STATE IMMUNITY

1. VILLASOR v. REPUBLIC
Republic vs. Villasor (Consti1)
Republic of the Philippines, petitioner, vs. Hon. Guillermo P. Villasor, as Judge
of the Court of First Instance of Cebu, Branch I, the Provincial Sheriff of Rizal,
the Sheriff of the City of Manila, the Clerk of Court of First Instance of Cebu, P.J.
Kiener Co., Ltd., GavinoUnchuan, and International Construction Corporation,
respondents.
November 28, 1973
Fernando, J:
Facts: The decision that was rendered in favor of respondents P.J. Kiener Co.,
Ltd, GavinoUnchuan and International Construction Corporation was declared
final and executory by Respondent Hon. Guillermo P. Villasor. Pursuant to the
said declaration, the corresponding Alias Writ of Execution was issued. And for
the strength of this writ, the provincial sheriff served notices of garnishment
with several banks, especially on the 'monies due the Armed Forces of the
Philippines in the form of deposits; the Philippines Veterans Bank received the
same notice of garnishment.
The funds of the AFP on deposit with the banks are public funds duly
appropriated and allocated for the payment of pensions of retirees, pay and
allowances of military and civillian personnel and for maintenance and
operations of AFP.
Petitioner filed a petition against Villasor for acting in excess jurisdiction
amounting to lack of jurisdiction in granting the issuance of a Writ of Execution
against the properties of AFP, hence the notices and garnishments are null and
void.
Issue:Whether or not the Writ of Execution issued by respondent Judge
Villasor is valid.
Held: No.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 and its
government is immune from suit unless it gives its consent. A sovereign is

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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.

2. LASCO v. UNRENRE
Lasco vs UNRFNRE
Eldepio Lasco et al v United Nations Revolving Fund For Natural Resources
Exploration (UNRFNRE)
G.R. Nos. 109095-109107 February 23, 1995
Facts: Petitioners were dismissed from their employment with private
respondent, the United Nations Revolving Fund for Natural Resources
Exploration (UNRFNRE), which is a special fund and subsidiary organ of the
United Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.
Petitioners are the complainants for illegal dismissal and damages. Private
respondent alleged that respondent Labor Arbiter had no jurisdiction over its
personality since it enjoyed diplomatic immunity.
Issue:WON specialized agencies enjoy diplomatic immunity
Held:Petition is dismissed. This is not to say that petitioner have no recourse.
Section 31 of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations states that ³each specialized agency
shall make a provision for appropriate modes of settlement of (a) disputes
arising out of contracts or other disputes of private character to which the
specialized agency is a party.´ Private respondent is not engaged in a
commercial venture in the Philippines. Its presence is by virtue of a joint project
entered into by the Philippine Government and the United Nations for mineral
exploration in Dinagat Island

3. SEAFDEC v. NLRC, G.R. Nos. 97468-70, September 2 1993, 241 SCRA 580

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FACTS: Two labor cases were filed by the herein private respondents against
the petitioner, Southeast Asian Fisheries Development Center (SEAFDEC),
before the National Labor Relations Commission (NLRC), Regional Arbitration
Branch, Iloilo City. In these cases, the private respondents claim having been
wrongfully terminated from their employment by the petitioner.
The petitioner, who claims to be an international inter-government organization
composed of various Southeast Asian countries, filed a Motion to Dismiss,
challenged the jurisdiction of the public respondent in taking cognizance of the
above cases.
The private respondents, as well as respondent labor arbiter, allege that the
petitioner is not immune from suit and assuming that if, indeed, it is an
international organization, it has, however, impliedly, if not expressly, waived
its immunity by belatedly raising the issue of jurisdiction.
ISSUE:Whether or not the petitioner is immune from suit.
HELD:The Court ruled for the petitioner. It is beyond question that petitioner
SEAFDEC is an international agency enjoying diplomatic immunity. It has
already been held in Southeast Asian Fisheries Development
Center-Aquaculture Department vs. National Labor Relations Commission (G.R.
No. 86773, 206 SCRA 283/1992). Petitioner Southeast Asian Fisheries
Development Center-Aquaculture Department (SEAFDEC-AQD) is an
international agency beyond the jurisdiction of public respondent NLRC.
Being an intergovernmental organization, SEAFDEC including its Departments
(AQD), enjoys functional independence and freedom from control of the state
in whose territory its office is located. One of the basic immunities of an
international organization is immunity from local jurisdiction, i.e., that it is
immune from the legal writs and processes issued by the tribunals of the
country where it is found. The obvious reason for this is that the subjection of
such an organization to the authority of the local courts would afford a
convenient medium thru which the host government may interfere in their
operations or even influence or control its policies and decisions of the
organization; besides, such objection to local jurisdiction would impair the

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capacity of such body to discharge its responsibilities impartially on behalf of its
member-states.

4. CALLADO v. IRRI G.R. No. 106483 May 22, 1995/ ROMERO, J.:
Facts: Ernesto Callado, petitioner, was employed as a driver at the IRRI. One
day while driving an IRRI vehicle on an official trip to the NAIA and back to the
IRRI, petitioner figured in an accident.
Petitioner was informed of the findings of a preliminary investigation conducted
by the IRRI's Human Resource Development Department Manager. In view of
the findings, he was charged with:
(1) Driving an institute vehicle while on official duty under the influence of
liquor;
(2) Serious misconduct consisting of failure to report to supervisors the failure
of the vehicle to start because of a problem with the car battery, and
(3) Gross and habitual neglect of duties.
Petitioner submitted his answer and defenses to the charges against him.
However, IRRI issued a Notice of Termination to petitioner.
Thereafter, petitioner filed a complaint before the Labor Arbiter for illegal
dismissal, illegal suspension and indemnity pay with moral and exemplary
damages and attorney's fees.
IRRI wrote the Labor Arbiter to inform him that the Institute enjoys immunity
from legal process by virtue of Article 3 of Presidential Decree No. 1620, 5 and
that it invokes such diplomatic immunity and privileges as an international
organization in the instant case filed by petitioner, not having waived the same.
While admitting IRRI's defense of immunity, the Labor Arbiter, nonetheless,
cited an Order issued by the Institute to the effect that "in all cases of
termination, respondent IRRI waives its immunity," and, accordingly,
considered the defense of immunity no longer a legal obstacle in resolving the
case.
The NLRC found merit in private respondent's appeal and, finding that IRRI did
not waive its immunity, ordered the aforesaid decision of the Labor Arbiter set
aside and the complaint dismissed.

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In this petition petitioner contends that the immunity of the IRRI as an
international organization granted by Article 3 of Presidential Decree No. 1620
may not be invoked in the case at bench inasmuch as it waived the same by
virtue of its Memorandum on "Guidelines on the handling of dismissed
employees in relation to P.D. 1620."
Issue: Did the (IRRI) waive its immunity from suit in this dispute which arose
from an employer-employee relationship?
Held: No.P.D. No. 1620, Article 3 provides:
Art. 3. Immunity from Legal Process. The Institute shall enjoy immunity from
any penal, civil and administrative proceedings, except insofar as that immunity
has been expressly waived by the Director-General of the Institute or his
authorized representatives.
The SC upholds the constitutionality of the aforequoted law. There is in this
case "a categorical recognition by the Executive Branch of the Government that
IRRI enjoys immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon the
Courts in order not to embarrass a political department of Government.
It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political question
and courts should refuse to look beyond a determination by the executive
branch of the government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the government as in the
case at bar, it is then the duty of the courts to accept the claim of immunity
upon appropriate suggestion by the principal law officer of the government or
other officer acting under his direction.
The raison d'etre for these immunities is the assurance of unimpeded
performance of their functions by the agencies concerned.
The grant of immunity to IRRI is clear and unequivocal and an express waiver
by its Director-General is the only way by which it may relinquish or abandon
this immunity.
In cases involving dismissed employees, the Institute may waive its immunity,
signifying that such waiver is discretionary on its part.

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5. Begosa vs. PVA
Gaudencio A. Begosa, plantiff-appellee,
vs. Chairman, Philippine Veterans Administration;and Members of the Board of
Administrators, Philippine Veterans Administration, defendants/ appellants

Nature: Appeal from a decision of the CFI of Manila

April 30, 1970, Fernando, J

Facts:
 Plaintiff sought the aid of the judiciary to obtain the benefits to which he
believed he was entitled under the Veterans’ Bill of Rights.
 He filed his claim for disability pension on March
4, 1955 but was erroneously disapproved on June 21, 1955 due to his
dishonorable discharge from the army.
 The Board of Administrators of PVA finally approved his claim on
September 2, 1964, entitling him with a pension of P30 a month, to take
effect on October 5 of that year.
 Believing that his pension should have taken effect back in 1955 when
his claim was disapproved, and that he is entitled to a higher pension of
P50 (RA No. 1362 amending Section 9 of RA No. 65) as a permanently
incapacitated person, which was increased toP100 a month when RP
1362 was amended by RA No. 1920 on June 22, 1957, Begosa filed a
case against PVA in the Court of First Instance.
 CFI ruled in favor plaintiff.
 Defendants claim that the plaintiff has not exhausted all administrative
remedies before resorting to court action and that the plaintiff’s claim is
in reality a suit against the Government
which cannot be entertained by this Court for lack of jurisdiction
because the Government has not given its consent.
Issue: WON the SC can entertain the suit against PVA.

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Held: Yes.
Ratio:
 Where a litigation may have adverse consequences on the public
treasury, whether in the disbursements of funds or loss of property, the
public official proceeded against not being liable in his personal
capacity, then the doctrine of non-suitability may
appropriately be invoked.
 However, it has no application where the suit against such a
functionary had to be instituted because of his failure to
comply with the duty imposed by statue appropriating public
funds for the benefit of plaintiff.
 Also, where there is a stipulation of facts, the question before the lower
court being solely one of law and on the face of the decision, the
actuation of appellants being patently illegal, the doctrine of exhaustion
of administrative remedies certainly does not come into play

6. DEL MAR V. PHILIPPINE VETERANS ADM (PVA)

Facts: Del Mar averred that he served during WW II as chief Judge advocate of
the Cebu Area Command(a duly recognized guerrilla org.) w/ the rank of major;
that he subsequently obtained an honorable discharge from the service on
10/20/46 on a cert. of permanent total physical disability; that upon proper
claim presented and after hearing and adjudication, the Phil. Veterans BD
granted him a monthly life pension of P50 effective 1/28/47;that in 3/50,the aid
Bd, discounted payment of monthly life pension on the ground that his receipt
of similar pension from the Us gov’t, thru the US Veterans Admin. by reason of
military service rendered in the US in the Far East during the war, precluded him
from receiving any further monthly life pension from the Phil. Govt; that he
wrote the said BB. Twice, demanding the continued payment of his monthly
pension but his demands went unheeded. And petition for mandamus was filed
w/ CFI Cebu w/c rendered judgement upholding Del mar’s claim.
The PVA argues that the court a quo was w/o jurisdiction to try civil cases bec.it
involves a money claim against PVA- a mere agency of the Gov’t performing

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governmental functions w/ no juridical personality of its own-and,in reality,
partakes of an action against the Phil. Gov’t which is immune from suit w/o its
consent.

HELD: As a general proposition, the rule on the immunity of the Government

from suit w/o its consent holds true in all actions resulting in “adverse
consequences on the public treasury, whether in the disbursements of funds or
loss pf prop. Needless to say, in such actions, which ,in effect, constitute suit
against the Gov’t, the court has no option but to dismiss them. Nonetheless, the
rule admits of an exception. It finds no application where a claimant. As clearly
discernible from the circumstances, the case at bar falls under the exception.

7. VETERANS MANPOWER AND PROTECTIVE SERVICE, INC. VS CA

(G.R. NO. 91359, SEPTEMBER 25, 1992)
FACTS: A suit was filed against the PC Chief for failure to act on the request by
petitioner seeking to set aside the findings of PADPAO expelling it from PADPAO
and considering its application for renewal of its license even without a
certificate of membership from PADPAO. A Motion to Dismiss was filed
invoking that it is a suit against the State which had not given its consent.
ISSUES: Whether or not the action taken by the petitioners is a suit against the
State.
Whether or not the PC Chief and PC-SUSIA are liable in their private capacities.
Whether or not the Memorandum of Agreement constitute as an implied
consent of the State to be sued
HELD: Yes, it is a suit against the State, the PC Chief and PC-SUSIA being
instrumentalities of the State exercising the governmental function of
regulating the organization and operation of private detective watchmen or
security guard agencies. Even if its action prospers, the payment of its
monetary claims may not be enforced because the State did not consent to
appropriate the necessary funds for the purpose.
No, since the acts for which the PC Chief and PC-SUSIA are being called to
account in this case, were performed by them as part of their official duties,

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without malice, gross negligence or bad faith, no recovery may be held against
them in their private capacities.
No, the Memorandum of Agreement did not constitute an implied consent by
the State to be sued because it was intended to professionalize the industry and
to standardized the salaries of the security guards. It is merely incidental to the
purpose of RA No. 5487 which is to regulate the organization and operation of
private security agencies.
The State is deemed to have given tacitly its consent to be sued when it enters
into a contract. However, it does not apply where the contact relates to the
exercise of its sovereign functions.

8. PNB v. CIR (81 SCRA 314)

Facts:
Petitioner’s motion to quash a notice of garnishment was denied for lack of
merit. What was sought to be garnished was the money of the People's
Homesite and Housing Corporation deposited at petitioner's branch in Quezon
City, to satisfy a decision of respondent Court which had become final
and executory. A writ of execution in favor of private respondent Gabriel V.
Manansala had previously been issued. He was the counsel of the prevailing
party, the United Homesite Employees and Laborers Association. The validity
of the order assailed is challenged on two grounds: (1) that the appointment
of respondent Gilbert P. Lorenzo as authorized deputy sheriff to serve the writ
of execution was contrary to law and (2) that the funds subject of
the garnishment "may be public in character."The order of August 26, 1970 of
respondent Court denying the motion to quash, subject of this certiorari
proceeding, reads as follows:"The Philippine National Bank moves to quash the
notice of garnishment served upon its branch in Quezon City by the authorize
ddeputy sheriff of this Court. It contends that the service of the notice by the
authorized deputy sheriff of the court contravenes Section11 of Commonwealth
Act No. 105, as amended which reads:" 'All writs and processes issued by the
Court shall be served and executed free of charge by provincial or city sheriffs,
or by any person authorized by this Court, in the same manner as writs and

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processes of Courts of First Instance.' Following the law, the Bank argues that
it is the Sheriff of Quezon City, and not the Clerk of this Court who is its
Ex-Officio Sheriff, that has the authority to serve the notice of garnishment,
and that the actual service by the latter officer of said notice is therefore not
in order. The Court finds no merit in this argument. Republic Act No. 4201 has,
since June 19, 1965, already repealed Commonwealth Act No. 103, and under
this law, it is now the Clerk of this Court that is at the same time the Ex-Officio
Sheriff. As such Ex-Officio Sheriff, the Clerk of this Court has therefore the
authority to issue writs of execution and notices of garnishment in an area
encompassing the whole of the country, including Quezon City, since his area
of authority is coterminous with that of the Court itself, which is national in
nature. ... At this stage, the Court notes from the record that the appeal to the
Supreme Court by individual employees of PHHC which questions the award of
attorney's fees to Atty. Gabriel V. Manansala, has already been dismissed and
that the same became final and executory on August 9, 1970. There is no
longer any reason, therefore, for withholding action in this case. [Wherefore],
the motion to quash filed by the Philippine National Bank is denied for lack of
merit. The said Bank is therefore ordered to comply within five days from
receipt with the 'notice of Garnishment' dated May 6, 1970."
There was a motion for reconsideration filed by petitioner, but in a resolution
dated September 22, 1970, it was denied. Hence, this certiorari petition.

Issue:
WON the funds mentioned may be garnished

Ruling:
No

Rationale:
National Shipyard and Steel Corporation v. court of Industrial Relations is squarely in
point. As was explicitly stated in the opinion of the then Justice, later Chief
Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO

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are public funds of the government, and that, as such, the same may not be
garnished, attached or levied upon, is untenable for, as a government owned
and controlled corporation. the NASSCO has a personality of its own, distinct
and separate from that of the Government. It has pursuant to Section 2 of
Executive Order No. 356, dated October 23, 1950 ..., pursuant to which the
NASSCO has been established — 'all the powers of a corporation under
the Corporation Law ...' Accordingly, it may sue and be sued and may be
subjected to court processes just like any other corporation (Section 13, Act No.
1459), as amended."In a 1941 decision,
Manila Hotel Employees Association v. Manila Hotel Company this Court,
through Justice Ozaeta, held: "On theother hand, it is well settled that when the
government enters into commercial business, it abandons its sovereign
capacity and is to betreated like any other corporation. (Bank of the United
States v. Planters' Bank,Wheat, 904, 6 L.ed. 244). By engaging in a particular
business thru the instrumentality of a corporation, the government divests
itself pro hac vice of its sovereign character, so as to render the corporation
subject to the rules of law governing private corporations."Both the Palacio and
the Commissioner of Public Highways decisions, insofar as they reiterate the
doctrine that one of the coronaries of the fundamental concept of
non-suability is that governmental funds are immune from garnishment. It is
an entirely different matter if, according to Justice
Sanchez in Ramos v. Court of Industrial Relations , the office or entity is "possessed of
a separate and distinct corporate existence." Then it can sue and be sued.
Thereafter, its funds may be levied upon or garnished.

9. SSS v CA 120 SCRA 707

MELENCIO-HERRERA; February 21. 1983

FACTS
- In March 1963, spouses David B. Cruz and Socorro Cancio Cruz applied for and
were granted a real estate loan by the SSS with their residential lot located at
Lozada Street, Sto. Rosario, Pateros, Rizal covered by Transfer Certificate of

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Title No. 2000 of the Register of Deeds of Rizal its collateral. Pursuant to this
real estate loan said spouses executed on March 26, 1963 the corresponding
real estate mortgage originally in the amount of P39,500.00 which was later
increased to P48,000.00 covering said property.
- On July 9, 1968, defendant SSS filed an application with the Provincial Sheriff
of Rizal for the foreclosure of the real estate mortgage executed by the plaintiffs
on the ground, among others that the conditions of the mortgage have been
broken since October 1967 with the default on the part of the mortgagor to pay
in full the installments then due and payable on the principal debt and the
interest thereon, and all of the monthly installments due and payable thereafter
up to the present date. Notice of the Sheriff's Sale of the mortgaged property
was initially published in the Sunday Chronicle in its issue of July 14, 1968
announcing the sale at public auction of the said mortgaged property. Despite
plaintiff’s letter to defendant demanding the latter to withdraw foreclosure and
discontinue the publication of the notice of sale of their property claiming that
plaintiffs were up-to date in the payment of their monthly amortizations,
defendant SSS still went on to publish second and third publications of
foreclosure.
- On July 24, 1968, the plaintiff Cruz spouses instituted before the Court of
First Instance of Rizal an action for damages and attorney's fees against the
SSS and the Provincial Sheriff of Rizal alleging, among other things, that they
had fully and religiously paid their monthly amortizations and had not defaulted
in any payment. Trial Court rendered judgment against defendant SSS. Court of
Appeals affirmed Trial Court’s decision. Hence, this petition for review on
certiorari.

ISSUES
(1) WON the Cruz spouses had, in fact, violated their real estate mortgage
contract with the SSS as would have warranted the publications of the notices
of as would have foreclosure
(2) WON the SSS is immune from suit
(3) WON SSS can be held liable for damages.

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HELD
(1) Ratio On questions of appreciation of evidence, factual findings of the
lower court are not subject to review by this Court.
Reasoning The reasoning used precedence to arrive at this ratio. Applying the
rule, it can be said therefore, that the findings of the Court of Appeals that the
mortgage-debtors have not in fact violated their contract because SSS accepted
their installment payments although given late will not be disturbed on appeal.
(2) Ratio An entity performing governmental functions, by virtue of the
explicit provision of an enabling law, is deemed to have waived immunity from
suit, although it does not thereby concede its liability.
Reasoning Again, the leg of reasoning is ratio by precedence, citing Rayo v.
Court of First Instance of Bulacan, (110 SCRA 457), which involved the National
Power Corporation as an entity performing governmental functions. In that
case it said, “It is sufficient to say that the government has organized a private
corporation, put money in it and has allowed it to site and be sued in any court
under its charter.” The enabling law is R.A. No. 6395. Applying this rule in the
present case, the SSS’ own organic act specifically provides that it can sue and
be sued in Court, the enabling law being R.A. 1161 and P.D. 24. Hence, there’s
a statutory consent by the SSS to waive right of immunity from suit.
(3) Ratio No moral and/or temperate damages is to be adjudged against a
party which commenced foreclosure proceedings in view of the irregular
payments of the debtor of his installments.
Decision (1) The ruling of the lower courts remain. While it is true that the
payments of the monthly installments were previously not regular, it is a fact
that as of June 30, 1968 the appellee, David B. Cruz and Socorro Concio-Cruz
were up-to-date and current in the payment of their monthly installments.
Having accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the mortgagors
apply for the extra-judicial foreclosure of the mortgage.
(2) SSS is deemed to have waived its immunity from suit.
(3) SSS cannot be held liable for damages.

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Voting 10 justices concur, 1 dissent, 3 took no part.
10. RAYO VS. CFI OF BULACAN
Facts: During the height of typhoon Kading , the National Power Corporation’s
plant superintendent Chavez opened simultaneously all the three floodgates of
the Angat Dam.
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.
The petitioners, who are among the unfortunate victims of the man-caused
flood, filed several complaints for damages against NPC and the plant
superintendent.
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.
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).

11. MALONG VS. PNR, G.R. NO. L-49930

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Facts: The Petitioners, Malong spouses alleged in their complaint that on
October 30, 1977 their son, Jaime Aquino, a paying passenger, was killed when
he fell from a PNR train while it was between Tarlac City and Capas. The said
train was overloaded with passengers and baggage in view of the proximity of
All Saints Day. The Malong spouses prayed that the PNR be ordered to pay
them damages totalling P136,370.
The trial court dismissed the complaint, ruling that it had no jurisdiction
because the PNR, being a government instrumentality, the action was a suit
against the State.
The petitioners appealed to SC pursuant to RA No. 5440.
Issue: W/N the PNR is immune from suit? NO.
 Although the PNR is a government instrumentality under Republic Act
No. 4156, as amended by Republic Act No. 6366 and Presidential Decree
No. 741, it was held that the State divested itself of its sovereign capacity
when it organized the PNR which is no different from its predecessor, the
Manila Railroad Company. The PNR did not become immune from suit. It
did not remove itself from the operation of articles 1732 to 1766 of the
Civil Code on common carriers.
 However, as held in precedents, the correct rule is that "not all
government entities, whether corporate or non-corporate, are immune
from suits. Immunity from suit is determined by the character of the”
objectives “for which the entity was organized.”
 The Manila Hotel case also relied on the following rulings: “By engaging
in a particular business through the instrumentality of a corporation, the
government divests itself pro hac vice of its sovereign character, so as to
render the corporation subject to the rules of law governing private
corporations.”
Held: The order of dismissal is reversed and set aside. The case is remanded to
the trial court for further proceedings, costs against the Philippine National
Railways.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR
employees could not sue the PNR for damages. Like any private common

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carrier, the PNR is subject to the obligations of persons engaged in that private
enterprise. It is not performing any governmental function.
Notes
Abad Santos, J., concurring:
 The claim that Philippine National Railways is immune from suit because
it is an instrumentality of the government is so outlandish that it
deserves slight consideration.
 He mentioned the Central Bank of the Philippines as an example of
government instrumentality that is not immune from suit for it also
performs proprietary functions.
 He also contended the use of the immunity from suit on the part of the
government corporations to deny justice that is due to the people they
are to serve.

12. JESUS DISNI v. SANDIGANBAYAN

Hermino T. Disini vs. the HonorableSandiganbayan
Decision: The Sandiganbayan has exclusive original jurisdiction over the
criminal action of Hermino T. Disini notwithstanding that he is a private
individual considering his criminal prosecution is intimately related to the
recovery of ill-gotten wealth of the Marcoses, their immediate family,
subordinates and close associates.
Facts:
1. Disini, is the husband of PacienciaEscolin-Disini, the first cousin of First
Lady Imelda Romualdez-Marcos, and at the same time the family
physician of the Marcoses, had close personal relations and intimacy
with and free access to President Marcos, a public official.
2. Mr. Disini was charged by the Sandiganbayan on June 30, 2004 with
corruption of public officials and violation of Section 4a of the Anti-Graft
and Corrupt Practices Act
a. Criminal Case No. 28001 – from the period of 1974 to February
1986 conspired with then President Marcos to give gifts and
presents to President Marcos in forms of 2.5 billion shares of

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 stock in Vulcan Industrial and Mining Corporation and 4 billion
shares of stock in the Energy Corporation with both shares
having a book value of P 100.00/share.
b. Criminal Case No. 28002 - from the period of 1974 to February
1986, conspired with then President Marcos to request and
receive from Burns and Roe, a foreign consultant, the total
amount of One Million U.S. Dollars ($1,000,000.00),more or less,
and also from Westinghouse Electric
Corporation(WESTINGHOUSE), the total amount of Seventeen
Million U.S. Dollars($17,000,000.00), more or less, all for and in
consideration of Disini to secure and obtain, which Disini did
secure and obtain, the contract for the said Burns and Roe and
Westinghouse to do the engineering and architectural design,
and construct, of the Philippine Nuclear Power Plant Project at
Morong, Bataan.
3. Mr. Disini via petition for critoriari alleging the Sandiganbayan
committed grace abuse of discretion amounting to lack or excess of
jurisdiction.
a. Sandiganbayan has no jurisdiction
b. Grave abuse of discretion by denial of petitioner’s constitutional
and statutory right of prescription erring in the following:
i. Determining applicable prescriptive period;
ii. Commencement of prescriptive period; and
iii. Determination of point of prescriptive period.
c. Sandiganbayan showed prejudgement of the case by upholding
the glaringly absent elements of the offenses charged
d. Sandiganbayan refused to quash the information despite utter
failure to comply to prescribed form denying the petitioner’s
constitutional and statutory right to be informed the nature and
cause of accusations against him.
Issue: The jurisdiction of Sandiganbayan over the criminal action of
HerminoDisina and the grave abuse of the Sandiganbayan to Mr. Disini’s

17
statutory and constitutional rights of prescription and rights to be informed the
cause and nature of accusations against him.
Ruling:
1. The petition for certiorari has no merit
2. On the issue of jurisdiction, Section 2 of E.O. No.1 has tasked the PCGG
to assist the recovery of ill-gotten wealth of President Marcos. It is
underscored that it was the PCGG that had initially filed the criminal
complaints in the Sandiganbayan, with the Office of the Ombudsman
taking over the investigation of Disini only after the Court issued in
Cojuangco, Jr. the directive to the PCGG to refer the criminal cases to the
Office of the Ombudsman on the ground that the PCGG would not be an
impartial office following its finding of a prima facie case being
established against Disini
3. Similarly, The Sandiganbayan also holds jurisdiction of Civil and criminal
cases filed pursuant to and in connection with Executive Order Nos. 1, 2,
14 and 14-A, issued in 1986 under Section c of RA 8249.
4. On the issue of offenses charged has not yet prescribed:
a. Applicability of prescription period: Although period of
prescription for corruption of public officials charged against
Disini is 15 years, it would not be held that the prescriptive period
began to run from 1974 since during the Marcos regime, no
person would have dared to assail the legality of the transaction.
b. Prescriptive period for the crime commenced from the date of its
discovery in 1992 after the Committee made an exhaustive
investigation. When the complaint was filed in 1997, only five
years have elapsed, and, hence, prescription has not yet set in.
c. Criminal complaints were filed and their records transmitted by
the PCGG to the Office of the Ombudsman on April 8, 1991for the
conduct the preliminary investigation and as such there was no
interruption of proscriptive period.
5. Information was insufficient in form and substance:

18
 a. Information on Criminal Case 28001 and 28002 is sufficiently
complied to the requirements of Section 6, Rule 110 of the Rules
of the Court since it states the name of the accused; the
designation of the offense given by the statute; the acts or
omissions complained of as constituting the offense; the name of
the offended party; the approximate date of the commission of
the offense; and the place where the offense was committed.
b. Allegations are also sufficiently upheld as the elements of the
offenses under Section 4(a) of RA 3019 are present.

13. DA v. NLRC
Department of Agriculture vs. the National Labor Relations Commission
Decision: Petition to nullify the Resolution, 1 dated 27 November 1991, of the
National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro
City, which will deny the petition for injunction, prohibition and mandamus that
prays to enjoin permanently the NLRC's Regional Arbitration Branch X and
Cagayan de Oro City Sheriff from enforcing the decision 2 of 31 May 1991 of the
Executive Labor Arbiter and from attaching and executing on petitioner's
property.

Facts:
1. The NLRC rendered a decision on May 31, 1990 finding the DA jointly
and severally liable with Sultan Security Agency for the payment of
money claims, aggregating P266,483.91, of the complainant security
guards. The petitioner and Sultan Security Agency did not appeal the
decision of the Labor Arbiter. Thus, the decision became final and
executory.
2. On 18 July 1991, the Labor Arbiter issued a writ of execution. 5
commanding the City Sheriff to enforce and execute the judgment
against the property of the two respondents. Forthwith, or on 19 July
1991, the City Sheriff levied on execution the motor vehicles of the
petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit Toyota Mini

19
 Cruiser, and one (1) unit Toyota Crown. 6 These units were put under
the custody of Zacharias Roa, the property custodian of the petitioner,
pending their sale at public auction or the final settlement of the case,
whichever would come first.
3. Petitioner charged that the NLRC with grave abuse of discretion for
refusing to quash the writ of execution as the NLRC assumes jurisdiction
over a money claim which should fall under the exclusive jurisdiction of
the Commission on Audit and the NLRC disregards the cardinal rule of
the non-suability of the State.
Issue: The non-suability of the State and execution of the NLRC to acquire the
government property.
Ruling:
1. Petition was granted.
2. The basic postulate in the Constitution states that "The State may not be
sued without its consent. (Article XVI, Section 3 of the Constitution). This
rule though does not say that the State cannot be sued in any
circumstances.
3. When the state gives its consent to be sued, it does thereby necessarily
consent to unrestrained execution against it. In other words, when the
State waives its immunity, all it does, in effect, is to give the other party
an opportunity to prove, if it can, that the State has a liability.
4. 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 the claimant's
action "only up to the completion of proceedings anterior to the stage of
execution"
5. That the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs or
execution or garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must be
covered by the correspondent appropriation as required by law. The
functions and public services rendered by the State cannot be allowed to

20
 be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.

14. VMPSI v. CA
Facts:Veterans Manpower and Protective Services, Inc. (VMPSI) alleges that
the provisions under Section 4 and 17 of Republic Act No. 5487 or the Private
Security Agency Law violate the 1987 Constitution against monopolies, unfair
competition and combinations in restraint of trade, and tend to favor and
institutionalize the Philippine Association of Detective and Protective Agency
Operators, Inc. (PADPAO) which is monopolistic because it has an interest in
more than one security agency.
Respondent VMPSI likewise questions the validity of paragraph 3,
subparagraph (g) of the Modifying Regulations on the Issuance of License to
Operate and Private Security Licenses and Specifying Regulations for the
Operation of PADPAO issued by then PC Chief Lt. Gen. Fidel V. Ramos, through
Col. Sabas V. Edades, requiring that “all private security agencies/company
security forces must register as members of any PADPAO Chapter organized
within the Region where their main offices are located...”. As such membership
requirement in PADPAO is compulsory in nature, it allegedly violates legal and
constitutional provisions against monopolies, unfair competition and
combinations in restraint of trade.
A Memorandum of Agreement was executed by PADPAO and the PC Chief,
which fixed the minimum monthly contract rate per guard for eight (8) hours of
security service per day at P2,255.00 within Metro Manila and P2,215.00
outside of Metro Manila.
Odin Security Agency (Odin) filed a complaint with PADPAO accusing VMPSI of
cut-throat competition by undercutting its contract rate for security services
rendered to the Metropolitan Waterworks and Sewerage System (MWSS),
charging said customer lower than the standard minimum rates provided in the
Memorandum of Agreement dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO
Committee on Discipline recommended the expulsion of VMPSI from PADPAO

21
and the cancellation of its license to operate a security agency. The PC-SUSIA
affirmed the findings and likewise recommended the cancellation of VMPSI’s
license. As a result, PADPAO refused to issue a clearance/certificate of
membership to VMPSI.
VMPSI made a request letter to the PC Chief to set aside or disregard the
findings of PADPAO and consider VMPSI’s application for renewal of its license,
even without a certificate of membership from PADPAO.
Issue:Whether or not VMPSI’s complaint against the PC Chief and PC-SUSIA is
a suit against the State without its consent.
Held:Yes. A public official may sometimes be held liable in his personal or
private capacity if he acts in bad faith, or beyond the scope of his authority or
jurisdiction, however, since the acts for which the PC Chief and PC-SUSIA are
being called to account in this case, were performed as part of their official
duties, without malice, gross negligence, or bad faith, no recovery may be had
against them in their private capacities. Furthermore, the Supreme Court
agrees with the Court of Appeals that the Memorandum of Agreement dated
May 12, 1986 does not constitute an implied consent by the State to be sued.
The consent of the State to be sued must emanate from statutory authority,
hence, a legislative act, not from a mere memorandum. Without such consent,
the trial court did not acquired jurisdiction over the public respondents. Petition
for review is denied and the judgment appealed from is affirmed in toto.

15. LARKINS v. NLRC

T/Sgt.Larkins vs NLRC (1995) G.R. 92432
Facts:On August 12, 1988, private respondents filed a complaint with the
Regional Arbitration Branch No. III of the NLRC, San Fernando, Pampanga,
against petitioner Larkins, a member of the United States Air Force (USAF)
assigned to oversee the dormitories of the Third Aircraft Generation Squadron
(3 AGS) at Clark Air Base, Pampanga., Lt. Col. Frankhauser, and Cunanan (the
new contractor ) for illegal dismissal and underpayment of wages. Petitioner
and Lt. Col. Frankhauser failed to answer the complaint and to appear at the
hearings.

22
They, likewise, failed to submit their position paper, which the Labor Arbiter
deemed a waiver on their part to do so. On the basis of private respondents'
position paper and supporting documents, the Labor Arbiter rendered a
decision granting all the claims of private respondents. He found both Lt. Col.
Frankhauser and petitioner "guilty of illegal dismissal" and ordered them to
reinstate private respondents with full back wages, or if that is no longer
possible, to pay private respondents' separation pay. Petitioner appealed to the
NLRC claiming that the Labor Arbiter never acquired jurisdiction over her
person because no summons or copies of the complaints, both original and
amended, were ever served on her. In her "Supplemental Memorandum to
Memorandum of Appeal," petitioner argued that the attempts to serve her with
notices of hearing were not in accordance with the provisions of the RP-US
Military Bases Agreement of 1947.
Issue:Whether or not the questioned resolutions are null and void.
Held:No jurisdiction was ever acquired by the Labor Arbiter over the case and
the person of petitioner and the judgment rendered is null and void.
Summonses and other processes issued by Philippine courts and administrative
agencies for United States Armed Forces personnel within any U.S. base in the
Philippines could be served therein only with the permission of the Base
Commander. If he withholds giving his permission, he should instead designate
another person to serve the process, and obtain the server's affidavit for filing
with the appropriate court. Respondent Labor Arbiter did not follow said
procedure. He instead, addressed the summons to Lt. Col. Frankhauser and not
the Base Commander. Respondents do not dispute petitioner's claim that no
summons was ever issued and served on her. They contend, however, that
they sent notices of the hearings to her Notices of hearing are not summonses.
The provisions and prevailing jurisprudence in Civil Procedure may be applied
by analogy to NLRC proceedings (Revised Rules of the NLRC, Rule I, Sec. 3). It
is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the
respondent without the latter being served with summons. In the absence of
service of summons or a valid waiver thereof, the hearings and judgment
rendered by the Labor Arbiter are null and void. Petitioner, in the case at bench,

23
appealed to the NLRC and participated in the oral argument before the said
body. This, however, does not constitute a waiver of the lack of summons and
a voluntary submission of her person to the jurisdiction of the Labor Arbiter.
She may have raised in her pleadings grounds other than lack of jurisdiction,
but these grounds were discussed in relation to and as a result of the issue of
the lack of jurisdiction. In effect, petitioner set forth only one issue and that is
the absence of jurisdiction over her
person. If an appearance before the NLRC is precisely to question the
jurisdiction of the said agency over the person of the defendant, then this
appearance is not equivalent to service of summons. Be that as it may, on the
assumption that petitioner validly waived service of summons on her, still the
case could not prosper. There is no allegation from the pleadings filed that Lt.
Col. Frankhauser and petitioner were being sued in their personal capacities for
tortious acts. However, private respondents named 3 AGS as one of the
respondents in their complaint. Private respondents were dismissed from their
employment by Lt. Col. Frankhauser acting for and in behalf of the U.S.
Government. The employer of private respondents was neither Lt. Col.
Frankhauser nor petitioner. The employer of private respondents, as found by
NLRC, was the U.S. Government which, by right of sovereign power, operated
and maintained the dormitories at Clark Air Base for members of the USAF.
Indeed, assuming that jurisdiction was acquired over the United States
Government and the monetary claims of private respondents proved, such
awards will have to be satisfied not by Lt. Col. Frankhauser and petitioner in
their personal capacities, but by the United States government.

16. SHAUF V COURT OF APPEALS 191 SCRA 713

REGALADO; November 27, 1990

FACTS:
Petitioner Loida Q. Shauf, a Filipino by origin and married to an American who
is a member of the United States Air Force, applied for the vacant position of
Guidance Counselor, GS 1710-9, in the Base Education Office at Clark Air Base,

24
for which she is eminently qualified. She had functioned as a Guidance
Counselor at the Clark Air Base at the GS 1710-9 level for approximately four
years at the time she applied for the same position in 1976. her application was
forwarded to Anthony Persi, who had some reservations regarding Shauf’s work
experience. Persi then requested the Civilian Personnel Office to initiate
immediate inquiry to the Central Oversea Rotation and Recruiting Office
(CORRO). Persi was then informed by CORRO that an Edward B. Isakson was
selected for the position. Isakson was placed on the rolls at Clark Air Base on
January 1977.
By reason of her non-selection to the position, Loida Shauf filed an equal
employment opportunity complain against respondents for alleged
discrimination against the former by reason of her nationality and sex. Trial
court held in favor of Shauf, while Court of Appeals reversed decision.

ISSUES
WoN the officers of the US Armed Forces performing official functions in
accordance with the powers vested in them under the Philippine American
Military Bases Agreement are immune from suit (even w/o consent of the
State).
WoN the respondents are guilty of discrimination against petitioner Shauf.
WoN Shauf should be awarded compensatory damages.

HELD
As expressed in Art. XVI, Section 3 of the 1987 Consti, the state may not be
sued without its consent. This is a generally accepted principle of International
law under Art II, Section 2. The case at hand may be construed as a suit against
the US, since the damages to Shauf will be taken from funds of the US.
However, it is also applicable to complaints filed against officials of the state for
acts allegedly performed by them in the discharge of their duties. Unauthorized
acts of government officials are not acts of the State, and an action against the
officials by one whose rights have been invaded by such offenses, is not a suit
against the State covered by the rule of immunity. The respondents are being

25
sued in their private and personal capacity. The rationale for this ruling is that
the doctrine of state immunity cannot be used as an instrument for perpetrating
an injustice. A public official may be liable in his personal private capacity for
whatever damage he may have caused by his act done with malice and in bad
faith, or beyond the scope of his authority or jurisdiction.

Doctrine Yes. Regalado is concurred with by Melencio-Herrera, Paras, Padilla,

and Sarmiento.
The US officers are NOT IMMUNE from suit even without the consent of the
State.
Yes the petitioners are guilty of discrimination against Shauf. Despite Shauf’s
qualifications, Persi did not even consider the former’s application. Since the
petitioner was able to prove the discrimination in the non-consideration of her
application, the burden shifted to the respondents. The respondents however
answered with mere denials of the charges.
Shauf need not be awarded compensatory damages. There was no proof that
she really was to earn $39,662 if she was employed at the time. Damages which
are merely possible are speculative. There must be an actual proof of loss.

17. REPUBLIC VS. SANDOVAL

220 SCRA 124 (1993)

FACTS:
By reason of the Mendiola massacre, wherein 12 rallyists died in their quest for
“genuine agrarian reform”, President Aquino issued Administrative Order No.11
which created the Citizen’s Mendiola Commission for the purpose of conducting
an investigation for the disorders, death and casualties that took place.
The most significant recommendation of the Commission was for the
deceased and other victims of Mendiola incident to be compensated by the
government.
Due to the recommendation, petitioners filed a formal letter of demand for
compensation from the government to which the latter did not take heed. The

26
group then instituted an action for damages against the Republic of the
Philippines together with military officers and personnel involved in
Mendiola incident.
Respondent Judge Sandoval dismissed the complaint as against the Republic of
the Philippines on the basis that there was no waver by the state. Hence, the
petition for certiorari.

ISSUE:
Whether the State by virtue of the administrative order waived its immunity
from suit?
HELD:
NO. Firstly, recommendation made by the commission does not in any way
mean that liability automatically attaches to the state. In effect, the same shall
only serve as a cause of action on the event that any party decides to litigate his
or her claim. The commission is merely a preliminary venue.
Secondly, whatever acts or utterances that then President Aquino may have
said or done, the same are not tantamount to the state having waived its
immunity from suit.
The principle of state immunity from suit does not apply in this case, as when
the relief demanded by the suit requires no affirmative official action on the part
of the state nor the affirmative discharge of any obligation which belongs to the
state in its political capacity, even though the officers or agents who are made
defendants claim to hold or act only by virtue of a title of the state and as its
agents and servants.

18. DEPARTMENT OF AGRICULTURE (DOA), petitioner, vs. THE

NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Facts:
 DOA and Sultan Security Agency (SSA) entered into a contract for
security services. Several guards filed a complaint against DOA and SSA
for under payment of wages, non-payment of 13th month pay and etc.

27
  The Labor Arbiter of Cagayan de Oro found DOA and SSA liable for the
payment of money claim of the guards. The Labor Arbiter issued a “Writ
of Execution” commanding the City Sheriff to execute the judgment
against the DOA and SSA. Hence, the City Sheriff seized three
motorcycles of the DOA.
 In a petition of certiorari, DOA filed a “petition for injunction, prohibition
and mandamus, with prayer for preliminary injunction” to the NLRC
Cagayan De Oro for reasons that the “writ” was null and void
 and the seizure of motorcycles jeopardizes governmental functions.
NLRC --- dismissed the petition.
 DOA charges NLRC for grave abuse of discretion for refusing to nullify
the “writ of execution”. DOA further asserts that NLRC has disregarded
the rule on the non-suability of the State.
Issue: Whether or not the doctrine of non-suability of the State applies in the
case
Held: Under the Constitution, the rule which says “the State cannot be sued
without its consent” is not really absolute. The State’s consent may be given
expressly through a general or special law, or impliedly when the State
commences litigation or enters a contract. In this jurisdiction, the general law
waiving the immunity of the state from suit is found in Act No. 3083, where the
Philippine government "consents and submits to be sued upon any money claim
involving liability arising from contract, express or implied”. The claims of the
guards for underpayment of wages and similar other items, arising from the
Contract for Security Services, clearly constitute money claims. However,
pursuant to Commonwealth Act No. 327, as amended by PD No. 1445, the
money claim should first be brought to the Commission on Audit.

19. MERRITT vs. GOVERNMENT OF THE PHILIPPINES

(G.R. NO. L-11154, MARCH 21, 1916)

TRENT, J.

28
 FACTS: Merritt, while riding his motorcycle was hit by an ambulance owned
by the Philippine General Hospital. A driver employed by the hospital
drove it. In order for Merritt to sue the Philippine government, Act No. 2457
was enacted by the Philippine Legislature authorizing Merritt to bring suit
against the Government of the Philippine Islands and authorizing the
Attorney-General of said Islands to appear in said suit. A suit was then filed
before the CFI of Manila, which fixed the responsibility for the collision solely on
the ambulance driver and determined the amount of damages to be awarded to
Merritt. Both parties appealed from the decision, plaintiff Merritt as to the
amount of damages and defendant in rendering the amount against the
government.

ISSUE: Whether or not defendant, Government of the Philippines, waived its

immunity from suit as well as conceded its liability to the plaintiff when it
enacted Act No. 2457

HELD:
NO. By consenting to be sued, a state simply waives its immunity from suit.
It does not thereby concede its liability to the 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 pre-existing liability and submit itself to
the jurisdiction of the court, subject to its right to interpose any lawful defense.
The Government of the Philippines Islands is only liable, for the acts of its
agents, officers and employees when they act as special agents. A special
agent 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. The special
agent acts in representation of the state and being bound to act as an agent
thereof, he executes the trust confided to him. This concept does not apply to
any executive agent who is an employee of the acting administration and who
on his own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the
regulations. The responsibility of the state is limited to that which it contracts

29
through a special agent, duly empowered by a definite order or
commission to perform some act or charged with some definite purpose which
gives rise to the claim, and not where the claim is based on acts or omissions
imputable to a public official charged with some administrative or technical
office who can be held to the proper responsibility in the manner laid down by
the law of civil responsibility. The chauffeur of the ambulance of the General
Hospital was not such an agent.

19 Merritt v. Gov. of the Phil Islands

(1916)

Plaintiff Merritt on a motorcycle collided with an ambulance which did not warn
of its impending approach. As the negligence which caused the collision is a tort
committed by an agent or employee of the Government, the inquiry at once
arises whether the Government is legally liable for the damages resulting
therefrom. The government, by no less than an Act, authorized Merritt to bring
suit in the CFI Manila in order to fix the responsibility for the collision between
his motorcycle and the ambulance of the General Hospital.

Did the government simply waive its immunity from suit or did it also concede
its liability to the plaintiff?

Paragraph 5 of article 1903 of the Civil Code reads: “The state is liable in this
sense when it acts through a special agent, but not when the damage should
have been caused by the official to whom properly it pertained to do the act
performed, in which case the provisions of the preceding article shall be
applicable." It is, therefore, evident that the State (the Government of the
Philippine Islands) is only liable, according to the above quoted decisions of the
Supreme Court of Spain, for the acts of its agents, officers and employees when
they act as special agents within the meaning of paragraph 5 of article 1903,
supra, and that the chauffeur of the ambulance of the General Hospital was not
such an agent.

30
20. Republic v. Purisima
(1977)

Yellow Bell Freight Lines brought a suit against the Rice and Corn
Administration for an alleged breach of contract. Rice and Corn moved to
dismiss the suit by using the doctrine of state immunity. Respondent judge
dismissed the motion to dismiss. The SC held that the courts do not have
jurisdiction to pass upon the merits of the claims against any office or entity
acting as part of the machinery of the national government.

Express waiver of immunity cannot be made by a mere counsel of the

government but must be effected through a duly-enacted statute. Neither does
such answer come under the implied forms of consent as earlier discussed.
United States v. Ruiz
(1985)

Respondent was able to win a bid for a project for the repair of the
wharves/shoreline of the Subic Bay Area. Petitioner asked for a quotation but
later on denied the respondent the project stating that the respondent was not
qualified. The latter files suit for awarding the project to him and for damages
as well.

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

31
Philippines, indisputably a function of the government of the highest order;
they are not utilized for nor dedicated to commercial or business purposes.

21. UNITED STATES OF AMERICA VS. RUIZ

136 SCRA 487 (1985)

FACTS:
Petitioner invited the submission of bids for repair of its wharves and shoreline
in the Subic Bay Area. Eligion and Co. responded to the invitation and submitted
bids. Said company was requested by telegram to confirm its price proposals
and for the name of its bonding company, and from which it complied.
Later, the United States, through its agents, informed said company that it was
not qualified to receive an award at the project for the poorly completed
projects it awarded to third parties. The company sued petitioner for specific
performance and if no longer possible, for damages. It also asked for a writ of
preliminary injunction to restrain the defendants from entering into contracts
with others.
The United States entered a special appearance for the purpose only of
questioning the jurisdiction of the court over the subject matter of the
complaint and the persons of the defendants, the subject matter of the
complaint being acts and omissions of the individual defendants as agents of
the defendant United States of America, a foreign sovereign which has not
given its consent to this suit or any other suit for the cause of action asserted in
the complaint.
US filed a motion to dismiss and opposed the writ. The trial court denied the
motion and issued a writ.

ISSUE: Whether the US may be sued?

HELD:
No. 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

32
necessary consequence of the principles of independence and equality of
States. However, the rules of International Law are not petrified; they are
constantly developing and evolving. And because the activities of states have
multiplied, it has been necessary to distinguish them — between
sovereign and governmental acts (jure imperii) and private, commercial
and proprietary acts (jure gestionis). The result is that State immunity now
extends only to acts jure imperii. The restrictive application of State
immunity is now the rule in the United States, the United Kingdom and
other states in western Europe. (See Coquia and Defensor-Santiago, Public
International Law, pp. 207-209 [1984].)
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 be thus deemed to have
tacitly given its consent to be sued only when 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 US
and the Philippines, undisputed a function of the government of the highest
order, they are not utilized for nor dedicated to commercial or
business purposes. The correct test for the application of State
immunity is not the conclusion of a contract by a State but the legal
nature of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949).
In that case the plaintiffs leased three apartment buildings to the United
States of America for the use of its military officials. The plaintiffs sued to
recover possession of the premises on the ground that the term of the leases
had expired, They also asked for increased rentals until the apartments shall
have been vacated.

22. MALONG VS. PNR, G.R. NO. L-49930

Facts: The Petitioners, Malong spouses alleged in their complaint that on
October 30, 1977 their son, Jaime Aquino, a paying passenger, was killed when
he fell from a PNR train while it was between Tarlac City and Capas. The said

33
train was overloaded with passengers and baggage in view of the proximity of
All Saints Day. The Malong spouses prayed that the PNR be ordered to pay
them damages totalling P136,370.
The trial court dismissed the complaint, ruling that it had no jurisdiction
because the PNR, being a government instrumentality, the action was a suit
against the State.
The petitioners appealed to SC pursuant to RA No. 5440.
Issue: W/N the PNR is immune from suit? NO.
 Although the PNR is a government instrumentality under Republic Act
No. 4156, as amended by Republic Act No. 6366 and Presidential Decree
No. 741, it was held that the State divested itself of its sovereign capacity
when it organized the PNR which is no different from its predecessor, the
Manila Railroad Company. The PNR did not become immune from suit. It
did not remove itself from the operation of articles 1732 to 1766 of the
Civil Code on common carriers.
 However, as held in precedents, the correct rule is that "not all
government entities, whether corporate or non-corporate, are immune
from suits. Immunity from suit is determined by the character of the”
objectives “for which the entity was organized.”
 The Manila Hotel case also relied on the following rulings: “By engaging
in a particular business through the instrumentality of a corporation, the
government divests itself pro hac vice of its sovereign character, so as to
render the corporation subject to the rules of law governing private
corporations.”
Held: The order of dismissal is reversed and set aside. The case is remanded to
the trial court for further proceedings, costs against the Philippine National
Railways.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR
employees could not sue the PNR for damages. Like any private common
carrier, the PNR is subject to the obligations of persons engaged in that private
enterprise. It is not performing any governmental function.
Notes

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Abad Santos, J., concurring:
 The claim that Philippine National Railways is immune from suit because
it is an instrumentality of the government is so outlandish that it
deserves slight consideration.
 He mentioned the Central Bank of the Philippines as an example of
government instrumentality that is not immune from suit for it also
performs proprietary functions.
 He also contended the use of the immunity from suit on the part of the
government corporations to deny justice that is due to the people they
are to serve.

22. DOH v Phil Pharmawealth GR No. 182358

Department of Health, Secretary Alfredo Romualdez, USec. Margarita Galon,
petitioner; Philippine Pharmawealth, Inc, respondent; February 20, 2013
Second Division Del Castillo, J.
FACTS: 1.

On December 22, 1998, Administrative Order (AO) No. 27 series of 1995 was
issued by then Department of Health Secretary Alfredo G. Romualdez. AO 27
sets the guidelines and procedure for accreditation of government suppliers of
pharmaceutical products for sale or distribution to the public, such
accreditation to be valid for three years but subject to annual review.
2.
On January 25, 2000, Secretary Romualdez issued AO 10 series of 2006 which
amended AO 27. Under Sec 7 of AO 10, accreditation period for government
suppliers of pharmaceutical products was reduced to 2 years. Also,
accreditation of Pharmaceutical companies may be recalled, suspended or
revoked after due deliberation and proper notice by the DOH Accreditation
Committee, through its Chairman.
3.
Sec 7 of AO 10 was later amended AO 66 series of 2008 which stated that the
2 year accreditation may be recalled, suspended or revoked only after due

35
deliberation, hearing and notice by the DOH Accreditation Committee, through
its Chairman.
4.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided
for a list and category of sanctions to be imposed on accredited government
suppliers. In line with Memorandum No. 171-C, the DOH, through former
Undersecretary Ma. Margarita M. Galon, issued Memorandum No. 209 series of
2000 inviting representatives of 24 accredited drug companies, including herein
respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000.
5.
During the meeting, Undersecretary Galon handed them copies of a document
entitled “Report on ViolativeProducts” issued by the Bureau of Food and Drugs
(BFAD), which detailed violations or adverse findings relative to these
accredited drug companies’ products. PPI’s products were included as BFAD
found that PPI’s products sold to the public were unfit for human consumption.
6.
The companies were directed to submit their respective explanations on the
findings within 10 days. PPI did not submit its reply on time. Instead, it
submitted a letter stating that it is referring the matter to its lawyers for
preparation of a reply but with no indicated date of compliance, which DOH
Usec Galon found untenable, thus she informed PPI thru letter that its
accreditation had been suspended for two years in accordance with AO 10 and
Memorandum No. 171-C. PPI thru letter, demanded that Usec Galon cease and
desist from enforcing the suspension under pain of legal redress.
7.
PPI then filed a complaint to declare certain DOH issuances (Memorandum No.
171-C, AO 10, Series 2000, Usec Galon’s suspension order; and AO 14, Series
2001) null and void for being in violation of Section 26, Republic Act 3720, with
prayer for injunction and damages against Usec Galon and later DOH Secretary
Dayrit. It claimed that its accreditation was suspended without due notice and
hearing. It prayed that it be awarded moral damages, attorneys fees and costs
of suit.

36
8.
The respondent DOH officials filed a motion to dismiss, alleging that it gave PPI
the opportunity to explain but it did not do so in a timely manner. The
suspension was necessary to stop the distribution and sale of substandard
products. In a Manifestation and Motion, the DOH officials further moved to
dismiss the case as it was a suit against the State; the complaint was improperly
verified; and the corporate officer lacked the authority to file the suit. The
Regional Trial Court dismissed the case, holding that the suit is against the
State, thus the principle of immunity form suit is applicable.
9.
On appeal to the CA, however, the latter reversed and set aside the RTC
decision. According to the CA, it was premature for the RTC to have dismissed
the case, as the cause of actions were sufficiently alleged in the complaint.
Further, by filing a complaint, the DOH officials hypothetically admitted the
allegations in the complaint-that they were being sued in their official and
private capacities. Thus the DOH officials, herein petitioners, elevated the case
to the Supreme Court, arguing that PPI’s prayer for damages should be
considered a suit against the State for it would require the needed
appropriation to satisfy PPI’s claim for damages should it win. In issuing the
assailed DOH issuances, they acted within the scope of their authority, hence
should not be made to account individually. Petition was granted.
ISSUE: Whether or not DOH, in this circumstance, is under the mantle of state
immunity.
HELD: As a general rule, a state may not be sued. However, if it consents,
either expressly or impliedly, then it may be the subject of a suit. There is
express consent when a law, either special or general, so provides. On the
other hand, there is implied consent when the state “enters into a contract or it
itself commences litigation.” However, it must be clarified that when a state
enters into a contract, it does not automatically mean that it has waived its
nonsuability. The State “will be deemed to have impliedly waived its
non-suability [only] if it has entered into a contract in its proprietary or private
capacity. [However,] when the contract involves its sovereign or governmental

37
capacity, x x x no such waiver may be implied.” “Statutory provisions waiving
state immunity are construed in strictissimi juris.
For, waiver of immunity is in derogation of sovereignty.”

24 JUSMAG PHILIPPINES V. NLRC

PUNO; December 15, 1994
FACTS
- Florencio Sacramento was one of the 74 security assistance support personnel
(SASP) working at JUSMAG Phils.; he had been with JUSMAG for more than
20yrs (1969-1992); was dismissed on April 27, 1992
- He filed a complaint with the Dept. of Labor and Employment (March 31,
1992) on the ground that he was illegally suspended and dismissed; asked for
reinstatement
- JUSMAG filed a Motion to Dismiss invoking its immunity from suit as an agency
of US; also alleged lack of employer-employee rel’p and it has no juridical
personality to sue and be sued
- Labor Arbiter Daniel Cueto dismissed complaint for want of jurisdiction
- NLRC reversed—JUSMAG had lost its right not to be sued based on: 1)
estoppel- JUSMAG failed to refute the employer-employee rel’p under the
control test and 2) it has waived its right to immunity from suit when it hired
Sacramento’s services.
- NLRC relied on Harry Lyons vs. USA (“US Govt waived its immunity from suit
by entering into a contract of stevedoring services, and thus, it submitted itself
to the jurisdiction of local courts”)
- JUSMAG now contends that the NLRC committed grave abuse of discretion in
reversing the labor arbiter’s decision, in saying that JUSMAG waived its
immunity from suit, in finding an employer-employee relp between JUSMAG
and Sacramento, and in considering JUSMAG estopped from denying that
respondent is its employee for failure to present proof.

ISSUE

38
Is the Joint United States Military Assistance Group to the RP (JUSMAG-PHIL)
immune from suit?

HELD
Ratio As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities. The mantle of state
immunity cannot be extended to commercial, private and proprietary acts.
Reasoning
- When JUSMAG took the services of Sacramento, it was performing a
governmental function on behalf of the US pursuant to the Military Assistance
Agreement. The suit is, in effect, one against the US and, considering that the
US has not waived or consented to the suit, the complaint cannot prosper.
- Immunity of State from suit is one of the universally recognized principles of
international law that the Phils. Recognizes and adopts as part of the law of the
land. This is anchored on the principle of sovereign equality of states (an equal
has no power over an equal).
Discussion
- Historical Background of JUSMAG
- was created pursuant to the Military Assistance Agreement dated March 21,
1947 between the Philippines and the US; primary task was to advise and assist
the Philippines on air force, army and naval matters
- in 1991, US manifested its preparedness to provide funds to cover the salaries
of SASP and security guards, the rent of bldgs, and housing, and cost of utilities
- Memorandum of Agreement between AFP and JUSMAG-Phils
- Salaries- for security guards and SASP
- SASP are employees of the AFP; under the total operational control of the
Chief JUSMAG-Phils; AFP to assume the severance/retirement pay liability for
all appointed SASP
- It is apparent that when JUSMAG took the services of private respondent, it
was performing a governmental function on behalf of the US. Hence, the suit is,
in effect, one against the US Government.

39
- In this jurisdiction, Immunity of State is a universally accepted principle.
Immunity is understood as the exemption of the state and its organs from the
judicial jurisdiction of another state.
- A state cannot be sued in the courts of another state, without its consent or
waiver. An exception to the doctrine, however, was recognized in Santos, et al
vs. Santos, et al: “the state itself may be sued, even without its consent,
because by entering into a contract, the sovereign state has descended the
level of the citizen and its consent to be sued is implied from the very act of
entering into such contract.”
- it was in this light that the state immunity issue in Harry Lyons vs. USA was
decided
- Exception evolved: existence of contract does not, per se, mean that
sovereign states may, at all times, be sued in local courts.
US vs. Ruiz: “...does not apply where the contract relates to the exercise of its
sovereign functions”
US vs. Hon. Rodrigo, et al: “petitioners cannot invoke the doctrine of state
immunity...the reason is that by entering into the employment contract with
Genove in the discharge of its proprietary functions, it impliedly divested itself
of its sovereign immunity from suit.”
- SASP are employees of the AFP as consistently contended by JUSMAG, thus it
is not estopped from denying employer-employee relationship
Dispositive Petition for certiori is granted, resolution of NLRC is reversed and
set aside.

25. SANTIAGO v. CA
Facts:On 20 Jan 1971, Santiago gratuitously donated a parcel of land to the
Bureau of Plant Industry. The terms of the donation are; that the Bureau should
construct a building on the said lot and that the building should be finished by
December 7, 1974, that the Bureau should install lighting facilities on the said
lot. However, come 1976 there were still no improvements on the lot. This
prompted Santiago to file a case pleading for the revocation of such contract of
donation. The trial court dismissed the petition claiming that it is a suit against

40
the government and should not prosper without the consent of the
government.
Issue:Whether or not the state has not waived its immunity from suit.
Held: The government has waived its immunity and such waiver is implied by
virtue of the terms provided in the deed of donation. The government is a
beneficiary of the terms of the donation. But the government through the
Bureau has breached the terms of the deed by not complying with such,
therefore, the donor Santiago has the right to have his day in court and be
heard. Further, to not allow the donor to be heard would be unethical and
contrary to equity which the government so advances. Case should prosper.

26. FROILAN V. ORIENTAL PAN SHIPPING, SEPTEMBER 30, 1950

Facts: Fernando A. Froilan purchased the vessel FS-197 from the Shipping
Commission for P200,000, paying P50,000 down and agreeing to pay the
balance in installments. However, the installments were not paid and the
Shipping Commission took possession of the vessel and considered the sale
cancelled. The Shipping Commission then chartered the vessel to Pan Oriental
Shipping Co.
Froilan then filed a complaint against Pan Oriental Shipping Co. Pan Oriental
Shipping Co. filed its answer denying the right of Froilan to the vessel. Following
this, the Republic of the Philippines, as intervenor, filed a complaint in
intervention alleging that Froilan had failed to pay to the Shipping Commission
the balance. Froilan then tendered to the Board of Liquidators (which was
liquidating the affairs of the Shipping Administration) a check in payment of his
obligation for the vessel. The lower court held that the check constituted a
payment and a discharge of Froilan's obligation to the government.
However, Pan Oriental Shipping Co. had also filed an answer to the
government's complaint in intervention saying that the government was
obligated to deliver the vessel to it by contract. In response, the government
filed a motion to dismiss the counterclaim of Pan Oriental Shipping Co. against
it on the grounds that the action of delivering the vessel to Pan Oriental
Shipping Co. was no longer feasible and was barred by prior judgment, and also

41
that the court has no jurisdiction over the intervenor government of the
Republic of the Philippines.
Issue: Whether or not the Government's motion to dismiss Pan Oriental's
counterclaims are allowable.
Held: The counterclaim was not barred by prior judgment, as the counterclaim
was filed before the decision had been made with regards to Froilan's payment.
The State was also not immune from suit, since by filing its complaint in
intervention, the Government waived its right of nonsuability. Appellee

27. RCBC v. DE CASTRO

Facts: The Court of First Instance of Rizal, Quezon City issued an order
regarding civil case Badoc Planters, Inc v. Philippine Virginia Tobacco
Administration, et al. for the recovery of unpaid tobacco deliveries to BADOC.
The Branch clerk of court then issued a Writ of Execution to Special Sheriff
Faustion Rigor, who issued a Notice of Garnishment to the General
Manager/Cashier of RCBC requesting a reply within 5 days to any property that
PVTA that was currently in control of RCBC. On the same day, BADOC filed an
Urgent Ex-Parte Motion for a Writ of Execution, which was also granted by the
respondent judge. In compliance, RCBC delivered to Sheriff Rigor a certified
check with the amount.
PVTA then filed a Motion for Reconsideration to restore the account of PTVA in
RCBC to the condition it was in before the issuance of the Writ of Execution and
the Orders. It was granted, and then RCBC filed a Motion for Reconsideration as
well. This, however, was denied, so RCBC filed a Notice of Appeal to the Court
of Appeals from the said orders.
Issues:
1) Whether or not PVTA funds are public funds not subject to garnishment;
2) Whether or not the respondent Judge correctly ordered the petitioner to
reimburse the amount paid to the special sheriff
Ruling: The court found that RCBC should not be held liable since it was
following the court order which instructed that a check be delivered to Sheriff
Rigor. They could also not be held responsible that the check was later

42
encashed, which was also directed by a court order. In response to the issues
at hand, the court found that PVTA funds are not exempt from garnishment
because PVTA was created by RA 2265 as an ordinary corporation subject to
the provisions of Corporation Law. Hence, it possesses the power to “sue and
be sued” and "to acquire and hold such assets and incur such liabilities resulting
directly from operations authorized by the provisions of this Act or as essential
to the proper conduct of such operations." [Section 3, Republic Act No. 2265.].
RCBC cannot therefore be compelled to make restitution solidarily with the
plaintiff BADOC. Plaintiff BADOC alone was responsible for the issuance of the
Writ of Execution and Order of Payment and so, the plaintiff alone should bear
the consequences of a subsequent annulment of such court orders; hence, only
the plaintiff can be ordered to restore the account of the PVTA.

28. SAN MIGUEL, BULACAN VS. FERNANDEZ 130 SCRA 56 (1984)

FACTS: In Civil Case No. 604-B, the then CFI of Bulacan rendered judgment
holding herein petitioner municipality liable to respondents Imperio, et al.
When the judgment became final, respondent judge issued a writ of execution
to satisfy the same. Petitioner municipality filed a motion to quash the writ on
the ground that the municipality’s property or funds are public exempt from
execution. The motion was denied. The respondent judge issued another
order requiring both the municipal and provincial treasurer to comply with the
money judgment. When the treasurers failed to do so, respondent judge
issued an order for their arrest and that they will be released upon
compliance, hence the present petition.
ISSUE: Whether the funds of the municipality in the hands of
the Provincial and Municipal Treasurers of Bulacan and San Miguel, respectively
are public funds which are exempt from execution?

HELD:
YES. Municipal funds in possession of municipal and provincial treasurers are
public funds exempt from execution. The reason for those was explained in
the case of Municipality of Paoay vs. Manaois ‘that are held in trust for the

43
people intended and used for the accomplices of the purposes for which
municipal corporations are created and that to subject said properties and
public funds to execution would materially impede, even defeat and in
some instance destroy said purpose.” Thus it is clear that all the funds of
petitioner municipality in the possession of the Municipal Treasurer of San
Miguel as well as those in the possession of the Provincial Treasurer of Bulacan
are also public funds and as such they are exempt from execution.
Besides PD 447, known as the Decree on Local Fiscal Administration, provides
in section 3 (a) that “no money shall be paid out of the treasury except in
pursuance of a lawful appropriation or other specific statutory authority.”
Otherwise stated, there must be a corresponding appropriation in the form of
an ordinance duly passed by the Sangguniang Bayan before any money of the
municipality may be paid out. In the case at bar, it has not been shown that
the Sangguniang Bayan has passed any ordinance to this effect.

29. MUNICIPALITY OF MAKATI VS CA 190 SCRA 206

Facts: An expropriation proceeding was filed by the Municipality of Makati,
herein petitioner, against the private property of Arceli Jo. In compliance to PD
42, the petitioner opened an account under its name at PNB depositing an
amount of P417,510.00. The court fixed the appraised value of the
expropriated property at P5,291,666.00 and an advanced payment was made
in the amount of P338,160 leaving a balance of P4,953,506. After the decision
becomes final and executory, the private respondent moved for the issuance of
a writ of execution. A notice of garnishment was thereafter issued by the court
to the PNB account. A manifestation was filed by the petitioner informing the
court that the private respondent was no longer the true owner of the
expropriated property. The court consolidated the ownership of the property to
PSB as a mortgagee/purchaser. The private respondent and PSB agreed to
divide the compensation due from the expropriation proceeding. The judge
ordered PNB to immediately release to them the sum of P4,953.506
corresponding to the balance of the appraised value of the expropriated
property. The PNB bank manager refused as he is waiting for the approval of

44
their head office. The Municipality of Makati contends that its fund with DBP
could neither be be garnished or levied upon execution for to do so would result
to the disbursement of public funds without the proper appropriation required
under the law. The lower court denied the motion for reconsideration of the
petitioner ruling that the account with DBP of the petitioner was an account
specifically opened for the expropriation proceeding. Petitioner filed a petition
for certiorari to the Court of Appeals which affirmed the lower court’s decision.
A petition for review with a prayer for preliminary injunction was filed to the
S.C. A temporary restraining order was issued by the S.C.
Issue: Whether or not the PNB funds may be levied in the expropriation
proceeding?
Held: The petitioner belatedly informed the court that there are two existing
accounts with PNB. Account A was the one intended for the expropriation
proceeding and account B is primarily intended for financing governmental
functions and activities. Because account A has a fund that is insufficient to
meet the remaining amount of its balance for the expropriation proceeding, it is
unlawful to get the remaining balance from Account B without an ordinance
appropriating said funds for expropriation purpose. Thus the court ruled that
account A maybe levied but not account B. The respondents are without
recourse however should the petitioner refuse to pay its remaining obligation.
Where a municipality refuses without justifiable reason to effect payment of a
final money judgment rendered against it, the claimant may avail the remedy of
mandamus in order to compel the enactment and approval of the necessary
appropriation ordinance and the corresponding disbursement of municipal
funds for such purpose.

30. MERITT VS. GOVT OF THE PHIL. ISLANDS.

Facts: Meritt, riding in a motorcycle collided with an ambulance of the General

Hospital. He was severely injured damaging his efficiency as contractor. The
inquiry arises whether the Government is liable for the damages due to the
negligence committed by an agent or employee of the government which is the

45
chauffer.
Issue: Whether or not the Government is liable in this case.

Held: No.According to Art. 1903, Paragraph 5 of Civil Code, in a damage case,

the responsibility of the State is limited to that which it contracts through a
special agent. The evidence showed that the chauffer, who acted negligently,
of the ambulance was not such of an agent. The court held that the judgment
rests solely with the Legislature and not with the Court.

31. National Irrigation Administration (nia) v Court of Appeals

Facts:
Petitioner NIA awarded HYDRO a contract for construction of the main civil
works of the Magat River Multi-purpose Project. The contract provided
Respondent HYDRO would be paid partly in Philippine pesos and partly in US
dollars. Respondent HYDRO substantially completed in 1982 and final
acceptance by Petitioner NIA was made in 1984. Thereafter, HYDRO still had an
account receivable from NIA representing dollar differential rate after the
prescribed provided in the contract. HYDRO filed Request for Adjudication in
Construction Industry Arbitration Commission (CIAC). Petitioner NIA filed its
Answer wherein it questioned the jurisdiction of the CIAC alleging lack of cause
of action, laches and estoppel in view of Respondent HYDRO’s alleged failure to
avail of its right to submit the dispute to arbitration within the prescribed period
as provided in the contract.
Later, Petitioner NIA filed a Motion to Dismiss alleging lack of jurisdiction over
the disputes.
Petitioner NIA filed with the CA an Original Action of Certiorari and Prohibition
with prayer for Restraining Order and/or Injunction which dismissed the same.
Hence, the present Petition for Certiorari and Prohibition with urgent prayer for
Temporary Restraining Order and Writ of Preliminary Injunction.
Issue: Whether or not the CIAC has jurisdiction over the case.

46
Held: Yes. The CIAC has jurisdiction over the controversy, contrary to the claim
of NIA. The instant Petition is dismissed for lack of merit.

47