUE HEARING IN THE CASE AT
Ang Tamang Daan.3 Forthwith, the MTRCB sent petitioner a notice of the hearing on BENCH;
August 16, 2004 in relation to the alleged use of some cuss words in the August 10,
2004 episode of Ang Dating Daan.4
 (C) FOR BEING VIOLATIVE OF EQUAL PROTECTION UNDER We shall first dispose of the issues in G.R. No. 164785, regarding the assailed order
THE LAW; of preventive suspension, although its implementability had already been overtaken
and veritably been rendered moot by the equally assailed September 27, 2004
(D) FOR BEING VIOLATIVE OF FREEDOM OF RELIGION; AND decision.

(E) FOR BEING VIOLATIVE OF FREEDOM OF SPEECH AND It is petitioner’s threshold posture that the preventive suspension imposed against him
EXPRESSION.10 and the relevant IRR provision authorizing it are invalid inasmuch as PD 1986 does
not expressly authorize the MTRCB to issue preventive suspension.
In G.R. No. 165636, petitioner relies on the following grounds:
Petitioner’s contention is untenable.
SECTION 3(C) OF [PD] 1986, IS PATENTLY UNCONSTITUTIONAL AND ENACTED
WITHOUT OR IN EXCESS OF JURISDICTION x x x CONSIDERING THAT: Administrative agencies have powers and functions which may be administrative,
investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of the five, as
may be conferred by the Constitution or by statute. 12 They have in fine only such
I powers or authority as are granted or delegated, expressly or impliedly, by law. 13 And
in determining whether an agency has certain powers, the inquiry should be from the
SECTION 3(C) OF [PD] 1986, AS APPLIED TO PETITIONER, UNDULY INFRINGES law itself. But once ascertained as existing, the authority given should be liberally
ON THE CONSTITUTIONAL GUARANTEE OF FREEDOM OF RELIGION, SPEECH, construed.14
AND EXPRESSION AS IT PARTAKES OF THE NATURE OF A SUBSEQUENT
PUNISHMENT CURTAILING THE SAME; CONSEQUENTLY, THE IMPLEMENTING A perusal of the MTRCB’s basic mandate under PD 1986 reveals the possession by
RULES AND REGULATIONS, RULES OF PROCEDURE, AND OFFICIAL ACTS OF the agency of the authority, albeit impliedly, to issue the challenged order of
THE MTRCB PURSUANT THERETO, I.E. DECISION DATED 27 SEPTEMBER 2004 preventive suspension. And this authority stems naturally from, and is necessary for
AND ORDER DATED 19 OCTOBER 2004, ARE LIKEWISE CONSTITUTIONALLY the exercise of, its power of regulation and supervision.
INFIRM AS APPLIED IN THE CASE AT BENCH;
Sec. 3 of PD 1986 pertinently provides the following:
II
Section 3. Powers and Functions.—The BOARD shall have the following functions,
SECTION 3(C) OF [PD] 1986, AS APPLIED TO PETITIONER, UNDULY INFRINGES powers and duties:
ON THE CONSTITUTIONAL GUARANTEE OF DUE PROCESS OF LAW AND
EQUAL PROTECTION UNDER THE LAW; CONSEQUENTLY, THE [IRR], RULES
OF PROCEDURE, AND OFFICIAL ACTS OF THE MTRCB PURSUANT THERETO, xxxx
I.E., DECISION DATED 27 SEPTEMBER 2004 AND ORDER DATED 19 OCTOBER
2004, ARE LIKEWISE CONSTITUTIONALLY INFIRM AS APPLIED IN THE CASE c) To approve or disapprove, delete objectionable portions from and/or prohibit the x x
AT BENCH; AND x production, x x x exhibition and/or television broadcast of the motion pictures,
television programs and publicity materials subject of the preceding paragraph, which,
III in the judgment of the board applying contemporary Filipino cultural values as
standard, are objectionable for being immoral, indecent, contrary to law and/or good
customs, injurious to the prestige of the Republic of the Philippines or its people, or
[PD] 1986 IS NOT COMPLETE IN ITSELF AND DOES NOT PROVIDE FOR A with a dangerous tendency to encourage the commission of violence or of wrong or
SUFFICIENT STANDARD FOR ITS IMPLEMENTATION THEREBY RESULTING IN crime such as but not limited to:
AN UNDUE DELEGATION OF LEGISLATIVE POWER BY REASON THAT IT DOES
NOT PROVIDE FOR THE PENALTIES FOR VIOLATIONS OF ITS PROVISIONS.
CONSEQUENTLY, THE [IRR], RULES OF PROCEDURE, AND OFFICIAL ACTS OF xxxx
THE MTRCB PURSUANT THERETO, I.E. DECISION DATED 27 SEPTEMBER 2004
AND ORDER DATED 19 OCTOBER 2004, ARE LIKEWISE CONSTITUTIONALLY vi) Those which are libelous or defamatory to the good name and reputation of any
INFIRM AS APPLIED IN THE CASE AT BENCH11 person, whether living or dead;

G.R. No. 164785 xxxx

(d) To supervise, regulate, and grant, deny or cancel, permits for the x x x production, regulate and supervise television programs to obviate the exhibition or broadcast of,
copying, distribution, sale, lease, exhibition, and/or television broadcast of all motion among others, indecent or immoral materials and to impose sanctions for violations
pictures, television programs and publicity materials, to the end that no such pictures, and, corollarily, to prevent further violations as it investigates. Contrary to petitioner’s
programs and materials as are determined by the BOARD to be objectionable in assertion, the aforequoted Sec. 3 of the IRR neither amended PD 1986 nor extended
accordance with paragraph (c) hereof shall be x x x produced, copied, reproduced, the effect of the law. Neither did the MTRCB, by imposing the assailed preventive
distributed, sold, leased, exhibited and/or broadcast by television; suspension, outrun its authority under the law. Far from it. The preventive suspension
was actually done in furtherance of the law, imposed pursuant, to repeat, to the
xxxx MTRCB’s duty of regulating or supervising television programs, pending a
determination of whether or not there has actually been a violation. In the final
analysis, Sec. 3, Chapter XIII of the 2004 IRR merely formalized a power which PD
k) To exercise such powers and functions as may be necessary or incidental to the 1986 bestowed, albeit impliedly, on MTRCB.
attainment of the purposes and objectives of this Act x x x. (Emphasis added.)
Sec. 3(c) and (d) of PD 1986 finds application to the present case, sufficient to
The issuance of a preventive suspension comes well within the scope of the authorize the MTRCB’s assailed action. Petitioner’s restrictive reading of PD 1986,
MTRCB’s authority and functions expressly set forth in PD 1986, more particularly limiting the MTRCB to functions within the literal confines of the law, would give the
under its Sec. 3(d), as quoted above, which empowers the MTRCB to "supervise, agency little leeway to operate, stifling and rendering it inutile, when Sec. 3(k) of PD
regulate, and grant, deny or cancel, permits for the x x x exhibition, and/or television 1986 clearly intends to grant the MTRCB a wide room for flexibility in its operation.
broadcast of all motion pictures, television programs and publicity materials, to the Sec. 3(k), we reiterate, provides, "To exercise such powers and functions as may be
end that no such pictures, programs and materials as are determined by the BOARD necessary or incidental to the attainment of the purposes and objectives of this Act x
to be objectionable in accordance with paragraph (c) hereof shall be x x x exhibited x x." Indeed, the power to impose preventive suspension is one of the implied powers
and/or broadcast by television." of MTRCB. As distinguished from express powers, implied powers are those that can
be inferred or are implicit in the wordings or conferred by necessary or fair implication
Surely, the power to issue preventive suspension forms part of the MTRCB’s express of the enabling act.17 As we held in Angara v. Electoral Commission, when a general
regulatory and supervisory statutory mandate and its investigatory and disciplinary grant of power is conferred or a duty enjoined, every particular power necessary for
authority subsumed in or implied from such mandate. Any other construal would the exercise of one or the performance of the other is also conferred by necessary
render its power to regulate, supervise, or discipline illusory. implication.18 Clearly, the power to impose preventive suspension pending
investigation is one of the implied or inherent powers of MTRCB.
Preventive suspension, it ought to be noted, is not a penalty by itself, being merely a
preliminary step in an administrative investigation. 15 And the power to discipline and We cannot agree with petitioner’s assertion that the aforequoted IRR provision on
impose penalties, if granted, carries with it the power to investigate administrative preventive suspension is applicable only to motion pictures and publicity materials.
complaints and, during such investigation, to preventively suspend the person subject The scope of the MTRCB’s authority extends beyond motion pictures. What the
of the complaint.16 acronym MTRCB stands for would suggest as much. And while the law makes
specific reference to the closure of a television network, the suspension of a television
To reiterate, preventive suspension authority of the MTRCB springs from its powers program is a far less punitive measure that can be undertaken, with the purpose of
conferred under PD 1986. The MTRCB did not, as petitioner insinuates, empower stopping further violations of PD 1986. Again, the MTRCB would regretfully be
itself to impose preventive suspension through the medium of the IRR of PD 1986. It rendered ineffective should it be subject to the restrictions petitioner envisages.
is true that the matter of imposing preventive suspension is embodied only in the IRR
of PD 1986. Sec. 3, Chapter XIII of the IRR provides: Just as untenable is petitioner’s argument on the nullity of the preventive suspension
order on the ground of lack of hearing. As it were, the MTRCB handed out the
Sec. 3. PREVENTION SUSPENSION ORDER.––Any time during the pendency of assailed order after petitioner, in response to a written notice, appeared before that
the case, and in order to prevent or stop further violations or for the interest and Board for a hearing on private respondents’ complaint. No less than petitioner
welfare of the public, the Chairman of the Board may issue a Preventive Suspension admitted that the order was issued after the adjournment of the hearing, 19 proving that
Order mandating the preventive x x x suspension of the permit/permits involved, he had already appeared before the MTRCB. Under Sec. 3, Chapter XIII of the IRR of
and/or closure of the x x x television network, cable TV station x x x provided that the PD 1986, preventive suspension shall issue "[a]ny time during the pendency of the
temporary/preventive order thus issued shall have a life of not more than twenty (20) case." In this particular case, it was done after MTRCB duly apprised petitioner of his
days from the date of issuance. having possibly violated PD 198620 and of administrative complaints that had been
filed against him for such violation.21

But the mere absence of a provision on preventive suspension in PD 1986, without

more, would not work to deprive the MTRCB a basic disciplinary tool, such as At any event, that preventive suspension can validly be meted out even without a
preventive suspension. Recall that the MTRCB is expressly empowered by statute to hearing.22
Petitioner next faults the MTRCB for denying him his right to the equal protection of Petitioner, as a final point in G.R. No. 164785, would have the Court nullify the 20-day
the law, arguing that, owing to the preventive suspension order, he was unable to preventive suspension order, being, as insisted, an unconstitutional abridgement of
answer the criticisms coming from the INC ministers. the freedom of speech and expression and an impermissible prior restraint. The main
issue tendered respecting the adverted violation and the arguments holding such
Petitioner’s position does not persuade. The equal protection clause demands that issue dovetails with those challenging the three-month suspension imposed under the
"all persons subject to legislation should be treated alike, under like circumstances assailed September 27, 2004 MTRCB decision subject of review under G.R. No.
and conditions both in the privileges conferred and liabilities imposed." 23 It guards 165636. Both overlapping issues and arguments shall be jointly addressed.
against undue favor and individual privilege as well as hostile discrimination. 24Surely,
petitioner cannot, under the premises, place himself in the same shoes as the INC G.R. No. 165636
ministers, who, for one, are not facing administrative complaints before the MTRCB.
For another, he offers no proof that the said ministers, in their TV programs, use Petitioner urges the striking down of the decision suspending him from hosting Ang
language similar to that which he used in his own, necessitating the MTRCB’s Dating Daan for three months on the main ground that the decision violates, apart
disciplinary action. If the immediate result of the preventive suspension order is that from his religious freedom, his freedom of speech and expression guaranteed under
petitioner remains temporarily gagged and is unable to answer his critics, this does Sec. 4, Art. III of the Constitution, which reads:
not become a deprivation of the equal protection guarantee. The Court need not
belabor the fact that the circumstances of petitioner, as host of Ang Dating Daan, on
one hand, and the INC ministers, as hosts of Ang Tamang Daan, on the other, are, No law shall be passed abridging the freedom of speech, of expression, or of the
within the purview of this case, simply too different to even consider whether or not press, or the right of the people peaceably to assemble and petition the government
there is a prima facie indication of oppressive inequality. for redress of grievance.

Petitioner next injects the notion of religious freedom, submitting that what he uttered He would also have the Court declare PD 1986, its Sec. 3(c) in particular,
was religious speech, adding that words like "putang babae" were said in exercise of unconstitutional for reasons articulated in this petition.
his religious freedom.
We are not persuaded as shall be explained shortly. But first, we restate certain
The argument has no merit. general concepts and principles underlying the freedom of speech and expression.

The Court is at a loss to understand how petitioner’s utterances in question can come It is settled that expressions by means of newspapers, radio, television, and motion
within the pale of Sec. 5, Article III of the 1987 Constitution on religious freedom. The pictures come within the broad protection of the free speech and expression
section reads as follows: clause.25 Each method though, because of its dissimilar presence in the lives of
people and accessibility to children, tends to present its own problems in the area of
free speech protection, with broadcast media, of all forms of communication, enjoying
No law shall be made respecting the establishment of a religion, or prohibiting the a lesser degree of protection.26Just as settled is the rule that restrictions, be it in the
free exercise thereof. The free exercise and enjoyment of religious profession and form of prior restraint, e.g., judicial injunction against publication or threat of
worship, without discrimination or preference, shall forever be allowed. No religious cancellation of license/franchise, or subsequent liability, whether in libel and damage
test shall be required for the exercise of civil or political rights. suits, prosecution for sedition, or contempt proceedings, are anathema to the freedom
of expression. Prior restraint means official government restrictions on the press or
There is nothing in petitioner’s statements subject of the complaints expressing any other forms of expression in advance of actual publication or dissemination. 27 The
particular religious belief, nothing furthering his avowed evangelical mission. The fact freedom of expression, as with the other freedoms encased in the Bill of Rights, is,
that he came out with his statements in a televised bible exposition program does not however, not absolute. It may be regulated to some extent to serve important public
automatically accord them the character of a religious discourse. Plain and simple interests, some forms of speech not being protected. As has been held, the limits of
insults directed at another person cannot be elevated to the status of religious the freedom of expression are reached when the expression touches upon matters of
speech. Even petitioner’s attempts to place his words in context show that he was essentially private concern.28 In the oft-quoted expression of Justice Holmes, the
moved by anger and the need to seek retribution, not by any religious conviction. His constitutional guarantee "obviously was not intended to give immunity for every
claim, assuming its veracity, that some INC ministers distorted his statements possible use of language."29From Lucas v. Royo comes this line: "[T]he freedom to
respecting amounts Ang Dating Daan owed to a TV station does not convert the foul express one’s sentiments and belief does not grant one the license to vilify in public
language used in retaliation as religious speech. We cannot accept that petitioner the honor and integrity of another. Any sentiments must be expressed within the
made his statements in defense of his reputation and religion, as they constitute no proper forum and with proper regard for the rights of others." 30
intelligible defense or refutation of the alleged lies being spread by a rival religious
group. They simply illustrate that petitioner had descended to the level of name- Indeed, as noted in Chaplinsky v. State of New Hampshire,31 "there are certain well-
calling and foul-language discourse. Petitioner could have chosen to contradict and defined and narrowly limited classes of speech that are harmful, the prevention and
disprove his detractors, but opted for the low road.
punishment of which has never been thought to raise any Constitutional problems." In were uttered in a TV program that is rated "G" or for general viewership, and in a time
net effect, some forms of speech are not protected by the Constitution, meaning that slot that would likely reach even the eyes and ears of children.
restrictions on unprotected speech may be decreed without running afoul of the
freedom of speech clause.32 A speech would fall under the unprotected type if the While adults may have understood that the terms thus used were not to be taken
utterances involved are "no essential part of any exposition of ideas, and are of such literally, children could hardly be expected to have the same discernment. Without
slight social value as a step of truth that any benefit that may be derived from them is parental guidance, the unbridled use of such language as that of petitioner in a
clearly outweighed by the social interest in order and morality." 33 Being of little or no television broadcast could corrupt impressionable young minds. The term "putang
value, there is, in dealing with or regulating them, no imperative call for the application babae" means "a female prostitute," a term wholly inappropriate for children, who
of the clear and present danger rule or the balancing-of-interest test, they being could look it up in a dictionary and just get the literal meaning, missing the context
essentially modes of weighing competing values, 34 or, with like effect, determining within which it was used. Petitioner further used the terms, "ang gumagana lang doon
which of the clashing interests should be advanced. yung ibaba," making reference to the female sexual organ and how a female
prostitute uses it in her trade, then stating that Sandoval was worse than that by using
Petitioner asserts that his utterance in question is a protected form of speech. his mouth in a similar manner. Children could be motivated by curiosity and ask the
meaning of what petitioner said, also without placing the phrase in context. They may
The Court rules otherwise. It has been established in this jurisdiction that unprotected be inquisitive as to why Sandoval is different from a female prostitute and the reasons
speech or low-value expression refers to libelous statements, obscenity or for the dissimilarity. And upon learning the meanings of the words used, young minds,
pornography, false or misleading advertisement, insulting or "fighting words", i.e., without the guidance of an adult, may, from their end, view this kind of indecent
those which by their very utterance inflict injury or tend to incite an immediate breach speech as obscene, if they take these words literally and use them in their own
of peace and expression endangering national security. speech or form their own ideas on the matter. In this particular case, where children
had the opportunity to hear petitioner’s words, when speaking of the average person
in the test for obscenity, we are speaking of the average child, not the average adult.
The Court finds that petitioner’s statement can be treated as obscene, at least with The average child may not have the adult’s grasp of figures of speech, and may lack
respect to the average child. Hence, it is, in that context, unprotected speech. In the understanding that language may be colorful, and words may convey more than
Fernando v. Court of Appeals, the Court expressed difficulty in formulating a definition the literal meaning. Undeniably the subject speech is very suggestive of a female
of obscenity that would apply to all cases, but nonetheless stated the ensuing sexual organ and its function as such. In this sense, we find petitioner’s utterances
observations on the matter: obscene and not entitled to protection under the umbrella of freedom of speech.

There is no perfect definition of "obscenity" but the latest word is that of Miller v. Even if we concede that petitioner’s remarks are not obscene but merely indecent
California which established basic guidelines, to wit: (a) whether to the average speech, still the Court rules that petitioner cannot avail himself of the constitutional
person, applying contemporary standards would find the work, taken as a whole, protection of free speech. Said statements were made in a medium easily accessible
appeals to the prurient interest; (b) whether the work depicts or describes, in a to children. With respect to the young minds, said utterances are to be treated as
patently offensive way, sexual conduct specifically defined by the applicable state unprotected speech.
law; and (c) whether the work, taken as a whole, lacks serious literary, artistic,
political, or scientific value. But, it would be a serious misreading of Miller to conclude
that the trier of facts has the unbridled discretion in determining what is "patently No doubt what petitioner said constitutes indecent or offensive utterances. But while a
offensive." x x x What remains clear is that obscenity is an issue proper for judicial jurisprudential pattern involving certain offensive utterances conveyed in different
determination and should be treated on a case to case basis and on the judge’s mediums has emerged, this case is veritably one of first impression, it being the first
sound discretion.35 time that indecent speech communicated via television and the applicable norm for its
regulation are, in this jurisdiction, made the focal point. Federal Communications
Commission (FCC) v. Pacifica Foundation,37 a 1978 American landmark case cited
Following the contextual lessons of the cited case of Miller v. California, 36 a patently in Eastern Broadcasting Corporation v. Dans, Jr.38and Chavez v. Gonzales,39 is a rich
offensive utterance would come within the pale of the term obscenity should it appeal source of persuasive lessons. Foremost of these relates to indecent speech without
to the prurient interest of an average listener applying contemporary standards. prurient appeal component coming under the category of protected speech
depending on the context within which it was made, irresistibly suggesting that, within
A cursory examination of the utterances complained of and the circumstances of the a particular context, such indecent speech may validly be categorized as
case reveal that to an average adult, the utterances "Gago ka talaga x x x, masahol unprotected, ergo, susceptible to restriction.
ka pa sa putang babae x x x. Yung putang babae ang gumagana lang doon yung
ibaba, [dito] kay Michael ang gumagana ang itaas, o di ba!" may not constitute In FCC, seven of what were considered "filthy" words40 earlier recorded in a
obscene but merely indecent utterances. They can be viewed as figures of speech or monologue by a satiric humorist later aired in the afternoon over a radio station
merely a play on words. In the context they were used, they may not appeal to the owned by Pacifica Foundation. Upon the complaint of a man who heard the pre-
prurient interests of an adult. The problem with the challenged statements is that they recorded monologue while driving with his son, FCC declared the language used as
"patently offensive" and "indecent" under a prohibiting law, though not necessarily bringing about a substantive evil the State has a right and duty to prevent and such
obscene. FCC added, however, that its declaratory order was issued in a "special danger must be grave and imminent.45
factual context," referring, in gist, to an afternoon radio broadcast when children were
undoubtedly in the audience. Acting on the question of whether the FCC could Petitioner’s invocation of the clear and present danger doctrine, arguably the most
regulate the subject utterance, the US Supreme Court ruled in the affirmative, owing permissive of speech tests, would not avail him any relief, for the application of said
to two special features of the broadcast medium, to wit: (1) radio is a pervasive test is uncalled for under the premises. The doctrine, first formulated by Justice
medium and (2) broadcasting is uniquely accessible to children. The US Court, Holmes, accords protection for utterances so that the printed or spoken words may
however, hastened to add that the monologue would be protected speech in other not be subject to prior restraint or subsequent punishment unless its expression
contexts, albeit it did not expound and identify a compelling state interest in putting creates a clear and present danger of bringing about a substantial evil which the
FCC’s content-based regulatory action under scrutiny. government has the power to prohibit.46 Under the doctrine, freedom of speech and of
press is susceptible of restriction when and only when necessary to prevent grave
The Court in Chavez41 elucidated on the distinction between regulation or restriction of and immediate danger to interests which the government may lawfully protect. As it
protected speech that is content-based and that which is content-neutral. A content- were, said doctrine evolved in the context of prosecutions for rebellion and other
based restraint is aimed at the contents or idea of the expression, whereas a content- crimes involving the overthrow of government. 47 It was originally designed to
neutral restraint intends to regulate the time, place, and manner of the expression determine the latitude which should be given to speech that espouses anti-
under well-defined standards tailored to serve a compelling state interest, without government action, or to have serious and substantial deleterious consequences on
restraint on the message of the expression. Courts subject content-based restraint to the security and public order of the community.48 The clear and present danger rule
strict scrutiny. has been applied to this jurisdiction.49 As a standard of limitation on free speech and
press, however, the clear and present danger test is not a magic incantation that
With the view we take of the case, the suspension MTRCB imposed under the wipes out all problems and does away with analysis and judgment in the testing of the
premises was, in one perspective, permissible restriction. We make this disposition legitimacy of claims to free speech and which compels a court to release a defendant
against the backdrop of the following interplaying factors: First, the indecent speech from liability the moment the doctrine is invoked, absent proof of imminent
was made via television, a pervasive medium that, to borrow from Gonzales v. Kalaw catastrophic disaster.50 As we observed in Eastern Broadcasting Corporation, the
Katigbak,42 easily "reaches every home where there is a set [and where] [c]hildren will clear and present danger test "does not lend itself to a simplistic and all embracing
likely be among the avid viewers of the programs therein shown"; second, the interpretation applicable to all utterances in all forums." 51
broadcast was aired at the time of the day when there was a reasonable risk that
children might be in the audience; and third, petitioner uttered his speech on a "G" or To be sure, the clear and present danger doctrine is not the only test which has been
"for general patronage" rated program. Under Sec. 2(A) of Chapter IV of the IRR of applied by the courts. Generally, said doctrine is applied to cases involving the
the MTRCB, a show for general patronage is "[s]uitable for all ages," meaning that the overthrow of the government and even other evils which do not clearly undermine
"material for television x x x in the judgment of the BOARD, does not contain anything national security. Since not all evils can be measured in terms of "proximity and
unsuitable for children and minors, and may be viewed without adult guidance or degree" the Court, however, in several cases—Ayer Productions v. Capulong52 and
supervision." The words petitioner used were, by any civilized norm, clearly not Gonzales v. COMELEC,53 applied the balancing of interests test. Former Chief Justice
suitable for children. Where a language is categorized as indecent, as in petitioner’s Fred Ruiz Castro, in Gonzales v. COMELEC, elucidated in his Separate Opinion that
utterances on a general-patronage rated TV program, it may be readily proscribed as "where the legislation under constitutional attack interferes with the freedom of
unprotected speech. speech and assembly in a more generalized way and where the effect of the speech
and assembly in terms of the probability of realization of a specific danger is not
A view has been advanced that unprotected speech refers only to susceptible even of impressionistic calculation," 54 then the "balancing of interests" test
pornography,43 false or misleading advertisement,44 advocacy of imminent lawless can be applied.
action, and expression endangering national security. But this list is not, as some
members of the Court would submit, exclusive or carved in stone. Without going into The Court explained also in Gonzales v. COMELEC the "balancing of interests" test:
specifics, it may be stated without fear of contradiction that US decisional law goes
beyond the aforesaid general exceptions. As the Court has been impelled to When particular conduct is regulated in the interest of public order, and the regulation
recognize exceptions to the rule against censorship in the past, this particular case results in an indirect, conditional, partial abridgment of speech, the duty of the courts
constitutes yet another exception, another instance of unprotected speech, created by is to determine which of the two conflicting interests demands the greater protection
the necessity of protecting the welfare of our children. As unprotected speech, under the particular circumstances presented. x x x We must, therefore, undertake
petitioner’s utterances can be subjected to restraint or regulation. the "delicate and difficult task x x x to weigh the circumstances and to appraise the
substantiality of the reasons advanced in support of the regulation of the free
Despite the settled ruling in FCC which has remained undisturbed since 1978, enjoyment of rights x x x.
petitioner asserts that his utterances must present a clear and present danger of
In enunciating standard premised on a judicial balancing of the conflicting social No doubt, one of the fundamental and most vital rights granted to citizens of a State is
values and individual interests competing for ascendancy in legislation which restricts the freedom of speech or expression, for without the enjoyment of such right, a free,
expression, the court in Douds laid the basis for what has been called the "balancing- stable, effective, and progressive democratic state would be difficult to attain. Arrayed
of-interests" test which has found application in more recent decisions of the U.S. against the freedom of speech is the right of the youth to their moral, spiritual,
Supreme Court. Briefly stated, the "balancing" test requires a court to take conscious intellectual, and social being which the State is constitutionally tasked to promote and
and detailed consideration of the interplay of interests observable in a given situation protect. Moreover, the State is also mandated to recognize and support the vital role
or type of situation. of the youth in nation building as laid down in Sec. 13, Art. II of the 1987 Constitution.

xxxx The Constitution has, therefore, imposed the sacred obligation and responsibility on
the State to provide protection to the youth against illegal or improper activities which
Although the urgency of the public interest sought to be secured by Congressional may prejudice their general well-being. The Article on youth, approved on second
power restricting the individual’s freedom, and the social importance and value of the reading by the Constitutional Commission, explained that the State shall "extend
freedom so restricted, "are to be judged in the concrete, not on the basis of social protection to minors against all forms of neglect, cruelty, exploitation,
abstractions," a wide range of factors are necessarily relevant in ascertaining the immorality, and practices which may foster racial, religious or other forms of
point or line of equilibrium. Among these are (a) the social value and importance of discrimination."58
the specific aspect of the particular freedom restricted by the legislation; (b) the
specific thrust of the restriction, i.e., whether the restriction is direct or indirect, Indisputably, the State has a compelling interest in extending social protection to
whether or not the persons affected are few; (c) the value and importance of the minors against all forms of neglect, exploitation, and immorality which may pollute
public interest sought to be secured by the legislation––the reference here is to the innocent minds. It has a compelling interest in helping parents, through regulatory
nature and gravity of the evil which Congress seeks to prevent; (d) whether the mechanisms, protect their children’s minds from exposure to undesirable materials
specific restriction decreed by Congress is reasonably appropriate and necessary for and corrupting experiences. The Constitution, no less, in fact enjoins the State, as
the protection of such public interest; and (e) whether the necessary safeguarding of earlier indicated, to promote and protect the physical, moral, spiritual, intellectual, and
the public interest involved may be achieved by some other measure less restrictive social well-being of the youth to better prepare them fulfill their role in the field of
of the protected freedom.55 nation-building.59 In the same way, the State is mandated to support parents in the
rearing of the youth for civic efficiency and the development of moral character. 60
This balancing of interest test, to borrow from Professor Kauper, 56 rests on the theory
that it is the court’s function in a case before it when it finds public interests served by Petitioner’s offensive and obscene language uttered in a television broadcast, without
legislation, on the one hand, and the free expression clause affected by it, on the doubt, was easily accessible to the children. His statements could have exposed
other, to balance one against the other and arrive at a judgment where the greater children to a language that is unacceptable in everyday use. As such, the welfare of
weight shall be placed. If, on balance, it appears that the public interest served by children and the State’s mandate to protect and care for them, as parens
restrictive legislation is of such nature that it outweighs the abridgment of freedom, patriae,61 constitute a substantial and compelling government interest in regulating
then the court will find the legislation valid. In short, the balance-of-interests theory petitioner’s utterances in TV broadcast as provided in PD 1986.
rests on the basis that constitutional freedoms are not absolute, not even those stated
in the free speech and expression clause, and that they may be abridged to some FCC explains the duty of the government to act as parens patriae to protect the
extent to serve appropriate and important interests. 57 To the mind of the Court, the children who, because of age or interest capacity, are susceptible of being corrupted
balancing of interest doctrine is the more appropriate test to follow. or prejudiced by offensive language, thus:

In the case at bar, petitioner used indecent and obscene language and a three (3)- [B]roadcasting is uniquely accessible to children, even those too young to read.
month suspension was slapped on him for breach of MTRCB rules. In this setting, the Although Cohen’s written message, ["Fuck the Draft"], might have been
assertion by petitioner of his enjoyment of his freedom of speech is ranged against incomprehensible to a first grader, Pacifica’s broadcast could have enlarged a child’s
the duty of the government to protect and promote the development and welfare of vocabulary in an instant. Other forms of offensive expression may be withheld from
the youth. the young without restricting the expression at its source. Bookstores and motion
picture theaters, for example, may be prohibited from making indecent material
After a careful examination of the factual milieu and the arguments raised by available to children. We held in Ginsberg v. New York that the government’s interest
petitioner in support of his claim to free speech, the Court rules that the government’s in the "well-being of its youth" and in supporting "parents’ claim to authority in their
interest to protect and promote the interests and welfare of the children adequately own household" justified the regulation of otherwise protected expression. The ease
buttresses the reasonable curtailment and valid restraint on petitioner’s prayer to with which children may obtain access to broadcast material, coupled with the
continue as program host of Ang Dating Daan during the suspension period. concerns recognized in Ginsberg, amply justify special treatment of indecent
broadcasting.
Moreover, Gonzales v. Kalaw Katigbak likewise stressed the duty of the State to After a review of the facts, the Court finds that what MTRCB imposed on petitioner is
attend to the welfare of the young: an administrative sanction or subsequent punishment for his offensive and obscene
language in Ang Dating Daan.
x x x It is the consensus of this Court that where television is concerned, a less liberal
approach calls for observance. This is so because unlike motion pictures where the To clarify, statutes imposing prior restraints on speech are generally illegal and
patrons have to pay their way, television reaches every home where there is a set. presumed unconstitutional breaches of the freedom of speech. The exceptions to
Children then will likely will be among the avid viewers of the programs therein prior restraint are movies, television, and radio broadcast censorship in view of its
shown. As was observed by Circuit Court of Appeals Judge Jerome Frank, it is hardly access to numerous people, including the young who must be insulated from the
the concern of the law to deal with the sexual fantasies of the adult population. It prejudicial effects of unprotected speech. PD 1986 was passed creating the Board of
cannot be denied though that the State as parens patriae is called upon to manifest Review for Motion Pictures and Television (now MTRCB) and which requires prior
an attitude of caring for the welfare of the young.62 permit or license before showing a motion picture or broadcasting a TV program. The
Board can classify movies and television programs and can cancel permits for
The compelling need to protect the young impels us to sustain the regulatory action exhibition of films or television broadcast.
lavvphi 1.net

MTRCB took in the narrow confines of the case. To reiterate, FCC justified the
restraint on the TV broadcast grounded on the following considerations: (1) the use of The power of MTRCB to regulate and even impose some prior restraint on radio and
television with its unique accessibility to children, as a medium of broadcast of a television shows, even religious programs, was upheld in Iglesia Ni Cristo v. Court of
patently offensive speech; (2) the time of broadcast; and (3) the "G" rating of the Ang Appeals. Speaking through Chief Justice Reynato S. Puno, the Court wrote:
Dating Daan program. And in agreeing with MTRCB, the court takes stock of and
cites with approval the following excerpts from FCC: We thus reject petitioner’s postulate that its religious program is per se beyond review
by the respondent Board. Its public broadcast on TV of its religious program brings it
It is appropriate, in conclusion, to emphasize the narrowness of our holding. This out of the bosom of internal belief. Television is a medium that reaches even the eyes
case does not involve a two-way radio conversation between a cab driver and a and ears of children. The Court iterates the rule that the exercise of religious freedom
dispatcher, or a telecast of an Elizabethan comedy. We have not decided that an can be regulated by the State when it will bring about the clear and present danger of
occasional expletive in either setting would justify any sanction. x x x The [FFC’s] some substantive evil which the State is duty bound to prevent, i.e., serious detriment
decision rested entirely on a nuisance rationale under which context is all important. to the more overriding interest of public health, public morals, or public welfare. x x x
The concept requires consideration of a host of variables. The time of day was
emphasized by the [FFC]. The content of the program in which the language is used xxxx
will affect the composition of the audience x x x. As Mr. Justice Sutherland wrote a
‘nuisance may be merely a right thing in the wrong place, like a pig in the parlor
instead of the barnyard.’ We simply hold that when the [FCC] finds that a pig has While the thesis has a lot to commend itself, we are not ready to hold that [PD 1986]
entered the parlor, the exercise of its regulatory power does not depend on proof that is unconstitutional for Congress to grant an administrative body quasi-judicial power
the pig is obscene. (Citation omitted.) to preview and classify TV programs and enforce its decision subject to review by our
courts. As far back as 1921, we upheld this setup in Sotto vs. Ruiz, viz:
There can be no quibbling that the remarks in question petitioner uttered on prime-
time television are blatantly indecent if not outright obscene. It is the kind of speech "The use of the mails by private persons is in the nature of a privilege which can be
that PD 1986 proscribes necessitating the exercise by MTRCB of statutory regulated in order to avoid its abuse. Persons possess no absolute right to put into
disciplinary powers. It is the kind of speech that the State has the inherent the mail anything they please, regardless of its character." 63
prerogative, nay duty, to regulate and prevent should such action served and further
compelling state interests. One who utters indecent, insulting, or offensive words on Bernas adds:
television when unsuspecting children are in the audience is, in the graphic language
of FCC, a "pig in the parlor." Public interest would be served if the "pig" is reasonably Under the decree a movie classification board is made the arbiter of what movies and
restrained or even removed from the "parlor." television programs or parts of either are fit for public consumption. It decides what
movies are "immoral, indecent, contrary to law and/or good customs, injurious to the
Ergo, petitioner’s offensive and indecent language can be subjected to prior restraint. prestige of the Republic of the Philippines or its people," and what "tend to incite
subversion, insurrection, rebellion or sedition," or "tend to undermine the faith and
Petitioner theorizes that the three (3)-month suspension is either prior restraint or confidence of the people in their government and/or duly constituted authorities," etc.
subsequent punishment that, however, includes prior restraint, albeit indirectly. Moreover, its decisions are executory unless stopped by a court. 64

Moreover, in MTRCB v. ABS-CBN Broadcasting Corporation,65 it was held that the

power of review and prior approval of MTRCB extends to all television programs and
is valid despite the freedom of speech guaranteed by the Constitution. Thus, all Any simplistic suggestion, however, that the MTRCB would be crossing the limits of
broadcast networks are regulated by the MTRCB since they are required to get a its authority were it to regulate and even restrain the prime-time television broadcast
permit before they air their television programs. Consequently, their right to enjoy of indecent or obscene speech in a "G" rated program is not acceptable. As made
their freedom of speech is subject to that requirement. As lucidly explained by Justice clear in Eastern Broadcasting Corporation, "the freedom of television and radio
Dante O. Tinga, government regulations through the MTRCB became "a necessary broadcasting is somewhat lesser in scope than the freedom accorded to newspaper
evil" with the government taking the role of assigning bandwidth to individual and print media." The MTRCB, as a regulatory agency, must have the wherewithal to
broadcasters. The stations explicitly agreed to this regulatory scheme; otherwise, enforce its mandate, which would not be effective if its punitive actions would be
chaos would result in the television broadcast industry as competing broadcasters will limited to mere fines. Television broadcasts should be subject to some form of
interfere or co-opt each other’s signals. In this scheme, station owners and regulation, considering the ease with which they can be accessed, and violations of
broadcasters in effect waived their right to the full enjoyment of their right to freedom the regulations must be met with appropriate and proportional disciplinary action. The
of speech in radio and television programs and impliedly agreed that said right may suspension of a violating television program would be a sufficient punishment and
be subject to prior restraint—denial of permit or subsequent punishment, like serve as a deterrent for those responsible. The prevention of the broadcast of
suspension or cancellation of permit, among others. petitioner’s television program is justified, and does not constitute prohibited prior
restraint. It behooves the Court to respond to the needs of the changing times, and
The three (3) months suspension in this case is not a prior restraint on the right of craft jurisprudence to reflect these times.
petitioner to continue with the broadcast of Ang Dating Daan as a permit was already
issued to him by MTRCB for such broadcast. Rather, the suspension is in the form of Petitioner, in questioning the three-month suspension, also tags as unconstitutional
permissible administrative sanction or subsequent punishment for the offensive and the very law creating the MTRCB, arguing that PD 1986, as applied to him, infringes
obscene remarks he uttered on the evening of August 10, 2004 in his television also upon his freedom of religion. The Court has earlier adequately explained why
program, Ang Dating Daan. It is a sanction that the MTRCB may validly impose under petitioner’s undue reliance on the religious freedom cannot lend justification, let alone
its charter without running afoul of the free speech clause. And the imposition is an exempting dimension to his licentious utterances in his program. The Court sees
separate and distinct from the criminal action the Board may take pursuant to Sec. no need to address anew the repetitive arguments on religious freedom. As earlier
3(i) of PD 1986 and the remedies that may be availed of by the aggrieved private discussed in the disposition of the petition in G.R. No. 164785, what was uttered was
party under the provisions on libel or tort, if applicable. As FCC teaches, the in no way a religious speech. Parenthetically, petitioner’s attempt to characterize his
imposition of sanctions on broadcasters who indulge in profane or indecent speech as a legitimate defense of his religion fails miserably. He tries to place his
broadcasting does not constitute forbidden censorship. Lest it be overlooked, the words in perspective, arguing evidently as an afterthought that this was his method of
sanction imposed is not per se for petitioner’s exercise of his freedom of speech via refuting the alleged distortion of his statements by the INC hosts of Ang Tamang
television, but for the indecent contents of his utterances in a "G" rated TV program. Daan. But on the night he uttered them in his television program, the word simply
came out as profane language, without any warning or guidance for undiscerning
More importantly, petitioner is deemed to have yielded his right to his full enjoyment ears.
of his freedom of speech to regulation under PD 1986 and its IRR as television station
owners, program producers, and hosts have impliedly accepted the power of MTRCB As to petitioner’s other argument about having been denied due process and equal
to regulate the broadcast industry. protection of the law, suffice it to state that we have at length debunked similar
arguments in G.R. No. 164785. There is no need to further delve into the fact that
Neither can petitioner’s virtual inability to speak in his program during the period of petitioner was afforded due process when he attended the hearing of the MTRCB,
suspension be plausibly treated as prior restraint on future speech. For viewed in its and that he was unable to demonstrate that he was unjustly discriminated against in
proper perspective, the suspension is in the nature of an intermediate penalty for the MTRCB proceedings.
uttering an unprotected form of speech. It is definitely a lesser punishment than the
permissible cancellation of exhibition or broadcast permit or license. In fine, the Finally, petitioner argues that there has been undue delegation of legislative power,
suspension meted was simply part of the duties of the MTRCB in the enforcement as PD 1986 does not provide for the range of imposable penalties that may be
and administration of the law which it is tasked to implement. Viewed in its proper applied with respect to violations of the provisions of the law.
context, the suspension sought to penalize past speech made on prime-time "G"
rated TV program; it does not bar future speech of petitioner in other television The argument is without merit.
programs; it is a permissible subsequent administrative sanction; it should not be
confused with a prior restraint on speech. While not on all fours, the Court, in
MTRCB,66 sustained the power of the MTRCB to penalize a broadcast company for In Edu v. Ericta, the Court discussed the matter of undue delegation of legislative
exhibiting/airing a pre-taped TV episode without Board authorization in violation of power in the following wise:
Sec. 7 of PD 1986.
It is a fundamental principle flowing from the doctrine of separation of powers that
Congress may not delegate its legislative power to the two other branches of the
government, subject to the exception that local governments may over local affairs
participate in its exercise. What cannot be delegated is the authority under the conferred. x x x [W]hen the statute does not specify the particular method to be
Constitution to make laws and to alter and repeal them; the test is the completeness followed or used by a government agency in the exercise of the power vested in it by
of the statute in all its term and provisions when it leaves the hands of the legislature. law, said agency has the authority to adopt any reasonable method to carry out its
To determine whether or not there is an undue delegation of legislative power, the function.68
inquiry must be directed to the scope and definiteness of the measure enacted. The
legislature does not abdicate its functions when it describes what job must be done, Given the foregoing perspective, it stands to reason that the power of the MTRCB to
who is to do it, and what is the scope of his authority. For a complex economy, that regulate and supervise the exhibition of TV programs carries with it or necessarily
may indeed be the only way in which the legislative process can go forward. A implies the authority to take effective punitive action for violation of the law sought to
distinction has rightfully been made between delegation of power to make laws which be enforced. And would it not be logical too to say that the power to deny or cancel a
necessarily involves a discretion as to what it shall be, which constitutionally may not permit for the exhibition of a TV program or broadcast necessarily includes the lesser
be done, and delegation of authority or discretion as to its execution to be exercised power to suspend?
under and in pursuance of the law, to which no valid objection can be made. The
Constitution is thus not to be regarded as denying the legislature the necessary
resources of flexibility and practicability. The MTRCB promulgated the IRR of PD 1986 in accordance with Sec. 3(a) which, for
reference, provides that agency with the power "[to] promulgate such rules and
regulations as are necessary or proper for the implementation of this Act, and the
To avoid the taint of unlawful delegation, there must be a standard, which implies at accomplishment of its purposes and objectives x x x." And Chapter XIII, Sec. 1 of the
the very least that the legislature itself determines matters of principle and lays down IRR providing:
fundamental policy. Otherwise, the charge of complete abdication may be hard to
repel. A standard thus defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances Section 1. VIOLATIONS AND ADMINISTRATIVE SANCTIONS.––Without prejudice
under which the legislative command is to be effected. It is the criterion by which to the immediate filing of the appropriate criminal action and the immediate seizure of
legislative purpose may be carried out. Thereafter, the executive or administrative the pertinent articles pursuant to Section 13, any violation of PD 1986 and its
office designated may in pursuance of the above guidelines promulgate supplemental Implementing Rules and Regulations governing motion pictures, television programs,
rules and regulations.67 and related promotional materials shall be penalized with suspension or cancellation
of permits and/or licenses issued by the Board and/or with the imposition of fines and
other administrative penalty/penalties. The Board recognizes the existing Table of
Based on the foregoing pronouncements and analyzing the law in question, Administrative Penalties attached without prejudice to the power of the Board to
petitioner’s protestation about undue delegation of legislative power for the sole amend it when the need arises. In the meantime the existing revised Table of
reason that PD 1986 does not provide for a range of penalties for violation of the law Administrative Penalties shall be enforced. (Emphasis added.)
is untenable. His thesis is that MTRCB, in promulgating the IRR of PD 1986,
prescribing a schedule of penalties for violation of the provisions of the decree, went
beyond the terms of the law. This is, in the final analysis, no more than a measure to specifically implement the
aforequoted provisions of Sec. 3(d) and (k). Contrary to what petitioner implies, the
IRR does not expand the mandate of the MTRCB under the law or partake of the
Petitioner’s posture is flawed by the erroneous assumptions holding it together, the nature of an unauthorized administrative legislation. The MTRCB cannot shirk its
first assumption being that PD 1986 does not prescribe the imposition of, or authorize responsibility to regulate the public airwaves and employ such means as it can as a
the MTRCB to impose, penalties for violators of PD 1986. As earlier indicated, guardian of the public.
however, the MTRCB, by express and direct conferment of power and functions, is
charged with supervising and regulating, granting, denying, or canceling permits for
the exhibition and/or television broadcast of all motion pictures, television programs, In Sec. 3(c), one can already find the permissible actions of the MTRCB, along with
and publicity materials to the end that no such objectionable pictures, programs, and the standards to be applied to determine whether there have been statutory
materials shall be exhibited and/or broadcast by television. Complementing this breaches. The MTRCB may evaluate motion pictures, television programs, and
provision is Sec. 3(k) of the decree authorizing the MTRCB "to exercise such powers publicity materials "applying contemporary Filipino cultural values as standard," and,
and functions as may be necessary or incidental to the attainment of the purpose and from there, determine whether these audio and video materials "are objectionable for
objectives of [the law]." As earlier explained, the investiture of supervisory, regulatory, being immoral, indecent, contrary to law and/or good customs, [etc.] x x x" and apply
and disciplinary power would surely be a meaningless grant if it did not carry with it the sanctions it deems proper. The lawmaking body cannot possibly provide for all the
the power to penalize the supervised or the regulated as may be proportionate to the details in the enforcement of a particular statute.69 The grant of the rule-making power
offense committed, charged, and proved. As the Court said in Chavez v. National to administrative agencies is a relaxation of the principle of separation of powers and
Housing Authority: is an exception to the non-delegation of legislative powers.70 Administrative
regulations or "subordinate legislation" calculated to promote the public interest are
necessary because of "the growing complexity of modern life, the multiplication of the
x x x [W]hen a general grant of power is conferred or duty enjoined, every particular subjects of governmental regulations, and the increased difficulty of administering the
power necessary for the exercise of the one or the performance of the other is also law."71 Allowing the MTRCB some reasonable elbow-room in its operations and, in the
exercise of its statutory disciplinary functions, according it ample latitude in fixing, by
way of an appropriate issuance, administrative penalties with due regard for the
severity of the offense and attending mitigating or aggravating circumstances, as the STATE IMMUNITY FROM SUIT
case may be, would be consistent with its mandate to effectively and efficiently
regulate the movie and television industry.
FIRST DIVISION

But even as we uphold the power of the MTRCB to review and impose sanctions for
G.R. No. 70853 March 12, 1987
violations of PD 1986, its decision to suspend petitioner must be modified, for
nowhere in that issuance, particularly the power-defining Sec. 3 nor in the MTRCB
Schedule of Administrative Penalties effective January 1, 1999 is the Board REPUBLIC OF THE PHILIPPINES, petitioner-appellee,
empowered to suspend the program host or even to prevent certain people from vs.
PABLO FELICIANO and INTERMEDIATE APPELLATE COURT, respondents-appellants.
appearing in television programs. The MTRCB, to be sure, may prohibit the broadcast
of such television programs or cancel permits for exhibition, but it may not suspend
television personalities, for such would be beyond its jurisdiction. The MTRCB cannot YAP, J.:
extend its exercise of regulation beyond what the law provides. Only persons,
offenses, and penalties clearly falling clearly within the letter and spirit of PD 1986 will Petitioner seeks the review of the decision of the Intermediate Appellate Court dated
be considered to be within the decree’s penal or disciplinary operation. And when it April 30, 1985 reversing the order of the Court of First Instance of Camarines Sur,
exists, the reasonable doubt must be resolved in favor of the person charged with Branch VI, dated August 21, 1980, which dismissed the complaint of respondent
violating the statute and for whom the penalty is sought. Thus, the MTRCB’s decision Pablo Feliciano for recovery of ownership and possession of a parcel of land on the
in Administrative Case No. 01-04 dated September 27, 2004 and the subsequent ground of non-suability of the State.
order issued pursuant to said decision must be modified. The suspension should
cover only the television program on which petitioner appeared and uttered the
The background of the present controversy may be briefly summarized as follows:
offensive and obscene language, which sanction is what the law and the facts
obtaining call for.
On January 22, 1970, respondent Feliciano filed a complaint with the then Court of
First Instance of Camarines Sur against the Republic of the Philippines, represented
In ending, what petitioner obviously advocates is an unrestricted speech paradigm in
by the Land Authority, for the recovery of ownership and possession of a parcel of
which absolute permissiveness is the norm. Petitioner’s flawed belief that he may
simply utter gutter profanity on television without adverse consequences, under the land, consisting of four (4) lots with an aggregate area of 1,364.4177 hectares,
situated in the Barrio of Salvacion, Municipality of Tinambac, Camarines Sur. Plaintiff
guise of free speech, does not lend itself to acceptance in this jurisdiction. We repeat:
alleged that he bought the property in question from Victor Gardiola by virtue of a
freedoms of speech and expression are not absolute freedoms. To say "any act that
Contract of Sale dated May 31, 1952, followed by a Deed of Absolute Sale on
restrains speech should be greeted with furrowed brows" is not to say that any act
that restrains or regulates speech or expression is per se invalid. This only recognizes October 30, 1954; that Gardiola had acquired the property by purchase from the heirs
of Francisco Abrazado whose title to the said property was evidenced by
the importance of freedoms of speech and expression, and indicates the necessity to
an informacion posesoria that upon plaintiff's purchase of the property, he took actual
carefully scrutinize acts that may restrain or regulate speech.
possession of the same, introduced various improvements therein and caused it to be
surveyed in July 1952, which survey was approved by the Director of Lands on
WHEREFORE, the decision of the MTRCB in Adm. Case No. 01-04 dated September 27, 2004 October 24, 1954; that on November 1, 1954, President Ramon Magsaysay issued
is hereby AFFIRMED with the MODIFICATION of limiting the suspension to the program Ang
Proclamation No. 90 reserving for settlement purposes, under the administration of
Dating Daan. As thus modified, the fallo of the MTRCB shall read as follows:
the National Resettlement and Rehabilitation Administration (NARRA), a tract of land
situated in the Municipalities of Tinambac and Siruma, Camarines Sur, after which the
WHEREFORE, in view of all the foregoing, a Decision is hereby rendered, imposing a penalty of NARRA and its successor agency, the Land Authority, started sub-dividing and
THREE (3) MONTHS SUSPENSION on the television program, Ang Dating Daan, subject of the
distributing the land to the settlers; that the property in question, while located within
instant petition.
the reservation established under Proclamation No. 90, was the private property of
plaintiff and should therefore be excluded therefrom. Plaintiff prayed that he be
Co-respondents Joselito Mallari, Luzviminda Cruz, and UNTV Channel 37 and its owner, PBC, declared the rightful and true owner of the property in question consisting of
are hereby exonerated for lack of evidence. 1,364.4177 hectares; that his title of ownership based on informacion posesoria of his
predecessor-in-interest be declared legal valid and subsisting and that defendant be
Costs against petitioner. ordered to cancel and nullify all awards to the settlers.

SO ORDERED. The defendant, represented by the Land Authority, filed an answer, raising by way of
affirmative defenses lack of sufficient cause of action and prescription.
On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate
decision declaring Lot No. 1, with an area of 701.9064 hectares, to be the private Appellate Court on petition for certiorari. On April 30, 1985, the respondent appellate
property of the plaintiff, "being covered by a possessory information title in the name court rendered its decision reversing the order of Judge Lising and remanding the
of his predecessor-in-interest" and declaring said lot excluded from the NARRA case to the court a quo for further proceedings. Hence this petition.
settlement reservation. The court declared the rest of the property claimed by plaintiff,
i.e. Lots 2, 3 and 4, reverted to the public domain. We find the petition meritorious. The doctrine of non-suability of the State has proper
application in this case. The plaintiff has impleaded the Republic of the Philippines as
A motion to intervene and to set aside the decision of August 29, 1970 was filed by defendant in an action for recovery of ownership and possession of a parcel of land,
eighty-six (86) settlers, together with the barrio council of Pag-asay, alleging among bringing the State to court just like any private person who is claimed to be usurping a
other things that intervenors had been in possession of the land in question for more piece of property. A suit for the recovery of property is not an action in rem, but an
than twenty (20) years under claim of ownership. action in personam.1 It is an action directed against a specific party or parties, and any judgment therein binds
only such party or parties. The complaint filed by plaintiff, the private respondent herein, is directed against the
Republic of the Philippines, represented by the Land Authority, a governmental agency created by Republic Act No.
On January 25, 1971, the court a quo reconsidered its decision, reopened the case 3844.
and directed the intervenors to file their corresponding pleadings and present their
evidence; all evidence already presented were to remain but plaintiff, as well as the By its caption and its allegation and prayer, the complaint is clearly a suit against the
Republic of the Philippines, could present additional evidence if they so desire. The State, which under settled jurisprudence is not permitted, except upon a showing that
plaintiff presented additional evidence on July 30, 1971, and the case was set for the State has consented to be sued, either expressly or by implication through the
hearing for the reception of intervenors' evidence on August 30 and August 31, 1971. use of statutory language too plain to be misinterpreted. There is no such showing in
2

the instant case. Worse, the complaint itself fails to allege the existence of such
On August 30, 1971, the date set for the presentation of the evidence for intervenors, consent. This is a fatal defect, and on this basis alone, the complaint should have
3

the latter did not appear but submitted a motion for postponement and resetting of the been dismissed.
hearing on the next day, August 31, 1971. The trial court denied the motion for
postponement and allowed plaintiff to offer his evidence "en ausencia," after which The failure of the petitioner to assert the defense of immunity from suit when the case
the case would be deemed submitted for decision. On the following day, August 31, was tried before the court a quo, as alleged by private respondent, is not fatal. It is
1971, Judge Sison rendered a decision reiterating his decision of August 29, 1970. now settled that such defense "may be invoked by the courts sua sponte at any stage
of the proceedings." 4

A motion for reconsideration was immediately filed by the intervenors. But before this
motion was acted upon, plaintiff filed a motion for execution, dated November 18, Private respondent contends that the consent of petitioner may be read from the
1971. On December 10, 1971, the lower court, this time through Judge Miguel Proclamation itself, when it established the reservation " subject to private rights, if
Navarro, issued an order denying the motion for execution and setting aside the order any there be. " We do not agree. No such consent can be drawn from the language of
denying intervenors' motion for postponement. The case was reopened to allow the Proclamation. The exclusion of existing private rights from the reservation
intervenors to present their evidence. Unable to secure a reconsideration of Judge established by Proclamation No. 90 can not be construed as a waiver of the immunity
Navarro's order, the plaintiff went to the Intermediate Appellate Court on a petition for of the State from suit. Waiver of immunity, being a derogation of sovereignty, will not
certiorari. Said petition was, however, denied by the Intermediate Appellate Court, be inferred lightly. but must be construed instrictissimi juris. Moreover, the 5

and petitioners brought the matter to this Court in G.R. No. 36163, which was denied Proclamation is not a legislative act. The consent of the State to be sued must
on May 3, 1973 Consequently, the case was remanded to the court a quo for further emanate from statutory authority. Waiver of State immunity can only be made by an
proceedings. act of the legislative body.

On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground Neither is there merit in respondent's submission, which the respondent appellate
that the Republic of the Philippines cannot be sued without its consent and hence the court sustained, on the basis of our decision in the Begosa case, that the present 6

action cannot prosper. The motion was opposed by the plaintiff. action is not a suit against the State within the rule of State immunity from suit,
because plaintiff does not seek to divest the Government of any of its lands or its
On August 21, 1980, the trial court, through Judge Esteban Lising, issued the funds. It is contended that the complaint involves land not owned by the State, but
questioned order dismissing the case for lack of jurisdiction. Respondent moved for private land belonging to the plaintiff, hence the Government is not being divested of
reconsideration, while the Solicitor General, on behalf of the Republic of the any of its properties. There is some sophistry involved in this argument, since the
Philippines filed its opposition thereto, maintaining that the dismissal was proper on character of the land sought to be recovered still remains to be established, and the
the ground of non-suability of the State and also on the ground that the existence plaintiff's action is directed against the State precisely to compel the latter to litigate
and/or authenticity of the purported possessory information title of the respondents' the ownership and possession of the property. In other words, the plaintiff is out to
predecessor-in-interest had not been demonstrated and that at any rate, the same is establish that he is the owner of the land in question based, incidentally, on
not evidence of title, or if it is, its efficacy has been lost by prescription and laches.
an informacion posesoria of dubious value, and he seeks to establish his claim of
ownership by suing the Republic of the Philippines in an action in personam.

The inscription in the property registry of an informacion posesoria under the Spanish
Mortgage Law was a means provided by the law then in force in the Philippines prior Republic of the Philippines
to the transfer of sovereignty from Spain to the United States of America, to record a SUPREME COURT
claimant's actual possession of a piece of land, established through an ex Manila
parte proceeding conducted in accordance with prescribed rules. Such inscription
7

merely furnishes, at best,prima facie evidence of the fact that at the time the
proceeding was held, the claimant was in possession of the land under a claim of EN BANC
right as set forth in his application. The possessory information could ripen into a
8

record of ownership after the lapse of 20 years (later reduced to 10 years), upon the G.R. No. L-11154 March 21, 1916
fulfillment of the requisites prescribed in Article 393 of the Spanish Mortgage Law.
E. MERRITT, plaintiff-appellant,
There is no showing in the case at bar that the informacion posesoria held by the vs.
respondent had been converted into a record of ownership. Such possessory GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
information, therefore, remained at best mere prima facie evidence of possession.
Using this possessory information, the respondent could have applied for judicial Crossfield and O'Brien for plaintiff.
confirmation of imperfect title under the Public Land Act, which is an action in Attorney-General Avanceña for defendant..
rem. However, having failed to do so, it is rather late for him to pursue this avenue at
this time. Respondent must also contend, as the records disclose, with the fact
admitted by him and stated in the decision of the Court a quo that settlers have been TRENT, J.:
occupying and cultivating the land in question since even before the outbreak of the
war, which puts in grave doubt his own claim of possession. This is an appeal by both parties from a judgment of the Court of First Instance of the
city of Manila in favor of the plaintiff for the sum of P14,741, together with the costs of
Worthy of note is the fact, as pointed out by the Solicitor General, that the informacion the cause.
posesoria registered in the Office of the Register of Deed of Camarines Sur on
September 23, 1952 was a "reconstituted" possessory information; it was Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general
"reconstituted from the duplicate presented to this office (Register of Deeds) by Dr. damages which the plaintiff suffered to P5,000, instead of P25,000 as claimed in the
Pablo Feliciano," without the submission of proof that the alleged duplicate was complaint," and (2) "in limiting the time when plaintiff was entirely disabled to two
authentic or that the original thereof was lost. Reconstitution can be validly made only months and twenty-one days and fixing the damage accordingly in the sum of P2,666,
in case of loss of the original. 10 These circumstances raise grave doubts as to the instead of P6,000 as claimed by plaintiff in his complaint."
authenticity and validity of the "informacion posesoria" relied upon by respondent
Feliciano. Adding to the dubiousness of said document is the fact that "possessory
The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in
information calls for an area of only 100 hectares," 11 whereas the land claimed by
finding that the collision between the plaintiff's motorcycle and the ambulance of the
respondent Feliciano comprises 1,364.4177 hectares, later reduced to 701-9064
General Hospital was due to the negligence of the chauffeur; (b) in holding that the
hectares. Courts should be wary in accepting "possessory information documents, as
Government of the Philippine Islands is liable for the damages sustained by the
well as other purportedly old Spanish titles, as proof of alleged ownership of lands.
plaintiff as a result of the collision, even if it be true that the collision was due to the
negligence of the chauffeur; and (c) in rendering judgment against the defendant for
WHEREFORE, judgment is hereby rendered reversing and setting aside the the sum of P14,741.
appealed decision of the Intermediate Appellate Court, dated April 30, 1985, and
affirming the order of the court a quo, dated August 21, 1980, dismissing the
The trial court's findings of fact, which are fully supported by the record, are as
complaint filed by respondent Pablo Feliciano against the Republic of the Philippines.
follows:
No costs.

It is a fact not disputed by counsel for the defendant that when the plaintiff,
SO ORDERED.
riding on a motorcycle, was going toward the western part of Calle Padre
Faura, passing along the west side thereof at a speed of ten to twelve miles
an hour, upon crossing Taft Avenue and when he was ten feet from the
southwestern intersection of said streets, the General Hospital ambulance,
upon reaching said avenue, instead of turning toward the south, after We may say at the outset that we are in full accord with the trial court to the effect that
passing the center thereof, so that it would be on the left side of said the collision between the plaintiff's motorcycle and the ambulance of the General
avenue, as is prescribed by the ordinance and the Motor Vehicle Act, turned Hospital was due solely to the negligence of the chauffeur.
suddenly and unexpectedly and long before reaching the center of the
street, into the right side of Taft Avenue, without having sounded any whistle The two items which constitute a part of the P14,741 and which are drawn in question
or horn, by which movement it struck the plaintiff, who was already six feet by the plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the
from the southwestern point or from the post place there. P2,666, the amount allowed for the loss of wages during the time the plaintiff was
incapacitated from pursuing his occupation. We find nothing in the record which
By reason of the resulting collision, the plaintiff was so severely injured that, would justify us in increasing the amount of the first. As to the second, the record
according to Dr. Saleeby, who examined him on the very same day that he shows, and the trial court so found, that the plaintiff's services as a contractor were
was taken to the General Hospital, he was suffering from a depression in the worth P1,000 per month. The court, however, limited the time to two months and
left parietal region, a would in the same place and in the back part of his twenty-one days, which the plaintiff was actually confined in the hospital. In this we
head, while blood issued from his nose and he was entirely unconscious. think there was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in the
The marks revealed that he had one or more fractures of the skull and that hospital only two months and twenty-one days while the remainder of the six months
the grey matter and brain was had suffered material injury. At ten o'clock of was spent in his home, would not prevent recovery for the whole time. We, therefore,
the night in question, which was the time set for performing the operation, find that the amount of damages sustained by the plaintiff, without any fault on his
his pulse was so weak and so irregular that, in his opinion, there was little part, is P18,075.
hope that he would live. His right leg was broken in such a way that the
fracture extended to the outer skin in such manner that it might be regarded As the negligence which caused the collision is a tort committed by an agent or
as double and the would be exposed to infection, for which reason it was of employee of the Government, the inquiry at once arises whether the Government is
the most serious nature. legally-liable for the damages resulting therefrom.

At another examination six days before the day of the trial, Dr. Saleeby Act No. 2457, effective February 3, 1915, reads:
noticed that the plaintiff's leg showed a contraction of an inch and a half and
a curvature that made his leg very weak and painful at the point of the An Act authorizing E. Merritt to bring suit against the Government of the
fracture. Examination of his head revealed a notable readjustment of the Philippine Islands and authorizing the Attorney-General of said Islands to
functions of the brain and nerves. The patient apparently was slightly deaf, appear in said suit.
had a light weakness in his eyes and in his mental condition. This latter
weakness was always noticed when the plaintiff had to do any difficult
mental labor, especially when he attempted to use his money for Whereas a claim has been filed against the Government of the Philippine
mathematical calculations. Islands by Mr. E. Merritt, of Manila, for damages resulting from a collision
between his motorcycle and the ambulance of the General Hospital on
March twenty-fifth, nineteen hundred and thirteen;
According to the various merchants who testified as witnesses, the plaintiff's
mental and physical condition prior to the accident was excellent, and that
after having received the injuries that have been discussed, his physical Whereas it is not known who is responsible for the accident nor is it possible
condition had undergone a noticeable depreciation, for he had lost the to determine the amount of damages, if any, to which the claimant is entitled;
agility, energy, and ability that he had constantly displayed before the and
accident as one of the best constructors of wooden buildings and he could
not now earn even a half of the income that he had secured for his work Whereas the Director of Public Works and the Attorney-General
because he had lost 50 per cent of his efficiency. As a contractor, he could recommended that an Act be passed by the Legislature authorizing Mr. E.
no longer, as he had before done, climb up ladders and scaffoldings to reach Merritt to bring suit in the courts against the Government, in order that said
the highest parts of the building. questions may be decided: Now, therefore,

As a consequence of the loss the plaintiff suffered in the efficiency of his By authority of the United States, be it enacted by the Philippine Legislature,
work as a contractor, he had to dissolved the partnership he had formed with that:
the engineer. Wilson, because he was incapacitated from making
mathematical calculations on account of the condition of his leg and of his SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First
mental faculties, and he had to give up a contract he had for the construction Instance of the city of Manila against the Government of the Philippine
of the Uy Chaco building." Islands in order to fix the responsibility for the collision between his
 motorcycle and the ambulance of the General Hospital, and to determine the improving agricultural and kindred industries; to disseminate information calculated to
amount of the damages, if any, to which Mr. E. Merritt is entitled on account educate and benefit the industrial classes; and to advance by such means the
of said collision, and the Attorney-General of the Philippine Islands is hereby material interests of the state, being objects similar to those sought by the public
authorized and directed to appear at the trial on the behalf of the school system. In passing upon the question of the state's liability for the negligent
Government of said Islands, to defendant said Government at the same. acts of its officers or agents, the court said:

SEC. 2. This Act shall take effect on its passage. No claim arises against any government is favor of an individual, by reason
of the misfeasance, laches, or unauthorized exercise of powers by its
Enacted, February 3, 1915. officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs.
State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93
Did the defendant, in enacting the above quoted Act, simply waive its immunity from Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)
suit or did it also concede its liability to the plaintiff? If only the former, then it cannot
be held that the Act created any new cause of action in favor of the plaintiff or
extended the defendant's liability to any case not previously recognized. As to the scope of legislative enactments permitting individuals to sue the state where
the cause of action arises out of either fort or contract, the rule is stated in 36 Cyc.,
915, thus:
All admit that the Insular Government (the defendant) cannot be sued by an individual
without its consent. It is also admitted that the instant case is one against the
Government. As the consent of the Government to be sued by the plaintiff was By consenting to be sued a state simply waives its immunity from suit. It
entirely voluntary on its part, it is our duty to look carefully into the terms of the does not thereby concede its liability to plaintiff, or create any cause of
consent, and render judgment accordingly. action in his favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a preexisting liability and
submits itself to the jurisdiction of the court, subject to its right to interpose
The plaintiff was authorized to bring this action against the Government "in order to fix any lawful defense.
the responsibility for the collision between his motorcycle and the ambulance of the
General Hospital and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, . . . ." These were the two questions In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915,
submitted to the court for determination. The Act was passed "in order that said the Act of 1913, which authorized the bringing of this suit, read:
questions may be decided." We have "decided" that the accident was due solely to
the negligence of the chauffeur, who was at the time an employee of the defendant, SECTION 1. Authority is hereby given to George Apfelbacher, of the town of
and we have also fixed the amount of damages sustained by the plaintiff as a result of Summit, Waukesha County, Wisconsin, to bring suit in such court or courts
the collision. Does the Act authorize us to hold that the Government is legally liable and in such form or forms as he may be advised for the purpose of settling
for that amount? If not, we must look elsewhere for such authority, if it exists. and determining all controversies which he may now have with the State of
Wisconsin, or its duly authorized officers and agents, relative to the mill
The Government of the Philippine Islands having been "modeled after the Federal property of said George Apfelbacher, the fish hatchery of the State of
and State Governments in the United States," we may look to the decisions of the Wisconsin on the Bark River, and the mill property of Evan Humphrey at the
high courts of that country for aid in determining the purpose and scope of Act No. lower end of Nagawicka Lake, and relative to the use of the waters of said
2457. Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin.

In the United States the rule that the state is not liable for the torts committed by its In determining the scope of this act, the court said:
officers or agents whom it employs, except when expressly made so by legislative
enactment, is well settled. "The Government," says Justice Story, "does not Plaintiff claims that by the enactment of this law the legislature admitted
undertake to guarantee to any person the fidelity of the officers or agents whom it liability on the part of the state for the acts of its officers, and that the suit
employs, since that would involve it in all its operations in endless embarrassments, now stands just as it would stand between private parties. It is difficult to see
difficulties and losses, which would be subversive of the public interest." (Claussen how the act does, or was intended to do, more than remove the state's
vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. immunity from suit. It simply gives authority to commence suit for the
Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.) purpose of settling plaintiff's controversies with the estate. Nowhere in the
act is there a whisper or suggestion that the court or courts in the disposition
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages of the suit shall depart from well established principles of law, or that the
from the state for personal injuries received on account of the negligence of the state amount of damages is the only question to be settled. The act opened the
officers at the state fair, a state institution created by the legislature for the purpose of door of the court to the plaintiff. It did not pass upon the question of liability,
 but left the suit just where it would be in the absence of the state's immunity The state is liable in this sense when it acts through a special agent, but not
from suit. If the Legislature had intended to change the rule that obtained in when the damage should have been caused by the official to whom properly
this state so long and to declare liability on the part of the state, it would not it pertained to do the act performed, in which case the provisions of the
have left so important a matter to mere inference, but would have done so in preceding article shall be applicable.
express terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24
N.E., 854; 8 L. R. A., 399.) The supreme court of Spain in defining the scope of this paragraph said:

In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon That the obligation to indemnify for damages which a third person causes to
and considered, are as follows: another by his fault or negligence is based, as is evidenced by the same
Law 3, Title 15, Partida 7, on that the person obligated, by his own fault or
All persons who have, or shall hereafter have, claims on contract or for negligence, takes part in the act or omission of the third party who caused
negligence against the state not allowed by the state board of examiners, the damage. It follows therefrom that the state, by virtue of such provisions
are hereby authorized, on the terms and conditions herein contained, to of law, is not responsible for the damages suffered by private individuals in
bring suit thereon against the state in any of the courts of this state of consequence of acts performed by its employees in the discharge of the
competent jurisdiction, and prosecute the same to final judgment. The rules functions pertaining to their office, because neither fault nor even negligence
of practice in civil cases shall apply to such suits, except as herein otherwise can be presumed on the part of the state in the organization of branches of
provided. public service and in the appointment of its agents; on the contrary, we must
presuppose all foresight humanly possible on its part in order that each
And the court said: branch of service serves the general weal an that of private persons
interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a
This statute has been considered by this court in at least two cases, arising case where the state acts as a judicial person capable of acquiring rights
under different facts, and in both it was held that said statute did not create and contracting obligations. (Supreme Court of Spain, January 7, 1898; 83
any liability or cause of action against the state where none existed before, Jur. Civ., 24.)
but merely gave an additional remedy to enforce such liability as would have
existed if the statute had not been enacted. (Chapman vs. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.) That the Civil Code in chapter 2, title 16, book 4, regulates the obligations
which arise out of fault or negligence; and whereas in the first article thereof.
No. 1902, where the general principle is laid down that where a person who
A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of by an act or omission causes damage to another through fault or negligence,
all claims against the commonwealth, whether at law or in equity," with an exception shall be obliged to repair the damage so done, reference is made to acts or
not necessary to be here mentioned. In construing this statute the court, in Murdock omissions of the persons who directly or indirectly cause the damage, the
Grate Co. vs. Commonwealth (152 Mass., 28), said: following articles refers to this persons and imposes an identical obligation
upon those who maintain fixed relations of authority and superiority over the
The statute we are discussing disclose no intention to create against the authors of the damage, because the law presumes that in consequence of
state a new and heretofore unrecognized class of liabilities, but only an such relations the evil caused by their own fault or negligence is imputable to
intention to provide a judicial tribunal where well recognized existing them. This legal presumption gives way to proof, however, because, as held
liabilities can be adjudicated. in the last paragraph of article 1903, responsibility for acts of third persons
ceases when the persons mentioned in said article prove that they employed
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the all the diligence of a good father of a family to avoid the damage, and among
terms of the statute of New York, jurisdiction of claims for damages for injuries in the these persons, called upon to answer in a direct and not a subsidiary
management of the canals such as the plaintiff had sustained, Chief Justice Ruger manner, are found, in addition to the mother or the father in a proper case,
remarks: "It must be conceded that the state can be made liable for injuries arising guardians and owners or directors of an establishment or enterprise, the
from the negligence of its agents or servants, only by force of some positive statute state, but not always, except when it acts through the agency of a special
assuming such liability." agent, doubtless because and only in this case, the fault or negligence,
which is the original basis of this kind of objections, must be presumed to lie
with the state.
It being quite clear that Act No. 2457 does not operate to extend the Government's
liability to any cause not previously recognized, we will now examine the substantive
law touching the defendant's liability for the negligent acts of its officers, agents, and That although in some cases the state might by virtue of the general
employees. Paragraph 5 of article 1903 of the Civil Code reads: principle set forth in article 1902 respond for all the damage that is
occasioned to private parties by orders or resolutions which by fault or
 negligence are made by branches of the central administration acting in the THIRD DIVISION
name and representation of the state itself and as an external expression of
its sovereignty in the exercise of its executive powers, yet said article is not G.R. No. 134887 July 27, 2006
applicable in the case of damages said to have been occasioned to the
petitioners by an executive official, acting in the exercise of his powers, in
proceedings to enforce the collections of certain property taxes owing by the PHILIPPINE AGILA SATELLITE, INC. represented by MICHAEL C. U. DE
owner of the property which they hold in sublease. GUZMAN, petitioner,
vs.
SEC. JOSEFINA TRINIDAD LICHAUCO and the HON.
That the responsibility of the state is limited by article 1903 to the case OMBUDSMAN, respondents.
wherein it acts through a special agent (and a special agent, in the sense in
which these words are employed, is one who receives a definite and fixed
order or commission, foreign to the exercise of the duties of his office if he is DECISION
a special official) so that in representation of the state and being bound to
act as an agent thereof, he executes the trust confided to him. This concept CARPIO MORALES, J.:
does not apply to any executive agent who is an employee of the acting
administration and who on his own responsibility performs the functions On June 6, 1994, a Memorandum of Understanding 1 (MOU) was entered into by a
which are inherent in and naturally pertain to his office and which are consortium of private telecommunications carriers and the Department of
regulated by law and the regulations." (Supreme Court of Spain, May 18, Transportation and Communications (DOTC) represented by then Secretary Jesus B.
1904; 98 Jur. Civ., 389, 390.) Garcia, Jr. relative to the launching, ownership, operation and management of a
Philippine satellite by a Filipino-owned or controlled private consortium or corporation.
That according to paragraph 5 of article 1903 of the Civil Code and the
principle laid down in a decision, among others, of the 18th of May, 1904, in Pursuant to Article IV of the MOU, the consortium of private telecommunications
a damage case, the responsibility of the state is limited to that which it carriers formed a corporation and adopted the corporate name Philippine Agila
contracts through a special agent, duly empowered by a definite order or Satellite, Inc. (PASI), herein petitioner.
commission to perform some act or charged with some definite purpose
which gives rise to the claim, and not where the claim is based on acts or
omissions imputable to a public official charged with some administrative or By letter2 dated June 28, 1996, PASI president Rodrigo A. Silverio (Silverio)
technical office who can be held to the proper responsibility in the manner requested the then DOTC Secretary Amado S. Lagdameo, Jr. for official government
laid down by the law of civil responsibility. Consequently, the trial court in not confirmation of the assignment of Philippine orbital slots 161ºE and 153ºE to PASI for
so deciding and in sentencing the said entity to the payment of damages, its AGILA satellites.
caused by an official of the second class referred to, has by erroneous
interpretation infringed the provisions of articles 1902 and 1903 of the Civil In response to Silverio’s letter, Secretary Lagdameo, by letter 3 dated July 3, 1996,
Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.) confirmed the government’s assignment of Philippine orbital slots 161ºE and 153ºE to
PASI for its AGILA satellites.
It is, therefore, evidence that the State (the Government of the Philippine Islands) is
only liable, according to the above quoted decisions of the Supreme Court of Spain, PASI thereupon undertook preparations for the launching, operation and
for the acts of its agents, officers and employees when they act as special agents management of its satellites by, among other things, obtaining loans, increasing its
within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the capital, conducting negotiations with its business partners, and making an initial
ambulance of the General Hospital was not such an agent. payment of US$ 3.5 million to Aerospatiale, a French satellite manufacturer.

For the foregoing reasons, the judgment appealed from must be reversed, without Michael de Guzman (de Guzman), PASI President and Chief Executive Officer
costs in this instance. Whether the Government intends to make itself legally liable for (CEO), later informed Jesli Lapuz (Lapuz), President and CEO of the Landbank of the
the amount of damages above set forth, which the plaintiff has sustained by reason of Philippines, by letter4 of December 3, 1996, of the government’s assignment to PASI
the negligent acts of one of its employees, by legislative enactment and by of orbital slots 161ºE and 153ºE and requested the bank’s confirmation of its
appropriating sufficient funds therefor, we are not called upon to determine. This participation in a club loan in the amount of US$ 11 million, the proceeds of which
matter rests solely with the Legislature and not with the courts. would be applied to PASI’s interim satellite.

Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur. It appears that Lapuz sent a copy of De Guzman’s letter to then DOTC
Undersecretary Josefina T. Lichauco, (Lichauco) who, by letter 5 of December 5, 1996,
wrote Lapuz as follows:
 1. Kindly be informed that there is simply no basis for Michael de Guzman to complaint7 before the Regional Trial Court (RTC) of Mandaluyong City against
allege that the DOTC has assigned two (2) slots to PASI. He conveniently Lichauco and the "Unknown Awardee," for injunction to enjoin the award of orbital slot
neglected to attach as another annex, in addition to Sec. Lagdameo’s letter 153ºE, declare its nullity, and for damages.
of 3 July 1996 (Annex "A") the letter of 28 June (Annex "B") in response to
which the July 3rd letter had been sent to PASI. Annex "B" precisely PASI also filed on February 23, 1998 a complaint before the Office of the
provides that one slot (153º E, to which the interim satellite was supposed to Ombudsman against Secretary Josefina Trinidad Lichauco. In his affidavit-complaint,
migrate) was to be used for the migration of the Russian satellite in time for de Guzman charged Lichauco with gross violation of Section 3(e) of Republic Act No.
the APEC Leaders’ Summit. This particular endeavor was not successful. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, as amended,
The interim satellite "Gorizont" never moved from its orbital location of 130ºE reading:
Longitude. Annex "C" is a letter from an official of the Subic Bay Satellite
Systems Inc., with its attachments, addressed to me stating that as of the
13th of November, no such voyage to 153ºE orbital slot had been (e) Causing any undue injury to any party, including the Government, or
commenced. In fact DHI hid this fact from me, and in fact stated that giving any private party any unwarranted benefits, advantage or preference
Gorizont had already moved and was on its way to 153ºE. in the discharge of his official, administrative or judicial functions through
manifest partiality, evident bad faith or gross inexcusable negligence. This
provision shall apply to officers and employees of officers or government
Since this timely migration did not happen in time for the APEC Leaders corporations charged with the grant of licenses or permits or other
Meeting on 24 November, this 153ºE Longitude slot can no longer be concessions.
assigned to PASI.
The complaint was docketed as OMB Case No. 0-98-0416. The Evaluation and
The other slot 161ºE Longitude is the one that can be made available for Preliminary Investigation Bureau (EPIB) of the Office of the Ombudsman, by
PASI’s eventual launch, in 1998 most likely, in exchange for one free Evaluation Report8 dated April 15, 1998, found the existence of a prejudicial question
satellite transponder unit utilization, for all requirements of Government. after considering that "the case filed with the RTC involves facts intimately related to
These have yet to be embodied in a contract between PASI and the DOTC. those upon which the criminal prosecution would be based and that the guilt or the
innocence of the accused would necessarily be determined in the resolution of the
2. I understand from my meeting with DHI/PASI this morning, and from the issues raised in the civil case." It thus concluded that the filing of the complaint before
de Guzman letter you sent to me, that the latter are still interested in the Ombudsman "is premature since the issues involved herein are now subject of
pursuing their "interim satellite project" and are applying for a loan with your litigation in the case filed with the RTC," and accordingly recommended its dismissal.
bank. Of course they can always pursue this as a business venture of Then Ombudsman Aniano A. Desierto approved on April 24, 1998 the
DHI/PASI which is their own corporate business decision. The DOTC recommendation of the EPIB.
supports this venture but they will be getting only one orbital slotfor both the
Interim Satellite Project and for the Launch Project. I understand from PASI moved to reconsider9 the dismissal of the complaint, but was denied by
today’s meeting with them that this is technically feasible. Order10 dated July 17, 1998.

3. As regards the use of the name "Agila", Mr. de Guzman’s allegation that In the meantime, a motion to dismiss the civil case against respondent was denied by
DHI/PASI has registered "Agila" as a "corporate alias/trademark" is FALSE. the trial court. On elevation of the order of denial to the Court of Appeals, said court,
There is no such thing as registration of a "corporate alias". Nor for that by Decision dated February 21, 2000, ordered the dismissal of the case. This Court,
matter can the trade name of a satellite be registered for just any satellite, by Decision dated May 3, 2006, ordered the reinstatement of the case, however.11
where it was the President who chose the name for the first Philippine
satellite in orbit. No one else coined that name but he. He has therefore
given the name "Agila I" to the Mabuhay satellite now in orbit at 144ºE, being PASI is now before this Court via petition for review on certiorari, arguing that the
the first Philippine satellite in orbit. He made this announcement in the Ombudsman erred in dismissing the complaint.
presence of all the APEC Heads of State just before the presentation to him
of the Manila Action Plan for APEC. (Underscoring supplied) In issue are 1) whether there exists a prejudicial question and, if in the affirmative, 2)
whether the dismissal of the complaint on that account is in order.
Lichauco subsequently issued, in December 1997, a Notice of Offer6 for several
orbital slots including 153ºE. Section 7, Rule 111 of the Rules on Criminal Procedure provides:

PASI, claiming that the offer was without its knowledge and that it subsequently came Section 7. Elements of prejudicial question. – The elements of a prejudicial
to learn that another company whose identity had not been disclosed had submitted a question are: (a) the previously instituted civil action involves an issue similar
bid and won the award for orbital slot 153ºE, filed on January 23, 1998 a or intimately related to the issue raised in the subsequent criminal action,
 and (b) the resolution of such issue determines whether or not the criminal Respecting the propriety of the dismissal by the Ombudsman of the complaint due to
action may proceed. the pendency of a prejudicial question, PASI argues that since the Rules of
Procedure of the Office of the Ombudsman is silent on the matter, the Rules of Court,
The rationale for the principle of prejudicial question is that although it does not specifically Section 6, Rule 111 of the Rules of Court, which now reads:
conclusively resolve the guilt or innocence of the accused, it tests the sufficiency of
the allegations in the complaint or information in order to sustain the further SECTION 6. Suspension by reason of prejudicial question. – A petition for
prosecution of the criminal case.12 Hence, the need for its prior resolution before suspension of the criminal action based upon the pendency of a prejudicial
further proceedings in the criminal action may be had. question in a civil action may be filed in the office of the prosecutor or the
court conducting the preliminary investigation. When the criminal action has
PASI concedes that the issues in the civil case are similar or intimately related to the been filed in court for trial, the petition to suspend shall be filed in the same
issue raised in the criminal case. It contends, however, that the resolution of the criminal action at any time before the prosecution rests. (Underscoring
issues in the civil case is not determinative of the guilt or innocence of Lichauco, it supplied),
arguing that even if she is adjudged liable for damages, it does not necessarily follow
that she would be convicted of the crime charged. applies in a suppletory character.

To determine the existence of a prejudicial question in the case before the The Ombudsman, on the other hand, argues that the above-quoted provision of the
Ombudsman, it is necessary to examine the elements of Section 3(e) of R.A. 3019 for Rules of Court applies to cases which are at the preliminary or trial stage and not to
which Lichauco was charged and the causes of action in the civil case. those, like the case subject of the present petition, at the evaluation stage.

Section 3(e) of R.A. 3019 which was earlier quoted has the following elements: The Ombudsman goes on to proffer that at the evaluation stage, the investigating
officer may recommend any of several causes of action including dismissal of the
1. The accused is a public officer discharging administrative or official complaint for want of palpable merit or subjecting the complaint to preliminary
functions or private persons charged in conspiracy with them; investigation, and the evaluation of the complaint involves the discretion of the
investigating officer which this Court cannot interfere with.
2. The public officer committed the prohibited act during the performance of
his official duty or in relation to his public position; While the evaluation of a complaint involves the discretion of the investigating officer,
its exercise should not be abused14 or wanting in legal basis.
3. The public officer acted with manifest partiality, evident bad faith or gross,
inexcusable negligence; and Rule II, Section 2 of the Rules of Procedure of the Office of the Ombudsman reads:

4. His action caused undue injury to the Government or any private party, or SECTION 2. Evaluation. – Upon evaluating the complaint, the investigating
gave any party any unwarranted benefit, advantage or preference to such officer shall recommend whether it may be:
parties.13
a) dismissed outright for want of palpable merit;
The civil case against Lichauco on the other hand involves three causes of action.
The first, for injunction, seeks to enjoin the award of orbital slot 153ºE, the DOTC b) referred to respondent for comment;
having previously assigned the same to PASI; the second, for declaration of nullity of
award, seeks to nullify the award given to the undisclosed bidder for being beyond c) indorsed to the proper government office or agency which has jurisdiction
Lichauco’s authority; and the third, for damages arising from Lichauco’s questioned over the case;
acts.
d) forwarded to the appropriate office or official for fact-finding investigation;
If the award to the undisclosed bidder of orbital slot 153ºE is, in the civil case,
declared valid for being within Lichauco’s scope of authority to thus free her from
liability for damages, there would be no prohibited act to speak of nor would there be e) referred for administrative adjudication; or
basis for undue injury claimed to have been suffered by petitioner. The finding by the
Ombudsman of the existence of a prejudicial question is thus well-taken. f) subjected to a preliminary investigation. (Underscoring supplied)
From the above-quoted provision, a complaint at the evaluation stage may be Those punishable by a correctional penalty shall prescribe in ten years; with
dismissed outright only for want of palpable merit. Want of palpable merit obviously the exception of those punishable by arresto mayor, which shall prescribe in
means that there is no basis for the charge or charges. If the complaint has prima five years.
facie merit, however, the investigating officer shall recommend the adoption of any of
the actions enumerated above from (b) to (f).15 The crime of libel or other similar offenses shall prescribe in one year.

When, in the course of the actions taken by those to whom the complaint is endorsed The offenses of oral defamation and slander by deed shall prescribe in six
or forwarded, a prejudicial question is found to be pending, Section 6, Rule 111 of the months.
Rules of Court should be applied in a suppletory character.16 As laid down in Yap v.
Paras,17 said rule directs that the proceedings may only be suspended, not
dismissed, and that it may be made only upon petition,and not at the instance of the Light offenses prescribe in two months.
judge alone or as in this case, the investigating officer.
When the penalty fixed by law is a compound one, the highest penalty shall
To give imprimatur to the Ombudsman’s dismissal of petitioner’s criminal complaint be made the basis of the application of the rules contained in the first,
due to prejudicial question would not only run counter to the provision of Section 6 of second, and third paragraphs of this article. x x x
Rule 111 of the Rules of Court. It would sanction the extinguishment of criminal
liability, if there be any, through prescription under Article 89 vis a vis Articles 90 and ART. 91. Computation of prescription of offenses. — The period of
91 of the Revised Penal Code which respectively read: prescription shall commence to run from the day on which the crime is
discovered by the offended party, the authorities, or their agents, and shall
ART. 89. How criminal liability is totally extinguished. — Criminal liability is be interrupted by the filing of the complaint or information, and
totally extinguished: shall commence to run again when suchproceedings terminate without the
accused being convicted or acquitted, or are unjustifiably stopped for any
reason not imputable to him.
1. By the death of the convict, as to the personal penalties; and as
to pecuniary penalties, liability therefore is extinguished only when
the death of the offender occurs before final judgment; x x x x (Emphasis and underscoring supplied)

2. By service of the sentence; WHEREFORE, the Order dated July 17, 1998 of respondent Ombudsman dismissing
OMB Case No. 0-98-0416 against respondent then Secretary Josefina Trinidad
Lichauco is SET ASIDE.
3. By amnesty, which completely extinguishes the penalty and all
its effects;
The Ombudsman is ORDERED to REINSTATE to its docket for further proceedings,
in line with the foregoing ratiocination, OMB Case No. 0-98-0416.
4. By absolute pardon;
SO ORDERED
5. By prescription of the crime;
Quisumbing, Chairman, Carpio, Tinga, Velasco, Jr., J.J., concur.
6. By prescription of the penalty;

7. By the marriage of the offended woman, as provided in Article

344 of this Code. (Underscoring supplied)

ART. 90. Prescription of crimes. — Crimes punishable by death, reclusion

perpetua or reclusion temporalshall prescribe in twenty years.

Crimes punishable by other afflictive penalties shall prescribe in fifteen

years.
 FIRST DIVISION card, which showed that he is working at the US Embassy in the Philippines, as a
special agent of the Drug Enforcement Administration, Department of Justice, of the
G.R. No. 142396 February 11, 2003 United States, and gave his address as US Embassy, Manila. At the back of the card
appears a telephone number in defendant’s own handwriting, the number of which he
KHOSROW MINUCHER, petitioner, can also be contacted.
vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents. "It was also during this first meeting that plaintiff expressed his desire to obtain a US
Visa for his wife and the wife of a countryman named Abbas Torabian. The defendant
DECISION told him that he [could] help plaintiff for a fee of $2,000.00 per visa. Their
conversation, however, was more concentrated on politics, carpets and caviar.
Thereafter, the defendant promised to see plaintiff again.
VITUG, J.:

"On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at
Sometime in May 1986, an Information for violation of Section 4 of Republic Act No.
Mario's Restaurant at Makati. He wanted to buy 200 grams of caviar. Plaintiff brought
6425, otherwise also known as the "Dangerous Drugs Act of 1972," was filed against
the merchandize but for the reason that the defendant was not yet there, he
petitioner Khosrow Minucher and one Abbas Torabian with the Regional Trial Court,
requested the restaurant people to x x x place the same in the refrigerator.
Branch 151, of Pasig City. The criminal charge followed a "buy-bust operation"
Defendant, however, came and plaintiff gave him the caviar for which he was paid.
conducted by the Philippine police narcotic agents in the house of Minucher, an
Then their conversation was again focused on politics and business.
Iranian national, where a quantity of heroin, a prohibited drug, was said to have been
seized. The narcotic agents were accompanied by private respondent Arthur Scalzo
who would, in due time, become one of the principal witnesses for the prosecution. "On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18
On 08 January 1988, Presiding Judge Eutropio Migrino rendered a decision acquitting years at Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which
the two accused. plaintiff valued at $27,900.00. After some haggling, they agreed at $24,000.00. For
the reason that defendant did not yet have the money, they agreed that defendant
would come back the next day. The following day, at 1:00 p.m., he came back with
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial
his $24,000.00, which he gave to the plaintiff, and the latter, in turn, gave him the pair
Court (RTC), Branch 19, of Manila for damages on account of what he claimed to
of carpets.
have been trumped-up charges of drug trafficking made by Arthur Scalzo. The Manila
1awphi1.nét

RTC detailed what it had found to be the facts and circumstances surrounding the
case. "At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to
plaintiff's house and directly proceeded to the latter's bedroom, where the latter and
his countryman, Abbas Torabian, were playing chess. Plaintiff opened his safe in the
"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the
bedroom and obtained $2,000.00 from it, gave it to the defendant for the latter's fee in
Philippines to study in the University of the Philippines in 1974. In 1976, under the
obtaining a visa for plaintiff's wife. The defendant told him that he would be leaving
regime of the Shah of Iran, he was appointed Labor Attaché for the Iranian
the Philippines very soon and requested him to come out of the house for a while so
Embassies in Tokyo, Japan and Manila, Philippines. When the Shah of Iran was
that he can introduce him to his cousin waiting in a cab. Without much ado, and
deposed by Ayatollah Khomeini, plaintiff became a refugee of the United Nations and
without putting on his shirt as he was only in his pajama pants, he followed the
continued to stay in the Philippines. He headed the Iranian National Resistance
defendant where he saw a parked cab opposite the street. To his complete surprise,
Movement in the Philippines.
an American jumped out of the cab with a drawn high-powered gun. He was in the
company of about 30 to 40 Filipino soldiers with 6 Americans, all armed. He was
"He came to know the defendant on May 13, 1986, when the latter was brought to his handcuffed and after about 20 minutes in the street, he was brought inside the house
house and introduced to him by a certain Jose Iñigo, an informer of the Intelligence by the defendant. He was made to sit down while in handcuffs while the defendant
Unit of the military. Jose Iñigo, on the other hand, was met by plaintiff at the office of was inside his bedroom. The defendant came out of the bedroom and out from
Atty. Crisanto Saruca, a lawyer for several Iranians whom plaintiff assisted as head of defendant's attaché case, he took something and placed it on the table in front of the
the anti-Khomeini movement in the Philippines. plaintiff. They also took plaintiff's wife who was at that time at the boutique near his
house and likewise arrested Torabian, who was playing chess with him in the
"During his first meeting with the defendant on May 13, 1986, upon the introduction of bedroom and both were handcuffed together. Plaintiff was not told why he was being
Jose Iñigo, the defendant expressed his interest in buying caviar. As a matter of fact, handcuffed and why the privacy of his house, especially his bedroom was invaded by
he bought two kilos of caviar from plaintiff and paid P10,000.00 for it. Selling caviar, defendant. He was not allowed to use the telephone. In fact, his telephone was
aside from that of Persian carpets, pistachio nuts and other Iranian products was his unplugged. He asked for any warrant, but the defendant told him to `shut up.’ He was
business after the Khomeini government cut his pension of over $3,000.00 per month. nevertheless told that he would be able to call for his lawyer who can defend him.
During their introduction in that meeting, the defendant gave the plaintiff his calling
"The plaintiff took note of the fact that when the defendant invited him to come out to Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a)
meet his cousin, his safe was opened where he kept the $24,000.00 the defendant declaring Scalzo in default for his failure to file a responsive pleading (answer) and (b)
paid for the carpets and another $8,000.00 which he also placed in the safe together setting the case for the reception of evidence. On 12 March 1990, Scalzo filed a
with a bracelet worth $15,000.00 and a pair of earrings worth $10,000.00. He also motion to set aside the order of default and to admit his answer to the complaint.
discovered missing upon his release his 8 pieces hand-made Persian carpets, valued Granting the motion, the trial court set the case for pre-trial. In his answer, Scalzo
at $65,000.00, a painting he bought for P30,000.00 together with his TV and betamax denied the material allegations of the complaint and raised the affirmative defenses
sets. He claimed that when he was handcuffed, the defendant took his keys from his (a) of Minucher’s failure to state a cause of action in his complaint and (b) that Scalzo
wallet. There was, therefore, nothing left in his house. had acted in the discharge of his official duties as being merely an agent of the Drug
Enforcement Administration of the United States Department of Justice. Scalzo
"That his arrest as a heroin trafficker x x x had been well publicized throughout the interposed a counterclaim of P100,000.00 to answer for attorneys' fees and expenses
world, in various newspapers, particularly in Australia, America, Central Asia and in of litigation.
the Philippines. He was identified in the papers as an international drug trafficker. x x
x Then, on 14 June 1990, after almost two years since the institution of the civil case,
Scalzo filed a motion to dismiss the complaint on the ground that, being a special
In fact, the arrest of defendant and Torabian was likewise on television, not only in the agent of the United States Drug Enforcement Administration, he was entitled to
Philippines, but also in America and in Germany. His friends in said places informed diplomatic immunity. He attached to his motion Diplomatic Note No. 414 of the United
him that they saw him on TV with said news. States Embassy, dated 29 May 1990, addressed to the Department of Foreign Affairs
of the Philippines and a Certification, dated 11 June 1990, of Vice Consul Donna
Woodward, certifying that the note is a true and faithful copy of its original. In an order
"After the arrest made on plaintiff and Torabian, they were brought to Camp Crame of 25 June 1990, the trial court denied the motion to dismiss.
handcuffed together, where they were detained for three days without food and
water."1

On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court,
docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao
During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for Polo, et al.," asking that the complaint in Civil Case No. 88-45691 be ordered
Scalzo and moved for extension of time to file an answer pending a supposed advice dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R.
from the United States Department of State and Department of Justice on the SP No. 22505, per this Court’s resolution of 07 August 1990. On 31 October 1990,
defenses to be raised. The trial court granted the motion. On 27 October 1988, the Court of Appeals promulgated its decision sustaining the diplomatic immunity of
Scalzo filed another special appearance to quash the summons on the ground that Scalzo and ordering the dismissal of the complaint against him. Minucher filed a
he, not being a resident of the Philippines and the action being one in personam, was petition for review with this Court, docketed G.R. No. 97765 and entitled "Khosrow
beyond the processes of the court. The motion was denied by the court, in its order of Minucher vs. the Honorable Court of Appeals, et. al." (cited in 214 SCRA 242),
13 December 1988, holding that the filing by Scalzo of a motion for extension of time appealing the judgment of the Court of Appeals. In a decision, dated 24 September
to file an answer to the complaint was a voluntary appearance equivalent to service of 1992, penned by Justice (now Chief Justice) Hilario Davide, Jr., this Court reversed
summons which could likewise be construed a waiver of the requirement of formal the decision of the appellate court and remanded the case to the lower court for trial.
notice. Scalzo filed a motion for reconsideration of the court order, contending that a The remand was ordered on the theses (a) that the Court of Appeals erred in granting
motion for an extension of time to file an answer was not a voluntary appearance the motion to dismiss of Scalzo for lack of jurisdiction over his person without even
equivalent to service of summons since it did not seek an affirmative relief. Scalzo considering the issue of the authenticity of Diplomatic Note No. 414 and (b) that the
argued that in cases involving the United States government, as well as its agencies complaint contained sufficient allegations to the effect that Scalzo committed the
and officials, a motion for extension was peculiarly unavoidable due to the need (1) imputed acts in his personal capacity and outside the scope of his official duties and,
for both the Department of State and the Department of Justice to agree on the absent any evidence to the contrary, the issue on Scalzo’s diplomatic immunity could
defenses to be raised and (2) to refer the case to a Philippine lawyer who would be not be taken up.
expected to first review the case. The court a quo denied the motion for
reconsideration in its order of 15 October 1989.
The Manila RTC thus continued with its hearings on the case. On 17 November 1995,
the trial court reached a decision; it adjudged:
Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R.
No. 17023, assailing the denial. In a decision, dated 06 October 1989, the appellate
court denied the petition and affirmed the ruling of the trial court. Scalzo then elevated "WHEREFORE, and in view of all the foregoing considerations, judgment is hereby
the incident in a petition for review on certiorari, docketed G.R. No. 91173, to this rendered for the plaintiff, who successfully established his claim by sufficient
Court. The petition, however, was denied for its failure to comply with SC Circular No. evidence, against the defendant in the manner following:
1-88; in any event, the Court added, Scalzo had failed to show that the appellate
court was in error in its questioned judgment.
"`Adjudging defendant liable to plaintiff in actual and compensatory damages of 1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;
P520,000.00; moral damages in the sum of P10 million; exemplary damages in the
sum of P100,000.00; attorney's fees in the sum of P200,000.00 plus costs. 2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June
1990;
`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of
the Court on this judgment to answer for the unpaid docket fees considering that the 3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;
plaintiff in this case instituted this action as a pauper litigant.’"
2

4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and
While the trial court gave credence to the claim of Scalzo and the evidence presented
by him that he was a diplomatic agent entitled to immunity as such, it ruled that he,
nevertheless, should be held accountable for the acts complained of committed 5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.
outside his official duties. On appeal, the Court of Appeals reversed the decision of
the trial court and sustained the defense of Scalzo that he was sufficiently clothed 6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser,
with diplomatic immunity during his term of duty and thereby immune from the Department of Foreign Affairs, dated 27 June 1990 forwarding Embassy
criminal and civil jurisdiction of the "Receiving State" pursuant to the terms of the Note No. 414 to the Clerk of Court of RTC Manila, Branch 19 (the trial court);
Vienna Convention.
7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh.
Hence, this recourse by Minucher. The instant petition for review raises a two-fold '3'); and
issue: (1) whether or not the doctrine of conclusiveness of judgment, following the
decision rendered by this Court in G.R. No. 97765, should have precluded the Court 8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol,
of Appeals from resolving the appeal to it in an entirely different manner, and (2) Department of Foreign Affairs, through Asst. Sec. Emmanuel Fernandez,
whether or not Arthur Scalzo is indeed entitled to diplomatic immunity. addressed to the Chief Justice of this Court. 5

The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would The documents, according to Scalzo, would show that: (1) the United States
require 1) the finality of the prior judgment, 2) a valid jurisdiction over the subject Embassy accordingly advised the Executive Department of the Philippine
matter and the parties on the part of the court that renders it, 3) a judgment on the Government that Scalzo was a member of the diplomatic staff of the United States
merits, and 4) an identity of the parties, subject matter and causes of action. Even
3
diplomatic mission from his arrival in the Philippines on 14 October 1985 until his
while one of the issues submitted in G.R. No. 97765 - "whether or not public departure on 10 August 1988; (2) that the United States Government was firm from
respondent Court of Appeals erred in ruling that private respondent Scalzo is a the very beginning in asserting the diplomatic immunity of Scalzo with respect to the
diplomat immune from civil suit conformably with the Vienna Convention on case pursuant to the provisions of the Vienna Convention on Diplomatic Relations;
Diplomatic Relations" - is also a pivotal question raised in the instant petition, the and (3) that the United States Embassy repeatedly urged the Department of Foreign
ruling in G.R. No. 97765, however, has not resolved that point with finality. Indeed, Affairs to take appropriate action to inform the trial court of Scalzo’s diplomatic
the Court there has made this observation - immunity. The other documentary exhibits were presented to indicate that: (1) the
Philippine government itself, through its Executive Department, recognizing and
"It may be mentioned in this regard that private respondent himself, in his Pre-trial respecting the diplomatic status of Scalzo, formally advised the "Judicial Department"
Brief filed on 13 June 1990, unequivocally states that he would present documentary of his diplomatic status and his entitlement to all diplomatic privileges and immunities
evidence consisting of DEA records on his investigation and surveillance of plaintiff under the Vienna Convention; and (2) the Department of Foreign Affairs itself
and on his position and duties as DEA special agent in Manila. Having thus reserved authenticated Diplomatic Note No. 414. Scalzo additionally presented Exhibits "9" to
his right to present evidence in support of his position, which is the basis for the "13" consisting of his reports of investigation on the surveillance and subsequent
alleged diplomatic immunity, the barren self-serving claim in the belated motion to arrest of Minucher, the certification of the Drug Enforcement Administration of the
dismiss cannot be relied upon for a reasonable, intelligent and fair resolution of the United States Department of Justice that Scalzo was a special agent assigned to the
issue of diplomatic immunity."4
Philippines at all times relevant to the complaint, and the special power of attorney
executed by him in favor of his previous counsel to show (a) that the United States
6

Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the Embassy, affirmed by its Vice Consul, acknowledged Scalzo to be a member of the
Philippines is a signatory, grants him absolute immunity from suit, describing his diplomatic staff of the United States diplomatic mission from his arrival in the
functions as an agent of the United States Drugs Enforcement Agency as "conducting Philippines on 14 October 1985 until his departure on 10 August 1988, (b) that, on
surveillance operations on suspected drug dealers in the Philippines believed to be May 1986, with the cooperation of the Philippine law enforcement officials and in the
the source of prohibited drugs being shipped to the U.S., (and) having ascertained the exercise of his functions as member of the mission, he investigated Minucher for
target, (he then) would inform the Philippine narcotic agents (to) make the actual alleged trafficking in a prohibited drug, and (c) that the Philippine Department of
arrest." Scalzo has submitted to the trial court a number of documents - Foreign Affairs itself recognized that Scalzo during his tour of duty in the Philippines
(14 October 1985 up to 10 August 1988) was listed as being an Assistant Attaché of Scalzo asserted, particularly in his Exhibits "9" to "13," that he was an Assistant
the United States diplomatic mission and accredited with diplomatic status by the Attaché of the United States diplomatic mission and was accredited as such by the
Government of the Philippines. In his Exhibit 12, Scalzo described the functions of the Philippine Government. An attaché belongs to a category of officers in the diplomatic
overseas office of the United States Drugs Enforcement Agency, i.e., (1) to provide establishment who may be in charge of its cultural, press, administrative or financial
criminal investigative expertise and assistance to foreign law enforcement agencies affairs. There could also be a class of attaches belonging to certain ministries or
on narcotic and drug control programs upon the request of the host country, 2) to departments of the government, other than the foreign ministry or department, who
establish and maintain liaison with the host country and counterpart foreign law are detailed by their respective ministries or departments with the embassies such as
enforcement officials, and 3) to conduct complex criminal investigations involving the military, naval, air, commercial, agricultural, labor, science, and customs attaches,
international criminal conspiracies which affect the interests of the United States. or the like. Attaches assist a chief of mission in his duties and are administratively
under him, but their main function is to observe, analyze and interpret trends and
The Vienna Convention on Diplomatic Relations was a codification of centuries-old developments in their respective fields in the host country and submit reports to their
customary law and, by the time of its ratification on 18 April 1961, its rules of law had own ministries or departments in the home government. These officials are not
14

long become stable. Among the city states of ancient Greece, among the peoples of generally regarded as members of the diplomatic mission, nor are they normally
the Mediterranean before the establishment of the Roman Empire, and among the designated as having diplomatic rank.
states of India, the person of the herald in time of war and the person of the
diplomatic envoy in time of peace were universally held sacrosanct. By the end of the
7
In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos.
16th century, when the earliest treatises on diplomatic law were published, the 414, 757 and 791, all issued post litem motam, respectively, on 29 May 1990, 25
inviolability of ambassadors was firmly established as a rule of customary October 1991 and 17 November 1992. The presentation did nothing much to alleviate
international law. Traditionally, the exercise of diplomatic intercourse among states
8 the Court's initial reservations in G.R. No. 97765, viz:
was undertaken by the head of state himself, as being the preeminent embodiment of
the state he represented, and the foreign secretary, the official usually entrusted with "While the trial court denied the motion to dismiss, the public respondent gravely
the external affairs of the state. Where a state would wish to have a more prominent abused its discretion in dismissing Civil Case No. 88-45691 on the basis of an
diplomatic presence in the receiving state, it would then send to the latter a diplomatic erroneous assumption that simply because of the diplomatic note, the private
mission. Conformably with the Vienna Convention, the functions of the diplomatic respondent is clothed with diplomatic immunity, thereby divesting the trial court of
mission involve, by and large, the representation of the interests of the sending state jurisdiction over his person.
and promoting friendly relations with the receiving state.9

"x x x x x x x x x
The Convention lists the classes of heads of diplomatic missions to include (a)
ambassadors or nuncios accredited to the heads of state, (b) envoys, ministers
10 11

or internuncios accredited to the heads of states; and (c) charges d' affairs accredited
12 "And now, to the core issue - the alleged diplomatic immunity of the private
to the ministers of foreign affairs. Comprising the "staff of the (diplomatic) mission"
13 respondent. Setting aside for the moment the issue of authenticity raised by the
are the diplomatic staff, the administrative staff and the technical and service staff. petitioner and the doubts that surround such claim, in view of the fact that it took
Only the heads of missions, as well as members of the diplomatic staff, excluding the private respondent one (1) year, eight (8) months and seventeen (17) days from the
members of the administrative, technical and service staff of the mission, are time his counsel filed on 12 September 1988 a Special Appearance and Motion
accorded diplomatic rank. Even while the Vienna Convention on Diplomatic Relations asking for a first extension of time to file the Answer because the Departments of
provides for immunity to the members of diplomatic missions, it does so, State and Justice of the United States of America were studying the case for the
nevertheless, with an understanding that the same be restrictively applied. Only purpose of determining his defenses, before he could secure the Diplomatic Note
"diplomatic agents," under the terms of the Convention, are vested with blanket from the US Embassy in Manila, and even granting for the sake of argument that
diplomatic immunity from civil and criminal suits. The Convention defines "diplomatic such note is authentic, the complaint for damages filed by petitioner cannot be
agents" as the heads of missions or members of the diplomatic staff, thus impliedly peremptorily dismissed.
withholding the same privileges from all others. It might bear stressing that even
consuls, who represent their respective states in concerns of commerce and "x x x x x x x x x
navigation and perform certain administrative and notarial duties, such as the
issuance of passports and visas, authentication of documents, and administration of "There is of course the claim of private respondent that the acts imputed to him were
oaths, do not ordinarily enjoy the traditional diplomatic immunities and privileges done in his official capacity. Nothing supports this self-serving claim other than the so-
accorded diplomats, mainly for the reason that they are not charged with the duty of called Diplomatic Note. x x x. The public respondent then should have sustained the
representing their states in political matters. Indeed, the main yardstick in ascertaining trial court's denial of the motion to dismiss. Verily, it should have been the most
whether a person is a diplomat entitled to immunity is the determination of whether or proper and appropriate recourse. It should not have been overwhelmed by the self-
not he performs duties of diplomatic nature. serving Diplomatic Note whose belated issuance is even suspect and whose
authenticity has not yet been proved. The undue haste with which respondent Court
yielded to the private respondent's claim is arbitrary."
A significant document would appear to be Exhibit No. 08, dated 08 November 1992, that all states are sovereign equals and cannot assert jurisdiction over one
issued by the Office of Protocol of the Department of Foreign Affairs and signed by another. The implication, in broad terms, is that if the judgment against an official
22

Emmanuel C. Fernandez, Assistant Secretary, certifying that "the records of the would require the state itself to perform an affirmative act to satisfy the award, such
Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office in as the appropriation of the amount needed to pay the damages decreed against him,
the Philippines (from 14 October 1985 up to 10 August 1988) was listed as an the suit must be regarded as being against the state itself, although it has not been
Assistant Attaché of the United States diplomatic mission and was, therefore, formally impleaded. 23

accredited diplomatic status by the Government of the Philippines." No certified true

copy of such "records," the supposed bases for the belated issuance, was presented In United States of America vs. Guinto, involving officers of the United States Air
24

in evidence. Force and special officers of the Air Force Office of Special Investigators charged with
the duty of preventing the distribution, possession and use of prohibited drugs, this
Concededly, vesting a person with diplomatic immunity is a prerogative of the Court has ruled -
executive branch of the government. In World Health Organization vs. Aquino, the 15

Court has recognized that, in such matters, the hands of the courts are virtually tied. "While the doctrine (of state immunity) appears to prohibit only suits against the state
Amidst apprehensions of indiscriminate and incautious grant of immunity, designed to without its consent, it is also applicable to complaints filed against officials of the state
gain exemption from the jurisdiction of courts, it should behoove the Philippine for acts allegedly performed by them in the discharge of their duties. x x x. It cannot
government, specifically its Department of Foreign Affairs, to be most circumspect, for a moment be imagined that they were acting in their private or unofficial capacity
that should particularly be no less than compelling, in its post litem motam issuances. when they apprehended and later testified against the complainant. It follows that for
It might be recalled that the privilege is not an immunity from the observance of the discharging their duties as agents of the United States, they cannot be directly
law of the territorial sovereign or from ensuing legal liability; it is, rather, an immunity impleaded for acts imputable to their principal, which has not given its consent to be
from the exercise of territorial jurisdiction. The government of the United States itself,
16
sued. x x x As they have acted on behalf of the government, and within the scope of
which Scalzo claims to be acting for, has formulated its standards for recognition of a their authority, it is that government, and not the petitioners personally, [who were]
diplomatic agent. The State Department policy is to only concede diplomatic status to responsible for their acts."25

a person who possesses an acknowledged diplomatic title and "performs duties of

diplomatic nature." Supplementary criteria for accreditation are the possession of a
17

valid diplomatic passport or, from States which do not issue such passports, a This immunity principle, however, has its limitations. Thus, Shauf vs. Court of
diplomatic note formally representing the intention to assign the person to diplomatic Appeals elaborates:
26

duties, the holding of a non-immigrant visa, being over twenty-one years of age, and
performing diplomatic functions on an essentially full-time basis. Diplomatic missions
18
"It is a different matter where the public official is made to account in his capacity as
are requested to provide the most accurate and descriptive job title to that which such for acts contrary to law and injurious to the rights of the plaintiff. As was clearly
currently applies to the duties performed. The Office of the Protocol would then set forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al.,
assign each individual to the appropriate functional category. 19
vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the State authorizes only legal acts
by its officers, unauthorized acts of government officials or officers are not acts of the
But while the diplomatic immunity of Scalzo might thus remain contentious, it was State, and an action against the officials or officers by one whose rights have been
sufficiently established that, indeed, he worked for the United States Drug invaded or violated by such acts, for the protection of his rights, is not a suit against
Enforcement Agency and was tasked to conduct surveillance of suspected drug the State within the rule of immunity of the State from suit. In the same tenor, it has
activities within the country on the dates pertinent to this case. If it should be been said that an action at law or suit in equity against a State officer or the director
ascertained that Arthur Scalzo was acting well within his assigned functions when he of a State department on the ground that, while claiming to act for the State, he
committed the acts alleged in the complaint, the present controversy could then be violates or invades the personal and property rights of the plaintiff, under an
resolved under the related doctrine of State Immunity from Suit. unconstitutional act or under an assumption of authority which he does not have, is
not a suit against the State within the constitutional provision that the State may not
be sued without its consent. The rationale for this ruling is that the doctrine of state
The precept that a State cannot be sued in the courts of a foreign state is a long- immunity cannot be used as an instrument for perpetrating an injustice.
standing rule of customary international law then closely identified with the personal
immunity of a foreign sovereign from suit and, with the emergence of democratic
20

states, made to attach not just to the person of the head of state, or his "x x x x x x x x x
representative, but also distinctly to the state itself in its sovereign capacity. If the
21

acts giving rise to a suit are those of a foreign government done by its foreign agent, "(T)he doctrine of immunity from suit will not apply and may not be invoked where the
although not necessarily a diplomatic personage, but acting in his official capacity, the public official is being sued in his private and personal capacity as an ordinary citizen.
complaint could be barred by the immunity of the foreign sovereign from suit without The cloak of protection afforded the officers and agents of the government is removed
its consent. Suing a representative of a state is believed to be, in effect, suing the the moment they are sued in their individual capacity. This situation usually arises
state itself. The proscription is not accorded for the benefit of an individual but for the where the public official acts without authority or in excess of the powers vested in
State, in whose service he is, under the maxim - par in parem, non habet imperium - him. It is a well-settled principle of law that a public official may be liable in his
personal private capacity for whatever damage he may have caused by his act done STATE IMMUNITY FROM SUIT
with malice and in bad faith or beyond the scope of his authority and jurisdiction."27

9. GTZ vs. Court of Appeals

A foreign agent, operating within a territory, can be cloaked with immunity from suit
but only as long as it can be established that he is acting within the directives of the DECISION
sending state. The consent of the host state is an indispensable requirement of basic
courtesy between the two sovereigns. Guinto and Shauf both involve officers and
personnel of the United States, stationed within Philippine territory, under the RP-US TINGA, J.:
Military Bases Agreement. While evidence is wanting to show any similar agreement
between the governments of the Philippines and of the United States (for the latter to On 7 September 1971, the governments of the Federal Republic of Germany and the
send its agents and to conduct surveillance and related activities of suspected drug Republic of the Philippines ratified an Agreement concerning Technical Co-operation
dealers in the Philippines), the consent or imprimatur of the Philippine government to (Agreement) in Bonn, capital of what was then West Germany. The Agreement
the activities of the United States Drug Enforcement Agency, however, can be affirmed the countries’ "common interest in promoting the technical and economic
gleaned from the facts heretofore elsewhere mentioned. The official exchanges of development of their States, and recogni[zed] the benefits to be derived by both
communication between agencies of the government of the two countries, States from closer technical co-operation," and allowed for the conclusion of
certifications from officials of both the Philippine Department of Foreign Affairs and "arrangements concerning individual projects of technical co-operation."1 While the
the United States Embassy, as well as the participation of members of the Philippine Agreement provided for a limited term of effectivity of five (5) years, it nonetheless
Narcotics Command in the "buy-bust operation" conducted at the residence of was stated that "[t]he Agreement shall be tacitly extended for successive periods of
Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic one year unless either of the two Contracting Parties denounces it in writing three
status" of the latter but they give enough indication that the Philippine government months prior to its expiry," and that even upon the Agreement’s expiry, its provisions
has given its imprimatur, if not consent, to the activities within Philippine territory of would "continue to apply to any projects agreed upon x x x until their completion."2
agent Scalzo of the United States Drug Enforcement Agency. The job description of
Scalzo has tasked him to conduct surveillance on suspected drug suppliers and, after On 10 December 1999, the Philippine government, through then Foreign Affairs
having ascertained the target, to inform local law enforcers who would then be Secretary Domingo Siazon, and the German government, agreed to an Arrangement
expected to make the arrest. In conducting surveillance activities on Minucher, later in furtherance of the 1971 Agreement. This Arrangement affirmed the common
acting as the poseur-buyer during the buy-bust operation, and then becoming a commitment of both governments to promote jointly a project called, Social Health
principal witness in the criminal case against Minucher, Scalzo hardly can be said to Insurance—Networking and Empowerment (SHINE), which was designed to "enable
have acted beyond the scope of his official function or duties. Philippine families–especially poor ones–to maintain their health and secure health
care of sustainable quality."3 It appears that SHINE had already been in existence
All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of even prior to the effectivity of the Arrangement, though the record does not indicate
the United States Drug Enforcement Agency allowed by the Philippine government to when exactly SHINE was constituted. Nonetheless, the Arrangement stated the
conduct activities in the country to help contain the problem on the drug traffic, is various obligations of the Filipino and German governments. The relevant provisions
entitled to the defense of state immunity from suit. of the Arrangement are reproduced as follows:

WHEREFORE, on the foregoing premises, the petition is DENIED. No costs. 3. The Government of the Federal Republic of Germany shall make the following
contributions to the project.
SO ORDERED.
It shall
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur
(a) second

- one expert in health economy, insurance and health systems for

up to 48 expert/months,

- one expert in system development for up to 10 expert/months

- short-term experts to deal with special tasks for a total of up to 18

expert/months,
 - project assistants/guest students as required, who shall work on xxx
the project as part of their basic and further training and assume
specific project tasks under the separately financed junior staff 4. The Government of the Republic of the Philippines shall make the following
promotion programme of the Deutsche Gesellschaft für Technische contributions to the project:
Zusammenarbeit (GTZ);
It shall
(b) provide in situ
(a) – provide the necessary Philippine experts for the project, in particular
- short-term experts to deal with diverse special tasks for a total of one project coordinator in the Philippine Health Insurance Corporation
up to 27 expert/months, (Philhealth), at least three further experts and a sufficient number of
administrative and auxiliary personnel, as well as health personnel in the
- five local experts in health economy, health insurance, community pilot provinces and in the other project partners, in particular one responsible
health systems, information technology, information systems, expert for each pilot province and for each association representing the
training and community mobilization for a total of up to 240 various target groups,
expert/months,
- release suitably qualified experts from their duties for attendance
- local and auxiliary personnel for a total of up to 120 months; at the envisaged basic and further training activities; it shall only
nominate such candidates as have given an undertaking to work on
(c) supply inputs, in particular the project for at least five years after completing their training and
shall ensure that these Philippine experts receive appropriate
remuneration,
- two cross-country vehicles,
- ensure that the project field offices have sufficient expendables,
- ten computers with accessories,
- make available the land and buildings required for the project;
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand
Deutsche Mark); (b) assume an increasing proportion of the running and operating costs of
the project;
(c) meet
(c) afford the seconded experts any assistance they may require in carrying
out the tasks assigned to them and place at their disposal all necessary
- the cost of accommodation for the seconded experts and their records and documents;
families in so far as this cost is not met by the seconded experts
themselves,
(d) guarantee that
- the cost of official travel by the experts referred to in sub-
paragraph (a) above within and outside the Republic of the - the project is provided with an itemized budget of its own in order
Philippines, to ensure smooth continuation of the project.

- the cost of seminars and courses, - the necessary legal and administrative framework is created for
the project,
- the cost of transport and insurance to the project site of inputs to
be supplied pursuant to sub-paragraph (c) above, excluding the - the project is coordinated in close cooperation with other national
charges and storage fees referred to in paragraph 4(d) below, and international agencies relevant to implementation,

- a proportion of the operating and administrative costs; - the inputs supplied for the project on behalf of the Government of
the Federal Republic of Germany are exempted from the cost of
licenses, harbour dues, import and export duties and other public
 charges and fees, as well as storage fees, or that any costs thereof were not sustainable—a philosophy that supposedly betrayed Nicolay’s lack of
are met, and that they are cleared by customs without delay. The understanding of the purpose of the project. Private respondents further alleged that
aforementioned exemptions shall, at the request of the as a result of Nicolay’s "new thrust, resources have been used inappropriately;" that
implementing agencies also apply to inputs procured in the the new management style was "not congruent with the original goals of the project;"
Republic of the Philippines, that Nicolay herself suffered from "cultural insensitivity" that consequently failed to
sustain healthy relations with SHINE’s partners and staff.
- the tasks of the seconded experts are taken over as soon as
possible by Philippine experts, The letter ended with these ominous words:

- examinations passed by Philippine nationals pursuant to this The issues that we [the private respondents] have stated here are very crucial to us in
Arrangement are recognized in accordance with their respective working for the project. We could no longer find any reason to stay with the project
standards and that the persons concerned are afforded such unless ALL of these issues be addressed immediately and appropriately. 15
opportunities with regard to careers, appointments and
advancement as are commensurate with their training.4 In response, Nicolay wrote each of the private respondents a letter dated 21 June
2000, all similarly worded except for their respective addressees. She informed
In the arraignment, both governments likewise named their respective implementing private respondents that the "project’s orientations and evolution" were decided in
organizations for SHINE. The Philippines designated the Department of Health (DOH) consensus with partner institutions, Philhealth and the DOH, and thus no longer
and the Philippine Health Insurance Corporation (Philhealth) with the implementation subject to modifications. More pertinently, she stated:
of SHINE. For their part, the German government "charge[d] the Deustche
Gesellschaft für Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn, with the You have firmly and unequivocally stated in the last paragraph of your 8th June 2000
implementation of its contributions."7 letter that you and the five other staff "could no longer find any reason to stay with the
project unless ALL of these issues be addressed immediately and appropriately."
Private respondents were engaged as contract employees hired by GTZ to work for Under the foregoing premises and circumstances, it is now imperative that I am to
SHINE on various dates between December of 1998 to September of 1999. accept your resignation, which I expect to receive as soon as possible.16
Bernadette Carmela Magtaas was hired as an "information systems manager and
project officer of SHINE;"8 Carolina Dionco as a "Project Assistant of Taken aback, private respondents replied with a common letter, clarifying that their
SHINE;"9 Christopher Ramos as "a project assistant and liason personnel of NHI earlier letter was not intended as a resignation letter, but one that merely intended to
related SHINE activities by GTZ;"10 Melvin Dela Paz and Randy Tamayo as raise attention to what they perceived as vital issues. 17Negotiations ensued between
programmers;11 and Edgardo Ramilo as "driver, messenger and multipurpose service private respondents and Nicolay, but for naught. Each of the private respondents
man."12The employment contracts of all six private respondents all specified Dr. received a letter from Nicolay dated 11 July 2000, informing them of the pre-
Rainer Tollkotter, identified as an adviser of GTZ, as the "employer." At the same termination of their contracts of employment on the grounds of "serious and gross
time, all the contracts commonly provided that "[i]t is mutually agreed and understood insubordination, among others, resulting to loss of confidence and trust."18
that [Dr. Tollkotter, as employer] is a seconded GTZ expert who is hiring the
Employee on behalf of GTZ and for a Philippine-German bilateral project named
‘Social Health Insurance—Networking and Empowerment (SHINE)’ which will end at On 21 August 2000, the private respondents filed a complaint for illegal dismissal with
a given time."13 the NLRC. Named as respondents therein where GTZ, the Director of its Manila office
Hans Peter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay.
In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post
of SHINE Project Manager. Disagreements eventually arose between Nicolay and On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground
private respondents in matters such as proposed salary adjustments, and the course that the Labor Arbiter had no jurisdiction over the case, as its acts were undertaken in
Nicolay was taking in the implementation of SHINE different from her predecessors. the discharge of the governmental functions and sovereign acts of the Government of
The dispute culminated in a letter14 dated 8 June 2000, signed by the private the Federal Republic of Germany. This was opposed by private respondents with the
respondents, addressed to Nicolay, and copies furnished officials of the DOH, arguments that GTZ had failed to secure a certification that it was immune from suit
Philheath, and the director of the Manila office of GTZ. The letter raised several from the Department of Foreign Affairs, and that it was GTZ and not the German
issues which private respondents claim had been brought up several times in the government which had implemented the SHINE Project and entered into the contracts
past, but have not been given appropriate response. It was claimed that SHINE under of employment.
Nicolay had veered away from its original purpose to facilitate the development of
social health insurance by shoring up the national health insurance program and On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to
strengthening local initiatives, as Nicolay had refused to support local partners and Dismiss. The Order cited, among others, that GTZ was a private corporation which
new initiatives on the premise that community and local government unit schemes
entered into an employment contract; and that GTZ had failed to secure from the DFA complaint for illegal dismissal should have been dismissed for lack of jurisdiction on
a certification as to its diplomatic status. account of GTZ’s insistence that it enjoys immunity from suit. No special arguments
are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay,
On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to respectively the then Director and the then Project Manager of GTZ in the Philippines;
Dismiss," again praying that the Motion to Dismiss be granted on the jurisdictional so we have to presume that the arguments raised in behalf of GTZ’s alleged immunity
ground, and reprising the arguments for dismissal it had earlier raised.20 No action from suit extend to them as well.
was taken by the Labor Arbiter on this new motion. Instead, on 15 October 2001, the
Labor Arbiter rendered a Decision21 granting the complaint for illegal dismissal. The The Court required the Office of the Solicitor General (OSG) to file a Comment on the
Decision concluded that respondents were dismissed without lawful cause, there petition. In its Comment dated 7 November 2005, the OSG took the side of GTZ, with
being "a total lack of due process both substantive and procedural [sic]."22 GTZ was the prayer that the petition be granted on the ground that GTZ was immune from suit,
faulted for failing to observe the notice requirements in the labor law. The Decision citing in particular its assigned functions in implementing the SHINE program—a joint
likewise proceeded from the premise that GTZ had treated the letter dated 8 June undertaking of the Philippine and German governments which was neither proprietary
2000 as a resignation letter, and devoted some focus in debunking this theory. nor commercial in nature.

The Decision initially offered that it "need not discuss the jurisdictional aspect The Court of Appeals had premised the dismissal of GTZ’s petition on its procedural
considering that the same had already been lengthily discussed in the Order misstep in bypassing an appeal to NLRC and challenging the Labor Arbiter’s Decision
de[n]ying respondents’ Motion to Dismiss."23 Nonetheless, it proceeded to discuss the directly with the appellate court by way of a Rule 65 petition. In dismissing the
jurisdictional aspect, in this wise: petition, the

Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to Court of Appeals relied on our ruling in Air Service Cooperative v. Court of
entertain the complaint on the following grounds: Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter
rendered without jurisdiction over the subject matter may be annulled in a petition
Firstly, under the employment contract entered into between complainants before a Regional Trial Court. That case may be differentiated from the present case,
and respondents, specifically Section 10 thereof, it provides that "contract since the Regional Trial Court does not have original or appellate jurisdiction to
partners agree that his contract shall be subject to the LAWS of the review a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as
jurisdiction of the locality in which the service is performed." affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by way
of its original certiorari jurisdiction, decisions ruling on complaints for illegal dismissal.
Secondly, respondent having entered into contract, they can no longer
invoke the sovereignty of the Federal Republic of Germany. Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the
proper recourse from the decision of the Labor Arbiter is to first appeal the same to
the NLRC. Air Services is in fact clearly detrimental to petitioner’s position in one
Lastly, it is imperative to be immune from suit, respondents should have regard. The Court therein noted that on account of the failure to correctly appeal the
secured from the Department of Foreign Affairs a certification of decision of the Labor Arbiter to the NLRC, such judgment consequently became final
respondents’ diplomatic status and entitlement to diplomatic privileges and executory.30 GTZ goes as far as to "request" that the Court re-examine Air
including immunity from suits. Having failed in this regard, respondents Services, a suggestion that is needlessly improvident under the circumstances. Air
cannot escape liability from the shelter of sovereign immunity.[sic]24 Services affirms doctrines grounded in sound procedural rules that have allowed for
the considered and orderly disposition of labor cases.
Notably, GTZ did not file a motion for reconsideration to the Labor Arbiter’s
Decision or elevate said decision for appeal to the NLRC. Instead, GTZ The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of
opted to assail the decision by way of a special civil action for certiorari filed Appeals,31 that even when appeal is available, the Court has nonetheless allowed a
with the Court of Appeals.25 On 10 December 2001, the Court of Appeals writ of certiorari when the orders of the lower court were issued either in excess of or
promulgated a Resolution26dismissing GTZ’s petition, finding that "judicial without jurisdiction. Indeed, the Court has ruled before that the failure to employ
recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy available intermediate recourses, such as a motion for reconsideration, is not a fatal
of the petitioners [being] an appeal to the NLRC x x x." 27 A motion for infirmity if the ruling assailed is a patent nullity. This approach suggested by the OSG
reconsideration to this Resolution proved fruitless for GTZ. 28 allows the Court to inquire directly into what is the main issue–whether GTZ enjoys
immunity from suit.
Thus, the present petition for review under Rule 45, assailing the decision and
resolutions of the Court of Appeals and of the Labor Arbiter. GTZ’s arguments center The arguments raised by GTZ and the OSG are rooted in several indisputable facts.
on whether the Court of Appeals could have entertained its petition for certiorari The SHINE project was implemented pursuant to the bilateral agreements between
despite its not having undertaken an appeal before the NLRC; and whether the the Philippine and German governments. GTZ was tasked, under the 1991
agreement, with the implementation of the contributions of the German government. and the City of Manila. By contrast, the unincorporated agency is so called because it
The activities performed by GTZ pertaining to the SHINE project are governmental in has no separate juridical personality but is merged in the general machinery of the
nature, related as they are to the promotion of health insurance in the Philippines. government, like the Department of Justice, the Bureau of Mines and the Government
The fact that GTZ entered into employment contracts with the private respondents did Printing Office.
not disqualify it from invoking immunity from suit, as held in cases such as Holy See
v. Rosario, Jr.,32 which set forth what remains valid doctrine: If the agency is incorporated, the test of its suability is found in its charter. The simple
rule is that it is suable if its charter says so, and this is true regardless of the functions
Certainly, the mere entering into a contract by a foreign state with a private party it is performing. Municipal corporations, for example, like provinces and cities, are
cannot be the ultimate test. Such an act can only be the start of the inquiry. The agencies of the State when they are engaged in governmental functions and
logical question is whether the foreign state is engaged in the activity in the regular therefore should enjoy the sovereign immunity from suit. Nevertheless, they are
course of business. If the foreign state is not engaged regularly in a business or trade, subject to suit even in the performance of such functions because their charter
the particular act or transaction must then be tested by its nature. If the act is in provides that they can sue and be sued.35
pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii,
especially when it is not undertaken for gain or profit.33 State immunity from suit may be waived by general or special law. 36 The special law
can take the form of the original charter of the incorporated government agency.
Beyond dispute is the tenability of the comment points raised by GTZ and the OSG Jurisprudence is replete with examples of incorporated government agencies which
that GTZ was not performing proprietary functions notwithstanding its entry into the were ruled not entitled to invoke immunity from suit, owing to provisions in their
particular employment contracts. Yet there is an equally fundamental premise which
GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy the charters manifesting their consent to be sued. These include the National Irrigation
Federal Republic’s immunity from suit? Administration,37 the former Central Bank,38 and the National Power Corporation.39 In
SSS v. Court of Appeals,40 the Court through Justice Melencio-Herrera explained that
The principle of state immunity from suit, whether a local state or a foreign state, is by virtue of an express provision in its charter allowing it to sue and be sued, the
reflected in Section 9, Article XVI of the Constitution, which states that "the State may Social Security System did not enjoy immunity from suit:
not be sued without its consent." Who or what consists of "the State"? For one, the
doctrine is available to foreign States insofar as they are sought to be sued in the We come now to the amendability of the SSS to judicial action and legal responsibility
courts of the local State,34 necessary as it is to avoid "unduly vexing the peace of for its acts. To our minds, there should be no question on this score considering that
nations." the SSS is a juridical entity with a personality of its own. It has corporate powers
separate and distinct from the Government. SSS' own organic act specifically
If the instant suit had been brought directly against the Federal Republic of Germany, provides that it can sue and be sued in Court. These words "sue and be sued"
there would be no doubt that it is a suit brought against a State, and the only embrace all civil process incident to a legal action. So that, even assuming that the
necessary inquiry is whether said State had consented to be sued. However, the SSS, as it claims, enjoys immunity from suit as an entity performing governmental
present suit was brought against GTZ. It is necessary for us to understand what functions, by virtue of the explicit provision of the aforecited enabling law, the
precisely are the parameters of the legal personality of GTZ. Government must be deemed to have waived immunity in respect of the SSS,
although it does not thereby concede its liability. That statutory law has given to the
Counsel for GTZ characterizes GTZ as "the implementing agency of the Government private citizen a remedy for the enforcement and protection of his rights. The SSS
of the Federal Republic of Germany," a depiction similarly adopted by the OSG. thereby has been required to submit to the jurisdiction of the Courts, subject to its
Assuming that characterization is correct, it does not automatically invest GTZ with right to interpose any lawful defense. Whether the SSS performs governmental or
the ability to invoke State immunity from suit. The distinction lies in whether the proprietary functions thus becomes unnecessary to belabor. For by that waiver, a
agency is incorporated or unincorporated. The following lucid discussion from Justice private citizen may bring a suit against it for varied objectives, such as, in this case, to
Isagani Cruz is pertinent: obtain compensation in damages arising from contract, and even for tort.

Where suit is filed not against the government itself or its officials but against one of A recent case squarely in point anent the principle, involving the National Power
its entities, it must be ascertained whether or not the State, as the principal that may Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457
ultimately be held liable, has given its consent to be sued. This ascertainment will (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
depend in the first instance on whether the government agency impleaded is
incorporated or unincorporated. "It is not necessary to write an extended dissertation on whether or not the NPC
performs a governmental function with respect to the management and operation of
An incorporated agency has a charter of its own that invests it with a separate the Angat Dam. It is sufficient to say that the government has organized a private
juridical personality, like the Social Security System, the University of the Philippines, corporation, put money in it and has allowed it to sue and be sued in any court under
its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the under difficult conditions, GTZ promotes complex reforms and change processes. Its
Government. Moreover, the charter provision that the NPC can 'sue and be sued in corporate objective is to improve people’s living conditions on a sustainable basis.
any court' is without qualification on the cause of action and accordingly it can include
a tort claim such as the one instituted by the petitioners." 41 GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was
founded in 1975 as a company under private law. The German Federal Ministry for
It is useful to note that on the part of the Philippine government, it had designated two Economic Cooperation and Development (BMZ) is its major client. The company also
entities, the Department of Health and the Philippine Health Insurance Corporation operates on behalf of other German ministries, the governments of other countries
(PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was and international clients, such as the European Commission, the United Nations and
established under Republic Act No. 7875, Section 16(g) of which grants the the World Bank, as well as on behalf of private enterprises. GTZ works on a public-
corporation the power "to sue and be sued in court." Applying the previously cited benefit basis. All surpluses generated are channeled [sic] back into its own
jurisprudence, PHIC would not enjoy immunity from suit even in the performance of international cooperation projects for sustainable development.47
its functions connected with SHINE, however, governmental in nature as they may
be. GTZ’s own website elicits that petitioner is "federally owned," a "federal enterprise,"
and "founded in 1975 as a company under private law." GTZ clearly has a very
Is GTZ an incorporated agency of the German government? There is some mystery meaningful relationship with the Federal Republic of Germany, which apparently
surrounding that question. Neither GTZ nor the OSG go beyond the claim that owns it. At the same time, it appears that GTZ was actually organized not through a
petitioner is "the implementing agency of the Government of the Federal Republic of legislative public charter, but under private law, in the same way that Philippine
Germany." On the other hand, private respondents asserted before the Labor Arbiter corporations can be organized under the Corporation Code even if fully owned by the
that GTZ was "a private corporation engaged in the implementation of development Philippine government.
projects."42 The Labor Arbiter accepted that claim in his Order denying the Motion to
Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private This self-description of GTZ in its own official website gives further cause for pause in
respondents argue in their Comment that the finding that GTZ was a private adopting petitioners’ argument that GTZ is entitled to immunity from suit because it is
corporation "was never controverted, and is therefore deemed admitted."44 In its "an implementing agency." The above-quoted statement does not dispute the
Reply, GTZ controverts that finding, saying that it is a matter of public knowledge that characterization of GTZ as an "implementing agency of the Federal Republic of
the status of petitioner GTZ is that of the "implementing agency," and not that of a Germany," yet it bolsters the notion that as a company organized under private law, it
private corporation.45 has a legal personality independent of that of the Federal Republic of Germany.

In truth, private respondents were unable to adduce any evidence to substantiate The Federal Republic of Germany, in its own official website,48 also makes reference
their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly in to GTZ and describes it in this manner:
accepting such claim without explanation. But neither has GTZ supplied any evidence
defining its legal nature beyond that of the bare descriptive "implementing agency."
There is no doubt that the 1991 Agreement designated GTZ as the "implementing x x x Going by the principle of "sustainable development," the German Technical
agency" in behalf of the German government. Yet the catch is that such term has no Cooperation (Deutsche Gesellschaft für Technische Zusammenarbeit GmbH, GTZ)
precise definition that is responsive to our concerns. Inherently, an agent acts in takes on non-profit projects in international "technical cooperation." The GTZ is a
behalf of a principal, and the GTZ can be said to act in behalf of the German state. private company owned by the Federal Republic of Germany.49
But that is as far as "implementing agency" could take us. The term by itself does not
supply whether GTZ is incorporated or unincorporated, whether it is owned by the Again, we are uncertain of the corresponding legal implications under German law
German state or by private interests, whether it has juridical personality independent surrounding "a private company owned by the Federal Republic of Germany." Yet
of the German government or none at all. taking the description on face value, the apparent equivalent under Philippine law is
that of a corporation organized under the Corporation Code but owned by the
GTZ itself provides a more helpful clue, inadvertently, through its own official Internet Philippine government, or a government-owned or controlled corporation without
website.46 In the "Corporate Profile" section of the English language version of its site, original charter. And it bears notice that Section 36 of the Corporate Code states that
GTZ describes itself as follows: "[e]very corporation incorporated under this Code has the power and capacity x x x to
sue and be sued in its corporate name."50
As an international cooperation enterprise for sustainable development with
worldwide operations, the federally owned Deutsche Gesellschaft für Technische It is entirely possible that under German law, an entity such as GTZ or particularly
Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its GTZ itself has not been vested or has been specifically deprived the power and
development-policy objectives. It provides viable, forward-looking solutions for capacity to sue and/or be sued. Yet in the proceedings below and before this Court,
political, economic, ecological and social development in a globalised world. Working GTZ has failed to establish that under German law, it has not consented to be sued
despite it being owned by the Federal Republic of Germany. We adhere to the rule have provided factual basis for its claim of immunity that would, at the very least,
that in the absence of evidence to the contrary, establish a disputable evidentiary presumption that the foreign party is indeed
immune which the opposing party will have to overcome with its own factual
foreign laws on a particular subject are presumed to be the same as those of the evidence. We do not see why GTZ could not have secured such certification or
Philippines,51 and following the most intelligent assumption we can gather, GTZ is endorsement from the DFA for purposes of this case. Certainly, it would have been
akin to a governmental owned or controlled corporation without original charter which, highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the
by virtue of the Corporation Code, has expressly consented to be sued. At the very motion to dismiss. Still, even at this juncture, we do not see any evidence that the
least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact DFA, the office of the executive branch in charge of our diplomatic relations, has
to conclude or presume that GTZ enjoys immunity from suit. indeed endorsed GTZ’s claim of immunity. It may be possible that GTZ tried, but
failed to secure such certification, due to the same concerns that we have discussed
herein.
This absence of basis in fact leads to another important point, alluded to by the Labor
Arbiter in his rulings. Our ruling in Holy See v. Del Rosario 52 provided a template on
how a foreign entity desiring to invoke State immunity from suit could duly prove such Would the fact that the Solicitor General has endorsed GTZ’s claim of State’s
immunity before our local courts. The principles enunciated in that case were derived immunity from suit before this Court sufficiently substitute for the DFA certification?
from public international law. We stated then: Note that the rule in public international law quoted in Holy See referred to
endorsement by the Foreign Office of the State where the suit is filed, such foreign
office in the Philippines being the Department of Foreign Affairs. Nowhere in the
In Public International Law, when a state or international agency wishes to plead Comment of the OSG is it manifested that the DFA has endorsed GTZ’s claim, or that
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the OSG had solicited the DFA’s views on the issue. The arguments raised by the
the state where it is sued to convey to the court that said defendant is entitled to OSG are virtually the same as the arguments raised by GTZ without any indication of
immunity. any special and distinct perspective maintained by the Philippine government on the
issue. The Comment filed by the OSG does not inspire the same degree of
In the United States, the procedure followed is the process of "suggestion," where the confidence as a certification from the DFA would have elicited.1avvphi1
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If Holy See made reference to Baer v. Tizon,55 and that in the said case, the United
the Secretary of State finds that the defendant is immune from suit, he, in turn, asks States Embassy asked the Secretary of Foreign Affairs to request the Solicitor
the Attorney General to submit to the court a "suggestion" that the defendant is General to make a "suggestion" to the trial court, accomplished by way of a
entitled to immunity. In England, a similar procedure is followed, only the Foreign Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the
Office issues a certification to that effect instead of submitting a "suggestion" Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated
(O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign in the text of Baer itself and was likely supplied in Holy See because its author,
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]). Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer.
Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which
In the Philippines, the practice is for the foreign government or the international directed the OSG to intervene in behalf of the United States government in the Baer
organization to first secure an executive endorsement of its claim of sovereign or case, and such fact is manifest enough of the endorsement by the Foreign Office. We
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement do not find a similar circumstance that bears here.
to the courts varies. In International Catholic Migration Commission v. Calleja, 190
SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the The Court is thus holds and so rules that GTZ consistently has been unable to
Secretary of Labor and Employment, informing the latter that the respondent- establish with satisfaction that it enjoys the immunity from suit generally enjoyed by its
employer could not be sued because it enjoyed diplomatic immunity. In World Health parent country, the Federal Republic of Germany. Consequently, both the Labor
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent Arbiter and the Court of Appeals acted within proper bounds when they refused to
the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. acknowledge that GTZ is so immune by dismissing the complaint against it. Our
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to finding has additional ramifications on the failure of GTZ to properly appeal the Labor
make, in behalf of the Commander of the United States Naval Base at Olongapo City, Arbiter’s decision to the NLRC. As pointed out by the OSG, the direct recourse to the
Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the Court of Appeals while bypassing the NLRC could have been sanctioned had the
"suggestion" in a Manifestation and Memorandum as amicus curiae. 53 Labor Arbiter’s decision been a "patent nullity." Since the Labor Arbiter acted properly
in deciding the complaint, notwithstanding GTZ’s claim of immunity, we cannot see
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was how the decision could have translated into a "patent nullity."
imperative for petitioners to secure from the Department of Foreign Affairs "a
certification of respondents’ diplomatic status and entitlement to diplomatic privileges As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by
including immunity from suits."54 The requirement might not necessarily be filing directly with the Court of Appeals the petition for certiorari. It then follows that
imperative. However, had GTZ obtained such certification from the DFA, it would
the Court of Appeals acted correctly in dismissing the petition on that ground. As a By 9 July 1992, the project was duly completed by respondent, who was then issued
further consequence, since petitioners failed to perfect an appeal from the Labor a Certificate of Project Completion dated 16 July 1992. The certificate was signed by
Arbiter’s Decision, the same has long become final and executory. All other questions Romeo M. Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief
related to this case, such as whether or not private respondents were illegally of the Construction Section, and by petitioner Twaño.
dismissed, are no longer susceptible to review, respecting as we do the finality of the
Labor Arbiter’s Decision. Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but
petitioners refused to pay the amount. He thus filed a Complaint 3 for the collection of
A final note. This decision should not be seen as deviation from the more common sum of money with damages before the Regional Trial Court of Guagua, Pampanga.
methodology employed in ascertaining whether a party enjoys State immunity from The complaint was docketed as Civil Case No. 3137.
suit, one which focuses on the particular functions exercised by the party and
determines whether these are proprietary or sovereign in nature. The nature of the Petitioners, for their part, set up the defense4 that the Complaint was a suit against
acts performed by the entity invoking immunity remains the most important barometer the state; that respondent failed to exhaust administrative remedies; and that the
for testing whether the privilege of State immunity from suit should apply. At the same "Contract of Agreement" covering the project was void for violating Presidential
time, our Constitution stipulates that a State immunity from suit is conditional on its Decree No. 1445, absent the proper appropriation and the Certificate of Availability of
withholding of consent; hence, the laws and circumstances pertaining to the creation Funds.5
and legal personality of an instrumentality or agency invoking immunity remain
relevant. Consent to be sued, as exhibited in this decision, is often conferred by the
very same statute or general law creating the instrumentality or agency. On 28 November 2003, the lower court ruled in favor of respondent, to wit:

WHEREFORE, the petition is DENIED. No pronouncement as to costs. WHEREFORE, premises considered, defendant Department of Public Works and
Highways is hereby ordered to pay the plaintiff Arnulfo D. Aquino the following:
SO ORDERED.
1. PhP1,873,790.69, Philippine Currency, representing actual amount for the
completion of the project done by the plaintiff;

2. PhP50,000.00 as attorney’s fee and

10. Vigilar vs. Aquino January 18, 2011
3. Cost of this suit.
DECISION
SO ORDERED. 6
SERENO, J.:

It is to be noted that respondent was only asking for PhP1,262,696.20; the award in
Before the Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of paragraph 1 above, however, conforms to the entire contract amount.
Court, assailing the Decision2of the Court of Appeals in C.A.-G.R. CV No. 82268,
dated 25 September 2006.
On appeal, the Court of Appeals reversed and set aside the Decision of the lower
court and disposed as follows:
The antecedent facts are as follows:
WHEREFORE, premises considered, the appeal is GRANTED. The "CONTRACT
On 19 June 1992, petitioner Angelito M. Twaño, then Officer-in-Charge (OIC)-District AGREEMENT" entered into between the plaintiff-appellee’s construction company,
Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering which he represented, and the government, through the Department of Public Works
District of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the and Highway (DPWH) – Pampanga 2nd Engineering District, is declared null and void
owner of A.D. Aquino Construction and Supplies. The bidding was for the ab initio.
construction of a dike by bulldozing a part of the Porac River at Barangay Ascomo-
Pulungmasle, Guagua, Pampanga.
The assailed decision of the court a quo is hereby REVERSED AND SET ASIDE.
Subsequently, on 7 July 1992, the project was awarded to respondent, and a
"Contract of Agreement" was thereafter executed between him and concerned In line with the pronouncement in Department of Health vs. C.V. Canchela &
petitioners for the amount of PhP1,873,790.69, to cover the project cost. Associates, Architects,7 the Commission on Audit (COA) is hereby ordered to
determine and ascertain with dispatch, on a quantum meruit basis, the total obligation
due to the plaintiff-appellee for his undertaking in implementing the subject contract of the issues in the present case involve the validity and the enforceability of the
public works, and to allow payment thereof, subject to COA Rules and Regulations, "Contract of Agreement" entered into by the parties. These are questions purely of
upon the completion of the said determination. law and clearly beyond the expertise of the Commission on Audit or the DPWH. In
Lacap, this Court said:
No pronouncement as to costs.
... It does not involve an examination of the probative value of the evidence presented
SO ORDERED.8 by the parties. There is a question of law when the doubt or difference arises as to
what the law is on a certain state of facts, and not as to the truth or the falsehood of
alleged facts. Said question at best could be resolved only tentatively by the
Dissatisfied with the Decision of the Court of Appeals, petitioners are now before this administrative authorities. The final decision on the matter rests not with them but with
Court, seeking a reversal of the appellate court’s Decision and a dismissal of the the courts of justice. Exhaustion of administrative remedies does not apply, because
Complaint in Civil Case No. G-3137. The Petition raises the following issues: nothing of an administrative nature is to be or can be done. The issue does not
require technical knowledge and experience but one that would involve the
1. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT interpretation and application of law. (Emphasis supplied.)
THE DOCTRINE OF NON-SUABILITY OF THE STATE HAS NO APPLICATION IN
THIS CASE. Secondly, in ordering the payment of the obligation due respondent on a quantum
meruit basis, the Court of Appeals correctly relied on Royal Trust Corporation v.
2. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT DISMISSING COA,10 Eslao v. COA,11 Melchor v. COA,12 EPG Construction Company v.
THE COMPLAINT FOR FAILURE OF RESPONDENT TO EXHAUST ALL Vigilar,13 and Department of Health v. C.V. Canchela & Associates, Architects. 14 All
ADMINISTRATIVE REMEDIES. these cases involved government projects undertaken in violation of the relevant
laws, rules and regulations covering public bidding, budget appropriations, and
3. WHETHER OR NOT THE COURT OF APPEALS ERRED IN ORDERING THE release of funds for the projects. Consistently in these cases, this Court has held that
COA TO ALLOW PAYMENT TO RESPONDENT ON A QUANTUM MERUIT BASIS the contracts were void for failing to meet the requirements mandated by law; public
DESPITE THE LATTER’S FAILURE TO COMPLY WITH THE REQUIREMENTS OF interest and equity, however, dictate that the contractor should be compensated for
PRESIDENTIAL DECREE NO. 1445. services rendered and work done.

After a judicious review of the case, the Court finds the Petition to be without merit. Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the
contracts involved in both cases failed to comply with the relevant provisions of
Presidential Decree No. 1445 and the Revised Administrative Code of 1987.
Firstly, petitioners claim that the Complaint filed by respondent before the Regional Nevertheless, "(t)he illegality of the subject Agreements proceeds, it bears emphasis,
Trial Court was done without exhausting administrative remedies. Petitioners aver from an express declaration or prohibition by law, not from any intrinsic illegality. As
that respondent should have first filed a claim before the Commission on Audit (COA) such, the Agreements are not illegal per se, and the party claiming thereunder may
before going to the courts. However, it has been established that the doctrine of recover what had been paid or delivered."15
exhaustion of administrative remedies and the doctrine of primary jurisdiction are not
ironclad rules. In Republic of the Philippines v. Lacap, 9 this Court enumerated the
numerous exceptions to these rules, namely: (a) where there is estoppel on the part The government project involved in this case, the construction of a dike, was
of the party invoking the doctrine; (b) where the challenged administrative act is completed way back on 9 July 1992. For almost two decades, the public and the
patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable government benefitted from the work done by respondent. Thus, the Court of Appeals
delay or official inaction that will irretrievably prejudice the complainant; (d) where the was correct in applying Eslao to the present case. In Eslao, this Court stated:
amount involved is relatively so small as to make the rule impractical and oppressive;
(e) where the question involved is purely legal and will ultimately have to be decided ...the Court finds that the contractor should be duly compensated for services
by the courts of justice; (f) where judicial intervention is urgent; (g) where the rendered, which were for the benefit of the general public. To deny the payment to the
application of the doctrine may cause great and irreparable damage; (h) where the contractor of the two buildings which are almost fully completed and presently
controverted acts violate due process; (i) where the issue of non-exhaustion of occupied by the university would be to allow the government to unjustly enrich itself at
administrative remedies has been rendered moot; (j) where there is no other plain, the expense of another. Justice and equity demand compensation on the basis
speedy and adequate remedy; (k) where strong public interest is involved; and (l) in of quantum meruit. (Emphasis supplied.)
quo warranto proceedings. In the present case, conditions (c) and (e) are present.
Neither can petitioners escape the obligation to compensate respondent for services
The government project contracted out to respondent was completed almost two rendered and work done by invoking the state’s immunity from suit. This Court has
decades ago. To delay the proceedings by remanding the case to the relevant long established in Ministerio v. CFI of Cebu,16 and recently reiterated in Heirs of
government office or agency will definitely prejudice respondent. More importantly, Pidacan v. ATO,17 that the doctrine of governmental immunity from suit cannot serve
as an instrument for perpetrating an injustice to a citizen. As this Court enunciated in Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
EPG Construction:181avvphi1 issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7 of
A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental
To our mind, it would be the apex of injustice and highly inequitable to defeat Cases (Rules), involving violations of environmental laws and regulations in relation
respondent’s right to be duly compensated for actual work performed and to the grounding of the US military ship USS Guardian over the Tubbataha Reefs.
services rendered, where both the government and the public have for years
received and accepted benefits from the project and reaped the fruits of Factual Background
respondent’s honest toil and labor.
The name "Tubbataha" came from the Samal (seafaring people of southern
xxx xxx xxx Philippines) language which means "long reef exposed at low tide." Tubbataha is
composed of two huge coral atolls - the north atoll and the south atoll - and the Jessie
Under these circumstances, respondent may not validly invoke the Royal Prerogative Beazley Reef, a smaller coral structure about 20 kilometers north of the atolls. The
of Dishonesty and conveniently hide under the State's cloak of invincibility against reefs of Tubbataha and Jessie Beazley are considered part of Cagayancillo, a remote
suit, considering that this principle yields to certain settled exceptions. True enough, island municipality of Palawan.1
the rule, in any case, is not absolute for it does not say that the state may not
be sued under any circumstance. In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation
No. 306 issued by President Corazon C. Aquino on August 11, 1988. Located in the
xxx xxx xxx middle of Central Sulu Sea, 150 kilometers southeast of Puerto Princesa City,
Tubbataha lies at the heart of the Coral Triangle, the global center of marine
biodiversity.
Although the Amigable and Ministerio cases generously tackled the issue of the
State's immunity from suit vis a vis the payment of just compensation for expropriated
property, this Court nonetheless finds the doctrine enunciated in the aforementioned In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and
cases applicable to the instant controversy, considering that the ends of justice Cultural Organization (UNESCO) as a World Heritage Site. It was recognized as one
would be subverted if we were to uphold, in this particular instance, the State's of the Philippines' oldest ecosystems, containing excellent examples of pristine reefs
immunity from suit. and a high diversity of marine life. The 97,030-hectare protected marine park is also
an important habitat for internationally threatened and endangered marine species.
UNESCO cited Tubbataha's outstanding universal value as an important and
To be sure, this Court — as the staunch guardian of the citizens' rights and significant natural habitat for in situ conservation of biological diversity; an example
welfare — cannot sanction an injustice so patent on its face, and allow itself to representing significant on-going ecological and biological processes; and an area of
be an instrument in the perpetration thereof. Justice and equity sternly demand exceptional natural beauty and aesthetic importance. 2
that the State's cloak of invincibility against suit be shred in this particular
instance, and that petitioners-contractors be duly compensated — on the basis
of quantum meruit — for construction done on the public works housing On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,3 otherwise known
project. (Emphasis supplied.) as the "Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure the protection
and conservation of the globally significant economic, biological, sociocultural,
educational and scientific values of the Tubbataha Reefs into perpetuity for the
WHEREFORE, in view of the foregoing, the Petition is DENIED for lack of merit. The enjoyment of present and future generations." Under the "no-take" policy, entry into
assailed Decision of the Court of Appeals in CA-G.R. No. 82268 dated 25 September the waters of TRNP is strictly regulated and many human activities are prohibited and
2006 is AFFIRMED. penalized or fined, including fishing, gathering, destroying and disturbing the
resources within the TRNP. The law likewise created the Tubbataha Protected Area
SO ORDERED. Management Board (TPAMB) which shall be the sole policy-making and permit-
granting body of the TRNP.

11. Arigo vs. Swift September 16, 2014 The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy.
In December 2012, the US Embassy in the Philippines requested diplomatic
DECISION clearance for the said vessel "to enter and exit the territorial waters of the Philippines
and to arrive at the port of Subic Bay for the purpose of routine ship replenishment,
maintenance, and crew liberty."4 On January 6, 2013, the ship left Sasebo, Japan for
VILLARAMA, JR, J.: Subic Bay, arriving on January 13, 2013 after a brief stop for fuel in Okinawa,
Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in that the Honorable Court: 1. Immediately issue upon the filing of this petition a
Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea, Temporary Environmental Protection Order (TEPO) and/or a Writ of Kalikasan, which
the ship ran aground on the northwest side of South Shoal of the Tubbataha Reefs, shall, in particular,
about 80 miles east-southeast of Palawan. No cine was injured in the incident, and
there have been no reports of leaking fuel or oil. a. Order Respondents and any person acting on their behalf, to cease and
desist all operations over the Guardian grounding incident;
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift,
expressed regret for the incident in a press statement.5 Likewise, US Ambassador to b. Initially demarcating the metes and bounds of the damaged area as well
the Philippines Harry K. Thomas, Jr., in a meeting at the Department of Foreign as an additional buffer zone;
Affairs (DFA) on February 4, "reiterated his regrets over the grounding incident and
assured Foreign Affairs Secretazy Albert F. del Rosario that the United States will
provide appropriate compensation for damage to the reef caused by the ship." 6 By c. Order Respondents to stop all port calls and war games under 'Balikatan'
March 30, 2013, the US Navy-led salvage team had finished removing the last piece because of the absence of clear guidelines, duties, and liability schemes for
of the grounded ship from the coral reef. breaches of those duties, and require Respondents to assume responsibility
for prior and future environmental damage in general, and environmental
damage under the Visiting Forces Agreement in particular.
On April 1 7, 2013, the above-named petitioners on their behalf and in representation
of their respective sector/organization and others, including minors or generations yet
unborn, filed the present petition agairtst Scott H. Swift in his capacity as Commander d. Temporarily define and describe allowable activities of ecotourism, diving,
of the US 7th Fleet, Mark A. Rice in his capacity as Commanding Officer of the USS recreation, and limited commercial activities by fisherfolk and indigenous
Guardian and Lt. Gen. Terry G. Robling, US Marine Corps Forces, Pacific and communities near or around the TRNP but away from the damaged site and
Balikatan 2013 Exercises Co-Director ("US respondents"); President Benigno S. an additional buffer zone;
Aquino III in his capacity as Commander-in-Chief of the Armed Forces of the
Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive Secretary Paquito 2. After summary hearing, issue a Resolution extending the TEPO until
Ochoa, Jr., Secretary Voltaire T. Gazmin (Department of National Defense), further orders of the Court;
Secretary Jesus P. Paje (Department of Environment and Natural Resources), Vice-
Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in Command, AFP), Admiral 3. After due proceedings, render a Decision which shall include, without
Rodolfo D. Isorena (Philippine Coast Guard Commandant), Commodore Enrico Efren limitation:
Evangelista (Philippine Coast Guard-Palawan), and Major General Virgilio 0.
Domingo (AFP Commandant), collectively the "Philippine respondents."
a. Order Respondents Secretary of Foreign Affairs, following the dispositive
portion of Nicolas v. Romulo, "to forthwith negotiate with the United States
The Petition representatives for the appropriate agreement on [environmental guidelines
and environmental accountability] under Philippine authorities as provided in
Petitioners claim that the grounding, salvaging and post-salvaging operations of the Art. V[] of the VFA ... "
USS Guardian cause and continue to cause environmental damage of such
magnitude as to affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo, b. Direct Respondents and appropriate agencies to commence
Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi- administrative, civil, and criminal proceedings against erring officers and
Tawi, which events violate their constitutional rights to a balanced and healthful individuals to the full extent of the law, and to make such proceedings public;
ecology. They also seek a directive from this Court for the institution of civil,
administrative and criminal suits for acts committed in violation of environmental laws
and regulations in connection with the grounding incident. c. Declare that Philippine authorities may exercise primary and exclusive
criminal jurisdiction over erring U.S. personnel under the circumstances of
this case;
Specifically, petitioners cite the following violations committed by US respondents
under R.A. No. 10067: unauthorized entry (Section 19); non-payment of conservation
fees (Section 21 ); obstruction of law enforcement officer (Section 30); damages to d. Require Respondents to pay just and reasonable compensation in the
the reef (Section 20); and destroying and disturbing resources (Section 26[g]). settlement of all meritorious claims for damages caused to the Tubbataha
Furthermore, petitioners assail certain provisions of the Visiting Forces Agreement Reef on terms and conditions no less severe than those applicable to other
(VFA) which they want this Court to nullify for being unconstitutional. States, and damages for personal injury or death, if such had been the case;

The numerous reliefs sought in this case are set forth in the final prayer of the e. Direct Respondents to cooperate in providing for the attendance of
petition, to wit: WHEREFORE, in view of the foregoing, Petitioners respectfully pray witnesses and in the collection and production of evidence, including seizure
and delivery of objects connected with the offenses related to the grounding q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other
of the Guardian; respects; and

f. Require the authorities of the Philippines and the United States to notify 4. Provide just and equitable environmental rehabilitation measures and
each other of the disposition of all cases, wherever heard, related to the such other reliefs as are just and equitable under the
grounding of the Guardian; premises.7 (Underscoring supplied.)

g. Restrain Respondents from proceeding with any purported restoration, Since only the Philippine respondents filed their comment8 to the petition, petitioners
repair, salvage or post salvage plan or plans, including cleanup plans also filed a motion for early resolution and motion to proceed ex parte against the US
covering the damaged area of the Tubbataha Reef absent a just settlement respondents.9
approved by the Honorable Court;
Respondents' Consolidated Comment
h. Require Respondents to engage in stakeholder and LOU consultations in
accordance with the Local Government Code and R.A. 10067; In their consolidated comment with opposition to the application for a TEPO and
ocular inspection and production orders, respondents assert that: ( 1) the grounds
i. Require Respondent US officials and their representatives to place a relied upon for the issuance of a TEPO or writ of Kalikasan have become fait
deposit to the TRNP Trust Fund defined under Section 17 of RA 10067 as a accompli as the salvage operations on the USS Guardian were already completed;
bona .fide gesture towards full reparations; (2) the petition is defective in form and substance; (3) the petition improperly raises
issues involving the VFA between the Republic of the Philippines and the United
j. Direct Respondents to undertake measures to rehabilitate the areas States of America; and ( 4) the determination of the extent of responsibility of the US
affected by the grounding of the Guardian in light of Respondents' Government as regards the damage to the Tubbataha Reefs rests exdusively with the
experience in the Port Royale grounding in 2009, among other similar executive branch.
grounding incidents;
The Court's Ruling
k. Require Respondents to regularly publish on a quarterly basis and in the
name of transparency and accountability such environmental damage As a preliminary matter, there is no dispute on the legal standing of petitioners to file
assessment, valuation, and valuation methods, in all stages of negotiation; the present petition.

l. Convene a multisectoral technical working group to provide scientific and Locus standi is "a right of appearance in a court of justice on a given
technical support to the TPAMB; question."10 Specifically, it is "a party's personal and substantial interest in a case
where he has sustained or will sustain direct injury as a result" of the act being
m. Order the Department of Foreign Affairs, Department of National challenged, and "calls for more than just a generalized grievance."11 However, the
Defense, and the Department of Environment and Natural Resources to rule on standing is a procedural matter which this Court has relaxed for non-traditional
review the Visiting Forces Agreement and the Mutual Defense Treaty to plaintiffs like ordinary citizens, taxpayers and legislators when the public interest so
consider whether their provisions allow for the exercise of erga omnes rights requires, such as when the subject matter of the controversy is of transcendental
to a balanced and healthful ecology and for damages which follow from any importance, of overreaching significance to society, or of paramount public interest. 12
violation of those rights;
In the landmark case of Oposa v. Factoran, Jr.,13 we recognized the "public right" of
n. Narrowly tailor the provisions of the Visiting Forces Agreement for citizens to "a balanced and healthful ecology which, for the first time in our
purposes of protecting the damaged areas of TRNP; constitutional history, is solemnly incorporated in the fundamental law." We declared
that the right to a balanced and healthful ecology need not be written in the
Constitution for it is assumed, like other civil and polittcal rights guaranteed in the Bill
o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction") of Rights, to exist from the inception of mankind and it is an issue of transcendental
and Article VI of the Visiting Forces Agreement unconstitutional for violating importance with intergenerational implications.1âwphi1 Such right carries with it the
equal protection and/or for violating the preemptory norm of correlative duty to refrain from impairing the environment. 14
nondiscrimination incorporated as part of the law of the land under Section
2, Article II, of the Philippine Constitution;
On the novel element in the class suit filed by the petitioners minors in Oposa, this
Court ruled that not only do ordinary citizens have legal standing to sue for the
p. Allow for continuing discovery measures;
enforcement of environmental rights, they can do so in representation of their own society of nations. Upon its admission to such society, the state is automatically
and future generations. Thus: obligated to comply with these principles in its relations with other states.

Petitioners minors assert that they represent their generation as well as generations As applied to the local state, the doctrine of state immunity is based on the
yet unborn. We find no difficulty in ruling that they can, for themselves, for others of justification given by Justice Holmes that ''there can be no legal right against the
their generation and for the succeeding generations, file a class suit. Their personality authority which makes the law on which the right depends." [Kawanakoa v. Polybank,
to sue in behalf of the succeeding generations can only be based on the concept of 205 U.S. 349] There are other practical reasons for the enforcement of the doctrine.
intergenerational responsibility insofar as the right to a balanced and healthful In the case of the foreign state sought to be impleaded in the local jurisdiction, the
ecology is concerned. Such a right, as hereinafter expounded, considers the "rhythm added inhibition is expressed in the maxim par in parem, non habet imperium. All
and harmony of nature." Nature means the created world in its entirety. Such rhythm states are sovereign equals and cannot assert jurisdiction over one another. A
and harmony indispensably include, inter alia, the judicious disposition, utilization, contrary disposition would, in the language of a celebrated case, "unduly vex the
management, renewal and conservation of the country's forest, mineral, land, waters, peace of nations." [De Haber v. Queen of Portugal, 17 Q. B. 171]
fisheries, wildlife, off-shore areas and other natural resources to the end that their
exploration, development and utilization be equitably accessible to the present a:: well While the doctrine appears to prohibit only suits against the state without its consent,
as future generations. Needless to say, every generation has a responsibility to the it is also applicable to complaints filed against officials of the state for acts allegedly
next to preserve that rhythm and harmony for the full 1:njoyment of a balanced and performed by them in the discharge of their duties. The rule is that if the judgment
healthful ecology. Put a little differently, the minors' assertion of their right to a sound against such officials will require the state itself to perform an affirmative act to satisfy
environment constitutes, at the same time, the performance of their obligation to the same,. such as the appropriation of the amount needed to pay the damages
ensure the protection of that right for the generations to come.15 (Emphasis supplied.) awarded against them, the suit must be regarded as against the state itself although it
has not been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a
The liberalization of standing first enunciated in Oposa, insofar as it refers to minors situation, the state may move to dismiss the comp.taint on the ground that it has been
and generations yet unborn, is now enshrined in the Rules which allows the filing of a filed without its consent.19 (Emphasis supplied.)
citizen suit in environmental cases. The provision on citizen suits in the Rules
"collapses the traditional rule on personal and direct interest, on the principle that Under the American Constitution, the doctrine is expressed in the Eleventh
humans are stewards of nature."16 Amendment which reads:

Having settled the issue of locus standi, we shall address the more fundamental The Judicial power of the United States shall not be construed to extend to any suit in
question of whether this Court has jurisdiction over the US respondents who did not law or equity, commenced or prosecuted against one of the United States by Citizens
submit any pleading or manifestation in this case. of another State, or by Citizens or Subjects of any Foreign State.

The immunity of the State from suit, known also as the doctrine of sovereign immunity In the case of Minucher v. Court of Appeals,20 we further expounded on the immunity
or non-suability of the State,17is expressly provided in Article XVI of the 1987 of foreign states from the jurisdiction of local courts, as follows:
Constitution which states:
The precept that a State cannot be sued in the courts of a foreign state is a long-
Section 3. The State may not be sued without its consent. standing rule of customary international law then closely identified with the personal
immunity of a foreign sovereign from suit and, with the emergence of democratic
In United States of America v. Judge Guinto,18 we discussed the principle of state states, made to attach not just to the person of the head of state, or his
immunity from suit, as follows: representative, but also distinctly to the state itself in its sovereign capacity. If the acts
giving rise to a suit arc those of a foreign government done by its foreign agent,
The rule that a state may not be sued without its consent, now · expressed in Article although not necessarily a diplomatic personage, but acting in his official capacity, the
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles of complaint could be barred by the immunity of the foreign sovereign from suit without
international law that we have adopted as part of the law of our land under Article II, its consent. Suing a representative of a state is believed to be, in effect, suing the
Section 2. x x x. state itself. The proscription is not accorded for the benefit of an individual but for the
State, in whose service he is, under the maxim -par in parem, non habet imperium -
that all states are soverr~ign equals and cannot assert jurisdiction over one another.
Even without such affirmation, we would still be bound by the generally accepted The implication, in broad terms, is that if the judgment against an official would rec
principles of international law under the doctrine of incorporation. Under this doctrine, 1uire the state itself to perform an affirmative act to satisfy the award, such as the
as accepted by the majority of states, such principles are deemed incorporated in the appropriation of the amount needed to pay the damages decreed against him, the suit
law of every civilized state as a condition and consequence of its membership in the must be regarded as being against the state itself, although it has not been formally
impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity, the The aforecited authorities are clear on the matter. They state that the doctrine of
privilege is not an immunity from the observance of the law of the territorial sovereign immunity from suit will not apply and may not be invoked where the public official is
or from ensuing legal liability; it is, rather, an immunity from the exercise of territorial being sued in his private and personal capacity as an ordinary citizen. The cloak of
jurisdiction.22 protection afforded the officers and agents of the government is removed the moment
they are sued in their individual capacity. This situation usually arises where the
In United States of America v. Judge Guinto,23 one of the consolidated cases therein public official acts without authority or in excess of the powers vested in him. It is a
involved a Filipino employed at Clark Air Base who was arrested following a buy-bust well-settled principle of law that a public official may be liable in his personal private
operation conducted by two officers of the US Air Force, and was eventually capacity for whatever damage he may have caused by his act done with malice and
dismissed from his employment when he was charged in court for violation of R.A. in bad faith, or beyond the scope of his authority or jurisdiction. 26 (Emphasis
No. 6425. In a complaint for damages filed by the said employee against the military supplied.) In this case, the US respondents were sued in their official capacity as
officers, the latter moved to dismiss the case on the ground that the suit was against commanding officers of the US Navy who had control and supervision over the USS
the US Government which had not given its consent. The RTC denied the motion but Guardian and its crew. The alleged act or omission resulting in the unfortunate
on a petition for certiorari and prohibition filed before this Court, we reversed the RTC grounding of the USS Guardian on the TRNP was committed while they we:re
and dismissed the complaint. We held that petitioners US military officers were acting performing official military duties. Considering that the satisfaction of a judgment
in the exercise of their official functions when they conducted the buy-bust operation against said officials will require remedial actions and appropriation of funds by the
against the complainant and thereafter testified against him at his trial. It follows that US government, the suit is deemed to be one against the US itself. The principle of
for discharging their duties as agents of the United States, they cannot be directly State immunity therefore bars the exercise of jurisdiction by this Court over the
impleaded for acts imputable to their principal, which has not given its consent to be persons of respondents Swift, Rice and Robling.
sued.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the position
This traditional rule of State immunity which exempts a State from being sued in the that the conduct of the US in this case, when its warship entered a restricted area in
courts of another State without the former's consent or waiver has evolved into a violation of R.A. No. 10067 and caused damage to the TRNP reef system, brings the
restrictive doctrine which distinguishes sovereign and governmental acts (Jure matter within the ambit of Article 31 of the United Nations Convention on the Law of
imperil") from private, commercial and proprietary acts (Jure gestionis). Under the the Sea (UNCLOS). He explained that while historically, warships enjoy sovereign
restrictive rule of State immunity, State immunity extends only to acts Jure imperii. immunity from suit as extensions of their flag State, Art. 31 of the UNCLOS creates
The restrictive application of State immunity is proper only when the proceedings an exception to this rule in cases where they fail to comply with the rules and
arise out of commercial transactions of the foreign sovereign, its commercial activities regulations of the coastal State regarding passage through the latter's internal waters
or economic affairs.24 and the territorial sea.

In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity According to Justice Carpio, although the US to date has not ratified the UNCLOS, as
principle, thus: a matter of long-standing policy the US considers itself bound by customary
international rules on the "traditional uses of the oceans" as codified in UNCLOS, as
can be gleaned from previous declarations by former Presidents Reagan and Clinton,
It is a different matter where the public official is made to account in his capacity as and the US judiciary in the case of United States v. Royal Caribbean Cruise Lines,
such for acts contrary to law and injurious to the rights of plaintiff. As was clearly set Ltd.27
forth by JustiGe Zaldivar in Director of the Bureau of Telecommunications, et al. vs.
Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an The international law of the sea is generally defined as "a body of treaty rules arid
action against the officials or officers by one whose rights have been invaded or customary norms governing the uses of the sea, the exploitation of its resources, and
violated by such acts, for the protection of his rights, is not a suit against the State the exercise of jurisdiction over maritime regimes. It is a branch of public international
within the rule of immunity of the State from suit. In the same tenor, it has been said law, regulating the relations of states with respect to the uses of the oceans."28 The
that an action at law or suit in equity against a State officer or the director of a State UNCLOS is a multilateral treaty which was opened for signature on December 10,
department on the ground that, while claiming to act for the State, he violates or 1982 at Montego Bay, Jamaica. It was ratified by the Philippines in 1984 but came
invades the personal and property rights of the plaintiff, under an unconstitutional act into force on November 16, 1994 upon the submission of the 60th ratification.
or under an assumption of authority which he does not have, is not a suit against the
State within the constitutional provision that the State may not be sued without its The UNCLOS is a product of international negotiation that seeks to balance State
consent." The rationale for this ruling is that the doctrine of state immunity cannot be sovereignty (mare clausum) and the principle of freedom of the high seas (mare
used as an instrument for perpetrating an injustice. liberum).29 The freedom to use the world's marine waters is one of the oldest
customary principles of international law.30 The UNCLOS gives to the coastal State
xxxx sovereign rights in varying degrees over the different zones of the sea which are: 1)
internal waters, 2) territorial sea, 3) contiguous zone, 4) exclusive economic zone,
and 5) the high seas. It also gives coastal States more or less jurisdiction over foreign Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk of
vessels depending on where the vessel is located.31 UNCLOS member states cooperated over the succeeding decade to revise the
objection.able provisions. The revisions satisfied the Clinton administration, which
Insofar as the internal waters and territorial sea is concerned, the Coastal State signed the revised Part XI implementing agreement in 1994. In the fall of 1994,
exercises sovereignty, subject to the UNCLOS and other rules of international law. President Clinton transmitted UNCLOS and the Part XI implementing agreement to
Such sovereignty extends to the air space over the territorial sea as well as to its bed the Senate requesting its advice and consent. Despite consistent support from
and subsoil.32 President Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the President to
internationally bind the United States to UNCLOS.
In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy
sovereign immunity subject to the following exceptions:
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the
108th and 110th Congresses, its progress continues to be hamstrung by significant
Article 30 pockets of political ambivalence over U.S. participation in international institutions.
Non-compliance by warships with the laws and regulations of the coastal State Most recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting
out" UNCLOS for full Senate consideration among his highest priorities. This did not
If any warship does not comply with the laws and regulations of the coastal State occur, and no Senate action has been taken on UNCLOS by the 112th Congress.34
concerning passage through the territorial sea and disregards any request for
compliance therewith which is made to it, the coastal State may require it to leave the Justice Carpio invited our attention to the policy statement given by President Reagan
territorial sea immediately. on March 10, 1983 that the US will "recognize the rights of the other , states in the
waters off their coasts, as reflected in the convention [UNCLOS], so long as the rights
Article 31 and freedom of the United States and others under international law are recognized
Responsibility of the flag State for damage caused by a warship by such coastal states", and President Clinton's reiteration of the US policy "to act in a
manner consistent with its [UNCLOS] provisions relating to traditional uses of the
or other government ship operated for non-commercial purposes oceans and to encourage other countries to do likewise." Since Article 31 relates to
the "traditional uses of the oceans," and "if under its policy, the US 'recognize[s] the
rights of the other states in the waters off their coasts,"' Justice Carpio postulates that
The flag State shall bear international responsibility for any loss or damage to the "there is more reason to expect it to recognize the rights of other states in their
coastal State resulting from the non-compliance by a warship or other government internal waters, such as the Sulu Sea in this case."
ship operated for non-commercial purposes with the laws and regulations of the
coastal State concerning passage through the territorial sea or with the provisions of
this Convention or other rules of international law. As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal
to join the UN CLOS was centered on its disagreement with UN CLOS' regime of
deep seabed mining (Part XI) which considers the oceans and deep seabed
Article 32 commonly owned by mankind," pointing out that such "has nothing to do with its [the
Immunities of warships and other government ships operated for non-commercial US'] acceptance of customary international rules on navigation."
purposes
It may be mentioned that even the US Navy Judge Advocate General's Corps publicly
With such exceptions as are contained in subsection A and in articles 30 and 31, endorses the ratification of the UNCLOS, as shown by the following statement posted
nothing in this Convention affects the immunities of warships and other government on its official website:
ships operated for non-commercial purposes. (Emphasis supplied.) A foreign
warship's unauthorized entry into our internal waters with resulting damage to marine
resources is one situation in which the above provisions may apply. But what if the The Convention is in the national interest of the United States because it establishes
offending warship is a non-party to the UNCLOS, as in this case, the US? stable maritime zones, including a maximum outer limit for territorial seas; codifies
innocent passage, transit passage, and archipelagic sea lanes passage rights; works
against "jurisdictiomtl creep" by preventing coastal nations from expanding their own
An overwhelming majority - over 80% -- of nation states are now members of maritime zones; and reaffirms sovereign immunity of warships, auxiliaries anJ
UNCLOS, but despite this the US, the world's leading maritime power, has not ratified government aircraft.
it.
xxxx
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from signing it due
to concerns over deep seabed mining technology transfer provisions contained in
Economically, accession to the Convention would support our national interests by Philippine government in the matter of criminal jurisdiction, movement of vessel and
enhancing the ability of the US to assert its sovereign rights over the resources of one aircraft, importation and exportation of equipment, materials and supplies. 36 The
of the largest continental shelves in the world. Further, it is the Law of the Sea invocation of US federal tort laws and even common law is thus improper considering
Convention that first established the concept of a maritime Exclusive Economic Zone that it is the VF A which governs disputes involving US military ships and crew
out to 200 nautical miles, and recognized the rights of coastal states to conserve and navigating Philippine waters in pursuance of the objectives of the agreement.
manage the natural resources in this Zone.35
As it is, the waiver of State immunity under the VF A pertains only to criminal
We fully concur with Justice Carpio's view that non-membership in the UNCLOS does jurisdiction and not to special civil actions such as the present petition for issuance of
not mean that the US will disregard the rights of the Philippines as a Coastal State a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of the Rules that
over its internal waters and territorial sea. We thus expect the US to bear a criminal case against a person charged with a violation of an environmental law is
"international responsibility" under Art. 31 in connection with the USS Guardian to be filed separately:
grounding which adversely affected the Tubbataha reefs. Indeed, it is difficult to
imagine that our long-time ally and trading partner, which has been actively SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the
supporting the country's efforts to preserve our vital marine resources, would shirk writ of kalikasan shall not preclude the filing of separate civil, criminal or
from its obligation to compensate the damage caused by its warship while transiting administrative actions.
our internal waters. Much less can we comprehend a Government exercising
leadership in international affairs, unwilling to comply with the UNCLOS directive for
all nations to cooperate in the global task to protect and preserve the marine In any case, it is our considered view that a ruling on the application or non-
environment as provided in Article 197, viz: application of criminal jurisdiction provisions of the VF A to US personnel who may be
found responsible for the grounding of the USS Guardian, would be premature and
beyond the province of a petition for a writ of Kalikasan. We also find it unnecessary
Article 197 at this point to determine whether such waiver of State immunity is indeed absolute.
Cooperation on a global or regional basis In the same vein, we cannot grant damages which have resulted from the violation of
environmental laws. The Rules allows the recovery of damages, including the
States shall cooperate on a global basis and, as appropriate, on a regional basis, collection of administrative fines under R.A. No. 10067, in a separate civil suit or that
directly or through competent international organizations, in formulating and deemed instituted with the criminal action charging the same violation of an
elaborating international rules, standards and recommended practices and environmental law.37
procedures consistent with this Convention, for the protection and preservation of the
marine environment, taking into account characteristic regional features. Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for
issuance of a writ of Kalikasan, to wit:
In fine, the relevance of UNCLOS provisions to the present controversy is beyond
dispute. Although the said treaty upholds the immunity of warships from the SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for
jurisdiction of Coastal States while navigating the.latter's territorial sea, the flag States decision, the court shall render judgment granting or denying the privilege of the writ
shall be required to leave the territorial '::;ea immediately if they flout the laws and of kalikasan.
regulations of the Coastal State, and they will be liable for damages caused by their
warships or any other government vessel operated for non-commercial purposes
under Article 31. The reliefs that may be granted under the writ are the following:

Petitioners argue that there is a waiver of immunity from suit found in the VFA. (a) Directing respondent to permanently cease and desist from committing
Likewise, they invoke federal statutes in the US under which agencies of the US have acts or neglecting the performance of a duty in violation of environmental
statutorily waived their immunity to any action. Even under the common law tort laws resulting in environmental destruction or damage;
claims, petitioners asseverate that the US respondents are liable for negligence,
trespass and nuisance. (b) Directing the respondent public official, govemment agency, private
person or entity to protect, preserve, rehabilitate or restore the environment;
We are not persuaded.
(c) Directing the respondent public official, government agency, private
The VFA is an agreement which defines the treatment of United States troops and person or entity to monitor strict compliance with the decision and orders of
personnel visiting the Philippines to promote "common security interests" between the the court;
US and the Philippines in the region. It provides for the guidelines to govern such
visits of military personnel, and further defines the rights of the United States and the
 (d) Directing the respondent public official, government agency, or private (a) To assist the parties in reaching a settlement;
person or entity to make periodic reports on the execution of the final
judgment; and xxxx

(e) Such other reliefs which relate to the right of the people to a balanced SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and
and healthful ecology or to the protection, preservation, rehabilitation or their counsels under oath, and they shall remain under oath in all pre-trial
restoration of the environment, except the award of damages to individual conferences.
petitioners. (Emphasis supplied.)
The judge shall exert best efforts to persuade the parties to arrive at a settlement of
We agree with respondents (Philippine officials) in asserting that this petition has the dispute. The judge may issue a consent decree approving the agreement
become moot in the sense that the salvage operation sought to be enjoined or between the parties in accordance with law, morals, public order and public policy to
restrained had already been accomplished when petitioners sought recourse from this protect the right of the people to a balanced and healthful ecology.
Court. But insofar as the directives to Philippine respondents to protect and
rehabilitate the coral reef stn icture and marine habitat adversely affected by the
grounding incident are concerned, petitioners are entitled to these reliefs xxxx
notwithstanding the completion of the removal of the USS Guardian from the coral
reef. However, we are mindful of the fact that the US and Philippine governments SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to
both expressed readiness to negotiate and discuss the matter of compensation for compromise or settle in accordance with law at any stage of the proceedings before
the damage caused by the USS Guardian. The US Embassy has also declared it is rendition of judgment. (Underscoring supplied.)
closely coordinating with local scientists and experts in assessing the extent of the
damage and appropriate methods of rehabilitation. The Court takes judicial notice of a similar incident in 2009 when a guided-missile
cruiser, the USS Port Royal, ran aground about half a mile off the Honolulu Airport
Exploring avenues for settlement of environmental cases is not proscribed by the Reef Runway and remained stuck for four days. After spending $6.5 million restoring
Rules. As can be gleaned from the following provisions, mediation and settlement are the coral reef, the US government was reported to have paid the State of Hawaii $8.5
available for the consideration of the parties, and which dispute resolution methods million in settlement over coral reef damage caused by the grounding. 38
are encouraged by the court, to wit:
To underscore that the US government is prepared to pay appropriate compensation
RULE3 for the damage caused by the USS Guardian grounding, the US Embassy in the
Philippines has announced the formation of a US interdisciplinary scientific team
xxxx which will "initiate discussions with the Government of the Philippines to review coral
reef rehabilitation options in Tubbataha, based on assessments by Philippine-based
marine scientists." The US team intends to "help assess damage and remediation
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall options, in coordination with the Tubbataha Management Office, appropriate
inquire from the parties if they have settled the dispute; otherwise, the court shall Philippine government entities, non-governmental organizations, and scientific
immediately refer the parties or their counsel, if authorized by their clients, to the experts from Philippine universities."39
Philippine Mediation Center (PMC) unit for purposes of mediation. If not available, the
court shall refer the case to the clerk of court or legal researcher for mediation.
A rehabilitation or restoration program to be implemented at the cost of the violator is
also a major relief that may be obtained under a judgment rendered in a citizens' suit
Mediation must be conducted within a non-extendible period of thirty (30) days from under the Rules, viz:
receipt of notice of referral to mediation.
RULES
The mediation report must be submitted within ten (10) days from the expiration of the
30-day period.
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of the
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the environment and the payment of attorney's fees, costs of suit and other litigation
continuance of the pre-trial. Before the scheduled date of continuance, the court may expenses. It may also require the violator to submit a program of rehabilitation or
refer the case to the branch clerk of court for a preliminary conference for the restoration of the environment, the costs of which shall be borne by the violator, or to
following purposes: contribute to a special trust fund for that purpose subject to the control of the
court.1âwphi1
In the light of the foregoing, the Court defers to the Executive Branch on the matter of Understanding (Aug 30 MOU), wherein China agreed to extend Preferential Buyer’s
compensation and rehabilitation measures through diplomatic channels. Resolution of Credit to the Philippine government to finance the Northrail Project. 3 The Chinese
these issues impinges on our relations with another State in the context of common government designated EXIM Bank as the lender, while the Philippine government
security interests under the VFA. It is settled that "[t]he conduct of the foreign named the DOF as the borrower.4 Under the Aug 30 MOU, EXIM Bank agreed to
relations of our government is committed by the Constitution to the executive and extend an amount not exceeding USD 400,000,000 in favor of the DOF, payable in 20
legislative-"the political" --departments of the government, and the propriety of what years, with a 5-year grace period, and at the rate of 3% per annum.5
may be done in the exercise of this political power is not subject to judicial inquiry or
decision."40 On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui
(Amb. Wang), wrote a letter to DOF Secretary Jose Isidro Camacho (Sec. Camacho)
On the other hand, we cannot grant the additional reliefs prayed for in the petition to informing him of CNMEG’s designation as the Prime Contractor for the Northrail
order a review of the VFA and to nullify certain immunity provisions thereof. Project.6

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora, 41 the VFA On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the
was duly concurred in by the Philippine Senate and has been recognized as a treaty construction of Section I, Phase I of the North Luzon Railway System from Caloocan
by the United States as attested and certified by the duly authorized representative of to Malolos on a turnkey basis (the Contract Agreement).7 The contract price for the
the United States government. The VF A being a valid and binding agreement, the Northrail Project was pegged at USD 421,050,000.8
parties are required as a matter of international law to abide by its terms and
provisions.42 The present petition under the Rules is not the proper remedy to assail On 26 February 2004, the Philippine government and EXIM Bank entered into a
the constitutionality of its provisions. WHEREFORE, the petition for the issuance of counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055 (the
the privilege of the Writ of Kalikasan is hereby DENIED. Loan Agreement).9 In the Loan Agreement, EXIM Bank agreed to extend Preferential
Buyer’s Credit in the amount of USD 400,000,000 in favor of the Philippine
No pronouncement as to costs. government in order to finance the construction of Phase I of the Northrail Project.10

SO ORDERED. On 13 February 2006, respondents filed a Complaint for Annulment of Contract and
Injunction with Urgent Motion for Summary Hearing to Determine the Existence of
Facts and Circumstances Justifying the Issuance of Writs of Preliminary Prohibitory
WAIVER OF IMMUNITY and Mandatory Injunction and/or TRO against CNMEG, the Office of the Executive
Secretary, the DOF, the Department of Budget and Management, the National
12. China National Machinery vs. Sta. Maria February 7, 2012 Economic Development Authority and Northrail.11 The case was docketed as Civil
Case No. 06-203 before the Regional Trial Court, National Capital Judicial Region,
Makati City, Branch 145 (RTC Br. 145). In the Complaint, respondents alleged that
DECISION the Contract Agreement and the Loan Agreement were void for being contrary to (a)
the Constitution; (b) Republic Act No. 9184 (R.A. No. 9184), otherwise known as the
SERENO, J.: Government Procurement Reform Act; (c) Presidential Decree No. 1445, otherwise
known as the Government Auditing Code; and (d) Executive Order No. 292,
This is a Petition for Review on Certiorari with Prayer for the Issuance of a Temporary otherwise known as the Administrative Code.12
Restraining Order (TRO) and/or Preliminary Injunction assailing the 30 September
2008 Decision and 5 December 2008 Resolution of the Court of Appeals (CA) in CA– RTC Br. 145 issued an Order dated 17 March 2006 setting the case for hearing on
G.R. SP No. 103351.1 the issuance of injunctive reliefs.13 On 29 March 2006, CNMEG filed an Urgent Motion
for Reconsideration of this Order.14 Before RTC Br. 145 could rule thereon, CNMEG
On 14 September 2002, petitioner China National Machinery & Equipment Corp. filed a Motion to Dismiss dated 12 April 2006, arguing that the trial court did not have
(Group) (CNMEG), represented by its chairperson, Ren Hongbin, entered into a jurisdiction over (a) its person, as it was an agent of the Chinese government, making
Memorandum of Understanding with the North Luzon Railways Corporation it immune from suit, and (b) the subject matter, as the Northrail Project was a product
(Northrail), represented by its president, Jose L. Cortes, Jr. for the conduct of a of an executive agreement.15
feasibility study on a possible railway line from Manila to San Fernando, La Union (the
Northrail Project).2 On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEG’s Motion
to Dismiss and setting the case for summary hearing to determine whether the
On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the injunctive reliefs prayed for should be issued.16 CNMEG then filed a Motion for
Department of Finance of the Philippines (DOF) entered into a Memorandum of Reconsideration,17 which was denied by the trial court in an Order dated 10 March
2008.18 Thus, CNMEG filed before the CA a Petition for Certiorari with Prayer for the There are two conflicting concepts of sovereign immunity, each widely held and firmly
Issuance of TRO and/or Writ of Preliminary Injunction dated 4 April 2008. 19 established. According to the classical or absolute theory, a sovereign cannot,
without its consent, be made a respondent in the courts of another
In the assailed Decision dated 30 September 2008, the appellate court dismissed the sovereign. According to the newer or restrictive theory, the immunity of the
Petition for Certiorari.20Subsequently, CNMEG filed a Motion for sovereign is recognized only with regard to public acts or acts jure imperii of a
Reconsideration,21 which was denied by the CA in a Resolution dated 5 December state, but not with regard to private acts or acts jure gestionis. (Emphasis
2008.22 Thus, CNMEG filed the instant Petition for Review on Certiorari dated 21 supplied; citations omitted.)
January 2009, raising the following issues: 23
xxx xxx xxx
Whether or not petitioner CNMEG is an agent of the sovereign People’s Republic of
China. The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental
Whether or not the Northrail contracts are products of an executive agreement functions. This is particularly true with respect to the Communist states which took
between two sovereign states. control of nationalized business activities and international trading.

Whether or not the certification from the Department of Foreign Affairs is necessary In JUSMAG v. National Labor Relations Commission,25 this Court affirmed the
under the foregoing circumstances. Philippines’ adherence to the restrictive theory as follows:

Whether or not the act being undertaken by petitioner CNMEG is an act jure imperii. The doctrine of state immunity from suit has undergone further metamorphosis. The
view evolved that the existence of a contract does not, per se, mean that sovereign
states may, at all times, be sued in local courts. The complexity of relationships
Whether or not the Court of Appeals failed to avoid a procedural limbo in the lower between sovereign states, brought about by their increasing commercial activities,
court. mothered a more restrictive application of the doctrine.

Whether or not the Northrail Project is subject to competitive public bidding. xxx xxx xxx

Whether or not the Court of Appeals ignored the ruling of this Honorable Court in the As it stands now, the application of the doctrine of immunity from suit has been
Neri case. restricted to sovereign or governmental activities (jure imperii). The mantle of state
immunity cannot be extended to commercial, private and proprietary acts (jure
CNMEG prays for the dismissal of Civil Case No. 06-203 before RTC Br. 145 for lack gestionis).26 (Emphasis supplied.)
of jurisdiction. It likewise requests this Court for the issuance of a TRO and, later on,
a writ of preliminary injunction to restrain public respondent from proceeding with the Since the Philippines adheres to the restrictive theory, it is crucial to ascertain the
disposition of Civil Case No. 06-203. legal nature of the act involved – whether the entity claiming immunity performs
governmental, as opposed to proprietary, functions. As held in United States of
The crux of this case boils down to two main issues, namely: America v. Ruiz –27

1. Whether CNMEG is entitled to immunity, precluding it from being sued The restrictive application of State immunity is proper only when the proceedings
before a local court. arise out of commercial transactions of the foreign sovereign, its commercial activities
or economic affairs. Stated differently, a State may be said to have descended to the
2. Whether the Contract Agreement is an executive agreement, such that it level of an individual and can thus be deemed to have tacitly given its consent to be
cannot be questioned by or before a local court. sued only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions.28
First issue: Whether CNMEG is entitled to immunity
A. CNMEG is engaged in a proprietary activity.

This Court explained the doctrine of sovereign immunity in Holy See v. Rosario,24 to
wit: A threshold question that must be answered is whether CNMEG performs
governmental or proprietary functions. A thorough examination of the basic facts of
the case would show that CNMEG is engaged in a proprietary activity.
The parties executed the Contract Agreement for the purpose of constructing the Contractor for the Project subject to compliance with Philippine and Chinese laws,
Luzon Railways, viz:29 rules and regulations for the selection of a contractor;

WHEREAS the Employer (Northrail) desired to construct the railways form Caloocan WHEREAS, the NORTHRAIL CORP. considers CNMEG’s proposal advantageous to
to Malolos, section I, Phase I of Philippine North Luzon Railways Project (hereinafter the Government of the Republic of the Philippines and has therefore agreed to assist
referred to as THE PROJECT); CNMEG in the conduct of the aforesaid Study;

AND WHEREAS the Contractor has offered to provide the Project on Turnkey basis, xxx xxx xxx
including design, manufacturing, supply, construction, commissioning, and training of
the Employer’s personnel; II. APPROVAL PROCESS

AND WHEREAS the Loan Agreement of the Preferential Buyer’s Credit between 2.1 As soon as possible after completion and presentation of the Study in accordance
Export-Import Bank of China and Department of Finance of Republic of the with Paragraphs 1.3 and 1.4 above and in compliance with necessary governmental
Philippines; laws, rules, regulations and procedures required from both parties, the parties shall
commence the preparation and negotiation of the terms and conditions of the
NOW, THEREFORE, the parties agree to sign this Contract for the Implementation of Contract (the "Contract") to be entered into between them on the implementation of
the Project. the Project. The parties shall use their best endeavors to formulate and finalize a
Contract with a view to signing the Contract within one hundred twenty (120) days
The above-cited portion of the Contract Agreement, however, does not on its own from CNMEG’s presentation of the Study.33 (Emphasis supplied)
reveal whether the construction of the Luzon railways was meant to be a proprietary
endeavor. In order to fully understand the intention behind and the purpose of the Clearly, it was CNMEG that initiated the undertaking, and not the Chinese
entire undertaking, the Contract Agreement must not be read in isolation. Instead, it government. The Feasibility Study was conducted not because of any diplomatic
must be construed in conjunction with three other documents executed in relation to gratuity from or exercise of sovereign functions by the Chinese government, but was
the Northrail Project, namely: (a) the Memorandum of Understanding dated 14 plainly a business strategy employed by CNMEG with a view to securing this
September 2002 between Northrail and CNMEG;30 (b) the letter of Amb. Wang dated commercial enterprise.
1 October 2003 addressed to Sec. Camacho;31 and (c) the Loan Agreement.32
2. Letter dated 1 October 2003
1. Memorandum of Understanding dated 14 September 2002
That CNMEG, and not the Chinese government, initiated the Northrail Project was
The Memorandum of Understanding dated 14 September 2002 shows that CNMEG confirmed by Amb. Wang in his letter dated 1 October 2003, thus:
sought the construction of the Luzon Railways as a proprietary venture. The relevant
parts thereof read: 1. CNMEG has the proven competence and capability to undertake the
Project as evidenced by the ranking of 42 given by the ENR among 225
WHEREAS, CNMEG has the financial capability, professional competence and global construction companies.
technical expertise to assess the state of the [Main Line North (MLN)] and
recommend implementation plans as well as undertake its rehabilitation and/or 2. CNMEG already signed an MOU with the North Luzon Railways
modernization; Corporation last September 14, 2000 during the visit of Chairman Li Peng.
Such being the case, they have already established an initial working
WHEREAS, CNMEG has expressed interest in the rehabilitation and/or relationship with your North Luzon Railways Corporation. This would
modernization of the MLN from Metro Manila to San Fernando, La Union passing categorize CNMEG as the state corporation within the People’s Republic of
through the provinces of Bulacan, Pampanga, Tarlac, Pangasinan and La Union (the China which initiated our Government’s involvement in the Project.
‘Project’);
3. Among the various state corporations of the People’s Republic of China,
WHEREAS, the NORTHRAIL CORP. welcomes CNMEG’s proposal to undertake a only CNMEG has the advantage of being fully familiar with the current
Feasibility Study (the "Study") at no cost to NORTHRAIL CORP.; requirements of the Northrail Project having already accomplished a
Feasibility Study which was used as inputs by the North Luzon Railways
WHEREAS, the NORTHRAIL CORP. also welcomes CNMEG’s interest in Corporation in the approvals (sic) process required by the Republic of the
undertaking the Project with Supplier’s Credit and intends to employ CNMEG as the Philippines.34 (Emphasis supplied.)
Thus, the desire of CNMEG to secure the Northrail Project was in the ordinary or 15.5 Waiver of Immunity The Borrower irrevocably and unconditionally waives, any
regular course of its business as a global construction company. The implementation immunity to which it or its property may at any time be or become entitled, whether
of the Northrail Project was intended to generate profit for CNMEG, with the Contract characterized as sovereign immunity or otherwise, from any suit, judgment, service of
Agreement placing a contract price of USD 421,050,000 for the venture. 35 The use of process upon it or any agent, execution on judgment, set-off, attachment prior to
the term "state corporation" to refer to CNMEG was only descriptive of its nature as a judgment, attachment in aid of execution to which it or its assets may be entitled in
government-owned and/or -controlled corporation, and its assignment as the Primary any legal action or proceedings with respect to this Agreement or any of the
Contractor did not imply that it was acting on behalf of China in the performance of transactions contemplated hereby or hereunder. Notwithstanding the foregoing, the
the latter’s sovereign functions. To imply otherwise would result in an absurd Borrower does not waive any immunity in respect of its assets which are (i) used by a
situation, in which all Chinese corporations owned by the state would be automatically diplomatic or consular mission of the Borrower, (ii) assets of a military character and
considered as performing governmental activities, even if they are clearly engaged in under control of a military authority or defense agency and (iii) located in the
commercial or proprietary pursuits. Philippines and dedicated to a public or governmental use (as distinguished from
patrimonial assets or assets dedicated to commercial use).37
3. The Loan Agreement
Thus, despite petitioner’s claim that the EXIM Bank extended financial assistance to
CNMEG claims immunity on the ground that the Aug 30 MOU on the financing of the Northrail because the bank was mandated by the Chinese government, and not
Northrail Project was signed by the Philippine and Chinese governments, and its because of any motivation to do business in the Philippines, 38 it is clear from the
assignment as the Primary Contractor meant that it was bound to perform a foregoing provisions that the Northrail Project was a purely commercial transaction.
governmental function on behalf of China. However, the Loan Agreement, which
originated from the same Aug 30 MOU, belies this reasoning, viz: Admittedly, the Loan Agreement was entered into between EXIM Bank and the
Philippine government, while the Contract Agreement was between Northrail and
Article 11. xxx (j) Commercial Activity The execution and delivery of this Agreement CNMEG. Although the Contract Agreement is silent on the classification of the legal
by the Borrower constitute, and the Borrower’s performance of and compliance with nature of the transaction, the foregoing provisions of the Loan Agreement, which is an
its obligations under this Agreement will constitute, private and commercial acts inextricable part of the entire undertaking, nonetheless reveal the intention of the
done and performed for commercial purposes under the laws of the Republic of parties to the Northrail Project to classify the whole venture as commercial or
the Philippines and neither the Borrower nor any of its assets is entitled to any proprietary in character.
immunity or privilege (sovereign or otherwise) from suit, execution or any other
legal process with respect to its obligations under this Agreement, as the case Thus, piecing together the content and tenor of the Contract Agreement, the
may be, in any jurisdiction. Notwithstanding the foregoing, the Borrower does not Memorandum of Understanding dated 14 September 2002, Amb. Wang’s letter dated
waive any immunity with respect of its assets which are (i) used by a diplomatic or 1 October 2003, and the Loan Agreement would reveal the desire of CNMEG to
consular mission of the Borrower and (ii) assets of a military character and under construct the Luzon Railways in pursuit of a purely commercial activity performed in
control of a military authority or defense agency and (iii) located in the Philippines and the ordinary course of its business.
dedicated to public or governmental use (as distinguished from patrimonial assets or
assets dedicated to commercial use). (Emphasis supplied.) B. CNMEG failed to adduce evidence that it is immune from suit under Chinese law.

(k) Proceedings to Enforce Agreement In any proceeding in the Republic of the Even assuming arguendo that CNMEG performs governmental functions, such claim
Philippines to enforce this Agreement, the choice of the laws of the People’s Republic does not automatically vest it with immunity. This view finds support in Malong v.
of China as the governing law hereof will be recognized and such law will be applied. Philippine National Railways, in which this Court held that "(i)mmunity from suit is
The waiver of immunity by the Borrower, the irrevocable submissions of the Borrower determined by the character of the objects for which the entity was organized." 39
to the non-exclusive jurisdiction of the courts of the People’s Republic of China and
the appointment of the Borrower’s Chinese Process Agent is legal, valid, binding and
enforceable and any judgment obtained in the People’s Republic of China will be if In this regard, this Court’s ruling in Deutsche Gesellschaft Für Technische
introduced, evidence for enforcement in any proceedings against the Borrower and its Zusammenarbeit (GTZ) v. CA40 must be examined. In Deutsche Gesellschaft,
assets in the Republic of the Philippines provided that (a) the court rendering Germany and the Philippines entered into a Technical Cooperation Agreement,
judgment had jurisdiction over the subject matter of the action in accordance with its pursuant to which both signed an arrangement promoting the Social Health
jurisdictional rules, (b) the Republic had notice of the proceedings, (c) the judgment of Insurance–Networking and Empowerment (SHINE) project. The two governments
the court was not obtained through collusion or fraud, and (d) such judgment was not named their respective implementing organizations: the Department of Health (DOH)
based on a clear mistake of fact or law.36 and the Philippine Health Insurance Corporation (PHIC) for the Philippines, and GTZ
for the implementation of Germany’s contributions. In ruling that GTZ was not immune
from suit, this Court held:
Further, the Loan Agreement likewise contains this express waiver of immunity:
The arguments raised by GTZ and the [Office of the Solicitor General (OSG)] are were ruled not entitled to invoke immunity from suit, owing to provisions in their
rooted in several indisputable facts. The SHINE project was implemented pursuant to charters manifesting their consent to be sued.
the bilateral agreements between the Philippine and German governments. GTZ was
tasked, under the 1991 agreement, with the implementation of the contributions of the xxx xxx xxx
German government. The activities performed by GTZ pertaining to the SHINE
project are governmental in nature, related as they are to the promotion of health
insurance in the Philippines. The fact that GTZ entered into employment contracts It is useful to note that on the part of the Philippine government, it had designated two
with the private respondents did not disqualify it from invoking immunity from suit, as entities, the Department of Health and the Philippine Health Insurance Corporation
held in cases such as Holy See v. Rosario, Jr., which set forth what remains valid (PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was
doctrine: established under Republic Act No. 7875, Section 16 (g) of which grants the
corporation the power "to sue and be sued in court." Applying the previously cited
jurisprudence, PHIC would not enjoy immunity from suit even in the performance of
Certainly, the mere entering into a contract by a foreign state with a private party its functions connected with SHINE, however, (sic) governmental in nature as (sic)
cannot be the ultimate test. Such an act can only be the start of the inquiry. The they may be.
logical question is whether the foreign state is engaged in the activity in the regular
course of business. If the foreign state is not engaged regularly in a business or trade,
the particular act or transaction must then be tested by its nature. If the act is in Is GTZ an incorporated agency of the German government? There is some
pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, mystery surrounding that question. Neither GTZ nor the OSG go beyond the
especially when it is not undertaken for gain or profit. claim that petitioner is "the implementing agency of the Government of the
Federal Republic of Germany." On the other hand, private respondents asserted
before the Labor Arbiter that GTZ was "a private corporation engaged in the
Beyond dispute is the tenability of the comment points (sic) raised by GTZ and the implementation of development projects." The Labor Arbiter accepted that claim in his
OSG that GTZ was not performing proprietary functions notwithstanding its entry into Order denying the Motion to Dismiss, though he was silent on that point in his
the particular employment contracts. Yet there is an equally fundamental premise Decision. Nevertheless, private respondents argue in their Comment that the finding
which GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy that GTZ was a private corporation "was never controverted, and is therefore deemed
the Federal Republic’s immunity from suit? admitted." In its Reply, GTZ controverts that finding, saying that it is a matter of public
knowledge that the status of petitioner GTZ is that of the "implementing agency," and
The principle of state immunity from suit, whether a local state or a foreign state, is not that of a private corporation.
reflected in Section 9, Article XVI of the Constitution, which states that "the State may
not be sued without its consent." Who or what consists of "the State"? For one, the In truth, private respondents were unable to adduce any evidence to substantiate
doctrine is available to foreign States insofar as they are sought to be sued in the their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly in
courts of the local State, necessary as it is to avoid "unduly vexing the peace of accepting such claim without explanation. But neither has GTZ supplied any
nations." evidence defining its legal nature beyond that of the bare descriptive
"implementing agency." There is no doubt that the 1991 Agreement designated
If the instant suit had been brought directly against the Federal Republic of Germany, GTZ as the "implementing agency" in behalf of the German government. Yet the
there would be no doubt that it is a suit brought against a State, and the only catch is that such term has no precise definition that is responsive to our
necessary inquiry is whether said State had consented to be sued. However, the concerns. Inherently, an agent acts in behalf of a principal, and the GTZ can be
present suit was brought against GTZ. It is necessary for us to understand what said to act in behalf of the German state. But that is as far as "implementing
precisely are the parameters of the legal personality of GTZ. agency" could take us. The term by itself does not supply whether GTZ is
incorporated or unincorporated, whether it is owned by the German state or by
Counsel for GTZ characterizes GTZ as "the implementing agency of the private interests, whether it has juridical personality independent of the
Government of the Federal Republic of Germany," a depiction similarly adopted German government or none at all.
by the OSG. Assuming that the characterization is correct, it does not automatically
invest GTZ with the ability to invoke State immunity from suit. The distinction lies xxx xxx xxx
in whether the agency is incorporated or unincorporated.
Again, we are uncertain of the corresponding legal implications under German
xxx xxx xxx law surrounding "a private company owned by the Federal Republic of
Germany." Yet taking the description on face value, the apparent equivalent
State immunity from suit may be waived by general or special law. The special law under Philippine law is that of a corporation organized under the Corporation
can take the form of the original charter of the incorporated government agency. Code but owned by the Philippine government, or a government-owned or
Jurisprudence is replete with examples of incorporated government agencies which controlled corporation without original charter. And it bears notice that Section
36 of the Corporate Code states that "[e]very corporation incorporated under
this Code has the power and capacity x x x to sue and be sued in its corporate Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
name." the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to
It is entirely possible that under German law, an entity such as GTZ or particularly make, in behalf of the Commander of the United States Naval Base at Olongapo City,
GTZ itself has not been vested or has been specifically deprived the power and Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the
capacity to sue and/or be sued. Yet in the proceedings below and before this "suggestion" in a Manifestation and Memorandum as amicus curiae.
Court, GTZ has failed to establish that under German law, it has not consented
to be sued despite it being owned by the Federal Republic of Germany. We In the case at bench, the Department of Foreign Affairs, through the Office of Legal
adhere to the rule that in the absence of evidence to the contrary, foreign laws Affairs moved with this Court to be allowed to intervene on the side of petitioner. The
on a particular subject are presumed to be the same as those of the Court allowed the said Department to file its memorandum in support of petitioner’s
Philippines, and following the most intelligent assumption we can gather, GTZ claim of sovereign immunity.
is akin to a governmental owned or controlled corporation without original
charter which, by virtue of the Corporation Code, has expressly consented to In some cases, the defense of sovereign immunity was submitted directly to the local
be sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court courts by the respondents through their private counsels (Raquiza v. Bradford, 75
has no basis in fact to conclude or presume that GTZ enjoys immunity from Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948];
suit.41 (Emphasis supplied.) United States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In
cases where the foreign states bypass the Foreign Office, the courts can inquire into
Applying the foregoing ruling to the case at bar, it is readily apparent that CNMEG the facts and make their own determination as to the nature of the acts and
cannot claim immunity from suit, even if it contends that it performs governmental transactions involved.43 (Emphasis supplied.)
functions. Its designation as the Primary Contractor does not automatically grant it
immunity, just as the term "implementing agency" has no precise definition for The question now is whether any agency of the Executive Branch can make a
purposes of ascertaining whether GTZ was immune from suit. Although CNMEG determination of immunity from suit, which may be considered as conclusive upon the
claims to be a government-owned corporation, it failed to adduce evidence that it has courts. This Court, in Department of Foreign Affairs (DFA) v. National Labor Relations
not consented to be sued under Chinese law. Thus, following this Court’s ruling in Commission (NLRC),44 emphasized the DFA’s competence and authority to provide
Deutsche Gesellschaft, in the absence of evidence to the contrary, CNMEG is to be such necessary determination, to wit:
presumed to be a government-owned and -controlled corporation without an original
charter. As a result, it has the capacity to sue and be sued under Section 36 of the
Corporation Code. The DFA’s function includes, among its other mandates, the determination of persons
and institutions covered by diplomatic immunities, a determination which, when
challenge, (sic) entitles it to seek relief from the court so as not to seriously impair the
C. CNMEG failed to present a certification from the Department of Foreign Affairs. conduct of the country's foreign relations. The DFA must be allowed to plead its case
whenever necessary or advisable to enable it to help keep the credibility of the
In Holy See,42 this Court reiterated the oft-cited doctrine that the determination by the Philippine government before the international community. When international
Executive that an entity is entitled to sovereign or diplomatic immunity is a political agreements are concluded, the parties thereto are deemed to have likewise accepted
question conclusive upon the courts, to wit: the responsibility of seeing to it that their agreements are duly regarded. In our
country, this task falls principally of (sic) the DFA as being the highest executive
In Public International Law, when a state or international agency wishes to plead department with the competence and authority to so act in this aspect of the
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of international arena.45 (Emphasis supplied.)
the state where it is sued to convey to the court that said defendant is entitled to
immunity. Further, the fact that this authority is exclusive to the DFA was also emphasized in
this Court’s ruling in Deutsche Gesellschaft:
xxx xxx xxx
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was
In the Philippines, the practice is for the foreign government or the international imperative for petitioners to secure from the Department of Foreign Affairs "a
organization to first secure an executive endorsement of its claim of sovereign or certification of respondents’ diplomatic status and entitlement to diplomatic privileges
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement including immunity from suits." The requirement might not necessarily be imperative.
to the courts varies. In International Catholic Migration Commission v. Calleja, 190 However, had GTZ obtained such certification from the DFA, it would have provided
SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the factual basis for its claim of immunity that would, at the very least, establish a
Secretary of Labor and Employment, informing the latter that the respondent- disputable evidentiary presumption that the foreign party is indeed immune which the
employer could not be sued because it enjoyed diplomatic immunity. In World Health opposing party will have to overcome with its own factual evidence. We do not see
why GTZ could not have secured such certification or endorsement from the DFA for
purposes of this case. Certainly, it would have been highly prudential for GTZ to Both parties shall attempt to amicably settle all disputes or controversies arising from
obtain the same after the Labor Arbiter had denied the motion to dismiss. Still, even this Contract before the commencement of arbitration.
at this juncture, we do not see any evidence that the DFA, the office of the executive
branch in charge of our diplomatic relations, has indeed endorsed GTZ’s claim of 33.2. Arbitration
immunity. It may be possible that GTZ tried, but failed to secure such certification,
due to the same concerns that we have discussed herein.
All disputes or controversies arising from this Contract which cannot be settled
between the Employer and the Contractor shall be submitted to arbitration in
Would the fact that the Solicitor General has endorsed GTZ’s claim of State’s accordance with the UNCITRAL Arbitration Rules at present in force and as may be
immunity from suit before this Court sufficiently substitute for the DFA certification? amended by the rest of this Clause. The appointing authority shall be Hong Kong
Note that the rule in public international law quoted in Holy See referred to International Arbitration Center. The place of arbitration shall be in Hong Kong at
endorsement by the Foreign Office of the State where the suit is filed, such foreign Hong Kong International Arbitration Center (HKIAC).
office in the Philippines being the Department of Foreign Affairs. Nowhere in the
Comment of the OSG is it manifested that the DFA has endorsed GTZ’s claim, or that
the OSG had solicited the DFA’s views on the issue. The arguments raised by the Under the above provisions, if any dispute arises between Northrail and CNMEG,
OSG are virtually the same as the arguments raised by GTZ without any indication of both parties are bound to submit the matter to the HKIAC for arbitration. In case the
any special and distinct perspective maintained by the Philippine government on the HKIAC makes an arbitral award in favor of Northrail, its enforcement in the Philippines
issue. The Comment filed by the OSG does not inspire the same degree of would be subject to the Special Rules on Alternative Dispute Resolution (Special
confidence as a certification from the DFA would have elicited.46 (Emphasis supplied.) Rules). Rule 13 thereof provides for the Recognition and Enforcement of a Foreign
Arbitral Award. Under Rules 13.2 and 13.3 of the Special Rules, the party to
arbitration wishing to have an arbitral award recognized and enforced in the
In the case at bar, CNMEG offers the Certification executed by the Economic and Philippines must petition the proper regional trial court (a) where the assets to be
Commercial Office of the Embassy of the People’s Republic of China, stating that the attached or levied upon is located; (b) where the acts to be enjoined are being
Northrail Project is in pursuit of a sovereign activity.47Surely, this is not the kind of performed; (c) in the principal place of business in the Philippines of any of the
certification that can establish CNMEG’s entitlement to immunity from suit, as Holy parties; (d) if any of the parties is an individual, where any of those individuals
See unequivocally refers to the determination of the "Foreign Office of the state where resides; or (e) in the National Capital Judicial Region.
it is sued."
From all the foregoing, it is clear that CNMEG has agreed that it will not be afforded
Further, CNMEG also claims that its immunity from suit has the executive immunity from suit. Thus, the courts have the competence and jurisdiction to
endorsement of both the OSG and the Office of the Government Corporate Counsel ascertain the validity of the Contract Agreement.
(OGCC), which must be respected by the courts. However, as expressly enunciated
in Deutsche Gesellschaft, this determination by the OSG, or by the OGCC for that
matter, does not inspire the same degree of confidence as a DFA certification. Even Second issue: Whether the Contract Agreement is an executive agreement
with a DFA certification, however, it must be remembered that this Court is not
precluded from making an inquiry into the intrinsic correctness of such certification. Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna Convention)
defines a treaty as follows:
D. An agreement to submit any dispute to arbitration may be construed as an implicit
waiver of immunity from suit. [A]n international agreement concluded between States in written form and governed
by international law, whether embodied in a single instrument or in two or more
In the United States, the Foreign Sovereign Immunities Act of 1976 provides for a related instruments and whatever its particular designation.
waiver by implication of state immunity. In the said law, the agreement to submit
disputes to arbitration in a foreign country is construed as an implicit waiver of In Bayan Muna v. Romulo, this Court held that an executive agreement is similar to a
immunity from suit. Although there is no similar law in the Philippines, there is reason treaty, except that the former (a) does not require legislative concurrence; (b) is
to apply the legal reasoning behind the waiver in this case. usually less formal; and (c) deals with a narrower range of subject matters. 50

The Conditions of Contract,48 which is an integral part of the Contract Despite these differences, to be considered an executive agreement, the following
Agreement,49 states: three requisites provided under the Vienna Convention must nevertheless concur: (a)
the agreement must be between states; (b) it must be written; and (c) it must
33. SETTLEMENT OF DISPUTES AND ARBITRATION governed by international law. The first and the third requisites do not obtain in the
case at bar.
33.1. Amicable Settlement
A. CNMEG is neither a government nor a government agency. No pronouncement on costs of suit.

The Contract Agreement was not concluded between the Philippines and China, but SO ORDERED.
between Northrail and CNMEG.51 By the terms of the Contract Agreement, Northrail is
a government-owned or -controlled corporation, while CNMEG is a corporation duly
organized and created under the laws of the People’s Republic of China. 52 Thus, both FORMS OF CONSENT – SUIT AGAINST GOVERNMENT AGENCIES
Northrail and CNMEG entered into the Contract Agreement as entities with
personalities distinct and separate from the Philippine and Chinese governments,
respectively. 13. NHMFC vs. Abayari October 2, 2009.

Neither can it be said that CNMEG acted as agent of the Chinese government. As DECISION
previously discussed, the fact that Amb. Wang, in his letter dated 1 October
2003,53 described CNMEG as a "state corporation" and declared its designation as DEL CASTILLO, J.:
the Primary Contractor in the Northrail Project did not mean it was to perform
sovereign functions on behalf of China. That label was only descriptive of its nature In this petition for review1 under Rule 45 of the Rules of Court, the National Home
as a state-owned corporation, and did not preclude it from engaging in purely Mortgage Finance Corporation assails the August 20, 2004 Decision 2 of the Court of
commercial or proprietary ventures. Appeals in CA-G.R. SP No. 82637, which dismissed its petition for certiorari from the
October 14, 20033 and December 15, 20034 Orders issued by the Regional Trial
B. The Contract Agreement is to be governed by Philippine law. Court (RTC) of Makati City, Branch 138.5 The said Orders, in turn, respectively
granted the issuance of a writ of execution and denied petitioner’s motion for
Article 2 of the Conditions of Contract,54 which under Article 1.1 of the Contract reconsideration in Civil Case No. 99-1209 – a case for mandamus.
Agreement is an integral part of the latter, states:
The antecedents follow.
APPLICABLE LAW AND GOVERNING LANGUAGE
Petitioner, the National Home Mortgage Finance Corporation (NHMFC), is a
The contract shall in all respects be read and construed in accordance with the laws government-owned and controlled corporation created under the authority of
of the Philippines. Presidential Decree No. 1267 for the primary purpose of developing and providing a
secondary market for home mortgages granted by public and/or private home-
financing institutions. 6 In its employ were respondents,7 mostly rank-and-file
The contract shall be written in English language. All correspondence and other employees, who all profess as having been hired after June 30, 1989. 8
documents pertaining to the Contract which are exchanged by the parties shall be
written in English language.
On July 1, 1989, Republic Act No. 6758, otherwise known as The Compensation and
Position Classification Act of 1989, was enacted and was subsequently approved on
Since the Contract Agreement explicitly provides that Philippine law shall be August 21, 1989. Section 12 thereof directed that all allowances – namely
applicable, the parties have effectively conceded that their rights and obligations representation and transportation allowance, clothing and laundry allowance,
thereunder are not governed by international law. subsistence allowance, hazard pay and other allowances as may be determined by
the budget department – enjoyed by covered employees should be deemed included
It is therefore clear from the foregoing reasons that the Contract Agreement does not in the standardized salary rates prescribed therein, and that the other additional
partake of the nature of an executive agreement. It is merely an ordinary commercial compensation being received by incumbents only as of July 1, 1989 not integrated
contract that can be questioned before the local courts. into the standardized salary rates should continue to be authorized. To implement the
law, the Department of Budget and Management (DBM) issued Corporate
WHEREFORE, the instant Petition is DENIED. Petitioner China National Machinery & Compensation Circular No. 10.9 Section 5.510 thereof excluded certain allowances
Equipment Corp. (Group) is not entitled to immunity from suit, and the Contract and benefits from integration into the standardized basic salary but continued their
Agreement is not an executive agreement. CNMEG’s prayer for the issuance of a grant to those who were incumbents as of June 30, 1989 and who were actually
TRO and/or Writ of Preliminary Injunction is DENIED for being moot and academic. receiving the benefits as of said date. These are the allowances involved in this case.
This case is REMANDED to the Regional Trial Court of Makati, Branch 145, for
further proceedings as regards the validity of the contracts subject of Civil Case No. Respondents filed a petition for mandamus with the RTC of Makati City, Branch
06-203. 13811 to compel petitioner to pay them meal, rice, medical, dental, optical and
children’s allowances, as well as longevity pay, which allegedly were already being
enjoyed by other NHMFC employees as early as July 1, 1989. In its April 27, 2001 Conflict arose when the DBM sent a letter20 dated July 15, 2003 to NHMFC President
Decision, the trial court ruled favorably and ordered petitioner to pay respondents the Angelico Salud disallowing the payment of certain allowances, including those
allowances prayed for, retroactive to the respective dates of appointment. 12 The awarded by the trial court to respondents. A reading of the letter reveals that the
dispositive portion of the Decision reads: disallowance was made in accordance with the 2002 NHMFC Corporate Operating
Budget previously issued by the DBM.
WHEREFORE, judgment is hereby rendered in favor of the petitioners and
respondent is ordered to pay petitioners their meal allowance, rice allowance, medical To abide by the DBM’s directive, petitioner then issued a memorandum stating that
allowance, longevity pay and children’s allowance retroactive to the dates of their effective August 2003, the grant of benefits to its covered employees, including those
respective appointments up to the present or for the time that they were employed by awarded to respondents, would be curtailed pursuant to the DBM letter. 21 This
the respondent. eventuality compelled respondents to file for the second time a motion for a writ of
execution of the trial court’s April 27, 2001 decision. 22
SO ORDERED.13
In its October 14, 2003 Order,23 the trial court found merit in respondents’ motion;
In arriving at the conclusion that respondents were entitled to the prayed-for benefits, hence, it directed the execution of the judgment. Petitioner moved for
the trial court explained, thus, reconsideration24 but it was denied.25 On February 16, 2004, the trial court issued a
Writ of Execution/Garnishment with a directive to the sheriff to tender to respondents
the amount of their collective claim equivalent to ₱4,806,530.00 to be satisfied out of
The use of the word "only" before the words July 1, 1989 in section 12 of Republic Act petitioners goods and chattels and if the same be not sufficient, out of its existing real
No. 6758 appears to be the source of the dispute. property.26 Respondents then sought the garnishment of its funds under the custody
of the Land Bank of the Philippines.27
Section 12 is clear that other additional compensation being received by incumbents
only as of July 1, 1989 that are not integrated into the standardized salary rates shall Bent on preventing execution, petitioner filed a petition for certiorari with the Court of
continue to be authorized. The law is prospective in effect and it does not say that Appeals, docketed as CA-G.R. SP No. 82637.28 In it, petitioner ascribed grave abuse
such additional compensation shall not continue to be authorized for employees of discretion to the trial court in ordering the execution of the judgment. It pointed out
appointed after June 30, 1989. The use of the word "only" before the words "as of that the trial court disregarded the fact that the DBM’s issuance amounted to a
July 1, 1989" qualifies the additional compensation which can be continued. The supervening event, or an occurrence that changed the situation of the parties that
foregoing applies to all employees whether permanent or casual. would make the continued payment of allowances to respondents impossible and
illegal, and disregarded the DBM’s exclusive authority to allow or disallow the
DBM Circular No. 10, the Implementing Rules and Regulations particularly section 5.5 payment of the benefits in question.29 It likewise faulted the trial court in ordering the
thereof…use the word "only" for incumbents as of June 30, 1989 and by implication garnishment of its funds despite the settled rule that government funds may not be
the same shall not apply to employees appointed after June 30, 1989. This is in effect garnished in the absence of an appropriation made by law. 301avvphi1
another qualification limiting the grant of benefits to those who are incumbents as of
June 30, 1989, a condition not imposed by Section 12 of Republic Act No. 6758 for The Court of Appeals, however, found no grave abuse of discretion on the part of the
which reason it has to be strike (sic) down.14 trial court; hence, in its August 20, 2004 Decision, it dismissed the petition for lack of
merit.31
Petitioner timely filed an appeal with the Court of Appeals. 15 In its November 21, 2001
Decision, the appellate court affirmed the trial court’s ruling.16 No appeal was taken In its present recourse, petitioner, on the one hand, insists that it is difficult not to
from the decision and upon its finality,17 respondents moved for execution.18 consider the issuance of the DBM in this case as a supervening event that would
make the execution of the trial court’s decision inequitable and/or impossible, since
However, the motion for execution was withdrawn when on May 12, 2002, petitioner the determination of entitlement to benefits and allowances among government
and respondents executed a Compromise Agreement in which petitioner bound itself employees is within the agency’s exclusive authority. It argues that, hence, both the
to comply with the decision rendered in the case, except that the payment of the trial court and the Court of Appeals were in error to order the execution of the
allowances adjudicated in favor of respondents would be made in four installments decision as the same totally disregards the rule that issuances of administrative
instead. It was, likewise stipulated therein that the parties waive all claims against agencies are valid and enforceable.32 Again, it asserts that the garnishment of its
each other. The trial court did not take any positive action on the compromise except funds was not in order as there was no existing appropriation therefor.33
to note the same since the parties did not intend to novate the April 27, 2001
Decision.19 On that basis, petitioner had started paying respondents the arrears in Respondents, on the other hand, argue in the main that inasmuch as the core issue
benefits. of whether they were entitled to the schedule of benefits under Section 12 of R.A. No.
6758 had already been settled by both the trial court in Civil Case No. 99-1209 and
the Court of Appeals in CA-G.R. SP No. 66303, the DBM letter should not be allowed
to interfere with the decision and render the same ineffective. Since the said decision Be that as it may, assuming for the sake of argument that execution by garnishment
had already attained finality, they posit that execution appeared to be the only just could proceed in this case against the funds of petitioner, it must bear stress that the
and equitable measure under the premises34 and that garnishment lies against latter is a government-owned or controlled corporation with a charter of its own. Its
petitioner’s funds inasmuch as it has a personality separate and distinct from the juridical personality is separate and distinct from the government and it can sue and
government.35 be sued in its name.41 As such, while indeed it cannot evade the effects of the
execution of an adverse judgment and may not ordinarily place its funds beyond an
There is partial merit in the petition. order of garnishment issued in ordinary cases,42 it is imperative in order for execution
to ensue that a claim for the payment of the judgment award be first filed with the
Commission on Audit (COA).43
To begin with, a writ of mandamus is a command issuing from a court of law of
competent jurisdiction, in the name of the state or sovereign, directed to an inferior
court, tribunal, or board, or to some corporation or person, requiring the performance Under Commonwealth Act No. 327,44 as amended by P.D. No. 1445,45 the COA, as
of a particular duty therein specified, which duty results from the official station of the one of the three independent constitutional commissions, is specifically vested with
party to whom the writ is directed, or from operation of law. 36 It is employed to compel the power, authority and duty to examine, audit and settle all accounts pertaining to
the performance, when refused, of a ministerial duty37 which, as opposed to a the revenue and receipts of, and expenditures or uses of funds and property owned
discretionary one, is that which an officer or tribunal performs in a given state of facts, or held in trust by the government, or any of its subdivisions, agencies or
in a prescribed manner, in obedience to the mandate of legal authority, without regard instrumentalities, including government-owned and controlled corporations.46 To
to or the exercise of his or its own judgment upon the propriety or impropriety of the ensure the effective discharge of its functions, it is vested with ample powers, subject
act done.38 to constitutional limitations, to define the scope of its audit and examination and
establish the techniques and methods required therefor, to promulgate accounting
and auditing rules and regulations, including those for the prevention and
A favorable judgment rendered in a special civil action for mandamus is in the nature disallowance of irregular, unnecessary, excessive, extravagant or unconscionable
of a special judgment. As such, it requires the performance of any other act than the expenditures or uses of government funds and properties. 47 Section 1,48 Rule II of the
payment of money or the sale or delivery of real or personal property the execution of COA Rules of Procedure materially provides:
which is governed by Section 11, Rule 39 of the Rules of Court 39 which states:
Section 1. General Jurisdiction.—The Commission on Audit shall have the power,
SECTION 11. Execution of Special Judgment.—When the judgment requires the authority and duty to examine, audit and settle all accounts pertaining to the revenue
performance of any act other than those mentioned in the two preceding sections, a and receipts of, and expenditures or uses of funds and property, owned or held in
certified copy of the judgment shall be attached to the writ of execution and shall be trust by, or pertaining to the Government, or any of its subdivisions, agencies or
served by the officer upon the party against whom the same is rendered, or upon any instrumentalities, including government owned and controlled corporations with
other person required thereby, or by law, to obey the same, and such party or person original charters, and on a post-audit basis: (a) constitutional bodies, commissions
may be punished for contempt if he disobeys such judgment. and offices that have been granted fiscal autonomy under the Constitution; (b)
autonomous state colleges and universities; (c) other government-owned or
While the April 17, 2001 Decision of the trial court ordered petitioner to pay the controlled corporations and their subsidiaries; and (d) such non-governmental entities
benefits claimed by respondents, it by no means ordered the payment of a specific receiving subsidy or equity directly or indirectly, from or through the government,
sum of money and instead merely directed petitioner to extend to respondents the which are required by law or the granting institution to submit to such audit as a
benefits under R.A. No. 6758 and its implementing rules. Being a special judgment, condition of subsidy or equity. However, where the internal control system of the
the decision may not be executed in the same way as a judgment for money handed audited agencies is inadequate, the Commission may adopt such measures,
down in an ordinary civil case governed by Section 9, Rule 39 of the Rules Court including temporary or special pre-audit, as are necessary or appropriate to correct
which sanctions garnishment of debts and credits to satisfy a monetary award. the deficiencies. It shall keep the general accounts of the Government, and for such
Garnishment is proper only when the judgment to be enforced is one for payment of a period as may be provided by law, preserve the vouchers and other supporting
sum of money. It cannot be employed to implement a special judgment such as that papers pertaining thereto.
rendered in a special civil action for mandamus.40
xxxx
On this score, not only did the trial court exceed the scope of its judgment when it
awarded the benefits claimed by respondents. It also committed a blatant error when Specifically, such jurisdiction shall extend over but not limited to the following: x x x
it issued the February 16, 2004 Order directing the garnishment of petitioner’s funds Money claims due from or owing to any government agency x x x. 49
with the Land Bank of the Philippines equivalent to ₱4,806,530.00, even though the
said amount was not specified in the decision it sought to implement.
Clearly, the matter of allowing or disallowing a money claim against petitioner is within
the primary power of the COA to decide. This no doubt includes money claims arising
from the implementation of R.A. No. 6758.50 Respondents’ claim against petitioner,
although it has already been validated by the trial court’s final decision, likewise In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, the
belongs to that class of claims; hence, it must first be filed with the COA before Court is called upon to reverse and set aside the Decision2 dated May 19, 2006 and
execution could proceed. And from the decision therein, the aggrieved party is the Resolution3 dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No.
afforded a remedy by elevating the matter to this Court via a petition for certiorari 51 in 78813, as well as to declare null and void the Decision 4 dated February 18, 2003 of
accordance with Section 1 Rule XI, of the COA Rules of Procedure. It states: the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 18, in Civil Case No. 333-
M-2002.
Section 1. Petition for Certiorari. - Any decision, order or resolution of the
Commission may be brought to the Supreme Court on certiorari by the aggrieved As culled from the records, the factual antecedents of the case are as follows:
party within thirty (30) days from receipt of a copy thereof in the manner provided by
law, the Rules of Court and these Rules. On April 26, 2002, herein respondent Alberto A. Domingo filed a Complaint for
Specific Performance with Damages5against the Department of Public Works and
When the decision, order or resolution adversely affects the interest of any Highways (DPWH), Region III, which was docketed as Civil Case No. 333-M-2002 in
government agency, the appeal may be taken by the proper head of the the RTC of Malolos, Bulacan, Branch 18. Domingo averred that from April to
agency.1avvphi1 September 1992, he entered into seven contracts with the DPWH Region III for the
lease of his construction equipment to said government agency. 6 The lease contracts
At this juncture, it is unmistakable that the recourse of respondents in CA-G.R. SP were allegedly executed in order to implement the emergency projects of the DPWH
No. 82637 as well as in the petition before us is at best premature. Thus, the Court Region III, which aimed to control the flow of lahar from Mt. Pinatubo in the adjacent
cannot possibly rule on the merits of the petition lest we would only be preempting the towns in the provinces of Tarlac and Pampanga. After the completion of the projects,
action of the COA on the matter. Suffice it to say that the propriety or regularity of Domingo claimed that the unpaid rentals of the DPWH Region III amounted to
respondents’ claim under the judgment of the trial court may properly be addressed ₱6,320,163.05. Despite repeated demands, Domingo asserted that the DPWH
by the COA in an appropriate action. And even if we endeavor to take great lengths in Region III failed to pay its obligations. Domingo was, thus, compelled to file the above
deciding the merits of the case and determine the propriety of the DBM’s issuance, its case for the payment of the ₱6,320,163.05 balance, plus ₱200,000.00 as moral and
sufficiency to prevent the execution of the final judgment rendered in this case, and compensatory damages, ₱100,000.00 as exemplary damages, and ₱200,000.00 as
the entitlement or non-entitlement of each one of the respondents to the benefits attorney’s fees.7
under R.A. No. 6758, the same would nevertheless be a futile exercise. This,
because after having pored over the records of the case, we found nothing sufficient Thereafter, summons was issued by the RTC. The Proof of Service8 of the Sheriff
to support respondents’ uniform claim that they were incumbents as of July 1, 1989 – dated May 9, 2002 stated, thus:
the date provided in Section 12 of R.A. 6758 – except perhaps their bare contention
that they were all hired after June 30, 1989. PROOF OF SERVICE

With this disquisition, we find no compelling reason to unnecessarily lengthen the The undersigned personally served the copy of the Summons together with the
discussion by undeservingly proceeding further with the other issues propounded by complaint issued in the above-entitled case upon defendant The Department of Public
the parties. Works and Highways, Region III, San Fernando Pampanga on May 6, 2002 through
Nora Cortez, Clerk III of said office as shown by her signature and stamped mark
WHEREFORE, the petition is GRANTED IN PART. The Writ of Execution dated received by said office appearing on the original Summons.
February 16, 2004 issued in Civil Case No. 99-1209 is hereby SET ASIDE. The
Regional Trial Court of Makati, Branch 138 is DIRECTED to issue a writ of execution WHEREFORE, the original Summons respectfully returned to the Court "DULY
in accordance with this Decision and execute the judgment pursuant to Section 11, SERVED", for its record and information.
Rule 39, of the Rules of Court.
Malolos, Bulacan, May 9, 2002.
SO ORDERED.

Subsequently, on July 30, 2002, Domingo filed a Motion to Declare Defendant in

Default9 in view of the failure of the DPWH Region III to file a responsive pleading
14. Republic vs. Domingo September 14, 2011 within the reglementary period as required under the Rules of Court. During the
hearing of the motion on August 8, 2002, the RTC directed the counsel of Domingo to
DECISION submit proof of service of said motion on the DPWH Region III. Thereafter, the motion
was deemed submitted for resolution.10Counsel for Domingo timely filed a
LEONARDO – DE CASTRO, J.: Manifestation,11 showing compliance with the order of the trial court.
In an Order12 dated September 2, 2002, the RTC declared the DPWH Region III in Domingo.16 A Writ of Execution17 was then issued on March 24, 2003, commanding
default and thereafter set the date for the reception of Domingo’s evidence ex parte. the sheriff to enforce the RTC Decision dated February 18, 2003.

After the ex parte presentation of Domingo’s evidence, the RTC rendered judgment On August 27, 2003, the Republic of the Philippines, represented by the Office of the
on February 18, 2003, finding that: Solicitor General (OSG), filed with the Court of Appeals a Petition for Annulment of
Judgment with Prayer for the Issuance of a Temporary Restraining Order and/or a
From the evidence presented by [Domingo], testimonial and documentary, it was Writ of Preliminary Injunction.18 The petition was docketed as CA-G.R. SP No. 78813.
convincingly proven that [Domingo] is entitled to the relief prayed for. The Republic argued that it was not impleaded as an indispensable party in Civil
Case No. 333-M-2002. The seven contracts sued upon in the trial court stated that
they were entered into by the Regional Director, Assistant Regional Director and/or
In his seven causes of actions, [Domingo] has religiously undertaken what is Project Manager of the DPWH Region III for and in behalf of the Republic of the
incumbent upon him in the contracts of lease signed by both [Domingo] and [the Philippines, which purportedly was the real party to the contract. Moreover, the
DPWH Region III]. As a matter of course, the [DPWH Region III] has the duty to pay Republic averred that, under the law, the statutory representatives of the government
[Domingo] the amount equivalent to the services performed by [Domingo] which [in] for purposes of litigation are either the Solicitor General or the Legal Service Branch
this case now amount to ₱6,320,163.05 excluding interest. of the Executive Department concerned. Since no summons was issued to either of
said representatives, the trial court never acquired jurisdiction over the Republic. The
Considering that there was a long delay in the payment of the obligation on the part of absence of indispensable parties allegedly rendered null and void the subsequent
the [DPWH Region III], Article 2209 of the New Civil Code finds application as to acts of the trial court because of its lack of authority to act, not only as to the absent
imputation of legal interest at six (6%) percent per annum, in the absence of parties, but even as to those present. The Republic prayed for the annulment of the
stipulation of interest on the amount due. RTC Decision dated February 18, 2003 and the dismissal of the said case, without
prejudice to the original action being refiled in the proper court.
With respect to the claim for attorney’s fees, although as a general rule, attorney’s
fees cannot be rewarded because of the policy that no premium should be placed on On May 19, 2006, the Court of Appeals promulgated its decision, dismissing the
the right to litigate, this rule does not apply in the case at bar in the face of the Petition for Annulment of Judgment filed by the Republic. The appellate court
stubborn refusal of [the DPWH Region III] to respect the valid claim of [Domingo] x x elaborated that:
x. Award of attorney’s fees in the amount of ₱30,000.00 appears proper. Moreover,
as to [the] demand for moral and exemplary damages, the same are hereby denied The hair-splitting distinction being made by [the Republic] between the DPWH as a
for lack of persuasive and sufficient evidence.13 department under the Republic, and the Regional Office of the DPWH fails to
persuade Us. Instead, We uphold [Domingo’s] position that the regional office is an
Thus, the RTC disposed: extension of the department itself and service of summons upon the former is service
upon the latter. x x x.
Wherefore, premises considered, judgment is hereby rendered in favor of plaintiff
Alberto Domingo and against defendant DPWH Region III, ordering defendant to pay xxxx
plaintiff:
x x x [A] regional office of the DPWH is part of the composition of the department
1. the sum of Six Million Three Hundred Twenty Thousand One Hundred itself and is therefore, not an entity that is altogether separate from the department.
Sixty[-]Three and 05/100 Pesos (₱6,320,163.05) representing the principal This conclusion lends credence to [Domingo’s] position that service of summons upon
obligation of the defendant plus interest at six percent (6%) per annum from the regional office is service upon the department itself because the former is
1993 until the obligation is fully paid; essentially part of the latter. Indeed, what militates heavily against [the Republic’s]
theory is the simple fact that the regional office is not a different entity at all, but, as
2. to pay attorney’s fees in the total amount of Thirty Thousand Pesos can be gleaned from the manner of its creation, a part of the department itself, so
(₱30,000.00) and much so that it does not even have a juridical personality of its own. x x x.

3. to pay the costs of suit.14 Anent the claim that the procedure for service of summons upon the Republic was not
followed because service should have been made on the OSG or the Legal Service
Department of the DPWH, We are likewise not persuaded. A perusal of the Revised
On March 12, 2003, Domingo filed a Motion for Issuance of Writ of Administrative Code of the Philippines suggests nothing of this import. x x x.
Execution,15 asserting that the DPWH Region III failed to file an appeal or a motion for
new trial and/or reconsideration despite its receipt of a copy of the RTC decision on
February 19, 2003. On March 20, 2003, the RTC granted the aforesaid motion of xxxx
Clearly, nothing [in the functions of the OSG] remotely suggests that service of I.
summons upon the Republic should be made exclusively on the OSG. What the
[provisions] merely state is that the OSG will represent the government in all If in the act by which the Republic consents to be sued, no designation is
proceedings involving it. It cannot be deduced nor implied from this, however, that made as to the officer to be served with summons, then the process can
summons should be served upon it alone. only be served upon the Solicitor General.

The same conclusion applies to the legal service branch of the DPWH, as there is [II.]
also nothing in the law that suggests that service of summons on the DPWH should
be made upon it alone. x x x.
The State is not bound by the errors or mistakes of its agents.
xxxx
III.
Obviously, petitioner’s conclusion that the proper procedure for service of summons
was not observed is a mere conjecture because We find nothing in the provisions Respondent can recover on the government contracts sued upon in Civil
invoked by it that such indeed is the procedure sanctioned by law. We are thus Case No. [3]33-M-2002 only on a quantum meruit basis.25
inclined to give more credence to [the Republic’s] argument that it was the regional
office’s fault if it failed to bring the subject case to the attention of the OSG for proper In essence, the primary issue that must be resolved in the instant petition is whether
representation. To allow it to benefit from its own omission in order to evade its just the Court of Appeals correctly dismissed the Petition for Annulment of Judgment filed
and valid obligation would be the height of injustice. by the Republic.

Finally, anent the argument that the Republic is estopped from questioning the Section 1, Rule 4726 of the Rules of Court provides for the remedy of annulment by
jurisdiction of the trial court, We rule in the negative. The existence of another case the Court of Appeals of judgments or final orders and resolutions of Regional Trial
against the regional office of the DPWH where the OSG appeared is of no moment as Courts for which the ordinary remedies of new trial, appeal, petition for relief or other
it concerns a totally different transaction. Thus, it would be erroneous for Us to rule on appropriate remedies are no longer available through no fault of the petitioner.
that basis alone, that the OSG is already acknowledging the service of summons
upon the regional office, especially considering the categorical stand taken by the Under the first paragraph of Section 2, Rule 4727 of the Rules of Court, the annulment
OSG on the matter in the case now before Us. Be that as it may, however, We still may be based only on the grounds of extrinsic fraud and lack of jurisdiction. As a
rule, as We have discussed above, that [Domingo’s] position is more impressed with ground for annulment of judgment, lack of jurisdiction refers to either lack of
merit. jurisdiction over the person of the defending party or over the subject matter of the
claim.28
WHEREFORE, in view of the foregoing, the instant Petition for Annulment of
Judgment is hereby DISMISSED.19 In the petition at bar, the Republic argues that the RTC failed to acquire jurisdiction
over the former. The Republic reiterates that the service of summons upon the DPWH
The Republic filed a Motion for Reconsideration20 of the above decision, but the Court Region III alone was insufficient. According to the Republic, the applicable rule of
of Appeals denied the same in the assailed Resolution dated October 25, 2006. procedure in this case is Section 13, Rule 14 of the Rules of Court, which mandates
that when the defendant is the Republic of the Philippines, the service of summons
Consequently, the Republic filed the instant petition before this Court. In a may be effected on the Office of the Solicitor General (OSG). The DPWH and its
Resolution21 dated February 19, 2007, we denied the Republic’s petition for failure to regional office are simply agents of the Republic, which is the real party in interest in
properly verify the petition and that the jurat in the verification and certification against Civil Case No. 333-M-2002. The Republic posits that, since it was not impleaded in
forum shopping did not contain any competent evidence of the affiant’s identity. In the case below and the RTC did not acquire jurisdiction over it, the proceedings in
addition, the Integrated Bar of the Philippines (IBP) dues payment (under IBP O.R. Civil Case No. 333-M-2002 are null and void.
No. 663485) of one of the counsels who signed the petition was not updated. The
Republic filed a Motion for Reconsideration22 of the above resolution.23On July 2, On the other hand, Domingo argues that the DPWH Region III is part of the DPWH
2007, the Court resolved24 to grant the Republic’s motion, thereby reinstating its itself; hence, a suit against the regional office is a suit against the said department
petition. and the Republic as well. Domingo stresses that the case he filed was against the
Republic, that is, against the DPWH Region III, and it was clear that the summons
In assailing the judgment of the Court of Appeals, the Republic brings to fore the and a copy of the complaint was duly served on the said regional office. Likewise,
following arguments: Domingo submits that the Republic is estopped from raising the issue of jurisdiction in
the instant case given that he has filed two other civil actions for specific performance
and damages against the DPWH Region III and, in the said cases, the OSG formally We now turn to the question of whether summons was properly served according to
entered its appearance for and in behalf of the Republic. Domingo alleges that the the Rules of Court. Petitioners rely solely on the sheriff's return to prove that
foregoing action of the OSG proved that it recognized the validity of the service of summons was properly served. We quote its contents, viz:
summons upon the DPWH Region III and the jurisdiction of the trial court over the
said regional office. "THIS IS TO CERTIFY that on the 19th day of May 1999, the undersigned caused the
service of Summons and Complaint upon defendant J.A. Development Corporation at
The Court finds merit in the Republic’s petition. the address indicated in the summons, the same having been received by a certain
Jacqueline delos Santos, a person employed thereat, of sufficient age and discretion
Summons is a writ by which the defendant is notified of the action brought against to receive such process, who signed on the lower portion of the Summons to
him. Service of such writ is the means by which the court acquires jurisdiction over his acknowledge receipt thereof.
person. Jurisdiction over the person of the defendant is acquired through coercive
process, generally by the service of summons issued by the court, or through the Likewise, copy of the Summons and Complaint was served upon defendant Bureau of
defendant's voluntary appearance or submission to the court.29 Telecommunications at the address indicated in the Summons, a copy of the same
was received by a certain Cholito Anitola, a person employed thereat, who signed on
Section 13, Rule 14 of the Rules of Court states that: the lower portion of the Summons to acknowledge receipt thereof."

SEC. 13. Service upon public corporations. – When the defendant is the Republic of It is incumbent upon the party alleging that summons was validly served to prove that
the Philippines, service may be effected on the Solicitor General; in case of a all requirements were met in the service thereof. We find that this burden was not
province, city or municipality, or like public corporations, service may be effected on discharged by the petitioners. The records show that the sheriff served summons on
its executive head, or on such other officer or officers as the law or the court may an ordinary employee and not on the Solicitor General. Consequently, the trial court
direct. (Emphasis ours.) acquired no jurisdiction over BUTEL, and all proceedings therein are null and
void.32 (Emphases supplied.)
Jurisprudence further instructs that when a suit is directed against an unincorporated
government agency, which, because it is unincorporated, possesses no juridical In the instant case, the Complaint for Specific Performance with Damages filed by
personality of its own, the suit is against the agency's principal, i.e., the State.30 In the Domingo specifically named as defendant the DPWH Region III. As correctly argued
similar case of Heirs of Mamerto Manguiat v. Court of Appeals, 31 where summons by the Republic, the DPWH and its regional office are merely the agents of the former
was served on the Bureau of Telecommunications which was an agency attached to (the Republic), which is the real party in interest in Civil Case No. 333-M-2002. Thus,
the Department of Transportation and Communications, we held that: as mandated by Section 13, Rule 14 of the Rules of Court, the summons in this case
should have been served on the OSG.
Rule 14, Section 13 of the 1997 Rules of Procedure provides:
Quite inexplicably, the Court of Appeals failed to apply, nay, to even consider, the
provisions of Section 13, Rule 14 of the Rules of Court in rendering its assailed
SEC. 13. Service upon public corporations. — When the defendant is the Republic of Decision. A perusal of the Decision dated May 19, 2006 shows that the appellate
the Philippines, service may be effected on the Solicitor General; in case of a court mainly dissertated regarding the functions and organizational structures of the
province, city or municipality, or like public corporations, service may be effected on DPWH and the OSG, as provided for in the Revised Administrative Code of 1987, in
its executive head, or on such other officer or officers as the law or the court may an attempt to demonstrate the relationship between the DPWH and its regional
direct. offices, as well as to refute the claim that the service of summons upon the Republic
should be made exclusively upon the OSG. Such an oversight on the part of the
It is clear under the Rules that where the defendant is the Republic of the Philippines, Court of Appeals is most unfortunate given the relevance and materiality of Section
service of summons must be made on the Solicitor General. The BUTEL is an agency 13, Rule 14 of the Rules of Court to the instant case, in addition to the fact that the
attached to the Department of Transportation and Communications created under Republic itself quoted the aforesaid provision in its petition before the appellate
E.O. No. 546 on July 23, 1979, and is in charge of providing telecommunication court.33
facilities, including telephone systems to government offices. It also provides its
services to augment limited or inadequate existing similar private communication The Court, nonetheless, subscribes to the ruling of the Court of Appeals that the
facilities. It extends its services to areas where no communication facilities exist yet; Republic is not estopped from raising the issue of jurisdiction in the case at bar in
and assists the private sector engaged in telecommunication services by providing view of the alleged entry of appearance of the OSG, in behalf of the Republic, in the
and maintaining backbone telecommunication network. It is indisputably part of the other civil cases supposedly filed by Domingo against the DPWH Region III. As held
Republic, and summons should have been served on the Solicitor General. by the appellate court, the other civil cases presumably pertained to transactions
involving Domingo and the DPWH Region III, which were totally different from the
contracts involved in the instant case. The fact that the OSG entered its appearance
in the other civil cases, notwithstanding that the summons therein were only served This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
upon the DPWH Region III, has no bearing in the case now before us. All this Procedure assailing the Decision1dated April 15, 2005 of the Court of Appeals in CA-
indicates is that, despite the improper service of summons in these other civil cases, G.R. SP No. 57847, and its Resolution2 dated January 27, 2006 denying petitioner’s
there appeared to be notice to the OSG and voluntary appearance on the latter’s part. Motion for Reconsideration.

Here, there was no indication, and Domingo did not insist otherwise, that the OSG The factual and procedural antecedents of this case are as follows:
had any notice of the filing of Civil Case No. 333-M-2002. Domingo speculates that, in
the subsequent civil actions against the DPWH Region III, the latter most likely Respondents in the case at bar, Cayetano Pacana III, Noe U. Dacer, Johnny B.
brought the said cases to the attention of the OSG. On the other hand, Domingo Racaza, Leonardo S. Orevillo, Araceli T. Libre, Genovevo E. Romitman, Porferia M.
opines that the DPWH Region III apparently neglected to inform the OSG of the Valmores, Meneleo G. Lactuan, Dionisio G. Bangga, Francisco D. Manga, Nestor A.
pendency of Civil Case No. 333-M-2002. Accordingly, Domingo asserted that he Amplayo, Leilani B. Gasataya, Loreta G. Lactuan, Ricardo B. Pido, Resigolo M.
should not be faulted therefor. The Court disagrees. Domingo ought to bear in mind Nacua and Anacleto C. Remedio (collectively, the DXWG personnel), are supervisory
that it is the duty of the plaintiff to implead all the necessary or indispensable parties and rank and file employees of the DXWG-Iligan City radio station which is owned by
for the complete determination of the action.34 It was, thus, incumbent upon him to petitioner Banahaw Broadcasting Corporation (BBC), a corporation managed by
name and implead the proper defendant in this case, i.e., the Republic, and cause the Intercontinental Broadcasting Corporation (IBC).
service of summons to be made upon the officer mandated by law, that is, the OSG.
As Domingo failed to discharge this burden, he cannot now be allowed to shift the
blame on the DPWH Region III or hold in estoppel the OSG.1âwphi1 On August 29, 1995, the DXWG personnel filed with the Sub-regional Arbitration
Branch No. XI, Iligan City a complaint for illegal dismissal, unfair labor practice,
reimbursement of unpaid Collective Bargaining Agreement (CBA) benefits, and
In sum, the Court holds that the Republic was not validly served with summons in attorney’s fees against IBC and BBC.
Civil Case No. 333-M-2002. Hence, the RTC failed to acquire jurisdiction over the
person of the Republic. Consequently, the proceedings had before the trial court and
its Decision dated February 18, 2003 are hereby declared void. On June 21, 1996, Labor Arbiter Abdullah L. Alug rendered his Decision3 awarding
the DXWG personnel a total of ₱12,002,157.28 as unpaid CBA benefits consisting of
unpaid wages and increases, 13th month pay, longevity pay, sick leave cash
In accordance with Section 7, Rule 4735 of the Rules of Court, a judgment of conversion, rice and sugar subsidy, retirement pay, loyalty reward and separation
annulment shall set aside the questioned judgment or final order or resolution and pay.4 The Labor Arbiter denied the other claims of the DXWG personnel for Christmas
render the same null and void, without prejudice to the original action being refiled in bonus, educational assistance, medical check-up and optical expenses. Both sets of
the proper court. parties appealed to the National Labor Relations Commission (NLRC).

In view of the above ruling of the Court declaring the nullity of the proceedings in the On May 15, 1997, a Motion to Dismiss, Release, Waiver and Quitclaim, 5 was jointly
RTC, the Court shall no longer pass upon the other issues raised by the parties in the filed by IBC and the DXWG personnel based on the latter’s admission that IBC is not
instant petition. their employer as it does not own DXWG-Iligan City. On April 21, 1997, the NLRC
granted the Motion and dismissed the case with respect to IBC. 6
WHEREFORE, the petition is GRANTED. The Decision dated May 19, 2006 and the
Resolution dated October 25, 2006 of the Court of Appeals in CA-G.R. SP No. 78813 BBC filed a Motion for Reconsideration alleging that (1) neither BBC nor its duly
are REVERSED. The Decision dated February 18, 2003 of the Regional Trial Court of authorized representatives or officers were served with summons and/or a copy of the
Malolos, Bulacan, Branch 18, in Civil Case No. 333-M-2002 is hereby ANNULLED complaint when the case was pending before the Labor Arbiter or a copy of the
and SET ASIDE, without prejudice to the filing of the original action in the proper Decision therein; (2) since the liability of IBC and BBC is solidary, the release and
Regional Trial Court. quitclaim issued by the DXWG personnel in favor of IBC totally extinguished BBC’s
liability; (3) it was IBC that effected the termination of the DXWG personnel’s
SO ORDERED. employment; (4) the DXWG personnel are members of the IBC union and are not
employees of BBC; and (5) the sequestered properties of BBC cannot be levied upon.
EXEMPTION FROM LEGAL REQUIREMENTS
On December 12, 1997, the NLRC issued a Resolution vacating the Decision of
15. Banahaw Broadcasting vs. Pacana May 30, 2011 Labor Arbiter Alug and remanding the case to the arbitration branch of origin on the
ground that while the complaint was filed against both IBC and BBC, only IBC was
DECISION served with summons, ordered to submit a position paper, and furnished a copy of
the assailed decision.7
LEONARDO-DE CASTRO, J.:
On October 15, 1998, Labor Arbiter Nicodemus G. Palangan rendered a Decision Appeal, BBC incorporated a Motion for the Recomputation of the Monetary Award (of
adjudging BBC to be liable for the same amount discussed in the vacated Decision of the Labor Arbiter),10 in order that the appeal bond may be reduced.
Labor Arbiter Alug:
On September 16, 1999, the NLRC issued an Order11 denying the Motion for the
WHEREFORE, premises considered, judgment is hereby rendered ordering the Recomputation of the Monetary Award. According to the NLRC, such recomputation
respondent Banahaw Broadcasting Corporation to pay complainants the following: would result in the premature resolution of the issue raised on appeal. The NLRC
ordered BBC to post the required bond within 10 days from receipt of said Order, with
a warning that noncompliance will cause the dismissal of the appeal for non-
1. Cayetano Pacana III ₱ 1,730,535.75 perfection.12 Instead of complying with the Order to post the required bond, BBC filed
a Motion for Reconsideration,13 alleging this time that since it is wholly owned by the
2. Noe U. Dacer 886,776.43 Republic of the Philippines, it need not post an appeal bond.
3. Johnny B. Racaza 1,271,739.34
On November 22, 1999, the NLRC rendered its Decision 14 in NLRC CA No. M-
4. Leonardo S. Orevillo 1,097,752.70 004419-98. In said Decision, the NLRC denied the Motion for Reconsideration of BBC
on its September 16, 1999 Order and accordingly dismissed the appeal of BBC for
5. Araceli T. Libre 543,467.22 non-perfection. The NLRC likewise dismissed the appeal of the DXWG personnel for
lack of merit in the same Decision.
6. Genovevo E. Romitman 716,455.72

7. Porferia M. Valmores 562,564.78 BBC filed a Motion for Reconsideration of the above Decision. On January 13, 2000,
the NLRC issued a Resolution15 denying the Motion.
8. Meneleo G. Lactuan 678,995.91
BBC filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the
9. Dionisio G. Bangga 580,873.78 Rules of Court assailing the above dispositions by the NLRC. The Petition was
docketed as CA-G.R. SP No. 57847.
10. Francisco D. Manga 29,286.65

11. Nestor A. Amplayo 583,798.51 On April 15, 2005, the Court of Appeals rendered the assailed Decision denying
BBC’s Petition for Certiorari. The Court of Appeals held that BBC, though owned by
12. Leilani B. Gasataya 42,669.75 the government, is a corporation with a personality distinct from the Republic or any
of its agencies or instrumentalities, and therefore do not partake in the latter’s
13. Loreta G. Lactuan 757,252.52 exemption from the posting of appeal bonds. The dispositive portion of the Decision
states:
14. Ricardo B. Pido 756,835.64

15. Resigolo M. Nacua 887,344.75 WHEREFORE, finding no grave abuse of discretion on the part of public respondents,
We DENY the petition. The challenged decision of public respondent dated
16. Anacleto C. Remedio 887,345.39 November 22, 1999, as well as its subsequent resolution dated January 13, 2000, in
NLRC Case No. M-004419-98 are hereby AFFIRMED. The decision of the Labor
Arbiter dated October 15, 1998 in RAB Case No. 12-09-00309-95 is hereby declared
GRAND TOTAL ₱ 12,002,157.28 FINAL AND EXECUTORY.16

On January 27, 2006, the Court of Appeals rendered the assailed Resolution denying
Respondent is likewise ordered to pay 10% of the total award as attorney’s fee. 8
the Motion for Reconsideration. Hence, this Petition for Review.

Both BBC and respondents appealed to the NLRC anew. The appeal was docketed
As stated above, both the NLRC and the Court of Appeals dealt with only one issue –
as NLRC CA No. M-004419-98. In their appeal, the DXWG personnel reasserted their
whether BBC is exempt from posting an appeal bond. To recall, the NLRC issued an
claim for the remaining CBA benefits not awarded to them, and alleged error in the
Order denying BBC’s Motion for the Recomputation of the Monetary Award and
reckoning date of the computation of the monetary award. BBC, in its own
ordered BBC to post the required bond within 10 days from receipt of said Order, with
Memorandum of Appeal, challenged the monetary award itself, claiming that such
a warning that noncompliance will cause the dismissal of the appeal for non-
benefits were only due to IBC, not BBC, employees.9 In the same Memorandum of
perfection.17 However, instead of heeding the warning, BBC filed a Motion for
Reconsideration, alleging that it need not post an appeal bond since it is wholly c. DX/TV 13 (Davao)
owned by the Republic of the Philippines.
d. DYOB/TV 12 (Iloilo)
There is no dispute as regards the history of the ownership of BBC and IBC. Both
BBC and IBC, together with Radio Philippines Network (RPN-9), were formerly owned e. DWLW/TV 13 (Laoag)
by Roberto S. Benedicto (Benedicto). In the aftermath of the 1986 people power
revolution, the three companies, collectively denominated as Broadcast City, were
sequestered and placed under the control and management of the Board of as well as the following Radio Stations
Administrators (BOA).18 The BOA was tasked to operate and manage its business
and affairs subject to the control and supervision of the Presidential Commission on a. DZMZ-FM Manila
Good Government (PCGG).19 In December 1986, Benedicto and PCGG allegedly
executed a Management Agreement whereby the Boards of Directors of BBC, IBC b. DYBQ Iloilo
and RPN-9 were agreed to be reconstituted. Under the agreement, 2/3 of the
membership of the Boards of Directors will be PCGG nominees, and 1/3 will be
Benedicto nominees. A reorganized Board of Directors was thus elected for each of c. DYOO Roxas
the three corporations. The BOA, however, refused to relinquish its function, paving
for the filing by Benedicto of a Petition for Prohibition with this Court in 1989, which d. DYRG Kalibo
was docketed as G.R. No. 87710.
e. DWLW Laoag
In the meantime, it was in 1987 when the Republic, represented by the PCGG, filed
the case for recovery/reconveyance/reversion and damages against Benedicto.
f. DWGW Legaspi
Following our ruling in Bataan Shipyard & Engineering Co., Inc. (BASECO) v.
Presidential Commission on Good Government,20 the institution of this suit
necessarily placed BBC, IBC and RPN-9 under custodia legis of the Sandiganbayan. g. DWDW Dagupan

On November 3, 1990, Benedicto and the Republic executed a Compromise h. DWNW Naga
Agreement whereby Benedicto, in exchange for immunity from civil and criminal
actions, "ceded to the government certain pieces of property listed in Annex A of the i. DXWG Iligan . . . . . . . . . . ₱352,455,286.0023 (Emphasis
agreement and assigned or transferred whatever rights he may have, if any, to the supplied.)
government over all corporate assets listed in Annex B of the agreement." 21 BBC is
one of the properties listed in Annex B.22 Annex A, on the other hand, includes the
Then Senator Teofisto T. Guingona, Jr. filed a Petition for Certiorari and Prohibition
following entry:
seeking to invalidate the Compromise Agreement, which was docketed as G.R. No.
96087. The Petition was consolidated with G.R. No. 87710.
CESSION TO THE GOVERNMENT:
On March 31, 1992, this Court, in Benedicto v. Board of Administrators of Television
I. PHILIPPINE ASSETS: Stations RPN, BBC and IBC,24promulgated its Decision on the consolidated petitions
in G.R. No. 87710 and G.R. No. 96087. Holding that the authority of the BOA had
xxxx become functus oficio, we granted the Petition in G.R. No. 87710, ordering the BOA
to "cease and desist from further exercising management, operation and control of
Broadcast City and is hereby directed to surrender the management, operation and
7. Inter-Continental Broadcasting Corporation (IBC), 100% of total assets estimated
control of Broadcast City to the reorganized Board of Directors of each of the
at P450 million, consisting of 41,000 sq.mtrs. of land, more or less, located at
Broadcast City television stations."25 We denied the Petition in G.R. No. 96087 for
Broadcast City Quezon City, other land and buildings in various Provinces, and
being premature, since the approval of the Compromise Agreement was still pending
operates the following TV stations:
in the Sandiganbayan.26

a. TV 13 (Manila)
The Sandiganbayan subsequently approved the Compromise Agreement on October
31, 1992, and the approval was affirmed by this Court on September 10, 1993 in
b. DY/TV 13 (Cebu) Republic v. Sandiganbayan.27 Thus, both BBC and IBC were government-owned and
controlled during the time the DXWG personnel filed their original complaint on "And more. By law, RCA depends for its continuous operation on appropriations
August 29, 1995. yearly set aside by the General Appropriations Act. So says Section 14 of Republic
Act 3452:
In the present Petition, BBC reiterates its argument that since it is now wholly and
solely owned by the government, the posting of the appeal bond was unnecessary on ‘SECTION 14. The sum of one hundred million pesos is hereby appropriated, out of
account of the fact that it is presumed that the government is always solvent. 28 Citing any funds in the National Treasury not otherwise appropriated, for the capitalization of
the 1975 case of Republic (Bureau of Forestry) v. Court of Appeals, 29 BBC adds the Administration: Provided, That the annual operational expenses of the
before us that it is not even necessary for BBC to raise its exempt status as the NLRC Administration shall not exceed three million pesos of the said amount: Provided
should have taken cognizance of the same.30 further, That the budget of the Rice and Corn Administration for the fiscal year
nineteen hundred and sixty-three to nineteen hundred and sixty-four and the years
When the Court of Appeals affirmed the dismissal by the NLRC of BBC’s appeal for thereafter shall be included in the General appropriations submitted to Congress.’
failure of the latter to post an appeal bond, it relied to the ruling of this Court in
Republic v. Presiding Judge, Branch XV, Court of First Instance of Rizal. 31 The "RCA is not possessed of a separate and distinct corporate existence. On the
appellate court, noting that BBC’s primary purpose as stated in its Articles of contrary, by the law of its creation, it is an office directly under the Office of the
Incorporation is to engage in commercial radio and television broadcasting, held that President of the Philippines."
BBC did not meet the criteria enunciated in Republic v. Presiding Judge for
exemption from the appeal bond.32 Respondent, however, contends that the RCA has been created to succeed to the
corporate assets, liabilities, functions and powers of the abolished National Rice &
We pertinently held in Republic v. Presiding Judge: Corn Corporation which is a government-owned and controlled corporation separate
and distinct from the Government of the Republic of the Philippines. He further
The sole issue implicit in this petition is whether or not the RCA is exempt from paying contends that the RCA, being a duly capitalized entity doing mercantile activity
the legal fees and from posting an appeal bond. engaged in the buying and selling of palay, rice, and corn cannot be the same as the
Republic of the Philippines; rather, it is an entity separate and distinct from the
Republic of the Philippines. These contentions are patently erroneous.
We find merit in the petition.
xxxx
To begin with, We have to determine whether the RCA is a governmental agency of
the Republic of the Philippines without a separate, distinct and independent legal
personality from the latter. We maintain the affirmative. The legal character of the The mercantile activity of RCA in the buying and selling of palay, rice, and corn is only
RCA as a governmental agency had already been passed upon in the case of Ramos incident to its primary governmental function which is to carry out its declared policy
vs. Court of Industrial Relations wherein this Court held: of subsidizing and stabilizing the price of palay, rice, and corn in order to make it well
within the reach of average consumers, an object obviously identified with the primary
function of government to serve the well-being of the people.
"Congress, by said Republic Act 3452 approved on June 14, 1962, created RCA, in
pursuance of its declared policy, viz:
As a governmental agency under the Office of the President the RCA is thus exempt
from the payment of legal fees as well as the posting of an appeal bond. Under the
‘SECTION 1. It is hereby declared to be the policy of the Government that in order to decisional laws which form part of the legal system of the Philippines the Republic of
stabilize the price of palay, rice and corn, it shall engage in the 'purchase of these the Philippines is exempt from the requirement of filing an appeal bond on taking an
basic foods directly from those tenants, farmers, growers, producers and landowners appeal from an adverse judgment, since there could be no doubt, as to the solvency
in the Philippines who wish to dispose of their produce at a price that will afford them of the Government. This well-settled doctrine of the Government's exemption from the
a fair and just return for their labor and capital investment and whenever requirement of posting an appeal bond was first enunciated as early as March 7,
circumstances brought about by any cause, natural or artificial, should so require, 1916 in Government of the Philippine Island vs. Judge of the Court of First Instance of
shall sell and dispose of these commodities to the consumers at areas of Iloiloand has since been so consistently enforced that it has become practically a
consumption at a price that is within their reach.’ matter of public knowledge and certainly a matter of judicial notice on the part of the
courts of the land.33
"RCA is, therefore, a government machinery to carry out a declared government
policy just noted, and not for profit. In the subsequent case of Badillo v. Tayag,34 we further discussed that:

Created by virtue of PD No. 757, the NHA is a government-owned and controlled

corporation with an original charter. As a general rule, however, such corporations --
with or without independent charters -- are required to pay legal fees under Section In doing so, the NLRC was merely applying Article 223 of the Labor Code, which
21 of Rule 141 of the 1997 Rules of Civil Procedure: provides:

"SEC. 21. Government Exempt. - The Republic of the Philippines, its agencies and ART. 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are final and
instrumentalities, are exempt from paying the legal fees provided in this rule. Local executory unless appealed to the Commission by any or both parties within ten (10)
governments and government-owned or controlled corporations with or without calendar days from receipt of such decisions, awards, or orders. Such appeal may be
independent charters are not exempt from paying such fees." entertained only on any of the following grounds:

On the other hand, the NHA contends that it is exempt from paying all kinds of fees (a) If there is prima facie evidence of abuse of discretion on the part of the
and charges, because it performs governmental functions. It cites Public Estates Labor Arbiter;
Authority v. Yujuico, which holds that the Public Estates Authority (PEA), a
government-owned and controlled corporation, is exempt from paying docket fees (b) If the decision, order or award was secured through fraud or coercion,
whenever it files a suit in relation to its governmental functions. including graft and corruption;

We agree. x x x.35 (c) If made purely on questions of law; and

We can infer from the foregoing jurisprudential precedents that, as a general rule, the (d) If serious errors in the findings of facts are raised which would cause
government and all the attached agencies with no legal personality distinct from the grave or irreparable damage or injury to the appellant.
former are exempt from posting appeal bonds, whereas government-owned and
controlled corporations (GOCCs) are not similarly exempted. This distinction is
brought about by the very reason of the appeal bond itself: to protect the presumptive In case of a judgment involving a monetary award, an appeal by the employer may be
judgment creditor against the insolvency of the presumptive judgment debtor. When perfected only upon the posting of a cash or surety bond issued by a reputable
the State litigates, it is not required to put up an appeal bond because it is presumed bonding company duly accredited by the Commission in the amount equivalent to the
to be always solvent.36 This exemption, however, does not, as a general rule, apply to monetary award in the judgment appealed from. (Italization supplied.)
GOCCs for the reason that the latter has a personality distinct from its shareholders.
Thus, while a GOCC’s majority stockholder, the State, will always be presumed The posting of the appeal bond within the period provided by law is not merely
solvent, the presumption does not necessarily extend to the GOCC itself. However, mandatory but jurisdictional. The failure on the part of BBC to perfect the appeal thus
when a GOCC becomes a "government machinery to carry out a declared had the effect of rendering the judgment final and executory.39
government policy,"37 it becomes similarly situated as its majority stockholder as there
is the assurance that the government will necessarily fund its primary functions. Thus, Neither was there an interruption of the period to perfect the appeal when BBC filed
a GOCC that is sued in relation to its governmental functions may be, under (1) its Motion for the Recomputation of the Monetary Award in order to reduce the
appropriate circumstances, exempted from the payment of appeal fees. appeal bond, and (2) its Motion for Reconsideration of the denial of the same. In
Lamzon v. National Labor Relations Commission,40 where the petitioner argued that
In the case at bar, BBC was organized as a private corporation, sequestered in the the NLRC gravely abused its discretion in dismissing her appeal on the ground of
1980’s and the ownership of which was subsequently transferred to the government non-perfection despite the fact that she filed a Motion for Extension of Time to File an
in a compromise agreement. Further, it is stated in its Amended Articles of Appeal Bond, we held:
Incorporation that BBC has the following primary function:
The pertinent provision of Rule VI, NLRC Rules of Procedure, as amended, provides
To engage in commercial radio and television broadcasting, and for this purpose, to as follows:
establish, operate and maintain such stations, both terrestrial and satellite or
interplanetary, as may be necessary for broadcasting on a network wide or xxxx
international basis.38

Section 6. Bond. - In case the decision of a Labor Arbiter, POEA Administrator and
It is therefore crystal clear that BBC’s function is purely commercial or proprietary and Regional Director or his duly authorized hearing officer involves a monetary award, an
not governmental. As such, BBC cannot be deemed entitled to an exemption from the appeal by the employer shall be perfected only upon the posting of a cash or surety
posting of an appeal bond. bond issued by a reputable bonding company duly accredited by the Commission or
the Supreme Court in an amount equivalent to the monetary award, exclusive of
Consequently, the NLRC did not commit an error, and much less grave abuse of moral and exemplary damages and attorney's fees.
discretion, in dismissing the appeal of BBC on account of non-perfection of the same.
The employer as well as counsel shall submit a joint declaration under oath attesting dismiss the appeal. Therefore, the Court of Appeals committed no error when it
that the surety bond posted is genuine and that it shall be in effect until final upheld the NLRC’s dismissal of petitioner’s appeal.
disposition of the case.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision
The Commission may, in meritorious cases and upon Motion of the Appellant, reduce of the Court of Appeals dated April 15, 2005 in CA-G.R. SP No. 57847, and its
the amount of the bond. The filing, however, of the motion to reduce bond shall not Resolution dated January 27, 2006 are hereby AFFIRMED.
stop the running of the period to perfect appeal.1awphil
No pronouncement as to costs.
Section 7. No Extension of Period. - No motion or request for extension of the period
within which to perfect an appeal shall be allowed." SO ORDERED.

As correctly observed by the NLRC, petitioner is presumptuous in assuming that the

10-day period for perfecting an appeal, during which she was to post her appeal 16. Land bank of the Philippines vs. Rivera February 27, 2013
bond, could be easily extended by the mere filing of an appropriate motion for
extension to file the bond and even without the said motion being granted. It bears
emphasizing that an appeal is only a statutory privilege and it may only be exercised RESOLUTION
in the manner provided by law. Nevertheless, in certain cases, we had occasion to
declare that while the rule treats the filing of a cash or surety bond in the amount PEREZ, J.:
equivalent to the monetary award in the judgment appealed from, as a jurisdictional
requirement to perfect an appeal, the bond requirement on appeals involving The Case
monetary awards is sometimes given a liberal interpretation in line with the desired
objective of resolving controversies on the merits. However, we find no cogent reason
to apply this same liberal interpretation in this case. Considering that the motion for Before the Court is a Motion for Reconsideration1 filed by the Land Bank of the
extension to file appeal bond remained unacted upon, petitioner, pursuant to the Philippines (LBP) alleging error on the part of this Court in affirming the award of 12%
NLRC rules, should have seasonably filed the appeal bond within the ten (10) day interest on just compensation due to the landowner.
reglementary period following receipt of the order, resolution or decision of the NLRC
to forestall the finality of such order, resolution or decision. Besides, the rule The Facts
mandates that no motion or request for extension of the period within which to perfect
an appeal shall be allowed. The motion filed by petitioner in this case is tantamount to
We reiterate the facts from the assailed 17 November 2010 Decision:
an extension of the period for perfecting an appeal. As payment of the appeal bond is
an indispensable and jurisdictional requisite and not a mere technicality of law or
procedure, we find the challenged NLRC Resolution of October 26, 1993 and Order The respondents are the co-owners of a parcel of agricultural land embraced by
dated January 11, 1994 in accordance with law. The appeal filed by petitioner was not Original Certificate of Title No. P-082, and later transferred in their names under
perfected within the reglementary period because the appeal bond was filed out of Transfer Certificate of Title No. T-95690 that was placed under the Operation Land
time. Consequently, the decision sought to be reconsidered became final and Transfer pursuant to Presidential Decree No. 27 in 1972. Only 18.8704 hectares of
executory. Unless there is a clear and patent grave abuse of discretion amounting to the total area of 20.5254 hectares were subject of the coverage.
lack or excess of jurisdiction, the NLRC's denial of the appeal and the motion for
reconsideration may not be disturbed.41 (Underscoring supplied.) After the Department of Agrarian Reform (DAR) directed payment, LBP approved the
payment of ₱265,494.20, exclusive of the advance payments made in the form of
In the case at bar, BBC already took a risk when it filed its Motion for the lease rental amounting to ₱75,415.88 but inclusive of 6% increment of ₱191,876.99
Recomputation of the Monetary Award without posting the bond itself. The Motion for pursuant to DAR Administrative Order No. 13, series of 1994.
the Recomputation of the Monetary Award filed by BBC, like the Motion for Extension
to File the Appeal Bond in Lamzon, was itself tantamount to a motion for extension to On 1 December 1994, the respondents instituted Civil Case No. 94-03 for
perfect the appeal, which is prohibited by the rules. The NLRC already exhibited determination and payment of just compensation before the Regional Trial Court
leniency when, instead of dismissing the appeal outright, it merely ordered BBC to (RTC), Branch 3 of Legaspi City, claiming that the landholding involved was irrigated
post the required bond within 10 days from receipt of said Order, with a warning that with two cropping seasons a year with an average gross production per season of
noncompliance will cause the dismissal of the appeal for non-perfection. When BBC 100 cavans of 50 kilos/hectare, equivalent of 200 cavans/year/hectare; and that the
further demonstrated its unwillingness by completely ignoring this warning and by fair market value of the property was not less than ₱130,000.00/hectare, or
filing a Motion for Reconsideration on an entirely new ground, the NLRC cannot be ₱2,668,302.00 for the entire landholding of 20.5254 hectares.
said to have committed grave abuse of discretion by making good its warning to
LBP filed its Answer, stating that rice and corn lands placed under the coverage of In its argument, LBP cited the applicability of the DAR A.O. No. 2, Series of 2004
Presidential Decree No. 27 [PD 27]2 were governed and valued in accordance with (A.O. 02-04) which provides for the 6% interest imposition to the just compensation
the provisions of Executive Order No. 228 [EO 228]3 as implemented by DAR until actual payment. Further, it added that the 12% interest finds application in cases
Administrative Order No. 2, Series of 1987 and other statutes and administrative of undue delay, which is not present in the case. As to the payment of costs, the bank
issuances; that the administrative valuation of lands covered by [PD 27] and [EO 228] argued that it was performing a governmental function when it disbursed the Agrarian
rested solely in DAR and LBP was the only financing arm; that the funds that LBP Reform Fund (ARF) as the financial intermediary of the agrarian program of the
would use to pay compensation were public funds to be disbursed only in accordance government.
with existing laws and regulations; that the supporting documents were not yet
received by LBP; and that the constitutionality of [PD 27] and [EO 228] was already In our 17 November 2010 Decision, this Court partly granted the prayers of LBP and
settled.4 deleted the costs adjudged. We agreed that the bank was indeed performing a
governmental function in agrarian reform proceeding pursuant to Section 1, Rule
The Trial Court’s Ruling 1428 of the Rules of Court.9 However, we upheld the imposition of 12% interest on the
just compensation beginning 7 October 2004 until full payment. We anchored our
On 6 October 2004, the trial court rendered its decision which reads: decision following the ruling in Republic of the Philippines v. Court of Appeals.10

ACCORDINGLY, the just compensation of the land partly covered by TCT No. T- As a conclusion, the Court rendered the assailed decision which reads:
95690 is fixed at Php1,297,710. 63. Land Bank of the Philippines is hereby ordered to
pay Esther Anson, Cesar Anson and Antonio Anson the aforesaid value of the land, WHEREFORE, premises considered, the petition is GRANTED. The decision of the
plus interest of 12% per annum or Php194.36 per day effective October 7, 2004, until Court of Appeals in C.A. G.R. SP No. 87463 dated 9 October 2007
the value is fully paid, in cash or in bond or in any other mode of payment at the is AFFIRMED with the MODIFICATION that LBP is hereby held exempted from the
option of the landowners in accordance with Sec. 18, R.A. 6657. 5 payment of costs of suit. In all other respects, the Decision of the Court of Appeals
is AFFIRMED. No costs.11
Discontented, LBP filed an appeal before the Court of Appeals (CA). It argued that
the trial court erred in disregarding the lease rentals already paid by the farmer Aggrieved, LBP filed this present Motion for Reconsideration and argued once again
beneficiaries as part of the just compensation as well as the imposition of 12% the erroneous imposition of 12% interest. The bank reiterated its previous argument
interest despite the increment of 6% interest allowed under the EO 228 and DAR that the imposition is justifiable only in case of undue delay in the payment of just
Administrative Order (A.O.) No. 13 Series of 1994 (A.O. 13-94). compensation.12 It argued13 against the application of the A.O. No. 6, Series of 2008
(A.O. 06-08)14 to the instant case because it claims that the 6% interest does not
The Court of Appeals’ Ruling apply to agricultural lands valued under R.A. 6657, such as the subject properties,
following the Court’s ruling in Land Bank of the Philippines v. Chico.15
The appellate court partly granted the petition of the LBP, the fallo of the decision
reading: We deny the prayers of LBP.

WHEREFORE, the DECISION DATED OCTOBER 6, 2004 is MODIFIED, ordering In many cases16 decided by this Court, it has been repeated time and again that the
petitioner LAND BANK OF THE PHILIPPINES to pay to the respondents just award of 12% interest is imposed in the nature of damages for delay in payment
compensation (inclusive of interests as of October 6, 2004) in the amount of ₱823, which in effect makes the obligation on the part of the government one of
957.23, plus interest of 12% per annum in the amount of ₱515, 777.57 or ₱61, 893.30 forbearance. This is to ensure prompt payment of the value of the land and limit the
per annum, beginning October 7, 2004 until just compensation is fully paid in opportunity loss of the owner that can drag from days to decades.
accordance with this decision.
In this case, LBP is adamant in contending that the landowners were promptly paid of
Costs of suit to be paid by the petitioner.6 their just compensation. It argues that, "there is no factual finding whatsoever
indicating undue delay on the part of LBP."17
In its petition7 before this Court, LBP alleged error in the imposition of 12% interest
per annum beginning from 7 October 2004 until full payment of just compensation for We disagree.
subject property and the liability of the bank for costs of suit.
It is true that LBP approved the amount of ₱265,494.20 in favor of the landowners on
17 November 2010 Decision 23 August 2004.18 However, that amount is way below the amount that should have
been received by the landowners based on the valuations adjudged by the agrarian
court, CA and this Court. To be considered as just compensation, it must be fair and paid to the owners of the land, but also its payment within a reasonable time from the
equitable and the landowners must have received it without any delay. 19 taking of the land; hence the imposition of interest in the nature of damages for the
delay.26
The contention that there can be no delay when there is a deposit of the amount of
the government valuation in favor of the landowners was also the same argument In this case, LBP pointed out the error made by this Court in Imperial in determining
raised in the second Motion for Reconsideration addressing the 12 October 2010 and the extent of the period of applicability of the 6% compounded interest.27 It asserts
23 November 2010 Resolutions in Apo Fruits20 case. LBP contended then that that:
landowners APO Fruits and Hijo Plantation did not suffer from any delay in payment
since the LBP made partial payments prior to the taking of the parcels of land. The "Based on the foregoing, this Court deemed the day after the expiration of DAR A.O.
Court there ruled that twelve years passed after the Government took the properties, No. 13, meaning 1 January 2007, as the date of finality, constraining it to impose the
before full payment was settled. The Court took into account that the partial payment 12% interest per annum.
made by LBP only amounted to 5% of the actual value of property.21
However, beyond the knowledge of the Supreme Court, a subsequent DAR A.O.
Similar to Apo Fruits, the delay in this case is traceable to the undervaluation of the extended the applicability of the imposition of 6% interest compounded annually from
property of the government. Had the landholdings been properly valued, the 1 January 2007 until 31 December 2009.
landowners would have accepted the payment and there would have been no need
for a judicial determination of just compensation.22 The landowners could not possibly
accept ₱265,494.20 as full payment for their entire 18 hectare-property. It must be Following the new DAR A.O., only 6% interest compounded annually would have
noted that the landowners, since the deprivation of their property, have been waiting been the correct interest to be imposed. This was not imposed, however, simply
for four decades to get the just compensation due to them. because the day after 31 December 2006 or 01 January 2007 was deemed by the
Supreme Court as the date of finality, leading to the imposition of 12% interest." 28
As in several other just compensation cases, respondents faced the difficult problem
whether to accept a low valuation or file a case for determination of just compensation Contrary to the position of LBP, this Court did not commit a mistake in not applying
before the court. Before the choice is made, and for a longer period if the judicial the extension thru A.O. 06-08 of the 6% interest until 31 December 2009. It must be
course is taken, the landowners already are deprived of the income that could have understood that at the time of the promulgation of the Imperial Decision on 12
been yielded by their lands. February 2007, A.O. 06-08 was not yet effective, as it was signed only on 30 July
2008.
The Imperial case23 is an applicable precedent.
Likewise, it is erroneous for LBP to anchor its motion on the contention that the 6%
interest compounded annually does not apply to agricultural lands valued under R.A.
Juan H. Imperial (Imperial) was the owner of five parcels of land with a total land area 6657 such as the subject properties.29 The fact is that the valuation in the instant case
of 151.7168 hectares. Upon the effectivity of P.D. No. 27 and EO 228, the parcels of was under P.D. 27 and E.O. 228, as adjudged by the trial court, because even if at
land were placed under the Land Reform Program and distributed to the farmer- the time of valuation R.A. 6657 was already effective, the respondents failed to
beneficiaries on 21 October 1972. On 20 July 1994, Imperial filed a complaint for present any evidence on the valuation factors under Section 17 of R.A. 6657.
determination and payment of just compensation before the Agrarian Court of
Legazpi City, Albay. As the amount fixed by the agrarian court was found to be
inacceptable by the parties, the case went up all the way to the Supreme Court. The Computation
Before this Court, LBP claimed that a 6% annual interest in the concept of damages
should not be imposed because (1) the delay in the payment of the just compensation The purpose of A.O. No. 13 is to compensate the landowners for unearned
was not its fault, and (2) DAR A.O. No. 13 already provides for the payment of a 6% interests.1âwphi1 Had they been paid in 1972 when the Government Support Price
annual interest, compounded annually, provided that the just compensation is (GSP) for rice and corn was valued at ₱35.00 and ₱31.00, respectively, and such
computed in accordance with its prescribed formula.24 The Court partly granted the amounts were deposited in a bank, they would have earned a compounded interest of
claim of LBP and directed the trial court to re-compute the just compensation by using 6% per annum. Thus, if the [Provincial Agrarian Reform Adjudicator] [(]PARAD[)]
the formula prescribed by DAR A.O. No. 13, as amended, which imposed a 6% used the 1972 GSP, then the product of (2.5 x Average Gross Production (AGP) x
interest compounded annually from the date of the compensable taking on 21 ₱35.00 or ₱31.00) could be multiplied by (1.06) to determine the value of the land
October 1972 until 31 December 2006; and thereafter, at the rate of 12% per annum, plus the additional 6% compounded interest it would have earned from 1972. 30
until full payment is made.25 This is to mean that from 1 January 2007 onwards, there
shall be an imposition of 12% interest per annum until full payment in the nature of Following A.O. 13-94, the 6% yearly interest compounded annually shall be reckoned
damages for the delay. The reason given was that it would be inequitable to from 21 October 1972 up to the effectivity date of this Order which was on 21 October
determine the just compensation based solely on the formula provided by DAR A.O. 1994. However, A.O. 02-0431 extended the period of application of 6% interest from
No. 13, as amended. Just compensation does not only pertain to the amount to be 21 October 1972 up to the time of actual payment but not later than December 2006.
Then, under A.O. 06-08,32 the application of 6% interest was further until 31
Compounded Amount = ₱1,416,830.06 less ₱75,415.88
December 2009. It must be noted that the term "actual payment" in the administrative
= ₱1,341,414.18
orders is to be interpreted as "full payment" pursuant to the ruling in Land Bank of the
Philippines v. Obias33 and Land Bank of the Philippines v. Soriano.34
We add a simple interest of 12% to the compounded amount from 31 December 2009
The amount of land value of ₱164,059.26 was already settled before the lower until the promulgation of this decision due to the delay incurred by LBP in not paying
courts.35 There is no need for a new computation. the full just compensation to the Spouses:

Applying the rules under A.O. 13-94, A.O. 02-04 and A.O. 06-08 the formula to I=PxRxT
determine the increment of 6% interest per annum compounded annually beginning
21 October 1972 up to 31 December 2009 is: (I = Interest, R = Rate, T = Time)

CI = P (1+R) n Where:

(CI as compounded interest; P as the Principal; R is the Rate of 6% and P = Compounded Amount

n = number of years from date of tenancy starting from.) R = 12%

Where: T = 31 December 2009 to 31 December 2012

P = ₱164,059. 26 1. COMPUTATION: 31 December 2009 to 31 December 2012

R = 6% I=PxRxT

n = 37 years I = (Compounded Amount) (.12) (3 years)

COMPUTATION: I = ₱1,341,414.18 (.12) (3years)

CI = P (1+R) n I = ₱482,909.1048
= ₱164,059.26 (1+ 6%) 37 years
= ₱164,059. 26 (1.06) 37 years 2. COMPUTATION: 31 December 2012 to 20 February 2013
= ₱1,252,770.80

I = PxRxT
Then we add the compounded interest to the land value ₱164,059.26:
(Compounded Amount) (12% interest)
= x No. of Days
Compounded Amount = Land Value + Compounded Interest 365 days
= ₱164,059.26 + ₱1,252,770.80
= ₱1,416,830.06 (Compounded Amount) (.12)
= x 50 days
365 days
To compute the compounded amount to be paid, we subtract the amount of lease
rental of ₱75,415.88 as adjudged by the appellate court to the compounded (₱1,341,414.18) (.12)
amount:36 = x 50 days
365 days
 a different conclusion, and sustains the right of the plaintiff to file a suit of this
₱160,969.69
character. Accordingly, we reverse.
= x 50 days
365
Petitioners as plaintiffs in a complaint filed with the Court of First Instance of Cebu,
= ₱441.01 x 50 days dated April 13, 1966, sought the payment of just compensation for a registered lot,
containing an area of 1045 square meters, alleging that in 1927 the National
= ₱22,050.50 Government through its authorized representatives took physical and material
possession of it and used it for the widening of the Gorordo Avenue, a national road,
Cebu City, without paying just compensation and without any agreement, either
Final Just Compensation = Compounded Amount + Interest written or verbal. There was an allegation of repeated demands for the payment of its
= ₱1,341,414.18 + ₱482,909.1048+ ₱22,050.50 price or return of its possession, but defendants Public Highway Commissioner and
= ₱1,846,373.70 the Auditor General refused to restore its possession. It was further alleged that on
August 25, 1965, the appraisal committee of the City of Cebu approved Resolution
No. 90, appraising the reasonable and just price of Lot No. 647-B at P50.00 per
WHEREFORE, premises considered, we PARTIALLY GRANT the petitioner's Motion square meter or a total price of P52,250.00. Thereafter, the complaint was amended
for Reconsideration. The Decision dated 17 November 2010 of the Court's First on June 30, 1966 in the sense that the remedy prayed for was in the alternative,
Division is hereby MODIFIED. either the restoration of possession or the payment of the just compensation.

The petitioner Land Bank of the Philippines is hereby ORDERED to pay Esther Anson In the answer filed by defendants, now respondents, through the then Solicitor
Rivera, Antonio G. Anson and Cesar G. Anson ₱1,846,373.70 as final just General, now Associate Justice, Antonio P. Barredo, the principal defense relied upon
compensation plus interest at the rate of 12% per annum from the finality of this was that the suit in reality was one against the government and therefore should be
decision until full payment. dismissed, no consent having been shown. Then on July 11, 1969, the parties
submitted a stipulation of facts to this effect: "That the plaintiffs are the registered
owners of Lot 647-B of the Banilad estate described in the Survey plan RS-600
SO ORDERED.
GLRO Record No. 5988 and more particularly described in Transfer Certificate of
Title No. RT-5963 containing an area of 1,045 square meters; That the National
Government in 1927 took possession of Lot 647-B Banilad estate, and used the same
for the widening of Gorordo Avenue; That the Appraisal Committee of Cebu City
approved Resolution No. 90, Series of 1965 fixing the price of Lot No. 647-B at
P50.00 per square meter; That Lot No. 647-B is still in the possession of the National
Government the same being utilized as part of the Gorordo Avenue, Cebu City, and
MONEY CLAIMS that the National Government has not as yet paid the value of the land which is being
utilized for public use."1
17. Ministerio vs. Court of First Instance August 31, 1971
The lower court decision now under review was promulgated on January 30, 1969. As
FERNANDO, J.: is evident from the excerpt to be cited, the plea that the suit was against the
government without its consent having been manifested met with a favorable
What is before this Court for determination in this appeal by certiorari to review a response. Thus: "It is uncontroverted that the land in question is used by the National
decision of the Court of First Instance of Cebu is the question of whether or not Government for road purposes. No evidence was presented whether or not there was
plaintiffs, now petitioners, seeking the just compensation to which they are entitled an agreement or contract between the government and the original owner and
under the Constitution for the expropriation of their property necessary for the whether payment was paid or not to the original owner of the land. It may be
widening of a street, no condemnation proceeding having been filed, could sue presumed that when the land was taken by the government the payment of its value
defendants Public Highway Commissioner and the Auditor General, in their capacity was made thereafter and no satisfactory explanation was given why this case was
as public officials without thereby violating the principle of government immunity from filed only in 1966. But granting that no compensation was given to the owner of the
suit without its consent. The lower court, relying on what it considered to be land, the case is undoubtedly against the National Government and there is no
authoritative precedents, held that they could not and dismissed the suit. The matter showing that the government has consented to be sued in this case. It may be
was then elevated to us. After a careful consideration and with a view to avoiding the contended that the present case is brought against the Public Highway Commissioner
grave inconvenience, not to say possible injustice contrary to the constitutional and the Auditor General and not against the National Government. Considering that
mandate, that would be the result if no such suit were permitted, this Court arrives at the herein defendants are sued in their official capacity the action is one against the
National Government who should have been made a party in this case, but, as stated
before, with its consent."2
Then came this petition for certiorari to review the above decision. The principal error possession is in effect barred by the above decision? If the constitutional mandate
assigned would impugn the holding that the case being against the national that the owner be compensated for property taken for public use 13 were to be
government which was sued without its consent should be dismissed, as it was in fact respected, as it should, then a suit of this character should not be summarily
dismissed. As was indicated in the opening paragraph of this opinion, this assignment dismissed. The doctrine of governmental immunity from suit cannot serve as an
of error is justified. The decision of the lower court cannot stand. We shall proceed to instrument for perpetrating an injustice on a citizen. Had the government followed the
explain why. procedure indicated by the governing law at the time, a complaint would have been
filed by it, and only upon payment of the compensation fixed by the judgment, or after
1. The government is immune from suit without its consent.3 Nor is it indispensable tender to the party entitled to such payment of the amount fixed, may it "have the right
that it be the party proceeded against. If it appears that the action, would in fact hold it to enter in and upon the land so condemned" to appropriate the same to the public
liable, the doctrine calls for application. It follows then that even if the defendants use defined in the judgment." 14 If there were an observance of procedural regularity,
named were public officials, such a principle could still be an effective bar. This is petitioners would not be in the sad plaint they are now. It is unthinkable then that
clearly so where a litigation would result in a financial responsibility for the precisely because there was a failure to abide by what the law requires, the
government, whether in the disbursements of funds or loss of property. Under such government would stand to benefit. It is just as important, if not more so, that there be
circumstances, the liability of the official sued is not personal. The party that could be fidelity to legal norms on the part of officialdom if the rule of law were to be
adversely affected is government. Hence the defense of non-suability may be maintained. It is not too much to say that when the government takes any property for
interposed.4 public use, which is conditioned upon the payment of just compensation, to be
judicially ascertained, it makes manifest that it submits to the jurisdiction of a court.
There is no thought then that the doctrine of immunity from suit could still be
So it has been categorically set forth in Syquia v. Almeda Lopez:5 "However, and this appropriately invoked. 15
is important, where the judgment in such a case would result not only in the recovery
of possession of the property in favor of said citizen but also in a charge against or
financial liability to the Government, then the suit should be regarded as one against Accordingly, the lower court decision is reversed so that the court may proceed with
the government itself, and, consequently, it cannot prosper or be validly entertained the complaint and determine the compensation to which petitioners are entitled,
by the courts except with the consent of said Government." 6 taking into account the ruling in the above Alfonso case: "As to the value of the
property, although the plaintiff claims the present market value thereof, the rule is that
to determine due compensation for lands appropriated by the Government, the basis
2. It is a different matter where the public official is made to account in his capacity as should be the price or value at the time that it was taken from the owner and
such for acts contrary to law and injurious to the rights of plaintiff. As was clearly set appropriated by the Government." 16
forth by Justice Zaldivar in Director of the Bureau of Telecommunications v.
Aligean:7 "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an WHEREFORE, the lower court decision of January 30, 1969 dismissing the complaint
action against the officials or officers by one whose rights have been invaded or is reversed and the case remanded to the lower court for proceedings in accordance
violated by such acts, for the protection of his rights, is not a suit against the State with law.
within the rule of immunity of the State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State officer or the director of a State Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Villamor and
department on the ground that, while claiming to act for the State, he violates or Makasiar, JJ., concur.
invades the personal and property rights of the plaintiff, under an unconstitutional act
or under an assumption of authority which he does not have, is not a suit against the Concepcion, C.J., and Barredo, J., took no part.
State within the constitutional provision that the State may not be sued without its
consent."8

3. It would follow then that the prayer in the amended complaint of petitioners being in
the alternative, the lower court, instead of dismissing the same, could have passed
upon the claim of plaintiffs there, now petitioners, for the recovery of the possession
of the disputed lot, since no proceeding for eminent domain, as required by the then
Code of Civil Procedure, was instituted.9 However, as noted in Alfonso v. Pasay
City, 10 this Court speaking through Justice Montemayor, restoration would be
"neither convenient nor feasible because it is now and has been used for road
purposes." 11 The only relief, in the opinion of this Court, would be for the government
"to make due compensation, ..." 12 It was made clear in such decision that
compensation should have been made "as far back as the date of the taking." Does it
result, therefore, that petitioners would be absolutely remediless since recovery of