1 2
Republic of the Philippines operating this concession, then known as the NCO club concession, and the expiration of the contract had
SUPREME COURT
Manila
EN BANC
G.R. No. 76607 February 26, 1990
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City, ROBERTO T.
VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.
G.R. No. 79470 February 26, 1990
UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO BELSA, PETER ORASCION AND
ROSE CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial Court (BAGUIO CITY), La Trinidad,
Benguet and FABIAN GENOVE, respondents.
G.R. No. 80018 February 26, 1990
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F. BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial Court, Branch 66, Capas, Tarlac, and LUIS
BAUTISTA, respondents.
G.R. No. 80258 February 26, 1990
UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC ERNEST E. RIVENBURGH, AIC ROBIN
BLEVINS, SGT. NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62 REGIONAL TRIAL COURT, Angeles
City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES
SANGALANG, ET AL., respondents.
Luna, Sison & Manas Law Office for petitioners.
CRUZ, J.:
These cases have been consolidated because they all involve the doctrine of state immunity. The United States
of America was not impleaded in the complaints below but has moved to dismiss on the ground that they are
in effect suits against it to which it has not consented. It is now contesting the denial of its motions by the
respondent judges.
In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force stationed in Clark Air
Base in connection with the bidding conducted by them for contracts for barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air Force, solicited
bids for such contracts through its contracting officer, James F. Shaw. Among those who submitted their bids
were private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had
been a concessionaire inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50 years.
The bidding was won by Ramon Dizon, over the objection of the private respondents, who claimed that he had
made a bid for four facilities, including the Civil Engineering Area, which was not included in the invitation to
bid.
The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through its
representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil Engineering
concession had not been awarded to Dizon as a result of the February 24, 1986 solicitation. Dizon was already
1 2
been extended from June 30, 1986 to August 31, 1986. They further explained that the solicitation of the CE
barbershop would be available only by the end of June and the private respondents would be notified.
On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and the
individual petitioners to cancel the award to defendant Dizon, to conduct a rebidding for the barbershop
concessions and to allow the private respondents by a writ of preliminary injunction to continue operating the
1
concessions pending litigation.
Upon the filing of the complaint, the respondent court issued an ex parte order directing the individual
petitioners to maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for preliminary
injunction on the ground that the action was in effect a suit against the United States of America, which had
not waived its non-suability. The individual defendants, as official employees of the U.S. Air Force, were also
immune from suit.
On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary injunction.
On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part as follows:
From the pleadings thus far presented to this Court by the parties, the Court's attention is
called by the relationship between the plaintiffs as well as the defendants, including the US
Government, in that prior to the bidding or solicitation in question, there was a binding
contract between the plaintiffs as well as the defendants, including the US Government. By
virtue of said contract of concession it is the Court's understanding that neither the US
Government nor the herein principal defendants would become the employer/s of the
plaintiffs but that the latter are the employers themselves of the barbers, etc. with the
employer, the plaintiffs herein, remitting the stipulated percentage of commissions to the
Philippine Area Exchange. The same circumstance would become in effect when the
Philippine Area Exchange opened for bidding or solicitation the questioned barber shop
concessions. To this extent, therefore, indeed a commercial transaction has been entered,
and for purposes of the said solicitation, would necessarily be entered between the plaintiffs
as well as the defendants.
The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement does not
cover such kind of services falling under the concessionaireship, such as a barber shop
2
concession.
On December 11, 1986, following the filing of the herein petition for certiorari and prohibition with preliminary
3
injunction, we issued a temporary restraining order against further proceedings in the court below.
In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia,
Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook in the U.S. Air Force Recreation
Center at the John Hay Air Station in Baguio City. It had been ascertained after investigation, from the
testimony of Belsa Cartalla and Orascion, that Genove had poured urine into the soup stock used in cooking
the vegetables served to the club customers. Lamachia, as club manager, suspended him and thereafter
referred the case to a board of arbitrators conformably to the collective bargaining agreement between the
Center and its employees. The board unanimously found him guilty and recommended his dismissal. This was
effected on March 5, 1986, by Col. David C. Kimball, Commander of the 3rd Combat Support Group, PACAF
Clark Air Force Base. Genove's reaction was to file Ms complaint in the Regional Trial Court of Baguio City
4
against the individual petitioners.
On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss the complaint,
alleging that Lamachia, as an officer of the U.S. Air Force stationed at John Hay Air Station, was immune from
suit for the acts done by him in his official capacity. They argued that the suit was in effect against the United
States, which had not given its consent to be sued.
This motion was denied by the respondent judge on June 4, 1987, in an order which read in part:
 3 4
It is the understanding of the Court, based on the allegations of the complaint — which have
been hypothetically admitted by defendants upon the filing of their motion to dismiss — that
although defendants acted initially in their official capacities, their going beyond what their
functions called for brought them out of the protective mantle of whatever immunities they
may have had in the beginning. Thus, the allegation that the acts complained of were illegal,
done. with extreme bad faith and with pre-conceived sinister plan to harass and finally
5 10
dismiss the plaintiff, gains significance.
The petitioners then came to this Court seeking certiorari and prohibition with preliminary injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell, an extension of
Clark Air Base, was arrested following a buy-bust operation conducted by the individual petitioners herein,
namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special agents of
the Air Force Office of Special Investigators (AFOSI). On the basis of the sworn statements made by them, an
information for violation of R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed against Bautista
in the Regional Trial Court of Tarlac. The above-named officers testified against him at his trial. As a result of
the filing of the charge, Bautista was dismissed from his employment. He then filed a complaint for damages
6 in the 1935 and 1973 Constitutions and also intended to manifest our resolve to abide by the rules of the
against the individual petitioners herein claiming that it was because of their acts that he was removed.
During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to the International
Law Division, Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the
defendants and moved for an extension within which to file an "answer and/or other pleadings." His reason
was that the Attorney General of the United States had not yet designated counsel to represent the
defendants, who were being sued for their official acts. Within the extended period, the defendants, without
the assistance of counsel or authority from the U.S. Department of Justice, filed their answer. They alleged
therein as affirmative defenses that they had only done their duty in the enforcement of the laws of the
Philippines inside the American bases pursuant to the RP-US Military Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the defendants,
filed with leave of court a motion to withdraw the answer and dismiss the complaint. The ground invoked was
that the defendants were acting in their official capacity when they did the acts complained of and that the
complaint against them was in effect a suit against the United States without its consent.
The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the
claimed immunity under the Military Bases Agreement covered only criminal and not civil cases. Moreover, the
7 duties. The rule is that if the judgment against such officials will require the state itself to perform an
defendants had come under the jurisdiction of the court when they submitted their answer.
Following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued
8 14
on October 14, 1987, a temporary restraining order.
In G.R. No. 80258, a complaint for damages was filed by the private respondents against the herein petitioners
(except the United States of America), for injuries allegedly sustained by the plaintiffs as a result of the acts of
9
the defendants. There is a conflict of factual allegations here. According to the plaintiffs, the defendants beat
them up, handcuffed them and unleashed dogs on them which bit them in several parts of their bodies and
caused extensive injuries to them. The defendants deny this and claim the plaintiffs were arrested for theft
and were bitten by the dogs because they were struggling and resisting arrest, The defendants stress that the
dogs were called off and the plaintiffs were immediately taken to the medical center for treatment of their
wounds.
In a motion to dismiss the complaint, the United States of America and the individually named defendants
argued that the suit was in effect a suit against the United States, which had not given its consent to be sued.
The defendants were also immune from suit under the RP-US Bases Treaty for acts done by them in the
performance of their official functions.
The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as
follows:
The defendants certainly cannot correctly argue that they are immune from suit. The
allegations, of the complaint which is sought to be dismissed, had to be hypothetically
3 4
admitted and whatever ground the defendants may have, had to be ventilated during the
trial of the case on the merits. The complaint alleged criminal acts against the individually-
named defendants and from the nature of said acts it could not be said that they are Acts of
State, for which immunity should be invoked. If the Filipinos themselves are duty bound to
respect, obey and submit themselves to the laws of the country, with more reason, the
members of the United States Armed Forces who are being treated as guests of this country
should respect, obey and submit themselves to its laws.
and so was the motion for reconsideration. The defendants submitted their answer as required but
subsequently filed their petition for certiorari and prohibition with preliminary injunction with this Court. We
11
issued a temporary restraining order on October 27, 1987.
II
The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of
the law of our land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied
international community.
Even without such affirmation, we would still be bound by the generally accepted principles of international
law under the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such
principles are deemed incorporated in the law of every civilized state as a condition and consequence of its
membership in the society of nations. Upon its admission to such society, the state is automatically obligated
to comply with these principles in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the justification given by Justice
Holmes that "there can be no legal right against the authority which makes the law on which the right
12
depends." There are other practical reasons for the enforcement of the doctrine. In the case of the foreign
state sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the maxim par in
parem, non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A
13
contrary disposition would, in the language of a celebrated case, "unduly vex the peace of nations."
While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed against officials of the state for acts allegedly performed by them in the discharge of their
affirmative act to satisfy the same, such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although it has not been formally
impleaded. In such a situation, the state may move to dismiss the complaint on the ground that it has been
filed without its consent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it
grants the state to defeat any legitimate claim against it by simply invoking its non-suability. That is hardly fair,
at least in democratic societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its
citizens. In fact, the doctrine is not absolute and does not say the state may not be sued under any
circumstance. On the contrary, the rule says that the state may not be sued without its consent, which clearly
imports that it may be sued if it consents.
The consent of the state to be sued may be manifested expressly or impliedly. Express consent may be
embodied in a general law or a special law. Consent is implied when the state enters into a contract or it itself
commences litigation.
The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the
Philippine government "consents and submits to be sued upon any moneyed claim involving liability arising
from contract, express or implied, which could serve as a basis of civil action between private parties." In
15
Merritt v. Government of the Philippine Islands, a special law was passed to enable a person to sue the
government for an alleged tort. When the government enters into a contract, it is deemed to have descended
to the level of the other contracting party and divested of its sovereign immunity from suit with its implied
 5 6
16
consent. Waiver is also implied when the government files a complaint, thus opening itself to a
17
counterclaim.
The above rules are subject to qualification. Express consent is effected only by the will of the legislature
18
through the medium of a duly enacted statute. We have held that not all contracts entered into by the
government will operate as a waiver of its non-suability; distinction must be made between its sovereign and
19
proprietary acts. As for the filing of a complaint by the government, suability will result only where the
20
government is claiming affirmative relief from the defendant.
In the case of the United States of America, the customary rule of international law on state immunity is
expressed with more specificity in the RP-US Bases Treaty. Article III thereof provides as follows:
It is mutually agreed that the United States shall have the rights, power and authority within
the bases which are necessary for the establishment, use, operation and defense thereof or
appropriate for the control thereof and all the rights, power and authority within the limits
of the territorial waters and air space adjacent to, or in the vicinity of, the bases which are
necessary to provide access to them or appropriate for their control.
21
The petitioners also rely heavily on Baer v. Tizon, along with several other decisions, to support their
position that they are not suable in the cases below, the United States not having waived its sovereign
immunity from suit. It is emphasized that in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign state without its consent is
appropriate. More specifically, insofar as alien armed forces is concerned, the starting point
is Raquiza v. Bradford, a 1945 decision. In dismissing a habeas corpus petition for the release
of petitioners confined by American army authorities, Justice Hilado speaking for the Court,
cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled that a foreign
army, permitted to march through a friendly country or to be stationed in it, by permission of
its government or sovereign, is exempt from the civil and criminal jurisdiction of the place.'
Two years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v.
Bradford and cited in support thereof excerpts from the works of the following authoritative
writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and
Lauterpacht. Accuracy demands the clarification that after the conclusion of the Philippine-
American Military Bases Agreement, the treaty provisions should control on such matter, the
assumption being that there was a manifestation of the submission to jurisdiction on the
part of the foreign power whenever appropriate. More to the point is Syquia v. Almeda
Lopez, where plaintiffs as lessors sued the Commanding General of the United States Army in
the Philippines, seeking the restoration to them of the apartment buildings they owned
leased to the United States armed forces stationed in the Manila area. A motion to dismiss
on the ground of non-suability was filed and upheld by respondent Judge. The matter was
taken to this Court in a mandamus proceeding. It failed. It was the ruling that respondent
Judge acted correctly considering that the 4 action must be considered as one against the
U.S. Government. The opinion of Justice Montemayor continued: 'It is clear that 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 firing 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 then came Marvel Building
Corporation v. Philippine War Damage Commission, where respondent, a United States
Agency established to compensate damages suffered by the Philippines during World War II
was held as falling within the above doctrine as the suit against it would eventually be a
charge against or financial liability of the United States Government because ... , the
Commission has no funds of its own for the purpose of paying money judgments.' The Syquia
5 6
ruling was again explicitly relied upon in Marquez Lim v. Nelson, involving a complaint for the
recovery of a motor launch, plus damages, the special defense interposed being 'that the
vessel belonged to the United States Government, that the defendants merely acted as
agents of said Government, and that the United States Government is therefore the real
party in interest.' So it was in Philippine Alien Property Administration v. Castelo, where it
was held that a suit against Alien Property Custodian and the Attorney General of the United
States involving vested property under the Trading with the Enemy Act is in substance a suit
against the United States. To the same effect is Parreno v. McGranery, as the following
excerpt from the opinion of justice Tuazon clearly shows: 'It is a widely accepted principle of
international law, which is made a part of the law of the land (Article II, Section 3 of the
Constitution), that a foreign state may not be brought to suit before the courts of another
state or its own courts without its consent.' Finally, there is Johnson v. Turner, an appeal by
the defendant, then Commanding General, Philippine Command (Air Force, with office at
Clark Field) from a decision ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the lower court decision, this
Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it
could not be sustained.
It bears stressing at this point that the above observations do not confer on the United States of America a
blanket immunity for all acts done by it or its agents in the Philippines. Neither may the other petitioners claim
that they are also insulated from suit in this country merely because they have acted as agents of the United
States in the discharge of their official functions.
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. This was our
22
ruling in United States of America v. Ruiz, where the transaction in question dealt with the improvement of
the wharves in the naval installation at Subic Bay. As this was a clearly governmental function, we held that the
contract did not operate to divest the United States of its sovereign immunity from suit. In the words of Justice
Vicente Abad Santos:
The traditional rule of 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 imperii The
restrictive application of State immunity is now the rule in the United States, the United
kingdom and other states in Western Europe.
xxx xxx xxx
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.
The other petitioners in the cases before us all aver they have acted in the discharge of their official functions
as officers or agents of the United States. However, this is a matter of evidence. The charges against them may
not be summarily dismissed on their mere assertion that their acts are imputable to the United States of
America, which has not given its consent to be sued. In fact, the defendants are sought to be held answerable
 7 8
for personal torts in which the United States itself is not involved. If found liable, they and they alone must
satisfy the judgment.
23
In Festejo v. Fernando, a bureau director, acting without any authority whatsoever, appropriated private
land and converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he
moved to dismiss the complaint on the ground that the suit was in effect against the Philippine government,
which had not given its consent to be sued. This Court sustained the denial of the motion and held that the
doctrine of state immunity was not applicable. The director was being sued in his private capacity for a
personal tort.
With these considerations in mind, we now proceed to resolve the cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that the individually-named petitioners therein were
acting in the exercise of their official functions when they conducted the buy-bust operation against the
complainant and thereafter testified against him at his trial. The said petitioners were in fact connected with
the Air Force Office of Special Investigators and were charged precisely with the function of preventing the
distribution, possession and use of prohibited drugs and prosecuting those guilty of such acts. It cannot for a
moment be imagined that they were acting in their private or unofficial capacity when they apprehended and
later testified against the complainant. It follows that for discharging their duties as agents of the United
States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent
24
to be sued. As we observed in Sanders v. Veridiano:
Given the official character of the above-described letters, we have to conclude that the
petitioners were, legally speaking, being sued as officers of the United States government. As
they have acted on behalf of that government, and within the scope of their authority, it is
that government, and not the petitioners personally, that is responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts
through a special agent. The argument, it would seem, is premised on the ground that since the officers are
designated "special agents," the United States government should be liable for their torts.
There seems to be a failure to distinguish between suability and liability and a misconception that the two
terms are synonymous. Suability depends on the consent of the state to be sued, liability on the applicable law
and the established facts. The circumstance that a state is suable does not necessarily mean that it is liable; on
the other hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by
the mere fact that the state has allowed itself to be sued. When the state does waive its sovereign immunity, it
is only giving the plaintiff the chance to prove, if it can, that the defendant is liable.
The said article establishes a rule of liability, not suability. The government may be held liable under this rule
only if it first allows itself to be sued through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent even if he is so denominated, as in
the case at bar. No less important, the said provision appears to regulate only the relations of the local state
with its inhabitants and, hence, applies only to the Philippine government and not to foreign governments
impleaded in our courts.
We reject the conclusion of the trial court that the answer filed by the special counsel of the Office of the
Sheriff Judge Advocate of Clark Air Base was a submission by the United States government to its jurisdiction.
25
As we noted in Republic v. Purisima, express waiver of immunity cannot be made by a mere counsel of the
government but must be effected through a duly-enacted statute. Neither does such answer come under the
implied forms of consent as earlier discussed.
But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the discharge of
their official functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual
allegations in this case deserve in our view a closer study of what actually happened to the plaintiffs. The
record is too meager to indicate if the defendants were really discharging their official duties or had actually
exceeded their authority when the incident in question occurred. Lacking this information, this Court cannot
directly decide this case. The needed inquiry must first be made by the lower court so it may assess and
7 8
resolve the conflicting claims of the parties on the basis of the evidence that has yet to be presented at the
trial. Only after it shall have determined in what capacity the petitioners were acting at the time of the
incident in question will this Court determine, if still necessary, if the doctrine of state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club located at the U.S. Air
Force Recreation Center, also known as the Open Mess Complex, at John Hay Air Station. As manager of this
complex, petitioner Lamachia is responsible for eleven diversified activities generating an annual income of $2
million. Under his executive management are three service restaurants, a cafeteria, a bakery, a Class VI store, a
coffee and pantry shop, a main cashier cage, an administrative office, and a decentralized warehouse which
maintains a stock level of $200,000.00 per month in resale items. He supervises 167 employees, one of whom
was Genove, with whom the United States government has concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the restaurant services offered at the John Hay Air
Station partake of the nature of a business enterprise undertaken by the United States government in its
proprietary capacity. Such services are not extended to the American servicemen for free as a perquisite of
membership in the Armed Forces of the United States. Neither does it appear that they are exclusively offered
to these servicemen; on the contrary, it is well known that they are available to the general public as well,
including the tourists in Baguio City, many of whom make it a point to visit John Hay for this reason. All
persons availing themselves of this facility pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable and relatively low, such services are undoubtedly
operated for profit, as a commercial and not a governmental activity.
The consequence of this finding is that the petitioners cannot invoke the doctrine of state immunity to justify
the dismissal of the damage suit against them by Genove. Such defense will not prosper even if it be
established that they were acting as agents of the United States when they investigated and later dismissed
Genove. For that matter, not even the United States government itself can claim such immunity. The reason is
that by entering into the employment contract with Genove in the discharge of its proprietary functions, it
impliedly divested itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the complaint against the petitioners in the court
below must still be dismissed. While suable, the petitioners are nevertheless not liable. It is obvious that the
claim for damages cannot be allowed on the strength of the evidence before us, which we have carefully
examined.
The dismissal of the private respondent was decided upon only after a thorough investigation where it was
established beyond doubt that he had polluted the soup stock with urine. The investigation, in fact, did not
stop there. Despite the definitive finding of Genove's guilt, the case was still referred to the board of
arbitrators provided for in the collective bargaining agreement. This board unanimously affirmed the findings
of the investigators and recommended Genove's dismissal. There was nothing arbitrary about the proceedings.
The petitioners acted quite properly in terminating the private respondent's employment for his unbelievably
nauseating act. It is surprising that he should still have the temerity to file his complaint for damages after
committing his utterly disgusting offense.
Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions granted by the United
States government are commercial enterprises operated by private person's. They are not agencies of the
United States Armed Forces nor are their facilities demandable as a matter of right by the American
servicemen. These establishments provide for the grooming needs of their customers and offer not only the
basic haircut and shave (as required in most military organizations) but such other amenities as shampoo,
massage, manicure and other similar indulgences. And all for a fee. Interestingly, one of the concessionaires,
private respondent Valencia, was even sent abroad to improve his tonsorial business, presumably for the
benefit of his customers. No less significantly, if not more so, all the barbershop concessionaires are under the
terms of their contracts, required to remit to the United States government fixed commissions in consideration
of the exclusive concessions granted to them in their respective areas.
This being the case, the petitioners cannot plead any immunity from the complaint filed by the private
respondents in the court below. The contracts in question being decidedly commercial, the conclusion reached
in the United States of America v. Ruiz case cannot be applied here.
 9 10
The Court would have directly resolved the claims against the defendants as we have done in G.R. No. 79470,
except for the paucity of the record in the case at hand. The evidence of the alleged irregularity in the grant of
the barbershop concessions is not before us. This means that, as in G.R. No. 80258, the respondent court will
have to receive that evidence first, so it can later determine on the basis thereof if the plaintiffs are entitled to
the relief they seek. Accordingly, this case must also be remanded to the court below for further proceedings.
IV
There are a number of other cases now pending before us which also involve the question of the immunity of
the United States from the jurisdiction of the Philippines. This is cause for regret, indeed, as they mar the
traditional friendship between two countries long allied in the cause of democracy. It is hoped that the so-
called "irritants" in their relations will be resolved in a spirit of mutual accommodation and respect, without
the inconvenience and asperity of litigation and always with justice to both parties.
WHEREFORE, after considering all the above premises, the Court hereby renders judgment as follows:
1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to
proceed with the hearing and decision of Civil Case No. 4772. The temporary restraining
order dated December 11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is DISMISSED.
3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is DISMISSED. The
temporary restraining order dated October 14, 1987, is made permanent.
4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to
proceed with the hearing and decision of Civil Case No. 4996. The temporary restraining
order dated October 27, 1987, is LIFTED.
All without any pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.
G.R. No. L-46930 June 10, 1988
DALE SANDERS, AND A.S. MOREAU, JR, petitioners,
vs.
HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I, Court of First Instance of Zambales, Olongapo
City, ANTHONY M. ROSSI and RALPH L. WYERS, respondents.
CRUZ, J.:
The basic issue to be resolved in this case is whether or not the petitioners were performing their official
duties when they did the acts for which they have been sued for damages by the private respondents. Once
this question is decided, the other answers will fall into place and this petition need not detain us any longer
than it already has.
Petitioner Sanders was, at the time the incident in question occurred, the special services director of the U.S.
1
Naval Station (NAVSTA) in Olongapo City. Petitioner Moreau was the commanding officer of the Subic Naval
2
Base, which includes the said station. Private respondent Rossi is an American citizen with permanent
9 10
3 4
residence in the Philippines, as so was private respondent Wyer, who died two years ago. They were both
employed as gameroom attendants in the special services department of the NAVSTA, the former having been
5
hired in 1971 and the latter in 1969.
On October 3, 1975, the private respondents were advised that their employment had been converted from
6
permanent full-time to permanent part-time, effective October 18, 1975. Their reaction was to protest this
conversion and to institute grievance proceedings conformably to the pertinent rules and regulations of the
U.S. Department of Defense. The result was a recommendation from the hearing officer who conducted the
proceedings for the reinstatement of the private respondents to permanent full-time status plus backwages.
The report on the hearing contained the observation that "Special Services management practices an
autocratic form of supervision."
7
In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the complaint), Sanders disagreed
with the hearing officer's report and asked for the rejection of the abovestated recommendation. The letter
contained the statements that: a ) "Mr. Rossi tends to alienate most co-workers and supervisors;" b) "Messrs.
Rossi and Wyers have proven, according to their immediate supervisors, to be difficult employees to
supervise;" and c) "even though the grievants were under oath not to discuss the case with anyone, (they)
placed the records in public places where others not involved in the case could hear."
On November 7, 1975, before the start of the grievance hearings, a-letter (Annex "B" of the complaint)
purportedly corning from petitioner Moreau as the commanding general of the U.S. Naval Station in Subic Bay
was sent to the Chief of Naval Personnel explaining the change of the private respondent's employment status
and requesting concurrence therewith. The letter did not carry his signature but was signed by W.B. Moore, Jr.
"by direction," presumably of Moreau.
On the basis of these antecedent facts, the private respondent filed in the Court of First Instance of Olongapo
8
City a for damages against the herein petitioners on November 8, 1976. The plaintiffs claimed that the letters
contained libelous imputations that had exposed them to ridicule and caused them mental anguish and that
the prejudgment of the grievance proceedings was an invasion of their personal and proprietary rights.
The private respondents made it clear that the petitioners were being sued in their private or personal
capacity. However, in a motion to dismiss filed under a special appearance, the petitioners argued that the
acts complained of were performed by them in the discharge of their official duties and that, consequently,
the court had no jurisdiction over them under the doctrine of state immunity.
After extensive written arguments between the parties, the motion was denied in an order dated March 8,
9
1977, on the main ground that the petitioners had not presented any evidence that their acts were official in
nature and not personal torts, moreover, the allegation in the complaint was that the defendants had acted
maliciously and in bad faith. The same order issued a writ of preliminary attachment, conditioned upon the
filing of a P10,000.00 bond by the plaintiffs, against the properties of petitioner Moreau, who allegedly was
then about to leave the Philippines. Subsequently, to make matters worse for the defendants, petitioner
Moreau was declared in a default by the trial court in its order dated August 9, 1977. The motion to lift the
default order on the ground that Moreau's failure to appear at the pre-trial conference was the result of some
misunderstanding, and the motion for reconsideration of the denial of the motion to dismiss, which was filed
by the petitioner's new lawyers, were denied by the respondent court on September 7, 1977.
This petition for certiorari, prohibition and preliminary injunction was thereafter filed before this Court, on the
contention that the above-narrated acts of the respondent court are tainted with grave abuse of discretion
amounting to lack of jurisdiction.
We return now to the basic question of whether the petitioners were acting officially or only in their private
capacities when they did the acts for which the private respondents have sued them for damages.
 11
It is stressed at the outset that the mere allegation that a government functionary is being sued in his personal
capacity will not automatically remove him from the protection of the law of public officers and, if appropriate,
the doctrine of state immunity. By the same token, the mere invocation of official character will not suffice to
insulate him from suability and liability for an act imputed to him as a personal tort committed without or in
excess of his authority. These well-settled principles are applicable not only to the officers of the local state
but also where the person sued in its courts pertains to the government of a foreign state, as in the present
case.
The respondent judge, apparently finding that the complained acts were prima facie personal and tortious,
decided to proceed to trial to determine inter alia their precise character on the strength of the evidence to be
submitted by the parties. The petitioners have objected, arguing that no such evidence was needed to
substantiate their claim of jurisdictional immunity. Pending resolution of this question, we issued a temporary
restraining order on September 26, 1977, that has since then suspended the proceedings in this case in the
courta quo.
In past cases, this Court has held that where the character of the act complained of can be determined from
the pleadings exchanged between the parties before the trial, it is not necessary for the court to require them
to belabor the point at a trial still to be conducted. Such a proceeding would be superfluous, not to say unfair
to the defendant who is subjected to unnecessary and avoidable inconvenience.
10
Thus, in Baer v. Tizon, we held that a motion to dismiss a complaint against the commanding general of the
Olongapo Naval Base should not have been denied because it had been sufficiently shown that the act for
which he was being sued was done in his official capacity on behalf of the American government. The United
States had not given its consent to be sued. It was the reverse situation in Syquia v. Almeda Lopez," where we
sustained the order of the lower court granting a where we motion to dismiss a complaint against certain
officers of the U.S. armed forces also shown to be acting officially in the name of the American government.
The United States had also not waived its immunity from suit. Only three years ago, in United States of
12
America v. Ruiz, we set aside the denial by the lower court of a motion to dismiss a complaint for damages
filed against the United States and several of its officials, it appearing that the act complained of was
13
governmental rather than proprietary, and certainly not personal. In these and several other cases the Court
found it redundant to prolong the other case proceedings after it had become clear that the suit could not
prosper because the acts complained of were covered by the doctrine of state immunity.
It is abundantly clear in the present case that the acts for which the petitioners are being called to account
were performed by them in the discharge of their official duties. Sanders, as director of the special services
department of NAVSTA, undoubtedly had supervision over its personnel, including the private respondents,
and had a hand in their employment, work assignments, discipline, dismissal and other related matters. It is
not disputed that the letter he had written was in fact a reply to a request from his superior, the other
14
petitioner, for more information regarding the case of the private respondents. Moreover, even in the
absence of such request, he still was within his rights in reacting to the hearing officer's criticism—in effect a
direct attack against him—-that Special Services was practicing "an autocratic form of supervision."
As for Moreau,what he is claimed to have done was write the Chief of Naval Personnel for concurrence with
the conversion of the private respondents' type of employment even before the grievance proceedings had
even commenced. Disregarding for the nonce the question of its timeliness, this act is clearly official in nature,
performed by Moreau as the immediate superior of Sanders and directly answerable to Naval Personnel in
matters involving the special services department of NAVSTA In fact, the letter dealt with the financial and
budgetary problems of the department and contained recommendations for their solution, including the re-
designation of the private respondents. There was nothing personal or private about it.
Given the official character of the above-described letters, we have to conclude that the petitioners were,
legally speaking, being sued as officers of the United States government. As they have acted on behalf of that
government, and within the scope of their authority, it is that government, and not the petitioners personally,
11
12
that is responsible for their acts. Assuming that the trial can proceed and it is proved that the claimants have a
right to the payment of damages, such award will have to be satisfied not by the petitioners in their personal
capacities but by the United States government as their principal. This will require that government to perform
an affirmative act to satisfy the judgment, viz, the appropriation of the necessary amount to cover the
damages awarded, thus making the action a suit against that government without its consent.
There should be no question by now that such complaint cannot prosper unless the government sought to be
held ultimately liable has given its consent to' be sued. So we have ruled not only in Baer but in many other
decisions where we upheld the doctrine of state immunity as applicable not only to our own government but
15
also to foreign states sought to be subjected to the jurisdiction of our courts.
The practical justification for the doctrine, as Holmes put it, is that "there can be no legal right against the
16
authority which 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 which wisely admonishes that par in parem non habet
17
imperium and that a contrary attitude would "unduly vex the peace of nations." Our adherence to this
precept is formally expressed in Article II, Section 2, of our Constitution, where we reiterate from our previous
charters that the Philippines "adopts the generally accepted principles of international law as part of the law of
the land.
All this is not to say that in no case may a public officer be sued as such without the previous consent of the
state. To be sure, there are a number of well-recognized exceptions. It is clear that a public officer may be sued
as such to compel him to do an act required by law, as where, say, a register of deeds refuses to record a deed
18
of sale; or to restrain a Cabinet member, for example, from enforcing a law claimed to be
19
unconstitutional; or to compel the national treasurer to pay damages from an already appropriated
20
assurance fund; or the commissioner of internal revenue to refund tax over-payments from a fund already
21
available for the purpose; or, in general, to secure a judgment that the officer impleaded may satisfy by
himself without the government itself having to do a positive act to assist him. We have also held that where
the government itself has violated its own laws, the aggrieved party may directly implead the government
even without first filing his claim with the Commission on Audit as normally required, as the doctrine of state
22
immunity "cannot be used as an instrument for perpetrating an injustice."
23
This case must also be distinguished from such decisions as Festejo v. Fernando, where the Court held that a
bureau director could be sued for damages on a personal tort committed by him when he acted without or in
excess of authority in forcibly taking private property without paying just compensation therefor although he
did convert it into a public irrigation canal. It was not necessary to secure the previous consent of the state,
nor could it be validly impleaded as a party defendant, as it was not responsible for the defendant's
unauthorized act.
The case at bar, to repeat, comes under the rule and not under any of the recognized exceptions. The
government of the United States has not given its consent to be sued for the official acts of the petitioners,
who cannot satisfy any judgment that may be rendered against them. As it is the American government itself
that will have to perform the affirmative act of appropriating the amount that may be adjudged for the private
respondents, the complaint must be dismissed for lack of jurisdiction.
The Court finds that, even under the law of public officers, the acts of the petitioners are protected by the
presumption of good faith, which has not been overturned by the private respondents. Even mistakes
concededly committed by such public officers are not actionable as long as it is not shown that they were
24 25
motivated by malice or gross negligence amounting to bad faith. This, to, is well settled . Furthermore,
applying now our own penal laws, the letters come under the concept of privileged communications and are
26
not punishable, let alone the fact that the resented remarks are not defamatory by our standards. It seems
the private respondents have overstated their case.
12
 13
A final consideration is that since the questioned acts were done in the Olongapo Naval Base by the petitioners
in the performance of their official duties and the private respondents are themselves American citizens, it
would seem only proper for the courts of this country to refrain from taking cognizance of this matter and to
treat it as coming under the internal administration of the said base.
The petitioners' counsel have submitted a memorandum replete with citations of American cases, as if they
were arguing before a court of the United States. The Court is bemused by such attitude. While these decisions
do have persuasive effect upon us, they can at best be invoked only to support our own jurisprudence, which
we have developed and enriched on the basis of our own persuasions as a people, particularly since we
became independent in 1946.
We appreciate the assistance foreign decisions offer us, and not only from the United States but also from
Spain and other countries from which we have derived some if not most of our own laws. But we should not
place undue and fawning reliance upon them and regard them as indispensable mental crutches without
which we cannot come to our own decisions through the employment of our own endowments We live in a
different ambience and must decide our own problems in the light of our own interests and needs, and of our
qualities and even idiosyncrasies as a people, and always with our own concept of law and justice.
The private respondents must, if they are still sominded, pursue their claim against the petitioners in
accordance with the laws of the United States, of which they are all citizens and under whose jurisdiction the
alleged offenses were committed. Even assuming that our own laws are applicable, the United States
government has not decided to give its consent to be sued in our courts, which therefore has not acquired the
competence to act on the said claim,.
WHEREFORE, the petition is GRANTED. The challenged orders dated March 8,1977, August 9,1977, and
September 7, 1977, are SET ASIDE. The respondent court is directed to DISMISS Civil Case No. 2077-O. Our
Temporary restraining order of September 26,1977, is made PERMANENT. No costs.
SO ORDERED.
Narvasa, Gancayco, Grino-Aquiño and Medialdea, JJ., Concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11897 October 31, 1964
FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING COMPANY, defendant-appellant,
REPUBLIC OF THE PHILIPPINES, and COMPANIA MARITIMA, intervenors-appellees.
Sycip, Salazar & Associates and Enrique Fernando & Emma Quisumbing-Fernando for defendant-appellant.
The Government Corporate Counsel for intervenors-appellees.
Rafael Dinglasan for plaintiff-appellee.
13
14
BARRERA, J.:
On March 7, 1947, Fernando A. Froilan purchased from the Shipping Administration a boat described as MV/FS
197 for the sum of P200,000.00, with a down payment of P50,000,00. To secure payment of the unpaid
balance of the purchase price, a mortgage was constituted on the vessel in favor of the Shipping
Administration in a contract which provides, among others, the following:
In the event that the FIRST PARTY should elect to exercise its rights to rescind under the terms of this
contract, it shall have the right to take possession of the vessel herein sold in the condition that it is at
the time of rescission but in no case in a worse condition than when originally delivered to the second
party, ordinary wear and tear excepted and in case at the time of rescission the condition of the
vessel is not satisfactory to the FIRST PARTY, it shall have the right to have the vessel reconditioned,
repaired, dry-docked at the expense of the SECOND PARTY. The same right is hereby granted to the
FIRST PARTY in case the SECOND PARTY should for any reason refuse or fail to comply with this
condition of sale and return the vessel herein sold in a condition not satisfactory to the FIRST PARTY.
The right of rescission shall be considered as a cumulative remedy granted to the FIRST PARTY and
shall not in any way prejudice his right to demand immediate and complete payment of the purchase
price of the vessel under the terms herein provided, and to demand and collect from the SECOND
PARTY such damages caused by the non-compliance with this contract.
This contract was duly approved by the President of the Philippines.
Froilan appeared to have defaulted in spite of demands, not only in the payment of the first installment on the
unpaid balance of the purchase price and the interest thereon when they fell due, but also failed in his express
undertaking to pay the premiums on the insurance coverage of the vessel, obliging the Shipping
Administration to advance such payment to the insurance company. Consequently, the Shipping
Administration requested the Commissioner of Customs on June 1, 1948 to refuse clearance on the vessel and
the voyage thereof was ordered suspended.
Thereafter, Froilan asked for a reconsideration of the action taken by the Shipping Administration, claiming
that his failure to pay the required installments was due to the fact that he was awaiting the decision of the
President on the petition of the shipowners for an extension of the period of payment of the purchased
vessels, which petition was favorably acted upon.
On July 3, 1948, the Shipping Administration and Froilan entered into an agreement whereby the latter
undertook to liquidate immediately all of his outstanding accounts, including the insurance premiums, within
30 days, and have the vessel overhauled, and promised that in case of his default, he shall "waive, any formal
notice of demand and to redeliver the said vessel peaceably and amicably without any other proceedings"
(Exh. 39).
Again, Froilan failed to settle his accounts within the prescribed period, thus, the Shipping Administration
threatened to rescind the contract unless payment be immediately made. On August 28, 1948, upon Froilan's
request, the Shipping Administration agreed to release the vessel on condition that the same would be
overhauled and repaired and the accrued interest on the first installment would be paid. The Administration
also allowed the mortgagor to pay his overdue accounts, amounting now to P48,500.00 in monthly
installments, with warming that in case of further default, it would immediately repossess the vessel and
rescind the contract. Froilan failed to pay. On January 17, 1949, the Shipping Administration required him to
return the vessel or else file a bond for P25,000.00 in five days. In a letter dated January 28, 1949, Froilan
requested that the period for filing the bond be extended to February 15, 1949, upon the express condition
and understanding that:
14
 15
... . If I fail to file the required bond on the said date, February 15, 1949, to the satisfaction of the
Shipping Administration, I am willing to relinquish and I do hereby relinquish any and all rights I have
or may have on the said vessel including any payments made thereon to the Shipping Administration,
without prejudice to other rights the Shipping Administration may have against me under the
contract of sale executed in my favor.
I wish to reiterate that if I fail to file the bond within the period I have requested, any and all rights I
have on the vessel and any payments made to the Shipping Administration shall be considered
automatically forfeited in favor of the Shipping Administration and the ownership of the said vessel
will be as it is hereby automatically transferred to the Shipping Administration which is then hereby
authorized to take immediate possession of said vessel. (Exh. 66)
This letter of Froilan was submitted by the General Manager of the Shipping Administration to the board of
directors for proper consideration. By resolution of January 31, 1949, the petition was granted subject
specifically to the conditions set forth therein. Froilan again failed to make good his promises. Hence, on
February 18, 1949, the General Manager of the Shipping Ad-ministration wrote the Collector of Customs of
Manila, advising the latter that the Shipping Administration, by action of its board, terminated the contract
with Froilan, and requesting the suspension of the clearance of the boat effective that date (Exh. 70).
On February 21, 1949, the General Manager directed its officers, Capt. Laconico and others, to take immediate
possession of the vessel and to suspend the unloading of all cargoes on the same until the owners thereof
made the corresponding arrangement with the Shipping Administration. Pursuant to these instructions, the
boat was, not only actually repossessed, but the title thereto was registered again in the name of the Shipping
Administration, thereby re-transferring the ownership thereof to the government.
On February 22, 1949, Pan Oriental Shipping Co., hereinafter referred to as Pan Oriental, offered to charter
said vessel FS-197 for a monthly rent of P3,000.00. Because the government was then spending for the
guarding of the boat and subsistence of the crew-members since repossession, the Shipping Administration on
April 1, 1949, accepted Pan Oriental's offer "in principle" subject to the condition that the latter shall cause the
repair of the vessel, advancing the cost of labor and drydocking thereof, and the Shipping Administration to
furnish the necessary spare parts. In accordance with this charter contract, the vessel was delivered to the
possession of Pan Oriental.
In the meantime, or on February 22, 1949, Froilan tried to explain his failure to comply with the obligations he
assumed and asked that he be given another extension up to March 15, 1949 to file the necessary bond. Then
on March 8, Froilan offered to pay all his overdue accounts. However, as he failed to fulfill even these offers
made by him in these two communications, the Shipping Administration denied his petition for
reconsideration (of the rescission of the contract) on March 22, 1949. It should be noted that while his petition
for reconsideration was denied on March 22, it does not appear when he formally formulated his appeal. In
the meantime, as already stated, the boat has being repossessed by the Shipping Administration and the title
thereto re-registered in the name of the government, and delivered to the Pan Oriental in virtue of the charter
agreement. On June 2, 1949, Froilan protested to the President against the charter of the vessel.
On the same date, the Executive Office advised the Administration and the Commissioner of Customs not to
dispose of the vessel in favor of another party pending final decision by the President on the appeal of Froilan
(Exhs. 93-A and 93-D). But since the vessel was already cleared in favor of Pan Oriental prior to the receipt of
the foregoing communication, and allegedly in order to prevent its being made answerable for damages, the
General Manager of the Shipping Administration advised the Collector of Customs not to suspend the voyage
of the vessel pending final decision on the appeal of Froilan. Similar manifestation, to allow the Pan Oriental's
operation of the vessel without prejudice to whatever action the President may take in the case, was also
made by the Administration to the Executive Secretary.
15
16
On June 4, 1949, the Shipping Administration and the Pan Oriental formalized the charter agreement and
signed a bareboat contract with option to purchase, containing the following pertinent provisions:
III. CHARTER HIRE, TIME OF PAYMENT. — The CHARTERER shall pay to the owner a monthly charter
hire of THREE THOUSAND (P3,000.00) PESOS from date of delivery of the vessel, payable in advance
on or before the 5th of every current month until the return of the vessel to OWNER or purchase of
the vessel by CHARTERER.
XII. RIGHT OF OPTION TO PURCHASE. — The right of option to purchase the vessel at the price of
P150,000.00 plus the amount expended for its present repairs is hereby granted to the CHARTERER
within 120 days from the execution of this Contract, unless otherwise extended by the OWNER. This
right shall be deemed exercised only if, before the expiration of the said period, or its extension by
the OWNER the CHARTERER completes the payment, including any amount paid as Charter hire, of a
total sum of not less than twenty-five percentum (25%) of said price of the vessel.
The period of option may be extended by the OWNER without in any way affecting the other
provisions, stipulations, and terms of this contract.
If, for any reason whatsoever, the CHARTERER fails to exercise its option to purchase within the
period stipulated, or within the extension thereof by the OWNER, its right of option to purchase shall
be deemed terminated, without prejudice to the continuance of the Charter Party provisions of this
contract. The right to dispose of the vessel or terminate the Charter Party at its discretion is reserved
to the OWNER.
XIII. TRANSFER OF OWNERSHIP OF THE VESSEL. — After the CHARTERER has exercised his right of
option as provided in the preceding paragraph (XII), the vessel shall be deemed conditionally sold to
the purchaser, but the ownership thereof shall not be deemed transferred unless and until all the
price of the vessel, together with the interests thereon, and any other obligation due and payable to
the OWNER under this contract, have been fully paid by the CHARTERER.
xxx xxx xxx
XXI. APPROVAL OF THE PRESIDENT. — This contract shall take effect only upon approval of His
Excellency, the President.
On September 6, 1949, the Cabinet revoked the cancellation of Froilan's contract of sale and restored to him
all his rights thereunder, on condition that he would give not less than P10,000.00 to settle partially his
overdue accounts and that reimbursement of the expenses incurred for the repair and drydocking of the
vessel performed by Pan Oriental was to be made in accordance with future adjustment between him and the
Shipping Administration (Exh. I). Later, pursuant to this reservation, Froilan's request to the Executive
Secretary that the Administration advance the payment of the expenses incurred by Pan Oriental in the
drydocking and repair of the vessel, was granted on condition that Froilan assume to pay the same and file a
bond to cover said undertaking (Exh. 111).
On September 7, 1949, the formal bareboat charter with option to purchase filed on June 4, 1949, in favor of
the Pan Oriental was returned to the General Manager of the Shipping Administration without action (not
disapproval), only because of the Cabinet resolution of September 6, 1949 restoring Froilan to his rights under
the conditions set forth therein, namely, the payment of P10,000.00 to settle partially his overdue accounts
and the filing of a bond to guarantee the reimbursement of the expenses incurred by the Pan Oriental in the
drydocking and repair of the vessel. But Froilan again failed to comply with these conditions. And so the
Cabinet, considering Froilan's consistent failure to comply with his obligations, including those imposed in the
resolution of September 6, 1949, resolved to reconsider said previous resolution restoring him to his previous
rights. And, in a letter dated December 3, 1949, the Executive Secretary authorized the Administration to
16
 17
continue its charter contract with Pan Oriental in respect to FS-197 and enforce whatever rights it may still
have under the original contract with Froilan (Exh. 188).
Froilan, for his part, petitioned anew for a reconsideration of this action of the Cabinet, claiming that other
ship purchasers, including the President-Treasurer of the Pan Oriental himself, had also defaulted in payment
and yet no action to rescind their contracts had been taken against them. He also offered to make a cash
partial payment of P10,000.00 on his overdue accounts and reimburse Pan Oriental of all its necessary expense
on the vessel. Pan Oriental, however, not only expressed its unwillingness to relinquish possession of the
vessel, but also tendered the sum of P15,000.00 which, together with its alleged expenses already made on
the vessel, cover 25% of the cost of the vessel, as provided in the option granted in the bareboat contract (Exh.
122). This amount was accepted by the Administration as deposit, subject to the final determination of
Froilan's appeal by the President. The Executive Secretary was also informed of the exercise by Pan Oriental of
said option to purchase.
On August 25, 1950, the Cabinet resolved once more to restore Froilan to his rights under the original contract
of sale, on condition that he shall pay the sum of P10,000.00 upon delivery of the vessel to him, said amount
to be credited to his outstanding accounts; that he shall continue paying the remaining installments due, and
that he shall assume the expenses incurred for the repair and drydocking of the vessel (Exh. 134). Pan Oriental
protested to this restoration of Froilan's rights under the contract of sale, for the reason that when the vessel
was delivered to it, the Shipping Administration had authority to dispose of the said property, Froilan having
already relinquished whatever rights he may have thereon. Froilan paid the required cash of P10,000.00, and
as Pan Oriental refused to surrender possession of the vessel, he filed an action for replevin in the Court of
First Instance of Manila (Civil Case No. 13196) to recover possession thereof and to have him declared the
rightful owner of said property.
Upon plaintiff's filing a bond of P400,000.00, the court ordered the seizure of the vessel from Pan Oriental and
its delivery to the plaintiff. Pan Oriental tried to question the validity of this order in a petition
for certiorari filed in this Court (G.R. No. L-4577), but the same was dismissed for lack of merit by resolution of
February 22, 1951. Defendant accordingly filed an answer, denying the averments of the complaint.
The Republic of the Philippines, having been allowed to intervene in the proceeding, also prayed for the
possession of the vessel in order that the chattel mortgage constituted thereon may be foreclosed. Defendant
Pan Oriental resisted said intervention, claiming to have a better right to the possession of the vessel by
reason of a valid and subsisting contract in its favor, and of its right of retention, in view of the expenses it had
incurred for the repair of the said vessel. As counterclaim, defendant demanded of the intervenor to comply
with the latter's obligation to deliver the vessel pursuant to the provisions of the charter contract.
Thereafter, and upon plaintiff's presenting proof that he had made payment to the intervenor Republic of the
Philippines, of the sum of P162,576.96, covering the insurance premiums, unpaid balance of the purchase
price of the vessel and interest thereon, the lower court by order of February 8, 1952, dismissed the complaint
in intervention on the ground that the claim or demand therein had already been released. Said dismissal,
however, was made without prejudice to the determination of defendant's right, and that the release and
cancellation of the chattel mortgage did not "prejudge the question involved between the plaintiff and the
defendant which is still the subject of determination in this case."
In view of the dismissal of its complaint, intervenor Republic of the Philippines also moved for the dismissal of
defendant's counterclaims against it, which was granted by the court. On appeal by Pan Oriental to this Court
(G.R. No. L-6060), said order was reversed and the case remanded to the lower court for further proceedings.
Subsequently, Compañia Maritima, as purchaser of the vessel from Froilan, was allowed to intervene in the
proceedings (in the lower court), said intervenor taking common cause with the plaintiff Froilan. In its answer
to the complaint in intervention, defendant set up a counterclaim for damages in the sum of P50,000.00,
alleging that plaintiff secured the Cabinet resolutions and the writ of replevin, resulting in its deprivation of
17
18
possession of the, vessel, at the instigation and inducement of Compañia Maritima. This counterclaim was
denied by both plaintiff and intervenor Maritima.
On September 28, 1956, the lower court rendered a decision upholding Froilan's (and Compañia Maritima's)
right to the ownership and possession of the FS-197. It was ruled that Froilan's violations of the conditions of
the contract of sale in his favor did not automatically deprive him of his right of ownership of the vessel, which
passed to him upon execution of the contract, but merely gave rise to the Shipping Administration's right
either to foreclose the mortgage or rescind the contract by court action. As the Shipping Administration failed
to avail itself of any of these remedies, Froilan's right of ownership remained unaffected. And the subsequent
resolutions of the Cabinet, restoring him to his rights under the said contract, reaffirmed the same. The charter
contract between the Shipping Administration and defendant was declared null and void, not only because the
former could not have legally bound the vessel, but also due to the fact that said agreement has not been
perfected for lack of approval by the President of the Philippines. And, even assuming that the said charter
contract was valid, the lower court held that, as the owner (Republic of the Philippines) under the same
agreement was given the right to terminate the charter or dispose of the vessel anytime, the action of the
Cabinet in cancelling or withdrawing the rescission of Froilan's contract, had the effect of terminating the
charter agreement with the defendant. The court also dismissed (1) defendant's counterclaims against plaintiff
Froilan and intervenor Compañia Maritima, on the ground that it (defendant) was a possessor in bad faith, and
consequently, not entitled to damages; (2) plaintiff's counterclaims against defendant, for the reason that the
same should have been directed against intervenor Republic of the Philippines; and (3) defendant's
counterclaims said intervenor Republic, on the ground that the order dismissing the complaint in intervention
had already become final and it was materially impossible for the latter to secure possession of the vessel.
From this decision, Pan Oriental brought the instant appeal.
Contrary to appellant's contention, the ruling of the lower court that under the contract of sale with mortgage,
ownership of the vessel passed to Froilan, upon delivery of the property to the latter, must be sustained. It is
to be noted that unlike in the charter contract where it was specifically prescribed that ownership of the vessel
shall be transferred to the vendee only upon full payment of the purchase price, no similar provision appears
in the contract of sale in favor of Froilan. In the absence of stipulation to the contrary, the ownership of the
thing sold passes to the vendee upon the actual or constructive delivery thereof (Art. 1477, new Civil Code). It
is for this reason that Froilan was able to constitute a mortgage on the vessel in favor of the Administration, to
secure payment of the unpaid balance of the purchase price.
There is no gainsaying the fact that there was continuous violation by Froilan of the terms of said contract of
sale. The records conclusively show that notwithstanding the numerous opportunities given him, Froilan had
been remiss in the fulfillment of his obligations thereunder. Nevertheless, the lower court upheld his allegation
that the Administration may not legally rescind the contract without filing the corresponding complaint in
court.
1
Under Article 1191 of the Civil Code, in case of reciprocal obligations, the power to rescind the contract where
a party incurs in default, is impliedly given to the injured party. Appellee maintains however, that the law
contemplates of rescission of contract by judicial action and not a unilateral act by the injured party;
consequently, the action of the Shipping Administration contravenes said provision of the law. This is not
entirely correct, because there is also nothing in the law that prohibits the parties from entering into
agreement that violation of the terms of the contract would cause cancellation thereof, even without court
intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of
2
the contract. As already held judicial action is needed where there, is absence of special provision in the
contract granting to a party the right of rescission.
In the instant case, while it may be true that the contract of sale did not expressly give to the mortgagee the
right to cancel the agreement it was, nevertheless, provided therein that said party may rescind the contract
as it may see fit in case of breach of the terms thereof by the mortgagor. Taking into account the promises,
waivers and representations made by Froilan, to the extent that he agreed to the automatic transfer of
18
 19 20

ownership of the vessel to the Administration, should he fall to fulfill what was incumbent upon him, which did
happen, the rescission of the contract without judicial action is proper.

The next question to be determined is whether there had been a valid and enforceable charter contract in
favor of appellant Pan Oriental, and what was the effect thereon of the subsequent restoration to Froilan by Republic of the Philippines
the Cabinet, of his rights under the original contract of sale with mortgage. SUPREME COURT
Manila
It is not disputed that appellant Pan Oriental took possession of the vessel in question after it had been
repossessed by the Shipping Administration and title thereto reacquired by the government, and operated the FIRST DIVISION
same from June 2, 1949 after it had repaired the vessel until it was dispossessed of the property on February 3,
1951, in virtue of a bareboat charter contract entered into between said company and the Shipping G.R. No. L-29993 October 23, 1978
Administration. In the same agreement, appellant as charterer, was given the option to purchase the vessel,
which may be exercised upon payment of a certain amount within a specified period. The President and
LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO R. MAGSANOC, JESUS
Treasurer of the appellant company, tendered the stipulated initial payment on January 16, 1950. Appellant
MACARANAS, MAXIMO MANANGAN, FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all
now contends that having exercised the option, the subsequent Cabinet resolutions restoring Froilan's rights
Members of the Municipal Council of Malasiqui in 1959, Malasiqui, Pangasinan, petitioners,
on the vessel violated its existing rights over the same property. To the contention of plaintiff Froilan that the
vs.
charter contract never became effective because it never received presidential approval, as required therein,
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA,
Pan Oriental answers that the letter of the Executive Secretary dated December 3, 1949 (Exh. 118), authorizing
REMEDIOS and ROBERTO, all surnamed FONTANILLA, and THE HONORABLE COURT OF
the Shipping Administration to continue its charter contract with appellant, satisfies such requirement (of
APPEALS,respondents.
presidential approval). It is to be noted, however, that said letter was signed by the Executive Secretary only
and not under authority of the President. The same, therefore, cannot be considered to have attached unto
G.R. No. L-30183 October 23, 1978
the charter contract the required consent of the Chief Executive for its validity.

MUNICIPALITY OF MALASIQUI, petitioner,

Upon the other hand, the Cabinet resolutions purporting to restore Froilan to his former rights under the deed
vs.
of sale, cannot also be considered as an act of the President which is specifically required in all contracts
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA,
relating to these vessels (Executive Order No. 31, series of 1946). Actions of the Cabinet are merely
REMEDIOS and ROBERTO, all surnamed FONTANILLA, and the Honorable COURT OF APPEALS,respondents.
recommendatory or advisory in character. Unless afterwards specifically adopted by the President as his own
executive act, they cannot be considered as equivalent to the act of approval of the President expressly
required in cases involving disposition of these vessels. Julian M. Armas, Assistant Provincial Fiscal for petitioners.

In the circumstances of this case, therefore, the resulting situation is that neither Froilan nor the Pan Oriental
holds a valid contract over the vessel. However, since the intervenor Shipping Administration, representing the
government practically ratified its proposed contract with Froilan by receiving the full consideration of the sale
to the latter, for which reason the complaint in intervention was dismissed as to Froilan, and since Pan Oriental
has no capacity to question this actuation of the Shipping Administration because it had no valid contract in its
favor, the decision of the lower court adjudicating the vessel to FroiIan and its successor Compañia Maritima,
must be sustained. Nevertheless, under the circumstances already adverted to, Pan Oriental cannot be
considered a possessor in bad faith until after the institution of the instant case. However, since it is not
disputed that said appellant made useful and necessary expenses on the vessel, appellant is entitled to the
refund of such expenses with the right to retain the vessel until he has been reimbursed therefor (Art. 546,
Civil Code). As it is by the concerted acts of defendants and intervenor Republic of the Philippines that
appellant was deprived of the possession of the vessel over which appellant had a lien for his expenses,
3
appellees Froilan, Compañia Maritima, and the Republic of the Philippines are declared liable for the
reimbursement to appellant of its legitimate expenses, as allowed by law, with legal interest from the time of
disbursement.
Modified in this manner, the decision appealed from is affirmed, without costs. Case is remanded to the lower
court for further proceedings in the matter of expenses. So ordered.
19
Isidro L. Padilla for respondents.
MUÑOZ PALMA, J.:
These Petitions for review present the issue of whether or not the celebration of a town fiesta authorized by a
municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised Administrative Code is a
governmental or a corporate or proprietary function of the municipality.
A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of Malasiqui,
and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a death which occurred
during the celebration of the town fiesta on January 22, 1959, and which was attributed to the negligence of
the municipality and its council members.
The following facts are not in dispute:
On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it
resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23, 1959." Resolution
No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn
organized a sub-committee on entertainment and stage, with Jose Macaraeg as Chairman. the council
appropriated the amount of P100.00 for the construction of 2 stages, one for the "zarzuela" and another for
the cancionan Jose Macaraeg supervised the construction of the stage and as constructed the stage for the
20
 21
"zarzuela" was "5-½ meters by 8 meters in size, had a wooden floor high at the rear and was supported by 24
1 6
bamboo posts — 4 in a row in front, 4 in the rear and 5 on each side — with bamboo braces."
The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui employees of the
Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of January 22 for the
performance and one of the members of the group was Vicente Fontanilla. The program started at about
10:15 o'clock that evening with some speeches, and many persons went up the stage. The "zarzuela" then
began but before the dramatic part of the play was reached, the stage collapsed and Vicente Fontanilla who
was at the rear of the stage was pinned underneath. Fontanilia was taken to tile San Carlos General Hospital
where he died in the afternoon of the following day.
The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on September 11,
1959 to recover damages. Named party-defendants were the Municipality of Malasiqui, the Municipal Council
of Malasiqui and all the individual members of the Municipal Council in 1959.
Answering the complaint defendant municipality invoked inter alia the principal defense that as a legally and
duly organized public corporation it performs sovereign functions and the holding of a town fiesta was an
exercise of its governmental functions from which no liability can arise to answer for the negligence of any of
its agents.
The defendant councilors inturn maintained that they merely acted as agents of the municipality in carrying
out the municipal ordinance providing for the management of the town fiesta celebration and as such they are
likewise not liable for damages as the undertaking was not one for profit; furthermore, they had exercised due
2
care and diligence in implementing the municipal ordinance.
After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the defendants
exercised due diligence 'm the construction of the stage. From his findings he arrived at the conclusion that the
Executive Committee appointed by the municipal council had exercised due diligence and care like a good
father of the family in selecting a competent man to construct a stage strong enough for the occasion and that
if it collapsed that was due to forces beyond the control of the committee on entertainment, consequently,
the defendants were not liable for damages for the death of Vicente Fontanilla. The complaint was accordingly
3 8
dismissed in a decision dated July 10, 1962.
The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968, the Court of
Appeals through its Fourth Division composed at the time of Justices Salvador V. Esguerra, Nicasio A. Yatco and
Eulogio S. Serrano reversed the trial court's decision and ordered all the defendants-appellees to pay jointly
and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and actual damages:
4
P1200.00 its attorney's fees; and the costs.
The case is now before Us on various assignments of errors all of which center on the proposition stated at the
sentence of this Opinion and which We repeat:
Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or public
function or is it or a private or proprietary character?
1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with the
faculties of municipal corporations to be exercised by and through their respective municipal governments in
conformity with law, and in their proper corporate name, they may inter alia sue and be sued, and contract
and be contracted with.
5 persons ex contract or ex delicto.
The powers of a municipality are twofold in character public, governmental or political on the one hand, and
corporate, private, or proprietary on the other. Governmental powers are those exercised by the corporation
in administering the powers of the state and promoting the public welfare and they include the legislative,
21
22
judicial public, and political Municipal powers on the other hand are exercised for the special benefit and
advantage of the community and include those which are ministerial private and corporate.
As to when a certain activity is governmental and when proprietary or private, that is generally a difficult
matter to determine. The evolution of the municipal law in American Jurisprudence, for instance, has shown
that; none of the tests which have evolved and are stated in textbooks have set down a conclusive principle or
rule, so that each case will have to be determined on the basis of attending circumstances.
In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper has ... a public
character as regards the state at large insofar as it is its agent in government, and private (so-called) insofar as
7
it is to promote local necessities and conveniences for its own community.
Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of Indiana in
1916, thus:
Municipal corporations exist in a dual capacity, and their functions are two fold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental Their officers and agents in such
capacity, though elected or appointed by the are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state.
In the other capacity the municipalities exercise a private. proprietary or corporate right,
arising from their existence as legal persons and not as public agencies. Their officers and
agents in the performance of such functions act in behalf of the municipalities in their
corporate or in. individual capacity, and not for the state or sovereign power. (112 N. E 994-
995)
In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant T. Trent,
relying mainly on American Jurisprudence classified certain activities of the municipality as governmental, e.g.:
regulations against fire, disease, preservation of public peace, maintenance of municipal prisons,
establishment of schools, post-offices, etc. while the following are corporate or proprietary in character, viz:
municipal waterwork, slaughter houses, markets, stables, bathing establishments, wharves, ferries, and
fisheries. Maintenance of parks, golf courses, cemeteries and airports among others, are also recognized as
9
municipal or city activities of a proprietary character.
2. This distinction of powers becomes important for purposes of determining the liability of the municipality
for the acts of its agents which result in an injury to third persons.
If the injury is caused in the course of the performance of a governmental function or duty no recovery, as a
10
rule, can be. had from the municipality unless there is an existing statute on the matter, nor from its officers,
so long as they performed their duties honestly and in good faith or that they did not act wantonly and
11
maliciously. InPalafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck driver employed by the
provincial government of Ilocos Norte ran over Proceto Palafox in the course of his work at the construction of
a road. The Supreme Court in affirming the trial court's dismissal of the complaint for damages held that the
province could not be made liable because its employee was in the performance of a governmental function —
the construction and maintenance of roads — and however tragic and deplorable it may be, the death of
12
Palafox imposed on the province no duty to pay monetary consideration.
With respect to proprietary functions, the settled rule is that a municipal corporation can be held liable to third
13 14
Municipal corporations are subject to be sued upon contracts and in tort. ...
xxx xxx xxx
22
 23
The rule of law is a general one, that the superior or employer must answer civilly for the
negligence or want of skill of its agent or servant in the course or fine of his employment, by
which another, who is free from contributory fault, is injured. Municipal corporations under
the conditions herein stated, fall within the operation of this rule of law, and are liable,
accordingly, to civil actions for damages when the requisite elements of liability co-exist. ...
(Dillon on Municipal Corporations, 5th ed. Sec. 1610,1647, cited in Mendoza v. de
Leon, supra. 514)
3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of the town
fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a private or proprietary function of
the municipality.
Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides:
Section 2282. Celebration of fiesta. — fiesta may be held in each municipality not oftener
than once a year upon a date fixed by the municipal council A fiesta s not be held upon any
other date than that lawfully fixed therefor, except when, for weighty reasons, such as
typhoons, foundations, earthquakes, epidemics, or other public ties, the fiesta cannot be
hold in the date fixed in which case it may be held at a later date in the same year, by
resolution of the council.
This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not impose
upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or historical
event of the town is in essence an act for the special benefit of the community and not for the general welfare
of the public performed in pursuance of a policy of the state. The mere fact that the celebration, as claimed
was not to secure profit or gain but merely to provide entertainment to the town inhabitants is not a
conclusive test. For instance, the maintenance of parks is not a source of income for the nonetheless it is
private undertaking as distinguished from the maintenance of public schools, jails, and the like which are for
public service.
As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an
undertaking or function of a municipality; the surrounding circumstances of a particular case are to be
considered and will be decisive. The basic element, however beneficial to the public the undertaking may be, is
that it is governmental in essence, otherwise. the function becomes private or proprietary in character. Easily,
15
no overnmental or public policy of the state is involved in the celebration of a town fiesta.
4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable for
damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the municipality's
officers, employees, or agents.
Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. . .
Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for
one's own acts or omission, but also for those of persons for whom one is responsible. . .
On this point, the Court of Appeals found and held that there was negligence.
The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now petitioners),
that a member of the "extravaganza troupe removed two principal braces located on the front portion of the
stage and u them to hang the screen or "telon", and that when many people went up the stage the latter
collapsed. This testimony was not believed however by respondent appellate court, and rightly so. According
to said defendants, those two braces were "mother" or "principal" braces located semi-diagonally from the
23
24
front ends of the stage to the front posts of the ticket booth located at the rear of the stage and were fastened
16
with a bamboo twine. That being the case, it becomes incredible that any person in his right mind would
remove those principal braces and leave the front portion of the stage practically unsuported Moreover, if that
did happen, there was indeed negligence as there was lack of suspension over the use of the stage to prevent
such an occurrence.
At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo braces
denied having done go. The Court of Appeals said "Amor by himself alone could not have removed the two
braces which must be about ten meters long and fastened them on top of the stags for the curtain. The stage
was only five and a half meters wide. Surely, it, would be impractical and unwieldy to use a ten meter bamboo
17
pole, much more two poles for the stage curtain.
The appellate court also found that the stage was not strong enough considering that only P100.00 was
appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of wooden
planks, the Post and braces used were of bamboo material We likewise observe that although the stage was
described by the Petitioners as being supported by "24" posts, nevertheless there were only 4 in front, 4 at the
rear, and 5 on each side. Where were the rest?
The Court of Appeals thus concluded
The court a quo itself attributed the collapse of the stage to the great number of onlookers
who mounted the stage. The municipality and/or its agents had the necessary means within
its command to prevent such an occurrence. Having filed to take the necessary steps to
maintain the safety of the stage for the use of the participants in the stage presentation
prepared in connection with the celebration of the town fiesta, particularly, in preventing
non participants or spectators from mounting and accumulating on the stage which was not
constructed to meet the additional weight- the defendant-appellees were negligent and are
liable for the death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993)
The findings of the respondent appellate court that the facts as presented to it establish negligence as a
matter of law and that the Municipality failed to exercise the due diligence of a good father of the family, will
not disturbed by Us in the absence of a clear showing of an abuse of discretion or a gross misapprehension of
18
facts."
Liability rests on negligence which is "the want of such care as a person of ordinary prudence would exercise
19
under the circumstances of the case."
Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during the town
fiesta was a "donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in
Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and constructed
precisely a "zarzuela stage" for the purpose, the participants in the stage show had the right to expect that the
Municipality through its "Committee on entertainment and stage" would build or put up a stage or platform
strong enough to sustain the weight or burden of the performance and take the necessary measures to insure
20
the personal safety of the participants. We agree.
Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which was an
action against the city for injuries sustained from a fall when plaintiff was descending the steps of the city
auditorium. The city was conducting a "Know your City Week" and one of the features was the showing of a
motion picture in the city auditorium to which the general public was invited and plaintiff Sanders was one of
those who attended. In sustaining the award for Damages in favor of plaintiff, the District Court of Appeal,
Second district, California, heldinter alia that the "Know your City Week" was a "proprietary activity" and not a
"governmental one" of the city, that defendant owed to plaintiff, an invitee the duty of exercising ordinary
care for her safety, and plaintiff was entitled to assume that she would not be exposed to a danger (which in
24
 25
this case consisted of lack of sufficient illumination of the premises) that would come to her through a
21
violation of defendant duty.
We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality of Malasiqui
resolved to celebrate the town fiesta in January of 1959; it created a committee in charge of the
entertainment and stage; an association of Malasiqui residents responded to the call for the festivities and
volunteered to present a stage show; Vicente Fontanilla was one of the participants who like Sanders had the
right to expect that he would be exposed to danger on that occasion.
Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was Jose
Macaraeg who constructed the stage. The municipality acting through its municipal council appointed
Macaraeg as chairman of the sub-committee on entertainment and in charge of the construction of the
"zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine of respondent
superior mentioned earlier, petitioner is responsible or liable for the negligence of its agent acting within his
22
assigned tasks.
... when it is sought to render a municipal corporation liable for the act of servants or agents, a cardinal inquiry
is, whether they are the servants or agents of the corporation. If the corporation appoints or elects them, can
control them in the discharge of their duties, can continue or remove the can hold them responsible for the
manner in which they discharge their trust, and if those duties relate to the exercise of corporate powers, and
are for the benefit of the corporation in its local or special interest, they may justly be regarded as its agents or
servants, and the maxim of respondent superior applies." ... (Dillon on Municipal Corporations, 5th Ed., Vol IV,
p. 2879)
5. The remaining question to be resolved centers on the liability of the municipal councilors who enacted the
ordinance and created the fiesta committee.
The Court of Appeals held the councilors jointly and solidarity liable with the municipality for damages under
Article 27 of the Civil Code which provides that d any person suffering ing material or moral loss because a
public servant or employee refuses or neglects, without just cause to perform his official duty may file an
23
action for damages and other relief at the latter.
In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling that the
holding of a town fiesta is not a governmental function and that there was negligence on their part for not
maintaining and supervising the safe use of the stage, in applying Article 27 of the Civil Code against them and
in not holding Jose Macaraeg liable for the collapse of the stage and the consequent death of Vicente
24
Fontanilla.
We agree with petitioners that the Court of Appeals erred in applying Article 27 of the Civil Code against the
for this particular article covers a case of nonfeasance or non-performance by a public officer of his official
duty; it does not apply to a case of negligence or misfeasance in carrying out an official duty.
If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are concerned, it is
because of a plain error committed by respondent court which however is not invoked in petitioners' brief.
In Miguel v. The Court of appeal. et al., the Court, through Justice, now Chief Justice, Fred Ruiz Castro, held
that the Supreme Court is vested with ample authority to review matters not assigned as errors in an appeal if
it finds that their consideration and resolution are indispensable or necessary in arriving at a just decision in a
25
given case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. We believe that this
pronouncement can well be applied in the instant case.
The Court of Appeals in its decision now under review held that the celebration of a town fiesta by the
Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal consequence
25
26
thereof is that the Municipality stands on the same footing as an ordinary private corporation with the
municipal council acting as its board of directors. It is an elementary principle that a corporation has a
26
personality, separate and distinct from its officers, directors, or persons composing it and the latter are not
as a rule co-responsible in an action for damages for tort or negligence culpa aquilla committed by the
corporation's employees or agents unless there is a showing of bad faith or gross or wanton negligence on
27
their part.
xxx xxx xxx
The ordinary doctrine is that a director, merely by reason of his office, is not personally
Stable for the torts of his corporation; he Must be shown to have personally voted for or
otherwise participated in them ... Fletcher Encyclopedia Corporations, Vol 3A Chapt 11, p.
207)
Officers of a corporation 'are not held liable for the negligence of the corporation merely
because of their official relation to it, but because of some wrongful or negligent act by such
officer amounting to a breach of duty which resulted in an injury ... To make an officer of a
corporation liable for the negligence of the corporation there must have been upon his part
such a breach of duty as contributed to, or helped to bring about, the injury; that is to say, he
must be a participant in the wrongful act. ... (pp. 207-208, Ibid.)
xxx xxx xxx
Directors who merely employ one to give a fireworks Ambition on the corporate are not
personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.)
On these people We absolve Use municipal councilors from any liability for the death of Vicente Fontanilla.
The records do not show that said petitioners directly participated in the defective construction of the
"zarzuela" stage or that they personally permitted spectators to go up the platform.
6. One last point We have to resolve is on the award of attorney's fees by respondent court. Petitioner-
municipality assails the award.
Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be granted
when the court deems it just and equitable. In this case of Vicente Fontanilla, although respondent appellate
court failed to state the grounds for awarding attorney's fees, the records show however that attempts were
made by plaintiffs, now private respondents, to secure an extrajudicial compensation from the municipality:
that the latter gave prorases and assurances of assistance but failed to comply; and it was only eight month
after the incident that the bereaved family of Vicente Fontanilla was compelled to seek relief from the courts
to ventilate what was believed to be a just cause.
28
We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a matter
of judicial discretion. The amount of P1,200.00 is fair and reasonable.
PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the Municipality of
Malasiqui is concerned (L-30183), and We absolve the municipal councilors from liability and SET ASIDE the
judgment against them (L-9993).
Without pronouncement as to costs.
SO ORDERED,
26
 27
Teehankee (Chairman), Makasiar, Fernandez, and Guerrero, JJ., concur.
SECOND DIVISION
[G.R. No. 102667. February 23, 2000]
AMADO J. LANSANG, petitioner, vs. COURT OF APPEALS, GENERAL ASSEMBLY OF THE BLIND, INC., and JOSE
IGLESIAS, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition to review the decision of the Court of Appeals in C.A. G.R. CV No. 27244, which set aside
the ruling of the Regional Trial Court, Manila, Branch 8, in Civil Case No. 88-43887, and ordered petitioner
Amado J. Lansang to pay private respondent Jose Iglesias P50,000.00 in moral damages, P10,000.00 in
exemplary damages and P5,000.00 in attorney’s fees.
Like public streets, public parks are beyond the commerce of man. However, private respondents were
allegedly awarded a "verbal contract of lease" in 1970 by the National Parks Development Committee (NPDC),
[1]
a government initiated civic body engaged in the development of national parks, including Rizal Park, but
actually administered by high profile civic leaders and journalists. Whoever in NPDC gave such "verbal"
accommodation to private respondents was unclear, for indeed no document or instrument appears on record
to show the grantor of the verbal license to private respondents to occupy a portion of the government park
dedicated to the national hero’s memory.
Private respondents were allegedly given office and library space as well as kiosks area selling food and drinks.
One such kiosk was located along T.M. Kalaw St., in front of the Army and Navy Club. Private respondent
General Assembly of the Blind, Inc. (GABI) was to remit to NPDC, 40 percent of the profits derived from
[2]
operating the kiosks, without again anything shown in the record who received the share of the profits or
how they were used or spent.
With the change of government after the EDSA Revolution, the new Chairman of the NPDC, herein petitioner,
sought to clean up Rizal Park. In a written notice dated February 23, 1988 and received by private respondents
on February 29, 1988, petitioner terminated the so-called verbal agreement with GABI and demanded that the
[3]
latter vacate the premises and the kiosks it ran privately within the public park. In another notice dated
[4]
March 5, 1988, respondents were given until March 8, 1988 to vacate.
The latter notice was signed by private respondent Iglesias, GABI president, allegedly to indicate his conformity
to its contents. However, Iglesias, who is totally blind, claims that he was deceived into signing the notice. He
was allegedly told by Ricardo Villanueva, then chief warden of Rizal Park, that he was merely acknowledging
receipt of the notice. Although blind, Iglesias as president was knowledgeable enough to run GABI as well as its
business.
27
28
On the day of the supposed eviction, GABI filed an action for damages and injunction in the Regional Trial
[5]
Court against petitioner, Villanueva, and "all persons acting on their behalf". The trial court issued a
[6]
temporary restraining order on the same day.
The TRO expired on March 28, 1988. The following day, GABI was finally evicted by NPDC.
GABI’s action for damages and injunction was subsequently dismissed by the RTC, ruling that the complaint
was actually directed against the State which could not be sued without its consent. Moreover, the trial court
ruled that GABI could not claim damages under the alleged oral lease agreement since GABI was a mere
accommodation concessionaire. As such, it could only recover damages upon proof of the profits it could
realize from the concession. The trial court noted that no such proof was presented.
On appeal, the Court of Appeals reversed the decision of the trial court.
The Court of Appeals ruled that the mere allegation that a government official is being sued in his official
capacity is not enough to protect such official from liability for acts done without or in excess of his
[7]
authority. Granting that petitioner had the authority to evict GABI from Rizal Park, "the abusive and
capricious manner in which that authority was exercised amounted to a legal wrong for which he must now be
[8]
held liable for damages" according to the Court of Appeals.
The Court of Appeals noted that, as the trial court observed, the eviction of GABI came at the heels of two
significant incidents. First, after private respondent Iglesias extended monetary support to striking workers of
the NPDC, and second, after Iglesias sent the Tanodbayan, a letter on November 26, 1987, denouncing alleged
[9]
graft and corruption in the NPDC. These, according to the Court of Appeals, should not have been taken
against GABI, which had been occupying Rizal Park for nearly 20 years. GABI was evicted purportedly for
[10]
violating its verbal agreement with NPDC. However, the Court of Appeals pointed out that NPDC failed to
present proof of such violation.
[11]
[12]
The Court of Appeals found petitioner liable for damages under Articles 19, 21, and 24 of the Civil Code.
The Court of Appeals absolved from liability all other persons impleaded in GABI’s complaint since it appeared
that they were merely acting under the orders of petitioner. The new officers of NPDC, additionally impleaded
by GABI, were likewise absolved from liability, absent any showing that they participated in the acts
complained of. Petitioner was ordered to pay private respondent Iglesias moral and exemplary damages and
attorney’s fees.
Hence, this petition, in which petitioner raises the following issues:
I. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT HOLDING THAT PRIVATE
RESPONDENTS’ COMPLAINT AGAINST PETITIONER, AS CHAIRMAN OF NPDC, AND HIS CO-
DEFENDANTS IN CIVIL CASE NO. 88-43887, IS IN EFFECT A SUIT AGAINST THE STATE WHICH
CANNOT BE SUED WITHOUT ITS CONSENT.
II. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT HOLDING THAT PETITIONER’S ACT
OF TERMINATING RESPONDENT GABI’S CONCESSION IS VALID AND DONE IN THE LAWFUL
[13]
PERFORMANCE OF OFFICIAL DUTY.
Petitioner insists that the complaint filed against him is in reality a complaint against the State, which could not
prosper without the latter’s consent. He anchors his argument on the fact that NPDC is a government agency,
and that when he ordered the eviction of GABI, he was acting in his capacity as chairman of NPDC. Petitioner
avers that the mere allegation that he was being sued in his personal capacity did not remove the case from
the coverage of the law of public officers and the doctrine of state immunity.
28
 29 30

Petitioner points out that Iglesias signed the notice of eviction to indicate his conformity thereto. He contends
that as evidence of private respondents’ bad faith, they sued petitioner instead of complying with their
undertaking to vacate their library and kiosk at Rizal Park.
Petitioner adds that during the actual eviction, no untoward incident occurred. GABI’s properties were
properly inventoried and stored.
We find, however, no evidence of such abuse of authority on record. As earlier stated, Rizal Park is beyond the
commerce of man and, thus, could not be the subject of a lease contract. Admittedly, there was no written
contract. That private respondents were allowed to occupy office and kiosk spaces in the park was only a
matter of accommodation by the previous administrator. This being so, also admittedly, petitioner may validly
discontinue the accommodation extended to private respondents, who may be ejected from the park when
necessary. Private respondents cannot and does not claim a vested right to continue to occupy Rizal Park.

According to petitioner, the Court of Appeals’ observation that the eviction was prompted by Iglesias’ support
for striking NPDC workers and the letter-complaint sent to the Tanodbayan is merely conjectural.
Finally, petitioner avers that the move to evict GABI and award the spaces it occupied to another group was an
executive policy decision within the discretion of NPDC. GABI’s possession of the kiosks as concessionaire was
by mere tolerance of NPDC and, thus, such possession may be withdrawn at any time, with or without cause.
On the other hand, private respondents aver that petitioner acted beyond the scope of his authority when he
showed malice and bad faith in ordering GABI’s ejectment from Rizal Park. Quoting from the decision of the
Court of Appeals, private respondents argue that petitioner is liable for damages for performing acts "to injure
an individual rather than to discharge a public duty."
[14]
While private respondents recognize the authority of petitioner to terminate the agreement with GABI "if [the
[15]
contract] is prejudicial to the interest of the NPDC," they maintain that petitioner’s personal interest, and
not that of the NPDC, was the root cause of GABI’s ejectment.
The Court of Appeals awarded private respondent Iglesias moral and exemplary damages and attorney’s fees.
However, we find no evidence on record to support Iglesias’ claim that he suffered moral injury as a result of
GABI’s ejectment from Rizal Park. Absent any satisfactory proof upon which the Court may base the amount of
[22]
damages suffered, the award of moral damages cannot be sustained.
Neither can we sustain the award of exemplary damages, which may only be awarded in addition to moral,
[23]
temperate, liquidated, or compensatory damages. We also disallow the award for attorney’s fees, which can
only be recovered per stipulation of the parties, which is absent in this case. There is no showing that any of
[24]
the exceptions justifying the award of attorney’s fees absent a stipulation is present in this case.
WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 27244 is
hereby SET ASIDE, and the DISMISSAL of the complaint for damages by the trial court for want of merit is
AFFIRMED. No costs.
SO ORDERED.

The doctrine of state immunity from suit applies to complaints filed against public officials for acts done in the
performance of their duties. The rule is that the suit must be regarded as one against the state where
satisfaction of the judgment against the public official concerned will require the state itself to perform a
[16]
positive act, such as appropriation of the amount necessary to pay the damages awarded to the plaintiff.

The rule does not apply where the public official is charged in his official capacity for acts that are unlawful and
[17]
injurious to the rights of others. Public officials are not exempt, in their personal capacity, from liability Republic of the Philippines
[18]
arising from acts committed in bad faith. SUPREME COURT
Manila
Neither does it apply where the public official is clearly being sued not in his official capacity but in his personal
capacity, although the acts complained of may have been committed while he occupied a public position. THIRD DIVISION

We are convinced that petitioner is being sued not in his capacity as NPDC chairman but in his personal
capacity. The complaint filed by private respondents in the RTC merely identified petitioner as chairman of the
[19]
NPDC, but did not categorically state that he is being sued in that capacity. Also, it is evident from paragraph
G.R. No. 104269 November 11, 1993
4 of said complaint that petitioner was sued allegedly for having personal motives in ordering the ejectment of
GABI from Rizal Park.
DEPARTMENT OF AGRICULTURE, petitioner,
vs.
"4. Defendant AMADO J. LANSANG, JR., the Chairman of the National Parks Development
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Committee, acting under the spirit of revenge, ill-will, evil motive and personal resentment
against plaintiff JOSE IGLESIAS, served on the plaintiff corporation a letter, dated February
23, 1988 terminating plaintiff’s lease agreement with a demand for the plaintiff corporation Roy Lago Salcedo for private respondents.
[20]
to vacate its office premises…" (Underscoring supplied.)

The parties do not dispute that it was petitioner who ordered the ejectment of GABI from their office and kiosk
at Rizal Park. There is also no dispute that petitioner, as chairman of the NPDC which was the agency tasked to VITUG, J.:
[21]
administer Rizal Park, had the authority to terminate the agreement with GABI and order the organization’s
ejectment. The question now is whether or not petitioner abused his authority in ordering the ejectment of For consideration are the incidents that flow from the familiar doctrine of non-suability of the state.
private respondents.

29 30
 31
1
In this petition for certiorari, the Department of Agriculture seeks to nullify the Resolution, dated 27
November 1991, of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City,
denying the petition for injunction, prohibition and mandamus that prays to enjoin permanently the NLRC's
2
Regional Arbitration Branch X and Cagayan de Oro City Sheriff from enforcing the decision of 31 May 1991 of
the Executive Labor Arbiter and from attaching and executing on petitioner's property.
3
The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a contract on 01
April 1989 for security services to be provided by the latter to the said governmental entity. Save for the
increase in the monthly rate of the guards, the same terms and conditions were also made to apply to another
contract, dated 01 May 1990, between the same parties. Pursuant to their arrangements, guards were
deployed by Sultan Agency in the various premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security Agency filed a complaint for underpayment of
wages, non-payment of 13th month pay, uniform allowances, night shift differential pay, holiday pay and
4
overtime pay, as well as for damages, before the Regional Arbitration Branch X of Cagayan de Oro City,
docketed as NLRC Case No. 10-09-00455-90 (or 10-10-00519-90, its original docket number), against the
Department of Agriculture and Sultan Security Agency.
The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner
and jointly and severallyliable with Sultan Security Agency for the payment of money claims, aggregating
P266,483.91, of the complainant security guards. The petitioner and Sultan Security Agency did not appeal the
decision of the Labor Arbiter. Thus, the decision became final and executory.
5
On 18 July 1991, the Labor Arbiter issued a writ of execution. commanding the City Sheriff to enforce and
execute the judgment against the property of the two respondents. Forthwith, or on 19 July 1991, the City
Sheriff levied on execution the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit
6
Toyota Mini Cruiser, and one (1) unit Toyota Crown. These units were put under the custody of Zacharias Roa,
the property custodian of the petitioner, pending their sale at public auction or the final settlement of the
case, whichever would come first.
A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of injunction was filed by
the petitioner with the National Labor Relations Commission (NLRC), Cagayan de Oro, alleging, inter alia, that
the writ issued was effected without the Labor Arbiter having duly acquired jurisdiction over the petitioner,
and that, therefore, the decision of the Labor Arbiter was null and void and all actions pursuant thereto should
be deemed equally invalid and of no legal, effect. The petitioner also pointed out that the attachment or
seizure of its property would hamper and jeopardize petitioner's governmental functions to the prejudice of
the public good.
On 27 November 1991, the NLRC promulgated its assailed resolution; viz:
WHEREFORE, premises considered, the following orders are issued:
1. The enforcement and execution of the judgments against petitioner in NLRC RABX Cases
Nos. 10-10-00455-90; 10-10-0481-90 and 10-10-00519-90 are temporarily suspended for a
period of two (2) months, more or less, but not extending beyond the last quarter of
calendar year 1991 to enable petitioner to source and raise funds to satisfy the judgment
awards against it;
2. Meantime, petitioner is ordered and directed to source for funds within the period above-
stated and to deposit the sums of money equivalent to the aggregate amount. it has been
adjudged to pay jointly and severally with respondent Sultan Security Agency with the
Regional Arbitration Branch X, Cagayan de Oro City within the same period for proper
dispositions;
31
32
3. In order to ensure compliance with this order, petitioner is likewise directed to put up and
post sufficient surety and supersedeas bond equivalent to at least to fifty (50%) percent of
the total monetary award issued by a reputable bonding company duly accredited by the
Supreme Court or by the Regional Trial Court of Misamis Oriental to answer for the
satisfaction of the money claims in case of failure or default on the part of petitioner to
satisfy the money claims;
4. The City Sheriff is ordered to immediately release the properties of petitioner levied on
execution within ten (10) days from notice of the posting of sufficient surety or supersedeas
bond as specified above. In the meanwhile, petitioner is assessed to pay the costs and/or
expenses incurred by the City Sheriff, if any, in connection with the execution of the
judgments in the above-stated cases upon presentation of the appropriate claims or
vouchers and receipts by the city Sheriff, subject to the conditions specified in the NLRC
Sheriff, subject to the conditions specified in the NLRC Manual of Instructions for Sheriffs;
5. The right of any of the judgment debtors to claim reimbursement against each other for
any payments made in connection with the satisfaction of the judgments herein is hereby
recognized pursuant to the ruling in the Eagle Security case, (supra). In case of dispute
between the judgment debtors, the Executive Labor Arbiter of the Branch of origin may upon
proper petition by any of the parties conduct arbitration proceedings for the purpose and
thereby render his decision after due notice and hearings;
7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of preliminary
injunction previously issued is Lifted and Set Aside and in lieu thereof, a Temporary Stay of
Execution is issued for a period of two (2) months but not extending beyond the last quarter
of calendar year 1991, conditioned upon the posting of a surety or supersedeas bond by
petitioner within ten (10) days from notice pursuant to paragraph 3 of this disposition. The
motion to admit the complaint in intervention isDenied for lack of merit while the motion to
dismiss the petition filed by Duty Sheriff is Noted
SO ORDERED.
In this petition for certiorari, the petitioner charges the NLRC with grave abuse of discretion for refusing to
quash the writ of execution. The petitioner faults the NLRC for assuming jurisdiction over a money claim
against the Department, which, it claims, falls under the exclusive jurisdiction of the Commission on Audit.
More importantly, the petitioner asserts, the NLRC has disregarded the cardinal rule on the non-suability of
the State.
The private respondents, on the other hand, argue that the petitioner has impliedly waived its immunity from
suit by concluding a service contract with Sultan Security Agency.
The basic postulate enshrined in the constitution that "(t)he State may not be sued without its
7
consent," reflects nothing less than a recognition of the sovereign character of the State and an express
8
affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It is based on the very
essence of sovereignty. As has been aptly observed, by Justice Holmes, a sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on the logical and practical ground that there can be
9
no legal right as against the authority that makes the law on which the right depends. True, the doctrine, not
too infrequently, is derisively called "the royal prerogative of dishonesty" because it grants the state the
10
prerogative to defeat any legitimate claim against it by simply invoking its non-suability. We have had
occasion, to explain in its defense, however, that a continued adherence to the doctrine of non-suability
cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its
multifarious functions would be far greater in severity than the inconvenience that may be caused private
32
 33
parties, if such fundamental principle is to be abandoned and the availability of judicial remedy is not to be
11
accordingly restricted.
The rule, in any case, is not really absolute for it does not say that the state may not be sued under any
circumstances. On the contrary, as correctly phrased, the doctrine only conveys, "the state may not be sued
12
without its consent;" its clear import then is that the State may at times be sued. The States' consent may be
13 14
given expressly or impliedly. Express consent may be made through a general law or a special law. In this
jurisdiction, the general law waiving the immunity of the state from suit is found in Act No. 3083, where the
Philippine government "consents and submits to be sued upon any money claims involving liability arising from
15
contract, express or implied, which could serve as a basis of civil action between private parties." Implied
consent, on the other hand, is conceded when the State itself commences litigation, thus opening itself to a
16 17
counterclaim or when it enters into a contract. In this situation, the government is deemed to have
descended to the level of the other contracting party and to have divested itself of its sovereign immunity. This
rule, relied upon by the NLRC and the private respondents, is not, however, without qualification. Not all
contracts entered into by the government operate as a waiver of its non-suability; distinction must still be
made between one which is executed in the exercise of its sovereign function and another which is done in its
18
proprietary capacity.
19
In the Unites States of America vs. Ruiz, where the questioned transaction dealt with improvements on the
wharves in the naval installation at Subic Bay, we held:
The traditional rule of 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 act ( jure
gestionisis). The result is that State immunity now extends only to acts jure imperii. The
restrictive application of State immunity is now the rule in the United States, the United
Kingdom and other states in Western Europe.
xxx xxx xxx
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 this be deemed to have actually given its consent to be sued only when it enters into
business contracts. It does not apply where the contracts 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 not dedicated to
commercial or business purposes.
In the instant case, the Department of Agriculture has not pretended to have assumed a capacity apart from
its being a governmental entity when it entered into the questioned contract; nor that it could have, in fact,
performed any act proprietary in character.
But, be that as it may, the claims of private respondents, i.e. for underpayment of wages, holiday pay,
overtime pay and similar other items, arising from the Contract for Service, clearly constitute money claims.
Act No. 3083, aforecited, gives the consent of the State to be "sued upon any moneyed claim involving liability
arising from contract, express or implied, . . . Pursuant, however, to Commonwealth Act ("C.A.") No. 327, as
amended by Presidential Decree ("P.D.") No. 1145, the money claim first be brought to the Commission on
20
Audit. Thus, inCarabao, Inc., vs. Agricultural Productivity Commission, we ruled:
33
34
(C)laimants have to prosecute their money claims against the Government under
Commonwealth Act 327, stating that Act 3083 stands now merely as the general law waiving
the State's immunity from suit, subject to the general limitation expressed in Section 7
thereof that "no execution shall issue upon any judgment rendered by any Court against the
Government of the (Philippines), and that the conditions provided in Commonwealth Act 327
for filing money claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions of C.A. No. 327 and the Labor
Code with respect to money claims against the State. The Labor code, in relation to Act No. 3083, provides the
legal basis for the State liability but the prosecution, enforcement or satisfaction thereof must still be pursued
in accordance with the rules and procedures laid down in C.A. No. 327, as amended by P.D. 1445.
When the state gives its consent to be sued, it does thereby necessarily consent to unrestrained execution
against it. tersely put, when the State waives its immunity, all it does, in effect, is to give the other party an
21 22
opportunity to prove, if it can, that the State has a liability. In Republic vs. Villasor this Court, in nullifying
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, has explained, thus —
The universal rule that where the State gives its consent to be sued by private parties either
by general or special law, it may limit the claimant's action "only up to the completion of
proceedings anterior to the stage of execution" and that the power of the Courts ends when
the judgment is rendered, since government funds and properties may not be seized under
writs or execution or garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must be covered by the
correspondent appropriation as required by law. The functions and public services rendered
by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds
23
from their legitimate and specific objects, as appropriated by law.
WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991, is hereby REVERSED and SET
ASIDE. The writ of execution directed against the property of the Department of Agriculture is nullified, and
the public respondents are hereby enjoined permanently from doing, issuing and implementing any and all
writs of execution issued pursuant to the decision rendered by the Labor Arbiter against said petitioner.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26400 February 29, 1972
34
 35
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
35
36
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.
1
In the case of Ministerio vs. Court of First Instance of Cebu, 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
2
for the land, the basis should be the price or value thereof at the time of the taking.
As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of
3
the land from the time it was taken up to the time that payment is made by the government. 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.
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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-49930 August 7, 1985
FRANCISCO MALONG and ROSALINA AQUINOMALONG petitioners,
vs.
PHILIPPINE NATIONAL RAILWAYS and COURT OF FIRST INSTANCE OF PANGASINAN, Lingayen Branch
11,respondents.
AQUINO, J.:
This case is about the immunity from suit of the Philippine National Railways. The Malong spouses alleged in
their complaint that on October 30, 1977 their son, Jaime Aquino, a paying passenger, was killed when he fell
from a PNR train while it was between Tarlac and Capas.
The tragedy occurred because Jaime had to sit near the door of a coach. The train was overloaded with
passengers and baggage in view of the proximity of All Saints Day. The Malong spouses prayed that the PNR be
ordered to pay them damages totalling P136,370.
Upon the Solicitor General's motion, the trial court dismissed the complaint. It ruled that it had no jurisdiction
because the PNR, being a government instrumentality, the action was a suit against the State (Sec. 16, Art. XV
of the Constitution). The Malong spouses appealed to this Court pursuant to Republic Act No. 5440.
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not immune from suit under
Act No. 1510, its charter.
The PNR charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and Presidential Decree No.
741, provides that the PNR is a government instrumentality under government ownership during its 50-year
term, 1964 to 2014. It is under the Office of the President of the Philippines. Republic Act No. 6366 provides:
SECTION 1-a. Statement of policy. The Philippine National Railways, being a factor for socio-
economic development and growth, shall be a part of the infrastructure program of the
government and as such shall remain in and under government ownership during its
corporate existence. The Philippine National Railways must be administered with the view of
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38
serving the interests of the public by providing them the maximum of service and, while
aiming at its greatest utility by the public, the economy of operation must be ensured so that
service can be rendered at the minimum passenger and freight prices possible.
The charter also provides:
SEC. 4. General powers. The Philippine National Railways shall have the following general
powers:
(a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the corporation; and
(b) Generally, to exercise all powers of a railroad corporation under the Corporation Law.
(This refers to sections 81 to 102 of the Corporation Law on railroad corporations, not
reproduced in the Corporation Code.)
Section 36 of the Corporation Code provides that every corporation has the power to sue and be sued in its
corporate name. Section 13(2) of the Corporation Law provides that every corporation has the power to sue
and be sued in any court.
A sovereign is exempt from suit, not because of any formal conception or obsolete theory,
but on the logical and practical ground that there can be no legal right as against the
authority that makes the law on which the right depends (Justice Holmes in Kawananakoa vs.
Polyblank 205 U.S. 353, 51 L. ed. 834).
The public service would be hindered, and public safety endangered, if the supreme
authority could be subjected to suit at the instance of every citizen and, consequently,
controlled in the use and disposition of the means required for the proper administration of
the Government (The Siren vs. U.S., 7 Wall. 152, 19 L. ed. 129).
Did the State act in a sovereign capacity or in a corporate capacity when it organized the PNR for the purpose
of engaging in transportation? Did it act differently when it organized the PNR as successor of the Manila
Railroad Company?
We hold that in the instant case the State divested itself of its sovereign capacity when it organized the PNR
which is no different from its predecessor, the Manila Railroad Company. The PNR did not become immune
from suit. It did not remove itself from the operation of articles 1732 to 1766 of the Civil Code on common
carriers.
The correct rule is that "not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity from suit is determined by the character of the objects for which the entity was organized."
(Nat. Airports Corp. vs. Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs, Santos, 92 Phil. 281, 285;
Harry Lyons, Inc. vs. USA, 104 Phil. 593.)
Suits against State agencies with respect to matters in which they have assumed to act in a private or non-
governmental capacity are not suits against the State (81 C.J.S. 1319).
Suits against State agencies with relation to matters in which they have assumed to act in a
private or non-governmental capacity, and various suits against certain corporations created
by the State for public purposes, but to engage in matters partaking more of the nature of
ordinary business rather than functions of a governmental or political character, are not
regarded as suits against the State.
38
 39
The latter is true, although the State may own the stock or property of such a corporation,
for by engaging in business operations through a corporation the State divests itself so far of
its sovereign character, and by implicating consents to suits against the corporation. (81 C.J.
S. 1319.)
The foregoing rule was applied to State Dock Commissions carrying on business relating to pilots, terminals
and transportation (Standard Oil Co. of New Jersey vs. U.S., 27 Fed. 2nd 370) and to State Highway
Commissions created to build public roads and given appropriations in advance to discharge obligations
incurred in their behalf (Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State Highway
Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports case).
The point is that when the government enters into a commercial business it abandons its sovereign capacity
and is to be treated like any other private corporation (Bank of the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L.
ed. 244, cited in Manila Hotel Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The
Manila Hotel case also relied on the following rulings:
By engaging in a particular business through the instrumentality of a corporation, the
government divests itself pro hac vice of its sovereign character, so as to render the
corporation subject to the rules of law governing private corporations.
When the State acts in its proprietary capacity, it is amenable to all the rules of law which
bind private individuals.
There is not one law for the sovereign and another for the subject, but when the sovereign
engages in business and the conduct of business enterprises, and contracts with individuals,
whenever the contract in any form comes before the courts, the rights and obligation of the
contracting parties must be adjusted upon the same principles as if both contracting parties
were private persons. Both stand upon equality before the law, and the sovereign is merged
in the dealer, contractor and suitor (People vs. Stephens, 71 N.Y. 549).
It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc., L-31948, July 25, 1978,
84 SCRA 223, it was held that the PNR funds could be garnished at the instance of a labor union.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees could not sue the
PNR for damages. Like any private common carrier, the PNR is subject to the obligations of persons engaged in
that private enterprise. It is not performing any governmental function.
Thus, the National Development Company is not immune from suit. It does not exercise sovereign functions. It
is an agency for the performance of purely corporate, proprietary or business functions (National
Development Company vs. Tobias, 117 Phil. 703, 705 and cases cited therein; National Development Company
vs. NDC Employees and Workers' Union, L-32387, August 19,1975,66 SCRA 181,184).
Other government agencies not enjoying immunity from suit are the Social Security System (Social Security
System vs. Court of Appeals, L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank
(Republic vs. Philippine National Bank, 121 Phil. 26).
WHEREFORE, the order of dismissal is reversed and set aside. The case is remanded to the trial court for
further proceedings. Costs against the Philippine National Railways.
SO ORDERED.
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40
Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ.,
concur.
Teehankee, J., concurs in the result.
Makasiar, C.J., I concur both on express waiver by its charter and implied waiver by the contract of carriage.
Separate Opinions
ABAD SANTOS, J., concurring:
The claim that Philippine National Railways is immune from suit because it is an instrumentality of the
government is so outlandish that it deserves scant consideration. All corporations organized by the
government are its instrumentality by the very reason of their creation. But that fact alone does not invest
them with immunity from suit. The Central Bank of the Philippines which theoretically formulates monetary
policies is perhaps the best example of a corporation which is an instrumentality of the government. But the
Central Bank is not immune from suit for it also performs proprietary functions. The docket of this Court
provides proof for this assertion. The test whether or not an instrumentality of the government is immune
from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government corporations. They would
deny justice to the people they are to serve. In Rayo et at vs. National Power Corporation et al., G.R. No.
55273-83, Dec. 19, 1981, I 10 SCRA 456, the petitioners filed suit against the National Power Corporation for
damages as a result of the opening of the floodgates of Angat Dam. The defendant invoked immunity from
suit. The trial court sustained the claim and dismissed the suit. This Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It
is sufficient to say that the government has organized a private corporation, put money in it
and has allowed it to sue and be sued in any court under its charter, (R.A. No. 6395, Sec. 3
(D).) As a government owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. (See National Shipyards and Steel Corp.
vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that
the NPC can sue and be sued in any court' is without qualification on the cause of action and
accordingly it can include a tort claim such as the one instituted by the petitioners. (At p.
460.)
Separate Opinions
ABAD SANTOS, J., concurring:
The claim that Philippine National Railways is immune from suit because it is an instrumentality of the
government is so outlandish that it deserves scant consideration. All corporations organized by the
government are its instrumentality by the very reason of their creation. But that fact alone does not invest
them with immunity from suit. The Central Bank of the Philippines which theoretically formulates monetary
policies is perhaps the best example of a corporation which is an instrumentality of the government. But the
Central Bank is not immune from suit for it also performs proprietary functions. The docket of this Court
40
 41
provides proof for this assertion. The test whether or not an instrumentality of the government is immune
from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government corporations. They would
deny justice to the people they are to serve. In Rayo et at vs. National Power Corporation et al., G.R. No.
55273-83, Dec. 19, 1981, I 10 SCRA 456, the petitioners filed suit against the National Power Corporation for
damages as a result of the opening of the floodgates of Angat Dam. The defendant invoked immunity from
suit. The trial court sustained the claim and dismissed the suit. This Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It
is sufficient to say that the government has organized a private corporation, put money in it
and has allowed it to sue and be sued in any court under its charter, (R.A. No. 6395, Sec. 3
(D).) As a government owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. (See National Shipyards and Steel Corp.
vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that
the NPC can sue and be sued in any court' is without qualification on the cause of action and
accordingly it can include a tort claim such as the one instituted by the petitioners. (At p.
460.)
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 Avanceña 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:
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42
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
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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
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44
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
44
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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
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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
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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.

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