Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-26400 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant,

vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES, defendants-appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977, dismissing the plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu City as shown by Transfer
Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds
of Cebu on February 1, 1924. No annotation in favor of the government of any right or interest in the property appears at the back of the
certificate. Without prior expropriation or negotiated sale, the government used a portion of said lot, with an area of 6,167 square meters, for
the construction of the Mango and Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and very narrow, unlike the wide and
beautiful avenues that they are now," and "that the tracing of said roads was begun in 1924, and the formal construction in
1925." *

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot which had been
appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated December 9,
1958. A copy of said indorsement was transmitted to Amigable's counsel by the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17, 1959 upon motion of the
defendants, against the Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public Highways for the
recovery of ownership and possession of the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She also sought
the payment of compensatory damages in the sum of P50,000.00 for the illegal occupation of her land, moral damages in the sum of
P25,000.00, attorney's fees in the sum of P5,000.00 and the costs of the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations of the complaint and interposing the
following affirmative defenses, to wit: (1) that the action was premature, the claim not having been filed first with the Office of the Auditor
General; (2) that the right of action for the recovery of any amount which might be due the plaintiff, if any, had already prescribed; (3) that the
action being a suit against the Government, the claim for moral damages, attorney's fees and costs had no valid basis since as to these
items the Government had not given its consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used
the area involved in the construction of Mango Avenue, plaintiff had no cause of action against the defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial court proceeded to receive the
plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision holding that it had no jurisdiction over the plaintiff's cause of
action for the recovery of possession and ownership of the portion of her lot in question on the ground that the government cannot be sued
without its consent; that it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for compensatory damages in
the sum of P50,000.00, the same being a money claim against the government; and that the claim for moral damages had long prescribed,
nor did it have jurisdiction over said claim because the government had not given its consent to be sued. Accordingly, the complaint was
dismissed. Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us,
there being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of the case.

In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a claim for payment of the value of a portion of land used for the
widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that where the government takes
away property from a private landowner for public use without going through the legal process of expropriation or negotiated sale, the
aggrieved party may properly maintain a suit against the government without thereby violating the doctrine of governmental immunity from
suit without its consent. We there said: .
 ... . If the constitutional mandate that the owner be compensated for property taken for public use were to be respected,
as it should, then a suit of this character should not be summarily dismissed. The doctrine of governmental immunity
from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the
procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment
of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed,
may it "have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in
the judgment." If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are
now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government
would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of
officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any
property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it
makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from
suit could still be appropriately invoked.

Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has not executed any
deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the whole lot. As registered owner, she
could bring an action to recover possession of the portion of land in question at anytime because possession is one of the attributes of
ownership. However, since restoration of possession of said portion by the government is neither convenient nor feasible at this time
because it is now and has been used for road purposes, the only relief available is for the government to make due compensation which it
could and should have done years ago. To determine the due compensation for the land, the basis should be the price or value thereof at the
time of the taking.2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the land from the time it was
taken up to the time that payment is made by the government.3 In addition, the government should pay for attorney's fees, the amount of
which should be fixed by the trial court after hearing.

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

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 84607 March 19, 1993

REPUBLIC OF THE PHILIPPINES, GEN. RAMON MONTANO, GEN. ALFREDO LIM, GEN. ALEXANDER AGUIRRE, COL. EDGAR
DULA TORRES, COL. CEZAR NAZARENO, MAJ. FILEMON GASMEN, PAT. NICANOR ABANDO, PFC SERAFIN CEBU, JR., GEN.
BRIGIDO PAREDES, COL. ROGELIO MONFORTE, PFC ANTONIO LUCERO, PAT. JOSE MENDIOLA, PAT. NELSON TUASON,
POLICE CORPORAL PANFILO ROGOS, POLICE LT. JUAN B. BELTRAN, PAT. NOEL MANAGBAO, MARINE THIRD CLASS TRAINEE
(3CT) NOLITO NOGATO, 3CT ALEJANDRO B. NAGUIO, JR., EFREN ARCILLAS, 3CT AGERICO LUNA, 3CT BASILIO BORJA, 3CT
MANOLITO LUSPO, 3CT CRISTITUTO GERVACIO, 3CT MANUEL DELA CRUZ, JR., MARINE (CDC) BN., (CIVIL DISTURBANCE
CONTROL), MOBILE DISPERSAL TEAM (MDT), LT. ROMEO PAQUINTO, LT. LAONGLAANG GOCE, MAJ. DEMETRIO DE LA CRUZ,
POLICE CAPTAIN RODOLFO NAVAL, JOHN DOE, RICHARD DOE, ROBERTO DOE AND OTHER DOES, petitioners,
vs.
HON. EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch IX, ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ,
MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA YUMUL,
MIGUEL ARABE, TERESITA ARJONA, RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE CAMPOMANES, ROGELIO
DOMUNICO, in their capacity as heirs of the deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO BAUTISTA,
DANTE EVANGELIO, ADELFA ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and (names
of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON BAUTISTA, DANILO CRUZ, EDDIE MENSOLA,
ALBERT PITALBO, VICENTE ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR., EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE, GERARDO COYOCA, LUISITO DACO,
BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS, TOMAS VALLOS, ARNOLD
ENAJE, MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER, RODEL DE GUIA, ELVIS
MENDOZA, VICTORIANO QUIJANO, JOEY ADIME, RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO
ALIAS, EMELITO ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN
CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO DEMASACA, FRANCISCO GONZALES,
ERNESTO GONZALES, RAMIRO JAMIL, JUAN LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL
SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO MEDINA, LITO NOVENARIO, and
ROSELLA ROBALE, respondents.

G.R. No. 84645 March 19, 1993

ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA GRAMPA, AMELIA
GUTIERREZ, NEMESIO LAKINDANUM, PURITA YUMUL, MIGUEL ARABE, TERESITA ARJONA, RONALDO CAMPOMANES AND
CARMENCITA ARDONI VDA. DE CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the deceased (ROBERTO C.
CAYLAO, SONNY "BOY" PEREZ, DIONESIO GRAMPA, ANGELITO GUTIERREZ, BERNABE LAKINDANUM, ROBERTO YUMUL,
LEOPOLDO ALONZO, ADELFA ARIBE, DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and (names
of sixty-two injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON BAUTISTA, DANILO CRUZ, EDDIE MENSOLA,
ALBERT PITALBO, VICENTE ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR. EFREN MACARAIG, SOLOMON
MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE, GERARDO COYOCA, LUISITO DACO,
BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA, CARLOS SIRAY, JOSE PERRAS TOMAS VALLOS, ARNOLD
ENAJE, MARIANITA DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER, RODEL DE GUIA, ELVIS
MENDOZA, VICTORINO QUIJANO, JOEY ADIME, RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS,
EMELITO ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN
CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO DEMASACA, FRANCISCO GONZALES,
ERNESTO GONZALES, RAMIRO JAMIL, JUAN LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS, EMIL
SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO MATIENZO, CARLO MEDINA, LITO NOVENARIO,
ROSELLA ROBALE, petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, and HONORABLE EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch 9,
respondents.

The Solicitor General for the Republic of the Philippines.

Structural Alternative Legal Assistance for Grassroots for petitioners in 84645 & private respondents in 84607.

CAMPOS, JR., J.:

People may have already forgotten the tragedy that transpired on January 22, 1987. It is quite ironic that then, some journalists
called it a Black Thursday, as a grim reminder to the nation of the misfortune that befell twelve (12) rallyists. But for most Filipinos
now, the Mendiola massacre may now just as well be a chapter in our history books. For those however, who have become widows
and orphans, certainly they would not settle for just that. They seek retribution for the lives taken that will never be brought back to
life again.

Hence, the heirs of the deceased, together with those injured (Caylao group), instituted this petition, docketed as G.R. No. 84645,
under Section 1 of Rule 65 of the Rules of Court, seeking the reversal and setting aside of the Orders of respondent Judge
Sandoval,1 dated May 31 and August 8, 1988, dismissing the complaint for damages of herein petitioners against the Republic of the
Philippines in Civil Case No. 88-43351.

Petitioner, the Republic of the Philippines, through a similar remedy, docketed as G.R. No. 84607, seeks to set aside the Order of
respondent Judge dated May 31, 1988, in Civil Case No. 88-43351 entitled "Erlinda Caylao, et al. vs. Republic of the Philippines, et al."

The pertinent portion of the questioned Order2 dated May 31, 1988, reads as follows:

With respect however to the other defendants, the impleaded Military Officers, since they are being charged in their
personal and official capacity, and holding them liable, if at all, would not result in financial responsibility of the
government, the principle of immunity from suit can not conveniently and correspondingly be applied to them.

WHEREFORE, the case as against the defendant Republic of the Philippines is hereby dismissed. As against the rest
of the defendants the motion to dismiss is denied. They are given a period of ten (10) days from receipt of this order
within which to file their respective pleadings.

On the other hand, the Order3 , dated August 8, 1988, denied the motions filed by both parties, for a reconsideration of the abovecited Order,
respondent Judge finding no cogent reason to disturb the said order.

The massacre was the culmination of eight days and seven nights of encampment by members of the militant Kilusang Magbubukid sa
Pilipinas (KMP) at the then Ministry (now Department) of Agrarian Reform (MAR) at the Philippine Tobacco Administration Building along
Elliptical Road in Diliman, Quezon City.

The farmers and their sympathizers presented their demands for what they called "genuine agrarian reform". The KMP, led by its national
president, Jaime Tadeo, presented their problems and demands, among which were: (a) giving lands for free to farmers; (b) zero retention of
lands by landlords; and (c) stop amortizations of land payments.

The dialogue between the farmers and the MAR officials began on January 15, 1987. The two days that followed saw a marked increase in
people at the encampment. It was only on January 19, 1987 that Jaime Tadeo arrived to meet with then Minister Heherson Alvarez, only to
be informed that the Minister can only meet with him the following day. On January 20, 1987, the meeting was held at the MAR conference
room. Tadeo demanded that the minimum comprehensive land reform program be granted immediately. Minister Alvarez, for his part, can
only promise to do his best to bring the matter to the attention of then President Aquino, during the cabinet meeting on January 21, 1987.

Tension mounted the following day. The farmers, now on their seventh day of encampment, barricaded the MAR premises and prevented the
employees from going inside their offices. They hoisted the KMP flag together with the Philippine flag.

At around 6:30 p.m. of the same day, Minister Alvarez, in a meeting with Tadeo and his leaders, advised the latter to instead wait for the
ratification of the 1987 Constitution and just allow the government to implement its comprehensive land reform program. Tadeo, however,
countered by saying that he did not believe in the Constitution and that a genuine land reform cannot be realized under a landlord-controlled
Congress. A heated discussion ensued between Tadeo and Minister Alvarez. This notwithstanding, Minister Alvarez suggested a negotiating
panel from each side to meet again the following day.

On January 22, 1987, Tadeo's group instead decided to march to Malacaang to air their demands. Before the march started, Tadeo talked
to the press and TV media. He uttered fiery words, the most telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kinakailangan alisin din niya ang barikada sa Mendiola sapagkat
bubutasin din namin iyon at dadanak ang dugo . . . ."4

The farmers then proceeded to march to Malacaang, from Quezon Memorial Circle, at 10:00 a.m. They were later joined by members of
other sectoral organizations such as the Kilusang Mayo Uno (KMU), Bagong Alyansang Makabayan (BAYAN), League of Filipino Students
(LFS) and Kongreso ng Pagkakaisa ng Maralitang Lungsod (KPML).

At around 1:00 p.m., the marchers reached Liwasang Bonifacio where they held a brief program. It was at this point that some of the
marchers entered the eastern side of the Post Office Building, and removed the steel bars surrounding the garden. Thereafter, they joined
the march to Malacaang. At about 4:30 p.m., they reached C.M. Recto Avenue.
In anticipation of a civil disturbance, and acting upon reports received by the Capital Regional Command (CAPCOM) that the rallyists would
proceed to Mendiola to break through the police lines and rush towards Malacaang, CAPCOM Commander General Ramon E. Montao
inspected the preparations and adequacy of the government forces to quell impending attacks.

OPLAN YELLOW (Revised) was put into effect. Task Force Nazareno under the command of Col. Cesar Nazareno was deployed at the
vicinity of Malacaang. The civil disturbance control units of the Western Police District under Police Brigadier General Alfredo S. Lim were
also activated.

Intelligence reports were also received that the KMP was heavily infiltrated by CPP/NPA elements and that an insurrection was impending.
The threat seemed grave as there were also reports that San Beda College and Centro Escolar University would be forcibly occupied.

In its report, the Citizens' Mendiola Commission (a body specifically tasked to investigate the facts surrounding the incident, Commission for
short) stated that the government anti-riot forces were assembled at Mendiola in a formation of three phalanges, in the following manner:

(1) The first line was composed of policemen from police stations Nos. 3, 4, 6, 7, 8, 9 and 10 and the Chinatown
detachment of the Western Police District. Police Colonel Edgar Dula Torres, Deputy Superintendent of the Western
Police District, was designated as ground commander of the CDC first line of defense. The WPD CDC elements were
positioned at the intersection of Mendiola and Legarda Streets after they were ordered to move forward from the top of
Mendiola bridge. The WPD forces were in khaki uniform and carried the standard CDC equipment aluminum
shields, truncheons and gas masks.

(2) At the second line of defense about ten (10) yards behind the WPD policemen were the elements of the Integrated
National Police (INP) Field Force stationed at Fort Bonifacio from the 61st and 62nd INP Field Force, who carried also
the standard CDC equipment truncheons, shields and gas masks. The INP Field Force was under the command of
Police Major Demetrio dela Cruz.

(3) Forming the third line was the Marine Civil Disturbance Control Battalion composed of the first and second
companies of the Philippine Marines stationed at Fort Bonifacio. The marines were all equipped with shields,
truncheons and M-16 rifles (armalites) slung at their backs, under the command of Major Felimon B. Gasmin. The
Marine CDC Battalion was positioned in line formation ten (10) yards farther behind the INP Field Force.

At the back of the marines were four (4) 6 x 6 army trucks, occupying the entire width of Mendiola street, followed
immediately by two water cannons, one on each side of the street and eight fire trucks, four trucks on each side of the
street. The eight fire trucks from Fire District I of Manila under Fire Superintendent Mario C. Tanchanco, were to supply
water to the two water cannons.

Stationed farther behind the CDC forces were the two Mobile Dispersal Teams (MDT) each composed of two tear gas
grenadiers, two spotters, an assistant grenadier, a driver and the team leader.

In front of the College of the Holy Spirit near Gate 4 of Malacaang stood the VOLVO Mobile Communications Van of
the Commanding General of CAPCOM/INP, General Ramon E. Montao. At this command post, after General
Montao had conferred with TF Nazareno Commander, Colonel Cezar Nazareno, about the adequacy and readiness
of his forces, it was agreed that Police General Alfredo S. Lim would designate Police Colonel Edgar Dula Torres and
Police Major Conrado Francisco as negotiators with the marchers. Police General Lim then proceeded to the WPD
CDC elements already positioned at the foot of Mendiola bridge to relay to Police Colonel Torres and Police Major
Francisco the instructions that the latter would negotiate with the marchers.5 (Emphasis supplied)

The marchers, at around 4:30 p.m., numbered about 10,000 to 15,000. From C.M. Recto Avenue, they proceeded toward the police lines. No
dialogue took place between the marchers and the anti-riot squad. It was at this moment that a clash occurred and, borrowing the words of
the Commission "pandemonium broke loose". The Commission stated in its findings, to wit:

. . . There was an explosion followed by throwing of pillboxes, stones and bottles. Steel bars, wooden clubs and lead
pipes were used against the police. The police fought back with their shields and truncheons. The police line was
breached. Suddenly shots were heard. The demonstrators disengaged from the government forces and retreated
towards C.M. Recto Avenue. But sporadic firing continued from the government forces.

After the firing ceased, two MDTs headed by Lt. Romeo Paquinto and Lt. Laonglaan Goce sped towards Legarda
Street and lobbed tear gas at the remaining rallyist still grouped in the vicinity of Mendiola. After dispersing the crowd,
the two MDTs, together with the two WPD MDTs, proceeded to Liwasang Bonifacio upon order of General Montao to
disperse the rallyists assembled thereat. Assisting the MDTs were a number of policemen from the WPD, attired in
civilian clothes with white head bands, who were armed with long firearms.6 (Emphasis ours)

After the clash, twelve (12) marchers were officially confirmed dead, although according to Tadeo, there were thirteen (13) dead, but he was
not able to give the name and address of said victim. Thirty-nine (39) were wounded by gunshots and twelve (12) sustained minor injuries, all
belonging to the group of the marchers.
Of the police and military personnel, three (3) sustained gunshot wounds and twenty (20) suffered minor physical injuries such as abrasions,
contusions and the like.

In the aftermath of the confrontation, then President Corazon C. Aquino issued Administrative Order No. 11,7 (A.O. 11, for brevity) dated
January 22, 1987, which created the Citizens' Mendiola Commission. The body was composed of retired Supreme Court Justice Vicente
Abad Santos as Chairman, retired Supreme Court Justice Jose Y. Feria and Mr. Antonio U. Miranda, both as members. A.O. 11 stated that
the Commission was created precisely for the "purpose of conducting an investigation of the disorder, deaths, and casualties that took place
in the vicinity of Mendiola Bridge and Mendiola Street and Claro M. Recto Avenue, Manila, in the afternoon of January 22, 1987". The
Commission was expected to have submitted its findings not later than February 6, 1987. But it failed to do so. Consequently, the deadline
was moved to February 16, 1987 by Administrative Order No. 13. Again, the Commission was unable to meet this deadline. Finally, on
February 27, 1987, it submitted its report, in accordance with Administrative Order No. 17, issued on February 11, 1987.

In its report, the Commission recapitulated its findings, to wit:

(1) The march to Mendiola of the KMP led by Jaime Tadeo, together with the other sectoral groups, was not covered by
any permit as required under Batas Pambansa Blg. 880, the Public Assembly Act of 1985, in violation of paragraph (a)
Section 13, punishable under paragraph (a), Section 14 of said law.

(2) The crowd dispersal control units of the police and the military were armed with .38 and .45 caliber handguns, and
M-16 armalites, which is a prohibited act under paragraph 4(g), Section 13, and punishable under paragraph (b),
Section 14 of Batas Pambansa Blg. 880.

(3) The security men assigned to protect the WPD, INP Field Force, the Marines and supporting military units, as well
as the security officers of the police and military commanders were in civilian attire in violation of paragraph (a), Section
10, Batas Pambansa 880.

(4) There was unnecessary firing by the police and military crowd dispersal control units in dispersing the marchers, a
prohibited act under paragraph (e), Section 13, and punishable under paragraph (b), Section 14, Batas Pambansa Blg.
880.

(5) The carrying and use of steel bars, pillboxes, darts, lead pipe, wooden clubs with spikes, and guns by the marchers
as offensive weapons are prohibited acts punishable under paragraph (g), Section 13, and punishable under paragraph
(e), Section 14 of Batas Pambansa Blg. 880.

(6) The KMP farmers broke off further negotiations with the MAR officials and were determined to march to
Malacaang, emboldened as they are, by the inflammatory and incendiary utterances of their leader, Jaime Tadeo
"bubutasin namin ang barikada . . Dadanak and dugo . . . Ang nagugutom na magsasaka ay gagawa ng sariling butas.
..

(7) There was no dialogue between the rallyists and the government forces. Upon approaching the intersections of
Legarda and Mendiola, the marchers began pushing the police lines and penetrated and broke through the first line of
the CDC contingent.

(8) The police fought back with their truncheons and shields. They stood their ground but the CDC line was breached.
There ensued gunfire from both sides. It is not clear who started the firing.

(9) At the onset of the disturbance and violence, the water cannons and tear gas were not put into effective use to
disperse the rioting crowd.

(10) The water cannons and fire trucks were not put into operation because (a) there was no order to use them; (b)
they were incorrectly prepositioned; and (c) they were out of range of the marchers.

(11) Tear gas was not used at the start of the disturbance to disperse the rioters. After the crowd had dispersed and the
wounded and dead were being carried away, the MDTs of the police and the military with their tear gas equipment and
components conducted dispersal operations in the Mendiola area and proceeded to Liwasang Bonifacio to disperse the
remnants of the marchers.

(12) No barbed wire barricade was used in Mendiola but no official reason was given for its absence.8

From the results of the probe, the Commission recommended9 the criminal prosecution of four unidentified, uniformed individuals, shown
either on tape or in pictures, firing at the direction of the marchers. In connection with this, it was the Commission's recommendation that the
National Bureau of Investigation (NBI) be tasked to undertake investigations regarding the identities of those who actually fired their guns
that resulted in the death of or injury to the victims of the incident. The Commission also suggested that all the commissioned officers of both
the Western Police District and the INP Field Force, who were armed during the incident, be prosecuted for violation of paragraph 4(g) of
Section 13, Batas Pambansa Blg. 880, the Public Assembly Act of 1985. The Commission's recommendation also included the prosecution
of the marchers, for carrying deadly or offensive weapons, but whose identities have yet to be established. As for Jaime Tadeo, the
Commission said that he should be prosecuted both for violation of paragraph (a), Section 13, Batas Pambansa Blg. 880 for holding the rally
without a permit and for violation of Article 142, as amended, of the Revised Penal Code for inciting to sedition. As for the following officers,
namely: (1) Gen. Ramon E. Montao; (2) Police Gen. Alfredo S. Lim; (3) Police Gen. Edgar Dula Torres; (4) Police Maj. Demetrio dela Cruz;
(5) Col. Cezar Nazareno; and (5) Maj. Felimon Gasmin, for their failure to make effective use of their skill and experience in directing the
dispersal operations in Mendiola, administrative sanctions were recommended to be imposed.

The last and the most significant recommendation of the Commission was for the deceased and wounded victims of the Mendiola incident to
be compensated by the government. It was this portion that petitioners (Caylao group) invoke in their claim for damages from the
government.

Notwithstanding such recommendation, no concrete form of compensation was received by the victims. Thus, on July 27, 1987, herein
petitioners, (Caylao group) filed a formal letter of demand for compensation from the Government. 10 This formal demand was indorsed by
the office of the Executive Secretary to the Department of Budget and Management (DBM) on August 13, 1987. The House Committee on
Human Rights, on February 10, 1988, recommended the expeditious payment of compensation to the Mendiola victims. 11

After almost a year, on January 20, 1988, petitioners (Caylao group) were constrained to institute an action for damages against the Republic
of the Philippines, together with the military officers, and personnel involved in the Mendiola incident, before the trial court. The complaint
was docketed as Civil Case No. 88-43351.

On February 23, 1988, the Solicitor General filed a Motion to Dismiss on the ground that the State cannot be sued without its consent.
Petitioners opposed said motion on March 16, 1988, maintaining that the State has waived its immunity from suit and that the dismissal of
the instant action is contrary to both the Constitution and the International Law on Human Rights.

Respondent Judge Sandoval, in his first questioned Order, dismissed the complaint as against the Republic of the Philippines on the ground
that there was no waiver by the State. Petitioners (Caylao group) filed a Motion for Reconsideration therefrom, but the same was denied by
respondent judge in his Order dated August 8, 1988. Consequently, Caylao and her co-petitioners filed the instant petition.

On the other hand, the Republic of the Philippines, together with the military officers and personnel impleaded as defendants in the court
below, filed its petition for certiorari.

Having arisen from the same factual beginnings and raising practically identical issues, the two (2) petitions were consolidated and will
therefore be jointly dealt with and resolved in this Decision.

The resolution of both petitions revolves around the main issue of whether or not the State has waived its immunity from suit.

Petitioners (Caylao group) advance the argument that the State has impliedly waived its sovereign immunity from suit. It is their considered
view that by the recommendation made by the Commission for the government to indemnify the heirs and victims of the Mendiola incident
and by the public addresses made by then President Aquino in the aftermath of the killings, the State has consented to be sued.

Under our Constitution the principle of immunity of the government from suit is expressly provided in Article XVI, Section 3. The principle is
based on the very essence of sovereignty, and on the practical ground that there can be no legal right as against the authority that makes the
law on which the right depends. 12 It also rests on reasons of public policy that public service would be hindered, and the public
endangered, if the sovereign authority could be subjected to law suits at the instance of every citizen and consequently controlled in the uses
and dispositions of the means required for the proper administration of the government. 13

This is not a suit against the State with its consent.

Firstly, the recommendation made by the Commission regarding indemnification of the heirs of the deceased and the victims of the incident
by the government does not in any way mean that liability automatically attaches to the State. It is important to note that A.O. 11 expressly
states that the purpose of creating the Commission was to have a body that will conduct an "investigation of the disorder, deaths and
casualties that took place." 14 In the exercise of its functions, A.O. 11 provides guidelines, and what is relevant to Our discussion reads:

1 Its conclusions regarding the existence of probable cause for the commission of any offense and of the persons
probably guilty of the same shall be sufficient compliance with the rules on preliminary investigation and the charges
arising therefrom may be filed directly with the proper court. 15

In effect, whatever may be the findings of the Commission, the same shall only serve as the cause of action in the event that any party
decides to litigate his/her claim. Therefore, the Commission is merely a preliminary venue. The Commission is not the end in itself. Whatever
recommendation it makes cannot in any way bind the State immediately, such recommendation not having become final and, executory. This
is precisely the essence of it being a fact-finding body.

Secondly, whatever acts or utterances that then President Aquino may have done or said, the same are not tantamount to the State having
waived its immunity from suit. The President's act of joining the marchers, days after the incident, does not mean that there was an
admission by the State of any liability. In fact to borrow the words of petitioners (Caylao group), "it was an act of solidarity by the government
with the people". Moreover, petitioners rely on President Aquino's speech promising that the government would address the grievances of
the rallyists. By this alone, it cannot be inferred that the State has admitted any liability, much less can it be inferred that it has consented to
the suit.

Although consent to be sued may be given impliedly, still it cannot be maintained that such consent was given considering the circumstances
obtaining in the instant case.

Thirdly, the case does not qualify as a suit against the State.

Some instances when a suit against the State is proper are: 16

(1) When the Republic is sued by name;

(2) When the suit is against an unincorporated government agency;

(3) When the, suit is on its face against a government officer but the case is such that ultimate liability will belong not to the officer but to the
government.

While the Republic in this case is sued by name, the ultimate liability does not pertain to the government. Although the military officers and
personnel, then party defendants, were discharging their official functions when the incident occurred, their functions ceased to be official the
moment they exceeded their authority. Based on the Commission findings, there was lack of justification by the government forces in the use
of firearms. 17 Moreover, the members of the police and military crowd dispersal units committed a prohibited act under B.P. Blg. 880 18 as
there was unnecessary firing by them in dispersing the marchers. 19

As early as 1954, this Court has pronounced that an officer cannot shelter himself by the plea that he is a public agent acting under the color
of his office when his acts are wholly without authority. 20 Until recently in 1991, 21 this doctrine still found application, this Court saying that
immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a privileged status not claimed by any other official
of the Republic. The military and police forces were deployed to ensure that the rally would be peaceful and orderly as well as to guarantee
the safety of the very people that they are duty-bound to protect. However, the facts as found by the trial court showed that they fired at the
unruly crowd to disperse the latter.

While it is true that nothing is better settled than the general rule that a sovereign state and its political subdivisions cannot be sued in the
courts except when it has given its consent, it cannot be invoked by both the military officers to release them from any liability, and by the
heirs and victims to demand indemnification from the government. The principle of state immunity from suit does not apply, as in this case,
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. 22 This Court has made it quite clear that even a "high position in the
government does not confer a license to persecute or recklessly injure another." 23

The inescapable conclusion is that the State cannot be held civilly liable for the deaths that followed the incident. Instead, the liability should
fall on the named defendants in the lower court. In line with the ruling of this court in Shauf vs. Court of Appeals, 24 herein public officials,
having been found to have acted beyond the scope of their authority, may be held liable for damages.

WHEREFORE, finding no reversible error and no grave abuse of discretion committed by respondent Judge in issuing the questioned orders,
the instant petitions are hereby DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-26400 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant,

vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES, defendants-appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977, dismissing the plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu City as shown by Transfer
Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds
of Cebu on February 1, 1924. No annotation in favor of the government of any right or interest in the property appears at the back of the
certificate. Without prior expropriation or negotiated sale, the government used a portion of said lot, with an area of 6,167 square meters, for
the construction of the Mango and Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and very narrow, unlike the wide and
beautiful avenues that they are now," and "that the tracing of said roads was begun in 1924, and the formal construction in
1925." *

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot which had been
appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated December 9,
1958. A copy of said indorsement was transmitted to Amigable's counsel by the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17, 1959 upon motion of the
defendants, against the Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public Highways for the
recovery of ownership and possession of the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She also sought
the payment of compensatory damages in the sum of P50,000.00 for the illegal occupation of her land, moral damages in the sum of
P25,000.00, attorney's fees in the sum of P5,000.00 and the costs of the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations of the complaint and interposing the
following affirmative defenses, to wit: (1) that the action was premature, the claim not having been filed first with the Office of the Auditor
General; (2) that the right of action for the recovery of any amount which might be due the plaintiff, if any, had already prescribed; (3) that the
action being a suit against the Government, the claim for moral damages, attorney's fees and costs had no valid basis since as to these
items the Government had not given its consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used
the area involved in the construction of Mango Avenue, plaintiff had no cause of action against the defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial court proceeded to receive the
plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision holding that it had no jurisdiction over the plaintiff's cause of
action for the recovery of possession and ownership of the portion of her lot in question on the ground that the government cannot be sued
without its consent; that it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for compensatory damages in
the sum of P50,000.00, the same being a money claim against the government; and that the claim for moral damages had long prescribed,
nor did it have jurisdiction over said claim because the government had not given its consent to be sued. Accordingly, the complaint was
dismissed. Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us,
there being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of the case.

In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a claim for payment of the value of a portion of land used for the
widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that where the government takes
away property from a private landowner for public use without going through the legal process of expropriation or negotiated sale, the
aggrieved party may properly maintain a suit against the government without thereby violating the doctrine of governmental immunity from
suit without its consent. We there said: .
 ... . If the constitutional mandate that the owner be compensated for property taken for public use were to be respected,
as it should, then a suit of this character should not be summarily dismissed. The doctrine of governmental immunity
from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the
procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment
of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed,
may it "have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in
the judgment." If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are
now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government
would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of
officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any
property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it
makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from
suit could still be appropriately invoked.

Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has not executed any
deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the whole lot. As registered owner, she
could bring an action to recover possession of the portion of land in question at anytime because possession is one of the attributes of
ownership. However, since restoration of possession of said portion by the government is neither convenient nor feasible at this time
because it is now and has been used for road purposes, the only relief available is for the government to make due compensation which it
could and should have done years ago. To determine the due compensation for the land, the basis should be the price or value thereof at the
time of the taking.2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the land from the time it was
taken up to the time that payment is made by the government.3 In addition, the government should pay for attorney's fees, the amount of
which should be fixed by the trial court after hearing.

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

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 90478 November 21, 1991

REPUBLIC OF THE PHILIPPINES (PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT), petitioner,
vs.
SANDIGANBAYAN, BIENVENIDO R. TANTOCO, JR. and DOMINADOR R.
SANTIAGO, respondents.

Dominador R. Santiago for and in his own behalf and as counsel for respondent Tantoco, Jr.

NARVASA, J.:

Private respondents Bienvenido R. Tantoco, Jr. and Dominador R. Santiago together with
Ferdinand E. Marcos, Imelda R. Marcos, Bienvenido R. Tantoco, Sr., Gliceria R. Tantoco, and
Maria Lourdes Tantoco-Pineda-are defendants in Civil Case No. 0008 of the Sandiganbayan.
The case was commenced on July 21, 1987 by the Presidential Commission on Good
Government (PCGG) in behalf of the Republic of the Philippines. The complaint which initiated
the action was denominated one "for reconveyance, reversion, accounting, restitution and
damages," and was avowedly filed pursuant to Executive Order No. 14 of President Corazon C.
Aquino.

After having been served with summons, Tantoco, Jr. and Santiago, instead of filing their
answer, jointly filed a "MOTION TO STRIKE OUT SOME PORTIONS OF THE COMPLAINT
AND FOR BILL OF PARTICULARS OF OTHER PORTIONS" dated Nov. 3, 1987. 1 The
PCGG filed an opposition thereto, 2 and the movants, a reply to the opposition. 3 By order dated
January 29, 1988, the Sandiganbayan, in order to expedite proceedings and accommodate the
defendants, gave the PCGG forty-five (45) days to expand its complaint to make more specific
certain allegations. 4

Tantoco and Santiago then presented a "motion for leave to file interrogatories under Rule 25 of
the Rules of Court" dated February 1, 1988, and "Interrogatories under Rule 25." 5 Basically,
they sought an answer to the question: "Who were the Commissioners of the PCGG (aside from
its Chairman, Hon. Ramon Diaz, who verified the complaint) who approved or authorized the
inclusion of Messrs. Bienvenido R. Tantoco, Jr. and Dominador R. Santiago as defendants in the
. . case?" 6 The PCGG responded by filing a motion dated February 9, 1988 to strike out said
motion and interrogatories as being impertinent, "queer," "weird," or "procedurally bizarre as the
purpose thereof lacks merit as it is improper, impertinent and irrelevant under any
guise." 7
On March 18, 1988, in compliance with the Order of January 29, 1988, the PCGG filed an
Expanded Complaint. 8 As this expanded complaint, Tantoco and Santiago reiterated their
motion for bill of particulars, through a Manifestation dated April 11, 1988. 9

Afterwards, by Resolution dated July 4, 1988, 10 the Sandiganbayan denied the motion to strike
out, for bill of particulars, and for leave to file interrogatories, holding them to be without legal
and factual basis. Also denied was the PCGG's motion to strike out impertinent pleading dated
February 9, 1988. The Sandiganbayan declared inter alia the complaint to be "sufficiently
definite and clear enough," there are adequate allegations . . which clearly portray the supposed
involvement and/or alleged participation of defendants-movants in the transactions described in
detail in said Complaint," and "the other matters sought for particularization are evidentiary in
nature which should be ventilated in the pre-trial or trial proper . ." It also opined that "(s)ervice
of interrogatories before joinder of issue and without leave of court is premature . . (absent) any
special or extraordinary circumstances . . which would justify . . (the same)."

Tantoco and Santiago then filed an Answer with Compulsory Counterclaim under date of July
18, 1988. 11 In response, the PCGG presented a "Reply to Answer with Motion to Dismiss
Compulsory Counterclaim " 12

The case was set for pre-trial on July 31, 1989. 13 On July 25, 1989, the PCGG submitted its
PRE-TRIAL. 14 The pre-trial was however reset to September 11, 1989, and all other parties
were required to submit pre-trial briefs on or before that date. 15

On July 27, 1989 Tantoco and Santiago filed with the Sandiganbayan a pleading denominated
"Interrogatories to Plaintiff," 16 and on August 2, 1989, an "Amended Interrogatories to
Plaintiff"' 17 as well as a Motion for Production and Inspection of Documents. 18

The amended interrogatories chiefly sought factual details relative to specific averments of
PCGG's amended complaint, through such questions, for instance, as

1. In connection with the allegations . . in paragraph 1 . ., what specific property or

properties does the plaintiff claim it has the right to recover from defendants Tantoco, Jr.
and Santiago for being ill-gotten?

3. In connection with the allegations . . in paragraph 10 (a) . . what specific act or acts . .
were committed by defendants Tantoco, Jr. and Santiago in "concert with" defendant
Ferdinand Marcos and in furtherance or pursuit, of the alleged systematic plan of said
defendant Marcos to accumulate ill-gotten wealth?"

5. In connection with . . paragraph 13 . ., what specific act or acts of the defendants

Tantoco, Jr. and Santiago . . were committed by said defendants as part, or in
furtherance, of the alleged plan to conceal assets of defendants Ferdinand and Imelda
Marcos?
 7. In connection with . . paragraph 15(c) . . is it plaintiff's position or theory of the case
that Tourist Duty Free Shops, Inc., including all the assets of said corporation, are
beneficially owned by either or both defendants Ferdinand and Imelda Marcos and that
the defendants Tantoco, Jr. and Santiago, as well as, the other stockholders of record of
the same corporation are mere "dummies" of said defendants Ferdinand and /or Imelda
R. Marcos?

On the other hand, the motion for production and inspection of documents prayed for
examination and copying of

1) the "official records and other evidence" on the basis of which the verification of the
Amended Complaint asserted that the allegations thereof are "true and correct;"

2) the documents listed in PCGG's Pre-Trial Brief as those "intended to be presented and
. . marked as exhibits for the plaintiff;" and

3) "the minutes of the meeting of the PCGG which chronicles the discussion (if any) and
the decision (of the Chairman and members) to file the complaint" in the case at bar.

By Resolutions dated August 21, 1989 and August 25, 1989, the Sandiganbayan admitted the
Amended Interrogatories and granted the motion for production and inspection of documents
(production being scheduled on September 14 and 15, 1989), respectively.

On September 1, 1989, the PCGG filed a Motion for Reconsideration of the Resolution of
August 25, 1989 (allowing production and inspection of documents). It argued that

1) since the documents subject thereof would be marked as exhibits during the pre-trial on
September 11, 1989 anyway, the order for "their production and inspection on September 14 and
15, are purposeless and unnecessary;"

2) movants already know of the existence and contents of the document which "are clearly
described . . (in) plaintiff's Pre-Trial Brief;"

3) the documents are "privileged in character" since they are intended to be used against the
PCGG and/or its Commissioners in violation of Section 4, Executive Order No. 1, viz.:

(a) No civil action shall lie against the Commission or any member thereof for anything
done or omitted in the discharge of the task contemplated by this Order.

(b) No member or staff of the Commission shall be required to testify or produce

evidence in any judicial, legislative, or administrative proceeding concerning matters
within its official cognizance.
It also filed on September 4, 1989 an opposition to the Amended Interrogatories, 19 which the
Sandiganbayan treated as a motion for reconsideration of the Resolution of August 21, 1989
(admitting the Amended Interrogatories). The opposition alleged that

1) the interrogatories "are not specific and do not name the person to whom they are propounded
. .," or "who in the PCGG, in particular, . . (should) answer the interrogatories;"

2) the interrogatories delve into "factual matters which had already been decreed . . as part of the
proof of the Complaint upon trial . .;"

3) the interrogatories "are frivolous" since they inquire about "matters of fact . . which
defendants . . sought to . . (extract) through their aborted Motion for Bill of Particulars;"

4) the interrogatories "are really in the nature of a deposition, which is prematurely filed and
irregularly utilized . . (since) the order of trial calls for plaintiff to first present its evidence."

Tantoco and Santiago filed a reply and opposition on September 18, 1989.

After hearing, the Sandiganbayan promulgated two (2) Resolutions on September 29, 1989, the
first, denying reconsideration (of the Resolution allowing production of documents), and the
second, reiterating by implication the permission to serve the amended interrogatories on the
plaintiff (PCGG). 20

Hence, this petition for certiorari.

The PCGG contends that said orders, both dated September 29, 1989, should be nullified
because rendered with grave abuse of discretion amounting to excess of jurisdiction. More
particularly, it claims

a) as regards the order allowing the amended interrogatories to the plaintiff PCGG:

1) that said interrogatories are not specific and do not name the particular individuals to
whom they are propounded, being addressed only to the PCGG;

2) that the interrogatories deal with factual matters which the Sandiganbayan (in denying
the movants' motion for bill of particulars) had already declared to be part of the PCGG's
proof upon trial; and

3) that the interrogatories would make PCGG Commissioners and officers witnesses, in
contravention of Executive Order No. 14 and related issuances; and

b) as regards the order granting the motion for production of documents:

1) that movants had not shown any good cause therefor;

2) that some documents sought to be produced and inspected had already been presented
in Court and marked preliminarily as PCGG's exhibits, and the movants had viewed,
scrutinized and even offered objections thereto and made comments thereon; and

3) that the other documents sought to be produced are either

(a) privileged in character or confidential in nature and their use is proscribed by

the immunity provisions of Executive Order No. 1, or

(b) non-existent, or mere products of the movants' suspicion and fear.

This Court issued a temporary restraining order on October 27, 1989, directing the
Sandiganbayan to desist from enforcing its questioned resolutions of September 29, 1989
in Civil Case No. 0008. 21

After the issues were delineated and argued at no little length by the parties, the Solicitor
General withdrew "as counsel for plaintiff . . with the reservation, however, conformably
with Presidential Decree No. 478, the provisions of Executive Order No. 292, as well as
the decisional law of 'Orbos v. Civil Service Commission, et al.,' (G.R. No. 92561,
September 12, 1990) 22 to submit his comment/observation on incidents/matters pending
with this . . Court if called for by circumstances in the interest of the Government or if he
is so required by the Court." 23 This, the Court allowed by Resolution dated January 21,
1991. 24

Subsequently, PCGG Commissioner Maximo A. Maceren advised the Court that the
cases from which the Solicitor General had withdrawn would henceforth be under his
(Maceren's) charge "and/or any of the following private attorneys: Eliseo B. Alampay,
Jr., Mario E. Ongkiko, Mario Jalandoni and such other attorneys as it may later
authorize." 25

The facts not being in dispute, and it appearing that the parties have fully ventilated their
respective positions, the Court now proceeds to decide the case.

Involved in the present proceedings are two of the modes of discovery provided in the
Rules of Court: interrogatories to parties , 26 and production and inspection of documents
and things. 27 Now, it appears to the Court that among far too many lawyers (and not a
few judges), there is, if not a regrettable unfamiliarity and even outright ignorance about
the nature, purposes and operation of the modes of discovery, at least a strong yet
unreasoned and unreasonable disinclination to resort to them which is a great pity for
the intelligent and adequate use of the deposition-discovery mechanism, coupled with
pre-trial procedure, could, as the experience of other jurisdictions convincingly
demonstrates, effectively shorten the period of litigation and speed up adjudication. 28
Hence, a few words about these remedies is not at all inappropriate.

The resolution of controversies is, as everyone knows, the raison d'etre of courts. This
essential function is accomplished by first, the ascertainment of all the material and
relevant facts from the pleadings and from the evidence adduced by the parties, and
second, after that determination of the facts has been completed, by the application of the
law thereto to the end that the controversy may be settled authoritatively, definitely and
finally.

It is for this reason that a substantial part of the adjective law in this jurisdiction is
occupied with assuring that all the facts are indeed presented to the Court; for obviously,
to the extent that adjudication is made on the basis of incomplete facts, to that extent
there is faultiness in the approximation of objective justice. It is thus the obligation of
lawyers no less than of judges to see that this objective is attained; that is to say, that
there no suppression, obscuration, misrepresentation or distortion of the facts; and that no
party be unaware of any fact material a relevant to the action, or surprised by any factual
detail suddenly brought to his attention during the trial. 29

Seventy-one years ago, in Alonso v. Villamor, 30 this Court described the nature and
object of litigation and in the process laid down the standards by which judicial contests
are to be conducted in this jurisdiction. It said:

A litigation is not a game of technicalities in which one, more deeply schooled

and skilled in the subtle art of movement and position, entraps and destroys the
other. It is, rather a contest in which each contending party fully and fairly lays
before the court the facts in issue and then brushing aside as wholly trivial and
indecisive all imperfections of form and technicalities of procedure, asks that
justice be done on the merits. Lawsuits, unlike duels, are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested right in technicalities. . . .

The message is plain. It is the duty of each contending party to lay before the court the
facts in issue-fully and fairly; i.e., to present to the court all the material and relevant
facts known to him, suppressing or concealing nothing, nor preventing another party, by
clever and adroit manipulation of the technical rules of pleading and evidence, from also
presenting all the facts within his knowledge.

Initially, that undertaking of laying the facts before the court is accomplished by the
pleadings filed by the parties; but that, only in a very general way. Only "ultimate facts"
are set forth in the pleadings; hence, only the barest outline of the facfual basis of a
party's claims or defenses is limned in his pleadings. The law says that every pleading
"shall contain in a methodical and logical form, a plain, concise and direct statement of
the ultimate facts on which the party pleading relies for his claim or defense, as the case
may be, omitting the statement of mere evidentiary facts." 31

Parenthetically, if this requirement is not observed, i.e., the ultimate facts are alleged too
generally or "not averred with sufficient definiteness or particularity to enable . . (an
adverse party) properly to prepare his responsive pleading or to prepare for trial," a bill of
particulars seeking a "more definite statement" may be ordered by the court on motion of
a party. The office of a bill of particulars is, however, limited to making more particular
or definite the ultimate facts in a pleading It is not its office to supply evidentiary matters.
And the common perception is that said evidentiary details are made known to the parties
and the court only during the trial, when proof is adduced on the issues of fact arising
from the pleadings.

The truth is that "evidentiary matters" may be inquired into and learned by the parties
before the trial. Indeed, it is the purpose and policy of the law that the parties before
the trial if not indeed even before the pre-trial should discover or inform themselves of
all the facts relevant to the action, not only those known to them individually, but also
those known to adversaries; in other words, the desideratum is that civil trials should not
be carried on in the dark; and the Rules of Court make this ideal possible through the
deposition-discovery mechanism set forth in Rules 24 to 29. The experience in other
jurisdictions has been that ample discovery before trial, under proper regulation,
accomplished one of the most necessary of modern procedure: it not only eliminates
unessential issue from trials thereby shortening them considerably, but also requires
parties to play the game with the cards on the table so that the possibility of fair
settlement before trial is measurably increased. . ." 32

As just intimated, the deposition-discovery procedure was designed to remedy the

conceded inadequacy and cumbersomeness of the pre-trial functions of notice-giving,
issue-formulation and fact revelation theretofore performed primarily by the pleadings.

The various modes or instruments of discovery are meant to serve (1) as a device, along
with the pre-trial hearing under Rule 20, to narrow and clarify the basic issues between
the parties, and (2) as a device for ascertaining the facts relative to those issues. The
evident purpose is, to repeat, to enable parties, consistent with recognized privileges, to
obtain the fullest possible knowledge of the issues and facts before trials and thus prevent
that said trials are carried on in the dark. 33

To this end, the field of inquiry that may be covered by depositions or interrogatories is
as broad as when the interrogated party is called as a witness to testify orally at trial. The
inquiry extends to all facts which are relevant, whether they be ultimate or evidentiary,
excepting only those matters which are privileged. The objective is as much to give every
party the fullest possible information of all the relevant facts before the trial as to obtain
evidence for use upon said trial. The principle is reflected in Section 2, Rule 24
(governing depositions) 34 which generally allows the examination of a deponent

1) "regarding any matter, not privileged, which is relevant to the subject of the
pending action, whether relating to the claim or defense of any other party;"

2) as well as:

(a) "the existence, description, nature, custody, condition and location of any
books, documents, or other tangible things" and

(b) "the identity and location of persons having knowledge of relevant facts."

What is chiefly contemplated is the discovery of every bit of information which may be
useful in the preparation for trial, such as the identity and location of persons having
knowledge of relevant facts; those relevant facts themselves; and the existence,
description, nature, custody, condition, and location of any books, documents, or other
tangible things. Hence, "the deposition-discovery rules are to be accorded a broad and
liberal treatment. No longer can the time-honored cry of "fishing expedition" serve to
preclude a party from inquiring into the facts underlying his opponent's case. Mutual
knowledge of all the relevant facts gathered by both parties is essential to proper
litigation. To that end, either party may compel the other to disgorge whatever facts he
has in his possession. The deposition-discovery procedure simply advances the stage at
which the disclosure can be compelled from the time of trial to the period preceding it,
thus reducing the possibility, of surprise, . . . 35

In line with this principle of according liberal treatment to the deposition-discovery

mechanism, such modes of discovery as (a) depositions (whether by oral examination or
written interrogatories) under Rule 24, (b) interrogatories to parties under Rule 25, and
(c) requests for admissions under Rule 26, may be availed of without leave of court, and
generally, without court intervention. The Rules of Court explicitly provide that leave of
court is not necessary to avail of said modes of discovery after an answer to the complaint
has been served. 36 It is only when an answer has not yet been filed (but after jurisdiction
has been obtained over the defendant or property subject of the action) that prior leave of
court is needed to avail of these modes of discovery, the reason being that at that time the
issues are not yet joined and the disputed facts are not clear. 37
On the other hand, leave of court is required as regards discovery by (a) production or
inspection of documents or things in accordance with Rule 27, or (b) physical and mental
examination of persons under Rule 28, which may be granted upon due application and a
showing of due cause.

To ensure that availment of the modes of discovery is otherwise untrammeled and

efficacious, the law imposes serious sanctions on the party who refuses to make
discovery, such as dismissing the action or proceeding or part thereof, or rendering
judgment by default against the disobedient party; contempt of court, or arrest of the
party or agent of the party; payment of the amount of reasonable expenses incurred in
obtaining a court order to compel discovery; taking the matters inquired into as
established in accordance with the claim of the party seeking discovery; refusal to allow
the disobedient party support or oppose designated claims or defenses; striking out
pleadings or parts thereof; staying further proceedings. 38

Of course, there are limitations to discovery, even when permitted to be undertaken

without leave and without judicial intervention. "As indicated by (the) Rules . . .,
limitations inevitably arise when it can be shown that the examination is being conducted
in bad faith or in such a manner as to annoy, embarass, or oppress the person subject to
the inquiry. 39 And . . . further limitations come into existence when the inquiry touches
upon the irrelevant or encroaches upon the recognized domains of privilege." 40

In fine, the liberty of a party to make discovery is well nigh unrestricted if the matters
inquired into are otherwise relevant and not privileged, and the inquiry is made in good
faith and within the bounds of the law.

It is in light of these broad principles underlying the deposition-discovery mechanism, in

relation of course to the particular rules directly involved, that the issues in this case will
now be resolved.

The petitioner's objections to the interrogatories served on it in accordance with Rule 25

of the Rules of Court cannot be sustained.

It should initially be pointed out as regards the private respondents "Motion for Leave
to File Interrogatories" dated February 1, 1988 41 that it was correct for them to seek
leave to serve interrogatories, because discovery was being availed of before an answer
had been served. In such a situation, i.e., "after jurisdiction has been obtained over any
defendant or over property subject of the action" but before answer, Section 1 of Rule 24
(treating of depositions), in relation to Section 1 of Rule 25 (dealing with interrogatories
to parties) explicitly requires "leave of court." 42 But there was no need for the private
respondents to seek such leave to serve their "Amended Interrogatories to Plaintiff"
(dated August 2, 1989 43) after they had filed their answer to the PCGG's complaint, just
as there was no need for the Sandiganbayan to act thereon.

1. The petitioner's first contention that the interrogatories in question are defective
because they (a) do not name the particular individuals to whom they are propounded,
being addressed only to the PCGG, and (b) are "fundamentally the same matters . .
(private respondents) sought to be clarified through their aborted Motion . . for Bill of
Particulars" are untenable and quickly disposed of.

The first part of petitioner's submission is adequately confuted by Section 1, Rule 25

which states that if the party served with interrogatories is a juridical entity such as "a
public or private corporation or a partnership or association," the same shall be "answered
. . by any officer thereof competent to testify in its behalf." There is absolutely no reason
why this proposition should not be applied by analogy to the interrogatories served on the
PCGG. That the interrogatories are addressed only to the PCGG, without naming any
specific commissioner o officer thereof, is utterly of no consequence, and may not be
invoked as a reason to refuse to answer. As the rule states, the interrogatories shall be
answered "by any officer thereof competent to testify in its behalf."

That the matters on which discovery is desired are the same matters subject of a prior
motion for bill of particulars addressed to the PCGG's amended complaint and denied
for lack of merit is beside the point. Indeed, as already pointed out above, a bill of
particulars may elicit only ultimate facts, not so-called evidentiary facts. The latter are
without doubt proper subject of discovery. 44

Neither may it be validly argued that the amended interrogatories lack specificity. The
merest glance at them disproves the argument. The interrogatories are made to relate to
individual paragraphs of the PCGG's expanded complaint and inquire about details of the
ultimate facts therein alleged. What the PCGG may properly do is to object to specific
items of the interrogatories, on the ground of lack of relevancy, or privilege, or that the
inquiries are being made in bad faith, or simply to embarass or oppress it. 45 But until
such an objection is presented and sustained, the obligation to answer subsists.

2. That the interrogatories deal with factual matters which will be part of the PCGG's
proof upon trial, is not ground for suppressing them either. As already pointed out, it is
the precise purpose of discovery to ensure mutual knowledge of all the relevant facts on
the part of all parties even before trial, this being deemed essential to proper litigation.
This is why either party may compel the other to disgorge whatever facts he has in his
possession; and the stage at which disclosure of evidence is made is advanced from the
time of trial to the period preceding it.

3. Also unmeritorious is the objection that the interrogatories would make PCGG
Commissioners and officers witnesses, in contravention of Executive Order No. 14 and
related issuances. In the first place, there is nothing at all wrong in a party's making his
adversary his witness . 46 This is expressly allowed by Section 6, Rule 132 of the Rules
of Court, viz.:

Sec. 6. Direct examination of unwilling or hostile witnesses. A party may . . .

call an adverse party or an officer, director, or managing agent of a public or
private corporation or of a partnership or association which is an adverse party,
and interrogate him by leading questions and contradict and impeach him in all
respects as if he had been called by the adverse party, and the witness thus called
may be contradicted and impeached by or on behalf of the adverse party also, and
may be cross-examined by the adverse party only upon the subject-matter of his
examination in chief.

The PCGG insinuates that the private respondents are engaged on a "fishing expedition,"
apart from the fact that the information sought is immaterial since they are evidently
meant to establish a claim against PCGG officers who are not parties to the action. It
suffices to point out that "fishing expeditions" are precisely permitted through the modes
of discovery. 47 Moreover, a defendant who files a counterclaim against the plaintiff is
allowed by the Rules to implead persons (therefore strangers to the action) as additional
defendants on said counterclaim. This may be done pursuant to Section 14, Rule 6 of the
Rules, to wit:

Sec. 14. Bringing new parties. When the presence of parties other than those to
the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be
brought in as defendants, if jurisdiction over them can be obtained."

The PCGG's assertion that it or its members are not amenable to any civil action "for
anything done or omitted in the discharge of the task contemplated by . . (Executive)
Order (No. 1)," is not a ground to refuse to answer the interrogatories. The disclosure of
facto relevant to the action and which are not self-incriminatory or otherwise privileged is
one thing; the matter of whether or not liability may arise from the facts disclosed in light
of Executive Order
No. 1, is another. No doubt, the latter proposition may properly be set up by way of
defense in the action.

The apprehension has been expressed that the answers to the interrogatories may be
utilized as foundation for a counterclaim against the PCGG or its members and officers.
They will be. The private respondents have made no secret that this is in fact their
intention. Withal, the Court is unable to uphold the proposition that while the PCGG
obviously feels itself at liberty to bring actions on the basis of its study and appreciation
of the evidence in its possession, the parties sued should not be free to file counterclaims
in the same actions against the PCGG or its officers for gross neglect or ignorance, if not
downright bad faith or malice in the commencement or initiation of such judicial
proceedings, or that in the actions that it may bring, the PCGG may opt not to be bound
by rule applicable to the parties it has sued, e.g., the rules of discovery.
So, too, the PCGG's postulation that none of its members may be "required to testify or
produce evidence in any judicial . . proceeding concerning matters within its official
cognizance," has no application to a judicial proceeding it has itself initiated. As just
suggested, the act of bringing suit must entail a waiver of the exemption from giving
evidence; by bringing suit it brings itself within the operation and scope of all the rules
governing civil actions, including the rights and duties under the rules of discovery.
Otherwise, the absurd would have to be conceded, that while the parties it has impleaded
as defendants may be required to "disgorge all the facts" within their knowledge and in
their possession, it may not itself be subject to a like compulsion.

The State is, of course, immune from suit in the sense that it cannot, as a rule, be sued
without its consent. But it is axiomatic that in filing an action, it divests itself of its
sovereign character and sheds its immunity from suit, descending to the level of an
ordinary litigant. The PCGG cannot claim a superior or preferred status to the State, even
while assuming to represent or act for the State. 48

The suggestion 49 that the State makes no implied waiver of immunity by filing suit
except when in so doing it acts in, or in matters concerning, its proprietary or non-
governmental capacity, is unacceptable; it attempts a distinction without support in
principle or precedent. On the contrary

The consent of the State to be sued may be given expressly or impliedly. Express
consent may be manifested either through a general law or a special law. Implied
consent is given when the State itself commences litigation or when it enters into a
contract. 50

The immunity of the State from suits does not deprive it of the right to sue private
parties in its own courts. The state as plaintiff may avail itself of the different
forms of actions open to private litigants. In short, by taking the initiative in an
action against the private parties, the state surrenders its privileged position and
comes down to the level of the defendant. The latter automatically acquires,
within certain limits, the right to set up whatever claims and other defenses he
might have against the state. . . . (Sinco, Philippine Political Law, Tenth E., pp.
36-37, citing U.S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899)" 51

It can hardly be doubted that in exercising the right of eminent domain, the State
exercises its jus imperii, as distinguished from its proprietary rights or jus gestionis. Yet,
even in that area, it has been held that where private property has been taken in
expropriation without just compensation being paid, the defense of immunity from suit
cannot be set up by the State against an action for payment by the owner. 52

The Court also finds itself unable to sustain the PCGG's other principal contention, of the
nullity of the Sandiganbayan's Order for the production and inspection of specified
documents and things allegedly in its possession.
The Court gives short shrift to the argument that some documents sought to be produced
and inspected had already been presented in Court and marked preliminarily as PCGG's
exhibits, the movants having in fact viewed, scrutinized and even offered objections
thereto and made comments thereon. Obviously, there is nothing secret or confidential
about these documents. No serious objection can therefore be presented to the desire of
the private respondents to have copies of those documents in order to study them some
more or otherwise use them during the trial for any purpose allowed by law.

The PCGG says that some of the documents are non-existent. This it can allege in
response to the corresponding question in the interrogatories, and it will incur no sanction
for doing so unless it is subsequently established that the denial is false.

The claim that use of the documents is proscribed by Executive Order No. 1 has already
been dealt with. The PCGG is however at liberty to allege and prove that said documents
fall within some other privilege, constitutional or statutory.

The Court finally finds that, contrary to the petitioner's theory, there is good cause for the
production and inspection of the documents subject of the motion dated August 3, 1989.
53 Some of the documents are, according to the verification of the amended complaint,
the basis of several of the material allegations of said complaint. Others, admittedly, are
to be used in evidence by the plaintiff. It is matters such as these into which inquiry is
precisely allowed by the rules of discovery, to the end that the parties may adequately
prepare for pre-trial and trial. The only other documents sought to be produced are
needed in relation to the allegations of the counterclaim. Their relevance is indisputable;
their disclosure may not be opposed.

One last word. Due no doubt to the deplorable unfamiliarity respecting the nature,
purposes and operation of the modes of discovery earlier
mentioned, 54 there also appears to be a widely entertained idea that application of said
modes is a complicated matter, unduly expensive and dilatory. Nothing could be farther
from the truth. For example, as will already have been noted from the preceding
discussion, all that is entailed to activate or put in motion the process of discovery by
interrogatories to parties under Rule 25 of the Rules of Court, is simply the delivery
directly to a party of a letter setting forth a list of least questions with the request that they
be answered individually. 55 That is all. The service of such a communication on the
party has the effect of imposing on him the obligation of answering the questions
"separately and fully in writing underoath," and serving "a copy of the answers on the
party submitting the interrogatories within fifteen (15) days after service of the
interrogatories . . ." 56 The sanctions for refusing to make discovery have already been
mentioned. 57 So, too, discovery under Rule 26 is begun by nothing more complex than
the service on a party of a letter or other written communication containing a request that
specific facts therein set forth and/or particular documents copies of which are thereto
appended, be admitted in writing. 58 That is all. Again, the receipt of such a
communication by the party has the effect of imposing on him the obligation of serving
the party requesting admission with "a sworn statement either denying specifically the
matters of which an admission is requested or setting forth in detail the reasons why he
cannot truthfully either admit or deny those matters," failing in which "(e)ach of the
matters of which admission is requested shall be deemed admitted." 59 The taking of
depositions in accordance with Rule 24 (either on oral examination or by written
interrogatories) while somewhat less simple, is nonetheless by no means as complicated
as seems to be the lamentably extensive notion.

WHEREFORE, the petition is DENIED, without pronouncement as to costs. The

temporary restraining order issued on October 27, 1989 is hereby LIFTED AND SET
ASIDE.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea,
Regalado and Davide, Jr., JJ., concur.
Melencio-Herrera, J., I also join Justice Cruz's concurrence.

Romero, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-11154 March 21, 1916

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

Crossfield and O'Brien for plaintiff.

Attorney-General Avancea for defendant..

TRENT, J.:

This is an appeal by both parties from a judgment of the Court of First Instance of the city of
Manila in favor of the plaintiff for the sum of P14,741, together with the costs of the cause.

Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages
which the plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint," and (2)
"in limiting the time when plaintiff was entirely disabled to two months and twenty-one days and
fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in
his complaint."

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding
that the collision between the plaintiff's motorcycle and the ambulance of the General Hospital
was due to the negligence of the chauffeur; (b) in holding that the Government of the Philippine
Islands is liable for the damages sustained by the plaintiff as a result of the collision, even if it be
true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment
against the defendant for the sum of P14,741.

The trial court's findings of fact, which are fully supported by the record, are as follows:

It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a
motorcycle, was going toward the western part of Calle Padre Faura, passing along the
west side thereof at a speed of ten to twelve miles an hour, upon crossing Taft Avenue
and when he was ten feet from the southwestern intersection of said streets, the General
Hospital ambulance, upon reaching said avenue, instead of turning toward the south, after
passing the center thereof, so that it would be on the left side of said avenue, as is
prescribed by the ordinance and the Motor Vehicle Act, turned suddenly and
unexpectedly and long before reaching the center of the street, into the right side of Taft
Avenue, without having sounded any whistle or horn, by which movement it struck the
plaintiff, who was already six feet from the southwestern point or from the post place
there.
 By reason of the resulting collision, the plaintiff was so severely injured that, according
to Dr. Saleeby, who examined him on the very same day that he was taken to the General
Hospital, he was suffering from a depression in the left parietal region, a would in the
same place and in the back part of his head, while blood issued from his nose and he was
entirely unconscious.

The marks revealed that he had one or more fractures of the skull and that the grey matter
and brain was had suffered material injury. At ten o'clock of the night in question, which
was the time set for performing the operation, his pulse was so weak and so irregular that,
in his opinion, there was little hope that he would live. His right leg was broken in such a
way that the fracture extended to the outer skin in such manner that it might be regarded
as double and the would be exposed to infection, for which reason it was of the most
serious nature.

At another examination six days before the day of the trial, Dr. Saleeby noticed that the
plaintiff's leg showed a contraction of an inch and a half and a curvature that made his leg
very weak and painful at the point of the fracture. Examination of his head revealed a
notable readjustment of the functions of the brain and nerves. The patient apparently was
slightly deaf, had a light weakness in his eyes and in his mental condition. This latter
weakness was always noticed when the plaintiff had to do any difficult mental labor,
especially when he attempted to use his money for mathematical calculations.

According to the various merchants who testified as witnesses, the plaintiff's mental and
physical condition prior to the accident was excellent, and that after having received the
injuries that have been discussed, his physical condition had undergone a noticeable
depreciation, for he had lost the agility, energy, and ability that he had constantly
displayed before the accident as one of the best constructors of wooden buildings and he
could not now earn even a half of the income that he had secured for his work because he
had lost 50 per cent of his efficiency. As a contractor, he could no longer, as he had
before done, climb up ladders and scaffoldings to reach the highest parts of the building.

As a consequence of the loss the plaintiff suffered in the efficiency of his work as a
contractor, he had to dissolved the partnership he had formed with the engineer. Wilson,
because he was incapacitated from making mathematical calculations on account of the
condition of his leg and of his mental faculties, and he had to give up a contract he had
for the construction of the Uy Chaco building."

We may say at the outset that we are in full accord with the trial court to the effect that the
collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due
solely to the negligence of the chauffeur.

The two items which constitute a part of the P14,741 and which are drawn in question by the
plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the P2,666, the
amount allowed for the loss of wages during the time the plaintiff was incapacitated from
pursuing his occupation. We find nothing in the record which would justify us in increasing the
amount of the first. As to the second, the record shows, and the trial court so found, that the
plaintiff's services as a contractor were worth P1,000 per month. The court, however, limited the
time to two months and twenty-one days, which the plaintiff was actually confined in the
hospital. In this we think there was error, because it was clearly established that the plaintiff was
wholly incapacitated for a period of six months. The mere fact that he remained in the hospital
only two months and twenty-one days while the remainder of the six months was spent in his
home, would not prevent recovery for the whole time. We, therefore, find that the amount of
damages sustained by the plaintiff, without any fault on his part, is P18,075.

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.

Act No. 2457, effective February 3, 1915, reads:

An Act authorizing E. Merritt to bring suit against the Government of the Philippine
Islands and authorizing the Attorney-General of said Islands to appear in said suit.

Whereas a claim has been filed against the Government of the Philippine Islands by Mr.
E. Merritt, of Manila, for damages resulting from a collision between his motorcycle and
the ambulance of the General Hospital on March twenty-fifth, nineteen hundred and
thirteen;

Whereas it is not known who is responsible for the accident nor is it possible to determine
the amount of damages, if any, to which the claimant is entitled; and

Whereas the Director of Public Works and the Attorney-General recommended that an
Act be passed by the Legislature authorizing Mr. E. Merritt to bring suit in the courts
against the Government, in order that said questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine Legislature, that:

SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of
the city of Manila against the Government of the Philippine Islands in order to fix the
responsibility for the collision between his motorcycle and the ambulance of the General
Hospital, and to determine the amount of the damages, if any, to which Mr. E. Merritt is
entitled on account of said collision, and the Attorney-General of the Philippine Islands is
hereby authorized and directed to appear at the trial on the behalf of the Government of
said Islands, to defendant said Government at the same.

SEC. 2. This Act shall take effect on its passage.

Enacted, February 3, 1915.

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did
it also concede its liability to the plaintiff? If only the former, then it cannot be held that the Act
created any new cause of action in favor of the plaintiff or extended the defendant's liability to
any case not previously recognized.

All admit that the Insular Government (the defendant) cannot be sued by an individual without
its consent. It is also admitted that the instant case is one against the Government. As the consent
of the Government to be sued by the plaintiff was entirely voluntary on its part, it is our duty to
look carefully into the terms of the consent, and render judgment accordingly.

The plaintiff was authorized to bring this action against the Government "in order to fix the
responsibility for the collision between his motorcycle and the ambulance of the General
Hospital and to determine the amount of the damages, if any, to which Mr. E. Merritt is entitled
on account of said collision, . . . ." These were the two questions submitted to the court for
determination. The Act was passed "in order that said questions may be decided." We have
"decided" that the accident was due solely to the negligence of the chauffeur, who was at the
time an employee of the defendant, and we have also fixed the amount of damages sustained by
the plaintiff as a result of the collision. Does the Act authorize us to hold that the Government is
legally liable for that amount? If not, we must look elsewhere for such authority, if it exists.

The Government of the Philippine Islands having been "modeled after the Federal and State
Governments in the United States," we may look to the decisions of the high courts of that
country for aid in determining the purpose and scope of Act No. 2457.

In the United States the rule that the state is not liable for the torts committed by its officers or
agents whom it employs, except when expressly made so by legislative enactment, is well
settled. "The Government," says Justice Story, "does not undertake to guarantee to any person
the fidelity of the officers or agents whom it employs, since that would involve it in all its
operations in endless embarrassments, difficulties and losses, which would be subversive of the
public interest." (Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9
Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.)

In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the
state for personal injuries received on account of the negligence of the state officers at the state
fair, a state institution created by the legislature for the purpose of improving agricultural and
kindred industries; to disseminate information calculated to educate and benefit the industrial
classes; and to advance by such means the material interests of the state, being objects similar to
those sought by the public school system. In passing upon the question of the state's liability for
the negligent acts of its officers or agents, the court said:

No claim arises against any government is favor of an individual, by reason of the

misfeasance, laches, or unauthorized exercise of powers by its officers or agents. (Citing
Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440;
Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29;
Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where the cause
of action arises out of either fort or contract, the rule is stated in 36 Cyc., 915, thus:
 By consenting to be sued a state simply waives its immunity from suit. It does not
thereby concede its liability to plaintiff, or create any cause of action in his favor, or
extend its liability to any cause not previously recognized. It merely gives a remedy to
enforce a preexisting liability and submits itself to the jurisdiction of the court, subject to
its right to interpose any lawful defense.

In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of
1913, which authorized the bringing of this suit, read:

SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit,

Waukesha County, Wisconsin, to bring suit in such court or courts and in such form or
forms as he may be advised for the purpose of settling and determining all controversies
which he may now have with the State of Wisconsin, or its duly authorized officers and
agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the
State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the
lower end of Nagawicka Lake, and relative to the use of the waters of said Bark River
and Nagawicka Lake, all in the county of Waukesha, Wisconsin.

In determining the scope of this act, the court said:

Plaintiff claims that by the enactment of this law the legislature admitted liability on the
part of the state for the acts of its officers, and that the suit now stands just as it would
stand between private parties. It is difficult to see how the act does, or was intended to do,
more than remove the state's immunity from suit. It simply gives authority to commence
suit for the purpose of settling plaintiff's controversies with the estate. Nowhere in the act
is there a whisper or suggestion that the court or courts in the disposition of the suit shall
depart from well established principles of law, or that the amount of damages is the only
question to be settled. The act opened the door of the court to the plaintiff. It did not pass
upon the question of liability, but left the suit just where it would be in the absence of the
state's immunity from suit. If the Legislature had intended to change the rule that
obtained in this state so long and to declare liability on the part of the state, it would not
have left so important a matter to mere inference, but would have done so in express
terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A.,
399.)

In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and
considered, are as follows:

All persons who have, or shall hereafter have, claims on contract or for negligence
against the state not allowed by the state board of examiners, are hereby authorized, on
the terms and conditions herein contained, to bring suit thereon against the state in any of
the courts of this state of competent jurisdiction, and prosecute the same to final
judgment. The rules of practice in civil cases shall apply to such suits, except as herein
otherwise provided.

And the court said:

 This statute has been considered by this court in at least two cases, arising under different
facts, and in both it was held that said statute did not create any liability or cause of
action against the state where none existed before, but merely gave an additional remedy
to enforce such liability as would have existed if the statute had not been enacted.
(Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.)

A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims
against the commonwealth, whether at law or in equity," with an exception not necessary to be
here mentioned. In construing this statute the court, in Murdock Grate Co. vs. Commonwealth
(152 Mass., 28), said:

The statute we are discussing disclose no intention to create against the state a new and
heretofore unrecognized class of liabilities, but only an intention to provide a judicial
tribunal where well recognized existing liabilities can be adjudicated.

In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the
statute of New York, jurisdiction of claims for damages for injuries in the management of the
canals such as the plaintiff had sustained, Chief Justice Ruger remarks: "It must be conceded that
the state can be made liable for injuries arising from the negligence of its agents or servants, only
by force of some positive statute assuming such liability."

It being quite clear that Act No. 2457 does not operate to extend the Government's liability to
any cause not previously recognized, we will now examine the substantive law touching the
defendant's liability for the negligent acts of its officers, agents, and employees. 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.

The supreme court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by
his fault or negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on
that the person obligated, by his own fault or negligence, takes part in the act or omission
of the third party who caused the damage. It follows therefrom that the state, by virtue of
such provisions of law, is not responsible for the damages suffered by private individuals
in consequence of acts performed by its employees in the discharge of the functions
pertaining to their office, because neither fault nor even negligence can be presumed on
the part of the state in the organization of branches of public service and in the
appointment of its agents; on the contrary, we must presuppose all foresight humanly
possible on its part in order that each branch of service serves the general weal an that of
private persons interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a case where the
state acts as a judicial person capable of acquiring rights and contracting obligations.
(Supreme Court of Spain, January 7, 1898; 83 Jur. Civ., 24.)
That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise
out of fault or negligence; and whereas in the first article thereof. No. 1902, where the
general principle is laid down that where a person who by an act or omission causes
damage to another through fault or negligence, shall be obliged to repair the damage so
done, reference is made to acts or omissions of the persons who directly or indirectly
cause the damage, the following articles refers to this persons and imposes an identical
obligation upon those who maintain fixed relations of authority and superiority over the
authors of the damage, because the law presumes that in consequence of such relations
the evil caused by their own fault or negligence is imputable to them. This legal
presumption gives way to proof, however, because, as held in the last paragraph of article
1903, responsibility for acts of third persons ceases when the persons mentioned in said
article prove that they employed all the diligence of a good father of a family to avoid the
damage, and among these persons, called upon to answer in a direct and not a subsidiary
manner, are found, in addition to the mother or the father in a proper case, guardians and
owners or directors of an establishment or enterprise, the state, but not always, except
when it acts through the agency of a special agent, doubtless because and only in this
case, the fault or negligence, which is the original basis of this kind of objections, must
be presumed to lie with the state.

That although in some cases the state might by virtue of the general principle set forth in
article 1902 respond for all the damage that is occasioned to private parties by orders or
resolutions which by fault or negligence are made by branches of the central
administration acting in the name and representation of the state itself and as an external
expression of its sovereignty in the exercise of its executive powers, yet said article is not
applicable in the case of damages said to have been occasioned to the petitioners by an
executive official, acting in the exercise of his powers, in proceedings to enforce the
collections of certain property taxes owing by the owner of the property which they hold
in sublease.

That the responsibility of the state is limited by article 1903 to the case wherein it acts
through a special agent (and a special agent, in the sense in which these words are
employed, is one who receives a definite and fixed order or commission, foreign to the
exercise of the duties of his office if he is a special official) so that in representation of
the state and being bound to act as an agent thereof, he executes the trust confided to him.
This concept 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." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)

That according to paragraph 5 of article 1903 of the Civil Code and the principle laid
down in a decision, among others, of the 18th of May, 1904, in a damage case, the
responsibility of the state is limited to that which it contracts 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. Consequently, the trial court in not so deciding and in sentencing the
said entity to the payment of damages, caused by an official of the second class referred
to, has by erroneous interpretation infringed the provisions of articles 1902 and 1903 of
the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)

It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable,
according to the above quoted decisions of the Supreme Court of Spain, 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.

For the foregoing reasons, the judgment appealed from must be reversed, without costs in this
instance. Whether the Government intends to make itself legally liable for the amount of
damages above set forth, which the plaintiff has sustained by reason of the negligent acts of one
of its employees, by legislative enactment and by appropriating sufficient funds therefor, we are
not called upon to determine. This matter rests solely with the Legislature and not with the
courts.

Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I.

COLLINS and ROBERT GOHIER, petitioners,
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal
and ELIGIO DE GUZMAN & CO., INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.

Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders and restrain the respondent judge
from trying Civil Case No. 779M of the defunct Court of First Instance of Rizal.

The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic,
Zambales. The base was one of those provided in the Military Bases Agreement
between the Philippines and the United States.

Sometime in May, 1972, the United States invited the submission of bids for the
following projects

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay,
Philippines.

2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline
revetment, NAVBASE Subic; and repair to Leyte Wharf approach, NAVBASE Subic
Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids.
Subsequent thereto, the company received from the United States two telegrams
requesting it to confirm its price proposals and for the name of its bonding company.
The company complied with the requests. [In its complaint, the company alleges that
the United States had accepted its bids because "A request to confirm a price proposal
confirms the acceptance of a bid pursuant to defendant United States' bidding
practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the
case has not reached the trial stage.]

In June, 1972, the company received a letter which was signed by Wilham I. Collins,
Director, Contracts Division, Naval Facilities Engineering Command, Southwest Pacific,
Department of the Navy of the United States, who is one of the petitioners herein. The
letter said that the company did not qualify to receive an award for the projects because
of its previous unsatisfactory performance rating on a repair contract for the sea wall at
the boat landings of the U.S. Naval Station in Subic Bay. The letter further said that the
projects had been awarded to third parties. In the abovementioned Civil Case No. 779-
M, the company sued the United States of America and Messrs. James E. Galloway,
William I. Collins and Robert Gohier all members of the Engineering Command of the
U.S. Navy. The complaint is to order the defendants to allow the plaintiff to perform the
work on the projects and, in the event that specific performance was no longer possible,
to order the defendants to pay damages. The company also asked for the issuance of a
writ of preliminary injunction to restrain the defendants from entering into contracts with
third parties for work on the projects.

The defendants entered their special appearance for the purpose only of questioning
the jurisdiction of this court over the subject matter of the complaint and the persons of
defendants, the subject matter of the complaint being acts and omissions of the
individual defendants as agents of defendant United States of America, a foreign
sovereign which has not given her consent to this suit or any other suit for the causes of
action asserted in the complaint." (Rollo, p. 50.)

Subsequently the defendants filed a motion to dismiss the complaint which included an
opposition to the issuance of the writ of preliminary injunction. The company opposed
the motion. The trial court denied the motion and issued the writ. The defendants moved
twice to reconsider but to no avail. Hence the instant petition which seeks to restrain
perpetually the proceedings in Civil Case No. 779-M for lack of jurisdiction on the part of
the trial court.

The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State from being sued in the courts of
another State without its consent or waiver. This rule is a necessary consequence of the
principles of independence and equality of States. However, the rules of International
Law are not petrified; they are constantly developing and evolving. And because the
activities of states have multiplied, it has been necessary to distinguish them-between
sovereign and governmental acts (jure imperii) and private, commercial and proprietary
acts (jure gestionis). The result is that State immunity now extends only to acts jure
imperil 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 respondent judge recognized the restrictive doctrine of State immunity when he
said in his Order denying the defendants' (now petitioners) motion: " A distinction should
be made between a strictly governmental function of the sovereign state from its private,
proprietary or non- governmental acts (Rollo, p. 20.) However, the respondent judge
also said: "It is the Court's considered opinion that entering into a contract for the repair
of wharves or shoreline is certainly not a governmental function altho it may partake of a
public nature or character. As aptly pointed out by plaintiff's counsel in his reply citing
the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes
with approval, viz.:

It is however contended that when a sovereign state enters into a contract

with a private person, the state can be sued upon the theory that it has
descended to the level of an individual from which it can be implied that it
has given its consent to be sued under the contract. ...

xxx xxx xxx

We agree to the above contention, and considering that the United States
government, through its agency at Subic Bay, entered into a contract with
appellant for stevedoring and miscellaneous labor services within the
Subic Bay Area, a U.S. Naval Reservation, it is evident that it can bring an
action before our courts for any contractual liability that that political entity
may assume under the contract. The trial court, therefore, has jurisdiction
to entertain this case ... (Rollo, pp. 20-21.)

The reliance placed on Lyons by the respondent judge is misplaced for the following
reasons:

In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the
Court of First Instance of Manila to collect several sums of money on account of a
contract between plaintiff and defendant. The defendant filed a motion to dismiss on the
ground that the court had no jurisdiction over defendant and over the subject matter of
the action. The court granted the motion on the grounds that: (a) it had no jurisdiction
over the defendant who did not give its consent to the suit; and (b) plaintiff failed to
exhaust the administrative remedies provided in the contract. The order of dismissal
was elevated to this Court for review.

In sustaining the action of the lower court, this Court said:

It appearing in the complaint that appellant has not complied with the
procedure laid down in Article XXI of the contract regarding the
prosecution of its claim against the United States Government, or, stated
differently, it has failed to first exhaust its administrative remedies against
said Government, the lower court acted properly in dismissing this
case.(At p. 598.)
It can thus be seen that the statement in respect of the waiver of State immunity from
suit was purely gratuitous and, therefore, obiter so that it has no value as an imperative
authority.

The restrictive application of State immunity is proper only when the proceedings arise
out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have descended to the level
of an individual and can thus be deemed to have tacitly given its consent to be sued
only when it enters into business contracts. It does not apply where the contract relates
to the exercise of its sovereign functions. In this case the projects are an integral part of
the naval base which is devoted to the defense of both the United States and the
Philippines, indisputably a function of the government of the highest order; they are not
utilized for nor dedicated to commercial or business purposes.

That 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.

The defendants who were armed forces officers of the United States moved to dismiss
the suit for lack of jurisdiction in the part of the court. The Municipal Court of Manila
granted the motion to dismiss; sustained by the Court of First Instance, the plaintiffs
went to this Court for review on certiorari. In denying the petition, this Court said:

On the basis of the foregoing considerations we are of the belief and we

hold that the real party defendant in interest is the Government of the
United States of America; that any judgment for back or Increased rentals
or damages will have to be paid not by defendants Moore and Tillman and
their 64 co-defendants but by the said U.S. Government. On the basis of
the ruling in the case of Land vs. Dollar already cited, and on what we
have already stated, the present action must be considered as one
against the U.S. Government. It is clear hat the courts of the Philippines
including the Municipal Court of Manila have no jurisdiction over the
present case for unlawful detainer. The question of lack of jurisdiction was
raised and interposed at the very beginning of the action. The U.S.
Government has not , given its consent to the filing of this suit which is
essentially against her, though not in name. Moreover, this is not only a
case of a citizen filing a suit against his own Government without the
latter's consent but it is of a citizen filing an action against a foreign
government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The principles
of law behind this rule are so elementary and of such general acceptance
that we deem it unnecessary to cite authorities in support thereof. (At p.
323.)
In Syquia,the United States concluded contracts with private individuals but the
contracts notwithstanding the States was not deemed to have given or waived its
consent to be sued for the reason that the contracts were for jure imperii and not for jure
gestionis.

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

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, Relova, Gutierrez, Jr., De la
Fuente, Cuevas and Alampay, JJ., concur.

Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the
defunct CFI (now RTC) of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the
contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S.
Government) involved stevedoring and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United States Government. through its
agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is
evident that it can bring an action before our courts for any contractual liability that that
political entity may assume under the contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance
of a bid of a private company for the repair of wharves or shoreline in the Subic Bay
area, it is deemed to have entered into a contract and thus waived the mantle of
sovereign immunity from suit and descended to the level of the ordinary citizen. Its
consent to be sued, therefore, is implied from its act of entering into a contract (Santos
vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its
contractual obligation in the case at bar by the unilateral cancellation of the award for
the project by the United States government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party who may have legitimate claims
against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his own
country for violation of his rights committed by the agents of the foreign government
professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs.
Almeda Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of

domestic courts of justice, such rule is inapplicable to cases in which the
foreign government enters into private contracts with the citizens of the
court's jurisdiction. A contrary view would simply run against all principles
of decency and violative of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as

well with regard to private individuals as with regard to governments either
domestic or foreign. Once a foreign government enters into a private
contract with the private citizens of another country, such foreign
government cannot shield its non-performance or contravention of the
terms of the contract under the cloak of non-jurisdiction. To place such
foreign government beyond the jurisdiction of the domestic courts is to
give approval to the execution of unilateral contracts, graphically
described in Spanish as 'contratos leoninos', because one party gets the
lion's share to the detriment of the other. To give validity to such contract
is to sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis that
all parties in a private contract, including governments and the most
powerful of them, are amenable to law, and that such contracts are
enforceable through the help of the courts of justice with jurisdiction to
take cognizance of any violation of such contracts if the same had been
entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this
jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its application
will particularly discourage Filipino or domestic contractors from transacting business
and entering into contracts with United States authorities or facilities in the Philippines
whether naval, air or ground forces-because the difficulty, if not impossibility, of
enforcing a validly executed contract and of seeking judicial remedy in our own courts
for breaches of contractual obligation committed by agents of the United States
government, always, looms large, thereby hampering the growth of Filipino enterprises
and creating a virtual monopoly in our own country by United States contractors of
contracts for services or supplies with the various U.S. offices and agencies operating in
the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over
emphasized. Whether the parties are nations or private individuals, it is to be
reasonably assumed and expected that the undertakings in the contract will be
complied with in good faith.
One glaring fact of modern day civilization is that a big and powerful nation, like the
United States of America, can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic
and military superiority impose upon and dictate to small nations, subverting their
sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its
citizens invoke principles of international law for their own benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at
Subic Bay on one hand, and herein private respondent on the other, was honored more
in the breach than in the compliance The opinion of the majority will certainly open the
floodgates of more violations of contractual obligations. American authorities or any
foreign government in the Philippines for that matter, dealing with the citizens of this
country, can conveniently seek protective cover under the majority opinion. The result is
disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic

imperialism and foreign political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an
instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400,
February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635,
August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government,
through its naval authorities at Subic Bay, should be held amenable to lawsuits in our
country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with
paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14,
1947, which states that "in the exercise of the above-mentioned rights, powers and
authority, the United States agrees that the powers granted to it will not be used
unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May
27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes "the need
to promote and maintain sound employment practices which will assure equality of
treatment of all employees ... and continuing favorable employer-employee relations ..."
and "(B)elieving that an agreement will be mutually beneficial and will strengthen the
democratic institutions cherished by both Governments, ... the United States
Government agrees to accord preferential employment of Filipino citizens in the Bases,
thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by
employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968).
Neither does the invocation by petitioners of state immunity from suit express fidelity to
paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which directs
that " contractors and concessionaires performing work for the U.S. Armed Forces shall
be required by their contract or concession agreements to comply with all applicable
Philippine labor laws and regulations, " even though paragraph 2 thereof affirms that
"nothing in this Agreement shall imply any waiver by either of the two Governments of
such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the
local courts, actually clashes with No. III on respect for Philippine law of the
Memorandum of Agreement signed on January 7, 1979, also amending RP-US Military
Bases Agreement, which stresses that "it is the duty of members of the United States
Forces, the civilian component and their dependents, to respect the laws of the
Republic of the Philippines and to abstain from any activity inconsistent with the spirit of
the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure that
they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized
by No. IV on the economic and social improvement of areas surrounding the bases,
which directs that "moreover, the United States Forces shall procure goods and
services in the Philippines to the maximum extent feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in
connection with the discussions on possible revisions or alterations of the Agreement of
May 27, 1968, "the discussions shall be conducted on the basis of the principles of
equality of treatment, the right to organize, and bargain collectively, and respect for the
sovereignty of the Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement
of President Marcos and Vice-President Mondale of the United States dated May 4,
1978 that "the United States re-affirms that Philippine sovereignty extends over the
bases and that Its base shall be under the command of a Philippine Base Commander,
" which is supposed to underscore the joint Communique of President Marcos and U.S.
President Ford of December 7, 1975, under which "they affirm that sovereign equality,
territorial integrity and political independence of all States are fundamental principles
which both countries scrupulously respect; and that "they confirm that mutual respect for
the dignity of each nation shall characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and
responsibilities of both the Philippine and American Base Commanders that "in the
performance of their duties, the Philippine Base Commander and the American Base
Commander shall be guided by full respect for Philippine sovereignty on the one hand
and the assurance of unhampered U.S. military operations on the other hand and that
"they shall promote cooperation understanding and harmonious relations within the
Base and with the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the
Annex covered by the exchange of notes, January 7, 1979, between Ambassador
Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
supplied).

Separate Opinions

MAKASIAR, J., dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the
defunct CFI (now RTC) of Rizal be allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the
contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S.
Government) involved stevedoring and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United States Government. through its
agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is
evident that it can bring an action before our courts for any contractual liability that that
political entity may assume under the contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance
of a bid of a private company for the repair of wharves or shoreline in the Subic Bay
area, it is deemed to have entered into a contract and thus waived the mantle of
sovereign immunity from suit and descended to the level of the ordinary citizen. Its
consent to be sued, therefore, is implied from its act of entering into a contract (Santos
vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its
contractual obligation in the case at bar by the unilateral cancellation of the award for
the project by the United States government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party who may have legitimate claims
against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his own
country for violation of his rights committed by the agents of the foreign government
professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs.
Almeda Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of

domestic courts of justice, such rule is inapplicable to cases in which the
 foreign government enters into private contracts with the citizens of the
court's jurisdiction. A contrary view would simply run against all principles
of decency and violative of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as

well with regard to private individuals as with regard to governments either
domestic or foreign. Once a foreign government enters into a private
contract with the private citizens of another country, such foreign
government cannot shield its non-performance or contravention of the
terms of the contract under the cloak of non-jurisdiction. To place such
foreign government beyond the jurisdiction of the domestic courts is to
give approval to the execution of unilateral contracts, graphically
described in Spanish as 'contratos leoninos', because one party gets the
lion's share to the detriment of the other. To give validity to such contract
is to sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis that
all parties in a private contract, including governments and the most
powerful of them, are amenable to law, and that such contracts are
enforceable through the help of the courts of justice with jurisdiction to
take cognizance of any violation of such contracts if the same had been
entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this
jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its application
will particularly discourage Filipino or domestic contractors from transacting business
and entering into contracts with United States authorities or facilities in the Philippines
whether naval, air or ground forces-because the difficulty, if not impossibility, of
enforcing a validly executed contract and of seeking judicial remedy in our own courts
for breaches of contractual obligation committed by agents of the United States
government, always, looms large, thereby hampering the growth of Filipino enterprises
and creating a virtual monopoly in our own country by United States contractors of
contracts for services or supplies with the various U.S. offices and agencies operating in
the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over
emphasized. Whether the parties are nations or private individuals, it is to be
reasonably assumed and expected that the undertakings in the contract will be
complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the
United States of America, can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic
and military superiority impose upon and dictate to small nations, subverting their
sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its
citizens invoke principles of international law for their own benefit.
In the case at bar, the efficacy of the contract between the U.S. Naval authorities at
Subic Bay on one hand, and herein private respondent on the other, was honored more
in the breach than in the compliance The opinion of the majority will certainly open the
floodgates of more violations of contractual obligations. American authorities or any
foreign government in the Philippines for that matter, dealing with the citizens of this
country, can conveniently seek protective cover under the majority opinion. The result is
disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic

imperialism and foreign political ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an
instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400,
February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635,
August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government,
through its naval authorities at Subic Bay, should be held amenable to lawsuits in our
country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with
paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14,
1947, which states that "in the exercise of the above-mentioned rights, powers and
authority, the United States agrees that the powers granted to it will not be used
unreasonably. . ." (Emphasis supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May
27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes "the need
to promote and maintain sound employment practices which will assure equality of
treatment of all employees ... and continuing favorable employer-employee relations ..."
and "(B)elieving that an agreement will be mutually beneficial and will strengthen the
democratic institutions cherished by both Governments, ... the United States
Government agrees to accord preferential employment of Filipino citizens in the Bases,
thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by
employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to
paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which directs
that " contractors and concessionaires performing work for the U.S. Armed Forces shall
be required by their contract or concession agreements to comply with all applicable
Philippine labor laws and regulations, " even though paragraph 2 thereof affirms that
"nothing in this Agreement shall imply any waiver by either of the two Governments of
such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the
local courts, actually clashes with No. III on respect for Philippine law of the
Memorandum of Agreement signed on January 7, 1979, also amending RP-US Military
Bases Agreement, which stresses that "it is the duty of members of the United States
Forces, the civilian component and their dependents, to respect the laws of the
Republic of the Philippines and to abstain from any activity inconsistent with the spirit of
the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure that
they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized
by No. IV on the economic and social improvement of areas surrounding the bases,
which directs that "moreover, the United States Forces shall procure goods and
services in the Philippines to the maximum extent feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in
connection with the discussions on possible revisions or alterations of the Agreement of
May 27, 1968, "the discussions shall be conducted on the basis of the principles of
equality of treatment, the right to organize, and bargain collectively, and respect for the
sovereignty of the Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement
of President Marcos and Vice-President Mondale of the United States dated May 4,
1978 that "the United States re-affirms that Philippine sovereignty extends over the
bases and that Its base shall be under the command of a Philippine Base Commander,
" which is supposed to underscore the joint Communique of President Marcos and U.S.
President Ford of December 7, 1975, under which "they affirm that sovereign equality,
territorial integrity and political independence of all States are fundamental principles
which both countries scrupulously respect; and that "they confirm that mutual respect for
the dignity of each nation shall characterize their friendship as well as the alliance
between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and
responsibilities of both the Philippine and American Base Commanders that "in the
performance of their duties, the Philippine Base Commander and the American Base
Commander shall be guided by full respect for Philippine sovereignty on the one hand
and the assurance of unhampered U.S. military operations on the other hand and that
"they shall promote cooperation understanding and harmonious relations within the
Base and with the general public in the proximate vicinity thereof" (par. 2 & par. 3 of the
Annex covered by the exchange of notes, January 7, 1979, between Ambassador
Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
supplied).

Footnotes
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch 61 and STARBRIGHT
SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside the Orders dated June 20, 1991 and
September 19, 1991 of the Regional Trial Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case No. 90-183, while the Order dated
September 19, 1991 denied the motion for reconsideration of the June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented in the Philippines by the Papal
Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A, Transfer Certificate of Title No.
390440) located in the Municipality of Paraaque, Metro Manila and registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title Nos. 271108 and 265388 respectively and
registered in the name of the Philippine Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his
rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to who of the parties has the
responsibility of evicting and clearing the land of squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to
Tropicana Properties and Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61, Makati, Metro Manila for annulment of
the sale of the three parcels of land, and specific performance and damages against petitioner, represented by the Papal Nuncio, and three
other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the PRC, agreed to sell to Ramon Licup Lots
5-A, 5-B and 5-D at the price of P1,240.00 per square meters; (2) the agreement to sell was made on the condition that earnest money of
P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of squatters who were then occupying the same; (3) Licup
paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the property to private respondent and
informed the sellers of the said assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that the sellers fulfill their
undertaking and clear the property of squatters; however, Msgr. Cirilos informed private respondent of the squatters' refusal to vacate the
lots, proposing instead either that private respondent undertake the eviction or that the earnest money be returned to the latter; (6) private
respondent counterproposed that if it would undertake the eviction of the squatters, the purchase price of the lots should be reduced from
P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private respondent giving
it seven days from receipt of the letter to pay the original purchase price in cash; (8) private respondent sent the earnest money back to the
sellers, but later discovered that on March 30, 1989, petitioner and the PRC, without notice to private respondent, sold the lots to Tropicana,
as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of
title over the lots were cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner and the PRC to sell
the lots to it and thus enriched itself at the expense of private respondent; (10) private respondent demanded the rescission of the sale to
Tropicana and the reconveyance of the lots, to no avail; and (11) private respondent is willing and able to comply with the terms of the
contract to sell and has actually made plans to develop the lots into a townhouse project, but in view of the sellers' breach, it lost profits of not
less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and the PRC on the one hand, and Tropicana
on the other; (2) the reconveyance of the lots in question; (3) specific performance of the agreement to sell between it and the owners of the
lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint petitioner for lack of jurisdiction based on
sovereign immunity from suit, and Msgr. Cirilos for being an improper party. An opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to dismiss after finding that petitioner "shed off
[its] sovereign immunity by entering into the business contract in question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner filed a "Motion for a Hearing for the Sole
Purpose of Establishing Factual Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate the determination of its
defense of sovereign immunity, petitioner prayed that a hearing be conducted to allow it to establish certain facts upon which the said
defense is based. Private respondent opposed this motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration until after trial on the merits and
directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign immunity only on its own behalf and
on behalf of its official representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign Affairs, claiming that it has a legal interest
in the outcome of the case as regards the diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained in the
petition of the Holy See insofar as they refer to arguments relative to its claim of sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with the resolution of this Court, both parties
and the Department of Foreign Affairs submitted their respective memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition for certiorari under Rule 65 of the Revised Rules of
Court can be availed of to question the order denying petitioner's motion to dismiss. The general rule is that an order denying a motion to
dismiss is not reviewable by the appellate courts, the remedy of the movant being to file his answer and to proceed with the hearing before
the trial court. But the general rule admits of exceptions, and one of these is when it is very clear in the records that the trial court has no
alternative but to dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service Commission,
216 SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to require the parties to undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal interest of the Department of Foreign Affairs to
intervene in the case in behalf of the Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it
requests the Foreign Office of the state where it is sued to convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or the international organization sued in
an American court requests the Secretary of State to make a determination as to whether it is entitled to immunity. If the Secretary of State
finds that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is
entitled to immunity. In England, a similar procedure is followed, only the Foreign Office issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its
claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In
International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the
Secretary of Labor and Employment, informing the latter that the respondent-employer could not be sued because it enjoyed diplomatic
immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that
effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to
make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The
Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with this Court to be allowed to intervene
on the side of petitioner. The Court allowed the said Department to file its memorandum in support of petitioner's claim of sovereign
immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the respondents through their private
counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America
v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the courts can inquire
into the facts and make their own determination as to the nature of the acts and transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a foreign state enjoying sovereign immunity.
On the other hand, private respondent insists that the doctrine of non-suability is not anymore absolute and that petitioner has divested itself
of such a cloak when, of its own free will, it entered into a commercial transaction for the sale of a parcel of land located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the Holy See, was considered a subject of
International Law. With the loss of the Papal States and the limitation of the territory under the Holy See to an area of 108.7 acres, the
position of the Holy See in International Law became controversial (Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive dominion and sovereign jurisdiction of
the Holy See over the Vatican City. It also recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to International Law (Garcia, Questions and Problems In International Law, Public and
Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the Holy See absolute and visible
independence and of guaranteeing to it indisputable sovereignty also in the field of international relations" (O'Connell, I International Law 311
[1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is vested in the Holy See or in the Vatican City.
Some writers even suggested that the treaty created two international persons the Holy See and Vatican City (Salonga and Yap, supra,
37).

The Vatican City fits into none of the established categories of states, and the attribution to it of "sovereignty" must be made in a sense
different from that in which it is applied to other states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a
community of national states, the Vatican City represents an entity organized not for political but for ecclesiastical purposes and international
objects. Despite its size and object, the Vatican City has an independent government of its own, with the Pope, who is also head of the
Roman Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the demands of its mission in the world.
Indeed, the world-wide interests and activities of the Vatican City are such as to make it in a sense an "international state" (Fenwick, supra.,
125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication that it is possible for any entity pursuing
objects essentially different from those pursued by states to be invested with international personality (Kunz, The Status of the Holy See in
International Law, 46 The American Journal of International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See and not in the name of the Vatican
City, one can conclude that in the Pope's own view, it is the Holy See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy See, through its Ambassador, the
Papal Nuncio, has had diplomatic representations with the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal
practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted principles of International Law. Even
without this affirmation, such principles of International Law are deemed incorporated as part of the law of the land as a condition and
consequence of our admission in the society of nations (United States of America v. Guinto, 182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the classical or absolute
theory, a sovereign cannot, without its consent, be made a respondent in the courts of another sovereign. According to the newer or
restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state, but not with regard
to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International Law 194 [1984]).

Some states passed legislation to serve as guidelines for the executive or judicial determination when an act may be considered as jure
gestionis. The United States passed the Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as "either a regular
course of commercial conduct or a particular commercial transaction or act." Furthermore, the law declared that the "commercial character of
the activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to
its purpose." The Canadian Parliament enacted in 1982 an Act to Provide For State Immunity in Canadian Courts. The Act defines a
"commercial activity" as any particular transaction, act or conduct or any regular course of conduct that by reason of its nature, is of a
"commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of sovereign immunity, has created
problems of its own. Legal treatises and the decisions in countries which follow the restrictive theory have difficulty in characterizing whether
a contract of a sovereign state with a private party is an act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial activities remotely connected with the
discharge of governmental functions. This is particularly true with respect to the Communist states which took control of nationalized
business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure imperii: (1) the lease by a foreign
government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for
the repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and (3) the change of employment status of
base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private parties as acts jure gestionis: (1) the
hiring of a cook in the recreation center, consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the
John Hay Air Station in Baguio City, to cater to American servicemen and the general public (United States of America v. Rodrigo, 182 SCRA
644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air Base in Angeles City (United States of America v. Guinto, 182
SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general public is undoubtedly for profit as a commercial
and not a governmental activity. By entering into the employment contract with the cook in the discharge of its proprietary function, the United
States government impliedly divested itself of its sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered "commercial" and as constituting acts jure
gestionis, we have to come out with our own guidelines, tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the
start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign
state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit
of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be deemed to have impliedly waived its
non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract involves its
sovereign or governmental capacity that no such waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business, surely the said transaction can
be categorized as an act jure gestionis. However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were made
for profit but claimed that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent
failed to dispute said claim.

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not for commercial purpose, but
for the use of petitioner to construct thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire
property, real or personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is recognized in the
1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force
in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and administrative jurisdiction of the receiving state
over any real action relating to private immovable property situated in the territory of the receiving state which the envoy holds on behalf of
the sending state for the purposes of the mission. If this immunity is provided for a diplomatic envoy, with all the more reason should
immunity be recognized as regards the sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a governmental character. Petitioner did
not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it almost impossible for petitioner
to use it for the purpose of the donation. The fact that squatters have occupied and are still occupying the lot, and that they stubbornly refuse
to leave the premises, has been admitted by private respondent in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the light of the pleadings, particularly the
admission of private respondent. Besides, the privilege of sovereign immunity in this case was sufficiently established by the Memorandum
and Certification of the Department of Foreign Affairs. As the department tasked with the conduct of the Philippines' foreign relations
(Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case and officially
certified that the Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the Philippines exempt from local
jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this country (Rollo, pp. 156-157).
The determination of the executive arm of government that a state or instrumentality is entitled to sovereign or diplomatic immunity is a
political question that is conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where
the plea of immunity is recognized and affirmed by the executive branch, it is the duty of the courts to accept this claim so as not to
embarrass the executive arm of the government in conducting the country's foreign relations (World Health Organization v. Aquino, 48 SCRA
242 [1972]). As in International Catholic Migration Commission and in World Health Organization, we abide by the certification of the
Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing to establish the facts alleged by
petitioner in its motion. In view of said certification, such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd.
Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances. Under both Public International Law and
Transnational Law, a person who feels aggrieved by the acts of a foreign sovereign can ask his own government to espouse his cause
through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its claims against the Holy See. Its first task is
to persuade the Philippine government to take up with the Holy See the validity of its claims. Of course, the Foreign Office shall first make a
determination of the impact of its espousal on the relations between the Philippine government and the Holy See (Young, Remedies of
Private Claimants Against Foreign States, Selected Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]). Once
the Philippine government decides to espouse the claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the International Court of Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or international judicial proceedings on
his behalf, a State is in reality asserting its own rights its right to ensure, in the person of its subjects, respect for the
rules of international law (The Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183 against petitioner is DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-33112 June 15, 1978

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III,
La Union, AGOO TOBACCO PLANTERS ASSOCIATION, INC., PHILIPPINE
VIRGINIA TOBACCO ADMINISTRATION, and PANFILO P. JIMENEZ, Deputy
Sheriff, La Union, respondents.

Conrado E. Medina, Edgardo M. Magtalas & Walfrido Climaco for petitioner.

Felimon A. Aspirin fit respondent Agoo 'Tobacco Planters Association, Inc.

Virgilio C. Abejo for respondent Phil. Virginia Tobacco Administration.

FERNANDO, Acting C.J.:

The reliance of petitioner Philippine National Bank in this certiorari and prohibition
proceeding against respondent Judge Javier Pabalan who issued a writ of execution, 1
followed thereafter by a notice of garnishment of the funds of respondent Philippine
Virginia Tobacco Administration, 2 deposited with it, is on the fundamental constitutional
law doctrine of non-suability of a state, it being alleged that such funds are public in
character. This is not the first time petitioner raised that issue. It did so before in
Philippine National Bank v. Court of industrial Relations, 3 decided only last January. It
did not meet with success, this Court ruling in accordance with the two previous cases
of National Shipyard and Steel Corporation 4 and Manila Hotel Employees Association
v. Manila Hotel Company,5 that funds of public corporations which can sue and be sued
were not exempt from garnishment. As respondent Philippine Virginia Tobacco
Administration is likewise a public corporation possessed of the same attributes,6 a
similar outcome is indicated. This petition must be dismissed.

It is undisputed that the judgment against respondent Philippine Virginia Tobacco

Administration had reached the stage of finality. A writ of execution was, therefore, in
order. It was accordingly issued on December 17, 1970. 7 There was a notice of
garnishment for the full amount mentioned in such writ of execution in the sum of
P12,724,66. 8 In view of the objection, however, by petitioner Philippine National Bank
on the above ground, coupled with an inquiry as to whether or not respondent Philippine
Virginia Tobacco Administration had funds deposited with petitioner's La Union branch,
it was not until January 25, 1971 that the order sought to be set aside in this certiorari
proceeding was issued by respondent Judge.9 Its dispositive portion reads as follows:
Conformably with the foregoing, it is now ordered, in accordance with law, that sufficient
funds of the Philippine Virginia Tobacco Administration now deposited with the
Philippine National Bank, La Union Branch, shall be garnished and delivered to the
plaintiff immediately to satisfy the Writ of Execution for one-half of the amount awarded
in the decision of November 16, 1970." 10 Hence this certiorari and prohibition
proceeding.

As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of
non-suability. It is to be admitted that under the present Constitution, what was formerly
implicit as a fundamental doctrine in constitutional law has been set forth in express
terms: "The State may not be sued without its consent." 11 If the funds appertained to
one of the regular departments or offices in the government, then, certainly, such a
provision would be a bar to garnishment. Such is not the case here. Garnishment would
lie. Only last January, as noted in the opening paragraph of this decision, this Court, in a
case brought by the same petitioner precisely invoking such a doctrine, left no doubt
that the funds of public corporations could properly be made the object of a notice of
garnishment. Accordingly, this petition must fail.

1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was
sought to be justified on the failure of respondent Judge to set aside the notice of
garnishment of funds belonging to respondent Philippine Virginia Tobacco
Administration. This excerpt from the aforecited decision of Philippine National Bank v.
Court of Industrial Relations makes manifest why such an argument is far from
persuasive. "The premise that the funds could be spoken as public character may be
accepted in the sense that the People Homesite and Housing Corporation was a
government-owned entity. It does not follow though that they were exempt. from
garnishment. 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 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 be sue and
be sued and may be subjected to court processes just like any other corporation
(Section 13, Act No. 1459, as amended.)" ... To repeat, the ruling was the appropriate
remedy for the prevailing party which could proceed against the funds of a corporate
entity even if owned or controlled by the government." 12

2. The National Shipyard and Steel Corporation decision was not the first of its kind.
The ruling therein could be inferred from the judgment announced in Manila Hotel
Employees Association v. Manila Hotel Company, decided as far back as 1941. 13 In
the language of its ponente Justice Ozaeta "On the other hand, it is well-settled that
when the government enters into commercial business, it abandons its sovereign
capacity and is to be treated like any other corporation. (Bank of the United States v.
Planters' Bank, 9 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." 14 It is worth mentioning that Justice Ozaeta could find
support for such a pronouncement from the leading American Supreme Court case of
united States v. Planters' Bank, 15 with the opinion coming from the illustrious Chief
Justice Marshall. It was handed down more than one hundred fifty years ago, 1824 to
be exact. It is apparent, therefore, that petitioner Bank could it legally set forth as a bar
or impediment to a notice of garnishment the doctrine of non-suability.

WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.

Barredo, Antonio, Aquino, and Santos, JJ., concur.

Concepcion, Jr., J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-61744 June 25, 1984

MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,

vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge,
Branch IV, Baliuag, Bulacan, The PROVINCIAL SHERIFF of Bulacan, MARGARITA
D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO IMPERIO, CONRADO
IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN
IMPERIO and SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents.

Pascual C. Liatchko for petitioner.

The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:

In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal
Government of San Miguel, Bulacan, et al.", the then Court of First Instance of Bulacan,
on April 28, 1978, rendered judgment holding herein petitioner municipality liable to
private respondents, as follows:

WHEREFORE, premises considered, judgment is hereby rendered in

favor of the plaintiffs and against the defendant Municipal Government of
San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure and its
Municipal Treasurer:

1. ordering the partial revocation of the Deed of Donation signed by the

deceased Carlos Imperio in favor of the Municipality of San Miguel
Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5,
Block 11 of Subdivision Plan Psd-20831 are concerned, with an aggregate
total area of 4,646 square meters, which lots are among those covered
and described under TCT No. T-1831 of the Register of Deeds of Bulacan
in the name of the Municipal Government of San Miguel Bulacan,

2. ordering the defendant to execute the corresponding Deed of

Reconveyance over the aforementioned five lots in favor of the plaintiffs in
the proportion of the undivided one-half () share in the name of plaintiffs
Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado, Ernesto,
 Alfredo, Carlos, Jr. and Juan, all surnamed Imperio, and the remaining
undivided one-half () share in favor of plaintiffs uses Marcelo E. Pineda
and Lucila Pongco;

3. ordering the defendant municipality to pay to the plaintiffs in the

proportion mentioned in the immediately preceding paragraph the sum of
P64,440.00 corresponding to the rentals it has collected from the
occupants for their use and occupation of the premises from 1970 up to
and including 1975, plus interest thereon at the legal rate from January
1970 until fully paid;

4. ordering the restoration of ownership and possession over the five lots
in question in favor of the plaintiffs in the same proportion aforementioned;

5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for
attomey's fees; and to pay the cost of suit.

The counterclaim of the defendant is hereby ordered dismissed for lack of

evidence presented to substantiate the same.

SO ORDERED. (pp. 11-12, Rollo)

The foregoing judgment became final when herein petitioner's appeal was dismissed
due to its failure to file the record on appeal on time. The dismissal was affirmed by the
then Court of Appeals in CA-G.R. No. SP-12118 and by this Court in G.R. No. 59938.
Thereafter, herein private respondents moved for issuance of a writ of execution for the
satisfaction of the judgment. Respondent judge, on July 27, 1982, issued an order, to
wit:

Considering that an entry of judgment had already been made on June 14,
1982 in G. R. No. L-59938 and;

Considering further that there is no opposition to plaintiffs' motion for

execution dated July 23, 1983;

Let a writ of execution be so issued, as prayed for in the aforestated

motion. (p. 10, Rollo)

Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground
that the municipality's property or funds are all public funds exempt from execution. The
said motion to quash was, however, denied by the respondent judge in an order dated
August 23, 1982 and the alias writ of execution stands in full force and effect.

On September 13, 1982, respondent judge issued an order which in part, states:
 It is clear and evident from the foregoing that defendant has more than
enough funds to meet its judgment obligation. Municipal Treasurer Miguel
C, Roura of San Miguel, Bulacan and Provincial Treasurer of Bulacan
Agustin O. Talavera are therefor hereby ordered to comply with the money
judgment rendered by Judge Agustin C. Bagasao against said
municipality. In like manner, the municipal authorities of San Miguel,
Bulacan are likewise ordered to desist from plaintiffs' legal possession of
the property already returned to plaintiffs by virtue of the alias writ of
execution.

Finally, defendants are hereby given an inextendible period of ten (10)

days from receipt of a copy of this order by the Office of the Provincial
Fiscal of Bulacan within which to submit their written compliance, (p. 24,
Rollo)

When the treasurers (provincial and municipal) failed to comply with the order of
September 13, 1982, respondent judge issued an order for their arrest and that they will
be release only upon compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San
Miguel, Bulacan, in the hands of the provincial and municipal treasurers of Bulacan and
San Miguel, respectively, are public funds which are exempt from execution for the
satisfaction of the money judgment in Civil Case No. 604-B.

Well settled is the rule that public funds are not subject to levy and execution. The
reason for this was explained in the case of Municipality of Paoay vs. Manaois, 86 Phil.
629 "that they are held in trust for the people, intended and used for the
accomplishment 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 instances destroy said purpose." And, in Tantoco vs. Municipal
Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not
only the public property but also the taxes and public revenues of such corporations
Cannot be seized under execution against them, either in the treasury or when in transit
to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of
officers of the law, are not subject to execution unless so declared by statute." 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, Presidential Decree No. 477, known as "The Decree on Local Fiscal
Administration", Section 2 (a), provides:

SEC. 2. Fundamental Principles. Local government financial affairs,

transactions, and operations shall be governed by the fundamental
principles set forth hereunder:
 (a) No money shall be paid out of the treasury except in pursuance of a
lawful appropriation or other specific statutory authority.

xxx xxx xxx

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 an ordinance to this effect.

Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for
the enforcement of money judgment:

(a) By levying on all the property of the debtor, whether real or personal,
not otherwise exempt from execution, or only on such part of the property
as is sufficient to satisfy the judgment and accruing cost, if he has more
than sufficient property for the purpose;

(b) By selling the property levied upon;

(c) By paying the judgment-creditor so much of the proceeds as will satisfy

the judgment and accruing costs; and

(d) By delivering to the judgment-debtor the excess, if any, unless

otherwise, directed by judgment or order of the court.

The foregoing has not been followed in the case at bar.

ACCORDINGLY, the petition is granted and the order of respondent judge, dated July
27, 1982, granting issuance of a writ of execution; the alias writ of execution, dated July
27, 1982; and the order of respondent judge, dated September 13, 1982, directing the
Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to
comply with the money judgments, are SET ASIDE; and respondents are hereby
enjoined from implementing the writ of execution.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 89898-99 October 1, 1990

MUNICIPALITY OF MAKATI, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati, Branch CXLII ADMIRAL
FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA, respondents.

Defante & Elegado for petitioner.

Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

RESOLUTION

CORTS, J.:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private
respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel
of land and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT
No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No. 13699. Attached to petitioner's
complaint was a certification that a bank account (Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under
petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing where the
parties presented their respective appraisal reports regarding the value of the property, respondent RTC judge rendered a decision on June
4, 1987, fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment
of P338,160.00 which was earlier released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of a writ of execution. This motion was granted by
respondent RTC judge. After issuance of the writ of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent
sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed that a "hold code" was
placed on the account of petitioner. As a result of this, private respondent filed a motion dated January 27, 1988 praying that an order be
issued directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated
June 4, 1987.

Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation amount should be done in
installments which the respondent RTC judge failed to state in his decision. Private respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing the court that private respondent was
no longer the true and lawful owner of the subject property because a new title over the property had been registered in the name of
Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents pertaining to its
transactions over the subject property, and the PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by
respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court that it had consolidated its ownership over the
property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and private
respondent entered into a compromise agreement whereby they agreed to divide between themselves the compensation due from the
expropriation proceedings.

Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the compromise agreement; (2) ordered
PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of
the subject property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and private
respondent to execute the necessary deed of conveyance over the subject property in favor of petitioner. Petitioner's motion to lift the
garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand, for failure of the manager of
the PNB Buendia Branch to comply with the order dated September 8, 1988, private respondent filed two succeeding motions to require the
bank manager to show cause why he should not be held in contempt of court. During the hearings conducted for the above motions, the
general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization
from the PNB head office enabling him to make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at
the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds
without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29,
1968, 23 SCRA 899].

Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for reconsideration on the ground that the
doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner's PNB Account No. S/A 265-537154-3 was an
account specifically opened for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42. Respondent RTC
judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his inexcusable refusal to obey the order dated September 8,
1988, and thus ordered his arrest and detention until his compliance with the said order.

Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions for certiorari with the Court of Appeals, which were
eventually consolidated. In a decision promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his
authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present petition for review with prayer for
preliminary injunction.

On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining respondent RTC judge, respondent sheriff, and
their representatives, from enforcing and/or carrying out the RTC order dated December 21, 1988 and the writ of garnishment issued
pursuant thereto. Private respondent then filed its comment to the petition, while petitioner filed its reply.

Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but also alleges for the first time that it has
actually two accounts with the PNB Buendia Branch, to wit:

xxx xxx xxx

(1) Account No. S/A 265-537154-3 exclusively for the expropriation of the subject property, with an outstanding
balance of P99,743.94.

(2) Account No. S/A 263-530850-7 for statutory obligations and other purposes of the municipal government, with a
balance of P170,098,421.72, as of July 12, 1989.

xxx xxx xxx

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it may fairly be asked whether the second
account was opened only for the purpose of undermining the legal basis of the assailed orders of respondent RTC judge and the decision of
the Court of Appeals, and strengthening its reliance on the doctrine that public funds are exempted from garnishment or execution as
enunciated in Republic v. Palacio [supra.] At any rate, the Court will give petitioner the benefit of the doubt, and proceed to resolve the
principal issues presented based on the factual circumstances thus alleged by petitioner.

Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation proceedings it had initiated over the subject
property, petitioner poses no objection to the garnishment or the levy under execution of the funds deposited therein amounting to
P99,743.94. However, it is petitioner's main contention that inasmuch as the assailed orders of respondent RTC judge involved the net
amount of P4,965,506.45, the funds garnished by respondent sheriff in excess of P99,743.94, which are public funds earmarked for the
municipal government's other statutory obligations, are exempted from execution without the proper appropriation required under the law.

There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are public funds of the municipal
government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for
by statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA
616]. More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and
sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and market
fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the
municipality, are exempt from execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of
Paoay, Ilocos Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130
SCRA 56]. The foregoing rule finds application in the case at bar. Absent a showing that the municipal council of Makati has passed an
ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less
the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of
petitioner deposited in Account No. S/A 263-530850-7.
Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails or refuses, without
justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus in
order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal
funds therefor [See Viuda De Tan Toco v. The Municipal Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v.
Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal was taken therefrom. For
three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its inexcusable failure to comply with its
legal obligation to pay just compensation. Petitioner has benefited from its possession of the property since the same has been the site of
Makati West High School since the school year 1986-1987. This Court will not condone petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact initiated. It cannot be over-emphasized that, within the context of the State's inherent
power of eminent domain,

. . . [j]ust compensation means not only the correct determination of the amount to be paid to the owner of the land but
also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot
be considered "just" for the property owner is made to suffer the consequence of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his
loss [Cosculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also
Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291].

The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar, considering that
valuable property has been taken, the compensation to be paid fixed and the municipality is in full possession and utilizing the property for
public purpose, for three (3) years, the Court finds that the municipality has had more than reasonable time to pay full compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and private
respondent the amount of P4,953,506.45. Petitioner is hereby required to submit to this Court a report of its compliance with the foregoing
order within a non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.

The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case No. 13699, is SET ASIDE and the
temporary restraining order issued by the Court on November 20, 1989 is MADE PERMANENT.

SO ORDERED.
G.R. No. 154705 June 26, 2003

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN,

and MINISTER COUNSELLOR AZHARI KASIM, Petitioners,
vs.
JAMES VINZON, doing business under the name and style of VINZON TRADE AND
SERVICES, Respondent.

DECISION

AZCUNA, J:

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated
May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled "The
Republic of Indonesia, His Excellency Ambassador Soeratmin and Minister Counselor Azhari
Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145, Makati City, and James
Vinzon, doing business under the name and style of Vinzon Trade and Services."

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a
Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of
Vinzon Trade and Services. The Maintenance Agreement stated that respondent shall, for a
consideration, maintain specified equipment at the Embassy Main Building, Embassy Annex
Building and the Wisma Duta, the official residence of petitioner Ambassador Soeratmin. The
equipment covered by the Maintenance Agreement are air conditioning units, generator sets,
electrical facilities, water heaters, and water motor pumps. It is likewise stated therein that the
agreement shall be effective for a period of four years and will renew itself automatically unless
cancelled by either party by giving thirty days prior written notice from the date of expiry.1

Petitioners claim that sometime prior to the date of expiration of the said agreement, or before
August 1999, they informed respondent that the renewal of the agreement shall be at the
discretion of the incoming Chief of Administration, Minister Counsellor Azhari Kasim, who was
expected to arrive in February 2000. When Minister Counsellor Kasim assumed the position of
Chief of Administration in March 2000, he allegedly found respondents work and services
unsatisfactory and not in compliance with the standards set in the Maintenance Agreement.
Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31, 2000.2
Petitioners claim, moreover, that they had earlier verbally informed respondent of their decision
to terminate the agreement.

On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful.
Respondent cites various circumstances which purportedly negated petitioners alleged
dissatisfaction over respondents services: (a) in July 2000, Minister Counsellor Kasim still
requested respondent to assign to the embassy an additional full-time worker to assist one of his
other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent to donate a
prize, which the latter did, on the occasion of the Indonesian Independence Day golf tournament;
and (c) in a letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked respondent
for sponsoring a prize and expressed his hope that the cordial relations happily existing between
them will continue to prosper and be strengthened in the coming years.

Hence, on December 15, 2000, respondent filed a complaint3 against petitioners docketed as
Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch 145. On February 20,
2001, petitioners filed a Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign
sovereign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the
Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor
Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations
and therefore enjoy diplomatic immunity.4 In turn, respondent filed on March 20, 2001, an
Opposition to the said motion alleging that the Republic of Indonesia has expressly waived its
immunity from suit. He based this claim upon the following provision in the Maintenance
Agreement:

"Any legal action arising out of this Maintenance Agreement shall be settled according to the
laws of the Philippines and by the proper court of Makati City, Philippines."

Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor
Kasim can be sued and held liable in their private capacities for tortious acts done with malice
and bad faith.5

On May 17, 2001, the trial court denied herein petitioners Motion to Dismiss. It likewise denied
the Motion for Reconsideration subsequently filed.

The trial courts denial of the Motion to Dismiss was brought up to the Court of Appeals by
herein petitioners in a petition for certiorari and prohibition. Said petition, docketed as CA-G.R.
SP No. 66894, alleged that the trial court gravely abused its discretion in ruling that the Republic
of Indonesia gave its consent to be sued and voluntarily submitted itself to the laws and
jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and Minister
Counsellor Kasim waived their immunity from suit.

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for
lack of merit.6 On August 16, 2002, it denied herein petitioners motion for reconsideration.7

Hence, this petition.

In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in
sustaining the trial courts decision that petitioners have waived their immunity from suit by
using as its basis the abovementioned provision in the Maintenance Agreement.

The petition is impressed with merit.

International law is founded largely upon the principles of reciprocity, comity, independence,
and equality of States which were adopted as part of the law of our land under Article II, Section
2 of the 1987 Constitution.8 The rule that a State may not be sued without its consent is a
necessary consequence of the principles of independence and equality of States.9 As enunciated
in Sanders v. Veridiano II,10 the practical justification for the doctrine of sovereign immunity is
that there can be no legal right against the authority that makes the law on which the right
depends. In the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another.11 A contrary attitude would
"unduly vex the peace of nations."12

The rules of International Law, however, are neither unyielding nor impervious to change. The
increasing need of sovereign States to enter into purely commercial activities remotely connected
with the discharge of their governmental functions brought about a new concept of sovereign
immunity. This concept, the restrictive theory, holds that the immunity of the sovereign is
recognized only with regard to public acts or acts jure imperii, but not with regard to private acts
or acts jure gestionis.13

In United States v. Ruiz,14 for instance, we held that the conduct of public bidding for the repair
of a wharf at a United States Naval Station is an act jure imperii. On the other hand, we
considered as an act jure gestionis the hiring of a cook in the recreation center catering to
American servicemen and the general public at the John Hay Air Station in Baguio City,15 as
well as the bidding for the operation of barber shops in Clark Air Base in Angeles City.16

Apropos the present case, the mere entering into a contract by a foreign State with a private party
cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure
gestionis. Such act is only the start of the inquiry. Is the foreign State engaged in the regular
conduct of a business? If the foreign State is not engaged regularly in a business or commercial
activity, and in this case it has not been shown to be so engaged, the particular act or transaction
must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii.17

Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of
the agreement shall be settled according to the laws of the Philippines and by a specified court of
the Philippines is not necessarily a waiver of sovereign immunity from suit. The aforesaid
provision contains language not necessarily inconsistent with sovereign immunity. On the other
hand, such provision may also be meant to apply where the sovereign party elects to sue in the
local courts, or otherwise waives its immunity by any subsequent act. The applicability of
Philippine laws must be deemed to include Philippine laws in its totality, including the principle
recognizing sovereign immunity. Hence, the proper court may have no proper action, by way of
settling the case, except to dismiss it.

Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be
given explicitly or by necessary implication. We find no such waiver in this case.

Respondent concedes that the establishment of a diplomatic mission is a sovereign

function.1wphi1 On the other hand, he argues that the actual physical maintenance of the
premises of the diplomatic mission, such as the upkeep of its furnishings and equipment, is no
longer a sovereign function of the State.18
We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure
imperii. A sovereign State does not merely establish a diplomatic mission and leave it at that; the
establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State
may enter into contracts with private entities to maintain the premises, furnishings and
equipment of the embassy and the living quarters of its agents and officials. It is therefore clear
that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered
into a contract with respondent for the upkeep or maintenance of the air conditioning units,
generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian
Embassy and the official residence of the Indonesian ambassador.

The Solicitor General, in his Comment, submits the view that, "the Maintenance Agreement was
entered into by the Republic of Indonesia in the discharge of its governmental functions. In such
a case, it cannot be deemed to have waived its immunity from suit." As to the paragraph in the
agreement relied upon by respondent, the Solicitor General states that it "was not a waiver of
their immunity from suit but a mere stipulation that in the event they do waive their immunity,
Philippine laws shall govern the resolution of any legal action arising out of the agreement and
the proper court in Makati City shall be the agreed venue thereof.19

On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor
Kasim may be sued herein in their private capacities, Article 31 of the Vienna Convention on
Diplomatic Relations provides:

xxx

1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State.
He shall also enjoy immunity from its civil and administrative jurisdiction, except in the case of:

(a) a real action relating to private immovable property situated in the territory of the
receiving State, unless he holds it on behalf of the sending State for the purposes of the
mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and not on behalf of the sending State;

(c) an action relating to any professional or commercial activity exercised by the

diplomatic agent in the receiving State outside his official functions.

xxx

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the
Maintenance Agreement is not covered by the exceptions provided in the abovementioned
provision.

The Solicitor General believes that said act may fall under subparagraph (c) thereof,20 but said
provision clearly applies only to a situation where the diplomatic agent engages in any
professional or commercial activity outside official functions, which is not the case herein.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of
Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the complaint in Civil
Case No. 18203 against petitioners is DISMISSED.

No costs.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-
Gutierrez, Carpio, Corona, Carpio-Morales, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on leave.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR RELATIONS AND TRADE UNIONS OF THE
PHILIPPINES AND ALLIED SERVICES (TUPAS) WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE,
petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH INSTITUTE, INC., respondents.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by the International Catholic Migration
Commission (ICMC) and the International Rice Research Institute, Inc. (IRRI) from the application of Philippine labor laws.

Facts and Issues

A. G.R. No. 85750 the International Catholic Migration Commission (ICMC) Case.

As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's communist rule confronted the
international community.

In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine Government and the United Nations High
Commissioner for Refugees whereby an operating center for processing Indo-Chinese refugees for eventual resettlement to other countries
was to be established in Bataan (Annex "A", Rollo, pp. 22-32).

ICMC was one of those accredited by the Philippine Government to operate the refugee processing center in Morong, Bataan. It was
incorporated in New York, USA, at the request of the Holy See, as a non-profit agency involved in international humanitarian and voluntary
work. It is duly registered with the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status, Category II. As
an international organization rendering voluntary and humanitarian services in the Philippines, its activities are parallel to those of the
International Committee for Migration (ICM) and the International Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-
62-87, ICMC v. Calleja, Vol. 1].

On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then Ministry of Labor and Employment a
Petition for Certification Election among the rank and file members employed by ICMC The latter opposed the petition on the ground that it is
an international organization registered with the United Nations and, hence, enjoys diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for lack of jurisdiction.

On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the Med-Arbiter's Decision and ordered the
immediate conduct of a certification election. At that time, ICMC's request for recognition as a specialized agency was still pending with the
Department of Foreign Affairs (DEFORAF).

Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF, granted ICMC the status of a specialized
agency with corresponding diplomatic privileges and immunities, as evidenced by a Memorandum of Agreement between the Government
and ICMC (Annex "E", Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking the immunity expressly granted but the
same was denied by respondent BLR Director who, again, ordered the immediate conduct of a pre-election conference. ICMC's two Motions
for Reconsideration were denied despite an opinion rendered by DEFORAF on 17 October 1988 that said BLR Order violated ICMC's
diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction assailing the BLR Order.

On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the certification election.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of the Court of Appeals, filed a Motion for
Intervention alleging that, as the highest executive department with the competence and authority to act on matters involving diplomatic
immunity and privileges, and tasked with the conduct of Philippine diplomatic and consular relations with foreign governments and UN
organizations, it has a legal interest in the outcome of this case.

Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.

On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the submittal of memoranda by the parties, which
has been complied with.

As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to ICMC extends to immunity from the
application of Philippine labor laws.

ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the Philippine Government giving it the status
of a specialized agency, (infra); (2) the Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN General
Assembly on 21 November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May 1949 (the Philippine
Instrument of Ratification was signed by the President on 30 August 1949 and deposited with the UN on 20 March 1950) infra; and (3) Article
II, Section 2 of the 1987 Constitution, which declares that the Philippines adopts the generally accepted principles of international law as part
of the law of the land.

Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the DEFORAF determination that the BLR
Order for a certification election among the ICMC employees is violative of the diplomatic immunity of said organization.

Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State policy and Philippine labor laws to justify its
assailed Order, particularly, Article II, Section 18 and Article III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of the
Labor Code, as amended, ibid. In addition, she contends that a certification election is not a litigation but a mere investigation of a non-
adversary, fact-finding character. It is not a suit against ICMC its property, funds or assets, but is the sole concern of the workers themselves.

B. G.R. No. 89331 (The International Rice Research Institute [IRRI] Case).

Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989, resolved to consolidate G.R. No. 89331
pending before it with G.R. No. 85750, the lower-numbered case pending with the Second Division, upon manifestation by the Solicitor
General that both cases involve similar issues.

The facts disclose that on 9 December 1959, the Philippine Government and the Ford and Rockefeller Foundations signed a Memorandum
of Understanding establishing the International Rice Research Institute (IRRI) at Los Baos, Laguna. It was intended to be an autonomous,
philanthropic, tax-free, non-profit, non-stock organization designed to carry out the principal objective of conducting "basic research on the
rice plant, on all phases of rice production, management, distribution and utilization with a view to attaining nutritive and economic advantage
or benefit for the people of Asia and other major rice-growing areas through improvement in quality and quantity of rice."

Initially, IRRI was organized and registered with the Securities and Exchange Commission as a private corporation subject to all laws and
regulations. However, by virtue of Pres. Decree No. 1620, promulgated on 19 April 1979, IRRI was granted the status, prerogatives,
privileges and immunities of an international organization.
The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor organization with an existing local union,
the Kapisanan ng Manggagawa at TAC sa IRRI (Kapisanan, for short) in respondent IRRI.

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV, Regional Office of the Department of Labor
and Employment (DOLE).

IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an international organization and granting it
immunity from all civil, criminal and administrative proceedings under Philippine laws.

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres. Decree No. 1620 and dismissed the Petition for
Direct Certification.

On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-Arbiter's Order and authorized the calling of
a certification election among the rank-and-file employees of IRRI. Said Director relied on Article 243 of the Labor Code, as amended, infra
and Article XIII, Section 3 of the 1987 Constitution, 1 and held that "the immunities and privileges granted to IRRI do not include exemption
from coverage of our Labor Laws." Reconsideration sought by IRRI was denied.

On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's Order, dismissed the Petition for Certification
Election, and held that the grant of specialized agency status by the Philippine Government to the IRRI bars DOLE from assuming and
exercising jurisdiction over IRRI Said Resolution reads in part as follows:

Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives, privileges and immunities of an
international organization is clear and explicit. It provides in categorical terms that:

Art. 3 The Institute shall enjoy immunity from any penal, civil and administrative proceedings, except insofar as
immunity has been expressly waived by the Director-General of the Institution or his authorized representative.

Verily, unless and until the Institute expressly waives its immunity, no summons, subpoena, orders, decisions or
proceedings ordered by any court or administrative or quasi-judicial agency are enforceable as against the Institute. In
the case at bar there was no such waiver made by the Director-General of the Institute. Indeed, the Institute, at the very
first opportunity already vehemently questioned the jurisdiction of this Department by filing an ex-parte motion to
dismiss the case.

Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of discretion by respondent Secretary of Labor in upholding
IRRI's diplomatic immunity.

The Third Division, to which the case was originally assigned, required the respondents to comment on the petition. In a Manifestation filed
on 4 August 1990, the Secretary of Labor declared that it was "not adopting as his own" the decision of the BLR Director in the ICMC Case
as well as the Comment of the Solicitor General sustaining said Director. The last pleading was filed by IRRI on 14 August 1990.

Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be excused from filing a comment "it appearing
that in the earlier case of International Catholic Migration Commission v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor
General had sustained the stand of Director Calleja on the very same issue now before it, which position has been superseded by
respondent Secretary of Labor in G.R. No. 89331," the present case. The Court acceded to the Solicitor General's prayer.

The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse of discretion in dismissing the Petition for
Certification Election filed by Kapisanan.

Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges, prerogatives and immunities of an
international organization, invoked by the Secretary of Labor, is unconstitutional in so far as it deprives the Filipino workers of their
fundamental and constitutional right to form trade unions for the purpose of collective bargaining as enshrined in the 1987 Constitution.

A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining IRRI'S appeal from the Order of the
Director of the Bureau of Labor Relations directing the holding of a certification election. Kapisanan contends that pursuant to Sections 7, 8,
9 and 10 of Rule V 2 of the Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final and unappeable
and that, therefore, the Secretary of Labor had no more jurisdiction over the said appeal.

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep. Act. No. 6715, which took effect on 21
March 1989, providing for the direct filing of appeal from the Med-Arbiter to the Office of the Secretary of Labor and Employment instead of to
the Director of the Bureau of Labor Relations in cases involving certification election orders.

III

Findings in Both Cases.

There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.

Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides that ICMC shall have a status "similar to
that of a specialized agency." Article III, Sections 4 and 5 of the Convention on the Privileges and Immunities of Specialized Agencies,
adopted by the UN General Assembly on 21 November 1947 and concurred in by the Philippine Senate through Resolution No. 19 on 17
May 1949, explicitly provides:

Art. III, Section 4. The specialized agencies, their property and assets, wherever located and by whomsoever held,
shall enjoy immunity from every form of legal process except insofar as in any particular case they have expressly
waived their immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution.

Sec. 5. The premises of the specialized agencies shall be inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held shall be immune from search, requisition, confiscation,
expropriation and any other form of interference, whether by executive, administrative, judicial or legislative action.
(Emphasis supplied).

IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:

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.

Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity when in a Memorandum, dated 17 October
1988, it expressed the view that "the Order of the Director of the Bureau of Labor Relations dated 21 September 1988 for the conduct of
Certification Election within ICMC violates the diplomatic immunity of the organization." Similarly, in respect of IRRI, the DEFORAF speaking
through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a letter, dated 17 June 1987, to the Secretary of Labor, maintained that
"IRRI enjoys immunity from the jurisdiction of DOLE in this particular instance."

The foregoing opinions constitute a categorical recognition by the Executive Branch of the Government that ICMC and IRRI enjoy 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. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction . . . as to embarrass the executive
arm of the government in conducting foreign relations, it is accepted doctrine that in such cases the judicial department
of (this) government follows the action of the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction. 3

A brief look into the nature of international organizations and specialized agencies is in order. The term "international organization" is
generally used to describe an organization set up by agreement between two or more states. 4 Under contemporary international law, such
organizations are endowed with some degree of international legal personality 5 such that they are capable of exercising specific rights,
duties and powers. 6 They are organized mainly as a means for conducting general international business in which the member states have
an interest. 7 The United Nations, for instance, is an international organization dedicated to the propagation of world peace.

"Specialized agencies" are international organizations having functions in particular fields. The term appears in Articles 57 8 and 63 9 of the
Charter of the United Nations:

The Charter, while it invests the United Nations with the general task of promoting progress and international
cooperation in economic, social, health, cultural, educational and related matters, contemplates that these tasks will be
mainly fulfilled not by organs of the United Nations itself but by autonomous international organizations established by
inter-governmental agreements outside the United Nations. There are now many such international agencies having
functions in many different fields, e.g. in posts, telecommunications, railways, canals, rivers, sea transport, civil
aviation, meteorology, atomic energy, finance, trade, education and culture, health and refugees. Some are virtually
world-wide in their membership, some are regional or otherwise limited in their membership. The Charter provides that
those agencies which have "wide international responsibilities" are to be brought into relationship with the United
Nations by agreements entered into between them and the Economic and Social Council, are then to be known as
"specialized agencies." 10

The rapid growth of international organizations under contemporary international law has paved the way for the development of the concept
of international immunities.

It is now usual for the constitutions of international organizations to contain provisions conferring certain immunities on
the organizations themselves, representatives of their member states and persons acting on behalf of the
 organizations. A series of conventions, agreements and protocols defining the immunities of various international
organizations in relation to their members generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of international immunities to international organizations. These principles,
contained in the ILO Memorandum are stated thus: 1) international institutions should have a status which protects them against control or
interference by any one government in the performance of functions for the effective discharge of which they are responsible to
democratically constituted international bodies in which all the nations concerned are represented; 2) no country should derive any national
financial advantage by levying fiscal charges on common international funds; and 3) the international organization should, as a collectivity of
States members, be accorded the facilities for the conduct of its official business customarily extended to each other by its individual member
States. 12 The theory behind all three propositions is said to be essentially institutional in character. "It is not concerned with the status,
dignity or privileges of individuals, but with the elements of functional independence necessary to free international institutions from national
control and to enable them to discharge their responsibilities impartially on behalf of all their members. 13 The raison d'etre for these
immunities is the assurance of unimpeded performance of their functions by the agencies concerned.

The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their international character and respective
purposes. The objective is to avoid the danger of partiality and interference by the host country in their internal workings. The exercise of
jurisdiction by the Department of Labor in these instances would defeat the very purpose of immunity, which is to shield the affairs of
international organizations, in accordance with international practice, from political pressure or control by the host country to the prejudice of
member States of the organization, and to ensure the unhampered performance of their functions.

ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights, which are guaranteed by Article II, Section
18, 14 Article III, Section 8, 15 and Article XIII, Section 3 (supra), of the 1987 Constitution; and implemented by Articles 243 and 246 of the
Labor Code, 16 relied on by the BLR Director and by Kapisanan.

For, ICMC employees are not without recourse whenever there are disputes to be settled. Section 31 of the Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations 17 provides that "each specialized agency shall make 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."
Moreover, pursuant to Article IV of the Memorandum of Agreement between ICMC the the Philippine Government, whenever there is any
abuse of privilege by ICMC, the Government is free to withdraw the privileges and immunities accorded. Thus:

Art. IV. Cooperation with Government Authorities. 1. The Commission shall cooperate at all times with the
appropriate authorities of the Government to ensure the observance of Philippine laws, rules and regulations, facilitate
the proper administration of justice and prevent the occurrences of any abuse of the privileges and immunities granted
its officials and alien employees in Article III of this Agreement to the Commission.

2. In the event that the Government determines that there has been an abuse of the privileges and immunities granted
under this Agreement, consultations shall be held between the Government and the Commission to determine whether
any such abuse has occurred and, if so, the Government shall withdraw the privileges and immunities granted the
Commission and its officials.

Neither are the employees of IRRI without remedy in case of dispute with management as, in fact, there had been organized a forum for
better management-employee relationship as evidenced by the formation of the Council of IRRI Employees and Management (CIEM)
wherein "both management and employees were and still are represented for purposes of maintaining mutual and beneficial cooperation
between IRRI and its employees." The existence of this Union factually and tellingly belies the argument that Pres. Decree No. 1620, which
grants to IRRI the status, privileges and immunities of an international organization, deprives its employees of the right to self-organization.

The immunity granted being "from every form of legal process except in so far as in any particular case they have expressly waived their
immunity," it is inaccurate to state that a certification election is beyond the scope of that immunity for the reason that it is not a suit against
ICMC. A certification election cannot be viewed as an independent or isolated process. It could tugger off a series of events in the collective
bargaining process together with related incidents and/or concerted activities, which could inevitably involve ICMC in the "legal process,"
which includes "any penal, civil and administrative proceedings." The eventuality of Court litigation is neither remote and from which
international organizations are precisely shielded to safeguard them from the disruption of their functions. Clauses on jurisdictional immunity
are said to be standard provisions in the constitutions of international Organizations. "The immunity covers the organization concerned, its
property and its assets. It is equally applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo), wherein TUPAS calls attention to the case
entitled "International Catholic Migration Commission v. NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that,
having taken cognizance of that dispute (on the issue of payment of salary for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon the question of DOLE jurisdiction petition over ICMC.

We find no merit to said submission. Not only did the facts of said controversy occur between 1983-1985, or before the grant to ICMC on 15
July 1988 of the status of a specialized agency with corresponding immunities, but also because ICMC in that case did not invoke its
immunity and, therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was tacitly recognized as
enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR Director, dated 15 February 1989, had not
become final because of a Motion for Reconsideration filed by IRRI Said Motion was acted upon only on 30 March 1989 when Rep. Act No.
6715, which provides for direct appeals from the Orders of the Med-Arbiter to the Secretary of Labor in certification election cases either from
the order or the results of the election itself, was already in effect, specifically since 21 March 1989. Hence, no grave abuse of discretion may
be imputed to respondent Secretary of Labor in his assumption of appellate jurisdiction, contrary to Kapisanan's allegations. The pertinent
portion of that law provides:

Art. 259. Any party to an election may appeal the order or results of the election as determined by the Med-Arbiter
directly to the Secretary of Labor and Employment on the ground that the rules and regulations or parts thereof
established by the Secretary of Labor and Employment for the conduct of the election have been violated. Such appeal
shall be decided within 15 calendar days (Emphasis supplied).

En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two departments of the executive branch of
government have been rectified and the resultant embarrassment to the Philippine Government in the eyes of the international community
now, hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the Bureau of Labor Relations for certification
election is SET ASIDE, and the Temporary Restraining Order earlier issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having been committed by the Secretary of Labor
and Employment in dismissing the Petition for Certification Election.

No pronouncement as to costs.

SO ORDERED.

Padilla, Sarmiento and Regalado, JJ., concur.

Paras, J., is on leave.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 171182 August 23, 2012

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

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

DECISION

BERSAMIN, J.:

Trial judges should not immediately issue writs of execution or garnishment against the
Government or any of its subdivisions, agencies and instrumentalities to enforce money
judgments.1 They should bear in mind that the primary jurisdiction to examine, audit and settle
all claims of any sort due from the Government or any of its subdivisions, agencies and
instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential Decree
No. 1445 (Government Auditing Code of the Philippines).

The Case

On appeal by the University of the Philippines and its then incumbent officials (collectively, the
UP) is the decision promulgated on September 16, 2005,2 whereby the Court of Appeals (CA)
upheld the order of the Regional Trial Court (RTC), Branch 80, in Quezon City that directed the
garnishment of public funds amounting to 16,370,191.74 belonging to the UP to satisfy the
writ of execution issued to enforce the already final and executory judgment against the UP.

Antecedents

On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General
Construction Agreement with respondent Stern Builders Corporation (Stern Builders),
represented by its President and General Manager Servillano dela Cruz, for the construction of
the extension building and the renovation of the College of Arts and Sciences Building in the
campus of the University of the Philippines in Los Baos (UPLB).3

In the course of the implementation of the contract, Stern Builders submitted three progress
billings corresponding to the work accomplished, but the UP paid only two of the billings. The
third billing worth 273,729.47 was not paid due to its disallowance by the Commission on
Audit (COA). Despite the lifting of the disallowance, the UP failed to pay the billing, prompting
Stern Builders and dela Cruz to sue the UP and its co-respondent officials to collect the unpaid
billing and to recover various damages. The suit, entitled Stern Builders Corporation and
Servillano R. Dela Cruz v. University of the Philippines Systems, Jose V. Abueva, Raul P. de
Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and
Josefina R. Licuanan, was docketed as Civil Case No. Q-93-14971 of the Regional Trial Court in
Quezon City (RTC).4

After trial, on November 28, 2001, the RTC rendered its decision in favor of the plaintiffs,5 viz:

Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering the latter to pay plaintiff, jointly and severally, the following, to
wit:

1. 503,462.74 amount of the third billing, additional accomplished work and retention
money

2. 5,716,729.00 in actual damages

3. 10,000,000.00 in moral damages

4. 150,000.00 and 1,500.00 per appearance as attorneys fees; and

5. Costs of suit.

SO ORDERED.

Following the RTCs denial of its motion for reconsideration on May 7, 2002,6 the UP filed a
notice of appeal on June 3, 2002.7 Stern Builders and dela Cruz opposed the notice of appeal on
the ground of its filing being belated, and moved for the execution of the decision. The UP
countered that the notice of appeal was filed within the reglementary period because the UPs
Office of Legal Affairs (OLS) in Diliman, Quezon City received the order of denial only on May
31, 2002. On September 26, 2002, the RTC denied due course to the notice of appeal for having
been filed out of time and granted the private respondents motion for execution.8

The RTC issued the writ of execution on October 4, 2002,9 and the sheriff of the RTC served the
writ of execution and notice of demand upon the UP, through its counsel, on October 9, 2002.10
The UP filed an urgent motion to reconsider the order dated September 26, 2002, to quash the
writ of execution dated October 4, 2002, and to restrain the proceedings.11 However, the RTC
denied the urgent motion on April 1, 2003.12

On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition for
certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395.13

On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UPs
notice of appeal had been filed late,14 stating:
Records clearly show that petitioners received a copy of the Decision dated November 28, 2001
and January 7, 2002, thus, they had until January 22, 2002 within which to file their appeal. On
January 16, 2002 or after the lapse of nine (9) days, petitioners through their counsel Atty.
Nolasco filed a Motion for Reconsideration of the aforesaid decision, hence, pursuant to the
rules, petitioners still had six (6) remaining days to file their appeal. As admitted by the
petitioners in their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Order denying
their motion for reconsideration on May 17, 2002, thus, petitioners still has until May 23, 2002
(the remaining six (6) days) within which to file their appeal. Obviously, petitioners were not
able to file their Notice of Appeal on May 23, 2002 as it was only filed on June 3, 2002.

In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal
filed by the petitioners was really filed out of time, the same having been filed seventeen (17)
days late of the reglementary period. By reason of which, the decision dated November 28, 2001
had already become final and executory. "Settled is the rule that the perfection of an appeal in
the manner and within the period permitted by law is not only mandatory but jurisdictional, and
failure to perfect that appeal renders the challenged judgment final and executory. This is not an
empty procedural rule but is grounded on fundamental considerations of public policy and sound
practice." (Rams Studio and Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA
691, 696). Indeed, Atty. Nolasco received the order of denial of the Motion for Reconsideration
on May 17, 2002 but filed a Notice of Appeal only on June 3, 3003. As such, the decision of the
lower court ipso facto became final when no appeal was perfected after the lapse of the
reglementary period. This procedural caveat cannot be trifled with, not even by the High
Court.15

The UP sought a reconsideration, but the CA denied the UPs motion for reconsideration on
April 19, 2004.16

On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No.
163501).

On June 23, 2004, the Court denied the petition for review.17 The UP moved for the
reconsideration of the denial of its petition for review on August 29, 2004,18 but the Court
denied the motion on October 6, 2004.19 The denial became final and executory on November
12, 2004.20

In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due
course to the appeal and the issuance of the writ of execution, Stern Builders and dela Cruz filed
in the RTC their motions for execution despite their previous motion having already been
granted and despite the writ of execution having already issued. On June 11, 2003, the RTC
granted another motion for execution filed on May 9, 2003 (although the RTC had already issued
the writ of execution on October 4, 2002).21

On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on
the UPs depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the
Development Bank of the Philippines (DBP), Commonwealth Branch.22 The UP assailed the
garnishment through an urgent motion to quash the notices of garnishment;23 and a motion to
quash the writ of execution dated May 9, 2003.24

On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release
order.25

On October 14, 2003, the RTC denied the UPs urgent motion to quash, and granted Stern
Builders and dela Cruzs ex parte motion for issuance of a release order.26

The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the
motion on November 7, 2003.27

On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished
funds.28 Despite the UPs opposition,29 the RTC granted the motion to release the garnished
funds on March 16, 2004.30 On April 20, 2004, however, the RTC held in abeyance the
enforcement of the writs of execution issued on October 4, 2002 and June 3, 2003 and all the
ensuing notices of garnishment, citing Section 4, Rule 52, Rules of Court, which provided that
the pendency of a timely motion for reconsideration stayed the execution of the judgment.31

On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the
release of the garnished funds of the UP,32 to wit:

WHEREFORE, premises considered, there being no more legal impediment for the release of the
garnished amount in satisfaction of the judgment award in the instant case, let the amount
garnished be immediately released by the Development Bank of the Philippines, Commonwealth
Branch, Quezon City in favor of the plaintiff.

SO ORDERED.

The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to
release the garnished funds.33

On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court
for its non-compliance with the order of release.34

Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to challenge
the jurisdiction of the RTC in issuing the order of December 21, 2004 (CA-G.R. CV No.
88125).35 Aside from raising the denial of due process, the UP averred that the RTC committed
grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that there was no
longer any legal impediment to the release of the garnished funds. The UP argued that
government funds and properties could not be seized by virtue of writs of execution or
garnishment, as held in Department of Agriculture v. National Labor Relations Commission,36
and citing Section 84 of Presidential Decree No. 1445 to the effect that "revenue funds shall not
be paid out of any public treasury or depository except in pursuance of an appropriation law or
other specific statutory authority;" and that the order of garnishment clashed with the ruling in
University of the Philippines Board of Regents v. Ligot-Telan37 to the effect that the funds
belonging to the UP were public funds.

On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by the
UP.38

On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for
sheriffs assistance to implement the release order dated December 21, 2004, stating that the 60-
day period of the TRO of the CA had already lapsed.39 The UP opposed the amended motion
and countered that the implementation of the release order be suspended.40

On May 3, 2005, the RTC granted the amended motion for sheriffs assistance and directed the
sheriff to proceed to the DBP to receive the check in satisfaction of the judgment.41

The UP sought the reconsideration of the order of May 3, 2005.42

On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and
to dismiss the motion to cite its officials in contempt of court.43

On May 23, 2005, the UP presented a motion to withhold the release of the payment of the
judgment award.44

On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had already
delivered to the sheriff Managers Check No. 811941 for 16,370,191.74 representing the
garnished funds payable to the order of Stern Builders and dela Cruz as its compliance with the
RTCs order dated December 21, 2004.46 However, the RTC directed in the same order that
Stern Builders and dela Cruz should not encash the check or withdraw its amount pending the
final resolution of the UPs petition for certiorari, to wit:47

To enable the money represented in the check in question (No. 00008119411) to earn interest
during the pendency of the defendant University of the Philippines application for a writ of
injunction with the Court of Appeals the same may now be deposited by the plaintiff at the
garnishee Bank (Development Bank of the Philippines), the disposition of the amount
represented therein being subject to the final outcome of the case of the University of the
Philippines et al., vs. Hon. Agustin S. Dizon et al., (CA G.R. 88125) before the Court of
Appeals.

Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount
represented in the check in question and enjoy the same in the fashion of an owner during the
pendency of the case between the parties before the Court of Appeals which may or may not be
resolved in plaintiffs favor.

With the end in view of seeing to it that the check in question is deposited by the plaintiff at the
Development Bank of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is
directed to accompany and/or escort the plaintiff in making the deposit of the check in question.
SO ORDERED.

On September 16, 2005, the CA promulgated its assailed decision dismissing the UPs petition
for certiorari, ruling that the UP had been given ample opportunity to contest the motion to direct
the DBP to deposit the check in the name of Stern Builders and dela Cruz; and that the garnished
funds could be the proper subject of garnishment because they had been already earmarked for
the project, with the UP holding the funds only in a fiduciary capacity,48 viz:

Petitioners next argue that the UP funds may not be seized for execution or garnishment to
satisfy the judgment award. Citing Department of Agriculture vs. NLRC, University of the
Philippines Board of Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at Land
Bank and the Development Bank of the Philippines, being government funds, may not be
released absent an appropriations bill from Congress.

The argument is specious. UP entered into a contract with private respondents for the expansion
and renovation of the Arts and Sciences Building of its campus in Los Baos, Laguna.
Decidedly, there was already an appropriations earmarked for the said project. The said funds are
retained by UP, in a fiduciary capacity, pending completion of the construction project.

We agree with the trial Court [sic] observation on this score:

"4. Executive Order No. 109 (Directing all National Government Agencies to Revert
Certain Accounts Payable to the Cumulative Result of Operations of the National
Government and for Other Purposes) Section 9. Reversion of Accounts Payable, provides
that, all 1995 and prior years documented accounts payable and all undocumented
accounts regardless of the year they were incurred shall be reverted to the Cumulative
Result of Operations of the National Government (CROU). This shall apply to accounts
payable of all funds, except fiduciary funds, as long as the purpose for which the funds
were created have not been accomplished and accounts payable under foreign assisted
projects for the duration of the said project. In this regard, the Department of Budget and
Management issued Joint-Circular No. 99-6 4.0 (4.3) Procedural Guidelines which
provides that all accounts payable that reverted to the CROU may be considered for
payment upon determination thru administrative process, of the existence, validity and
legality of the claim. Thus, the allegation of the defendants that considering no
appropriation for the payment of any amount awarded to plaintiffs appellee the funds of
defendant-appellants may not be seized pursuant to a writ of execution issued by the
regular court is misplaced. Surely when the defendants and the plaintiff entered into the
General Construction of Agreement there is an amount already allocated by the latter for
the said project which is no longer subject of future appropriation."49

After the CA denied their motion for reconsideration on December 23, 2005, the petitioners
appealed by petition for review.

Matters Arising During the Pendency of the Petition

On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela
Cruzs motion to withdraw the deposit, in consideration of the UPs intention to appeal to the
CA,50 stating:

Since it appears that the defendants are intending to file a petition for review of the Court of
Appeals resolution in CA-G.R. No. 88125 within the reglementary period of fifteen (15) days
from receipt of resolution, the Court agrees with the defendants stand that the granting of
plaintiffs subject motion is premature.

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case
of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125
before the Court of Appeals) is that the judgment or resolution of said court has to be final and
executory, for if the same will still be elevated to the Supreme Court, it will not attain finality yet
until the highest court has rendered its own final judgment or resolution.51

However, on January 22, 2007, the UP filed an Urgent Application for A Temporary Restraining
Order and/or A Writ of Preliminary Injunction,52 averring that on January 3, 2007, Judge Maria
Theresa dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latters
appointment to the CA) had issued another order allowing Stern Builders and dela Cruz to
withdraw the deposit,53 to wit:

It bears stressing that defendants liability for the payment of the judgment obligation has
become indubitable due to the final and executory nature of the Decision dated November 28,
2001. Insofar as the payment of the [sic] judgment obligation is concerned, the Court believes
that there is nothing more the defendant can do to escape liability. It is observed that there is
nothing more the defendant can do to escape liability. It is observed that defendant U.P. System
had already exhausted all its legal remedies to overturn, set aside or modify the decision (dated
November 28, 2001( rendered against it. The way the Court sees it, defendant U.P. Systems
petition before the Supreme Court concerns only with the manner by which said judgment award
should be satisfied. It has nothing to do with the legality or propriety thereof, although it prays
for the deletion of [sic] reduction of the award of moral damages.

It must be emphasized that this Courts finding, i.e., that there was sufficient appropriation
earmarked for the project, was upheld by the Court of Appeals in its decision dated September
16, 2005. Being a finding of fact, the Supreme Court will, ordinarily, not disturb the same was
said Court is not a trier of fact. Such being the case, defendants arguments that there was no
sufficient appropriation for the payment of the judgment obligation must fail.

While it is true that the former Presiding Judge of this Court in its Order dated January 30, 2006
had stated that:

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case
of the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125
before the Court of Appeals) is that the judgment or resolution of said court has to be final and
executory, for if the same will still be elevated to the Supreme Court, it will not attain finality yet
until the highest court has rendered its own final judgment or resolution.

it should be noted that neither the Court of Appeals nor the Supreme Court issued a preliminary
injunction enjoining the release or withdrawal of the garnished amount. In fact, in its present
petition for review before the Supreme Court, U.P. System has not prayed for the issuance of a
writ of preliminary injunction. Thus, the Court doubts whether such writ is forthcoming.

The Court honestly believes that if defendants petition assailing the Order of this Court dated
December 31, 2004 granting the motion for the release of the garnished amount was meritorious,
the Court of Appeals would have issued a writ of injunction enjoining the same. Instead, said
appellate court not only refused to issue a wit of preliminary injunction prayed for by U.P.
System but denied the petition, as well.54

The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of
Judge Dizon disallowing the withdrawal of the garnished amount until after the decision in the
case would have become final and executory.

Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons
acting pursuant to her authority from enforcing her order of January 3, 2007,55 it appears that on
January 16, 2007, or prior to the issuance of the TRO, she had already directed the DBP to
forthwith release the garnished amount to Stern Builders and dela Cruz; 56 and that DBP had
forthwith complied with the order on January 17, 2007 upon the sheriffs service of the order of
Judge Yadao.57

These intervening developments impelled the UP to file in this Court a supplemental petition on
January 26, 2007,58 alleging that the RTC (Judge Yadao) gravely erred in ordering the
immediate release of the garnished amount despite the pendency of the petition for review in this
Court.

The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied the UPs
motion for the redeposit of the withdrawn amount on April 10, 2007,60 to wit:

This resolves defendant U.P. Systems Urgent Motion to Redeposit Judgment Award praying
that plaintiffs be directed to redeposit the judgment award to DBP pursuant to the Temporary
Restraining Order issued by the Supreme Court. Plaintiffs opposed the motion and countered that
the Temporary Restraining Order issued by the Supreme Court has become moot and academic
considering that the act sought to be restrained by it has already been performed. They also
alleged that the redeposit of the judgment award was no longer feasible as they have already
spent the same.

It bears stressing, if only to set the record straight, that this Court did not in its Order dated
January 3, 2007 (the implementation of which was restrained by the Supreme Court in its
Resolution dated January 24, 2002) direct that that garnished amount "be deposited with the
garnishee bank (Development Bank of the Philippines)". In the first place, there was no need to
order DBP to make such deposit, as the garnished amount was already deposited in the account
of plaintiffs with the DBP as early as May 13, 2005. What the Court granted in its Order dated
January 3, 2007 was plaintiffs motion to allow the release of said deposit. It must be recalled
that the Court found plaintiffs motion meritorious and, at that time, there was no restraining
order or preliminary injunction from either the Court of Appeals or the Supreme Court which
could have enjoined the release of plaintiffs deposit. The Court also took into account the
following factors:

a) the Decision in this case had long been final and executory after it was rendered on
November 28, 2001;

b) the propriety of the dismissal of U.P. Systems appeal was upheld by the Supreme
Court;

c) a writ of execution had been issued;

d) defendant U.P. Systems deposit with DBP was garnished pursuant to a lawful writ of
execution issued by the Court; and

e) the garnished amount had already been turned over to the plaintiffs and deposited in
their account with DBP.

The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by
the plaintiffs, having been delivered to them by the Deputy Sheriff of this Court pursuant to par.
(c), Section 9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment obligation
has already been fully satisfied as per Report of the Deputy Sheriff.

Anent the Temporary Restraining Order issued by the Supreme Court, the same has become
functus oficio, having been issued after the garnished amount had been released to the plaintiffs.
The judgment debt was released to the plaintiffs on January 17, 2007, while the Temporary
Restraining Order issued by the Supreme Court was received by this Court on February 2, 2007.
At the time of the issuance of the Restraining Order, the act sought to be restrained had already
been done, thereby rendering the said Order ineffectual.

After a careful and thorough study of the arguments advanced by the parties, the Court is of the
considered opinion that there is no legal basis to grant defendant U.P. Systems motion to
redeposit the judgment amount. Granting said motion is not only contrary to law, but it will also
render this Courts final executory judgment nugatory. Litigation must end and terminate
sometime and somewhere, and it is essential to an effective administration of justice that once a
judgment has become final the issue or cause involved therein should be laid to rest. This
doctrine of finality of judgment is grounded on fundamental considerations of public policy and
sound practice. In fact, nothing is more settled in law than that once a judgment attains finality it
thereby becomes immutable and unalterable. It may no longer be modified in any respect, even if
the modification is meant to correct what is perceived to be an erroneous conclusion of fact or
law, and regardless of whether the modification is attempted to be made by the court rendering it
or by the highest court of the land.
WHEREFORE, premises considered, finding defendant U.P. Systems Urgent Motion to
Redeposit Judgment Award devoid of merit, the same is hereby DENIED.

SO ORDERED.

Issues

The UP now submits that:

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE

PETITION, ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT
RULED THAT FUNDS HAVE ALREADY BEEN EARMARKED FOR THE
CONSTRUCTION PROJECT; AND THUS, THERE IS NO NEED FOR FURTHER
APPROPRIATIONS.

II

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING

GARNISHMENT OF A STATE UNIVERSITYS FUNDS IN VIOLATION OF ARTICLE
XIV, SECTION 5(5) OF THE CONSTITUTION.

III

IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW

POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE
AWARD OF 10 MILLION AS MORAL DAMAGES TO RESPONDENTS.

IV

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE

RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON
THE GROUND OF EQUITY AND JUDICIAL COURTESY.

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE

RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON
THE GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION FOR
RECONSIDERATION OF THE ORDER DATED 3 JANUARY 2007.

VI

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE

REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE
CLEAR LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24 JANUARY
2007.

The UP argues that the amount earmarked for the construction project had been purposely set
aside only for the aborted project and did not include incidental matters like the awards of actual
damages, moral damages and attorneys fees. In support of its argument, the UP cited Article
12.2 of the General Construction Agreement, which stipulated that no deductions would be
allowed for the payment of claims, damages, losses and expenses, including attorneys fees, in
case of any litigation arising out of the performance of the work. The UP insists that the CA
decision was inconsistent with the rulings in Commissioner of Public Highways v. San Diego61
and Department of Agriculture v. NLRC62 to the effect that government funds and properties
could not be seized under writs of execution or garnishment to satisfy judgment awards.

Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the
Constitution by allowing the garnishment of UP funds, because the garnishment resulted in a
substantial reduction of the UPs limited budget allocated for the remuneration, job satisfaction
and fulfillment of the best available teachers; that Judge Yadao should have exhibited judicial
courtesy towards the Court due to the pendency of the UPs petition for review; and that she
should have also desisted from declaring that the TRO issued by this Court had become functus
officio.

Lastly, the UP states that the awards of actual damages of 5,716,729.00 and moral damages of
10 million should be reduced, if not entirely deleted, due to its being unconscionable,
inequitable and detrimental to public service.

In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective
for its failure to mention the other cases upon the same issues pending between the parties (i.e.,
CA-G.R. No. 77395 and G.R No. 163501); that the UP was evidently resorting to forum
shopping, and to delaying the satisfaction of the final judgment by the filing of its petition for
review; that the ruling in Commissioner of Public Works v. San Diego had no application
because there was an appropriation for the project; that the UP retained the funds allotted for the
project only in a fiduciary capacity; that the contract price had been meanwhile adjusted to
22,338,553.25, an amount already more than sufficient to cover the judgment award; that the
UPs prayer to reduce or delete the award of damages had no factual basis, because they had
been gravely wronged, had been deprived of their source of income, and had suffered untold
miseries, discomfort, humiliation and sleepless years; that dela Cruz had even been constrained
to sell his house, his equipment and the implements of his trade, and together with his family had
been forced to live miserably because of the wrongful actuations of the UP; and that the RTC
correctly declared the Courts TRO to be already functus officio by reason of the withdrawal of
the garnished amount from the DBP.

The decisive issues to be considered and passed upon are, therefore:

(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UPs prayer for the deletion of the awards of actual
damages of 5,716,729.00, moral damages of 10,000,000.00 and attorneys fees of
150,000.00 plus 1,500.00 per appearance could be granted despite the finality of the judgment
of the RTC.

Ruling

The petition for review is meritorious.

I.
UPs funds, being government funds,
are not subject to garnishment

The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in
literature, philosophy, the sciences, and arts, and to give professional and technical training to
deserving students.63 Despite its establishment as a body corporate,64 the UP remains to be a
"chartered institution"65 performing a legitimate government function. It is an institution of
higher learning, not a corporation established for profit and declaring any dividends.66 In
enacting Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congress
has declared the UP as the national university67 "dedicated to the search for truth and knowledge
as well as the development of future leaders."68

Irrefragably, the UP is a government instrumentality,69 performing the States constitutional

mandate of promoting quality and accessible education.70 As a government instrumentality, the
UP administers special funds sourced from the fees and income enumerated under Act No. 1870
and Section 1 of Executive Order No. 714,71 and from the yearly appropriations, to achieve the
purposes laid down by Section 2 of Act 1870, as expanded in Republic Act No. 9500.72 All the
funds going into the possession of the UP, including any interest accruing from the deposit of
such funds in any banking institution, constitute a "special trust fund," the disbursement of which
should always be aligned with the UPs mission and purpose,73 and should always be subject to
auditing by the COA.74

Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the
possession of an agency of the government or of a public officer as trustee, agent or
administrator, or that is received for the fulfillment of some obligation.75 A trust fund may be
utilized only for the "specific purpose for which the trust was created or the funds received."76

The funds of the UP are government funds that are public in character. They include the income
accruing from the use of real property ceded to the UP that may be spent only for the attainment
of its institutional objectives.77 Hence, the funds subject of this action could not be validly made
the subject of the RTCs writ of execution or garnishment. The adverse judgment rendered
against the UP in a suit to which it had impliedly consented was not immediately enforceable by
execution against the UP,78 because suability of the State did not necessarily mean its
liability.79

A marked distinction exists between suability of the State and its liability. As the Court
succinctly stated in Municipality of San Fernando, La Union v. Firme:80
A distinction should first be made between suability and liability. "Suability depends on the
consent of the state to be sued, liability on the applicable law and the established facts. The
circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it
can never be held liable if it does not first consent to be sued. Liability is not conceded by the
mere fact that the state has allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable.

Also, in Republic v. Villasor,81 where the issuance of an alias writ of execution directed against
the funds of the Armed Forces of the Philippines to satisfy a final and executory judgment was
nullified, the Court said:

xxx The universal rule that where the State gives its consent to be sued by private parties either
by general or special law, it may limit claimants action "only up to the completion of
proceedings anterior to the stage of execution" and that the power of the Courts ends when the
judgment is rendered, since government funds and properties may not be seized under writs of
execution or garnishment to satisfy such judgments, is based on obvious considerations of public
policy. Disbursements of public funds must be covered by the corresponding appropriation as
required by law. The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects,
as appropriated by law.

The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards of
actual and moral damages (including attorneys fees) was not validly made if there was no
special appropriation by Congress to cover the liability. It was, therefore, legally unwarranted for
the CA to agree with the RTCs holding in the order issued on April 1, 2003 that no
appropriation by Congress to allocate and set aside the payment of the judgment awards was
necessary because "there (were) already an appropriations (sic) earmarked for the said
project."82 The CA and the RTC thereby unjustifiably ignored the legal restriction imposed on
the trust funds of the Government and its agencies and instrumentalities to be used exclusively to
fulfill the purposes for which the trusts were created or for which the funds were received except
upon express authorization by Congress or by the head of a government agency in control of the
funds, and subject to pertinent budgetary laws, rules and regulations.83

Indeed, an appropriation by Congress was required before the judgment that rendered the UP
liable for moral and actual damages (including attorneys fees) would be satisfied considering
that such monetary liabilities were not covered by the "appropriations earmarked for the said
project." The Constitution strictly mandated that "(n)o money shall be paid out of the Treasury
except in pursuance of an appropriation made by law."84

II
COA must adjudicate private respondents claim
before execution should proceed

The execution of the monetary judgment against the UP was within the primary jurisdiction of
the COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, to wit:
Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to
and comprehend all matters relating to auditing procedures, systems and controls, the keeping of
the general accounts of the Government, the preservation of vouchers pertaining thereto for a
period of ten years, the examination and inspection of the books, records, and papers relating to
those accounts; and the audit and settlement of the accounts of all persons respecting funds or
property received or held by them in an accountable capacity, as well as the examination, audit,
and settlement of all debts and claims of any sort due from or owing to the Government or any of
its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non
governmental entities subsidized by the government, those funded by donations through the
government, those required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the government.

It was of no moment that a final and executory decision already validated the claim against the
UP. The settlement of the monetary claim was still subject to the primary jurisdiction of the
COA despite the final decision of the RTC having already validated the claim.85 As such, Stern
Builders and dela Cruz as the claimants had no alternative except to first seek the approval of the
COA of their monetary claim.

On its part, the RTC should have exercised utmost caution, prudence and judiciousness in
dealing with the motions for execution against the UP and the garnishment of the UPs funds.
The RTC had no authority to direct the immediate withdrawal of any portion of the garnished
funds from the depository banks of the UP. By eschewing utmost caution, prudence and
judiciousness in dealing with the execution and garnishment, and by authorizing the withdrawal
of the garnished funds of the UP, the RTC acted beyond its jurisdiction, and all its orders and
issuances thereon were void and of no legal effect, specifically: (a) the order Judge Yadao issued
on January 3, 2007 allowing Stern Builders and dela Cruz to withdraw the deposited garnished
amount; (b) the order Judge Yadao issued on January 16, 2007 directing DBP to forthwith
release the garnish amount to Stern Builders and dela Cruz; (c) the sheriffs report of January 17,
2007 manifesting the full satisfaction of the writ of execution; and (d) the order of April 10, 2007
deying the UPs motion for the redeposit of the withdrawn amount. Hence, such orders and
issuances should be struck down without exception.

Nothing extenuated Judge Yadaos successive violations of Presidential Decree No. 1445. She
was aware of Presidential Decree No. 1445, considering that the Court circulated to all judges its
Administrative Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to observe
utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units" precisely in order to
prevent the circumvention of Presidential Decree No. 1445, as well as of the rules and
procedures of the COA, to wit:

In order to prevent possible circumvention of the rules and procedures of the Commission
on Audit, judges are hereby enjoined to observe utmost caution, prudence and
judiciousness in the issuance of writs of execution to satisfy money judgments against
government agencies and local government units.
Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA
617, 625 1970), this Court explicitly stated:

"The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimants action only up to the completion of proceedings
anterior to the stage of execution and that the power of the Court ends when the judgment is
rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation as required
by law. The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects,
as appropriated by law.

Moreover, it is settled jurisprudence that upon determination of State liability, the

prosecution, enforcement or satisfaction thereof must still be pursued in accordance with
the rules and procedures laid down in P.D. No. 1445, otherwise known as the Government
Auditing Code of the Philippines (Department of Agriculture v. NLRC, 227 SCRA 693,
701-02 1993 citing Republic vs. Villasor, 54 SCRA 84 1973). All money claims against the
Government must first be filed with the Commission on Audit which must act upon it
within sixty days. Rejection of the claim will authorize the claimant to elevate the matter to
the Supreme Court on certiorari and in effect, sue the State thereby (P.D. 1445, Sections 49-
50).

However, notwithstanding the rule that government properties are not subject to levy and
execution unless otherwise provided for by statute (Republic v. Palacio, 23 SCRA 899 1968;
Commissioner of Public Highways v. San Diego, supra) or municipal ordinance (Municipality of
Makati v. Court of Appeals, 190 SCRA 206 1990), the Court has, in various instances,
distinguished between government funds and properties for public use and those not held for
public use. Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the
Court ruled that "where property of a municipal or other public corporation is sought to be
subjected to execution to satisfy judgments recovered against such corporation, the question as to
whether such property is leviable or not is to be determined by the usage and purposes for which
it is held." The following can be culled from Viuda de Tan Toco v. Municipal Council of Iloilo:

1. Properties held for public uses and generally everything held for governmental
purposes are not subject to levy and sale under execution against such corporation. The
same rule applies to funds in the hands of a public officer and taxes due to a municipal
corporation.

2. Where a municipal corporation owns in its proprietary capacity, as distinguished from its
public or government capacity, property not used or used for a public purpose but for quasi-
private purposes, it is the general rule that such property may be seized and sold under execution
against the corporation.
3. Property held for public purposes is not subject to execution merely because it is temporarily
used for private purposes. If the public use is wholly abandoned, such property becomes subject
to execution.

This Administrative Circular shall take effect immediately and the Court Administrator shall see
to it that it is faithfully implemented.

Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any
writ of preliminary injunction to enjoin the release or withdrawal of the garnished amount, she
did not need any writ of injunction from a superior court to compel her obedience to the law. The
Court is disturbed that an experienced judge like her should look at public laws like Presidential
Decree No. 1445 dismissively instead of loyally following and unquestioningly implementing
them. That she did so turned her court into an oppressive bastion of mindless tyranny instead of
having it as a true haven for the seekers of justice like the UP.

III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period rule announced in
Neypes v. Court of Appeals
can be given retroactive application

The UP next pleads that the Court gives due course to its petition for review in the name of
equity in order to reverse or modify the adverse judgment against it despite its finality. At stake
in the UPs plea for equity was the return of the amount of 16,370,191.74 illegally garnished
from its trust funds. Obstructing the plea is the finality of the judgment based on the supposed
tardiness of UPs appeal, which the RTC declared on September 26, 2002. The CA upheld the
declaration of finality on February 24, 2004, and the Court itself denied the UPs petition for
review on that issue on May 11, 2004 (G.R. No. 163501). The denial became final on November
12, 2004.

It is true that a decision that has attained finality becomes immutable and unalterable, and cannot
be modified in any respect,87 even if the modification is meant to correct erroneous conclusions
of fact and law, and whether the modification is made by the court that rendered it or by this
Court as the highest court of the land.88 Public policy dictates that once a judgment becomes
final, executory and unappealable, the prevailing party should not be deprived of the fruits of
victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement of
such judgment sets at naught the role and purpose of the courts to resolve justiciable
controversies with finality.89 Indeed, all litigations must at some time end, even at the risk of
occasional errors.

But the doctrine of immutability of a final judgment has not been absolute, and has admitted
several exceptions, among them: (a) the correction of clerical errors; (b) the so-called nunc pro
tunc entries that cause no prejudice to any party; (c) void judgments; and (d) whenever
circumstances transpire after the finality of the decision that render its execution unjust and
inequitable.90 Moreover, in Heirs of Maura So v. Obliosca,91 we stated that despite the absence
of the preceding circumstances, the Court is not precluded from brushing aside procedural norms
if only to serve the higher interests of justice and equity. Also, in Gumaru v. Quirino State
College,92 the Court nullified the proceedings and the writ of execution issued by the RTC for
the reason that respondent state college had not been represented in the litigation by the Office of
the Solicitor General.

We rule that the UPs plea for equity warrants the Courts exercise of the exceptional power to
disregard the declaration of finality of the judgment of the RTC for being in clear violation of the
UPs right to due process.

Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to
be tardy. They based their finding on the fact that only six days remained of the UPs
reglementary 15-day period within which to file the notice of appeal because the UP had filed a
motion for reconsideration on January 16, 2002 vis--vis the RTCs decision the UP received on
January 7, 2002; and that because the denial of the motion for reconsideration had been served
upon Atty. Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only
until May 23, 2002 within which to file the notice of appeal.

The UP counters that the service of the denial of the motion for reconsideration upon Atty.
Nolasco was defective considering that its counsel of record was not Atty. Nolasco of the UPLB
Legal Office but the OLS in Diliman, Quezon City; and that the period of appeal should be
reckoned from May 31, 2002, the date when the OLS received the order. The UP submits that the
filing of the notice of appeal on June 3, 2002 was well within the reglementary period to appeal.

We agree with the submission of the UP.

Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the
UPLB Legal Office was invalid and ineffectual because he was admittedly not the counsel of
record of the UP. The rule is that it is on the counsel and not the client that the service should be
made.93

That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on
May 31, 2002. As such, the running of the remaining period of six days resumed only on June 1,
2002,94 rendering the filing of the UPs notice of appeal on June 3, 2002 timely and well within
the remaining days of the UPs period to appeal.

Verily, the service of the denial of the motion for reconsideration could only be validly made
upon the OLS in Diliman, and no other. The fact that Atty. Nolasco was in the employ of the UP
at the UPLB Legal Office did not render the service upon him effective. It is settled that where a
party has appeared by counsel, service must be made upon such counsel.95 Service on the party
or the partys employee is not effective because such notice is not notice in law.96 This is clear
enough from Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly states
that: "If any party has appeared by counsel, service upon him shall be made upon his counsel or
one of them, unless service upon the party himself is ordered by the court. Where one counsel
appears for several parties, he shall only be entitled to one copy of any paper served upon him by
the opposite side." As such, the period to appeal resumed only on June 1, 2002, the date
following the service on May 31, 2002 upon the OLS in Diliman of the copy of the decision of
the RTC, not from the date when the UP was notified.97

Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual and
legal bases, is set aside.

Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such that
the remaining period for the UP to take a timely appeal would end by May 23, 2002, it would
still not be correct to find that the judgment of the RTC became final and immutable thereafter
due to the notice of appeal being filed too late on June 3, 2002.

In so declaring the judgment of the RTC as final against the UP, the CA and the RTC applied the
rule contained in the second paragraph of Section 3, Rule 41 of the Rules of Court to the effect
that the filing of a motion for reconsideration interrupted the running of the period for filing the
appeal; and that the period resumed upon notice of the denial of the motion for reconsideration.
For that reason, the CA and the RTC might not be taken to task for strictly adhering to the rule
then prevailing.

However, equity calls for the retroactive application in the UPs favor of the fresh-period rule
that the Court first announced in mid-September of 2005 through its ruling in Neypes v. Court of
Appeals,98 viz:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to
appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to
file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing
a motion for a new trial or motion for reconsideration.

The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or
make the appeal period uniform, to be counted from receipt of the order denying the motion for
new trial, motion for reconsideration (whether full or partial) or any final order or resolution,"99
is impervious to any serious challenge. This is because there are no vested rights in rules of
procedure.100 A law or regulation is procedural when it prescribes rules and forms of procedure
in order that courts may be able to administer justice.101 It does not come within the legal
conception of a retroactive law, or is not subject of the general rule prohibiting the retroactive
operation of statues, but is given retroactive effect in actions pending and undetermined at the
time of its passage without violating any right of a person who may feel that he is adversely
affected.

We have further said that a procedural rule that is amended for the benefit of litigants in
furtherance of the administration of justice shall be retroactively applied to likewise favor actions
then pending, as equity delights in equality.102 We may even relax stringent procedural rules in
order to serve substantial justice and in the exercise of this Courts equity jurisdiction.103 Equity
jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its
judgments to the special circumstances of a case because of the inflexibility of its statutory or
legal jurisdiction.104
It is cogent to add in this regard that to deny the benefit of the fresh-period rule to the UP would
amount to injustice and absurdity injustice, because the judgment in question was issued on
November 28, 2001 as compared to the judgment in Neypes that was rendered in 1998;
absurdity, because parties receiving notices of judgment and final orders issued in the year 1998
would enjoy the benefit of the fresh-period rule but the later rulings of the lower courts like that
herein would not.105

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

IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted

Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of law
should be made in the decision rendered by any court, to wit:

Section 14. No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused
due course or denied without stating the legal basis therefor.

Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of Court,
viz:

Section 1. Rendition of judgments and final orders. A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating
clearly and distinctly the facts and the law on which it is based, signed by him, and filed with the
clerk of the court. (1a)

The Constitution and the Rules of Court apparently delineate two main essential parts of a
judgment, namely: the body and the decretal portion. Although the latter is the controlling
part,106 the importance of the former is not to be lightly regarded because it is there where the
court clearly and distinctly states its findings of fact and of law on which the decision is based.
To state it differently, one without the other is ineffectual and useless. The omission of either
inevitably results in a judgment that violates the letter and the spirit of the Constitution and the
Rules of Court.
The term findings of fact that must be found in the body of the decision refers to statements of
fact, not to conclusions of law.107 Unlike in pleadings where ultimate facts alone need to be
stated, the Constitution and the Rules of Court require not only that a decision should state the
ultimate facts but also that it should specify the supporting evidentiary facts, for they are what
are called the findings of fact.

The importance of the findings of fact and of law cannot be overstated. The reason and purpose
of the Constitution and the Rules of Court in that regard are obviously to inform the parties why
they win or lose, and what their rights and obligations are. Only thereby is the demand of due
process met as to the parties. As Justice Isagani A. Cruz explained in Nicos Industrial
Corporation v. Court of Appeals:108

It is a requirement of due process that the parties to a litigation be informed of how it was
decided, with an explanation of the factual and legal reasons that led to the conclusions of the
court. The court cannot simply say that judgment is rendered in favor of X and against Y and just
leave it at that without any justification whatsoever for its action. The losing party is entitled to
know why he lost, so he may appeal to a higher court, if permitted, should he believe that the
decision should be reversed. A decision that does not clearly and distinctly state the facts and the
law on which it is based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for
review by a higher tribunal.

Here, the decision of the RTC justified the grant of actual and moral damages, and attorneys
fees in the following terse manner, viz:

xxx The Court is not unmindful that due to defendants unjustified refusal to pay their
outstanding obligation to plaintiff, the same suffered losses and incurred expenses as he was
forced to re-mortgage his house and lot located in Quezon City to Metrobank (Exh. "CC") and
BPI Bank just to pay its monetary obligations in the form of interest and penalties incurred in the
course of the construction of the subject project.109

The statement that "due to defendants unjustified refusal to pay their outstanding obligation to
plaintiff, the same suffered losses and incurred expenses as he was forced to re-mortgage his
house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its
monetary obligations in the form of interest and penalties incurred in the course of the
construction of the subject project" was only a conclusion of fact and law that did not comply
with the constitutional and statutory prescription. The statement specified no detailed expenses
or losses constituting the 5,716,729.00 actual damages sustained by Stern Builders in relation
to the construction project or to other pecuniary hardships. The omission of such expenses or
losses directly indicated that Stern Builders did not prove them at all, which then contravened
Article 2199, Civil Code, the statutory basis for the award of actual damages, which entitled a
person to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. As such, the actual damages allowed by the RTC, being bereft of factual support, were
speculative and whimsical. Without the clear and distinct findings of fact and law, the award
amounted only to an ipse dixit on the part of the RTC,110 and did not attain finality.
There was also no clear and distinct statement of the factual and legal support for the award of
moral damages in the substantial amount of 10,000,000.00. The award was thus also
speculative and whimsical. Like the actual damages, the moral damages constituted another
judicial ipse dixit, the inevitable consequence of which was to render the award of moral
damages incapable of attaining finality. In addition, the grant of moral damages in that manner
contravened the law that permitted the recovery of moral damages as the means to assuage
"physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury."111 The contravention of the law
was manifest considering that Stern Builders, as an artificial person, was incapable of
experiencing pain and moral sufferings.112 Assuming that in granting the substantial amount of
10,000,000.00 as moral damages, the RTC might have had in mind that dela Cruz had himself
suffered mental anguish and anxiety. If that was the case, then the RTC obviously disregarded
his separate and distinct personality from that of Stern Builders.113 Moreover, his moral and
emotional sufferings as the President of Stern Builders were not the sufferings of Stern Builders.
Lastly, the RTC violated the basic principle that moral damages were not intended to enrich the
plaintiff at the expense of the defendant, but to restore the plaintiff to his status quo ante as much
as possible. Taken together, therefore, all these considerations exposed the substantial amount of
10,000,000.00 allowed as moral damages not only to be factually baseless and legally
indefensible, but also to be unconscionable, inequitable and unreasonable.

Like the actual and moral damages, the 150,000.00, plus 1,500.00 per appearance, granted as
attorneys fees were factually unwarranted and devoid of legal basis. The general rule is that a
successful litigant cannot recover attorneys fees as part of the damages to be assessed against
the losing party because of the policy that no premium should be placed on the right to
litigate.114 Prior to the effectivity of the present Civil Code, indeed, such fees could be
recovered only when there was a stipulation to that effect. It was only under the present Civil
Code that the right to collect attorneys fees in the cases mentioned in Article 2208115 of the
Civil Code came to be recognized.116 Nonetheless, with attorneys fees being allowed in the
concept of actual damages,117 their amounts must be factually and legally justified in the body
of the decision and not stated for the first time in the decretal portion.118 Stating the amounts
only in the dispositive portion of the judgment is not enough;119 a rendition of the factual and
legal justifications for them must also be laid out in the body of the decision.120

That the attorneys fees granted to the private respondents did not satisfy the foregoing
requirement suffices for the Court to undo them.121 The grant was ineffectual for being contrary
to law and public policy, it being clear that the express findings of fact and law were intended to
bring the case within the exception and thereby justify the award of the attorneys fees. Devoid
of such express findings, the award was a conclusion without a premise, its basis being
improperly left to speculation and conjecture.122

Nonetheless, the absence of findings of fact and of any statement of the law and jurisprudence on
which the awards of actual and moral damages, as well as of attorneys fees, were based was a
fatal flaw that invalidated the decision of the RTC only as to such awards. As the Court declared
in Velarde v. Social Justice Society,123 the failure to comply with the constitutional requirement
for a clear and distinct statement of the supporting facts and law "is a grave abuse of discretion
amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in careless
disregard of the constitutional mandate are a patent nullity and must be struck down as void."124
The other item granted by the RTC (i.e., 503,462.74) shall stand, subject to the action of the
COA as stated herein.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and
SETS ASIDE the decision of the Court of Appeals under review; ANNULS the orders for the
garnishment of the funds of the University of the Philippines and for the release of the garnished
amount to Stern Builders Corporation and Servillano dela Cruz; and DELETES from the
decision of the Regional Trial Court dated November 28, 2001 for being void only the awards of
actual damages of 5,716,729.00, moral damages of 10,000,000.00, and attorney's fees of
150,000.00, plus 1,500.00 per appearance, in favor of Stern Builders Corporation and
Servillano dela Cruz.

The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the
amount of 16,370,191.74 within 10 days from receipt of this decision.

Costs of suit to be paid by the private respondents.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7995 May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien residents, corporations
and partnerships adversely affected. by Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO, City
Treasurer of Manila, respondents.

Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for
respondent Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for respondent City
Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.

LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the validity and constitutionality of a
legislative enactment, fundamental and far-reaching in significance. The enactment poses
questions of due process, police power and equal protection of the laws. It also poses an
important issue of fact, that is whether the conditions which the disputed law purports to remedy
really or actually exist. Admittedly springing from a deep, militant, and positive nationalistic
impulse, the law purports to protect citizen and country from the alien retailer. Through it, and
within the field of economy it regulates, Congress attempts to translate national aspirations for
economic independence and national security, rooted in the drive and urge for national survival
and welfare, into a concrete and tangible measures designed to free the national retailer from the
competing dominance of the alien, so that the country and the nation may be free from a
supposed economic dependence and bondage. Do the facts and circumstances justify the
enactment?

II. Pertinent provisions of Republic Act No. 1180

Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it
nationalizes the retail trade business. The main provisions of the Act are: (1) a prohibition
against persons, not citizens of the Philippines, and against associations, partnerships, or
corporations the capital of which are not wholly owned by citizens of the Philippines, from
engaging directly or indirectly in the retail trade; (2) an exception from the above prohibition in
favor of aliens actually engaged in said business on May 15, 1954, who are allowed to continue
to engaged therein, unless their licenses are forfeited in accordance with the law, until their death
or voluntary retirement in case of natural persons, and for ten years after the approval of the Act
or until the expiration of term in case of juridical persons; (3) an exception therefrom in favor of
citizens and juridical entities of the United States; (4) a provision for the forfeiture of licenses (to
engage in the retail business) for violation of the laws on nationalization, control weights and
measures and labor and other laws relating to trade, commerce and industry; (5) a prohibition
against the establishment or opening by aliens actually engaged in the retail business of
additional stores or branches of retail business, (6) a provision requiring aliens actually engaged
in the retail business to present for registration with the proper authorities a verified statement
concerning their businesses, giving, among other matters, the nature of the business, their assets
and liabilities and their offices and principal offices of judicial entities; and (7) a provision
allowing the heirs of aliens now engaged in the retail business who die, to continue such business
for a period of six months for purposes of liquidation.

III. Grounds upon which petition is based-Answer thereto

Petitioner, for and in his own behalf and on behalf of other alien residents corporations and
partnerships adversely affected by the provisions of Republic Act. No. 1180, brought this action
to obtain a judicial declaration that said Act is unconstitutional, and to enjoin the Secretary of
Finance and all other persons acting under him, particularly city and municipal treasurers, from
enforcing its provisions. Petitioner attacks the constitutionality of the Act, contending that: (1) it
denies to alien residents the equal protection of the laws and deprives of their liberty and
property without due process of law ; (2) the subject of the Act is not expressed or
comprehended in the title thereof; (3) the Act violates international and treaty obligations of the
Republic of the Philippines; (4) the provisions of the Act against the transmission by aliens of
their retail business thru hereditary succession, and those requiring 100% Filipino capitalization
for a corporation or entity to entitle it to engage in the retail business, violate the spirit of
Sections 1 and 5, Article XIII and Section 8 of Article XIV of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1) the Act
was passed in the valid exercise of the police power of the State, which exercise is authorized in
the Constitution in the interest of national economic survival; (2) the Act has only one subject
embraced in the title; (3) no treaty or international obligations are infringed; (4) as regards
hereditary succession, only the form is affected but the value of the property is not impaired, and
the institution of inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.

There is no question that the Act was approved in the exercise of the police power, but petitioner
claims that its exercise in this instance is attended by a violation of the constitutional
requirements of due process and equal protection of the laws. But before proceeding to the
consideration and resolution of the ultimate issue involved, it would be well to bear in mind
certain basic and fundamental, albeit preliminary, considerations in the determination of the ever
recurrent conflict between police power and the guarantees of due process and equal protection
of the laws. What is the scope of police power, and how are the due process and equal protection
clauses related to it? What is the province and power of the legislature, and what is the function
and duty of the courts? These consideration must be clearly and correctly understood that their
application to the facts of the case may be brought forth with clarity and the issue accordingly
resolved.

It has been said the police power is so far - reaching in scope, that it has become almost
impossible to limit its sweep. As it derives its existence from the very existence of the State
itself, it does not need to be expressed or defined in its scope; it is said to be co-extensive with
self-protection and survival, and as such it is the most positive and active of all governmental
processes, the most essential, insistent and illimitable. Especially is it so under a modern
democratic framework where the demands of society and of nations have multiplied to almost
unimaginable proportions; the field and scope of police power has become almost boundless, just
as the fields of public interest and public welfare have become almost all-embracing and have
transcended human foresight. Otherwise stated, as we cannot foresee the needs and demands of
public interest and welfare in this constantly changing and progressive world, so we cannot
delimit beforehand the extent or scope of police power by which and through which the State
seeks to attain or achieve interest or welfare. So it is that Constitutions do not define the scope or
extent of the police power of the State; what they do is to set forth the limitations thereof. The
most important of these are the due process clause and the equal protection clause.

b. Limitations on police power.

The basic limitations of due process and equal protection are found in the following provisions
of our Constitution:

SECTION 1.(1) No person shall be deprived of life, liberty or property without due
process of law, nor any person be denied the equal protection of the laws. (Article III,
Phil. Constitution)

These constitutional guarantees which embody the essence of individual liberty and freedom in
democracies, are not limited to citizens alone but are admittedly universal in their application,
without regard to any differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30,
L. ed. 220, 226.)

c. The, equal protection clause.

The equal protection of the law clause is against undue favor and individual or class privilege, as
well as hostile discrimination or the oppression of inequality. It is not intended to prohibit
legislation, which is limited either in the object to which it is directed or by territory within
which is to operate. It does not demand absolute equality among residents; it merely requires that
all persons shall be treated alike, under like circumstances and conditions both as to privileges
conferred and liabilities enforced. The equal protection clause is not infringed by legislation
which applies only to those persons falling within a specified class, if it applies alike to all
persons within such class, and reasonable grounds exists for making a distinction between those
who fall within such class and those who do not. (2 Cooley, Constitutional Limitations, 824-
825.)

d. The due process clause.

The due process clause has to do with the reasonableness of legislation enacted in pursuance of
the police power. Is there public interest, a public purpose; is public welfare involved? Is the Act
reasonably necessary for the accomplishment of the legislature's purpose; is it not unreasonable,
arbitrary or oppressive? Is there sufficient foundation or reason in connection with the matter
involved; or has there not been a capricious use of the legislative power? Can the aims conceived
be achieved by the means used, or is it not merely an unjustified interference with private
interest? These are the questions that we ask when the due process test is applied.

The conflict, therefore, between police power and the guarantees of due process and equal
protection of the laws is more apparent than real. Properly related, the power and the guarantees
are supposed to coexist. The balancing is the essence or, shall it be said, the indispensable means
for the attainment of legitimate aspirations of any democratic society. There can be no absolute
power, whoever exercise it, for that would be tyranny. Yet there can neither be absolute liberty,
for that would mean license and anarchy. So the State can deprive persons of life, liberty and
property, provided there is due process of law; and persons may be classified into classes and
groups, provided everyone is given the equal protection of the law. The test or standard, as
always, is reason. The police power legislation must be firmly grounded on public interest and
welfare, and a reasonable relation must exist between purposes and means. And if distinction and
classification has been made, there must be a reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place and role of the courts? It
must not be overlooked, in the first place, that the legislature, which is the constitutional
repository of police power and exercises the prerogative of determining the policy of the State, is
by force of circumstances primarily the judge of necessity, adequacy or reasonableness and
wisdom, of any law promulgated in the exercise of the police power, or of the measures adopted
to implement the public policy or to achieve public interest. On the other hand, courts, although
zealous guardians of individual liberty and right, have nevertheless evinced a reluctance to
interfere with the exercise of the legislative prerogative. They have done so early where there has
been a clear, patent or palpable arbitrary and unreasonable abuse of the legislative prerogative.
Moreover, courts are not supposed to override legitimate policy, and courts never inquire into the
wisdom of the law.

V. Economic problems sought to be remedied

With the above considerations in mind, we will now proceed to delve directly into the issue
involved. If the disputed legislation were merely a regulation, as its title indicates, there would be
no question that it falls within the legitimate scope of legislative power. But it goes further and
prohibits a group of residents, the aliens, from engaging therein. The problem becomes more
complex because its subject is a common, trade or occupation, as old as society itself, which
from the immemorial has always been open to residents, irrespective of race, color or citizenship.

a. Importance of retail trade in the economy of the nation.

In a primitive economy where families produce all that they consume and consume all that they
produce, the dealer, of course, is unknown. But as group life develops and families begin to live
in communities producing more than what they consume and needing an infinite number of
things they do not produce, the dealer comes into existence. As villages develop into big
communities and specialization in production begins, the dealer's importance is enhanced. Under
modern conditions and standards of living, in which man's needs have multiplied and diversified
to unlimited extents and proportions, the retailer comes as essential as the producer, because thru
him the infinite variety of articles, goods and needed for daily life are placed within the easy
reach of consumers. Retail dealers perform the functions of capillaries in the human body, thru
which all the needed food and supplies are ministered to members of the communities
comprising the nation.

There cannot be any question about the importance of the retailer in the life of the community.
He ministers to the resident's daily needs, food in all its increasing forms, and the various little
gadgets and things needed for home and daily life. He provides his customers around his store
with the rice or corn, the fish, the salt, the vinegar, the spices needed for the daily cooking. He
has cloths to sell, even the needle and the thread to sew them or darn the clothes that wear out.
The retailer, therefore, from the lowly peddler, the owner of a small sari-sari store, to the
operator of a department store or, a supermarket is so much a part of day-to-day existence.

b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country in the bigger centers of
population (Time there was when he was unknown in provincial towns and villages). Slowly but
gradually be invaded towns and villages; now he predominates in the cities and big centers of
population. He even pioneers, in far away nooks where the beginnings of community life appear,
ministering to the daily needs of the residents and purchasing their agricultural produce for sale
in the towns. It is an undeniable fact that in many communities the alien has replaced the native
retailer. He has shown in this trade, industry without limit, and the patience and forbearance of a
slave.

Derogatory epithets are hurled at him, but he laughs these off without murmur; insults of ill-bred
and insolent neighbors and customers are made in his face, but he heeds them not, and he forgets
and forgives. The community takes note of him, as he appears to be harmless and extremely
useful.

c. Alleged alien control and dominance.

There is a general feeling on the part of the public, which appears to be true to fact, about the
controlling and dominant position that the alien retailer holds in the nation's economy. Food and
other essentials, clothing, almost all articles of daily life reach the residents mostly through him.
In big cities and centers of population he has acquired not only predominance, but apparent
control over distribution of almost all kinds of goods, such as lumber, hardware, textiles,
groceries, drugs, sugar, flour, garlic, and scores of other goods and articles. And were it not for
some national corporations like the Naric, the Namarco, the Facomas and the Acefa, his control
over principal foods and products would easily become full and complete.

Petitioner denies that there is alien predominance and control in the retail trade. In one breath it
is said that the fear is unfounded and the threat is imagined; in another, it is charged that the law
is merely the result of radicalism and pure and unabashed nationalism. Alienage, it is said, is not
an element of control; also so many unmanageable factors in the retail business make control
virtually impossible. The first argument which brings up an issue of fact merits serious
consideration. The others are matters of opinion within the exclusive competence of the
legislature and beyond our prerogative to pass upon and decide.

The best evidence are the statistics on the retail trade, which put down the figures in black and
white. Between the constitutional convention year (1935), when the fear of alien domination and
control of the retail trade already filled the minds of our leaders with fears and misgivings, and
the year of the enactment of the nationalization of the retail trade act (1954), official statistics
unmistakably point out to the ever-increasing dominance and control by the alien of the retail
trade, as witness the following tables:

Assets Gross Sales

Year and No.- Per cent Per cent
Retailers Establishment Pesos Distributio Pesos Distributio
Nationality s n n
1941
:
Filipino 106,671 200,323,13 55.82 174,181,92 51.74
.......... 8 4
Chinese 15,356 118,348,69 32.98 148,813,23 44.21
........... 2 9
Others 1,646 40,187,090 11.20 13,630,239 4.05
............
1947
:
Filipino 111,107 208,658,94 65.05 279,583,33 57.03
.......... 6 3
Chinese 13,774 106,156,21 33.56 205,701,13 41.96
........... 8 4
Others 354 8,761,260 .49 4,927,168 1.01
...........
1948 (Census
: )
 Filipino 113,631 213,342,26 67.30 467,161,66 60.51
.......... 4 7
Chinese 12,087 93,155,459 29.38 294,894,22 38.20
.......... 7
Others 422 10,514,675 3.32 9,995,402 1.29
..........
1949
:
Filipino 113,659 213,451,60 60.89 462,532,90 53.47
.......... 2 1
Chinese 16,248 125,223,33 35.72 392,414,87 45.36
.......... 6 5
Others 486 12,056,365 3.39 10,078,364 1.17
..........
1951
:
Filipino 119,352 224,053,62 61.09 466,058,05 53.07
......... 0 2
Chinese 17,429 134,325,30 36.60 404,481,38 46.06
.......... 3 4
Others 347 8,614,025 2.31 7,645,327 87
..........

AVERAGE
ASSETS AND GROSS SALES PER ESTABLISHMENT

Item Gross
Year and Retailer's
Assets Sales
Nationality
(Pesos) (Pesos)

1941:

Filipino 1,878 1,633

.............................................

Chinese 7,707 9,691

..............................................

Others 24,415 8,281

...............................................

1947:
 Filipino 1,878 2,516
.............................................

Chinese 7,707 14,934

...........................................

Others 24,749 13,919

..............................................

1948: (Census)

Filipino 1,878 4,111

.............................................

Chinese 7,707 24,398

.............................................

Others 24,916 23,686

..............................................

1949:

Filipino 1,878 4,069

.............................................

Chinese 7,707 24,152

..............................................

Others 24,807 20,737

..............................................

1951:

Filipino 1,877 3,905

.............................................

Chinese 7,707 33,207

.............................................

Others 24,824 22,033

...............................................

(Estimated Assets and Gross Sales of Retail Establishments, By Year and Nationality of
Owners, Benchmark: 1948 Census, issued by the Bureau of Census and Statistics,
Department of Commerce and Industry; pp. 18-19 of Answer.)

The above statistics do not include corporations and partnerships, while the figures on Filipino
establishments already include mere market vendors, whose capital is necessarily small..
The above figures reveal that in percentage distribution of assests and gross sales, alien
participation has steadily increased during the years. It is true, of course, that Filipinos have the
edge in the number of retailers, but aliens more than make up for the numerical gap through their
assests and gross sales which average between six and seven times those of the very many
Filipino retailers. Numbers in retailers, here, do not imply superiority; the alien invests more
capital, buys and sells six to seven times more, and gains much more. The same official report,
pointing out to the known predominance of foreign elements in the retail trade, remarks that the
Filipino retailers were largely engaged in minor retailer enterprises. As observed by respondents,
the native investment is thinly spread, and the Filipino retailer is practically helpless in matters of
capital, credit, price and supply.

d. Alien control and threat, subject of apprehension in Constitutional convention.

It is this domination and control, which we believe has been sufficiently shown to exist, that is
the legislature's target in the enactment of the disputed nationalization would never have been
adopted. The framers of our Constitution also believed in the existence of this alien dominance
and control when they approved a resolution categorically declaring among other things, that "it
is the sense of the Convention that the public interest requires the nationalization of the retail
trade; . . . ." (II Aruego, The Framing of the Philippine Constitution, 662-663, quoted on page 67
of Petitioner.) That was twenty-two years ago; and the events since then have not been either
pleasant or comforting. Dean Sinco of the University of the Philippines College of Law,
commenting on the patrimony clause of the Preamble opines that the fathers of our Constitution
were merely translating the general preoccupation of Filipinos "of the dangers from alien
interests that had already brought under their control the commercial and other economic
activities of the country" (Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern
of the members of the constitutional convention for the economic life of the citizens, in
connection with the nationalistic provisions of the Constitution, he says:

But there has been a general feeling that alien dominance over the economic life of the
country is not desirable and that if such a situation should remain, political independence
alone is no guarantee to national stability and strength. Filipino private capital is not big
enough to wrest from alien hands the control of the national economy. Moreover, it is but
of recent formation and hence, largely inexperienced, timid and hesitant. Under such
conditions, the government as the instrumentality of the national will, has to step in and
assume the initiative, if not the leadership, in the struggle for the economic freedom of
the nation in somewhat the same way that it did in the crusade for political freedom. Thus
. . . it (the Constitution) envisages an organized movement for the protection of the nation
not only against the possibilities of armed invasion but also against its economic
subjugation by alien interests in the economic field. (Phil. Political Law by Sinco, 10th
ed., p. 476.)

Belief in the existence of alien control and predominance is felt in other quarters. Filipino
businessmen, manufacturers and producers believe so; they fear the dangers coming from alien
control, and they express sentiments of economic independence. Witness thereto is Resolution
No. 1, approved on July 18, 1953, of the Fifth National convention of Filipino Businessmen, and
a similar resolution, approved on March 20, 1954, of the Second National Convention of
Manufacturers and Producers. The man in the street also believes, and fears, alien predominance
and control; so our newspapers, which have editorially pointed out not only to control but to
alien stranglehold. We, therefore, find alien domination and control to be a fact, a reality proved
by official statistics, and felt by all the sections and groups that compose the Filipino community.

e. Dangers of alien control and dominance in retail.

But the dangers arising from alien participation in the retail trade does not seem to lie in the
predominance alone; there is a prevailing feeling that such predominance may truly endanger the
national interest. With ample capital, unity of purpose and action and thorough organization,
alien retailers and merchants can act in such complete unison and concert on such vital matters as
the fixing of prices, the determination of the amount of goods or articles to be made available in
the market, and even the choice of the goods or articles they would or would not patronize or
distribute, that fears of dislocation of the national economy and of the complete subservience of
national economy and of the consuming public are not entirely unfounded. Nationals, producers
and consumers alike can be placed completely at their mercy. This is easily illustrated. Suppose
an article of daily use is desired to be prescribed by the aliens, because the producer or importer
does not offer them sufficient profits, or because a new competing article offers bigger profits for
its introduction. All that aliens would do is to agree to refuse to sell the first article, eliminating it
from their stocks, offering the new one as a substitute. Hence, the producers or importers of the
prescribed article, or its consumers, find the article suddenly out of the prescribed article, or its
consumers, find the article suddenly out of circulation. Freedom of trade is thus curtailed and
free enterprise correspondingly suppressed.

We can even go farther than theoretical illustrations to show the pernicious influences of alien
domination. Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact
within judicial notice, which courts of justice may not properly overlook or ignore in the interests
of truth and justice, that there exists a general feeling on the part of the public that alien
participation in the retail trade has been attended by a pernicious and intolerable practices, the
mention of a few of which would suffice for our purposes; that at some time or other they have
cornered the market of essential commodities, like corn and rice, creating artificial scarcities to
justify and enhance profits to unreasonable proportions; that they have hoarded essential foods to
the inconvenience and prejudice of the consuming public, so much so that the Government has
had to establish the National Rice and Corn Corporation to save the public from their continuous
hoarding practices and tendencies; that they have violated price control laws, especially on foods
and essential commodities, such that the legislature had to enact a law (Sec. 9, Republic Act No.
1168), authorizing their immediate and automatic deportation for price control convictions; that
they have secret combinations among themselves to control prices, cheating the operation of the
law of supply and demand; that they have connived to boycott honest merchants and traders who
would not cater or yield to their demands, in unlawful restraint of freedom of trade and
enterprise. They are believed by the public to have evaded tax laws, smuggled goods and money
into and out of the land, violated import and export prohibitions, control laws and the like, in
derision and contempt of lawful authority. It is also believed that they have engaged in
corrupting public officials with fabulous bribes, indirectly causing the prevalence of graft and
corruption in the Government. As a matter of fact appeals to unscrupulous aliens have been made
both by the Government and by their own lawful diplomatic representatives, action which
impliedly admits a prevailing feeling about the existence of many of the above practices.

The circumstances above set forth create well founded fears that worse things may come in the
future. The present dominance of the alien retailer, especially in the big centers of population,
therefore, becomes a potential source of danger on occasions of war or other calamity. We do not
have here in this country isolated groups of harmless aliens retailing goods among nationals;
what we have are well organized and powerful groups that dominate the distribution of goods
and commodities in the communities and big centers of population. They owe no allegiance or
loyalty to the State, and the State cannot rely upon them in times of crisis or emergency. While
the national holds his life, his person and his property subject to the needs of his country, the
alien may even become the potential enemy of the State.

f. Law enacted in interest of national economic survival and security.

We are fully satisfied upon a consideration of all the facts and circumstances that the disputed
law is not the product of racial hostility, prejudice or discrimination, but the expression of the
legitimate desire and determination of the people, thru their authorized representatives, to free
the nation from the economic situation that has unfortunately been saddled upon it rightly or
wrongly, to its disadvantage. The law is clearly in the interest of the public, nay of the national
security itself, and indisputably falls within the scope of police power, thru which and by which
the State insures its existence and security and the supreme welfare of its citizens.

VI. The Equal Protection Limitation

a. Objections to alien participation in retail trade. The next question that now poses solution
is, Does the law deny the equal protection of the laws? As pointed out above, the mere fact of
alienage is the root and cause of the distinction between the alien and the national as a trader.
The alien resident owes allegiance to the country of his birth or his adopted country; his stay here
is for personal convenience; he is attracted by the lure of gain and profit. His aim or purpose of
stay, we admit, is neither illegitimate nor immoral, but he is naturally lacking in that spirit of
loyalty and enthusiasm for this country where he temporarily stays and makes his living, or of
that spirit of regard, sympathy and consideration for his Filipino customers as would prevent him
from taking advantage of their weakness and exploiting them. The faster he makes his pile, the
earlier can the alien go back to his beloved country and his beloved kin and countrymen. The
experience of the country is that the alien retailer has shown such utter disregard for his
customers and the people on whom he makes his profit, that it has been found necessary to adopt
the legislation, radical as it may seem.

Another objection to the alien retailer in this country is that he never really makes a genuine
contribution to national income and wealth. He undoubtedly contributes to general distribution,
but the gains and profits he makes are not invested in industries that would help the country's
economy and increase national wealth. The alien's interest in this country being merely transient
and temporary, it would indeed be ill-advised to continue entrusting the very important function
of retail distribution to his hands.
The practices resorted to by aliens in the control of distribution, as already pointed out above,
their secret manipulations of stocks of commodities and prices, their utter disregard of the
welfare of their customers and of the ultimate happiness of the people of the nation of which they
are mere guests, which practices, manipulations and disregard do not attend the exercise of the
trade by the nationals, show the existence of real and actual, positive and fundamental
differences between an alien and a national which fully justify the legislative classification
adopted in the retail trade measure. These differences are certainly a valid reason for the State to
prefer the national over the alien in the retail trade. We would be doing violence to fact and
reality were we to hold that no reason or ground for a legitimate distinction can be found
between one and the other.

b. Difference in alien aims and purposes sufficient basis for distinction.

The above objectionable characteristics of the exercise of the retail trade by the aliens, which are
actual and real, furnish sufficient grounds for legislative classification of retail traders into
nationals and aliens. Some may disagree with the wisdom of the legislature's classification. To
this we answer, that this is the prerogative of the law-making power. Since the Court finds that
the classification is actual, real and reasonable, and all persons of one class are treated alike, and
as it cannot be said that the classification is patently unreasonable and unfounded, it is in duty
bound to declare that the legislature acted within its legitimate prerogative and it can not declare
that the act transcends the limit of equal protection established by the Constitution.

Broadly speaking, the power of the legislature to make distinctions and classifications among
persons is not curtailed or denied by the equal protection of the laws clause. The legislative
power admits of a wide scope of discretion, and a law can be violative of the constitutional
limitation only when the classification is without reasonable basis. In addition to the authorities
we have earlier cited, we can also refer to the case of Linsey vs. Natural Carbonic Fas Co.
(1911), 55 L. ed., 369, which clearly and succinctly defined the application of equal protection
clause to a law sought to be voided as contrary thereto:

. . . . "1. The equal protection clause of the Fourteenth Amendment does not take from the
state the power to classify in the adoption of police laws, but admits of the exercise of the
wide scope of discretion in that regard, and avoids what is done only when it is without
any reasonable basis, and therefore is purely arbitrary. 2. A classification having some
reasonable basis does not offend against that clause merely because it is not made with
mathematical nicety, or because in practice it results in some inequality. 3. When the
classification in such a law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of facts at the time the law was
enacted must be assumed. 4. One who assails the classification in such a law must carry
the burden of showing that it does not rest upon any reasonable basis but is essentially
arbitrary."

c. Authorities recognizing citizenship as basis for classification.

The question as to whether or not citizenship is a legal and valid ground for classification has
already been affirmatively decided in this jurisdiction as well as in various courts in the United
States. In the case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act No.
2761 of the Philippine Legislature was in issue, because of a condition therein limiting the
ownership of vessels engaged in coastwise trade to corporations formed by citizens of the
Philippine Islands or the United States, thus denying the right to aliens, it was held that the
Philippine Legislature did not violate the equal protection clause of the Philippine Bill of Rights.
The legislature in enacting the law had as ultimate purpose the encouragement of Philippine
shipbuilding and the safety for these Islands from foreign interlopers. We held that this was a
valid exercise of the police power, and all presumptions are in favor of its constitutionality. In
substance, we held that the limitation of domestic ownership of vessels engaged in coastwise
trade to citizens of the Philippines does not violate the equal protection of the law and due
process or law clauses of the Philippine Bill of Rights. In rendering said decision we quoted with
approval the concurring opinion of Justice Johnson in the case of Gibbons vs. Ogden, 9 Wheat.,
I, as follows:

"Licensing acts, in fact, in legislation, are universally restraining acts; as, for example,
acts licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance,
is distinctly of that character, and forms part of an extensive system, the object of which
is to encourage American shipping, and place them on an equal footing with the shipping
of other nations. Almost every commercial nation reserves to its own subjects a
monopoly of its coasting trade; and a countervailing privilege in favor of American
shipping is contemplated, in the whole legislation of the United States on this subject. It
is not to give the vessel an American character, that the license is granted; that effect has
been correctly attributed to the act of her enrollment. But it is to confer on her American
privileges, as contra distinguished from foreign; and to preserve the Government from
fraud by foreigners; in surreptitiously intruding themselves into the American
commercial marine, as well as frauds upon the revenue in the trade coastwise, that this
whole system is projected."

The rule in general is as follows:

Aliens are under no special constitutional protection which forbids a classification

otherwise justified simply because the limitation of the class falls along the lines of
nationality. That would be requiring a higher degree of protection for aliens as a class
than for similar classes than for similar classes of American citizens. Broadly speaking,
the difference in status between citizens and aliens constitutes a basis for reasonable
classification in the exercise of police power. (2 Am., Jur. 468-469.)

In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the licensing of

hawkers and peddlers, which provided that no one can obtain a license unless he is, or has
declared his intention, to become a citizen of the United States, was held valid, for the following
reason: It may seem wise to the legislature to limit the business of those who are supposed to
have regard for the welfare, good order and happiness of the community, and the court cannot
question this judgment and conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a
statute which prevented certain persons, among them aliens, from engaging in the traffic of
liquors, was found not to be the result of race hatred, or in hospitality, or a deliberate purpose to
discriminate, but was based on the belief that an alien cannot be sufficiently acquainted with "our
institutions and our life as to enable him to appreciate the relation of this particular business to
our entire social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach,
274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court had under consideration an
ordinance of the city of Cincinnati prohibiting the issuance of licenses (pools and billiard rooms)
to aliens. It held that plainly irrational discrimination against aliens is prohibited, but it does not
follow that alien race and allegiance may not bear in some instances such a relation to a
legitimate object of legislation as to be made the basis of permitted classification, and that it
could not state that the legislation is clearly wrong; and that latitude must be allowed for the
legislative appraisement of local conditions and for the legislative choice of methods for
controlling an apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio, 1919) is a
parallel case to the one at bar. In Asakura vs. City of Seattle, 210 P. 30 (Washington, 1922), the
business of pawn brooking was considered as having tendencies injuring public interest, and
limiting it to citizens is within the scope of police power. A similar statute denying aliens the
right to engage in auctioneering was also sustained in Wright vs. May, L.R.A., 1915 P. 151
(Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said
that aliens are judicially known to have different interests, knowledge, attitude, psychology and
loyalty, hence the prohibitions of issuance of licenses to them for the business of pawnbroker,
pool, billiard, card room, dance hall, is not an infringement of constitutional rights. In Templar
vs. Michigan State Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law prohibiting the
licensing of aliens as barbers was held void, but the reason for the decision was the court's
findings that the exercise of the business by the aliens does not in any way affect the morals, the
health, or even the convenience of the community. In Takahashi vs. Fish and Game Commission,
92 L. ed. 1479 (1947), a California statute banning the issuance of commercial fishing licenses to
person ineligible to citizenship was held void, because the law conflicts with Federal power over
immigration, and because there is no public interest in the mere claim of ownership of the waters
and the fish in them, so there was no adequate justification for the discrimination. It further
added that the law was the outgrowth of antagonism toward the persons of Japanese ancestry.
However, two Justices dissented on the theory that fishing rights have been treated traditionally
as natural resources. In Fraser vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a
state law which imposed a tax on every employer of foreign-born unnaturalized male persons
over 21 years of age, was declared void because the court found that there was no reason for the
classification and the tax was an arbitrary deduction from the daily wage of an employee.

d. Authorities contra explained.

It is true that some decisions of the Federal court and of the State courts in the United States hold
that the distinction between aliens and citizens is not a valid ground for classification. But in this
decision the laws declared invalid were found to be either arbitrary, unreasonable or capricious,
or were the result or product of racial antagonism and hostility, and there was no question of
public interest involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the
United States Supreme Court declared invalid a Philippine law making unlawful the keeping of
books of account in any language other than English, Spanish or any other local dialect, but the
main reasons for the decisions are: (1) that if Chinese were driven out of business there would be
no other system of distribution, and (2) that the Chinese would fall prey to all kinds of fraud,
because they would be deprived of their right to be advised of their business and to direct its
conduct. The real reason for the decision, therefore, is the court's belief that no public benefit
would be derived from the operations of the law and on the other hand it would deprive Chinese
of something indispensable for carrying on their business. In Yick Wo vs. Hopkins, 30 L. ed 220
(1885) an ordinance conferring powers on officials to withhold consent in the operation of
laundries both as to persons and place, was declared invalid, but the court said that the power
granted was arbitrary, that there was no reason for the discrimination which attended the
administration and implementation of the law, and that the motive thereof was mere racial
hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a law prohibiting aliens to engage
as hawkers and peddlers was declared void, because the discrimination bore no reasonable and
just relation to the act in respect to which the classification was proposed.

The case at bar is radically different, and the facts make them so. As we already have said, aliens
do not naturally possess the sympathetic consideration and regard for the customers with whom
they come in daily contact, nor the patriotic desire to help bolster the nation's economy, except in
so far as it enhances their profit, nor the loyalty and allegiance which the national owes to the
land. These limitations on the qualifications of the aliens have been shown on many occasions
and instances, especially in times of crisis and emergency. We can do no better than borrow the
language of Anton vs. Van Winkle, 297 F. 340, 342, to drive home the reality and significance of
the distinction between the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this country are without
the intimate knowledge of our laws, customs, and usages that our own people have. So it
is likewise known that certain classes of aliens are of different psychology from our
fellow countrymen. Furthermore, it is natural and reasonable to suppose that the foreign
born, whose allegiance is first to their own country, and whose ideals of governmental
environment and control have been engendered and formed under entirely different
regimes and political systems, have not the same inspiration for the public weal, nor are
they as well disposed toward the United States, as those who by citizenship, are a part of
the government itself. Further enlargement, is unnecessary. I have said enough so that
obviously it cannot be affirmed with absolute confidence that the Legislature was without
plausible reason for making the classification, and therefore appropriate discriminations
against aliens as it relates to the subject of legislation. . . . .

VII. The Due Process of Law Limitation.

a. Reasonability, the test of the limitation; determination by legislature decisive.

We now come to due process as a limitation on the exercise of the police power. It has been
stated by the highest authority in the United States that:

. . . . And the guaranty of due process, as has often been held, demands only that the law
shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a
real and substantial relation to the subject sought to be attained. . . . .

xxx xxx xxx

 So far as the requirement of due process is concerned and in the absence of other
constitutional restriction a state is free to adopt whatever economic policy may
reasonably be deemed to promote public welfare, and to enforce that policy by legislation
adapted to its purpose. The courts are without authority either to declare such policy, or,
when it is declared by the legislature, to override it. If the laws passed are seen to have a
reasonable relation to a proper legislative purpose, and are neither arbitrary nor
discriminatory, the requirements of due process are satisfied, and judicial determination
to that effect renders a court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940,
950, 957.)

Another authority states the principle thus:

. . . . Too much significance cannot be given to the word "reasonable" in considering the
scope of the police power in a constitutional sense, for the test used to determine the
constitutionality of the means employed by the legislature is to inquire whether the
restriction it imposes on rights secured to individuals by the Bill of Rights are
unreasonable, and not whether it imposes any restrictions on such rights. . . .

xxx xxx xxx

. . . . A statute to be within this power must also be reasonable in its operation upon the
persons whom it affects, must not be for the annoyance of a particular class, and must not
be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)

In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of the public, it must
appear, first, that the interests of the public generally, as distinguished from those of a
particular class, require such interference; and second, that the means are reasonably
necessary for the accomplishment of the purpose, and not unduly oppressive upon
individuals. . . .

Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this test of
constitutionality:

In determining whether a given act of the Legislature, passed in the exercise of the police
power to regulate the operation of a business, is or is not constitutional, one of the first
questions to be considered by the court is whether the power as exercised has a sufficient
foundation in reason in connection with the matter involved, or is an arbitrary,
oppressive, and capricious use of that power, without substantial relation to the health,
safety, morals, comfort, and general welfare of the public.

b. Petitioner's argument considered.

Petitioner's main argument is that retail is a common, ordinary occupation, one of those
privileges long ago recognized as essential to the orderly pursuant of happiness by free men; that
it is a gainful and honest occupation and therefore beyond the power of the legislature to prohibit
and penalized. This arguments overlooks fact and reality and rests on an incorrect assumption
and premise, i.e., that in this country where the occupation is engaged in by petitioner, it has
been so engaged by him, by the alien in an honest creditable and unimpeachable manner, without
harm or injury to the citizens and without ultimate danger to their economic peace, tranquility
and welfare. But the Legislature has found, as we have also found and indicated, that the
privilege has been so grossly abused by the alien, thru the illegitimate use of pernicious designs
and practices, that he now enjoys a monopolistic control of the occupation and threatens a deadly
stranglehold on the nation's economy endangering the national security in times of crisis and
emergency.

The real question at issue, therefore, is not that posed by petitioner, which overlooks and ignores
the facts and circumstances, but this, Is the exclusion in the future of aliens from the retail trade
unreasonable. Arbitrary capricious, taking into account the illegitimate and pernicious form and
manner in which the aliens have heretofore engaged therein? As thus correctly stated the answer
is clear. The law in question is deemed absolutely necessary to bring about the desired legislative
objective, i.e., to free national economy from alien control and dominance. It is not necessarily
unreasonable because it affects private rights and privileges (11 Am. Jur. pp. 1080-1081.) The
test of reasonableness of a law is the appropriateness or adequacy under all circumstances of the
means adopted to carry out its purpose into effect (Id.) Judged by this test, disputed legislation,
which is not merely reasonable but actually necessary, must be considered not to have infringed
the constitutional limitation of reasonableness.

The necessity of the law in question is explained in the explanatory note that accompanied the
bill, which later was enacted into law:

This bill proposes to regulate the retail business. Its purpose is to prevent persons who are
not citizens of the Philippines from having a strangle hold upon our economic life. If the
persons who control this vital artery of our economic life are the ones who owe no
allegiance to this Republic, who have no profound devotion to our free institutions, and
who have no permanent stake in our people's welfare, we are not really the masters of our
destiny. All aspects of our life, even our national security, will be at the mercy of other
people.

In seeking to accomplish the foregoing purpose, we do not propose to deprive persons

who are not citizens of the Philippines of their means of livelihood. While this bill seeks
to take away from the hands of persons who are not citizens of the Philippines a power
that can be wielded to paralyze all aspects of our national life and endanger our national
security it respects existing rights.

The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then economic independence is

none the less legitimate. Freedom and liberty are not real and positive if the people are subject to
the economic control and domination of others, especially if not of their own race or country.
The removal and eradication of the shackles of foreign economic control and domination, is one
of the noblest motives that a national legislature may pursue. It is impossible to conceive that
legislation that seeks to bring it about can infringe the constitutional limitation of due process.
The attainment of a legitimate aspiration of a people can never be beyond the limits of legislative
authority.

c. Law expressly held by Constitutional Convention to be within the sphere of legislative action.

The framers of the Constitution could not have intended to impose the constitutional restrictions
of due process on the attainment of such a noble motive as freedom from economic control and
domination, thru the exercise of the police power. The fathers of the Constitution must have
given to the legislature full authority and power to enact legislation that would promote the
supreme happiness of the people, their freedom and liberty. On the precise issue now before us,
they expressly made their voice clear; they adopted a resolution expressing their belief that the
legislation in question is within the scope of the legislative power. Thus they declared the their
Resolution:

That it is the sense of the Convention that the public interest requires the nationalization
of retail trade; but it abstain from approving the amendment introduced by the Delegate
for Manila, Mr. Araneta, and others on this matter because it is convinced that the
National Assembly is authorized to promulgate a law which limits to Filipino and
American citizens the privilege to engage in the retail trade. (11 Aruego, The Framing of
the Philippine Constitution, quoted on pages 66 and 67 of the Memorandum for the
Petitioner.)

It would do well to refer to the nationalistic tendency manifested in various provisions of the
Constitution. Thus in the preamble, a principle objective is the conservation of the patrimony of
the nation and as corollary the provision limiting to citizens of the Philippines the exploitation,
development and utilization of its natural resources. And in Section 8 of Article XIV, it is
provided that "no franchise, certificate, or any other form of authorization for the operation of the
public utility shall be granted except to citizens of the Philippines." The nationalization of the
retail trade is only a continuance of the nationalistic protective policy laid down as a primary
objective of the Constitution. Can it be said that a law imbued with the same purpose and spirit
underlying many of the provisions of the Constitution is unreasonable, invalid and
unconstitutional?

The seriousness of the Legislature's concern for the plight of the nationals as manifested in the
approval of the radical measures is, therefore, fully justified. It would have been recreant to its
duties towards the country and its people would it view the sorry plight of the nationals with the
complacency and refuse or neglect to adopt a remedy commensurate with the demands of public
interest and national survival. As the repository of the sovereign power of legislation, the
Legislature was in duty bound to face the problem and meet, through adequate measures, the
danger and threat that alien domination of retail trade poses to national economy.

d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals how tolerant, how reasonable
the Legislature has been. The law is made prospective and recognizes the right and privilege of
those already engaged in the occupation to continue therein during the rest of their lives; and
similar recognition of the right to continue is accorded associations of aliens. The right or
privilege is denied to those only upon conviction of certain offenses. In the deliberations of the
Court on this case, attention was called to the fact that the privilege should not have been denied
to children and heirs of aliens now engaged in the retail trade. Such provision would defeat the
law itself, its aims and purposes. Beside, the exercise of legislative discretion is not subject to
judicial review. It is well settled that the Court will not inquire into the motives of the
Legislature, nor pass upon general matters of legislative judgment. The Legislature is primarily
the judge of the necessity of an enactment or of any of its provisions, and every presumption is in
favor of its validity, and though the Court may hold views inconsistent with the wisdom of the
law, it may not annul the legislation if not palpably in excess of the legislative power.
Furthermore, the test of the validity of a law attacked as a violation of due process, is not its
reasonableness, but its unreasonableness, and we find the provisions are not unreasonable. These
principles also answer various other arguments raised against the law, some of which are: that
the law does not promote general welfare; that thousands of aliens would be thrown out of
employment; that prices will increase because of the elimination of competition; that there is no
need for the legislation; that adequate replacement is problematical; that there may be general
breakdown; that there would be repercussions from foreigners; etc. Many of these arguments are
directed against the supposed wisdom of the law which lies solely within the legislative
prerogative; they do not import invalidity.

VIII. Alleged defect in the title of the law

A subordinate ground or reason for the alleged invalidity of the law is the claim that the title
thereof is misleading or deceptive, as it conceals the real purpose of the bill which is to
nationalize the retail business and prohibit aliens from engaging therein. The constitutional
provision which is claimed to be violated in Section 21 (1) of Article VI, which reads:

No bill which may be enacted in the law shall embrace more than one subject which shall
be expressed in the title of the bill.

What the above provision prohibits is duplicity, that is, if its title completely fails to appraise the
legislators or the public of the nature, scope and consequences of the law or its operation (I
Sutherland, Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the title and
the provisions of the bill fails to show the presence of duplicity. It is true that the term "regulate"
does not and may not readily and at first glance convey the idea of "nationalization" and
"prohibition", which terms express the two main purposes and objectives of the law. But
"regulate" is a broader term than either prohibition or nationalization. Both of these have always
been included within the term regulation.

Under the title of an act to "regulate", the sale of intoxicating liquors, the Legislature may
prohibit the sale of intoxicating liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in
page 41 of Answer.)
 Within the meaning of the Constitution requiring that the subject of every act of the
Legislature shall be stated in the tale, the title to regulate the sale of intoxicating liquors,
etc." sufficiently expresses the subject of an act prohibiting the sale of such liquors to
minors and to persons in the habit of getting intoxicated; such matters being properly
included within the subject of regulating the sale. (Williams vs. State, 48 Ind. 306, 308,
quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies some degree of restraint
and prohibition of acts usually done in connection with the thing to be regulated. While
word regulate does not ordinarily convey meaning of prohibit, there is no absolute reason
why it should not have such meaning when used in delegating police power in connection
with a thing the best or only efficacious regulation of which involves suppression. (State
vs. Morton, 162 So. 718, 182 La. 887, quoted in p. 42 of Answer.)

The general rule is for the use of general terms in the title of a bill; it has also been said that the
title need not be an index to the entire contents of the law (I Sutherland, Statutory Construction,
See. 4803, p. 345.) The above rule was followed the title of the Act in question adopted the more
general term "regulate" instead of "nationalize" or "prohibit". Furthermore, the law also contains
other rules for the regulation of the retail trade which may not be included in the terms
"nationalization" or "prohibition"; so were the title changed from "regulate" to "nationalize" or
"prohibit", there would have been many provisions not falling within the scope of the title which
would have made the Act invalid. The use of the term "regulate", therefore, is in accord with the
principle governing the drafting of statutes, under which a simple or general term should be
adopted in the title, which would include all other provisions found in the body of the Act.

One purpose of the constitutional directive that the subject of a bill should be embraced in its
title is to apprise the legislators of the purposes, the nature and scope of its provisions, and
prevent the enactment into law of matters which have received the notice, action and study of the
legislators or of the public. In the case at bar it cannot be claimed that the legislators have been
appraised of the nature of the law, especially the nationalization and the prohibition provisions.
The legislators took active interest in the discussion of the law, and a great many of the persons
affected by the prohibitions in the law conducted a campaign against its approval. It cannot be
claimed, therefore, that the reasons for declaring the law invalid ever existed. The objection must
therefore, be overruled.

IX. Alleged violation of international treaties and obligations

Another subordinate argument against the validity of the law is the supposed violation thereby of
the Charter of the United Nations and of the Declaration of the Human Rights adopted by the
United Nations General Assembly. We find no merit in the Nations Charter imposes no strict or
legal obligations regarding the rights and freedom of their subjects (Hans Kelsen, The Law of the
United Nations, 1951 ed. pp. 29-32), and the Declaration of Human Rights contains nothing
more than a mere recommendation or a common standard of achievement for all peoples and all
nations (Id. p. 39.) That such is the import of the United Nations Charter aid of the Declaration
of Human Rights can be inferred the fact that members of the United Nations Organizations,
such as Norway and Denmark, prohibit foreigners from engaging in retail trade, and in most
nations of the world laws against foreigners engaged in domestic trade are adopted.

The Treaty of Amity between the Republic of the Philippines and the Republic of China of April
18, 1947 is also claimed to be violated by the law in question. All that the treaty guarantees is
equality of treatment to the Chinese nationals "upon the same terms as the nationals of any other
country." But the nationals of China are not discriminating against because nationals of all other
countries, except those of the United States, who are granted special rights by the Constitution,
are all prohibited from engaging in the retail trade. But even supposing that the law infringes
upon the said treaty, the treaty is always subject to qualification or amendment by a subsequent
law (U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never curtail or restrict the
scope of the police power of the State (plaston vs. Pennsylvania, 58 L. ed. 539.)

X. Conclusion

Resuming what we have set forth above we hold that the disputed law was enacted to remedy a
real actual threat and danger to national economy posed by alien dominance and control of the
retail business and free citizens and country from dominance and control; that the enactment
clearly falls within the scope of the police power of the State, thru which and by which it protects
its own personality and insures its security and future; that the law does not violate the equal
protection clause of the Constitution because sufficient grounds exist for the distinction between
alien and citizen in the exercise of the occupation regulated, nor the due process of law clause,
because the law is prospective in operation and recognizes the privilege of aliens already
engaged in the occupation and reasonably protects their privilege; that the wisdom and efficacy
of the law to carry out its objectives appear to us to be plainly evident as a matter of fact it
seems not only appropriate but actually necessary and that in any case such matter falls within
the prerogative of the Legislature, with whose power and discretion the Judicial department of
the Government may not interfere; that the provisions of the law are clearly embraced in the title,
and this suffers from no duplicity and has not misled the legislators or the segment of the
population affected; and that it cannot be said to be void for supposed conflict with treaty
obligations because no treaty has actually been entered into on the subject and the police power
may not be curtailed or surrendered by any treaty or any other conventional agreement.

Some members of the Court are of the opinion that the radical effects of the law could have been
made less harsh in its impact on the aliens. Thus it is stated that the more time should have been
given in the law for the liquidation of existing businesses when the time comes for them to close.
Our legal duty, however, is merely to determine if the law falls within the scope of legislative
authority and does not transcend the limitations of due process and equal protection guaranteed
in the Constitution. Remedies against the harshness of the law should be addressed to the
Legislature; they are beyond our power and jurisdiction.

The petition is hereby denied, with costs against petitioner.

Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia and
Felix, JJ., concur.
Separate Opinions

PADILLA, J., concurring and dissenting:

I agree to the proposition, principle or rule that courts may not inquire into the wisdom of an the
Act passed by the Congress and duly approved by the President of the Republic. But the rule
does not preclude courts from inquiring and determining whether the Act offends against a
provision or provisions of the Constitution. I am satisfied that the Act assailed as violative of the
due process of law and the equal protection of the laws clauses of the Constitution does not
infringe upon them, insofar as it affects associations, partnership or corporations, the capital of
which is not wholly owned by the citizens of the Philippines, and aliens, who are not and have
not been engaged in the retail business. I am, however, unable to persuade myself that it does not
violate said clauses insofar as the Act applies to associations and partnerships referred to in the
Act and to aliens, who are and have heretofore been engaged in said business. When they did
engage in the retail business there was no prohibition on or against them to engage in it. They
assumed and believed in good faith they were entitled to engaged in the business. The Act allows
aliens to continue in business until their death or voluntary retirement from the business or
forfeiture of their license; and corporations, associations or partnership, the capital of which is
not wholly owned by the citizens of the Philippines to continue in the business for a period of ten
years from the date of the approval of the Act (19 June 1954) or until the expiry of term of the
existence of the association or partnership or corporation, whichever event comes first. The
prohibition on corporations, the capital of which is not wholly owned by citizens of the
Philippines, to engage in the retail business for a period of more than ten years from the date of
the approval of the Act or beyond the term of their corporate existence, whichever event comes
first, is valid and lawful, because the continuance of the existence of such corporations is subject
to whatever the Congress may impose reasonably upon them by subsequent legislation.1 But the
prohibition to engage in the retail business by associations and partnerships, the capital of which
is not wholly owned by citizen of the Philippines, after ten years from the date of the approval of
the Act, even before the end of the term of their existence as agreed upon by the associates and
partners, and by alien heirs to whom the retail business is transmitted by the death of an alien
engaged in the business, or by his executor or administrator, amounts to a deprivation of their
property without due process of law. To my mind, the ten-year period from the date of the
approval of the Act or until the expiration of the term of the existence of the association and
partnership, whichever event comes first, and the six-month period granted to alien heirs of a
deceased alien, his executor or administrator, to liquidate the business, do not cure the defect of
the law, because the effect of the prohibition is to compel them to sell or dispose of their
business. The price obtainable at such forced sale of the business would be inadequate to
reimburse and compensate the associates or partners of the associations or partnership, and the
alien heirs of a deceased alien, engaged in the retail business for the capital invested in it. The
stock of merchandise bought and sold at retail does not alone constitute the business. The
goodwill that the association, partnership and the alien had built up during a long period of
effort, patience and perseverance forms part of such business. The constitutional provisions that
no person shall be deprived of his property without due process of law2 and that no person shall
be denied the equal protection of the laws3 would have no meaning as applied to associations or
partnership and alien heirs of an alien engaged in the retail business if they were to be compelled
to sell or dispose of their business within ten years from the date of the approval of the Act and
before the end of the term of the existence of the associations and partnership as agreed upon by
the associations and partners and within six months after the death of their predecessor-in-
interest.

The authors of the Constitution were vigilant, careful and zealous in the safeguard of the
ownership of private agricultural lands which together with the lands of the public domain
constitute the priceless patrimony and mainstay of the nation; yet, they did not deem it wise and
prudent to deprive aliens and their heirs of such lands.4

For these reasons, I am of the opinion that section 1 of the Act, insofar as it compels associations
and partnership referred to therein to wind up their retail business within ten years from the date
of the approval of the Act even before the expiry of the term of their existence as agreed upon by
the associates and partners and section 3 of the Act, insofar as it compels the aliens engaged in
the retail business in his lifetime his executor or administrator, to liquidate the business, are
invalid, for they violate the due process of law and the equal protection of the laws clauses of the
Constitution.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-59234 September 30, 1982

TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO CABIGAO and

ACE TRANSPORTATION CORPORATION, petitioners,
vs.
THE BOARD OF TRANSPORTATION and THE DIRECTOR OF THE BUREAU OF
LAND TRANSPORTATION, respondents.

MELENCIO-HERRERA, J.:

This Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and
Temporary Restraining Order" filed by the Taxicab Operators of Metro Manila, Inc.,
Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of
Memorandum Circular No. 77-42, dated October 10, 1977, of the Board of
Transportation, and Memorandum Circular No. 52, dated August 15, 1980, of the
Bureau of Land Transportation.

Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation

composed of taxicab operators, who are grantees of Certificates of Public Convenience
to operate taxicabs within the City of Manila and to any other place in Luzon accessible
to vehicular traffic. Petitioners Ace Transportation Corporation and Felicisimo Cabigao
are two of the members of TOMMI, each being an operator and grantee of such
certificate of public convenience.

On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum

Circular No. 77-42 which reads:

SUBJECT: Phasing out and Replacement of

Old and Dilapidated Taxis

WHEREAS, it is the policy of the government to insure that only safe and
comfortable units are used as public conveyances;

WHEREAS, the riding public, particularly in Metro-Manila, has, time and

again, complained against, and condemned, the continued operation of
old and dilapidated taxis;
 WHEREAS, in order that the commuting public may be assured of
comfort, convenience, and safety, a program of phasing out of old and
dilapidated taxis should be adopted;

WHEREAS, after studies and inquiries made by the Board of

Transportation, the latter believes that in six years of operation, a taxi
operator has not only covered the cost of his taxis, but has made
reasonable profit for his investments;

NOW, THEREFORE, pursuant to this policy, the Board hereby declares

that no car beyond six years shall be operated as taxi, and in
implementation of the same hereby promulgates the following rules and
regulations:

1. As of December 31, 1977, all taxis of Model 1971 and earlier are
ordered withdrawn from public service and thereafter may no longer be
registered and operated as taxis. In the registration of cards for 1978, only
taxis of Model 1972 and later shall be accepted for registration and
allowed for operation;

2. As of December 31, 1978, all taxis of Model 1972 are ordered

withdrawn from public service and thereafter may no longer be registered
and operated as taxis. In the registration of cars for 1979, only taxis of
Model 1973 and later shall be accepted for registration and allowed for
operation; and every year thereafter, there shall be a six-year lifetime of
taxi, to wit:

1980 Model 1974

1981 Model 1975, etc.

All taxis of earlier models than those provided above are hereby ordered
withdrawn from public service as of the last day of registration of each
particular year and their respective plates shall be surrendered directly to
the Board of Transportation for subsequent turnover to the Land
Transportation Commission.

For an orderly implementation of this Memorandum Circular, the rules

herein shall immediately be effective in Metro-Manila. Its implementation
outside Metro- Manila shall be carried out only after the project has been
implemented in Metro-Manila and only after the date has been determined
by the Board. 1

Pursuant to the above BOT circular, respondent Director of the Bureau of Land Transportation (BLT)
issued Implementing Circular No. 52, dated August 15, 1980, instructing the Regional Director, the MV
Registrars and other personnel of BLT, all within the National Capitol Region, to implement said Circular,
and formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public
conveyances. To quote said Circular:

Pursuant to BOT Memo-Circular No. 77-42, taxi units with year models over six (6) years
old are now banned from operating as public utilities in Metro Manila. As such the units
involved should be considered as automatically dropped as public utilities and, therefore,
do not require any further dropping order from the BOT.

Henceforth, taxi units within the National Capitol Region having year models over 6 years
old shall be refused registration. The following schedule of phase-out is herewith
prescribed for the guidance of all concerned:

Year Model Automatic Phase-

Out Year

1980

1974 1981

1975 1982

1976 1983

1977

etc. etc.

Strict compliance here is desired. 2

In accordance therewith, cabs of model 1971 were phase-out in registration year 1978; those of model
1972, in 1979; those of model 1973, in 1980; and those of model 1974, in 1981.

On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No. 80-7553, seeking to
nullify MC No. 77-42 or to stop its implementation; to allow the registration and operation in 1981 and
subsequent years of taxicabs of model 1974, as well as those of earlier models which were phased-out,
provided that, at the time of registration, they are roadworthy and fit for operation.

On February 16, 1981, petitioners filed before the BOT a "Manifestation and Urgent Motion", praying for
an early hearing of their petition. The case was heard on February 20, 1981. Petitioners presented
testimonial and documentary evidence, offered the same, and manifested that they would submit
additional documentary proofs. Said proofs were submitted on March 27, 1981 attached to petitioners'
pleading entitled, "Manifestation, Presentation of Additional Evidence and Submission of the Case for
Resolution." 3

On November 28, 1981, petitioners filed before the same Board a "Manifestation and Urgent Motion to
Resolve or Decide Main Petition" praying that the case be resolved or decided not later than December
10, 1981 to enable them, in case of denial, to avail of whatever remedy they may have under the law for
the protection of their interests before their 1975 model cabs are phased-out on January 1, 1982.

Petitioners, through its President, allegedly made personal follow-ups of the case, but was later informed
that the records of the case could not be located.

On December 29, 1981, the present Petition was instituted wherein the following queries were posed for
consideration by this Court:
 A. Did BOT and BLT promulgate the questioned memorandum circulars in accord with
the manner required by Presidential Decree No. 101, thereby safeguarding the
petitioners' constitutional right to procedural due process?

B. Granting, arguendo, that respondents did comply with the procedural requirements
imposed by Presidential Decree No. 101, would the implementation and enforcement of
the assailed memorandum circulars violate the petitioners' constitutional rights to.

(1) Equal protection of the law;

(2) Substantive due process; and

(3) Protection against arbitrary and unreasonable

classification and standard?

On Procedural and Substantive Due Process:

Presidential Decree No. 101 grants to the Board of Transportation the power

4. To fix just and reasonable standards, classification, regulations, practices,

measurements, or service to be furnished, imposed, observed, and followed by operators
of public utility motor vehicles.

Section 2 of said Decree provides procedural guidelines for said agency to follow in the exercise of its
powers:

Sec. 2. Exercise of powers. In the exercise of the powers granted in the preceding
section, the Board shag proceed promptly along the method of legislative inquiry.

Apart from its own investigation and studies, the Board, in its discretion, may require the
cooperation and assistance of the Bureau of Transportation, the Philippine Constabulary,
particularly the Highway Patrol Group, the support agencies within the Department of
Public Works, Transportation and Communications, or any other government office or
agency that may be able to furnish useful information or data in the formulation of the
Board of any policy, plan or program in the implementation of this Decree.

The Board may also can conferences, require the submission of position papers or other
documents, information, or data by operators or other persons that may be affected by
the implementation of this Decree, or employ any other suitable means of inquiry.

In support of their submission that they were denied procedural due process, petitioners contend that they
were not caged upon to submit their position papers, nor were they ever summoned to attend any
conference prior to the issuance of the questioned BOT Circular.

It is clear from the provision aforequoted, however, that the leeway accorded the Board gives it a wide
range of choice in gathering necessary information or data in the formulation of any policy, plan or
program. It is not mandatory that it should first call a conference or require the submission of position
papers or other documents from operators or persons who may be affected, this being only one of the
options open to the Board, which is given wide discretionary authority. Petitioners cannot justifiably claim,
therefore, that they were deprived of procedural due process. Neither can they state with certainty that
public respondents had not availed of other sources of inquiry prior to issuing the challenged Circulars.
operators of public conveyances are not the only primary sources of the data and information that may be
desired by the BOT.
Dispensing with a public hearing prior to the issuance of the Circulars is neither violative of procedural
due process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307 (1972):

Pevious notice and hearing as elements of due process, are constitutionally required for
the protection of life or vested property rights, as well as of liberty, when its limitation or
loss takes place in consequence of a judicial or quasi-judicial proceeding, generally
dependent upon a past act or event which has to be established or ascertained. It is not
essential to the validity of general rules or regulations promulgated to govern future
conduct of a class or persons or enterprises, unless the law provides otherwise.
(Emphasis supplied)

Petitioners further take the position that fixing the ceiling at six (6) years is arbitrary and oppressive
because the roadworthiness of taxicabs depends upon their kind of maintenance and the use to which
they are subjected, and, therefore, their actual physical condition should be taken into consideration at
the time of registration. As public contend, however, it is impractical to subject every taxicab to constant
and recurring evaluation, not to speak of the fact that it can open the door to the adoption of multiple
standards, possible collusion, and even graft and corruption. A reasonable standard must be adopted to
apply to an vehicles affected uniformly, fairly, and justly. The span of six years supplies that reasonable
standard. The product of experience shows that by that time taxis have fully depreciated, their cost
recovered, and a fair return on investment obtained. They are also generally dilapidated and no longer fit
for safe and comfortable service to the public specially considering that they are in continuous operation
practically 24 hours everyday in three shifts of eight hours per shift. With that standard of reasonableness
and absence of arbitrariness, the requirement of due process has been met.

On Equal Protection of the Law:

Petitioners alleged that the Circular in question violates their right to equal protection of the law because
the same is being enforced in Metro Manila only and is directed solely towards the taxi industry. At the
outset it should be pointed out that implementation outside Metro Manila is also envisioned in
Memorandum Circular No. 77-42. To repeat the pertinent portion:

For an orderly implementation of this Memorandum Circular, the rules herein shall
immediately be effective in Metro Manila. Its implementation outside Metro Manila shall
be carried out only after the project has been implemented in Metro Manila and only after
the date has been determined by the Board. 4

In fact, it is the understanding of the Court that implementation of the Circulars in Cebu City is already
being effected, with the BOT in the process of conducting studies regarding the operation of taxicabs in
other cities.

The Board's reason for enforcing the Circular initially in Metro Manila is that taxicabs in this city,
compared to those of other places, are subjected to heavier traffic pressure and more constant use. This
is of common knowledge. Considering that traffic conditions are not the same in every city, a substantial
distinction exists so that infringement of the equal protection clause can hardly be successfully claimed.

As enunciated in the preambular clauses of the challenged BOT Circular, the overriding consideration is
the safety and comfort of the riding public from the dangers posed by old and dilapidated taxis. The State,
in the exercise, of its police power, can prescribe regulations to promote the health, morals, peace, good
order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and
welfare of society. 5 It may also regulate property rights. 6 In the language of Chief Justice Enrique M.
Fernando "the necessities imposed by public welfare may justify the exercise of governmental authority to
regulate even if thereby certain groups may plausibly assert that their interests are disregarded". 7
In so far as the non-application of the assailed Circulars to other transportation services is concerned, it
need only be recalled that the equal protection clause does not imply that the same treatment be
accorded all and sundry. It applies to things or persons Identically or similarly situated. It permits of
classification of the object or subject of the law provided classification is reasonable or based on
substantial distinction, which make for real differences, and that it must apply equally to each member of
the class. 8 What is required under the equal protection clause is the uniform operation by legal means so
that all persons under Identical or similar circumstance would be accorded the same treatment both in
privilege conferred and the liabilities imposed. 9 The challenged Circulars satisfy the foregoing criteria.

Evident then is the conclusion that the questioned Circulars do not suffer from any constitutional infirmity.
To declare a law unconstitutional, the infringement of constitutional right must be clear, categorical and
undeniable. 10

WHEREFORE, the Writs prayed for are denied and this Petition is hereby dismissed. No costs.

SO ORDERED.

Fernando, CJ., Barredo, Makasiar, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Plana, Escolin,
Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Teehankee and Aquino, JJ., concur in the result.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 89572 December 21, 1989

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and DIRECTOR

OF CENTER FOR EDUCATIONAL MEASUREMENT, petitioners,
vs.
ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZON-CAPULONG, in her
capacity as Presiding Judge of the Regional Trial Court of Valenzuela, Metro
Manila, Branch 172, respondents.

Ramon M. Guevara for private respondent.

CRUZ, J.:

The issue before us is mediocrity. The question is whether a person who has thrice
failed the National Medical Admission Test (NMAT) is entitled to take it again.

The petitioner contends he may not, under its rule that-

h) A student shall be allowed only three (3) chances to take the NMAT.
After three (3) successive failures, a student shall not be allowed to take
the NMAT for the fourth time.

The private respondent insists he can, on constitutional grounds.

But first the facts.

The private respondent is a graduate of the University of the East with a degree of
Bachelor of Science in Zoology. The petitioner claims that he took the NMAT three
times and flunked it as many times.1 When he applied to take it again, the petitioner
rejected his application on the basis of the aforesaid rule. He then went to the Regional
Trial Court of Valenzuela, Metro Manila, to compel his admission to the test.

In his original petition for mandamus, he first invoked his constitutional rights to
academic freedom and quality education. By agreement of the parties, the private
respondent was allowed to take the NMAT scheduled on April 16, 1989, subject to the
outcome of his petition. 2 In an amended petition filed with leave of court, he squarely
challenged the constitutionality of MECS Order No. 12, Series of 1972, containing the
above-cited rule. The additional grounds raised were due process and equal protection.
After hearing, the respondent judge rendered a decision on July 4, 1989, declaring the
challenged order invalid and granting the petition. Judge Teresita Dizon-Capulong held
that the petitioner had been deprived of his right to pursue a medical education through
an arbitrary exercise of the police power. 3

We cannot sustain the respondent judge. Her decision must be reversed.

In Tablarin v. Gutierrez, 4 this Court upheld the constitutionality of the NMAT as a

measure intended to limit the admission to medical schools only to those who have
initially proved their competence and preparation for a medical education. Justice
Florentino P. Feliciano declared for a unanimous Court:

Perhaps the only issue that needs some consideration is whether there is
some reasonable relation between the prescribing of passing the NMAT
as a condition for admission to medical school on the one hand, and the
securing of the health and safety of the general community, on the other
hand. This question is perhaps most usefully approached by recalling that
the regulation of the pratice of medicine in all its branches has long been
recognized as a reasonable method of protecting the health and safety of
the public. That the power to regulate and control the practice of medicine
includes the power to regulate admission to the ranks of those authorized
to practice medicine, is also well recognized. Thus, legislation and
administrative regulations requiring those who wish to practice medicine
first to take and pass medical board examinations have long ago been
recognized as valid exercises of governmental power. Similarly, the
establishment of minimum medical educational requirements-i.e., the
completion of prescribed courses in a recognized medical school-for
admission to the medical profession, has also been sustained as a
legitimate exercise of the regulatory authority of the state. What we have
before us in the instant case is closely related: the regulation of access to
medical schools. MECS Order No. 52, s. 1985, as noted earlier,
articulates the rationale of regulation of this type: the improvement of the
professional and technical quality of the graduates of medical schools, by
upgrading the quality of those admitted to the student body of the medical
schools. That upgrading is sought by selectivity in the process of
admission, selectivity consisting, among other things, of limiting admission
to those who exhibit in the required degree the aptitude for medical
studies and eventually for medical practice. The need to maintain, and the
difficulties of maintaining, high standards in our professional schools in
general, and medical schools in particular, in the current state of our social
and economic development, are widely known.

We believe that the government is entitled to prescribe an admission test

like the NMAT as a means of achieving its stated objective of "upgrading
the selection of applicants into [our] medical schools" and of "improv[ing]
the quality of medical education in the country." Given the widespread use
 today of such admission tests in, for instance, medical schools in the
United States of America (the Medical College Admission Test [MCAT]
and quite probably, in other countries with far more developed educational
resources than our own, and taking into account the failure or inability of
the petitioners to even attempt to prove otherwise, we are entitled to hold
that the NMAT is reasonably related to the securing of the ultimate end of
legislation and regulation in this area. That end, it is useful to recall, is the
protection of the public from the potentially deadly effects of incompetence
and ignorance in those who would undertake to treat our bodies and
minds for disease or trauma.

However, the respondent judge agreed with the petitioner that the said case was not
applicable. Her reason was that it upheld only the requirement for the admission test
and said nothing about the so-called "three-flunk rule."

We see no reason why the rationale in the Tablarin case cannot apply to the case at
bar. The issue raised in both cases is the academic preparation of the applicant. This
may be gauged at least initially by the admission test and, indeed with more reliability,
by the three-flunk rule. The latter cannot be regarded any less valid than the former in
the regulation of the medical profession.

There is no need to redefine here the police power of the State. Suffice it to repeat that
the power is validly exercised if (a) the interests of the public generally, as distinguished
from those of a particular class, require the interference of the State, and (b) the means
employed are reasonably necessary to the attainment of the object sought to be
accomplished and not unduly oppressive upon individuals.5

In other words, the proper exercise of the police power requires the concurrence of a
lawful subject and a lawful method.

The subject of the challenged regulation is certainly within the ambit of the police power.
It is the right and indeed the responsibility of the State to insure that the medical
profession is not infiltrated by incompetents to whom patients may unwarily entrust their
lives and health.

The method employed by the challenged regulation is not irrelevant to the purpose of
the law nor is it arbitrary or oppressive. The three-flunk rule is intended to insulate the
medical schools and ultimately the medical profession from the intrusion of those not
qualified to be doctors.

While every person is entitled to aspire to be a doctor, he does not have a constitutional
right to be a doctor. This is true of any other calling in which the public interest is
involved; and the closer the link, the longer the bridge to one's ambition. The State has
the responsibility to harness its human resources and to see to it that they are not
dissipated or, no less worse, not used at all. These resources must be applied in a
manner that will best promote the common good while also giving the individual a sense
of satisfaction.

A person cannot insist on being a physician if he will be a menace to his patients. If one
who wants to be a lawyer may prove better as a plumber, he should be so advised and
adviced. Of course, he may not be forced to be a plumber, but on the other hand he
may not force his entry into the bar. By the same token, a student who has
demonstrated promise as a pianist cannot be shunted aside to take a course in nursing,
however appropriate this career may be for others.

The right to quality education invoked by the private respondent is not absolute. The
Constitution also provides that "every citizen has the right to choose a profession or
course of study, subject to fair, reasonable and equitable admission and academic
requirements.6

The private respondent must yield to the challenged rule and give way to those better
prepared. Where even those who have qualified may still not be accommodated in our
already crowded medical schools, there is all the more reason to bar those who, like
him, have been tested and found wanting.

The contention that the challenged rule violates the equal protection clause is not well-
taken. A law does not have to operate with equal force on all persons or things to be
conformable to Article III, Section 1 of the Constitution.

There can be no question that a substantial distinction exists between medical students
and other students who are not subjected to the NMAT and the three-flunk rule. The
medical profession directly affects the very lives of the people, unlike other careers
which, for this reason, do not require more vigilant regulation. The accountant, for
example, while belonging to an equally respectable profession, does not hold the same
delicate responsibility as that of the physician and so need not be similarly treated.

There would be unequal protection if some applicants who have passed the tests are
admitted and others who have also qualified are denied entrance. In other words, what
the equal protection requires is equality among equals.

The Court feels that it is not enough to simply invoke the right to quality education as a
guarantee of the Constitution: one must show that he is entitled to it because of his
preparation and promise. The private respondent has failed the NMAT five times. 7
While his persistence is noteworthy, to say the least, it is certainly misplaced, like a
hopeless love.

No depreciation is intended or made against the private respondent. It is stressed that a

person who does not qualify in the NMAT is not an absolute incompetent unfit for any
work or occupation. The only inference is that he is a probably better, not for the
medical profession, but for another calling that has not excited his interest.
In the former, he may be a bungler or at least lackluster; in the latter, he is more likely to
succeed and may even be outstanding. It is for the appropriate calling that he is entitled
to quality education for the full harnessing of his potentials and the sharpening of his
latent talents toward what may even be a brilliant future.

We cannot have a society of square pegs in round holes, of dentists who should never
have left the farm and engineers who should have studied banking and teachers who
could be better as merchants.

It is time indeed that the State took decisive steps to regulate and enrich our system of
education by directing the student to the course for which he is best suited as
determined by initial tests and evaluations. Otherwise, we may be "swamped with
mediocrity," in the words of Justice Holmes, not because we are lacking in intelligence
but because we are a nation of misfits.

WHEREFORE, the petition is GRANTED. The decision of the respondent court dated
January 13, 1989, is REVERSED, with costs against the private respondent. It is so
ordered.

Fernan, C.J., Narvasa Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco,

Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-5060 January 26, 1910

THE UNITED STATES, plaintiff-appellee,

vs.
LUIS TORIBIO, defendant-appellant.

Rodriguez & Del Rosario, for appellant.

Attorney-General Villamor, for appellee.

CARSON, J.:

The evidence of record fully sustains the findings of the trial court that the appellant slaughtered
or caused to be slaughtered for human consumption, the carabao described in the information,
without a permit from the municipal treasure of the municipality wherein it was slaughtered, in
violation of the provisions of sections 30 and 33 of Act No. 1147, an Act regulating the
registration, branding, and slaughter of large cattle.

It appears that in the town of Carmen, in the Province of Bohol, wherein the animal was
slaughtered there is no municipal slaughterhouse, and counsel for appellant contends that under
such circumstances the provisions of Act No. 1147 do not prohibit nor penalize the slaughter of
large cattle without a permit of the municipal treasure. Sections 30, 31, 32, and 33 of the Act are
as follows:

SEC. 30. No large cattle shall be slaughtered or killed for food at the municipal
slaughterhouse except upon permit secured from the municipal treasure. Before issuing
the permit for the slaughter of large cattle for human consumption, the municipal
treasurer shall require for branded cattle the production of the original certificate of
ownership and certificates of transfer showing title in the person applying for the permit,
and for unbranded cattle such evidence as may satisfy said treasurer as to the ownership
of the animals for which permit to slaughter has been requested.

SEC. 31. No permit to slaughter has been carabaos shall be granted by the municipal
treasurer unless such animals are unfit for agricultural work or for draft purposes, and in
no event shall a permit be given to slaughter for food any animal of any kind which is not
fit for human consumption.

SEC. 32. The municipal treasurer shall keep a record of all permits for slaughter issued
by him, and such record shall show the name and residence of the owner, and the class,
sex, age, brands, knots of radiated hair commonly know as remolinos or cowlicks, and
other marks of identification of the animal for the slaughter of which permit is issued and
 the date on which such permit is issued. Names of owners shall be alphabetically
arranged in the record, together with date of permit.

A copy of the record of permits granted for slaughter shall be forwarded monthly to the
provincial treasurer, who shall file and properly index the same under the name of the
owner, together with date of permit.

SEC. 33. Any person slaughtering or causing to be slaughtered for human consumption
or killing for food at the municipal slaughterhouse any large cattle except upon permit
duly secured from the municipal treasurer, shall be punished by a fine of not less than ten
nor more than five hundred pesos, Philippine currency, or by imprisonment for not less
than one month nor more than six months, or by both such fine and imprisonment, in the
discretion of the court.

It is contended that the proper construction of the language of these provisions limits the
prohibition contained in section 30 and the penalty imposed in section 33 to cases (1) of
slaughter of large cattle for human consumption in a municipal slaughter without a permit duly
secured from the municipal treasurer, and (2) cases of killing of large cattle for food in a
municipal slaughterhouse without a permit duly secured from the municipal treasurer; and it is
urged that the municipality of Carmen not being provided with a municipal slaughterhouse,
neither the prohibition nor the penalty is applicable to cases of slaughter of large cattle without a
permit in that municipality.

We are of opinion, however, that the prohibition contained in section 30 refers (1) to the
slaughter of large cattle for human consumption, anywhere, without a permit duly secured from
the municipal treasurer, and (2) expressly and specifically to the killing for food of large cattle at
a municipal slaughterhouse without such permit; and that the penalty provided in section 33
applies generally to the slaughter of large cattle for human consumption, anywhere, without a
permit duly secured from the municipal treasurer, and specifically to the killing for food of large
cattle at a municipal slaughterhouse without such permit.

It may be admitted at once, that the pertinent language of those sections taken by itself and
examined apart from the context fairly admits of two constructions: one whereby the phrase "at
the municipal slaughterhouse" may be taken as limiting and restricting both the word
"slaughtered" and the words "killed for food" in section 30, and the words "slaughtering or
causing to be slaughtered for human consumption" and the words "killing for food" in section
33; and the other whereby the phrase "at the municipal slaughterhouse" may be taken as limiting
and restricting merely the words "killed for food" and "killing for food" as used in those sections.
But upon a reading of the whole Act, and keeping in mind the manifest and expressed purpose
and object of its enactment, it is very clear that the latter construction is that which should be
adopted.

The Act primarily seeks to protect the "large cattle" of the Philippine Islands against theft and to
make easy the recovery and return of such cattle to their proper owners when lost, strayed, or
stolen. To this end it provides an elaborate and compulsory system for the separate branding and
registry of ownership of all such cattle throughout the Islands, whereby owners are enabled
readily and easily to establish their title; it prohibits and invalidates all transfers of large cattle
unaccompanied by certificates of transfer issued by the proper officer in the municipality where
the contract of sale is made; and it provides also for the disposition of thieves or persons
unlawfully in possession, so as to protect the rights of the true owners. All this, manifestly, in
order to make it difficult for any one but the rightful owner of such cattle to retain them in his
possession or to dispose of them to others. But the usefulness of this elaborate and compulsory
system of identification, resting as it does on the official registry of the brands and marks on each
separate animal throughout the Islands, would be largely impaired, if not totally destroyed, if
such animals were requiring proof of ownership and the production of certificates of registry by
the person slaughtering or causing them to be slaughtered, and this especially if the animals were
slaughtered privately or in a clandestine manner outside of a municipal slaughterhouse. Hence,
as it would appear, sections 30 and 33 prohibit and penalize the slaughter for human
consumption or killing for food at a municipal slaughterhouse of such animals without a permit
issued by the municipal treasurer, and section 32 provides for the keeping of detailed records of
all such permits in the office of the municipal and also of the provincial treasurer.

If, however, the construction be placed on these sections which is contended for by the appellant,
it will readily be seen that all these carefully worked out provisions for the registry and record of
the brands and marks of identification of all large cattle in the Islands would prove in large part
abortion, since thieves and persons unlawfully in possession of such cattle, and naturally would,
evade the provisions of the law by slaughtering them outside of municipal slaughterhouses, and
thus enjoy the fruits of their wrongdoing without exposing themselves to the danger of detection
incident to the bringing of the animals to the public slaughterhouse, where the brands and other
identification marks might be scrutinized and proof of ownership required.

Where the language of a statute is fairly susceptible of two or more constructions, that
construction should be adopted which will most tend to give effect to the manifest intent of the
lawmaker and promote the object for which the statute was enacted, and a construction should be
rejected which would tend to render abortive other provisions of the statute and to defeat the
object which the legislator sought to attain by its enactment. We are of opinion, therefore, that
sections 30 and 33 of the Act prohibit and penalize the slaughtering or causing to be slaughtered
for human consumption of large cattle at any place without the permit provided for in section 30.

It is not essential that an explanation be found for the express prohibition in these sections of the
"killing for food at a municipal slaughterhouse" of such animals, despite the fact that this
prohibition is clearly included in the general prohibition of the slaughter of such animals for
human consumption anywhere; but it is not improbable that the requirement for the issue of a
permit in such cases was expressly and specifically mentioned out of superabundance of
precaution, and to avoid all possibility of misunderstanding in the event that some of the
municipalities should be disposed to modify or vary the general provisions of the law by the
passage of local ordinances or regulations for the control of municipal slaughterhouse.

Similar reasoning applied to the specific provisions of section 31 of the Act leads to the same
conclusion. One of the secondary purposes of the law, as set out in that section, is to prevent the
slaughter for food of carabaos fit for agricultural and draft purposes, and of all animals unfit for
human consumption. A construction which would limit the prohibitions and penalties prescribed
in the statute to the killing of such animals in municipal slaughterhouses, leaving unprohibited
and unpenalized their slaughter outside of such establishments, so manifestly tends to defeat the
purpose and object of the legislator, that unless imperatively demanded by the language of the
statute it should be rejected; and, as we have already indicated, the language of the statute is
clearly susceptible of the construction which we have placed upon it, which tends to make
effective the provisions of this as well as all the other sections of the Act.

It appears that the defendant did in fact apply for a permit to slaughter his carabao, and that it
was denied him on the ground that the animal was not unfit "for agricultural work or for draft
purposes." Counsel for appellant contends that the statute, in so far as it undertakes to penalize
the slaughter of carabaos for human consumption as food, without first obtaining a permit which
can not be procured in the event that the animal is not unfit "for agricultural work or draft
purposes," is unconstitutional and in violation of the terms of section 5 of the Philippine Bill (Act
of Congress, July 1, 1902), which provides that "no law shall be enacted which shall deprive any
person of life, liberty, or property without due process of law."

It is not quite clear from the argument of counsel whether his contention is that this provision of
the statute constitutes a taking of property for public use in the exercise of the right of eminent
domain without providing for the compensation of the owners, or that it is an undue and
unauthorized exercise of the police power of the State. But whatever may be the basis of his
contention, we are of opinion, appropriating, with necessary modifications understood, the
language of that great jurist, Chief Justice Shaw (in the case of Com. vs. Tewksbury, 11 Met., 55,
where the question involved was the constitutionality of a statute prohibiting and penalizing the
taking or carrying away by any person, including the owner, of any stones, gravel, or sand, from
any of the beaches in the town of Chesea,) that the law in question "is not a taking of the
property for public use, within the meaning of the constitution, but is a just and legitimate
exercise of the power of the legislature to regulate and restrain such particular use of the property
as would be inconsistent with or injurious to the rights of the public. All property is acquired and
held under the tacit condition that it shall not be so used as to injure the equal rights of others or
greatly impair the public rights and interest of the community."

It may be conceded that the benificial use and exclusive enjoyment of the property of all carabao
owners in these Islands is to a greater or less degree interfered with by the provisions of the
statute; and that, without inquiring what quantum of interest thus passes from the owners of such
cattle, it is an interest the deprivation of which detracts from their right and authority, and in
some degree interferes with their exclusive possession and control of their property, so that if the
regulations in question were enacted for purely private purpose, the statute, in so far as these
regulations are concerned, would be a violation of the provisions of the Philippine Bill relied on
be appellant; but we are satisfied that it is not such a taking, such an interference with the right
and title of the owners, as is involved in the exercise by the State of the right of eminent domain,
so as to entitle these owners to compensation, and that it is no more than "a just restrain of an
injurious private use of the property, which the legislature had authority to impose."

In the case of Com. vs. Alger (7 Cush., 53, 84), wherein the doctrine laid down in Com. vs.
Tewksbury (supra) was reviewed and affirmed, the same eminent jurist who wrote the former
opinion, in distinguishing the exercise of the right of eminent domain from the exercise of the
sovereign police powers of the State, said:

We think it is settled principle, growing out of the nature of well-ordered civil society,
that every holder of property, however absolute and unqualified may be his title, holds it
under the implied liability that his use of it may be so regulated that is shall not be
injurious to the equal enjoyment of others having an equal right to the enjoyment of their
property, nor injurious to the rights of the community. . . . Rights of property, like all
other social and conventional rights, are subject to such reasonable limitations in their
enjoyment as shall prevent them from being injurious, and to such reasonable restrain and
regulations establish by law, as the legislature, under the governing and controlling power
vested in them by the constitution, may think necessary and expedient.

This is very different from the right of eminent domain, the right of a government to take
and appropriate private property to public use, whenever the public exigency requires it;
which can be done only on condition of providing a reasonable compensation therefor.
The power we allude to is rather the police power, the power vested in the legislature by
the constitution, to make, ordain, and establish all manner of wholesome and reasonable
laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and
of the subjects of the same.

It is much easier to perceive and realize the existence and sources of this power than to
mark its boundaries or prescribe limits to its exercise.

Applying these principles, we are opinion that the restrain placed by the law on the slaughter for
human consumption of carabaos fit for agricultural work and draft purpose is not an
appropriation of property interests to a "public use," and is not, therefore, within the principle of
the exercise by the State of the right of eminent domain. It is fact a mere restriction or limitation
upon a private use, which the legislature deemed to be determental to the public welfare. And we
think that an examination of the general provisions of the statute in relation to the public interest
which it seeks to safeguard and the public necessities for which it provides, leaves no room for
doubt that the limitations and restraints imposed upon the exercise of rights of ownership by the
particular provisions of the statute under consideration were imposed not for private purposes
but, strictly, in the promotion of the "general welfare" and "the public interest" in the exercise of
the sovereign police power which every State possesses for the general public welfare and which
"reaches to every species of property within the commonwealth."

For several years prior to the enactment of the statute a virulent contagious or infectious disease
had threatened the total extinction of carabaos in these Islands, in many sections sweeping away
seventy, eighty, and in some cases as much as ninety and even one hundred per cent of these
animals. Agriculture being the principal occupation of the people, and the carabao being the
work animal almost exclusively in use in the fields as well as for draft purposes, the ravages of
the disease with which they were infected struck an almost vital blow at the material welfare of
the country. large areas of productive land lay waste for years, and the production of rice, the
staple food of the inhabitants of the Islands, fell off to such an extent that the impoverished
people were compelled to spend many millions of pesos in its importation, notwithstanding the
fact that with sufficient work animals to cultivate the fields the arable rice lands of the country
could easily be made to produce a supply more that sufficient for its own needs. The drain upon
the resources of the Islands was such that famine soon began to make itself felt, hope sank in the
breast of the people, and in many provinces the energies of the breadwinners seemed to be
paralyzed by the apparently hopeless struggle for existence with which they were confronted.

To meet these conditions, large sums of money were expended by the Government in relieving
the immediate needs of the starving people, three millions of dollars were voted by the Congress
of the United States as a relief or famine fund, public works were undertaken to furnish
employment in the provinces where the need was most pressing, and every effort made to
alleviate the suffering incident to the widespread failure of the crops throughout the Islands, due
in large measure to the lack of animals fit for agricultural work and draft purposes.

Such measures, however, could only temporarily relieve the situation, because in an agricultural
community material progress and permanent prosperity could hardly be hoped for in the absence
of the work animals upon which such a community must necessarily rely for the cultivation of
the fields and the transportation of the products of the fields to market. Accordingly efforts were
made by the Government to increase the supply of these animals by importation, but, as appears
from the official reports on this subject, hope for the future depended largely on the conservation
of those animals which had been spared from the ravages of the diseased, and their redistribution
throughout the Islands where the need for them was greatest.

At large expense, the services of experts were employed, with a view to the discovery and
applications of preventive and curative remedies, and it is hoped that these measures have proved
in some degree successful in protecting the present inadequate supply of large cattle, and that the
gradual increase and redistribution of these animals throughout the Archipelago, in response to
the operation of the laws of supply and demand, will ultimately results in practically relieving
those sections which suffered most by the loss of their work animals.

As was to be expected under such conditions, the price of carabaos rapidly increase from the
three to five fold or more, and it may fairly be presumed that even if the conservative measures
now adopted prove entirely successful, the scant supply will keep the price of these animals at a
high figure until the natural increase shall have more nearly equalized the supply to the demand.

Coincident with and probably intimately connected with this sudden rise in the price of cattle, the
crime of cattle stealing became extremely prevalent throughout the Islands, necessitating the
enactment of a special law penalizing with the severest penalties the theft of carabaos and other
personal property by roving bands; and it must be assumed from the legislative authority found
that the general welfare of the Islands necessitated the enactment of special and somewhat
burdensome provisions for the branding and registration of large cattle, and supervision and
restriction of their slaughter for food. It will hardly be questioned that the provisions of the
statute touching the branding and registration of such cattle, and prohibiting and penalizing the
slaughter of diseased cattle for food were enacted in the due and proper exercise of the police
power of the State; and we are of opinion that, under all the circumstances, the provision of the
statute prohibiting and penalizing the slaughter for human consumption of carabaos fit for work
were in like manner enacted in the due and proper exercise of that power, justified by the exigent
necessities of existing conditions, and the right of the State to protect itself against the
overwhelming disaster incident to the further reduction of the supply of animals fit for
agricultural work or draft purposes.

It is, we think, a fact of common knowledge in these Islands, and disclosed by the official reports
and records of the administrative and legislative departments of the Government, that not merely
the material welfare and future prosperity of this agricultural community were threatened by the
ravages of the disease which swept away the work animals during the years prior to the
enactment of the law under consideration, but that the very life and existence of the inhabitants
of these Islands as a civilized people would be more or less imperiled by the continued
destruction of large cattle by disease or otherwise. Confronted by such conditions, there can be
no doubt of the right of the Legislature to adopt reasonable measures for the preservation of work
animals, even to the extent of prohibiting and penalizing what would, under ordinary conditions,
be a perfectly legitimate and proper exercise of rights of ownership and control of the private
property of the citizen. The police power rests upon necessity and the right of self-protection and
if ever the invasion of private property by police regulation can be justified, we think that the
reasonable restriction placed upon the use of carabaos by the provision of the law under
discussion must be held to be authorized as a reasonable and proper exercise of that power.

As stated by Mr. Justice Brown in his opinion in the case of Lawton vs. Steele (152 U.S., 133,
136):

The extent and limits of what is known as the police power have been a fruitful subject of
discussion in the appellate courts of nearly every State in the Union. It is universally
conceded to include everything essential to the public safely, health, and morals, and to
justify the destruction or abatement, by summary proceedings, of whatever may be
regarded as a public nuisance. Under this power it has been held that the State may order
the destruction of a house falling to decay or otherwise endangering the lives of passers-
by; the demolition of such as are in the path of a conflagration; the slaughter of diseased
cattle; the destruction of decayed or unwholesome food; the prohibition of wooden
buildings in cities; the regulation of railways and other means of public conveyance, and
of interments in burial grounds; the restriction of objectionable trades to certain localities;
the compulsary vaccination of children; the confinement of the insane or those afficted
with contagious deceases; the restraint of vagrants, beggars, and habitual drunkards; the
suppression of obscene publications and houses of ill fame; and the prohibition of
gambling houses and places where intoxicating liquors are sold. Beyond this, however,
the State may interfere wherever the public interests demand it, and in this particular a
large discretion is necessarily vested in the legislature to determine, not only what the
interests of the public require, but what measures are necessary for the protection of such
interests. (Barbier vs. Connolly, 113 U. S., 27; Kidd vs. Pearson, 128 U. S., 1.) To justify
the State in thus interposing its authority in behalf of the public, it must appear, first, that
the interests of the public generally, as distinguished from those of a particular class,
require such interference; and, second, that the means are reasonably necessary for the
accomplishment of the purpose, and not unduly oppressive upon individuals. The
legislature may not, under the guise of protecting the public interests, arbitrarily interfere
 with private business, or impose unusual and unnecessary restrictions upon lawful
occupations. In other words, its determination as to what is a proper exercise of its police
powers is not final or conclusive, but is subject to the supervision of the court.

From what has been said, we think it is clear that the enactment of the provisions of the statute
under consideration was required by "the interests of the public generally, as distinguished from
those of a particular class;" and that the prohibition of the slaughter of carabaos for human
consumption, so long as these animals are fit for agricultural work or draft purposes was a
"reasonably necessary" limitation on private ownership, to protect the community from the loss
of the services of such animals by their slaughter by improvident owners, tempted either by
greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so
doing the productive power of the community may be measurably and dangerously affected.

Chief Justice Redfield, in Thorpe vs. Rutland & Burlington R. R. Co. (27 Vt., 140), said (p. 149)
that by this "general police power of the State, persons and property are subjected to all kinds of
restraints and burdens, in order to secure the general comfort, health, and prosperity of the State;
of the perfect right in the legislature to do which no question ever was, or, upon acknowledge
and general principles, ever can be made, so far as natural persons are concerned."

And Cooley in his "Constitutional Limitations" (6th ed., p. 738) says:

It would be quite impossible to enumerate all the instances in which the police power is
or may be exercised, because the various cases in which the exercise by one individual of
his rights may conflict with a similar exercise by others, or may be detrimental to the
public order or safety, are infinite in number and in variety. And there are other cases
where it becomes necessary for the public authorities to interfere with the control by
individuals of their property, and even to destroy it, where the owners themselves have
fully observed all their duties to their fellows and to the State, but where, nevertheless,
some controlling public necessity demands the interference or destruction. A strong
instance of this description is where it becomes necessary to take, use, or destroy the
private property of individuals to prevent the spreading of a fire, the ravages of a
pestilence, the advance of a hostile army, or any other great public calamity. Here the
individual is in no degree in fault, but his interest must yield to that "necessity" which
"knows no law." The establishment of limits within the denser portions of cities and
villages within which buildings constructed of inflammable materials shall not be erected
or repaired may also, in some cases, be equivalent to a destruction of private property;
but regulations for this purpose have been sustained notwithstanding this result. Wharf
lines may also be established for the general good, even though they prevent the owners
of water-fronts from building out on soil which constitutes private property. And,
whenever the legislature deem it necessary to the protection of a harbor to forbid the
removal of stones, gravel, or sand from the beach, they may establish regulations to that
effect under penalties, and make them applicable to the owners of the soil equally with
other persons. Such regulations are only "a just restraint of an injurious use of property,
which the legislature have authority" to impose.
 So a particular use of property may sometimes be forbidden, where, by a change of
circumstances, and without the fault of the power, that which was once lawful, proper,
and unobjectionable has now become a public nuisance, endangering the public health or
the public safety. Milldams are sometimes destroyed upon this grounds; and churchyards
which prove, in the advance of urban population, to be detrimental to the public health, or
in danger of becoming so, are liable to be closed against further use for cemetery
purposes.

These citations from some of the highest judicial and text-book authorities in the United States
clearly indicate the wide scope and extent which has there been given to the doctrine us in our
opinion that the provision of the statute in question being a proper exercise of that power is not in
violation of the terms of section 5 of the Philippine Bill, which provide that "no law shall be
enacted which shall deprive any person of life, liberty, or property without due process of law," a
provision which itself is adopted from the Constitution of the United States, and is found in
substance in the constitution of most if not all of the States of the Union.

The judgment of conviction and the sentence imposed by the trial court should be affirmed with
the costs of this instance against the appellant. So ordered.
G.R. No. 135962 March 27, 2000

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner,

vs.
BEL-AIR VILLAGE ASSOCIATION, INC., respondent.

PUNO, J.:

Not infrequently, the government is tempted to take legal shortcuts solve urgent problems of the
people. But even when government is armed with the best of intention, we cannot allow it to run
roughshod over the rule of law. Again, we let the hammer fall and fall hard on the illegal attempt
of the MMDA to open for public use a private road in a private subdivision. While we hold that
the general welfare should be promoted, we stress that it should not be achieved at the expense of
the rule of law.

Petitioner MMDA is a government agency tasked with the delivery of basic services in Metro
Manila. Respondent Bel-Air Village Association, Inc. (BAVA) is a non-stock, non-profit
corporation whose members are homeowners in Bel-Air Village, a private subdivision in Makati
City. Respondent BAVA is the registered owner of Neptune Street, a road inside Bel-Air
Village.

On December 30, 1995, respondent received from petitioner, through its Chairman, a notice
dated December 22, 1995 requesting respondent to open Neptune Street to public vehicular
traffic starting January 2, 1996. The notice reads:

SUBJECT: NOTICE of the Opening of Neptune Street to Traffic.

Dear President Lindo,

Please be informed that pursuant to the mandate of the MMDA law or Republic Act No.
7924 which requires the Authority to rationalize the use of roads and/or thoroughfares for
the safe and convenient movement of persons, Neptune Street shall be opened to
vehicular traffic effective January 2, 1996.

In view whereof, the undersigned requests you to voluntarily open the points of entry and
exit on said street.

Thank you for your cooperation and whatever assistance that may be extended by your
association to the MMDA personnel who will be directing traffic in the area.

Finally, we are furnishing you with a copy of the handwritten instruction of the President
on the matter.

Very truly yours,

PROSPERO I. ORETA
 Chairman 1

On the same day, respondent was apprised that the perimeter wall separating the
subdivision from the adjacent Kalayaan Avenue would be demolished.

On January 2, 1996, respondent instituted against petitioner before the Regional Trial Court,
Branch 136, Makati City, Civil Case No. 96-001 for injunction. Respondent prayed for the
issuance of a temporary restraining order and preliminary injunction enjoining the opening of
Neptune Street and prohibiting the demolition of the perimeter wall. The trial court issued a
temporary restraining order the following day.

On January 23, 1996, after due hearing, the trial court denied issuance of a preliminary
injunction. 2 Respondent questioned the denial before the Court of Appeals in CA-G.R. SP No.
39549. The appellate court conducted an ocular inspection of Neptune Street 3 and on February
13, 1996, it issued a writ of preliminary injunction enjoining the implementation of the MMDA's
proposed action. 4

On January 28, 1997, the appellate court rendered a Decision on the merits of the case finding
that the MMDA has no authority to order the opening of Neptune Street, a private subdivision
road and cause the demolition of its perimeter walls. It held that the authority is lodged in the
City Council of Makati by ordinance. The decision disposed of as follows:

WHEREFORE, the Petition is GRANTED; the challenged Order dated January 23, 1995,
in Civil Case No. 96-001, is SET ASIDE and the Writ of Preliminary Injunction issued
on February 13, 1996 is hereby made permanent.

For want of sustainable substantiation, the Motion to Cite Roberto L. del Rosario in
contempt is denied. 5

No pronouncement as to costs.

SO ORDERED. 6

The Motion for Reconsideration of the decision was denied on September 28, 1998. Hence, this
recourse.

Petitioner MMDA raises the following questions:

HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY (MMDA)

THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC TRAFFIC PURSUANT
TO ITS REGULATORY AND POLICE POWERS?

II
 IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE
THE MMDA MAY ORDER THE OPENING OF SUBDIVISION ROADS TO PUBLIC
TRAFFIC?

III

IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM

DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO OPEN THE
SUBJECT STREET?

IV

WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL

MEETINGS HELD BETWEEN MMDA AND THE AFFECTED EEL-AIR
RESIDENTS AND BAVA OFFICERS?

HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?7

Neptune Street is owned by respondent BAVA. It is a private road inside Bel-Air Village, a
private residential subdivision in the heart of the financial and commercial district of Makati
City. It runs parallel to Kalayaan Avenue, a national road open to the general public. Dividing
the two (2) streets is a concrete perimeter wall approximately fifteen (15) feet high. The western
end of Neptune Street intersects Nicanor Garcia, formerly Reposo Street, a subdivision road
open to public vehicular traffic, while its eastern end intersects Makati Avenue, a national road.
Both ends of Neptune Street are guarded by iron gates.

Petitioner MMDA claims that it has the authority to open Neptune Street to public traffic
because it is an agent of the state endowed with police power in the delivery of basic services in
Metro Manila. One of these basic services is traffic management which involves the regulation
of the use of thoroughfares to insure the safety, convenience and welfare of the general public. It
is alleged that the police power of MMDA was affirmed by this Court in the consolidated cases
of Sangalang v. Intermediate Appellate Court. 8 From the premise that it has police power, it is
now urged that there is no need for the City of Makati to enact an ordinance opening Neptune
street to the public. 9

Police power is an inherent attribute of sovereignty. It has been defined as the power vested by
the Constitution in the legislature to make, ordain, and establish all manner of wholesome and
reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the
Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the
subjects of the same. 10 The power is plenary and its scope is vast and pervasive, reaching and
justifying measures for public health, public safety, public morals, and the general welfare. 11

It bears stressing that police power is lodged primarily in the National Legislature. 12 It cannot
be exercised by any group or body of individuals not possessing legislative power. 13 The
National Legislature, however, may delegate this power to the President and administrative
boards as well as the lawmaking bodies of municipal corporations or local government units. 14
Once delegated, the agents can exercise only such legislative powers as are conferred on them by
the national lawmaking body. 15

A local government is a "political subdivision of a nation or state which is constituted by law and
has substantial control of local affairs." 16 The Local Government Code of 1991 defines a local
government unit as a "body politic and corporate." 17 one endowed with powers as a political
subdivision of the National Government and as a corporate entity representing the inhabitants of
its territory. 18 Local government units are the provinces, cities, municipalities and barangays.
19 They are also the territorial and political subdivisions of the state. 20

Our Congress delegated police power to the local government units in the Local Government
Code of 1991. This delegation is found in Section 16 of the same Code, known as the general
welfare clause, viz:

Sec. 16. General Welfare. Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of appropriate
and self-reliant scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among their residents,
maintain peace and order, and preserve the comfort and convenience of their inhabitants.
21

Local government units exercise police power through their respective legislative bodies. The
legislative body of the provincial government is the sangguniang panlalawigan, that of the city
government is the sangguniang panlungsod, that of the municipal government is the
sangguniang bayan, and that of the barangay is the sangguniang barangay. The Local
Government Code of 1991 empowers the sangguniang panlalawigan, sangguniang panlungsod
and sangguniang bayan to "enact ordinances, approve resolutions and appropriate funds for the
general welfare of the [province, city or municipality, as the case may be], and its inhabitants
pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the
[province, city municipality] provided under the Code . . . " 22 The same Code gives the
sangguniang barangay the power to "enact ordinances as may be necessary to discharge the
responsibilities conferred upon it by law or ordinance and to promote the general welfare of the
inhabitants thereon." 23

Metropolitan or Metro Manila is a body composed of several local government units i.e.,
twelve (12) cities and five (5) municipalities, namely, the cities of Caloocan, Manila,
Mandaluyong, Makati, Pasay, Pasig, Quezon, Muntinlupa, Las Pinas, Marikina, Paranaque and
Valenzuela, and the municipalities of Malabon, Navotas, Pateros, San Juan and Taguig. With the
passage of Republic Act (R. A.) No. 7924 24 in 1995, Metropolitan Manila was declared as a
"special development and administrative region" and the Administration of "metro-wide" basic
services affecting the region placed under "a development authority" referred to as the MMDA.
25

"Metro-wide services" are those "services which have metro-wide impact and transcend local
political boundaries or entail huge expenditures such that it would not be viable for said services
to be provided by the individual local government units comprising Metro Manila." 26 There are
seven (7) basic metro-wide services and the scope of these services cover the following: (1)
development planning; (2) transport and traffic management; (3) solid waste disposal and
management; (4) flood control and sewerage management; (5) urban renewal, zoning and land
use planning, and shelter services; (6) health and sanitation, urban protection and pollution
control; and (7) public safety. The basic service of transport and traffic management includes the
following:

(b) Transport and traffic management which include the formulation, coordination, and
monitoring of policies, standards, programs and projects to rationalize the existing
transport operations, infrastructure requirements, the use of thoroughfares, and
promotion of safe and convenient movement of persons and goods; provision for the mass
transport system and the institution of a system to regulate road users; administration
and implementation of all traffic enforcement operations, traffic engineering services and
traffic education programs, including the institution of a single ticketing system in
Metropolitan Manila;" 27

In the delivery of the seven (7) basic services, the MMDA has the following powers and
functions:

Sec. 5. Functions and powers of the Metro Manila Development Authority. The
MMDA shall:

(a) Formulate, coordinate and regulate the implementation of medium and long-term
plans and programs for the delivery of metro-wide services, land use and physical
development within Metropolitan Manila, consistent with national development
objectives and priorities;

(b) Prepare, coordinate and regulate the implementation of medium-term investment

programs for metro-wide services which shall indicate sources and uses of funds for
priority programs and projects, and which shall include the packaging of projects and
presentation to funding institutions;

(c) Undertake and manage on its own metro-wide programs and projects for the delivery
of specific services under its jurisdiction, subject to the approval of the Council. For this
purpose, MMDA can create appropriate project management offices;

(d) Coordinate and monitor the implementation of such plans, programs and projects in
Metro Manila; identify bottlenecks and adopt solutions to problems of implementation;
 (e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall
coordinate and regulate the implementation of all programs and projects concerning
traffic management, specifically pertaining to enforcement, engineering and education.
Upon request, it shall be extended assistance and cooperation, including but not limited
to, assignment of personnel, by all other government agencies and offices concerned;

(f) Install and administer a single ticketing system, fix, impose and collect fines and
penalties for all kinds of violations of traffic rules and regulations, whether moving or
non-moving in nature, and confiscate and suspend or revoke drivers' licenses in the
enforcement of such traffic laws and regulations, the provisions of RA 4136 and PD 1605
to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic
laws and regulations in Metro Manila, through its traffic operation center, and may
deputize members of the PNP, traffic enforcers of local government units, duly licensed
security guards, or members of non-governmental organizations to whom may be
delegated certain authority, subject to such conditions and requirements as the Authority
may impose; and

(g) Perform other related functions required to achieve the objectives of the MMDA,
including the undertaking of delivery of basic services to the local government units,
when deemed necessary subject to prior coordination with and consent of the local
government unit concerned.

The implementation of the MMDA's plans, programs and projects is undertaken by the local
government units, national government agencies, accredited people's organizations, non-
governmental organizations, and the private sector as well as by the MMDA itself. For this
purpose, the MMDA has the power to enter into contracts, memoranda of agreement and other
arrangements with these bodies for the delivery of the required services Metro Manila. 28

The governing board of the MMDA is the Metro Manila Council. The Council is composed of
the mayors of the component 12 cities and 5 municipalities, the president of the Metro Manila
Vice-Mayors' League and the president of the Metro Manila Councilors' League. 29 The Council
is headed by Chairman who is appointed by the President and vested with the rank of cabinet
member. As the policy-making body of the MMDA, the Metro Manila Council approves metro-
wide plans, programs and projects, and issues the necessary rules and regulations for the
implementation of said plans; it approves the annual budget of the MMDA and promulgate the
rules and regulations for the delivery of basic services, collection of service and regulatory fees,
fines and penalties. These functions are particularly enumerated as follows:

Sec. 6. Functions of the Metro Manila Council.

(a) The Council shall be the policy-making body of the MMDA;

(b) It shall approve metro-wide plans, programs and projects and issue rules and
regulations deemed necessary by the MMDA to carry out the purposes of this Act;
 (c) It may increase the rate of allowances and per diems of the members of the Council to
be effective during the term of the succeeding Council. It shall fix the compensation of
the officers and personnel of the MMDA, and approve the annual budget thereof for
submission to the Department of Budget and Management (DBM);

(d) It shall promulgate rules and regulations and set policies and standards for metro-wide
application governing the delivery of basic services, prescribe and collect service and
regulatory fees, and impose and collect fines and penalties.

Clearly, the scope of the MMDA's function is limited to the delivery of the seven (7) basic
services. One of these is transport and traffic management which includes the formulation and
monitoring of policies, standards and projects to rationalize the existing transport operations,
infrastructure requirements, the use of thoroughfares and promotion of the safe movement of
persons and goods. It also covers the mass transport system and the institution of a system of
road regulation, the administration of all traffic enforcement operations, traffic engineering
services and traffic education programs, including the institution of a single ticketing system in
Metro Manila for traffic violations. Under the service, the MMDA is expressly authorized "to set
the policies concerning traffic" and "coordinate and regulate the implementation of all traffic
management programs." In addition, the MMDA may "install and administer a single ticketing
system," fix, impose and collect fines and penalties for all traffic violations.

It will be noted that the powers of the MMDA are limited to the following acts: formulation,
coordination, regulation, implementation, preparation, management, monitoring, setting of
policies, installation of a system and administration. There is no syllable in R.A. No. 7924 that
grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has
not been delegated any legislative power. Unlike the legislative bodies of the local government
units, there is no provision in R.A. No. 7924 that empowers the MMDA or its Council to "enact
ordinances, approve resolutions appropriate funds for the general welfare" of the inhabitants of
Metro Manila. The MMDA is, as termed in the charter itself, "development authority." 30 It is an
agency created for the purpose of laying down policies and coordinating with the various
national government agencies, people's organizations, non-governmental organizations and the
private sector for the efficient and expeditious delivery of basic services in the vast metropolitan
area. All its functions are administrative in nature and these are actually summed up in the
charter itself, viz:

Sec. 2. Creation of the Metropolitan Manila Development Authority. . . . .

The MMDA shall perform planning, monitoring and coordinative functions, and in the
process exercise regulatory and supervisory authority over the delivery of metro-wide
services within Metro Manila, without diminution of the autonomy of the local
government units concerning purely local matters. 31

Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate Appellate Court 32
where we upheld a zoning ordinance issued by the Metro Manila Commission (MMC), the
predecessor of the MMDA, as an exercise of police power. The first Sangalang decision was on
the merits of the petition, 33 while the second decision denied reconsideration of the first case
and in addition discussed the case of Yabut v. Court of Appeals. 34

Sangalang v. IAC involved five (5) consolidated petitions filed by respondent BAVA and three
residents of Bel-Air Village against other residents of the Village and the Ayala Corporation,
formerly the Makati Development Corporation, as the developer of the subdivision. The
petitioners sought to enforce certain restrictive easements in the deeds of sale over their
respective lots in the subdivision. These were the prohibition on the setting up of commercial and
advertising signs on the lots, and the condition that the lots be used only for residential purposes.
Petitioners alleged that respondents, who were residents along Jupiter Street of the subdivision,
converted their residences into commercial establishments in violation of the "deed restrictions,"
and that respondent Ayala Corporation ushered in the full commercialization" of Jupiter Street
by tearing down the perimeter wall that separated the commercial from the residential section of
the village. 35

The petitions were dismissed based on Ordinance No. 81 of the Municipal Council of Makati and
Ordinance No. 81-01 of the Metro Manila Commission (MMC). Municipal Ordinance No. 81
classified Bel-Air Village as a Class A Residential Zone, with its boundary in the south
extending to the center line of Jupiter Street. The Municipal Ordinance was adopted by the MMC
under the Comprehensive Zoning Ordinance for the National Capital Region and promulgated as
MMC Ordinance No. 81-01. Bel-Air Village was indicated therein as bounded by Jupiter Street
and the block adjacent thereto was classified as a High Intensity Commercial Zone. 36

We ruled that since both Ordinances recognized Jupiter Street as the boundary between Bel-Air
Village and the commercial district, Jupiter Street was not for the exclusive benefit of Bel-Air
residents. We also held that the perimeter wall on said street was constructed not to separate the
residential from the commercial blocks but simply for security reasons, hence, in tearing down
said wall, Ayala Corporation did not violate the "deed restrictions" in the deeds of sale.

We upheld the ordinances, specifically MMC Ordinance No. 81-01, as a legitimate exercise of
police power. 37 The power of the MMC and the Makati Municipal Council to enact zoning
ordinances for the general welfare prevailed over the "deed restrictions".

In the second Sangalang/Yabut decision, we held that the opening of Jupiter Street was
warranted by the demands of the common good in terms of "traffic decongestion and public
convenience." Jupiter was opened by the Municipal Mayor to alleviate traffic congestion along
the public streets adjacent to the Village. 38 The same reason was given for the opening to public
vehicular traffic of Orbit Street, a road inside the same village. The destruction of the gate in
Orbit Street was also made under the police power of the municipal government. The gate, like
the perimeter wall along Jupiter, was a public nuisance because it hindered and impaired the use
of property, hence, its summary abatement by the mayor was proper and legal. 39

Contrary to petitioner's claim, the two Sangalang cases do not apply to the case at bar. Firstly,
both involved zoning ordinances passed by the municipal council of Makati and the MMC. In the
instant case, the basis for the proposed opening of Neptune Street is contained in the notice of
December 22, 1995 sent by petitioner to respondent BAVA, through its president. The notice
does not cite any ordinance or law, either by the Sangguniang Panlungsod of Makati City or by
the MMDA, as the legal basis for the proposed opening of Neptune Street. Petitioner MMDA
simply relied on its authority under its charter "to rationalize the use of roads and/or
thoroughfares for the safe and convenient movement of persons." Rationalizing the use of roads
and thoroughfares is one of the acts that fall within the scope of transport and traffic
management. By no stretch of the imagination, however, can this be interpreted as an express or
implied grant of ordinance-making power, much less police power.

Secondly, the MMDA is not the same entity as the MMC in Sangalang. Although the MMC is
the forerunner of the present MMDA, an examination of Presidential Decree (P. D.) No. 824, the
charter of the MMC, shows that the latter possessed greater powers which were not bestowed on
the present MMDA.

Metropolitan Manila was first created in 1975 by Presidential Decree (P.D.) No. 824. It
comprised the Greater Manila Area composed of the contiguous four (4) cities of Manila,
Quezon, Pasay and Caloocan, and the thirteen (13) municipalities of Makati, Mandaluyong, San
Juan, Las Pinas, Malabon, Navotas, Pasig, Pateros, Paranaque, Marikina, Muntinlupa and Taguig
in the province of Rizal, and Valenzuela in the province of Bulacan. 40 Metropolitan Manila was
created as a response to the finding that the rapid growth of population and the increase of social
and economic requirements in these areas demand a call for simultaneous and unified
development; that the public services rendered by the respective local governments could be
administered more efficiently and economically if integrated under a system of central planning;
and this coordination, "especially in the maintenance of peace and order and the eradication of
social and economic ills that fanned the flames of rebellion and discontent [were] part of reform
measures under Martial Law essential to the safety and security of the State." 41

Metropolitan Manila was established as a "public corporation" with the following powers:

Sec. 1. Creation of the Metropolitan Manila. There is hereby created a public

corporation, to be known as the Metropolitan Manila, vested with powers and attributes
of a corporation including the power to make contracts, sue and be sued, acquire,
purchase, expropriate, hold, transfer and dispose of property and such other powers as
are necessary to carry out its purposes. The Corporation shall be administered by a
Commission created under this Decree. 42

The administration of Metropolitan Manila was placed under the Metro Manila Commission
(MMC) vested with the following powers:

Sec. 4. Powers and Functions of the Commission. The Commission shall have the following
powers and functions:

1. To act as a central government to establish and administer programs and provide

services common to the area;

2. To levy and collect taxes and special assessments, borrow and expend money and issue
bonds, revenue certificates, and other obligations of indebtedness. Existing tax measures
should, however, continue to be operative until otherwise modified or repealed by the
Commission;

3. To charge and collect fees for the use of public service facilities;

4. To appropriate money for the operation of the metropolitan government and review
appropriations for the city and municipal units within its jurisdiction with authority to
disapprove the same if found to be not in accordance with the established policies of the
Commission, without prejudice to any contractual obligation of the local government
units involved existing at the time of approval of this Decree;

5. To review, amend, revise or repeal all ordinances, resolutions and acts of cities and
municipalities within Metropolitan Manila;

6. To enact or approve ordinances, resolutions and to fix penalties for any violation
thereof which shall not exceed a fine of P10,000.00 or imprisonment of six years or both
such fine and imprisonment for a single offense;

7. To perform general administrative, executive and policy-making functions;

8. To establish a fire control operation center, which shall direct the fire services of the
city and municipal governments in the metropolitan area;

9. To establish a garbage disposal operation center, which shall direct garbage collection
and disposal in the metropolitan area;

10. To establish and operate a transport and traffic center, which shall direct traffic
activities;

11. To coordinate and monitor governmental and private activities pertaining to essential
services such as transportation, flood control and drainage, water supply and sewerage,
social, health and environmental services, housing, park development, and others;

12. To insure and monitor the undertaking of a comprehensive social, economic and
physical planning and development of the area;

13. To study the feasibility of increasing barangay participation in the affairs of their
respective local governments and to propose to the President of the Philippines definite
programs and policies for implementation;

14. To submit within thirty (30) days after the close of each fiscal year an annual report to
the President of the Philippines and to submit a periodic report whenever deemed
necessary; and

15. To perform such other tasks as may be assigned or directed by the President of the
Philippines.
The MMC was the "central government" of Metro Manila for the purpose of establishing and
administering programs providing services common to the area. As a "central government" it had
the power to levy and collect taxes and special assessments, the power to charge and collect fees;
the power to appropriate money for its operation, and at the same time, review appropriations for
the city and municipal units within its jurisdiction. It was bestowed the power to enact or
approve ordinances, resolutions and fix penalties for violation of such ordinances and
resolutions. It also had the power to review, amend, revise or repeal all ordinances, resolutions
and acts of any of the four (4) cities and thirteen (13) municipalities comprising Metro Manila.

P.D. No. 824 further provided:

Sec. 9. Until otherwise provided, the governments of the four cities and thirteen
municipalities in the Metropolitan Manila shall continue to exist in their present form
except as may be inconsistent with this Decree. The members of the existing city and
municipal councils in Metropolitan Manila shall, upon promulgation of this Decree, and
until December 31, 1975, become members of the Sangguniang Bayan which is hereby
created for every city and municipality of Metropolitan Manila.

In addition, the Sangguniang Bayan shall be composed of as many barangay captains as

may be determined and chosen by the Commission, and such number of representatives
from other sectors of the society as may be appointed by the President upon
recommendation of the Commission.

xxx xxx xxx

The Sangguniang Bayan may recommend to the Commission ordinances, resolutions or

such measures as it may adopt; Provided, that no such ordinance, resolution or measure
shall become effective, until after its approval by the Commission; and Provided further,
that the power to impose taxes and other levies, the power to appropriate money and the
power to pass ordinances or resolutions with penal sanctions shall be vested exclusively
in the Commission.

The creation of the MMC also carried with it the creation of the Sangguniang Bayan. This was
composed of the members of the component city and municipal councils, barangay captains
chosen by the MMC and sectoral representatives appointed by the President. The Sangguniang
Bayan had the power to recommend to the MMC the adoption of ordinances, resolutions or
measures. It was the MMC itself, however, that possessed legislative powers. All ordinances,
resolutions and measures recommended by the Sangguniang Bayan were subject to the MMC's
approval. Moreover, the power to impose taxes and other levies, the power to appropriate money,
and the power to pass ordinances or resolutions with penal sanctions were vested exclusively in
the MMC.

Thus, Metropolitan Manila had a "central government," i.e., the MMC which fully possessed
legislative police powers. Whatever legislative powers the component cities and municipalities
had were all subject to review and approval by the MMC.
After President Corazon Aquino assumed power, there was a clamor to restore the autonomy of
the local government units in Metro Manila. Hence, Sections 1 and 2 of Article X of the 1987
Constitution provided:

Sec. 1. The territorial and political subdivisions of the Republic of the Philippines are the
provinces, cities, municipalities and barangays. There shall be autonomous regions in
Muslim Mindanao and the Cordilleras as herein provided.

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

The Constitution, however, recognized the necessity of creating metropolitan regions not only in
the existing National Capital Region but also in potential equivalents in the Visayas and
Mindanao. 43 Section 11 of the same Article X thus provided:

Sec. 11. The Congress may, by law, create special metropolitan political subdivisions,
subject to a plebiscite as set forth in Section 10 hereof. The component cities and
municipalities shall retain their basic autonomy and shall be entitled to their own local
executives and legislative assemblies. The jurisdiction of the metropolitan authority that
will thereby be created shall be limited to basic services requiring coordination.

Constitution itself expressly provides that Congress may, by law, create "special metropolitan
political subdivisions" which shall be subject to approval by a majority of the votes cast in a
plebiscite in the political units directly affected; the jurisdiction of this subdivision shall be
limited to basic services requiring coordination; and the cities and municipalities comprising this
subdivision shall retain their basic services requiring coordination; and the cities and
municipalities comprising this subdivision shall retain their basic autonomy and their own local
executive and legislative assemblies. 44 Pending enactment of this law, the Transitory Provisions
of the Constitution gave the President of the Philippines the power to constitute the Metropolitan
Authority, viz:

Sec. 8. Until otherwise provided by Congress, the President may constitute the
Metropolitan Authority to be composed of the heads of all local government units
comprising the Metropolitan Manila area. 45

In 1990, President Aquino issued Executive Order (E. O.) No. 392 and constituted the
Metropolitan Manila Authority (MMA). The powers and functions of the MMC were devolved
to the MMA. 46 It ought to be stressed, however, that not all powers and functions of the MMC
were passed to the MMA. The MMA's power was limited to the "delivery of basic urban services
requiring coordination in Metropolitan Manila." 47 The MMA's governing body, the
Metropolitan Manila Council, although composed of the mayors of the component cities and
municipalities, was merely given power of: (1) formulation of policies on the delivery of basic
services requiring coordination and consolidation; and (2) promulgation resolutions and other
issuances, approval of a code of basic services and the exercise of its rule-making power. 48

Under the 1987 Constitution, the local government units became primarily responsible for the
governance of their respective political subdivisions. The MMA's jurisdiction was limited to
addressing common problems involving basic services that transcended local boundaries. It did
not have legislative power. Its power was merely to provide the local government units technical
assistance in the preparation of local development plans. Any semblance of legislative power it
had was confined to a "review [of] legislation proposed by the local legislative assemblies to
ensure consistency among local governments and with the comprehensive development plan of
Metro Manila," and to "advise the local governments accordingly." 49

When R.A. No. 7924 took effect, Metropolitan Manila became a "special development and
administrative region" and the MMDA a "special development authority" whose functions were
"without prejudice to the autonomy of the affected local government units." The character of the
MMDA was clearly defined in the legislative debates enacting its charter.

R.A. No. 7924 originated as House Bill No. 14170/11116 and was introduced by several
legislators led by Dante Tinga, Roilo Golez and Feliciano Belmonte. It was presented to the
House of Representatives by the Committee on Local Governments chaired by Congressman
Ciriaco R. Alfelor. The bill was a product of Committee consultations with the local government
units in the National Capital Region (NCR), with former Chairmen of the MMC and MMA, 50
and career officials of said agencies. When the bill was first taken up by the Committee on Local
Governments, the following debate took place:

THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has been debated
a long time ago, you know. It's a special . . . we can create a special metropolitan political
subdivision.

Actually, there are only six (6) political subdivisions provided for in the Constitution:
barangay, municipality, city, province, and we have the Autonomous Region of
Mindanao and we have the Cordillera. So we have 6. Now. . . . .

HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the Autonomous
Region, that is also specifically mandated by the Constitution.

THE CHAIRMAN: That's correct. But it is considered to be a political subdivision. What

is the meaning of a political subdivision? Meaning to say, that it has its own government,
it has its own political personality, it has the power to tax, and all governmental powers:
police power and everything. All right. Authority is different; because it does not have its
own government. It is only a council, it is an organization of political subdivision,
powers, "no, which is not imbued with any political power.

If you go over Section 6, where the powers and functions of the Metro Manila
Development Authority, it is purely coordinative. And it provides here that the council is
policy-making. All right.

Under the Constitution is a Metropolitan Authority with coordinative power. Meaning to

say, it coordinates all of the different basic services which have to be delivered to the
constituency. All right.
 There is now a problem. Each local government unit is given its respective . . . as a
political subdivision. Kalookan has its powers, as provided for and protected and
guaranteed by the Constitution. All right, the exercise. However, in the exercise of that
power, it might be deleterious and disadvantageous to other local government units. So,
we are forming an authority where all of these will be members and then set up a policy
in order that the basic services can be effectively coordinated. All right.

Of course, we cannot deny that the MMDA has to survive. We have to provide some
funds, resources. But it does not possess any political power. We do not elect the
Governor. We do not have the power to tax. As a matter of fact, I was trying to intimate
to the author that it must have the power to sue and be sued because it coordinates. All
right. It coordinates practically all these basic services so that the flow and the
distribution of the basic services will be continuous. Like traffic, we cannot deny that. It's
before our eyes. Sewerage, flood control, water system, peace and order, we cannot deny
these. It's right on our face. We have to look for a solution. What would be the right
solution? All right, we envision that there should be a coordinating agency and it is called
an authority. All right, if you do not want to call it an authority, it's alright. We may call it
a council or maybe a management agency.

xxx xxx x x x 51

Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is
that given to the Metro Manila Council to promulgate administrative rules and regulations in the
implementation of the MMDA's functions. There is no grant of authority to enact ordinances and
regulations for the general welfare of the inhabitants of the metropolis. This was explicitly stated
in the last Committee deliberations prior to the bill's presentation to Congress. Thus:

THE CHAIRMAN: Yeah, but we have to go over the suggested revision. I think this was
already approved before, but it was reconsidered in view of the proposals, set-up, to make
the MMDA stronger. Okay, so if there is no objection to paragraph "f". . . And then next
is paragraph "b," under Section 6. "It shall approve metro-wide plans, programs and
projects and issue ordinances or resolutions deemed necessary by the MMDA to carry
out the purposes of this Act." Do you have the powers? Does the MMDA... because that
takes the form of a local government unit, a political subdivision.

HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we say that it has
the policies, it's very clear that those policies must be followed. Otherwise, what's the use
of empowering it to come out with policies. Now, the policies may be in the form of a
resolution or it may be in the form of a ordinance. The term "ordinance" in this case
really gives it more teeth, your honor. Otherwise, we are going to see a situation where
you have the power to adopt the policy but you cannot really make it stick as in the case
now, and I think here is Chairman Bunye. I think he will agree that that is the case now.
You've got the power to set a policy, the body wants to follow your policy, then we say
let's call it an ordinance and see if they will not follow it.
 THE CHAIRMAN: That's very nice. I like that. However, there is a constitutional
impediment.1wphi1 You are making this MMDA a political subdivision. The creation
of the MMDA would be subject to a plebiscite. That is what I'm trying to avoid. I've been
trying to avoid this kind of predicament. Under the Constitution it states: if it is a political
subdivision, once it is created it has to be subject to a plebiscite. I'm trying to make this
as administrative. That's why we place the Chairman as a cabinet rank.

HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying there is . . . . .

THE CHAIRMAN: In setting up ordinances, it is a political exercise, Believe me.

HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of rules and
regulations. That would be . . . it shall also be enforced.

HON. BELMONTE: Okay, I will . . . .

HON. LOPEZ: And you can also say that violation of such rule, you impose a sanction.
But you know, ordinance has a different legal connotation.

HON. BELMONTE: All right, I defer to that opinion, your Honor.

THE CHAIRMAN: So instead of ordinances, say rules and regulations.

HON. BELMONTE: Or resolutions. Actually, they are actually considering resolutions

now.

THE CHAIRMAN: Rules and resolutions.

HON. BELMONTE: Rules, regulations and resolutions. 52

The draft of H. B. No. 14170/11116 was presented by the Committee to the House of
Representatives. The explanatory note to the bill stated that the proposed MMDA is a
"development authority" which is a "national agency, not a political government unit." 53 The
explanatory note was adopted as the sponsorship speech of the Committee on Local
Governments. No interpellations or debates were made on the floor and no amendments
introduced. The bill was approved on second reading on the same day it was presented. 54

When the bill was forwarded to the Senate, several amendments were made.1wphi1 These
amendments, however, did not affect the nature of the MMDA as originally conceived in the
House of Representatives. 55

It is thus beyond doubt that the MMDA is not a local government unit or a public corporation
endowed with legislative power. It is not even a "special metropolitan political subdivision" as
contemplated in Section 11, Article X of the Constitution. The creation of a "special
metropolitan political subdivision" requires the approval by a majority of the votes cast in a
plebiscite in the political units directly affected." 56 R. A. No. 7924 was not submitted to the
inhabitants of Metro Manila in a plebiscite. The Chairman of the MMDA is not an official
elected by the people, but appointed by the President with the rank and privileges of a cabinet
member. In fact, part of his function is to perform such other duties as may be assigned to him by
the President, 57 whereas in local government units, the President merely exercises supervisory
authority. This emphasizes the administrative character of the MMDA.

Clearly then, the MMC under P.D. No. 824 is not the same entity as the MMDA under R.A. No.
7924. Unlike the MMC, the MMDA has no power to enact ordinances for the welfare of the
community. It is the local government units, acting through their respective legislative councils,
that possess legislative power and police power. In the case at bar, the Sangguniang Panlungsod
of Makati City did not pass any ordinance or resolution ordering the opening of Neptune Street,
hence, its proposed opening by petitioner MMDA is illegal and the respondent Court of Appeals
did not err in so ruling. We desist from ruling on the other issues as they are unnecessary.

We stress that this decision does not make light of the MMDA's noble efforts to solve the chaotic
traffic condition in Metro Manila. Everyday, traffic jams and traffic bottlenecks plague the
metropolis. Even our once sprawling boulevards and avenues are now crammed with cars while
city streets are clogged with motorists and pedestrians. Traffic has become a social malaise
affecting our people's productivity and the efficient delivery of goods and services in the country.
The MMDA was created to put some order in the metropolitan transportation system but
unfortunately the powers granted by its charter are limited. Its good intentions cannot justify the
opening for public use of a private street in a private subdivision without any legal warrant. The
promotion of the general welfare is not antithetical to the preservation of the rule of
law.1wphi1.nt

IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 39549 are affirmed.

SO ORDERED.
G.R. No. 130230 April 15, 2005

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, Petitioner,

vs.
DANTE O. GARIN, respondent.

DECISION

CHICO-NAZARIO, J.:

At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the
Metropolitan Manila Development Authority (MMDA), which authorizes it to confiscate and
suspend or revoke driver's licenses in the enforcement of traffic laws and regulations.

The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was
issued a traffic violation receipt (TVR) and his driver's license confiscated for parking illegally
along Gandara Street, Binondo, Manila, on 05 August 1995. The following statements were
printed on the TVR:

You are hereby directed to report to the MMDA Traffic Operations Center Port Area Manila
after 48 hours from date of apprehension for disposition/appropriate action thereon. Criminal
case shall be filed for failure to redeem license after 30 days.

Valid as temporary DRIVER'S license for seven days from date of apprehension.1

Shortly before the expiration of the TVR's validity, the respondent addressed a letter2 to then
MMDA Chairman Prospero Oreta requesting the return of his driver's license, and expressing his
preference for his case to be filed in court.

Receiving no immediate reply, Garin filed the original complaint3 with application for
preliminary injunction in Branch 260 of the Regional Trial Court (RTC) of Paraaque, on 12
September 1995, contending that, in the absence of any implementing rules and regulations, Sec.
5(f) of Rep. Act No. 7924 grants the MMDA unbridled discretion to deprive erring motorists of
their licenses, pre-empting a judicial determination of the validity of the deprivation, thereby
violating the due process clause of the Constitution. The respondent further contended that the
provision violates the constitutional prohibition against undue delegation of legislative authority,
allowing as it does the MMDA to fix and impose unspecified and therefore unlimited - fines
and other penalties on erring motorists.

In support of his application for a writ of preliminary injunction, Garin alleged that he suffered
and continues to suffer great and irreparable damage because of the deprivation of his license
and that, absent any implementing rules from the Metro Manila Council, the TVR and the
confiscation of his license have no legal basis.

For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the
powers granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and
imposition of fines and penalties for traffic violations, which powers are legislative and
executive in nature; the judiciary retains the right to determine the validity of the penalty
imposed. It further argued that the doctrine of separation of powers does not preclude
"admixture" of the three powers of government in administrative agencies.4

The MMDA also refuted Garin's allegation that the Metro Manila Council, the governing board
and policy making body of the petitioner, has as yet to formulate the implementing rules for Sec.
5(f) of Rep. Act No. 7924 and directed the court's attention to MMDA Memorandum Circular
No. TT-95-001 dated 15 April 1995. Respondent Garin, however, questioned the validity of
MMDA Memorandum Circular No. TT-95-001, as he claims that it was passed by the Metro
Manila Council in the absence of a quorum.

Judge Helen Bautista-Ricafort issued a temporary restraining order on 26 September 1995,

extending the validity of the TVR as a temporary driver's license for twenty more days. A
preliminary mandatory injunction was granted on 23 October 1995, and the MMDA was directed
to return the respondent's driver's license.

On 14 August 1997, the trial court rendered the assailed decision5 in favor of the herein
respondent and held that:

a. There was indeed no quorum in that First Regular Meeting of the MMDA Council held
on March 23, 1995, hence MMDA Memorandum Circular No. TT-95-001, authorizing
confiscation of driver's licenses upon issuance of a TVR, is void ab initio.

b. The summary confiscation of a driver's license without first giving the driver an
opportunity to be heard; depriving him of a property right (driver's license) without DUE
PROCESS; not filling (sic) in Court the complaint of supposed traffic infraction, cannot be
justified by any legislation (and is) hence unconstitutional.

WHEREFORE, the temporary writ of preliminary injunction is hereby made permanent; th(e)
MMDA is directed to return to plaintiff his driver's license; th(e) MMDA is likewise ordered to
desist from confiscating driver's license without first giving the driver the opportunity to be
heard in an appropriate proceeding.

In filing this petition,6 the MMDA reiterates and reinforces its argument in the court below and
contends that a license to operate a motor vehicle is neither a contract nor a property right, but is
a privilege subject to reasonable regulation under the police power in the interest of the public
safety and welfare. The petitioner further argues that revocation or suspension of this privilege
does not constitute a taking without due process as long as the licensee is given the right to
appeal the revocation.

To buttress its argument that a licensee may indeed appeal the taking and the judiciary retains the
power to determine the validity of the confiscation, suspension or revocation of the license, the
petitioner points out that under the terms of the confiscation, the licensee has three options:

1. To voluntarily pay the imposable fine,

 2. To protest the apprehension by filing a protest with the MMDA Adjudication
Committee, or

3. To request the referral of the TVR to the Public Prosecutor's Office.

The MMDA likewise argues that Memorandum Circular No. TT-95-001 was validly passed in
the presence of a quorum, and that the lower court's finding that it had not was based on a
"misapprehension of facts," which the petitioner would have us review. Moreover, it asserts that
though the circular is the basis for the issuance of TVRs, the basis for the summary confiscation
of licenses is Sec. 5(f) of Rep. Act No. 7924 itself, and that such power is self-executory and
does not require the issuance of any implementing regulation or circular.

Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani Fernando,
implemented Memorandum Circular No. 04, Series of 2004, outlining the procedures for the use
of the Metropolitan Traffic Ticket (MTT) scheme. Under the circular, erring motorists are issued
an MTT, which can be paid at any Metrobank branch. Traffic enforcers may no longer
confiscate drivers' licenses as a matter of course in cases of traffic violations. All motorists with
unredeemed TVRs were given seven days from the date of implementation of the new system to
pay their fines and redeem their license or vehicle plates.7

It would seem, therefore, that insofar as the absence of a prima facie case to enjoin the petitioner
from confiscating drivers' licenses is concerned, recent events have overtaken the Court's need to
decide this case, which has been rendered moot and academic by the implementation of
Memorandum Circular No. 04, Series of 2004.

The petitioner, however, is not precluded from re-implementing Memorandum Circular No. TT-
95-001, or any other scheme, for that matter, that would entail confiscating drivers' licenses. For
the proper implementation, therefore, of the petitioner's future programs, this Court deems it
appropriate to make the following observations:

1. A license to operate a motor vehicle is a privilege that the state may withhold in the
exercise of its police power.

The petitioner correctly points out that a license to operate a motor vehicle is not a property right,
but a privilege granted by the state, which may be suspended or revoked by the state in the
exercise of its police power, in the interest of the public safety and welfare, subject to the
procedural due process requirements. This is consistent with our rulings in Pedro v. Provincial
Board of Rizal8 on the license to operate a cockpit, Tan v. Director of Forestry9 and Oposa v.
Factoran10 on timber licensing agreements, and Surigao Electric Co., Inc. v. Municipality of
Surigao11 on a legislative franchise to operate an electric plant.

Petitioner cites a long list of American cases to prove this point, such as State ex. Rel.
Sullivan,12 which states in part that, "the legislative power to regulate travel over the highways
and thoroughfares of the state for the general welfare is extensive. It may be exercised in any
reasonable manner to conserve the safety of travelers and pedestrians. Since motor vehicles are
instruments of potential danger, their registration and the licensing of their operators have been
required almost from their first appearance. The right to operate them in public places is not a
natural and unrestrained right, but a privilege subject to reasonable regulation, under the police
power, in the interest of the public safety and welfare. The power to license imports further
power to withhold or to revoke such license upon noncompliance with prescribed conditions."

Likewise, the petitioner quotes the Pennsylvania Supreme Court in Commonwealth v. Funk,13 to
the effect that: "Automobiles are vehicles of great speed and power. The use of them constitutes
an element of danger to persons and property upon the highways. Carefully operated, an
automobile is still a dangerous instrumentality, but, when operated by careless or incompetent
persons, it becomes an engine of destruction. The Legislature, in the exercise of the police
power of the commonwealth, not only may, but must, prescribe how and by whom motor
vehicles shall be operated on the highways. One of the primary purposes of a system of general
regulation of the subject matter, as here by the Vehicle Code, is to insure the competency of the
operator of motor vehicles. Such a general law is manifestly directed to the promotion of public
safety and is well within the police power."

The common thread running through the cited cases is that it is the legislature, in the exercise of
police power, which has the power and responsibility to regulate how and by whom motor
vehicles may be operated on the state highways.

2. The MMDA is not vested with police power.

In Metro Manila Development Authority v. Bel-Air Village Association, Inc.,14 we categorically

stated that Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative
power, and that all its functions are administrative in nature.

The said case also involved the herein petitioner MMDA which claimed that it had the authority
to open a subdivision street owned by the Bel-Air Village Association, Inc. to public traffic
because it is an agent of the state endowed with police power in the delivery of basic services in
Metro Manila. From this premise, the MMDA argued that there was no need for the City of
Makati to enact an ordinance opening Neptune Street to the public.

Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we concluded that the
MMDA is not a local government unit or a public corporation endowed with legislative power,
and, unlike its predecessor, the Metro Manila Commission, it has no power to enact ordinances
for the welfare of the community. Thus, in the absence of an ordinance from the City of Makati,
its own order to open the street was invalid.

We restate here the doctrine in the said decision as it applies to the case at bar: police power, as
an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to
make, ordain, and establish all manner of wholesome and reasonable laws, statutes and
ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge
to be for the good and welfare of the commonwealth, and for the subjects of the same.

Having been lodged primarily in the National Legislature, it cannot be exercised by any group or
body of individuals not possessing legislative power. The National Legislature, however, may
delegate this power to the president and administrative boards as well as the lawmaking bodies
of municipal corporations or local government units (LGUs). Once delegated, the agents can
exercise only such legislative powers as are conferred on them by the national lawmaking body.

Our Congress delegated police power to the LGUs in the Local Government Code of 1991.15 A
local government is a "political subdivision of a nation or state which is constituted by law and
has substantial control of local affairs."16 Local government units are the provinces, cities,
municipalities and barangays, which exercise police power through their respective legislative
bodies.

Metropolitan or Metro Manila is a body composed of several local government units. With the
passage of Rep. Act No. 7924 in 1995, Metropolitan Manila was declared as a "special
development and administrative region" and the administration of "metro-wide" basic services
affecting the region placed under "a development authority" referred to as the MMDA. Thus:

. . . [T]he powers of the MMDA are limited to the following acts: formulation, coordination,
regulation, implementation, preparation, management, monitoring, setting of policies, installation
of a system and administration. There is no syllable in R. A. No. 7924 that grants the MMDA
police power, let alone legislative power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative bodies of the local government units,
there is no provision in R. A. No. 7924 that empowers the MMDA or its Council to "enact
ordinances, approve resolutions and appropriate funds for the general welfare" of the
inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a "development
authority." It is an agency created for the purpose of laying down policies and coordinating
with the various national government agencies, people's organizations, non-governmental
organizations and the private sector for the efficient and expeditious delivery of basic
services in the vast metropolitan area. All its functions are administrative in nature and these
are actually summed up in the charter itself, viz:

"Sec. 2. Creation of the Metropolitan Manila Development Authority. -- -x x x.

The MMDA shall perform planning, monitoring and coordinative functions, and
in the process exercise regulatory and supervisory authority over the delivery of
metro-wide services within Metro Manila, without diminution of the autonomy of
the local government units concerning purely local matters."

Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is
that given to the Metro Manila Council to promulgate administrative rules and regulations in the
implementation of the MMDA's functions. There is no grant of authority to enact ordinances
and regulations for the general welfare of the inhabitants of the metropolis. 17 (footnotes
omitted, emphasis supplied)

Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the
petitioner to grant the MMDA the power to confiscate and suspend or revoke drivers' licenses
without need of any other legislative enactment, such is an unauthorized exercise of police
power.

3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and
regulations.

Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila
Development Authority." The contested clause in Sec. 5(f) states that the petitioner shall "install
and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds
of violations of traffic rules and regulations, whether moving or nonmoving in nature, and
confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws and
regulations, the provisions of Rep. Act No. 413618 and P.D. No. 160519 to the contrary
notwithstanding," and that "(f)or this purpose, the Authority shall enforce all traffic laws and
regulations in Metro Manila, through its traffic operation center, and may deputize members of
the PNP, traffic enforcers of local government units, duly licensed security guards, or members
of non-governmental organizations to whom may be delegated certain authority, subject to such
conditions and requirements as the Authority may impose."

Thus, where there is a traffic law or regulation validly enacted by the legislature or those
agencies to whom legislative powers have been delegated (the City of Manila in this case), the
petitioner is not precluded and in fact is duty-bound to confiscate and suspend or revoke
drivers' licenses in the exercise of its mandate of transport and traffic management, as well as the
administration and implementation of all traffic enforcement operations, traffic engineering
services and traffic education programs.20

This is consistent with our ruling in Bel-Air that the MMDA is a development authority created
for the purpose of laying down policies and coordinating with the various national government
agencies, people's organizations, non-governmental organizations and the private sector, which
may enforce, but not enact, ordinances.

This is also consistent with the fundamental rule of statutory construction that a statute is to be
read in a manner that would breathe life into it, rather than defeat it,21 and is supported by the
criteria in cases of this nature that all reasonable doubts should be resolved in favor of the
constitutionality of a statute.22

A last word. The MMDA was intended to coordinate services with metro-wide impact that
transcend local political boundaries or would entail huge expenditures if provided by the
individual LGUs, especially with regard to transport and traffic management,23 and we are
aware of the valiant efforts of the petitioner to untangle the increasingly traffic-snarled roads of
Metro Manila. But these laudable intentions are limited by the MMDA's enabling law, which we
can but interpret, and petitioner must be reminded that its efforts in this respect must be
authorized by a valid law, or ordinance, or regulation arising from a legitimate source.

WHEREFORE, the petition is dismissed.

SO ORDERED.