DEUTSCHE GESELLSCHAFT TECHNISCHE ZUSAMMENARBEIT (GTZ) v. HON.

COURT OF APPEALS
G.R. No. 152318, April 16, 2009

FACTS
The Federal Republic of Germany and the Republic of the Philippines ratified and
agreement which lead to the Social Health InsuranceNetworking and Empowerment (SHINE)
program wherein the program seeks to provide health care to Filipino families, especially the
poor. The Republic of Germany assigned the GTZ as the implementing corporation for the
program, while the Philippines designated the Department of Health and the Philippine Health
Insurance Corporation. Private respondents, as employed by GTZ for the implementation of the
SHINE, had a misunderstanding with the Project Manager of SHINE. This lead to an exchange
of letters which was interpreted to be the resignation of the private respondents. Private
respondents then filed a complaint for illegal dismissal to the labor arbiter. GTZ contends that it
is immune from suit as it is the accredited agency of the Federal Republic of Germany.

ISSUE
Whether or not the GTZ is immune from suit.

HELD
A state may waive its immunity through a general or specific law. The special law can
take the form of the original charter of the incorporated government agency. In this case
however, GTZ presented any evidence to support their claim that they are immune from suit, and
has failed to obtain a certification of immunity from suit from the Department of Foreign Affairs.
If GTZ has done so, then there would be no ambiguity in their claim that they are immune from
suit.

VERSION 2

FACTS

On 1971, the governments of the Federal Republic of Germany and the Republic of the
Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in Bonn,
capital of what was then West Germany.
The Agreement affirmed the countries common interest in promoting the technical and
economic development of their States, and recognized the benefits to be derived by both States
from closer technical co-operation, and allowed for the conclusion of arrangements concerning
individual projects of technical co-operation.
Pursuant to such Agreement, both governments affirmed their common commitment to promote
jointly a project called, Social Health InsuranceNetworking and Empowerment (SHINE),
which was designed to enable Philippine familiesespecially poor onesto maintain their health

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 and secure health care of sustainable quality.
In the arraignment, both governments likewise named their respective implementing
organizations for SHINE. The Philippines designated the DOH and Philhealth with the
implementation of SHINE. For their part, the German government charged the Deustche
Gesellschaft fr Technische Zusammenarbeit (GTZ) with the implementation of its
contributions.
Private respondents were engaged as contract employees hired by GTZ to work for SHINE on
various dates between December of 1998 to September of 1999.
In September of 1999, Nicolay, a Belgian national, assumed the post of SHINE Project Manager.
Disagreements eventually arose between Nicolay and private respondents in matters such as
proposed salary adjustments, and the course Nicolay was taking in the implementation of SHINE
different from her predecessors.
It was claimed that SHINE under 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 strengthening local initiatives, as Nicolay had refused to support local partners and new
initiatives on the premise that community and local government unit schemes were not
sustainablea philosophy that supposedly betrayed Nicolays lack of understanding of the
purpose of the project.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very crucial to us in
working for the project. We could no longer find any reason to stay with the project
unless ALL of these issues be addressed immediately and appropriately

In response, Nicolay wrote each of the private respondents a letter:

You have firmly and unequivocally stated in the last paragraph of your 8 th June
2000 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. Under the foregoing premises and circumstances, it is now
imperative that I am to accept your resignation, which I expect to receive
as soon as possible.

Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was
not intended as a resignation letter, but one that merely intended to raise attention to what they
perceived as vital issues.
Each of the private respondents received a letter from Nicolay dated 11 July 2000, informing them of
the pre-termination of their contracts of employment on the grounds of serious and gross
insubordination, among others, resulting to loss of confidence and trust.
On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the
NLRC.
GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no
jurisdiction over the case, as its acts were undertaken in the discharge of the governmental
functions and sovereign acts of the Government of the Federal Republic of Germany.
This was opposed by private respondents with the arguments that GTZ had failed to secure a
certification that it was immune from suit from the Department of Foreign Affairs, and that it
was GTZ and not the German government which had implemented the SHINE Project and

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 entered into the contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order denying the Motion to Dismiss. The
Order cited, among others, that GTZ was a private corporation which entered into an
employment contract; and that GTZ had failed to secure from the DFA a certification as to its
diplomatic status.
The Labor Arbiter rendered a Decision granting the complaint for illegal dismissal. The Decision
concluded that respondents were dismissed without lawful cause, there being a total lack of due
process both substantive and procedural.GTZ was faulted for failing to observe the notice
requirements in the labor law.
The Decision proceeded to discuss the jurisdictional aspect, in this wise:
It imperative to be immune from suit, respondents should have secured from the
Department of Foreign Affairs a certification of respondents diplomatic status and
entitlement to diplomatic privileges including immunity from suits. Having failed in
this regard, respondents cannot escape liability from the shelter of sovereign immunity.
GTZ opted to assail the decision by way of a special civil action for certiorari filed with the Court of
Appeals.

Issue: W/N GTZ enjoys immunity from suit

Held: No.

The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In
its Comment, the OSG took the side of GTZ, with the prayer that the petition be granted on the
ground that GTZ was immune from suit, citing in particular its assigned functions in implementing
the SHINE programa joint undertaking of the Philippine and German governments which was
neither proprietary nor commercial in nature.
On the other hand, Counsel for GTZ characterizes GTZ as the implementing agency of the
Government of the Federal Republic of Germany, a depiction similarly adopted by the OSG.
Assuming that characterization is correct, it does not automatically invest GTZ with the
ability to invoke State immunity from suit. The distinction lies in whether the agency is
incorporated or unincorporated. The following lucid discussion from Justice Isagani Cruz is
pertinent:

Where suit is filed not against the government itself or its officials but
against one of its entities, it must be ascertained whether or not the State, as the
principal that may ultimately be held liable, has given its consent to be sued. This
ascertainment will depend in the first instance on whether the government
agency impleaded is incorporated or unincorporated.

An incorporated agency has a charter of its own that invests it with a

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 separate juridical personality, like the Social Security System, the University of
the Philippines, and the City of Manila. By contrast, the unincorporated agency is so
called because it has no separate juridical personality but is merged in the general
machinery of the government, like the Department of Justice, the Bureau of Mines
and the Government Printing Office.

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 it is performing. Municipal corporations, for
example, like provinces and cities, are agencies of the State when they are
engaged in governmental functions and therefore should enjoy the sovereign
immunity from suit. Nevertheless, they are subject to suit even in the
performance of such functions because their charter provides that they can sue
and be sued.

State immunity from suit may be waived by general or special law. The special law can take the
form of the original charter of the incorporated government agency. Jurisprudence is replete with
examples of incorporated government agencies which were ruled not entitled to invoke immunity
from suit, owing to provisions in their charters manifesting their consent to be sued.
Is GTZ an incorporated agency of the German government? There is some mystery surrounding that
question. Neither GTZ nor the OSG go beyond the 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 implementation of development projects.
There is no doubt that the 1991 Agreement designated GTZ as the implementing agency in behalf
of the German government.
GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website. In
the Corporate Profile GTZ describes itself as a federally owned, a federal enterprise, and
founded in 1975 as a company under private law.
GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which
apparently owns it. At the same time, it appears that GTZ was actually organized not through a
legislative public charter, but under private law, in the same way that Philippine corporations can
be organized under the Corporation Code even if fully owned by the Philippine government.
This self-description of GTZ in its own official website gives further cause for pause in adopting
petitioners argument that GTZ is entitled to immunity from suit because it is an implementing
agency.
The above-quoted statement does not dispute the characterization of GTZ as an implementing
agency of the Federal Republic of Germany, yet it bolsters the notion that as a company
organized under private law, it has a legal personality independent of that of the Federal
Republic of Germany.
The Federal Republic of Germany, in its own official website, also makes reference to GTZ and
describes it as a private company owned by the Federal Republic of Germany.
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 Philippine government, or a
government-owned or controlled corporation without original charter. And it bears notice that
Section 36 of the Corporate Code states that every corporation incorporated under this Code

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 has the power and capacity x x x to sue and be sued in its corporate name.
It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has
not been vested or has been specifically deprived the power and capacity to sue and/or be sued. Yet
in the proceedings below and before this 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
adhere to the rule that in the absence of evidence to the contrary, foreign laws on a
particular subject are presumed to be the same as those of the Philippines, and following the
most intelligent assumption we can gather, GTZ is akin to a governmental owned or controlled
corporation without original charter which, by virtue of the Corporation Code, has expressly
consented to be sued.

In Holy See v. Del Rosario provided a template on how a foreign entity desiring to invoke State
immunity from suit could duly prove such immunity before our local courts. The principles
enunciated in that case were derived from public international law. We stated then:
In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of
the state where it is sued to convey to the court that said defendant is entitled to
immunity.
In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity.

It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for
petitioners to secure from the Department of Foreign Affairs a certification of respondents
diplomatic status and entitlement to diplomatic privileges including immunity from suits.
The requirement might not necessarily be imperative. However, had GTZ obtained such
certification from the DFA, it would have provided factual basis for its claim of immunity
that would, at the very least, establish a disputable evidentiary presumption that the foreign
party is indeed immune which the 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.
Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit
before this Court sufficiently substitute for the DFA certification? 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 Comment of the OSG is it manifested that the DFA has
endorsed GTZs claim, the Comment filed by the OSG does not inspire the same degree of
confidence as a certification from the DFA would have elicited.
The Court thus holds and so rules that GTZ consistently has been unable to establish with
satisfaction that it enjoys the immunity from suit generally enjoyed by its parent country, the
Federal Republic of Germany.

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SANDERS VS VERIDIANO

SANDERS VS. VERIDIANO II

Justice Cruz 1998
FACTS:
Petitioner:
Sanders Special Services Director of NAVSTA (Naval Station)
Moreau Commanding Officer of the Subic Naval Base

Respondents:
Rossi and Wyer American Citizen employed as game room attendants in the
special services department of NAVSTA

Events:
Private Respondents employment had been converted from permanent full-
time to part-time
Respondents filed protest and a recommendation report was made by the
hearing officer stipulating the reinstatement of both respondents plus back
wages. Report on hearing contained the observation that Special Services
Management practices an autocratic form of supervision.
Sanders disagreed with recommendation report with the later containing
statements that:
Mr. Rossi tends to alienate most co-workers and supervisors
Mr. Rossi and Wyers have proven, according to their immediate
supervisors, to be difficult employees to supervise.
Grievants placed the records in public places where other not involved
in the case could hear.
Moreau sent a letter to the Chief of Naval Personnel explaining the change of
the private respondents employment status and requesting concurrence
therewith.

Filling of Case:
Respondents filed a case in Court of First Instance of Olongapo City a
complaint for damages against petitioners; plaintiffs claimed that letters
contained libelous imputations.
Petitioners filed a motion to dismiss on grounds that acts complained of were
performed by them in their discharge of official duties; consequently, court
has no jurisdiction over them under the doctrine of state immunity.

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 Petitioners motion was denied on ground that petitioners had not presented
any evidence that their acts were official in nature and not personal torts.
An order issued a writ of preliminary attachment, conditioned upon the filling
of a P10,000 bond on plaintiffs, against properties of Moreau, who allegedly
was then about to leave the Philippines.
Moreau was declared in default.
Petitioners Motion to lift the default order was dismissed on ground that
Moreaus failure to appear at the pre-trial conference was the result of some
understanding.
Motion for reconsideration of the denial motion was also dismissed.

ISSUES:
Petition for Certiorari, Prohibition, and Preliminary Injunction was thereafter
filed before this court.
W/N petitioners were performing their official duties when they did acts for
which they have been sued for damages by the private respondent.

RULING:
Petition was granted. Challenged Orders were set aside. Respondent Court is
directed to dismiss the case.
Court held that he acts for which the petitioner are being called to account
were performed by them in the discharge of their official duties.
Sanders wrote the letter as a reply from Moreau for more information
regarding the case of the private respondents. Even without such request, he
has the rights in reacting to the hearing officers criticism.
Moreaus letter is clearly official in nature as the Commanding Chief of the
Naval Base answerable to the naval personnel in matters involving the
special services department of NAVSTA.
Court concludes that petitioners acted behalf of the government, within the
scope of their authority making the action a suit against the government
without its consent.

VERSION 2

Sanders v. Veridiano
FACTS:
Petitioner Dale Sanders was the special services of the US Naval Station (NAVSTA) in Olongapo city.
Private respondents Anthony Rossi and Ralph Wyers are American citizens permanently residing in the
Philippines and who were employed as gameroom attendants in the special services department of
NAVSTA. On October 3, 1975, the respondents were advised that their employment had been converted
from permanent full-time to permanent part-time. In a letter addressed to petitioner Moreau, Sanders

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disagreed with the hearing officers report of the reinstatement of private respondents to permanent full-
time status plus backwages. Respondents allege that the letters contained libellous imputations which
caused them to be ridiculed and thus filed for damages against petitioners.

ISSUE:
1) Were the petitioners acting officially or only in their private capacities when they did the acts for which
the private respondents sued them for damages?
2) Does the court have jurisdiction over the case?

HELD:
It is abundantly clear in the present case that the acts for which the petitioner are being called to account
were performed by them in the discharge of their official duties. Given the official character of the letters,
the petioners were, legally speaking, being sued as officers of the United States government. As such, the
complaint cannot prosper unless the government sought to be held ultimately liable has given its consent
to be sued. The private respondents must pursue their claim against the petitioners in accordance with
the laws of the Unites States of which they are all citizens and under whose jurisdiction the alleged
offenses were committed for the Philippine courts have no jurisdiction over the case.

UP vs. Dizon

G.R. No. 171182 : August 23, 2012

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

GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P.
DAVID, CASIANO S. ABRIGO, and JOSEFINA R.
LICUANAN, Petitioners,

v.

HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the

Regional Trial Court of Quezon City, Branch 80, STERN BUILDERS,
INC., and SERVILLANO DELA CRUZ, Respondents.

FACTS:

University of the Philippines (UP) entered into a General Construction

Agreement with respondent Stern Builders Corporation (Stern Builders) for
the construction and renovation of the buildings in the campus of the UP
in Los Bas. UP was able to pay its first and second billing. However, the
third billing worth P273,729.47 was not paid due to its disallowance by

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the Commission on Audit (COA). Thus, Stern Builders sued the UP to
collect the unpaid balance.

On November 28, 2001, the RTC rendered its decision ordering UP to pay
Stern Builders. Then on January 16, 2002, the UP filed its motion for
reconsideration. The RTC denied the motion. The denial of the said motion
was served upon Atty. Felimon Nolasco (Atty.Nolasco) of the UPLB Legal
Office on May 17, 2002. Notably, Atty. Nolasco was not the counsel of
record of the UP but the OLS inDiliman, Quezon City.

Thereafter, the UP filed a notice of appeal on June 3, 2002. However, the

RTC denied due course to the notice of appeal for having been filed out of
time. On October 4, 2002, upon motion of Stern Builders, the RTC issued
the writ of execution.

On appeal, both the CA and the High Court denied UPs petition. The
denial became final and executory. Hence, Stern Builders filed in the RTC
its motion for execution despite their previous motion having already
been granted and despite the writ of execution having already issued. On
June 11, 2003, the RTC granted another motion for execution filed on May
9, 2003 (although the RTC had already issued the writ of execution on
October 4, 2002). Consequently, the sheriff served notices of garnishment
to the UPs depositary banks and the RTC ordered the release of the funds.

Aggrieved, UP elevated the matter to the CA. The CA sustained the

RTC. Hence, this petition.

ISSUES:

I. Whether or not the UPs funds can be validly garnished?

II. Whether or not the UPs appeal dated June 3, 2002 has been
filed out of time?

HELD: The petition for review is meritorious.

FIRST ISSUE: UPs funds, being government funds, are not subject to
garnishment.

POLITICAL LAW: garnishment of public funds; suability vs. liability of the

State

Despite its establishment as a body corporate, the UP remains to be a

"chartered institution" performing a legitimate government function.
Irrefragably, the UP is a government instrumentality, performing the

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States constitutional mandate of promoting quality and accessible
education. As a government instrumentality, the UP administers special
funds sourced from the fees and income enumerated under Act No. 1870
and Section 1 of Executive Order No. 714, and from the yearly
appropriations, to achieve the purposes laid down by Section 2 of Act
1870, as expanded in Republic Act No. 9500. All the funds going into the
possession of the UP, including any interest accruing from the deposit of
such funds in any banking institution, constitute a "special trust fund," the
disbursement of which should always be aligned with the UPs mission and
purpose, and should always be subject to auditing by the COA. The funds
of the UP are government funds that are public in character. They include
the income accruing from the use of real property ceded to the UP that
may be spent only for the attainment of its institutional objectives.

A marked distinction exists between suability of the State and its

liability. As the Court succinctly stated in Municipality of San Fernando, La
Union v. Firme: A distinction should first be made between suability and
liability. "Suability depends on the consent of the state to be sued, liability
on the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first consent to be sued.
Liability is not conceded by the mere fact that the state has allowed itself
to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is
liable.

The Constitution strictly mandated that "no money shall be paid out of the
Treasury except in pursuance of an appropriation made by law." The
execution of the monetary judgment against the UP was within the
primary jurisdiction of the COA. It was of no moment that a final
and executory decision already validated the claim against the UP.

SECOND ISSUE: Period of appeal did not start without effective service of
decision upon counsel of record.

REMEDIAL LAW: doctrine of immutability of a final judgment; service of

judgments; fresh-period rule; computation of time

At stake in the UPs plea for equity was the return of the amount of
P16,370,191.74 illegally garnished from its trust funds. Obstructing the
plea is the finality of the judgment based on the supposed tardiness of
UPs appeal, which the RTC declared on September 26, 2002. It is true that
a decision that has attained finality becomes immutable and unalterable,
and cannot be modified in any respect, even if the modification is meant

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to correct erroneous conclusions of fact and law, and whether the
modification is made by the court that rendered it or by this Court as the
highest court of the land. But the doctrine of immutability of a final
judgment has not been absolute, and has admitted several exceptions,
among them: (a) the correction of clerical errors; (b) the so-
called nunc pro tunc entries that cause no prejudice to any party; (c) void
judgments; and (d) whenever circumstances transpire after the finality of
the decision that render its execution unjust and inequitable. We rule that
the UPs plea for equity warrants the Courts exercise of the exceptional
power to disregard the declaration of finality of the judgment of the RTC
for being in clear violation of the UPs right to due process.

Firstly, the service of the denial of the motion for reconsideration upon
Atty. Nolasco of the UPLB Legal Office was invalid and ineffectual because
he was admittedly not the counsel of record of the UP. Verily, the service
of the denial of the motion for reconsideration could only be validly made
upon the OLS in Diliman, and no other. It is settled that where a party has
appeared by counsel, service must be made upon such counsel. This is
clear enough from Section 2, second paragraph, of Rule 13, Rules of
Court, which explicitly states that: "If any party has appeared by counsel,
service upon him shall be made upon his counsel or one of them, unless
service upon the party himself is ordered by the court. Where one counsel
appears for several parties, he shall only be entitled to one copy of any
paper served upon him by the opposite side."

Secondly, even assuming that the service upon Atty. Nolasco was valid
and effective, such that the remaining period for the UP to take a timely
appeal would end by May 23, 2002, it would still not be correct to find
that the judgment of the RTC became final and immutable thereafter due
to the notice of appeal being filed too late on June 3, 2002. In so declaring
the judgment of the RTC as final against the UP, the CA and the RTC
applied the rule contained in the second paragraph of Section 3, Rule 41
of the Rules of Court to the effect that the filing of a motion for
reconsideration interrupted the running of the period for filing the appeal;
and that the period resumed upon notice of the denial of the motion for
reconsideration. For that reason, the CA and the RTC might not be taken
to task for strictly adhering to the rule then prevailing.

However, equity calls for the retroactive application in the UPs favor of
the fresh-period rule that the Court first announced in mid-September of
2005 through its ruling in Neypes v. Court of Appeals, viz: "to standardize
the appeal periods provided in the Rules and to afford litigants fair
opportunity to appeal their cases, the Court deems it practical to allow a
fresh period of 15 days within which to file the notice of appeal in the

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Regional Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration." The retroactive
application of the fresh-period rule, a procedural law that aims "to
regiment or make the appeal period uniform, to be counted from receipt
of the order denying the motion for new trial, motion for reconsideration
(whether full or partial) or any final order or resolution," is impervious to
any serious challenge. This is because there are no vested rights in rules
of procedure.

Consequently, even if the reckoning started from May 17, 2002, when
Atty. Nolasco received the denial, the UPs filing on June 3, 2002 of the
notice of appeal was not tardy within the context of the fresh-period rule.
For the UP, the fresh period of 15-days counted from service of the denial
of the motion for reconsideration would end on June 1, 2002, which was a
Saturday. Hence, the UP had until the next working day, or June 3, 2002, a
Monday, within which to appeal, conformably with Section 1 of Rule 22,
Rules of Court, which holds that: "If the last day of the period, as thus
computed, falls on a Saturday, a Sunday, or a legal holiday in the place
where the court sits, the time shall not run until the next working day."

Petition for review is GRANTED. The CA is REVERSED and SET

ASIDE.

REPUBLIC VS SANDOVAL

Republic vs. Sandoval (Consti1)

(Two petitions consolidated.)

En Banc

Campos, Jr., March 19, 1993

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Topic: Sovereignty - Suit not against the State - Beyond the Scope of Authority
Facts:
The heirs of the deceased of the January 22, 1987 Mendiola massacre
(background: Wiki), together with those injured (Caylao group), instituted the
petition, seeking the reversal and setting aside of the orders of respondent Judge
Sandoval (May 31 and Aug 8, 1988) in "Erlinda Caylao, et al. vs. Republic of the
Philippines, et al." which dismissed the case against the Republic of the Philippines
May 31 order: Because the impleaded military officers are being charged in their
personal and official capacity, holding them liable, if at all, would not result in
financial responsibility of the government
Aug 8 order: denied the motions filed by both parties for reconsideration
In January 1987, farmers and their sympathizers presented their demands for what
they called "genuine agrarian reform"
The Kilusang Magbubukid ng Pilipinas (KMP), led by Jaime Tadeo, presented their
problems and demands such as:
giving lands for free to farmers
zero retention of lands by landlords
stop amortizations of land payments
Dialogue between the farmers and then Ministry of Agrarian Reform (MAR) began on
January 15, 1987
On January 20, 1987, Tadeo met with MAR Minister Heherson Alvarez
Alvarez was only able to promise to do his best to bring the matter to the attention
of then President Cory Aquino during the January 21 Cabinet meeting
Tension mounted the next day
The farmers, on their 7th day of encampment, barricaded the MAR premises and
prevented the employees from going inside their offices
On January 22, 1987, following a heated discussion between Alvarez and Tadeo,
Tadeo's group decided to march to Malacanang to air their demands
On their march to Malacanang, they were joined by Kilusang Mayo Uno (KMU),
Bagong Alyansang Makabayan (BAYAN), League of Filipino Students (LFS), and
Kongreso ng Pagkakaisa ng Maralitang Lungsod (KPML)
Government intelligent reports were also received that the KMP was heavily
infliltrated by CPP/NPA elements, and that an insurrection was impending
Government anti-riot forces assembled at Mendiola

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The marchers numbered about 10,000 to 15,000 at around 4:30 pm
From CM Recto, they proceeded toward the police lines. No dialogue took place;
"pandemonium broke loose"
After the clash, 12 marchers were officially confirmed dead (13 according to Tadeo)
39 were wounded by gunshots and 12 sustained minor injuries, all belonging to the
group of marchers
Of the police and military, 3 sustained gunshot wounds and 20 suffered minor
physical injuries
The "Citizens' Mendiola Commission" submitted its report on the incident on
February 27, 1987 as follows
The march did not have any permit
The police and military were armed with handguns prohibited by law
The security men assigned to protect the government units were in civilian attire
(prohibited by law)
There was unnecessary firing by the police and military
The weapons carried by the marchers are prohibited by law
It is not clear who started the firing
The water cannons and tear gas were not put into effective use to disperse the
crowd; the water cannons and fire trucks were not put into operation because:
there was no order to use them
they were incorrectly prepositioned
they were out of range of the marchers
The Commission recommended the criminal prosecution of four unidentified,
uniformed individuals shown either on tape or in pictures, firing at the direction of
the marchers
The Commission also recommended that all the commissioned officers of both the
Western Police District (WPD) and Integrated National Police (INP) who were armed
be prosecuted for violation of par. 4(g) of the Public Assembly Act of 1985
Prosecution of the marchers was also recommended
It was also recommended that Tadeo be prosecuted both for holding the rally
without permit and for inciting sedition
Administrative sanctions were recommended for the following officers for their
failure to make effective use of their skill and experience in directing the dispersal
operations in Mendiola:

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Gen. Ramon E. Montao
Police Gen. Alfredo S. Lim
Police Gen. Edgar Dula Torres
Police Maj. Demetrio dela Cruz
Col. Cezar Nazareno
Maj. Filemon Gasmin
Last and most important recommendation: for the deceased and wounded victims
to be compensated by the government
It was this portion that petitioners (Caylao group) invoke in their claim for damages
from the government
No concrete form of compensation was received by the victims
On January, 1988, petitioners instituted an action for damages against the Republic
of the Philippines, together with the military officers, and personnel involved in the
Mendiola incident
Solicitor general filed a Motion to Dismiss on the ground that the State cannot be
sued without its consent
Petitioners said that the State has waived its immunity from suit
Judge Sandoval dismissed the case on the ground that there was no such waiver
Motion for Reconsideration was also denied
Issues:
Whether or not the State has waived its immunity from suit (i.e. Whether or not this
is a suit against the State with its consent)
Petitioners argue that by the recommendation made by the Commission for the
government to indemnify the heirs and victims, and by public addresses made by
President Aquino, the State has consented to be sued
Whether or not the case qualifies as a suit against the State
Holding:
No.
This is not a suit against the State with its consent.
No.
Ratio:
Art. XIV, Sec. 3, 1987 Constitution: The State may not be sued without its
consent

15 | P a g e
The recommendations by the Commission does not in any way mean that liability
automatically attaches to the State
The Commission was simply a fact-finding body; its findings shall serve only as
cause of action for litigation; it does not bind the State immediately
President Aquino's speeches are likewise not binding on the State; they are not
tantamount to a waiver by the State
Some instances when a suit against the State is proper:
When the Republic is sued by name;
When the suit is against an unincorporated government agency
When the suit is on its face against a government officer but the case is such that
the ultimate liability will belong not to the officer but to the government
Although the military officers and personnel were discharging their official functions
during the incident, their functions ceased to be official the moment they exceeded
their authority
There was lack of justification by the government forces in the use of firearms.
Their main purpose in the rally was to ensure peace and order, but they fired at the
crowd instead
No reversible error by the respondent Judge found. Petitions dismissed.

Festejo v. Fernando

Festejo v. Fernando

GR No. L-5156 March 11, 1954

Diokno, J.

Facts:

Carmen Festejo, owner of sugar lands, a total of about 9 acres of surface, sued Isaiah
Fernando Director, Bureau of Public Works, as such Director of Public Works is responsible for
systems and irrigation projects and is the official responsible for the construction of irrigation systems
in the country, claiming that the defendant, as Director of the Bureau of Public Works, without
Authority Obtained from the first Court of First Instance of Ilocos Sur, without first Obtaining a right of
way, and without the consent and Knowledge of the plaintiff, and Against her express objection

16 | P a g e
unlawfully Took possession of portions of the three parcels of land Described Above, an irrigation
canal and Caused to be Constructed on the Portion of the three parcels of land on or about the
month of February 1951 Being the aggregate area 24.179 square meters to the damage and
prejudice of the plaintiff varied causing her damages.

Issue:

whether the court has no jurisdiction to render judgment against valid, since the claim is in
court against the Republic of the Philippines, and it has not submitted its consent to the application

Held:

No. The motion against Isaias Fernando, Director of Public Works in charge and
responsible for the construction of irrigation systems in the Philippines is a directed personally
against him, for acts which he assumed to run on your official concept. The law does not excuse you
from responsibility for the abuses to commit or have committed in the performance of their official
duties.

Merritt vs Government of the Philippine

Islands

Political Law Non-Suability of the State Waiver of Non-Suability is Not Admission of

Liability

The facts of the case took place in the 1910s. E. Merritt was a constructor who was
excellent at his work. One day, while he was riding his motorcycle along Calle Padre Faura,
he was bumped by a government ambulance. The driver of the ambulance was proven to
have been negligent. Because of the incident, Merritt was hospitalized and he was severely
injured beyond rehabilitation so much so that he could never perform his job the way he
used to and that he cannot even earn at least half of what he used to earn.

In order for Merritt to recover damages, he sought to sue the government which later
authorized Merritt to sue the government by virtue of Act 2457 enacted by the legislature
(An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands

17 | P a g e
and authorizing the Attorney-General of said Islands to appear in said suit). The lower court
then determined the amount of damages and ordered the government to pay the same.

ISSUE: Whether or not the government is liable for the negligent act of the driver of the
ambulance.

HELD: No. By consenting to be sued a state simply waives its immunity from suit. It does
not thereby concede its liability to plaintiff, or create any cause of action in his favor, or
extend its liability to any cause not previously recognized. It merely gives a remedy to
enforce a preexisting liability and submits itself to the jurisdiction of the court, subject to its
right to interpose any lawful defense. It follows therefrom that the state, by virtue of such
provisions of law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the functions
pertaining to their office, because neither fault nor even negligence can be presumed on the
part of the state in the organization of branches of public service and in the appointment of
its agents. The State can only be liable if it acts through a special agent (and a special
agent, in the sense in which these words are employed, is one who receives a definite and
fixed order or commission, foreign to the exercise of the duties of his office if he is a special
official) so that in representation of the state and being bound to act as an agent thereof, he
executes the trust confided to him.

In the case at bar, the ambulance driver was not a special agent nor was a government
officer acting as a special agent hence, there can be no liability from the government. The
Government does not undertake to guarantee to any person the fidelity of the officers or
agents whom it employs, since that would involve it in all its operations in endless
embarrassments, difficulties and losses, which would be subversive of the public interest.

AMIGABLE VS CUENCA

VICTORIA AMIGABLE vs. NICOLAS CUENCA G.R. No.

L-26400 February 29, 1972
FACTS: Victoria Amigable is the is the registered owner of a lot which, without prior expropriation
proceedings or negotiated sale, was used by the government. Amigable's counsel wrote the President of
the Philippines requesting payment of the portion of her lot which had been expropriated by the
government.

Amigable later filed a case against Cuenca, the Commissioner of Public Highways, for recovery of
ownership and possession of the said lot. She also sought payment for comlensatory damages, moral
damages and attorney's fees.

18 | P a g e
The defendant said that the case was premature, barred by prescription, and the government did not give
its consent to be sued.

ISSUE: W/N the appellant may properly sue the government.

HELD: Where the government takes away property from a private landowner for public use without going
through the legal process of expropriation or negotiated sale, the aggrieved party may properly maintain a
suit against the government without violating the doctrine of governmental immunity from suit.

The doctrine of immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen.
The only relief available is for the government to make due compensation which it could and should have
done years ago. To determine just compensation of the land, the basis should be the price or value at the
time of the taking.

VERSION 2 AMICABLE VS CUENCA

Facts:
This is an appeal from the decision of the Court of First Instance of Cebu in its Civil
Case No. R-5977, dismissing the plaintiff's complaint.
Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the
Banilad Estate in Cebu City
At the back of her Transfer Certificate of Title (1924), there was no annotation in
favor of the government of any right or interest in the property.
Without prior expropriation or negotiated sale, the government used a portion of
said lot, with an area of 6,167 square meters, for the construction of the Mango and
Gorordo Avenues.
On March 27, 1958 Amigable's counsel wrote the President of the Philippines,
requesting payment of the portion of her lot which had been appropriated by the
government. The claim was indorsed to the Auditor General, who disallowed it in his
9th Indorsement dated December 9, 1958. A copy of said indorsement was
transmitted to Amigable's counsel by the Office of the President on January 7, 1959.
On February 6, 1959 Amigable filed in the court a quo a complaint, which was later
amended on April 17, 1959 upon motion of the defendants, against the Republic of
the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public
Highways for the recovery of ownership and possession of the 6,167 square meters
of land traversed by the Mango and Gorordo Avenues. She also sought the payment
of compensatory damages in the sum of P50,000.00 for the illegal occupation of her
land, moral damages in the sum of P25,000.00, attorney's fees in the sum of
P5,000.00 and the costs of the suit.

19 | P a g e
On July 29, 1959 said court rendered its decision holding that it had no jurisdiction
over the plaintiff's cause of action for the recovery of possession and ownership of
the portion of her lot in question on the ground that the government cannot be sued
without its consent; that it had neither original nor appellate jurisdiction to hear, try
and decide plaintiff's claim for compensatory damages in the sum of P50,000.00,
the same being a money claim against the government; and that the claim for
moral damages had long prescribed, nor did it have jurisdiction over said claim
because the government had not given its consent to be sued. Accordingly, the
complaint was dismissed.
Unable to secure a reconsideration, the Amigable appealed to the Court of Appeals,
which subsequently certified the case to Us, there being no question of fact
involved.

Issue/s:
WON the Amigable may properly sue the government under the facts of the case

Held: the government is NOT immune to the suit.

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

Ratio:
Ministerio vs. Court of First Instance of Cebu: where the government takes away
property from a private landowner for public use without going through the legal
process of expropriation or negotiated sale, the aggrieved party may properly
maintain a suit against the government without thereby violating the doctrine of
governmental immunity from suit without its consent
Considering that no annotation in favor of the government appears at the back of
her certificate of title and that she has not executed any deed of conveyance of any
portion of her lot to the government, the appellant remains the owner of the whole
lot.
As registered owner, she could bring an action to recover possession of the portion
of land in question at any time because possession is one of the attributes of
ownership.
However, since restoration of possession of said portion by the government is
neither convenient nor feasible at this time because it is now and has been used for
road purposes, the only relief available is for the government to make due
compensation which it could and should have done years ago. To determine the due

20 | P a g e
compensation for the land, the basis should be the price or value thereof at the time
of the taking
the plaintiff is entitled thereto in the form of legal interest on the price of the land
from the time it was taken up to the time that payment is made by the government.
the government should pay for attorney's fees, the amount of which should be fixed
by the trial court after hearing.

US v. Ruiz
Facts:

At times material to this case, the United States of America had a naval base in
Subic, Zambales. The base was one of those provided in the Military Bases
Agreement between the Philippines and the United States.
US invited the submission of bids for Repair offender system and Repair typhoon
damages. Eligio de Guzman & Co., Inc. responded to the invitation, submitted bids
and complied with the requests based on the letters received from the US.
In June 1972, a letter was received by the Eligio De Guzman & Co indicating that the
company did not qualify to receive an award for the projects because of its previous
unsatisfactory performance rating on a repair contract for the sea wall at the boat
landings of the U.S. Naval Station in Subic Bay.
The company sued the United States of America and Messrs. James E.
Galloway, William I. Collins and Robert Gohier all members of the
Engineering Command of the U.S. Navy. The complaint is to order the
defendants to allow the plaintiff to perform the work on the projects and, in the
event that specific performance was no longer possible, to order the defendants to
pay damages. The company also asked for the issuance of a writ of preliminary
injunction to restrain the defendants from entering into contracts with third parties
for work on the projects.
The defendants entered their special appearance for the purpose only of
questioning the jurisdiction of this court over the subject matter of the complaint
and the persons of defendants, the subject matter of the complaint being acts and
omissions of the individual defendants as agents of defendant United States of
America, a foreign sovereign which has not given her consent to this suit or any
other suit for the causes of action asserted in the complaint." (Rollo, p. 50.)
Subsequently the defendants filed a motion to dismiss the complaint which included
an opposition to the issuance of the writ of preliminary injunction. The company
opposed the motion.
The trial court denied the motion and issued the writ. The defendants moved twice
to reconsider but to no avail.

21 | P a g e
Hence the instant petition which seeks to restrain perpetually the proceedings in
Civil Case No. 779-M for lack of jurisdiction on the part of the trial court.
Issue/s:

WON the US naval base in bidding for said contracts exercise

governmental functions to be able to invoke state immunity

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

Ratio:
The traditional rule of State immunity exempts a State from being sued in the courts
of another State without its consent or waiver. This rule is a necessary consequence
of the principles of independence and equality of States. However, the rules of
International Law are not petrified; they are constantly developing and evolving.
And because the activities of states have multiplied, it has been necessary
to distinguish them-between sovereign and governmental acts (jure
imperii) and private, commercial and proprietary acts (jure gestionis).
The result is that State immunity now extends only to acts jure imperil (sovereign &
governmental acts)
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign,
its commercial activities or economic affairs. Stated differently, a State
may be said to have descended to the level of an individual and can thus
be deemed to have tacitly given its consent to be sued only when it enters
into business contracts. It does not apply where the contract relates to
the exercise of its sovereign functions. In this case the projects are an
integral part of the naval base which is devoted to the defense of both the
United States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for nor dedicated to
commercial or business purposes.
correct test for the application of State immunity is not the conclusion of a contract
by a State but the legal nature of the act

22 | P a g e
REPUBLIC VS. VILLASOR, ET AL.
REPUBLIC VS. VILLASOR, ET AL.

G.R. No. L-30671 November 28, 1973

Facts: On July 7, 1969, a decision was rendered in Special Proceedings No. 2156-R
in favor of respondents P.J. Kiener Co., Ltd., Gavino Unchuan, and International
Construction Corporation and against petitioner confirming the arbitration award in
the amount of P1,712,396.40.The award is for the satisfaction of a judgment against
the Phlippine Government. On June 24, 1969, respondent Honorable Guillermo
Villasor issued an Order declaring the decision final and executory. Villasor directed
the Sheriffs of Riza lProvince, Quezon City as well as Manila to execute said
decision. The Provincial Sheriff of Rizal served Notices of Garnishment with several
Banks, specially on Philippine Veterans Bank and PNB. The funds of the Armed
Forces of the Philippines on deposit with Philippine Veterans Bank andPNB are public
funds duly appropriated and allocated for the payment of pensions of retirees, pay
and allowances of military and civilian personnel and for maintenance and
operations of the AFP. Petitioner, on certiorari, filed prohibition proceedings against
respondent Judge Villasor for acting in excess of jurisdiction with grave abuse of
discretion amounting to lack of jurisdiction in granting the issuance of a Writ of
Execution against the properties of the AFP, hence the notices and garnishment are
null and void.

Issue: Is the Writ of Execution issued by Judge Villasor valid?

Held: What was done by respondent Judge is not in conformity with the dictates of
the Constitution. It is a fundamental postulate of constitutionalism flowing from the
juristic concept of sovereignty that the state as well as its
government is immune from suit unless it gives its consent. A
sovereign is exempt from suit, not because of any formal conception
or obsolete theory, but on the logical and practical ground that
there can be no legal right as against the authority that makes the
law on which the right depends. The State may not be sued without its
consent. A corollary, both dictated by logic and sound sense from a basic concept is
that public funds cannot be the object of a garnishment proceeding even if the
consent to be sued had been previously granted and the state liability adjudged.
The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit claimants action only up to the
completion of proceedings anterior to the stage of execution and that the power of
the Courts ends when the judgment is rendered, since the government funds and
properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious sconsiderations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation
as required by law. The functions and public services rendered by the State cannot

23 | P a g e
be allowed to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.

Department of Agriculture vs. NLRC G.R. No.

104269, November 11, 1993

Facts: Petitioner Department of Agriculture (DA) and Sultan Security Agency

entered into a contract for security services to be provided by the latter to the
said governmental entity. Pursuant to their arrangements, guards were
deployed by Sultan Security Agency in the various premises of the DA.
Thereafter, several guards filed a complaint for underpayment of wages,
nonpayment of 13th month pay, uniform allowances, night shift differential pay,
holiday pay, and overtime pay, as well as for damages against the DA and the
security agency.

The Labor Arbiter rendered a decision finding the DA jointly and severally liable
with the security agency for the payment of money claims of the complainant
security guards. The DA and the security agency did not appeal the decision.
Thus, the decision became final and executory. The Labor Arbiter issued a writ
of execution to enforce and execute the judgment against the property of the
DA and the security agency. Thereafter, the City Sheriff levied on execution the
motor vehicles of the DA.

Issue: Whether or not the doctrine of non-suability of the State applies in

the case

Held: The basic postulate enshrined in the Constitution that the State may
not be sued without its consent reflects nothing less than a recognition of the
sovereign character of the State and an express affirmation of the unwritten
rule effectively insulating it from the jurisdiction of courts. It is based on the
very essence of sovereignty. A sovereign is exempt from suit based on the
logical and practical ground that there can be no legal right as against the
authority that makes the law on which the right depends.

24 | P a g e
The rule is not really absolute for it does not say that the State may not be sued
under any circumstances. The State may at times be sued. The States consent
may be given expressly or impliedly. Express consent may be made through a
general law or a special law. Implied consent, on the other hand, is conceded
when the State itself commences litigation, thus opening itself to a
counterclaim, or when it enters into a contract. In this situation, the
government is deemed to have descended to the level of the other contracting
party and to have divested itself of its sovereign immunity.

But not all contracts entered into by the government operate as a waiver of its
non-suability; distinction must still be made between one which is executed in
the exercise of its sovereign function and another which is done in its
proprietary capacity. A State may be said to have descended to the level of an
individual and can this be deemed to have actually given its consent to be sued
only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions.

In the case, the DA has not pretended to have assumed a capacity apart from
its being a governmental entity when it entered into the questioned contract;
nor that it could have, in fact, performed any act proprietary in character.

But, be that as it may, the claims of the complainant security guards clearly
constitute money claims. Act No. 3083 gives the consent of the State to be sued
upon any moneyed claim involving liability arising from contract, express or
implied. Pursuant, however, to Commonwealth Act 327, as amended by PD
1145, the money claim must first be brought to the Commission on Audit.

Philippine National Bank vs

Judge Javier Pabalan

FACTS: On December 17, 1970, Judge Javier Pabalan issued a writ of execution followed
thereafter by a notice of garnishment on the funds of Philippine Virginia Tobacco
Administration (PVTA) in the sum of P12,724.66 deposited with the Philippine National Bank
in La Union. PNB La Union filed an administrative complaint against Pabalan for grave
abuse of discretion, alleging that the latter failed to recognize that the questioned funds are

25 | P a g e
of public character and therefore may not be garnished, attached, nor may be levied upon.
The PNB La Union Branch invoked the doctrine of non suability, putting a bar on the notice
of garnishment.

ISSUE: Whether or not PNB may be sued.

HELD: Yes. Funds of public corporations which can sue and be sued are not exempt from
garnishment. PVTA is also a public corporation with the same attributes, a similar outcome
is attributed. The government has entered with them into a commercial business hence it
has abandoned its sovereign capacity and has stepped down to the level of a corporation.
Therefore, it is subject to rules governing ordinary corporations and in effect can be sued.
Therefore, the petition of PNB La Union is denied.

VERSION 2

PNB vs Pabalan
Facts:
Judge Javier Pabalan issued a writ of execution on December 17, 1970. It was
followed thereafter by a notice of garnishment on the funds of respondent
Philippine Virginia Tobacco Administration for the sum of P12,724.66. This
amount was said to belong to Philippine Virginia Tobacco Administration and
was deposited with the Philippine National Bank (PNB) La Union branch. On
January 25, 1971, it is ordered that Philippine Virginia Tobacco Administration
funds deposited with PNB shall be garnished and delivered to the plaintiff
immediately to satisfy the Writ of Execution for one-half of the amount
awarded in the decision of November 16, 1970. PNB invoked the doctrine of
non-suability in behalf of Philippine Virginia Tobacco Administration. PNB
claims that since fund is public in character, a prohibition must be issued
against Pabalans order.

Issue:
Whether or not funds are public in character, thus immune from suit.

Held:
No. Petition dismissed. It is to be admitted that under the present
Constitution, what was formerly implicit as a fundamental doctrine in
constitutional law has been set forth in express terms: "The State may not be
sued without its consent." 11 If the funds appertained to one of the regular
departments or offices in the government, then, certainly, such a provision
would be a bar to garnishment. Such is not the case here.
26 | P a g e
It is well-settled that when the government enters into commercial business,
it abandons its sovereign capacity and is to be treated like any other
corporation. By engaging in a particular business thru the instrumentality of
a corporation, the government divests itself pro hac vice of its sovereign
character, so as to render the corporation subject to the rules of law
governing private corporations.

GAUDENCIO RAYO vs. COURT OF FIRST INSTANCE

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

FACTS: At the height of the infamous typhoon "Kading", the respondent opened simultaneously all the
three floodgates of the Angat Dam which resulted in a sudden, precipitate and simultaneous opening of
said floodgates several towns in Bulacan were inundated. The petitioners filed for damages against the
respondent corporation.

Petitioners opposed the prayer of the respondents forn dismissal of the case and contended that the
respondent corporation is merely performing a propriety functions and that under its own organic act, it
can sue and be sued in court.

ISSUE: W/N the respondent performs governmental functions with respect to the management and
operation of the Angat Dam.

W/N the power of the respondent to sue and be sued under its organic charter includes the power to be
sued for tort.

HELD: The government has organized a private corporation, put money in it and has allowed it to sue
and be sued in any court under its charter.

27 | P a g e
As a government owned and controlled corporation, it has a personality of its own, distinct and separate
from that of the government. Moreover, the charter provision that it can sue and be sued in any court.

VERSION 2 RAYO VS CFI

RAYO vs. CFI of BULACAN

Facts:
1. During the height of typhoon Kading, the National Power Corporations plant
superintendent Chavez opened simultaneously all the three floodgates of the Angat
Dam.
2. As a direct and immediate result, several towns in Bulacan were flooded (particularly
Norzagaray). About a hundred of its residents died and properties worth million of pesos
were destroyed.
3. The petitioners, who are among the unfortunate victims of the man-caused flood, filed
several complaints for damages against NPC and the plant superintendent.
4. NPC claimed, as its defense, that in the operation of the Angat Dam, it is performing a
purely governmental function. Thus, it cannot be sued without the express consent of the
State.
5. The petitioners opposed the claim of NPC and claimed that it is performing not
governmental but merely proprietary functions and that based on the organic charter
(charter - a legal document that provides for the creation of a corporate entity) of NPC, it
can be sued and be sued in any court.

Issue: Whether or not the power of NPC to sue and be sued under its organic charter includes
the power to be sued for tort.

Held: The government has organized a private corporation, put money in it and has allowed it to
sue and be sued in any court under its charter. NPC, as a government owned and controlled
corporation, has a personality of its own, distinct and separate from that of the Government. In
any court, NPC can sue and be sued for tort. The petition of the petitioners was granted.

Notes:
Government-owned and controlled corporations have a personality of their own, separate and
distinct from the government. Therefore, although they are considered to be public in character,
they are not exempt from garnishment (legal proceedings).

28 | P a g e
 Sps. Ramos discovered that a portion of their land (somewhere in Baguio) was being used as part of the
runway and running shoulder of the Loakan Airport which is operated by ATO. Sometime in 1995,
respondents agreed to convey the subject portion by deed of sale to ATO in consideration of the amount
of Php778,150.00. However, ATO failed to pay despite repeated verbal and written demands. Thus, an
action for collection against ATO was filed by the respondents before the RTC. ATOs primary contention
was that the deed of sale was entered into the performance of governmental functions. RTC ruled in favor
of the respondents. CA affirmed RTC. Hence, the petition.

Issue/s

Whether ATO could be sued without the States consent.

Ruling/s

SC dismissed the petition for lack of merit.

The States immunity from suit does not extend to the petitioner (ATO) because it is an agency of the
State engaged in an enterprise that is far from being the States exclusive prerogative. The CA thereby
correctly appreciated the juridical character of the ATO as an agency of the Government not
performing a purely governmental or sovereign function, but was instead involved in the
management and maintenance of the Loakan Airport, an activity that was not the exclusive
prerogative of the State in its sovereign capacity. Hence, the ATO had no claim to the States
immunity from suit. The SC further observes that the doctrine of sovereign immunity cannot be
successfully invoked to defeat a valid claim for compensation arising from the taking without just
compensation and without the proper expropriation proceedings being first resorted to of the plaintiffs
property.

Lastly, the issue of whether or not the ATO could be sued without the States consent has been
rendered moot by the passage of Republic Act No. 9497, otherwise known as the Civil Aviation
Authority Act of 2008. R.A. No. 9497 abolished the ATO and u nder its Transitory Provisions, R.A.
No. 9497 established in place of the ATO the Civil Aviation Authority of the Philippines (CAAP),
which thereby assumed all of the ATOs powers, duties and rights, assets, real and personal
properties, funds, and revenues. Section 23 of R.A. No. 9497 enumerates the corporate powers
vested in the CAAP, including the power to sue and be sued, to enter into contracts of every class,
kind and description, to construct, acquire, own, hold, operate, maintain, administer and lease
personal and real properties, and to settle, under such terms and conditions most advantageous
to it, any claim by or against it. With the CAAP having legally succeeded the ATO pursuant to R.A.
No. 9497, the obligations that the ATO had incurred by virtue of the deed of sale with the Ramos
spouses might now be enforced against the CAAP.

29 | P a g e
NHMFC VS ABAYARI

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. Respondents claim against petitioner, although it has already been validated by the
trial courts final decision, likewise belongs to that class of claims; hence, it must first be filed with the
COA before execution could proceed. And from the decision therein, the aggrieved party is afforded
a remedy by elevating the matter to this Court via a petition for certiorari in accordance with Section
1 Rule XI, of the COA Rules of Procedure.

NHMFC v ABAYARI

Petitioner, the National Home Mortgage Finance Corporation (NHMFC), is a government-owned and controlled
corporation created under the authority of 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 employees, who all profess as having been hired after June 30,
1989.8

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 August 21, 1989. Section 12 thereof directed that all
allowances namely representation and transportation allowance, clothing and laundry allowance, subsistence
allowance, hazard pay and other allowances as may be determined by the budget department enjoyed by covered
employees should be deemed included in the standardized salary rates prescribed therein, and that the other
additional compensation being received by incumbents only as of July 1, 1989 not integrated into the standardized
salary rates should continue to be authorized. To implement the law, the Department of Budget and Management
(DBM) issued Corporate Compensation Circular No. 10.9 Section 5.510 thereof excluded certain
allowances and benefits from integration into the standardized basic salary but continued their
grant to those who were incumbents as of June 30, 1989 and who were actually receiving the
benefits as of said date. These are the allowances involved in this case.

Respondents filed a petition for mandamus with the RTC of Makati City, Branch 13811 to compel
petitioner to pay them meal, rice, medical, dental, optical and childrens 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 Decision, the trial court ruled favorably and ordered
petitioner to pay respondents the allowances prayed for, retroactive to the respective dates of
appointment.

Conflict arose when the DBM sent a letter20 dated July 15, 2003 to NHMFC President Angelico
Salud disallowing the payment of certain allowances, including those awarded by the trial court
to respondents. A reading of the letter reveals that the disallowance was made in accordance
with the 2002 NHMFC Corporate Operating Budget previously issued by the DBM.

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To abide by the DBMs directive, petitioner then issued a memorandum stating that effective
August 2003, the grant of benefits to its covered employees, including those awarded to
respondents, would be curtailed pursuant to the DBM letter.21 This eventuality compelled
respondents to file for the second time a motion for a writ of execution of the trial courts April
27, 2001 decision. 22

In its October 14, 2003 Order,23 the trial court found merit in respondents motion; hence, it
directed the execution of the judgment. Petitioner moved for 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 P4,806,530.00 to be satisfied out of petitioners goods and chattels and if the same be not
sufficient, out of its existing real property.26 Respondents then sought the garnishment of its
funds under the custody of the Land Bank of the Philippines.27

Bent on preventing execution, petitioner filed a petition for certiorari with the Court of Appeals, In
it, petitioner ascribed grave abuse of discretion to the trial court in ordering the execution of the
judgment. It pointed out that the trial court disregarded the fact that the DBMs issuance
amounted to a supervening event, or an occurrence that changed the situation of the parties
that would make the continued payment of allowances to respondents impossible and illegal,
and disregarded the DBMs exclusive authority to allow or disallow the payment of the benefits
in question.29 It likewise faulted the trial court in ordering the garnishment of its funds
despite the settled rule that government funds may not be garnished in the absence of an
appropriation made by law.301avvphi1

The Court of Appeals, however, found no grave abuse of discretion on the part of the trial court;
hence, in its August 20, 2004 Decision, it dismissed the petition for lack of merit.31

SC:

Be that as it may, assuming for the sake of argument that execution by garnishment could
proceed in this case against the funds of petitioner, it must bear stress that the latter is a
government-owned or controlled corporation with a charter of its own. Its juridical
personality is separate and distinct from the government and it can sue and 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 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

Under Commonwealth Act No. 327,44 as amended by P.D. No. 1445,45 the COA, as one of the
three independent constitutional commissions, is specifically vested with the power, authority
and duty to examine, audit and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property owned or held in trust by the government, or any of
its subdivisions, agencies or instrumentalities, including government-owned and controlled
corporations.46 To ensure the effective discharge of its functions, it is vested with ample powers,
subject 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 disallowance of irregular,
unnecessary, excessive, extravagant or unconscionable expenditures or uses of government
funds and properties.47 Section 1,48 Rule II of the COA Rules of Procedure materially provides:

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Section 1. General Jurisdiction.The Commission on Audit shall have the power,
authority and duty to examine, audit and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property, owned or held in trust by, or
pertaining to the Government, or any of its subdivisions, agencies or instrumentalities, including
government owned and controlled corporations with original charters, and on a post-audit basis:
(a) constitutional bodies, commissions and offices that have been granted fiscal autonomy
under the Constitution; (b) autonomous state colleges and universities; (c) other government-
owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities
receiving subsidy or equity directly or indirectly, from or through the government, which are
required by law or the granting institution to submit to such audit as a condition of subsidy or
equity. However, where the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special pre-audit, as are
necessary or appropriate to correct the deficiencies. It shall keep the general accounts of the
Government, and for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto.

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. 6758.50Respondents claim against petitioner, although it has already
been validated by the trial courts final decision, likewise belongs to that class of claims; hence,
it must first be filed with the COA before execution could proceed. And from the decision
therein, the aggrieved party is afforded a remedy by elevating the matter to this Court via a
petition for certiorari51 in accordance with Section 1 Rule XI, of the COA Rules of Procedure. It
states:

MOBIL PHILIPPINES EXPLORATION VS.

CUSTOMS ARRASTRE SERVICE
18 SCRA 1120

FACTS: Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville",
consigned to Mobil Philippines Exploration, Inc., Manila. The shipment was
discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of
Customs then handling arrastre operations therein. The Customs Arrastre Service
later delivered to the broker of the consignee three cases only of the shipment.

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

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

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

ISSUE: Whether or not the defendants can invoke state immunity.

HELD: Now, the fact that a non-corporate government entity performs a

function proprietary in nature does not necessarily result in its being suable.
If said non-governmental function is undertaken as an incident to its
governmental function, there is no waiver thereby of the sovereign immunity
from suit extended to such government entity.

The Bureau of Customs, to repeat, is part of the Department of Finance, with

no personality of its own apart from that of the national government. Its
primary function is governmental, that of assessing and collecting lawful
revenues from imported articles and all other tariff and customs duties, fees,
charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre
service is a necessary incident.

Clearly, therefore, although said arrastre function may be deemed

proprietary, it is a necessary incident of the primary and governmental
function of the Bureau of Customs, so that engaging in the same does not
necessarily render said Bureau liable to suit. For otherwise, it could not
perform its governmental function without necessarily exposing itself to suit.
Sovereign immunity, granted as to the end, should not be denied as to the
necessary means to that end.

GSIS vs GROUP MANAGEMENT CORP. et. al. (JUNE 8,

2011)
FACTS: This case revolves around the petitions of the Lapu-Lapu Development & Housing
Corporation (LLDHC), Group Management Corporation (GMC) and the Government Service
Insurance System (GSIS). The three entities consistently filed cases for the same subject lots
from April 30, 1980, until this case. The cases were filed before both the RTC of Lapu-Lapu City,
where the subject lots are situated in, and the RTC of Manila.

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LLDHC entered into a Project and Loan Agreement with GSIS on February 4, 1974, involving
seventy-eight lots situated in Barrio, Marigondon, Lapu-Lapu City. GSIS agreed to a 25 million
peso loan with LLDHC, the owner of the lots. LLDHC failed to fulfill all of its obligations
regarding the lots, which included the real estate mortgage in favor of GSIS, and so, GSIS
closed the mortgage. Being the only bidder in the public auction sale, GSIS won over the
subject lots, and in time secured its ownership over the lots with the transfer certificate of
titles issued to its name. GMC offered to purchase on installment the subject lots with a
collective area specified as 423,177 square meters from GSIS, with the amount of 1,100,000
pesos. GSIS accepted the offer through a Deed of Conditional Sale on February 26, 1980. GMC
then learned that the subject lots was only 298,504 square meters and requested GSIS to
reduce the price according to the actual proportion of the land. This proposal was approved
with an Amendment to the Deed of Conditional Sale, which reflected the agreement of GSIS
and GMC. LLDHC filed a complaint against GSIS before the RTC of Manila on April 23, 1980 for
Foreclosure with Writ of Mandatory Injunction, known as Civil Case No. R-82-3429. GMC filed a
complaint also against GSIS on November 3, 1989, known as Civil Case No. 2203-L, for Specific
Performance with Damages before the RTC of Lapu-Lapu City. GSIS, in its defense, submitted a
COA Memorandum dated April 3, 1989 disallowing in audit the sale of the subject to the court,
stating that there were apparent inherent irregularities, and that GMC bought the property
at a value much lower than GSIS purchasing price.

On February 24, 1992, with regard to Civil Case No. 2203-L, the RTC of Lapu-Lapu City decided
in favor of GMC, and that GSIS was to execute order of the court pertaining to damages, and
actions needed to finalize the deed of absolute sale with GMC. On May 10, 1994, the RTC of
Manila also rendered its judgment that, aside from court orders, all claims and counterclaims
by the parties against each other are dismissed in Civil Case No. R-82-3429. LLDHC now used
the Manila RTC decision as a means to file a Petition for Annulment of Judgment of the Lapu-
Lapu RTC Decision in Civil Case No. 2203-L, named CA-GR SP No. 34696, which was dismissed
by the Court of Appeals. After this was a series of filing petitions to appeal the judgment.
Throughout the years, eventually, the three parties approached the Supreme Court, where, in
G.R. No. 167000, GSIS seeks to reverse and set aside the decision made on November 25, 2004
and January 20, 2005, and to annul and set aside the March 1, 2004 and May 7 2004 orders
from the Lapu-Lapu RTC in Civil Case No. 2203-L. And in G.R. No. 169971, GMC seeks to
reverse and set aside the Decision made in September 23, 2005 and to annul and set aside the
March 11, 2004 Lapu-Lapu RTC decision.

Issues: Whether or not the decisions of the Manila RTC in Civil Case No. R-82-3429 shall be
executory, despite the decision of Lapu-Lapu RTC in Civil Case No. 2203-L. Whether or not the
decision in CA GR SP No. 84382 and GSIS Petition in 167000 are barred by Res Judicata.
Whether or not due process was given to the parties/entities involved in the case. Whether or
not GSIS can be immune to acting out the orders of the court.

Ruling: The petition in G.R. No. 167000 was denied by the court, and the petition in G.R. No.
169971 is granted.

Ratio Decidendi: The decision of the Lapu-Lapu RTC in Civil Case No. 2203-L does not in any
way affect the orders from the Manila RTC in Civil Case No. R-82-3429, since the former has

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been finalized on January 28, 1995, while the latter became final on May 30, 1997. Procedural
due process was extended to all parties, that there was no immediate dismissal of their cases
before they were heard by the respective courts, even if they have already had a rendered
decision. However, the Supreme Court also recognized the doctrine of Finality of Judgment,
where the decisions, once final and executed cannot be appealed, unless of circumstances
that happen after the finalization, void judgments, correction of clerical errors and nunc pro
tunc entries. The decision in CA GR SP No. 84382 and GSIS Petition in 167000 are barred by
Res Judicata, which is one of the reasons why G.R. No. 167000 was denied. GSIS acted jure
gestonis, entering into a contract, and being solely liable for their irresponsibility. They are not
immune from acting out the orders of the court.

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