THE DEPARTMENT OF HEALTH et al. v. PHIL. PHARMAWEALTH, INC.

518 SCRA 240 (2007)

Defense of state immunity does not apply where the public official is charged in his official
capacity for acts that are unauthorized or unlawful and injurious to the rights of others neither
does it apply where the public official is clearly being sued not in his official capacity but in his
personal capacity, although the acts complained of may have been committed while he
occupied a public position.

Secretary of Health Alberto G. Romualdez, Jr. issued an Administrative Order providing for
additional guidelines for accreditation of drug suppliers aimed at ensuring that only qualified
bidders can transact business with petitioner Department of Health (DOH). Respondent Phil.
Pharmawealth, Inc. (Pharmawealth) submitted to DOH a request for the inclusion of additional
items in its list of accredited drug products, including the antibiotic Penicillin G
Benzathine. Petitioner DOH issued an Invitation for Bids for the procurement of 1.2 million units
vials of Penicillin G Benzathine. Despite the lack of response from DOH regarding
Pharmawealths request for inclusion of additional items in its list of accredited products, the
latter submitted its bid for the Penicillin G Benzathine contract and gave the lowest bid thereof.
. In view, however, of the non- accreditation of respondents Penicillin G Benzathine product,
the contract was awarded to Cathay/YSS Laboratories (YSS). Respondent Pharmawealth filed a
complaint for injunction, mandamus and damages with prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining order with the Regional Trial praying, inter
alia, that the trial court nullify the award of the Penicillin G Benzathine contract to YSS
Laboratories, Inc. and direct petitioners DOH et al. to declare Pharmawealth as the lowest
complying responsible bidder for the Benzathine contract, and that they accordingly award the
same to plaintiff company and adjudge defendants Romualdez, Galon and Lopez liable,
jointly and severally to plaintiff. Petitioners DOH et al. subsequently filed a motion to dismiss
praying for the dismissal of the complaint based on the doctrine of state immunity. The trial
court, however, denied the motion to dismiss. The Court of Appeals (CA) denied DOHs petition
for review which affirmed the order issued Regional Trial Court of Pasig City denying petitioners
motion to dismiss the case.

ISSUE:

Whether or not the charge against the public officers acting in their official capacity will prosper.

HELD:

The suability of a government official depends on whether the official concerned was acting
within his official or jurisdictional capacity, and whether the acts done in the performance of
official functions will result in a charge or financial liability against the government. In its
complaint, DOH sufficiently imputes grave abuse of discretion against petitioners in their official
capacity. Since judicial review of acts alleged to have been tainted with grave abuse of discretion
is guaranteed by the Constitution, it necessarily follows that it is the official concerned who
should be impleaded as defendant or respondent in an appropriate suit. As regards petitioner
DOH, the defense of immunity from suit will not avail despite its being an unincorporated
agency of the government, for the only causes of action directed against it are preliminary
injunction and mandamus. Under Section 1, Rule 58 of the Rules of Court, preliminary injunction
may be directed against a party or a court, agency or a person. Moreover, the defense of state

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immunity from suit does not apply in causes of action which do not seek to impose a charge or
financial liability against the State. Hence, the rule does not apply where the public official is
charged in his official capacity for acts that are unauthorized or unlawful and injurious to the
rights of others. Neither does it apply where the public official is clearly being sued not in his
official capacity but in his personal capacity, although the acts complained of may have been
committed while he occupied a public position. In the present case, suing individual petitioners
in their personal capacities for damages in connection with their alleged act of illegally
abusing their official positions to make sure that plaintiff Pharmawealth would not be awarded
the Benzathine contract [which act was] done in bad faith and with full knowledge of the limits
and breadth of their powers given by law is permissible, in consonance with the foregoing
principles. For an officer who exceeds the power conferred on him by law cannot hide behind
the plea of sovereign immunity and must bear the liability personally.

Political Law; The State may be sued if it consents, either expressly or impliedly. The rule, in any
case, is not really absolute for it does not say that the state may not be sued under any
circumstance. On the contrary, as correctly phrased, the doctrine only conveys, the state may
not be sued without its consent; its clear import then is that the State may at times be sued.
The States consent may be given either expressly or impliedly. Express consent may be made
through a general law or a special law. x x x 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. This
rule, x x x is not, however, without qualification. 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.

As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly,
then it 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 non-suability. 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 capacity[,] xx x no such waiver may be implied. Statutory provisions waiving
[s]tate immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of
sovereignty.

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